Semiconductor and AI stocks fall, plus poor earnings
Stock market news
• The second big day of company reports brought almost total disappointment to shareholders. Apparently the market approached the reports too high. Semiconductor and health insurance stocks were the leaders of the fall. Oil stocks also fell due to calm in the Middle East. Markets are calm in the morning. Bitcoin is above $67 thousand, finally breaking away from the Nasdaq-100.
• European chip and luxury goods stocks will be in focus for investors on Wednesday for all the wrong reasons, after weak earnings at the region’s biggest tech company ASML and luxury goods leader LVMH sent shares lower. Shares in chip makers around the world fell after ASML forecast weak sales in 2025 and said that while AI-related chips are booming, other parts of the semiconductor market are not growing, which the Dutch company said is making many of its chipmaking clients cautious. ASML is the world’s largest maker of chipmaking equipment, with clients including AI chipmaker TSMC, logic chip makers Intel and Samsung, and memory chip specialists Micron and SK Hynix. Unsurprisingly, its gloomy outlook has sparked a sell-off in chip stocks across Europe, the US and Asia. Europe's index of technology shares fell 6.5% on Tuesday, its biggest one-day drop in four years. Shares could stabilise on Wednesday, but sentiment is expected to be weak throughout the day.
• Investors will also be watching the reaction of luxury stocks after LVMH reported a decline in quarterly sales for the first time since the onset of the pandemic, amid weakening consumer demand in China. That added to investor concerns about a sector heavily dependent on China and capped a recent rally in luxury stocks that followed news of China’s stimulus measures. Consumer confidence in China has fallen to a historic low since the COVID-19 pandemic, according to LVMH Chief Financial Officer Jean-Jacques Guiony. There was already growing skepticism among investors about whether China would implement detailed and tough fiscal stimulus measures to revive the sagging economy. China has also been a topic for ASML, which derived 47% of its total revenue from China in the latest quarter but expects that contribution to fall to 20% in 2025. Investors will be watching a press conference in Beijing (yes, another one) on Thursday, this time to discuss promoting the "sustainable and healthy" development of the property sector.
• On the macro front, UK inflation data for September is due later today and will help chart the likely path of action for the Bank of England at its policy meeting next month as markets lean towards a rate cut.
• Google has partnered with US nuclear startup Kairos Power to use the energy produced by small modular reactors to power its AI operations.
• Japan's Biggest IPO: Tokyo Metro Raises $2.3B The Tokyo Metro operator raised 348.6 billion yen ($2.3 billion) in an IPO, listing shares at the high end of its price range. The IPO was Japan's largest since SoftBank, the telecom unit of SoftBank Group, floated more than $21 billion in 2018.
• Goldman Sachs' (GS) third-quarter profit rose 45% y/y, driven by a rebound in bond sales, equity offerings and mergers. GS shares are neutral.
• Bank of America's (BAC) Wall Street performance was better than expected, as the company took advantage of volatile markets and net interest income beat analyst estimates. BAC shares rose 0.6% as investors applauded the turnaround of the troubled business.
• Walgreens (WBA) plans to close about 1,200 stores over the next three years. The drugstore chain is trying to revive its struggling U.S. business. The company said Tuesday that about 500 stores will close in the current fiscal year. WBA shares rose 16% as investors cheered the streamlining of its troubled business.
• Charles Schwab's (SCHW) third-quarter profit jumped as asset management fees rose. Schwab's results often reflect trends in the investment landscape. The results are also among the last under CEO Walt Bettinger, who will step down at the end of 2024 after nearly 16 years at the helm of the company.
SCHW shares rose 6%.
• PNC Financial's quarterly profit fell on lower interest income and higher reserves. PNC said net interest income, or the difference between what a bank earns in interest on loans and what it pays on deposits, fell to $3.41 billion in the third quarter from $3.42 billion.
• Google has redesigned its infinite scroll shopping page to better match consumers with storefronts in an effort to differentiate the platform from e-commerce sites like Amazon.
• Bitcoin miner Blockstream has raised $210 million in a convertible note offering that will be used to fund the rollout of the company's Layer 2 technology, expand its mining operations, and buy more cryptocurrency.
• Base, a Coinbase project, has become the largest depository in Ethereum layer 2, surpassing Arbitrum with over $2.4 billion in DeFi deposits.
• Oil fell after reports that Israel may avoid attacking Iran's oil infrastructure eased fears of a major supply disruption, turning traders' attention back to the International Energy Agency's expectation of a large crude glut early next year
• UNH shares fell 8% after the report, dragging down shares across the industry.
• Boeing is seeking $25 billion in funding to stave off a financial crisis, giving the troubled planemaker the financial resources to weather a crippling strike and a string of operational setbacks.
• US startup Lyten is investing more than $1 billion in a lithium-sulfur battery plant in Nevada.
With battery costs significantly impacting the prices of electric vehicles, automakers are increasingly looking to alternative technologies to make such vehicles available to a wider market.
• Global EV sales up more than 30% in September - Rho Motion Sales of electric vehicles - both fully electric (BEV) and plug-in hybrid (PHEV) - reached 1.7 million in September 2024 worldwide.
🇨🇳 Sales in China jumped 47.9% last month to 1.12 million vehicles, while in the US and Canada they rose 4.3% to 150,000.
🇪🇺 In Europe, EV sales rose 4.2% to 300,000 units.
Shares after morning reports
JBHT up 7%
UAL down 1%
IBKR down 4%
• Charles Schwab's third-quarter profit rose on higher asset management fees.
• StanChart wins private UK court case over Libor replacement rate issue.
• PNC Financial's quarterly profit falls on lower interest income and higher reserves.
• Citigroup profit beats expectations on growth in investment banking.
• State Street reports third-quarter profit rise; CFO steps down
• Goldman Sachs profit beats expectations as bond sales boost investment banking
• Swiss regulator orders UBS to strengthen contingency plans.
• BofA earnings beat expectations on investment banking and trading strength.
• Indian insurer HDFC Life's profit rises but margins shrink.
• HSBC probes Pinnacle's China asset management business over costs and controls
• Embraer's Eve receives $88 million BNDES loan to build first plant.
• Boeing raises $35 billion through stock and bond sales and debt.
• Musk challenges Indian billionaires over satellite spectrum allocation.
• Oil falls 4% as worries over supply disruptions from Iran ease and demand outlook worsens.
• 7-Eleven's turnaround plan requires major efforts to stop $47 billion Couche-Tard takeover
• Boeing prepares layoff notices for thousands of workers as unrest mounts
• Goldman Sachs profit rises 45% on growth in investment banking.
• Boeing reaches $10 billion loan deal with banks amid damaging strike
• Walgreens to close 1,200 stores as CEO Wentworth looks for ways to turn things around.
• Boeing plant workers to protest in Seattle as strike enters second month.
• Apple releases new iPad mini with artificial intelligence features.
• American startup Lyten is investing more than $1 billion in a lithium-sulfur battery plant in Nevada.
• Blackstone to invest $8.2 billion in data centers in northeastern Spain.
• The Federal Communications Commission is launching a formal investigation into the use of data caps by telecommunications companies.
• Adyen co-founder's new firm Tebi raises $22M to expand
• Platinum Equity's Ingram Micro seeks valuation of up to $5.4 billion in U.S. IPO
• Italy in talks with Google over undersea network bases in Sicily.
• Brazil's central bank chief says stablecoins will be regulated in 2025.
• Ripple challenges industry giants with new stablecoin.
• India said it would not hold a satellite spectrum auction after Musk condemned the move.
Data on Tuesday showed that UK wages grew at their slowest pace in two years in the three months to August and job openings fell again, allowing the central bank to continue cutting rates.
Key events that could impact markets on Wednesday:
- Economic events: UK Consumer Price Index (CPI) and Producer Price Index (PPI) for September
Fundamental news
• Americans said they expect higher inflation in the long term, and their expectations for credit turbulence rose to the highest level since April 2020, according to a report from the Federal Reserve Bank of New York.
• US presidential election betting allowed: traders predict Donald Trump to win over Kamala Harris - FT.
Investors are being offered to bet up to $100 million on Harris or Trump to win on Kalshi.
The platform has raised over $12 million in the first few days after the ban was lifted. The platform is currently pricing bets on Trump to win higher than on Harris - 54 cents per contract versus 47 cents.
• Trump Media & Technology Group (DJT) shares have tripled in the past three weeks, signaling Trump's chances of winning are growing. Stock market investors are also betting on it, sending stock indexes to record highs.
But DJT shares rose 12% yesterday before ending the day down 10%.
• The EU is preparing a new law to regulate migration. The rules for sending back to their home countries migrants who do not have the right to stay in the EU will be changed.
• Turkey can use cooperation within BRICS and SCO as a trump card to reorganize relations with the West - Aydinlik.
Erdogan said that "participation in these structures is an opportunity for Turkey, and it does not mean abandoning NATO."
• North Korea has blown up part of the roads that connect it with South Korea - South Korean news agency Yonhap. The two Koreas are connected by roads and railways near the border cities of Paju and Kaesong, as well as along the east coast.
• In Georgia, during the 12 years of the Georgian Dream's rule, a one-party Russian government has formed that controls everything,
- President Salome Zurabishvili in an interview with the FT. According to Zurabishvili, the ruling party does not seek to win by "traditional means", its "means of victory are election fraud (October 26 - ed.), and this has already begun."
• In less than ten years, all six Balkan countries will become EU members, says German Chancellor Olaf Scholz. At a meeting with heads of state and government of the Western Balkan countries in Berlin, Scholz expressed confidence that Albania, Bosnia and Herzegovina, Kosovo, North Macedonia, Serbia and Montenegro will join the European Union.
• Energy ministers from 27 EU member states will hold a meeting to discuss the issue of Russian gas supplies. In particular, they will raise various plans to replace Russia on the EU energy market, as well as the participation of the Ukrainian GTS in it.
• Israel faces shortage of air defense missiles - FT. The CEO of Israel Aerospace Industries said his company is working "in three shifts" and some lines are operating around the clock to meet the needs of the defense industry.
• NASA's historic mission to Jupiter's icy moon Europa has launched. The mission kicks off a decade-long quest to find out whether Jupiter's Europa is habitable - WSJ.
The uncrewed spacecraft is named the Europa Clipper after the ships that crossed Earth's oceans hundreds of years ago.
• The US plans to restrict the export of AI chips to the Persian Gulf countries - Bloomberg. Discussions in the Joe Biden administration are in the early stages and still remain without a final decision. Although, according to the agency's interlocutors, they have recently become more active.