Futures mixed as banks kick off Q3 earnings season; Tesla falls

By Lisa Pauline Mattackal and Pranav Kashyap

(Reuters) -Futures tracking the S&P 500 and the Dow treaded water on Friday as major banks began the third-quarter earnings season, while caution reigned after higher-than-expected inflation numbers boosted bets of a 25-bps cut in borrowing costs in November.

Shares of Tesla dropped 6.5% in premarket trading after the EV maker unveiled its long awaited robotaxi, but did not provide details on how fast it could ramp up production or deal with potential regulatory hurdles.

Major financial companies kicked off the earnings season, with JPMorgan Chase rising 1.9% after the lender reported its third-quarter results.

Wells Fargo rose 3.9%, reversing initial declines after the bank's profit fell in the third quarter as its interest income was squeezed by subdued loan demand.

Dow E-minis were up 27 points, or 0.06%, U.S. S&P 500 E-minis were down 2.5 points, or 0.04%, and Nasdaq 100 E-minis were down 47.25 points, or 0.23%.

All three major indexes are on track to notch their fifth consecutive week of gains - the best winning streak for the Dow in eight months and the best for the Nasdaq since May.

With major indexes trading around record highs and the benchmark S&P 500 up more than 21% year-to-date, third-quarter results will test if 2024's rally can be sustained amid uncertainty over monetary policy, geopolitical risks and the upcoming U.S. presidential elections.

Wall Street closed slightly lower on Thursday after a keenly watched Consumer Price Index report showed inflation rose higher than expected in September, but an uptick in jobless claims pointed to potential weakness in the labor market.

Still, bets on a 25-basis-point rate cut from the U.S. central bank in November remained intact.

"On the whole, there is relatively little in the data that is likely to dispel the FOMC’s confidence in inflation returning towards the 2% inflation target over the medium term," said Michael Brown, senior research strategist at Pepperstone.

Traders are pricing in a roughly 84% chance of a 25-bps reduction at November's Fed meeting and see a slight chance - about 16% - of no change then, according to CME's FedWatch.

On the other hand, Atlanta Federal Reserve President Raphael Bostic said he was open to keeping rates unchanged in November.

Also on deck are Producer Price Index data and the University of Michigan's consumer sentiment survey, as well as speeches from Fed officials Michelle Bowman, Lorie Logan and Austan Goolsbee, through the day.

U.S.-listed shares of Chinese companies lost ground ahead of a closely watched fiscal stimulus update from Beijing on Saturday. Among them, JD.com lost 2.7%, Alibaba Group dipped 1.6% and PDD Holdings fell 3%.

(Reporting by Lisa Mattackal and Pranav Kashyap in Bengaluru; Editing by Pooja Desai)