Wall Street stalls on tech losses

General market commentary

Equity markets finished lower on Tuesday as the government shutdown in the United States entered its seventh day. The S&P 500, Dow Jones Industrial Average and Nasdaq all declined, retreating from recent record highs as investors adopted a more cautious stance. Sector performance was mixed, with consumer staples and utility shares leading gains, while consumer discretionary and communication sectors lagged, reflecting a more risk-averse tone. Smaller companies underperformed larger ones, with small and mid-cap equities trailing large caps. In other markets, Asian equities ended mixed, though Japan’s Nikkei 225 reached another record closing high. European markets declined following the unexpected resignation of France’s Prime Minister Sebastien Lecornu, which added political uncertainty and weighed on investor sentiment. The US dollar strengthened against major currencies, while oil prices edged higher after OPEC+ announced smaller-than-expected output increases.

Investor caution was evident across asset classes. The decline in major US share indices was driven in part by weakness in consumer discretionary shares, particularly Tesla, which fell after unveiling lower-priced versions of its Model Y and Model 3 vehicles to revive slowing sales. Meanwhile, demand for safe-haven assets supported a record rise in gold prices, with futures surpassing 4,000 dollars an ounce. Broader market sentiment was dampened by ongoing political uncertainty in France, the US government shutdown, and expectations surrounding future Federal Reserve rate cuts, leaving investors balancing optimism over monetary easing against concerns about slowing growth and geopolitical instability.

Latest market and economic update

Most Asian shares declined on Wednesday, led by losses in Hong Kong as technology shares fell sharply. Japan’s recent rally cooled, with the Nikkei 225 little changed amid fiscal concerns over new leadership. Trading volumes were muted by holidays in China and South Korea, while broader markets weakened on tech softness and global risk aversion.

US equity futures were largely unchanged overnight after Tuesday’s declines, as the S&P 500, Nasdaq and Dow pulled back from record highs. Investor caution was driven by concerns over a potential reversal in the AI rally, highlighted by weaker cloud margins at Oracle, and the ongoing US government shutdown weighing on economic data and sentiment.

European equities were largely flat on Tuesday as investors monitored political developments in France. Sector performance was mixed, with energy and luxury shares outperforming. LVMH rose 1.7% and Kering gained 2% on an upgrade from Morgan Stanley, while Shell advanced 1.4%. Lagging shares included Novo Nordisk down 2.3%, ASML 0.8%, and Hermes 0.1%.

The US dollar rose to a two-month high as investors sought safe havens amid the government shutdown and global uncertainties. EUR/USD fell to 1.1619, reflecting political concerns in France and Japan, while the dollar gained against the kiwi after New Zealand’s surprise rate cut, with markets awaiting Federal Reserve guidance.

Oil prices rose in Asian trade this morning, with Brent up 0.7% to 65.91 dollars and WTI up 0.8% to 62.23 dollars per barrel. Gains followed a mixed US inventories report showing higher crude stocks but lower fuel reserves. Traders also weighed a modest OPEC+ output hike and record US production forecasts.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Tesla unveiled lower-priced versions of its Model Y and Model 3, starting at $39,990 and $36,990, aiming to boost sales amid rising competition and the loss of US tax credits. The Standard models offer over 300 miles range but fewer features. Analysts argue prices remain too high to attract new buyers or counter cheaper global rivals.

Dell has nearly doubled its annual profit growth target for the next four years, expecting adjusted EPS to rise at least 15% annually, up from 8%, driven by strong demand for AI servers. The company also raised its long-term revenue growth forecast to 7–9%, with infrastructure solutions leading, while client solutions growth remains modest at 2–3%.

Oracle shares fell as much as 7% on Tuesday after reports revealed its AI cloud server business operates on thin gross margins, but recovered to close just 2.5% lower. The company earned $900 million in revenue from Nvidia-powered server rentals in the three months to August, with gross profit averaging around 14–16%, raising concerns over AI expansion profitability.

Elon Musk’s AI startup xAI has doubled its planned fundraising to as much as 20 billion dollars, Bloomberg reported. The capital, including a 2 billion dollar equity investment from Nvidia, will fund the purchase of AI chips for xAI’s Colossus 2 data centre in Memphis. The round combines equity and debt, valuing xAI near 200 billion dollars.

Google plans to invest 10 billion dollars to build a 1-gigawatt data centre cluster in India, located in Visakhapatnam. The project will feature three campuses in Adavivaram, Tarluvada and Rambilli, highlighting Google’s expanding push into cloud infrastructure to meet rising digital demand in one of its fastest-growing markets.

Intel plans to reveal technical details of its Panther Lake laptop processor on Thursday, built entirely on its next-generation 18A process. Slated for early 2026, the chips target high-end laptops, offering up to 50% faster graphics and compute performance and 30% lower energy use compared with Lunar Lake, while showcasing Intel’s redesigned AI engine and processor cores.

PayPal shares rallied 4.7% on Tuesday after the company announced PayPal Ads Manager, a new platform allowing small businesses to earn money by displaying ads on their websites. Launching in early 2026 in the US, followed by the UK and Germany, it uses transaction data to target ads based on actual buying behaviour, helping merchants generate revenue more effectively.

Shell’s third-quarter update showed stronger liquefaction volumes, higher trading activity, and improved refining margins. Integrated gas guidance was raised to 7–7.4 million tonnes, while upstream production was 910,000–950,000 boe/d. Refining margins rose to $11.6 per barrel, with high utilisation. Cash flow before working capital is expected at $11.1 billion.

BMW has lowered its 2025 earnings forecast due to slower growth in China and US import tariffs, expecting a slight decline in group earnings before tax. Automotive ROCE is cut to 8–10% and high three-digit-million euro customs duty reimbursements delayed to 2026, reducing free cash flow to over 2.5 billion euros, while maintaining dividends and share buybacks.

Bank of America raised its price target for Taiwan Semiconductor Manufacturing to NT$1,600 from NT$1,400, citing improved pricing outlook and stronger earnings visibility through 2026. The bank lifted 2026/27 EPS estimates by 8–9%, expects a strong 2nm ramp with 24% revenue growth, and highlighted robust demand from non-Apple smartphones and high-performance computing clients.

Jefferies upgraded AMD to Buy from Hold with a new $300 price target, citing OpenAI’s plan to purchase up to 6 gigawatts of AMD hardware as a “multi-generational opportunity.” The brokerage raised 2026 and 2027 EPS forecasts to $6.30 and $9.32, highlighting accelerating AI demand and potential server market share gains for AMD.

Morgan Stanley upgraded LVMH and Kering to Overweight, citing a “creative supply shock” with new designers at Gucci, Bottega Veneta, and Dior. The shift towards bold, maximalist aesthetics could boost sales, supporting a gradual sector recovery in 2026. Hermès and Prada were downgraded to Equal-weight amid weak middle-income demand and currency challenges.

Morgan Stanley flagged softer-than-expected third-quarter results for Rheinmetall, citing delayed German budget approval, one-off impacts in Weapon & Ammunition and Vehicle Systems, low downpayments, inventory buildup, and high capital expenditure affecting free cash flow. The bank sees potential buying opportunities ahead of possible earnings upgrades.

Raymond James views October’s copper weakness as a buying opportunity ahead of stronger gains from November to April. Rising technical momentum and institutional buying signal an intermediate-term rally, with copper reclaiming key 50- and 200-day moving averages and potential upside to $5.22–$5.44 per pound.

Upcoming data and events

Today, US markets will focus on the FOMC meeting minutes and EIA crude oil inventories, providing insights into monetary policy and energy supply. In Germany, August’s industrial production data is scheduled, offering a gauge of manufacturing activity and economic momentum.

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