What is Driving the Markets Today?

U.S. stock futures move slightly above the flatline ahead of a fresh series of quarterly earnings. Netflix shares fall by more than 6% in after-hours trading, as traders flag a lower-than-expected third-quarter operating margin. Tesla will report its latest results after the market close, while luxury bag maker Hermes hints at improvement in demand in its key Chinese market, and bargain hunting supports a rebound in gold prices.

1. Futures remain subdued

U.S. stock futures are muted on Wednesday as investors digest a series of corporate earnings and monitor the aftermath of the sudden drop in gold.

By 03:39 ET (07:39 GMT), the Dow futures rise by 38 points, or 0.1%, S&P 500 futures tick up 10 points, or 0.1%, and Nasdaq 100 futures remain mostly unchanged.

Major Wall Street indexes close mixed on Tuesday. Rising concerns over elevated stock valuations and the questions they raise about the recent market rally remain in focus.

Geopolitical uncertainty also draws significant attention. President Donald Trump suggests that the long-anticipated meeting with Chinese leader Xi Jinping in South Korea later this month may not take place, disappointing hopes for a potential easing of trade tensions between the world’s two largest economies. At the same time, Trump says that if the meeting does happen, it will be “very successful” and he expects to secure a “fantastic” and “fair” trade agreement with Xi.

A possible summit between Trump and Russian President Vladimir Putin is on hold, as Russian officials indicate no intention to end the ongoing war in Ukraine.

2. Netflix margins pressured by Brazil tax dispute

Netflix shares fall in after-hours trading, weighed down by a third-quarter operating margin below expectations.

With a margin of 28%, the result is slightly below forecasts, mainly due to expenses related to a dispute with Brazilian tax authorities. Without these charges, the margin would have exceeded estimates, Netflix says.

The Brazilian issue also affects full-year margins. Netflix lowers its annual forecast from 30% to 29%.

Still, revenue and profit for the period rise, supported by the company’s best-ever quarter in advertising sales, along with increased membership and higher prices.

3. Tesla to report

Later today, the parade of corporate earnings continues, with a focus on Tesla, which will release its data after U.S. market close.

The company announced record third-quarter deliveries earlier this month, fueled by marketing campaigns and discounts aimed at boosting sales before the $7,500 U.S. EV tax credit is withdrawn. Concerns arise over how Tesla’s performance will be affected after the tax credits expire.

Analysts at Vital Knowledge note that “earnings reports for this company are nearly irrelevant, as the bulk of the narrative and equity value is not related to the core business of manufacturing and selling cars, but rather to hopes and hype for products that will not materially affect the income statement for years to come.”

CEO Elon Musk and Tesla have long highlighted the benefits of initiatives like robotaxis and full self-driving technology.

Tesla’s stock price has risen more than 16% this year, supported in part by the board’s proposal of a massive new pay package for Musk, who has also bought additional shares.

Other companies reporting before Wall Street opens include telecom group AT&T, electric services firm GE Vernova, and biotech company Thermo Fisher.

4. Hermes shows slight improvement in China demand

In Europe, Paris-listed Hermes shares rise slightly in early trading due to a modest sales improvement in the key Chinese market for the Birkin bag maker in Q3.

Hermes CFO Eric de Halgouet says stronger returns in the country reflect stabilization in property prices in major cities as well as positive stock market trends.

China remains one of the most important regions for the luxury industry. The prolonged real estate crisis and slow economic recovery have dampened demand for luxury goods in recent quarters, although Hermes’ announcement, along with comments from peers like L’Oreal and LVMH, indicates cautious optimism in the sector.

Group-wide quarterly sales at Hermes, known for luxury leather goods such as Constance and Kelly bags, rise 9.6% to €3.88 billion. Analysts had expected 10% growth, according to Visible Alpha estimates cited by Reuters.

5. Gold rebounds

Gold prices rise on Wednesday after continuing dramatic sell-offs in early Asian trading, supported by bargain-hunting investors and a weaker dollar.

Attention turns to key U.S. inflation data to be released later this week, which may influence the Federal Reserve’s approach to interest rates in the coming months. This is likely one of the few updated official economic indicators the central bank will receive before its next meeting on October 28–29, due to the ongoing federal government shutdown delaying key releases.

Spot gold rises 1.1% to $4,153.24 per ounce as of 03:32 ET, recovering slightly after falling to around $4,000/oz earlier in the day. U.S. gold futures increase 1.2% to $4,156.79/oz.

The yellow metal fell more than 5% on Tuesday, marking its steepest one-day drop since 2020 amid heavy volatility. Prices had surged to record highs earlier this week, supported by geopolitical concerns and expectations of U.S. monetary easing.