Shares decline amid rising yields

On Wednesday, Wall Street suffered its worst losses in over a month, with major indices declining as rising Treasury yields and a stronger dollar weighed on investor sentiment. The S&P 500 fell 53.78 points (–0.92%) to 5,797.42, the Dow Jones lost 409.94 points (–0.96%) to 42,514.95, and the Nasdaq Composite dropped 296.47 points (–1.60%) to 18,276.65. Similarly, European shares closed lower, with the Eurozone’s Stoxx 50 down 0.3% to 4,922, impacted by disappointing corporate earnings, notably L’Oreal's 2.5% decline due to weak Chinese demand. Despite this, Iberdrola's better-than-expected earnings provided a glimmer of hope, lifting its shares by 1.5%.

Summary for 24.10.2024

Most Asian equities fell on Thursday as rising U.S. Treasury yields pressured technology shares and weak economic data from several regional economies dampened sentiment. South Korea’s KOSPI declined 0.2%, and Hong Kong’s Hang Seng index dropped 0.7%. However, Japan’s Nikkei 225 rose slightly amid mixed economic indicators. Australia’s ASX 200 gained 0.3%, while China’s Shanghai Composite fell 0.4%.

European equities are anticipated to open higher today, reversing part of the losses of the previous day. Meantime, S&P and Nasdaq futures also rose on Wednesday evening after Tesla's stronger-than-expected Q3 earnings boosted sentiment. Wall Street's focus will now shifts to upcoming earnings from major tech firms, as well as key economic data amid ongoing market volatility.

Oil prices rose in Asian trade on Thursday, driven by heightened tensions after Israel's Defence Minister hinted at potential strikes on Iran. Concerns over Middle East conflict have been a key factor supporting crude prices, despite recent dips due to U.S. inventory builds and fears of slowing demand. Focus now shifts to U.S. and EU business activity data, which could influence outlooks for economic strength and crude demand.

Tesla's Q3 results exceeded expectations, with adjusted earnings per share of $0.72 and revenue of $25.18 billion, driven by improved margins and rising automotive sales. Gross margins rose to 17.05%, while its energy business achieved a record 30.5% margin. Despite concerns over competition, Tesla expects slight delivery growth in 2024 and plans to launch affordable models by 2025. Shares rose 12% post-announcement.

Boeing factory workers rejected a contract offer, extending a five-week strike that has halted production of key models like the 737 MAX, 777, and 767. CEO Kelly Ortberg, citing nearly $8 billion in losses this year, called for a "fundamental culture change" to address financial challenges, hinting at asset sales, downsizing, and equity offerings while acknowledging damage to the company’s reputation.

Apple shares fell over 2% after analyst Ming-Chi Kuo reported a reduction of 10 million iPhone 16 orders through H1 2025, mainly affecting non-Pro models, with production expected to drop year-on-year. Additionally, Apple has scaled back production of its Vision Pro headset due to weaker demand and accumulated inventory. The company now focuses on a more affordable version, expected by late 2025, as high prices hindered initial sales.

Nvidia CEO Jensen Huang confirmed a design flaw in its Blackwell AI chips, which delayed production, has been resolved with assistance from TSMC. The issue, causing low yields, led to a 2.8% drop in Nvidia shares. Despite earlier tensions, Huang praised TSMC’s role in resuming production. Blackwell chips, offering 30 times more speed, will now ship in Q4.

Lam Research Corp reported stronger-than-expected first-quarter earnings, with adjusted earnings per share of $0.86 and revenue of $4.17 billion, exceeding analyst estimates. Shares rose 5.6% following the report. For the second quarter, the company forecasts revenue between $4 billion and $4.6 billion and adjusted EPS of $0.77 to $0.97, both above analyst expectations. Gross margin improved to 48.0%.

ServiceNow raised its full-year guidance after reporting third-quarter results that surpassed Wall Street estimates, with adjusted earnings of $3.72 per share and revenue of $2.79 billion, beating expectations of $3.45 and $2.75 billion, respectively. Current remaining performance obligations rose 16% to $9.36 billion. For Q4, the company anticipates subscription revenue between $2.875 billion and $2.880 billion.

International Business Machines reported third-quarter adjusted earnings of $2.30 per share, exceeding expectations, but revenue of $15 billion fell short of the forecast of $15.04 billion, leading to a 4.5% decline in shares post-announcement. The Software segment performed well, with a 9.7% revenue increase, while the Infrastructure segment saw a 7% decline. IBM maintained its 2024 growth outlook and raised free cash flow guidance to over $12 billion.

Kering's Q3 revenue fell 16% to €3.8 billion, hit by declining demand in Asia-Pacific and Japan. Gucci's revenue dropped 25%, and Yves Saint Laurent's fell 12%, while Bottega Veneta saw a 5% rise. CEO François-Henri Pinault highlighted challenging market conditions and ongoing cost-cutting efforts. The company expects continued uncertainty, with 2024 operating income projected at around €2.5 billion.

Coca-Cola aims for the upper end of its 2024 organic sales forecast after robust U.S. demand led to a surprise rise in Q3 revenue. Despite a 12% increase in North American sales, shares fell 2% as CEO James Quincey cited volume declines in China and the Middle East. The company reported a 0.3% revenue increase to $11.95 billion and maintained its profit growth forecast.

T-Mobile exceeded expectations for Q3 by adding 865,000 postpaid subscribers, driven by discounted 5G plans bundled with streaming services. Over 60% of new customers chose premium plans like Go5G Next. The company raised its annual forecast for net customer additions to between 5.6 million and 5.8 million. Revenue hit $20.16 billion, with record free cash flow of $5.2 billion.

Hilton Worldwide reduced its annual room revenue growth and net income forecasts due to declining demand in China and disruptions in the U.S., despite steady demand in Europe and business travel. Shares fell 2%, while rival Marriott dropped 3%. Hilton's adjusted earnings were $1.92 per share, above estimates, but net income fell 9% to $344 million. The company projects 2024 room revenue growth of 2% to 2.5%.

AT&T added 403,000 net wireless subscribers in Q3, exceeding expectations, driven by the popularity of its higher-tier unlimited plans. The telecom's adjusted profit of 60 cents per share also beat estimates. However, total revenue of $30.2 billion fell short of forecasts, impacted by lower phone upgrades and a decline in its legacy fixed-line unit. AT&T anticipates increased phone purchasing activity in Q4.

Thermo Fisher Scientific raised the lower end of its annual profit forecast for the third time this year, now expecting earnings between $21.35 and $22.07 per share, up from a previous range of $21.29 to $22.07. Despite a slight revenue miss in Q3, the company reported strong sales in its laboratory products segment, driven by improved demand for drug development tools and services.

Boston Scientific's shares fell 0.6% in regular trading after the company raised its full-year earnings guidance. For Q3, it reported earnings per share (EPS) of $0.63, exceeding the $0.59 estimate, with revenue of $4.21 billion, above the $4.04 billion forecast. For Q4, EPS is projected between $0.64 and $0.66, while full-year EPS is now expected to be between $2.45 and $2.47.

GE Vernova Inc. reported mixed third-quarter results, with a loss of $0.35 per share, missing analyst estimates of $0.24 earnings, but revenue of $8.91 billion exceeded expectations. Shares rose by 1.25%. CEO Scott Strazik noted double-digit order growth and continued revenue expansion, while reaffirming its 2024 revenue guidance of $34-35 billion despite challenges in the Wind segment.

Vertiv Holdings raised its sales forecast for fiscal 2024 after reporting strong Q3 results, but shares fell about 4% in regular trading. The company posted earnings per share (EPS) of $0.76, exceeding the $0.69 estimate, with revenue of $2.07 billion, above the $1.98 billion projection. For Q4, EPS is expected between $0.80 and $0.84, while 2024 EPS is forecasted at $2.66 to $2.70.

Newmont, the world’s leading gold producer, reported third-quarter profits that fell short of Wall Street expectations, posting adjusted earnings of 81 cents per share against forecasts of 86 cents. Higher costs, driven by maintenance at its Lihir project and increased contract services, contributed to a 19.3% decline in production at Nevada Gold Mines, despite total output rising 29.2% to 1.67 million ounces. Shares dropped 6.6% post-announcement.

Enphase Energy shares fell over 14% after third-quarter results missed analyst expectations, with adjusted earnings per share at $0.65 and revenue of $380.9 million, down 30.9% year-on-year. The company forecasted fourth-quarter revenue between $360 million and $400 million, below the $435.2 million anticipated. Analysts downgraded the shares, citing cyclical weakness in key markets, despite a 43% sequential increase in U.S. revenue.

NextEra Energy Partners reported third-quarter earnings that fell short of analyst expectations, posting an adjusted loss per share of -$0.43 compared to a consensus estimate of $0.59. Revenue was $319 million, missing projections of $328.04 million. Despite the disappointing results, shares rose 1.5%. The company maintained its outlook for adjusted EBITDA, expecting a contribution of $1.9 billion to $2.1 billion from its forecasted portfolio by December 31, 2024.

O'Reilly Automotive tightened its 2024 profit and sales outlook, citing reduced demand for non-essential auto parts, leading to a 3.2% drop in shares. The company cut its comparable store sales growth forecast to 2.0%-3.0% and now expects full-year profit of $40.60-$41.10 per share, below analysts' estimates. Q3 profit and sales also missed forecasts, reflecting weaker demand across its segments.

Upwork's shares jumped over 25% after announcing a restructuring plan and strong preliminary Q3 2024 results. The company will cut 21% of its workforce, aiming to save $60 million annually, streamline operations, and enhance profitability. Preliminary revenue reached $194 million, beating forecasts, while adjusted EBITDA grew to $43 million. CEO Hayden Brown emphasised a focus on durable, profitable growth and operational efficiency.

Deutsche Bank raised its bad loan forecast amid a weak German economy, reporting a net profit of €1.461 billion in Q3, boosted by investment banking and a €440 million reduction in Postbank lawsuit provisions. However, shares fell 3%. The bank increased its credit loss provision estimate to 38 basis points for 2024, citing integration challenges at Postbank and stagnating economic conditions.

Citi analysts recommend buying Microsoft shares following a recent pullback, citing potential upside in the coming quarters. Despite concerns over high capital expenditure and slower Azure growth, surveys indicate stability among resellers. The analysts expect modestly better second-quarter results and believe lowered expectations could lead to positive surprises. They also adjusted estimates for Office 365 growth but remain above consensus for fiscal years 2026 and 2027.

Porsche's shares rose after Citi Research upgraded the luxury automaker from "neutral" to "buy," reflecting optimism for a turnaround in 2025 despite challenges in 2024, including declining demand in China. Citi projects improved sales and profitability from new model launches, revising its price target to €85. Analysts foresee a 26% upside in the shares, citing Porsche’s focus on high-margin models and brand strength.

RBC Capital initiated coverage of Oracle Corporation with a Sector Perform rating and a $165 price target, citing concerns about rising competition and the sustainability of recent growth drivers, particularly in Oracle Cloud Infrastructure (OCI) and generative AI. While Oracle's database business remains strong, analysts are cautious about OCI's future and the ability to compete with larger hyperscale vendors. Despite optimism for Oracle Fusion, they noted slower EPS growth compared to peers.

B Riley analysts have initiated coverage of Coinbase with a Neutral rating, citing valuation concerns and regulatory uncertainty, while setting a 12-month price target of $185. They acknowledge Coinbase's position as a leading crypto exchange and highlight the ongoing shift towards digital currencies. However, they expect COIN shares to remain range-bound until clearer regulatory signals and more stable profit growth emerge.

Peloton shares surged nearly 11% to $6.27 on Wednesday after Greenlight Capital’s David Einhorn deemed them significantly undervalued at the Robin Hood Investors Conference. Greenlight had acquired 6.8 million shares in August, boosting the equity. Peloton also recently partnered with Costco and shifted focus towards profitability following debt refinancing.

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