- Dow Jones Industrial Average is down 0.4%
- S&P 500 is down 0.4%
- Nasdaq 100 is down 0.6%
US futures are trading lower today as markets raise their bets that the Federal Reserve isn’t done hiking rates and respond to another rise in US 10-year treasury yields, which have hit new 16-year highs of around 4.735% and is sapping sentiment in the equities market.
Traders have increased their bets that we will see another rate hike before the end of the year following speeches from Federal Reserve officials yesterday. Markets now see around a 26% chance of a 25bps increase in November, up from around 18% a couple of days ago, according to the CME FedWatch Tool. Loretta Mester said one more hike could be needed this year before they peak, although stressed the Fed’s manoeuvring is still at the behest of economic data. That followed on from Michelle Bowman saying earlier this week that multiple more hikes could be needed.
Vice chair Michael Barr and chair Jerome Powell said the central bank is now in a position where we can “proceed carefully”. Barr said the “most important question” right now is not about whether we will see one more rate hike, but how long rates will need to remain elevated to bring inflation down. Markets have already scaled back their expectations for rate cuts next year as the higher for longer message starts to get through.
The headline events in the economic calendar today are JOLTs job openings for August and IBD/TIPP economic optimism for October. There is also the API crude oil stock change for the week to September 29 later.
Oil prices slide back below $90
Oil prices are falling for a fourth consecutive day as the recent rally that sent the commodity to an 11-month high eases. Brent has fallen back below the $90 threshold today while WTI is trading at $87.50. Prices are still up around 28% over the past three months despite the recent pullback.
That comes ahead of an OPEC+ meeting tomorrow, when there is not expected to be any change in policy. UAE energy minister Suhail al Mazrouei said the group has “the right policy” on Monday. The market is expected to remain tight for the remainder of 2023 as Saudi Arabia and Russia extend production cuts while US inventories keep declining.
Gold hits 6-month low
Gold prices continue to slump, with the metal sliding for a seventh consecutive session today and at six-month lows.
“Gold is the most oversold it’s been since August 2018 on the daily, suggesting it’s not just soaring real bond yields and US dollar that’s tarnishing its performance. Given how erratic the bearish unwind has become, it points to possible forced liquidations, potentially to cover losses in other asset classes which have fared even worse in the current environment,” said our analyst David Scutt.
You can find his insight, as well as his technical analysis, in Gold is the Most Oversold Since 2018.
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:
- Marathon Digital
- Eversource Energy
- NextEra Energy
Most active US stocks before the bell
Below are the most active stocks with a valuation of at least $500 million before the bell, based on trading data taken from Bloomberg:
- MSP Recovery
- Point BioPharma
- Lucid Group
- Ginkgo Bioworks
- Marathon Digital
US premarket winners and losers
Here are the stocks worth at least $500 million experiencing the sharpest movements in premarket trade, according to data from Bloomberg:
P3 Health Partners
Clean Energy Fuels
Top US stocks to watch
Let’s have a look at the top stocks to watch today.
Tesla stock avoids selloff after big delivery miss
Tesla shares are down 1.1% this morning. The electric carmaker initially lost ground after reporting a big delivery miss yesterday but recovered by the end of the day and closed higher.
Tesla delivered 435,059 vehicles in the third quarter of 2023, which was well below the 456,772 forecast by Wall Street. The miss is all the dramatic considering Wall Street raced to cut estimates from over 473,000 last month and 460,000 just last week. Tesla finally started to work through some of its existing inventory in the first quarter as deliveries outpaced production for the first time in six quarters. Still, there is a lot of inventory to work through following the buildup we have seen over the past year or so. That may raise questions as to why deliveries didn’t perform better despite the disruption to production.
The fall in output in the third quarter is largely being blamed on factory downtime. However, the sequential decline in deliveries and elevated inventory levels will stoke fears that demand is under pressure and heighten concerns that more price cuts will be needed to drive demand going forward.
You can read more of our insight and see our technical analysis in Tesla Reports Big Delivery Miss.
Rivian stock falls despite delivery beat
Rivian shares are down 1% before the bell. The electric vehicle maker initially jumped after delivering more electric vehicles than anticipated in the third quarter but reversed course and closed down after some were left disappointed it didn’t raise its full year outlook and others took the recent surge in its share price into account.
Rivian delivered 15,564 vehicles in the latest quarter, ahead of the 14,973 forecast by analysts. That was more than double what it produced the year before and was up about one-fifth compared to the previous quarter. It said it remains on course to deliver 52,000 vehicles over the full year, which left some analysts disappointed considering the consensus stood at 53,654.
The fact Rivian shares had risen over 18% in the week running up to the delivery numbers being released also set a high bar.
Microsoft accuses Apple of being a kingmaker in Google trial
Alphabet, which is down 0.5% today, is currently undergoing an antitrust trial about its dominance in the search industry through Google. One of the accusations on the table is that Google pays significant sums to Apple to ensure Google remains the default search engine. Apple shares are down 0.6% this morning.
As a result, the CEO of Microsoft, which is trying to shake Google’s monopoly, Satya Nadella is testifying and said yesterday that it offered to provide Bing without its brand on Apple phones in an attempt to increase competition in the market. “Whomever they choose, they king-make,” Nadella said about Apple’s selection of what search engine is used on its iPhones and other devices. Nadella said Microsoft has repeatedly tried to become the default search engine on Apple devices.
Nadella didn’t just lay into Apple, but also said that Google’s dominance will allow it to gain a similar advantage in new breakthrough areas like AI. He claims Google will be able to use its monopoly to fund payments to publishers in order to secure exclusive content to gain an advantage for its AI tools over that of rivals. Microsoft is down 0.6% in premarket trade.
Is Meta considering ad-free subscriptions?
Meta shares are down 0.1% on reports it is considering introducing ad-free subscription plans for Instagram and Facebook, according to an unnamed source speaking to Reuters. Several pricing plans have been discussed, but one at around EUR10 is seen as the most feasible, the source said.
The move is thought to be part of a proposal for Meta to try and get around new EU regulations that threaten to limit its ability to personalise ads for users without their consent, threatening a vital revenue source.
NVIDIA stock hits 2-week high
NVIDIA shares are up 0.2% at $448.60 and set to open at their highest level in over two weeks today as brokers give markets fresh confidence that it can keep rallying higher despite the pullback we have seen since the start of August.
The stock, which is on course to gain ground for a fifth consecutive session today, unsuccessfully tested the 50-day moving average at $449.50 yesterday and is looking to move above this level today.
KeyBanc Capital reiterated its Overweight rating on the stock and bumped-up its target price to $750 from $670. That followed on from Goldman Sachs adding NVIDIA to its Conviction List yesterday and issuing a $605 price target.
Birkenstock IPO next to test appetite for new listings
German sandal maker Birkenstock is set to become the next big name to test the waters by launching an IPO, hot on the heels of recent listings from Arm, Instacart and Klaviyo.
Birkenstock is expected to go public as soon as this week or next and has said it will price its shares between $44 to $49 each. At the top-end of that range, the IPO will raise about $1.6 billion and give Birkenstock a valuation of around $9.2 billion. Birkenstock will receive about one-third of the proceeds and plans to use them to pay-down debt, with the rest going to its current owner, private equity firm L Catterton. You can find out more in Everything You Need to Know About the Birkenstock IPO.
Recent listings have had a tough time since going public. Instacart is up 0.7% at $27.15 and is now trading below its IPO price just weeks after listing. Arm has also slipped below its IPO price of $51 but is holding-up just above here today, with the chip designer down 0.7% at $51.90. Email marketing specialist Klaviyo is also falling back toward its listing price and is trading broadly flat at $33.50 today.
It is also worth noting the performance of Vietnamese electric vehicle maker VinFast, which is down over 10% at $8.73 today. The stock, which went public through a SPAC merger on August 15, opened at $22 per share when it went public but has now sank below $10! That means we have seen the company’s valuation go from $23 billion under the SPAC deal, to $65 billion when it listed, to almost $160 billion when it peaked in late August, all the way back toward $23 billion today. That is a mighty bubble that quickly inflated and then burst within just a matter of weeks – and many investors will have been burned in the process.
Point Biopharma jumps on Eli Lilly takeover
Point Biopharma Global has popped to its highest level since March 2021 today at $12.32 after it announced it has agreed to be taken over by pharma giant Eli Lilly, which is trading broadly flat today.
Eli Lilly is paying $12.50 per share, marking an 87% premium to Point Biopharma’s last closing share price. The deal is set to close before the end of 2023.
“Over the past few years, we have seen how well-designed radiopharmaceuticals can demonstrate meaningful results for patients with cancer and rapidly integrate into standards of care, yet the field remains in the early days of the impact it may ultimately deliver,” said Jacob Van Naarden from Eli Lilly. “We are excited by the potential of this emerging modality and see the acquisition of POINT as the beginning of our investment in developing multiple meaningful radioligand medicines for hard-to-treat cancers, as we have done in small molecule and biologic oncology drug discovery and development.”
Boeing sets record 737 goal
Boeing shares are down 0.3% amid news it plans to raise production of its 737 jet to a record of at least 57 per month by July 2025, according to an exclusive report from Reuters. That would see it hit a goal that was missed several years ago, when the problems with MAX disrupted operations.
The report said the goal was outlined in a master schedule provided to suppliers and was confirmed by unnamed sources. The current plan is aiming for output of 737s to hit 42 per month by December 2023.
Visa to invest $100 million into generative AI
Visa shares are flat this morning. The payments giant announced yesterday that it is investing $100 million into new generative AI ventures with the hope of backing the next generation of companies working on the technology.
The payments giant recently hit three-week lows and is trying to find some new momentum. We have seen the 200-day moving average at $229 provide some support in recent sessions, including yesterday. The immediate upside target is a return above $233.
HP pops on double upgrade
HP shares are up 2.5% at $26.30 after receiving a double-upgrade to Buy from Underperform by Bank of America this morning, raising its target price to $33 from $25.
The broker said it believes depressed demand for personal computers is bottoming-out and that cost-cutting efforts should support margins. It said buybacks also provide scope for earnings per share to improve. HP shares have underperformed lately and have been in decline for seven straight weeks, with markets having been spooked by weaker cashflow and news that Berkshire Hathaway has been selling HP shares and reducing its stake.
Is Warner Music stock a buy?
Warner Music is up 3.5% at $32.18 after two brokers said there is a buying opportunity following the recent selloff, with the stock down over 7% since the start of September.
JPMorgan said the recent underperformance versus its rival UMG could present an attractive opportunity for investors, citing that Warner Music has seen an acceleration in business momentum thanks to price increases and a renewed deal with social media platform TikTok. It reiterated its Overweight rating and set a $40 price target.
UBS upgraded its rating to Buy and raised its target price to $37 from $34 this morning, stating that the recent pullback is a buying opportunity and that Warner Music will be a beneficiary of secular music trends.
NextEra stock selloff sends it to 3-year low
NextEra Energy is down 1.1% at $51.60 and set to open at its lowest level since March 2020 following a recent selloff, which gained momentum yesterday after Goldman Sachs cut its price target on the energy stock to $72 from $83 and said it was worried about its ability to find capital investment.
The warning about its financial viability really spooked the markets even though the broker’s target price implies significant upside potential following the recent selloff. Daily trading volumes hit their highest level since 2012 yesterday and the stock has not been this oversold since 1999, according to the RSI.
The selloff that has really gained traction over the past week comes after NextEra lowered its growth guidance over the next three years. NextEra said that the lower pace of growth means it won’t need fresh equity until 2027.
Bitcoin pulls back below $28,000
Bitcoin’s rally that sent the cryptocurrency to a six-week high and back above $28,000 yesterday was short-lived, with prices having pulled back and trading at $27,600 this morning. That is feeding through to crypto stocks, with Marathon Digital and Riot Platforms both trading down 1.2% today.