- Dow Jones Industrial Average is up 0.9%
- S&P 500 is up 1.2%
- Nasdaq 100 is up 1.4%
US futures are on the rise today as markets find some much-needed optimism, driven by hopes that the Federal Reserve could be done with hiking interest rates after leaving them unchanged yesterday. Chair Jerome Powell refused to rule out more hikes in the future but bolstered theories that elevated bond yields could help the central bank by weighing on the economy and requiring less tightening.
Yields on 10-year US government bonds have eased in recent days, helping provide further support to growth and tech stocks, but remain elevated after hitting 16-year highs last month.
Traders have now reduced their bets on another interest rate increase in December, as well as January. Overall, bets that the Fed is done hiking altogether have increased, according to the CME FedWatch tool.
We discovered this morning that US initial jobless claims rose by 217,000 in the week to October 28, which accelerated from the 212,000 rise we saw the week before and came in higher than the 210,000 rise anticipated by economists. That shows more people than expected are claiming unemployment and suggests the labour market is weakening, albeit slowly.
That comes ahead of the more closely-watched non-farm payrolls, hourly earnings and unemployment data out tomorrow, when we also have PMIs on tap. The economic calendar is quiet for the remainder of today, with US factory orders the only notable event to watch.
Over the Atlantic, the Bank of England also kept interest rates unchanged at a meeting today, warning that the UK economy will flatline until 2025 after cutting its forecasts, adding to fears that rates could remain higher for longer than previously predicted. Governor Andrew Bailey also said more hikes could be yet to come but stressed its all data dependent and that it is “much too early to be thinking about rate cuts”.
Meanwhile, earnings season continues at pace as results keep flooding in. The vast majority of companies in the S&P 500 that have reported so far have beaten expectations but more companies have tempered their guidance than raised it, according to FactSet, suggesting the outlook is becoming more challenging. The headline update to watch out for today comes from the world’s most valuable publicly-listed company when Apple reports results after the closing bell.
Elsewhere, oil prices hit their lowest level in almost a month today, with Brent hitting $84.80 and WTI at $80.40. They have slowly fallen back since spiking in light of rising geopolitical tensions in the oil-rich Middle East. Gold is up 0.4% today at $1,990 an ounce but has pulled back since peaking at six-month highs last week.
Bitcoin is down 0.2% today and falling from 18-month highs today following a stellar rally over the past two weeks, fuelled by hopes that a Bitcoin exchange-traded fund will soon hit the market.
Most discussed Reddit stocks
Below is a list of the top 10 most mentioned US stocks on the WallStreetBets thread on Reddit over the last 24 hours, according to data from Quiver Quantitative. Exchange-Traded Funds (ETFs) and other instruments have been excluded:
- Jacob’s Solutions
Top US stocks to watch
Let’s have a look at the top stocks to watch today.
Apple stock: Q4 earnings preview
Apple shares are up 1.2% and at a two-week high as markets brace for fourth quarter results out after markets close today.
Eyes will be on how strong initial demand has been for the new iPhone 15, especially in China amid concerns it has fallen out of favour amid the rise in popularity of the new Huawei Mate 60 series and heightened geopolitical tensions between the US and China.
Apple has already warned that revenue will be down for a fourth consecutive quarter in the final three months of its financial year. Sales of its flagship iPhone, which accounts for about half of its revenue, are predicted to rise 2.3% from last year and services growth is accelerating, but that will not be enough to counter the ongoing weakness in demand for iPads, Macs and wearables. Wall Street hopes new products can revive growth in the new financial year, so Apple’s outlook will be closely watched.
You can find out what you need to know in our Apple Q4 Earnings Preview.
Qualcomm rises on hopes smartphone lull is ending
Qualcomm shares are up 3.9% this morning and at their highest level in three months after beating expectations in the fourth quarter and raising hopes that the lull in demand for smartphones is bottoming-out.
Revenue was down 24% from the year before at $8.63 billion and adjusted EPS was down 35% at $2.02. Sales fell less than anticipated and earnings were higher than the $1.91 estimate, while its outlook for the first quarter of the new financial year was rosier than expected. It is targeting quarterly sales of $9.1 billion to $9.9 billion, with the midpoint coming in above the $9.2 billion forecast. Its adjusted EPS goal of $2.25 to $2.45 was also ahead of the $2.23 pencilled-in by analysts.
The impressive outlook helped allay fears about Qualcomm’s prospects that have been dogged down by the slump in demand for consumer electronics and rising competition from firms like Huawei and Samsung.
Several brokers raised their target price on Qualcomm this morning, including Susquehanna to $140, Morgan Stanley to $119, JPMorgan to $140 and Bernstein to $145.
Other chips stocks are on the rise this morning too as hopes rise that the soft demand for other consumer electronics, such as PCs, is also hitting the trough following recent results out from companies like AMD and Intel, which are both down in early trade today. Meanwhile, AI favourite NVIDIA is up over 2%.
Palantir impresses with outlook and AI demand
Palantir is up almost 20% today after beating expectations and providing a solid outlook as it starts to see significant demand for its new AI products.
The company reported a 17% year-on-year rise in revenue in the third quarter to $558 million and this was just above estimates. It delivered its fourth consecutive quarter of profits. Notably, revenue from sales to the US government and its allies grew 12%, falling short of the 15% forecast as budgets tightened. This was countered by stronger 23% growth from commercial customers, with US companies fuelling the expansion.
Palantir raised its annual sales outlook and said fourth quarter sales should be between $599 to $603 million, providing upside potential from the $600.5 million pencilled-in by analysts.
Palantir said the number of clients using its new AI platform almost tripled in the third quarter from the second and that it has seen strong demand for ‘AI bootcamps’ that provide clients with access to new AI tools for one to five days, saying that around 140 customers will have signed-up by the end of November.
PayPal ups outlook as consumers keep spending
PayPal shares are up 3.6% after earnings came in higher than expected in the latest quarter thanks to the ongoing strength of US consumer spending, allowing it to raise its outlook.
The company said total payments volumes grew 15% in the third quarter, just ahead of the 14% forecast. Net revenue climbed 9% to $7.4 billion and met expectations while the 20% rise in adjusted EPS to $1.30 beat the $1.23 forecast.
PayPal also announced it is appointing Jamie Miller as its new chief financial officer, having most recently been the CFO of EY. That came as it said it is now expecting to deliver adjusted EPS of around $4.98 this year, up from the previous goal of $4.95 and ahead of the $4.92 forecast by Wall Street.
PayPal also said it has received a subpoena from the Securities & Exchange Commission in relation to its US dollar stablecoin.
Disney to buy Comcast out of Hulu
Disney is up 1.3% after making its long-anticipated move to take full control of streaming platform Hulu by buying the 33% stake owned by its partner and rival Comcast, which is up 1.2%.
Hulu was last valued at $27.5 billion back in 2019 and Disney is hoping to pay $8.61 billion for the 33% stake as a result. However, Hulu will now be valued again and Disney could have to pay considerably more depending on what sort of price tag is put on the platform, with reports suggesting Comcast sees it being worth a total of around $60 billion! Disney should fully acquire Hulu sometime during 2024.
Roku rises as growth and profitability improve
Roku shares are up over 19% this morning at $70 and at a three-week high as it grows faster than analysts had anticipated and makes quicker progress with its cost-cutting efforts.
The streaming stock said revenue rose 20% in the latest quarter to $912 million and this smashed the $855.2 million expected by analysts. It reported its fourth consecutive quarter of adjusted Ebitda losses, this time of $34.4 million, but it said it is predicting a profit of $10 million in the fourth, which impressed considering analysts thought it would remain loss-making. Its revenue target of $955 million was also rosy versus the $952 million forecast.
Roku said it remains cautious of the uncertain macro environment, an uneven recovery in the advertising market and tougher comparatives but raised its guidance on hopes its cost-cutting efforts, including headcount reduction, will improve returns on investment and boost profitability, with the firm aiming to deliver annual positive adjusted Ebitda in 2024.
Several brokers upped their view on Roku in wake of the update, including Wells Fargo to $77, Susquehanna to $100 and DA Davidson to $101. Oppenheimer lowered its more optimistic target to $100.
Shopify returns to profit on deep cost reductions
Shopify is up over 16% this morning and at its highest level in over a month after swinging to a profit in the third quarter, helped by a sharp reduction in costs.
The ecommerce giant said revenue rose 25% to $1.71 billion in the quarter, just ahead of the $1.67 billion forecast. EPS of $0.55 turned from a $0.12 loss the year before as expenses plunged almost 23%! It delivered its fourth consecutive quarter of positive free cashflow too.
Shopify said it is expecting fourth quarter revenue to grow by a high-teens percentage. That would suggest things are slowing down but Shopify reminded investors that it will be facing its toughest comparatives of the year in the period.
Novo Nordisk and Eli Lilly beat on success of new drugs
Pharmaceutical giants Eli Lilly and Novo Nordisk are both on the rise this morning after the pair beat expectations in the latest quarter thanks to strong demand for their diabetes and weight loss drugs.
Eli Lilly is up 4.5% after reporting a 37% jump in revenue in the third quarter to $9.50 billion and this smashed the $8.95 billion forecast. Sales of its diabetes drug Mounjaro exploded to $1.41 billion from just $187 million the year before and that came in above the $1.26 billion estimate. Adjusted EPS plunged 95% from last year to $0.10, but this was welcomed considering analysts had anticipated a loss. Still, Eli Lilly lowered its annual adjusted EPS view to $6.50 to $6.70 from its previous goal of $9.70 to $9.90, partly because it has struggled to keep supplies up with demand for Mounjaro and because of charges related to acquisitions.
Danish firm Novo Nordisk is up 4.5% and testing all-time highs after it reported a 29% rise in revenue in the quarter to DKK58,731 million and this also beat the DKK57,632 million expected by analysts. Operating profit also grew faster than anticipated.
Moderna sales to fall as it develops new drugs
Moderna shares are down 14.7% today and at levels last seen in 2020 after tempering its annual sales outlook and warning revenue will fall in 2024, while warning it will also remain in the red until 2026!
The company, which currently only sells its Covid-19 vaccine, said it is now anticipating annual sales of about $6 billion in 2023, at the bottom-end of its $6 billion to $8 billion guidance range. It warned this will fall to about $4 billion in 2024 as demand for Covid-19 jabs wanes but said it expects to return to topline growth in 2025, with the view of escaping the red by breaking-even in 2026.
Revenue of $1.8 billion in the latest quarter was much better than the $1.3 billion forecast by analysts. Moderna is hoping to launch two or three new products in addition to its new Covid-19/flu combo vaccination that it hopes can propel growth over the coming years, although 2024 looks like it could be a low point for Moderna as it transitions to a more diverse portfolio of drugs.
Starbucks seen as affordable luxury for consumers
Starbucks is up 9.9% and at a two-and-a-half month high after sales grew faster than forecast in the latest quarter, helped by price increases and strong interest in new products, from its renowned Pumpkin Spice Latte to its new breakfast, wrap and bakery items.
Global comparable sales rose 8% in the fourth quarter of its financial year, ahead of the 6.6% rise expected by Wall Street. Adjusted EPS of $1.06 came in ahead of the $0.97 forecast. US same-store sales rose 8% but China was a bit of a disappointment after rising just 5% following that 46% surge we saw in the previous quarter, implying hopes of a strong recovery could be overdone.
Marriott benefits from higher prices and resilient demand
Marriott International is down 2.6% despite seeing revenue and profits both grow in the latest quarter thanks to higher prices and durable demand for travel. The stock is at its lowest level in almost four months today.
The hotelier said revenue rose 12% in the third quarter to $5.93 billion and that EPS climbed to $2.51 from $1.94 the year before. Adjusted EPS of $2.11 was in line with forecasts.
Revenue per available room was up 8.8% from last year and Marriott said it is now expecting the annual figure to grow 14% to 15% this year, up from its previous range of 12% to 14%. Marriott said international travel activity increased, bolstering occupancy and allowing it to capitalise more from higher prices.
Airbnb sees greater uncertainty around travel demand
Airbnb is down 2.5% at $116.17 after beating expectations in the latest quarter, but warned that it is seeing “greater volatility” in the fourth quarter as it starts to see bigger risks to demand for travel, leading its outlook to fall short of estimates.
The company said revenue rose 18% in the third quarter to $3.4 billion and adjusted EPS of $2.43 came in above the $2.10 forecast. However, its outlook for $2.13 billion to $2.17 billion of sales in the fourth quarter was shy of the $2.18 billion pencilled-in by analysts.
The Asia business returned to pre-pandemic levels thanks to a strong recovery in China and Latin America continued to lead the way in terms of growth, although conditions remain much tougher in the US.
Several brokers lowered their view on Airbnb today, including Piper Sandler to $123, Baird to $130, TD Cowen to $125, JPMorgan to $118, Evercore ISI to $136, Needham to $150, Morgan Stanley to $105, Wedbush to $135 and Goldman Sachs to $114.
Tesla sees China output fall in October
Tesla is up 3.7%. The company produced 72,115 vehicles from its biggest factory in China during October, down about 2.6% from the previous month, according to the latest figures from the China Passenger Car Association.
That suggests production could still be struggling following the big miss we saw in the third quarter and that could stoke more concerns about demand, especially as major rivals saw growth. The data showed BYD sales of electric vehicle and hybrids surpassed 300,000 in October and rose 5% from what we saw in September. That could mean Tesla has lost further ground after Reuters reported that Tesla’s market share in China dwindled to 9.89% in the third quarter from 12.98% in the second.
Concerns about demand are growing as several companies from the industry supply chain warned they are seeing softer demand as we approach 2024. Tesla is already prioritising growth by cutting prices and sacrificing its margin, but it appears Tesla is now growing slower and boasting smaller margins than some rivals like BYD in a tough environment.
DoorDash grows sales and profit faster than expected
DoorDash is up over 13% at $86.14, marking a three-month high, after the company grew sales and adjusted earnings faster than expected as demand for deliveries of everything from food to groceries remains strong in a challenging environment for consumers.
The company said revenue was up 27% in the latest quarter to $2.16 billion, coming in ahead of the $2.09 billion forecast. Adjusted Ebitda jumped to $344 million from just $87 million the year before, although it remained deep in the red at the bottom-line.
DoorDash said it is anticipating adjusted Ebitda of $320 million to $380 million in the fourth quarter, which smashed the $253 million predicted by Wall Street.
“Excellent execution and continued investment allowed us to serve more consumers on more occasions than at any time in our history in Q3 2023, which drove strong year-over-year growth in total orders, marketplace GOV, and revenue in the quarter,” said DoorDash.
Several brokers upped their view on DoorDash today, including Citigroup to $113, Barclays to $95, Wedbush to $92, Truist Securities to $130 and JPMorgan to $96.
Theme park operators Cedar Fair and Six Flags to merge
Cedar Fair is down 1% while Six Flags is up 3.8% after the two theme park operators said they are planning a “merger of equals” to create a new powerhouse in the industry, boasting 42 parks and nine resorts across the US, Canada and Mexico.
The deal gives the combination an enterprise value of $8 billion including debt. Cedar Fair shareholders will receive one share in the new company for each one they currently own, while Six Flags shareholders will receive 0.58 shares for each one they hold. That will see Cedar Fair investors own 51.2% of the new combined business, with the rest owned by Six Flags shareholders. Six Flags will pay a special cash dividend worth $1 per share ahead of the completion.
The pair see around $200 million in annual synergies through the deal, with $120 million worth of cost savings to be locked-in within the first two years of the deal closing. The merger will also boost EPS within the first 12 months.
Peloton disappoints yet again
Peloton is up 2.1% but is still lingering not far above all-time lows after the exercise equipment and software company issued a disappointing sales outlook and reported its eleventh straight quarter of losses, further denting confidence in its turnaround plan.
Peloton’s exercise equipment has fallen out of favour since booming during the pandemic and sales fell 13% to $180.6 million, countered only by tepid 0.7% growth in its subscription revenue to $415 million. Its outlook for $715 million to $750 million of sales in the final three months of 2023 was also weak compared to the $763.3 million forecast by analysts.
Peloton has revamped its strategy over the past year, shifting more equipment through partners and retailers and moving its focus onto higher-margin services. Peloton said it is aiming to return to revenue growth in the second half that will begin in 2024, when it also hopes to start reporting positive adjusted Ebitda and positive free cashflow. It is then targeting breakeven on an annual basis in the 2025 financial year.