U.S. pending home sales fall 7.3%; dollar slips alongside oil and yields

Key Facts

The U.S. pending home sales index fell 7.3% in September from August to 66.0 points, Reuters reported, a steeper decline than economists had expected. Economists polled by the agency had forecast a decline in contracts of just 0.5% for the month, compared with the index's actual drop. Pending home sales fell 11.3% from September a year earlier, according to the same report. In currency markets, the dollar fell during the 20 October session alongside declines in oil prices and long-term U.S. Treasury yields, according to Reuters. Sterling rose 0.59% against the U.S. currency after data showed resilience in the British labour market, the agency reported.

The decline in housing contracts spanned all 4 major U.S. regions, according to Reuters, extending September's downturn across the country's main regions. The pending home sales index measures contracts signed before a sale is completed, tracking the contracting stage that precedes the completion of a property transaction. The weakness in contracts came as financing costs remained elevated, with the average rate on a 30-year fixed mortgage at 6.86% in September, according to the National Association of Realtors. The average rate then rose to 7.4% in the week ended 15 October, according to Freddie Mac data cited by the association in its housing market coverage. The weekly rate reading in October was therefore above the average recorded in September, the month in which signed contracts declined.

In corporate results, Netflix reported earnings of $3.66 billion for the third quarter of 2026, according to the Associated Press, with earnings per share reaching 87 cents. Profit rose 44% from the same quarter a year earlier, when the company posted earnings of $2.55 billion. Earnings per share in the comparison period were 59 cents, according to the figures the agency reported on the company's quarterly results. Actual earnings exceeded forecasts from analysts polled by FactSet, who had estimated third-quarter earnings of 82 cents per share. Revenue reached $12.87 billion, up 12% from $11.51 billion in the corresponding period a year earlier.

But Netflix cut its annual advertising revenue forecast to about $2.7 billion, according to its shareholder letter filed with the U.S. Securities and Exchange Commission. The company had previously expected advertising revenue of about $3 billion in 2026, before the revision in its earnings letter. Netflix attributed the reduction to a slower-than-expected rollout of some advertising product capabilities, according to its explanation of the revision in the letter. The company said the reason was "a slightly slower-than-expected rollout of some advertising product capabilities," identifying the factor behind the cut to its estimates for the business. Netflix shares fell in trading following the earnings announcement as investors focused on the lower advertising outlook, according to the Associated Press.

The results followed plans Netflix announced the previous week to lay off about 6% of its workforce, according to the Associated Press, placing the quarterly figures after the announcement of those plans. On cash flow, the company cut its annual free cash flow forecast to about $12.0 billion, according to its shareholder letter. Its previous estimates had pointed to free cash flow of $12.5 billion for the same year, before the reduction in the latest update. Netflix linked the revision to its free cash flow forecast primarily to an expected real estate transaction in the final quarter of the year, according to its explanation accompanying the results. The revisions also included a cut to the annual revenue forecast, alongside the separate adjustment the company announced to its advertising revenue outlook for 2026.

According to the updated forecast in its shareholder letter, Netflix expects annual revenue of $51.1 billion in 2026. The company scheduled its third-quarter earnings interview with management for 20 October, according to the announcement on its investor relations website. The interview is scheduled to begin at 1:45 p.m. Pacific time, according to the time the company announced for discussing its results. On U.S. monetary policy, the Federal Reserve holds its next meeting on 27 and 28 October, according to the Federal Open Market Committee's official calendar. The meeting comes after the session in which the dollar declined, and follows September's weak housing contract reading and the rise in the average mortgage rate in the week ended 15 October.