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Hello everyone, I'm Leonie Kidd, and here is today's Morning Squawk.
Supported by gains from Anthropic, the Nasdaq rose for a second consecutive day, providing overnight support to global tech stocks.
The Federal Reserve remains a key focus for the market. Investors expect the Fed to maintain a hawkish hold stance at this week’s meeting, which would almost certainly pave the way for a rate hike in December.
Current status: Brief upward movement
As market optimism continues following Anthropic’s transformative IPO announcement, investors appear set for a second consecutive day of gains in the technology sector. Previously, this news had already spurred a rebound in AI-related stocks across Asia and Europe.
The company’s highly anticipated IPO will list on Nasdaq next month, testing investor enthusiasm. In recent weeks, AI favorite stocks have been sold off due to a debt-fueled capital expenditure supercycle, marking one of the most significant moments of “buyer’s remorse” in the AI sector.
- The devil is in the details: the over 300-page S-1 filing reveals a complex governance structure in which common shareholders have almost no voice in their dealings with the founders.
- Chain reaction: Anthropic’s IPO will generate significant spillover effects.
The Federal Reserve is competing with the market for attention.
The first day of the two-day meeting will begin later today, and policy decisions will be announced at 2:00 PM Eastern Time on Wednesday.
- Why it matters: This is almost certainly going to be a hawkish hold decision, as the midterm elections are just one week away and inflation remains elevated.
- Analysis: A rate hike in December is still under discussion; CME FedWatch shows the market pricing in a 90% probability of a December rate hike.
Significant volatility: Earnings review
This morning, there was little overall movement in pre-market trading on Wall Street, but European stock markets saw some volatility.
HSBC's third-quarter profit surged significantly, but still fell short of market expectations, and its cautious guidance caused the bank's stock to plunge sharply in London and Hong Kong.
- Analysis: Investors had expected HSBC to further benefit from the favorable phase of the interest rate hiking cycle, as well as from aggressive cost-cutting measures implemented by CEO Georges Elhedery.
Novartis raised its profit outlook earlier on Tuesday. The Swiss pharmaceutical company said sales increased despite challenges from generic drug competition. The stock rose in Zurich.
- CEO Perspective: Novartis CEO Vas Narasimhan told CNBC’s Squawk Box Europe that, although “the patent cliff is a reality in this industry,” he remains confident in the company’s raised guidance.
Today's earnings report: Airplanes and canned beverages
Here are several important earnings reports released this morning:
Despite weakening demand in North America, Coca-Cola has raised its profit outlook. The company's stock has risen 32% year-to-date, outperforming the S&P 500.
- Outlook: This marks the beverage giant's third consecutive quarter raising its full-year guidance, pushing its premarket stock price higher.
Boeing has just announced that its third-quarter loss narrowed, driven by stronger sales in its defense business.
- Exclusive: CNBC’s Phil LeBeau will interview CEO Kelly Ortberg at 9 a.m. Eastern Time on Squawk on the Street. Last month, he told investors that the time required to stabilize production was “slightly longer” than expected.
Election economy: Only 7 days left...
One week remains until the midterm elections.
- CNBC survey: Click to see what Republicans and Democrats fear most about each other—this survey may reveal "total polarization."
Finally...
Microsoft offers a voluntary separation program to 60,000 employees, driven by AI-powered efficiency gains.
Microsoft announced on Monday that it is offering buyout packages to a broad range of employees as it seeks to balance the costs of building expensive AI infrastructure with capital efficiency.
The software company announced a new voluntary separation program for eligible employees at levels 70 and below in the United States, Canada, India, and the United Kingdom.
According to a person familiar with the matter, approximately 60,000 individuals are eligible. The person requested anonymity due to the sensitivity of discussing internal matters. This move affects 27% of Microsoft’s approximately 223,000 employees.
— Ashley Calvo, Jason Gewirtz, Amelia Lucas, and Jordan Novet contributed to this report.
John Melloy edited this issue.