Equity futures drop, oil climbs on renewed Iran worries

The morning briefing: stock futures indicate sharp losses, oil prices are climbing, and Treasury yields are edging lower as the North American session approaches. Fresh concerns about potential military strikes on Iran keep energy risks elevated, while corporate earnings deliver mixed results with some harsh market reactions.

The dollar is mixed. The yen and Swiss franc are gaining against the greenback, while the euro, pound, Australian dollar and New Zealand dollar are declining. The Canadian dollar holds a modest gain as crude oil moves back toward $100.

Middle East: Strike concerns return to the forefront

Overnight developments have refocused attention on the possibility of renewed military action. Reports indicate that the US and Israel are preparing for further strikes on Iran. A separate report from the New York Times said military planners had prepared options for a short, intense round of strikes after the US midterm elections. Preparations do not imply approval, but they keep the threat in focus.

Adding to those worries, an Al Arabiya headline reported that Israeli Prime Minister Benjamin Netanyahu will inform President Trump of Israel's intentions but will not seek his permission to strike Iran.

For financial markets, uncertainty remains the key issue. Hopes for a diplomatic breakthrough have repeatedly competed with threats of further attacks. Traders are left weighing what another escalation could mean for regional energy supplies and shipping.

Crude oil moves back toward $100

Crude oil is trading at $99.25, up $2.08 or 2.12%.

The increase brings the $100 level back within reach and keeps energy costs in the inflation discussion. It also adds another worry for equity investors already digesting a busy earnings calendar.

The headline risk is two-sided. Concrete diplomatic progress could remove some of the geopolitical premium, while further escalation could add to it. That makes following price action and defining risk against technical levels particularly important.

US stock futures point to a sharply lower opening

Futures for the main US stock indexes are trading lower:

• Dow futures: down 317 points.
• S&P 500 futures: down 76 points.
• Nasdaq futures: down 500 points.

Earnings reactions show that beating consensus is only part of the story. Traders also judge guidance, the quality of the results, and how much good news was already priced in. Geopolitical tension provides an additional reason for the negative turnaround in some cases.

Meta, IBM and Lam Research are examples this morning. Each reported beats on the metrics outlined below, but their shares are lower.

Earnings released after yesterday's close

• Meta (META) surpassed EPS expectations excluding the litigation charge, but reported EPS missed. Revenue beat forecasts. Excluding the charge, EPS would have been $7.40—$3.83 reported plus the $3.57 charge—versus $6.67 expected. Reported EPS of $3.83 missed that estimate. Revenue of $64.6 billion topped $63.31 billion expected. Shares are down 2.65% this morning.

• IBM (IBM) beat on operating EPS and revenue. Operating EPS of $2.95 exceeded $2.86 expected. Revenue of $17.1 billion topped $16.81 billion expected. IBM reaffirmed full-year revenue guidance and raised its free-cash-flow outlook. The share reaction was down 5.11%.

• Lam Research (LRCX) beat on adjusted EPS and revenue. Adjusted EPS of $2.20 exceeded $2.18 expected, while revenue of $8.22 billion topped $8.13 billion expected. Despite the beats, shares are down 7.25%.

• SAP (SAP) beat on revenue and adjusted operating profit. Revenue of €10.3 billion exceeded €10.1 billion expected. Adjusted operating profit of €3.0 billion topped €2.93 billion expected. Full-year adjusted operating profit guidance of €11.8–€12.2 billion exceeded €11.7 billion expected. Shares are up 0.38%. The profit measure here is operating profit rather than EPS.

• CSX (CSX) beat on EPS and revenue. EPS of $0.57 exceeded $0.53 expected, while revenue of $4.02 billion topped $3.96 billion expected.

• Tesla (TSLA) beat on adjusted EPS but missed on revenue. Adjusted EPS of $0.48 exceeded $0.45 expected, but revenue of $28.0 billion fell short of $28.1 billion expected. The after-hours share reaction was up 3.46%.

• Texas Instruments (TXN) beat on EPS and revenue. EPS of $2.62 exceeded $2.42 expected. Revenue of $6.06 billion topped $5.92 billion expected. Next-quarter revenue guidance of $5.8–$6.3 billion exceeded the $5.75 billion consensus, even at the low end. Shares are down 0.76%.

Earnings released this morning

• Blackstone (BX) beat on distributable EPS. Distributable earnings of $1.32 per share exceeded the $1.26 LSEG consensus. Investment exits remained under pressure, although quarterly inflows exceeded $63 billion. Reported total revenue was $3.06 billion. Shares are down 2.90%.

• Lockheed Martin (LMT) beat on EPS and revenue. EPS of $7.97 exceeded $7.52 expected, while revenue of $20.71 billion topped $20.48 billion expected. The company raised its full-year sales and EPS outlook. Shares are up 4.17%.

• Spotify (SPOT) missed on EPS and narrowly missed on revenue. EPS of €2.48 fell short of €2.80 expected, while revenue of €4.97 billion was just below €4.98 billion expected. Fourth-quarter operating income guidance of €820 million, however, exceeded €813.4 million expected. Shares are up 4.88%, with the stronger profit outlook helping the reaction.

• Honeywell (HON) beat on adjusted EPS but missed on revenue. Adjusted EPS of $2.27 exceeded $2.17 expected, while revenue of $4.99 billion fell just short of $5.01 billion expected. Shares are up 0.13%.

The dollar is mixed, with the yen outperforming

The dollar's performance against the major currencies shows a divided market:

• EURUSD: 1.1196, down 0.32% — USD higher.
• USDJPY: 157.05, down 0.68% — USD lower.
• GBPUSD: 1.3366, down 0.21% — USD higher.
• USDCHF: 0.8223, down 0.25% — USD lower.
• USDCAD: 1.4037, down 0.06% — USD marginally lower.
• AUDUSD: 0.7005, down 0.31% — USD higher.
• NZDUSD: 0.5676, down 0.42% — USD higher.

The yen has the largest gain against the greenback, while the New Zealand dollar has the largest decline. The Canadian dollar is little changed despite the rise in oil.

Currency ranges and room to roam

Using the displayed session highs and lows against the supplied ATR(22) averages:

• EURUSD: 1.1195–1.1256 — 61 pips, or approximately 92% of its 66-pip average.
• USDJPY: 156.70–158.25 — 155 pips, or approximately 161% of its 96-pip average.
• GBPUSD: 1.3363–1.3418 — 55 pips, or approximately 72% of its 76-pip average.
• USDCHF: 0.8193–0.8249 — 56 pips, or approximately 156% of its 36-pip average.
• USDCAD: 1.4015–1.4069 — 54 pips, or approximately 102% of its 53-pip average.
• AUDUSD: 0.6995–0.7036 — 41 pips, or approximately 84% of its 49-pip average.
• NZDUSD: 0.5670–0.5710 — 40 pips, or approximately 93% of its 43-pip average.

GBPUSD has the most room to roam relative to its average daily range, followed by AUDUSD.

USDJPY and USDCHF have already moved well beyond their normal daily ranges. That does not prevent further extension, but traders should recognize that those pairs have already had a substantial shove.

An average range provides context. It is not a ceiling, and it does not require a quieter pair to travel farther. The technical levels still define where traders can lean with risk defined and limited.

Treasury yields fall across the curve

US Treasury yields are sharply lower:

• 2-year: 4.7334%, down 8.96 basis points.
• 5-year: 4.8697%, down 10.03 basis points.
• 10-year: 5.0482%, down 9.78 basis points.
• 30-year: 5.3599%, down 7.71 basis points.

The roughly 8–10 basis-point declines are meaningful. Higher oil keeps inflation concerns alive, but investors are also buying Treasuries as stocks retreat.

The decline in US yields is consistent with the pressure on USDJPY. For currency traders, the next question is whether the price can sustain its move through the relevant technical levels or whether buyers begin to lean against support.

Gold, silver and Bitcoin move lower

Oil is higher, but the gains are not extending to metals or Bitcoin:

• Gold: $4,064.68, down $76.06 or 1.84%.
• Silver: $55.794, down $2.154 or 3.72%.
• Copper futures: $6.3985, down 2.75%.
• Bitcoin: $81,826, down $2,198 or 2.62%.

The different reactions are a reminder to follow each market's price action. Geopolitical uncertainty does not guarantee that every perceived defensive asset will move higher.

North American calendar: Jobless claims lead the way

The calendar provides several checkpoints, although earnings and Middle East headlines could continue to dominate. All times below are ET.

• 8:30 AM — US initial jobless claims: 200,000 expected, versus 199,000 previously. The prior four-week average was 198,500.
• 8:30 AM — US continuing claims: 1.720 million expected, versus 1.710 million previously.
• 8:30 AM — Canadian industrial product prices: Previous readings were +1.3% month over month and +13.5% year over year.
• 8:30 AM — Canadian raw materials prices: Previous readings were +3.1% month over month and +22.8% year over year.
• 9:30 AM — Canadian new housing price index: Previously −0.1% month over month.
• 10:00 AM — Eurozone flash consumer confidence: −17.0 expected, versus −16.5 previously.
• 10:00 AM — US leading economic index: −0.1% expected, versus −0.1% previously.
• 11:00 AM — Kansas City Fed manufacturing survey: The previous manufacturing index was 20, with the composite index at 14.

Jobless claims will provide the first scheduled check on labor-market conditions. A reading close to expectations would suggest layoffs remain contained, while a meaningful surprise could give yields and currencies another reason to move.

For traders, the task is to let the news develop while using the technical levels to judge the reaction. Does a break attract follow-through? Can the price stay beyond the level? That is what would give buyers or sellers more control.