- Dow Jones Industrial Average is up 0.3%
- S&P 500 is up 0.2%
- Nasdaq 100 is up 0.1%
US futures are trading higher this morning as the latest economic data didn’t offer any unwelcome surprises to deter from the dovish commentary from several Fed members that has kept markets in a positive mood this week.
US CPI and core inflation both rose 0.3% from the previous month in September as expected.
That meant CPI was 3.7% higher than a year ago, with core inflation up 4.1%. The annual rise in core inflation was the lowest reading seen since 2021.
US initial jobless claims
US initial jobless claims increased by 209,000 in the week to October 7. That was a mild uptick from the 207,000 rise we saw in the previous week but just shy of the 210,000 forecast once again.
The inflation and jobs data is likely to underpin the higher for longer narrative from the Federal Reserve, but without denting new hopes that the Fed may be done hiking interest rates, at least for now.
Oil prices rise as OPEC reiterates demand outlook
Oil prices have reversed course today and are now climbing higher after OPEC stuck to its forecasts that oil demand will see strong growth in 2023 and 2024. It said it expects global demand will rise by 2.25 million barrels by day in 2024, in-line with the predictions issued a month ago. That is reinforcing expectations that the oil market will remain tight. Brent is up 1.9% today at $86.70 while WTI is up 1.8% at $83.60.
Notably, we have EIA crude stocks oil change data out later.
Gold prices hit 2-week high
Gold prices continue to push higher, trading up 0.4% today at a two-week high of $1,882 per ounce, as appetite for safe haven assets increases in light of rising geopolitical tensions and treasury yields continue to ease.
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:
- Lockheed Martin
- Eli Lilly
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:
- Delta Air Lines
- Walgreens Boots Alliance
- Plug Power
- American Airlines
- AMC Entertainment
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:
Alpha Metallurgical Resources
Green Brick Partners
Clean Energy Fuels
Top US stocks to watch
Let’s have a look at the top stocks to watch today.
Birkenstock IPO: No flip and all flop
German sandal maker Birkenstock launched its IPO yesterday at $46 per share but immediately came under pressure upon listing, opening at just $41 and closing the first day of trading down 12.6% at $40.20! That means its IPO valuation has fallen from $8.3 billion upon listing to under $7.6 billion at the end of play yesterday, and that investors can buy shares at a cheaper price compared to those that invested in the IPO. Birkenstock shares are up 0.7% before the bell today at $40.46.
The company decided to price its IPO at the middle of its price range, but this still gave Birkenstock a large premium valuation over other footwear brands. Markets disagree and don’t believe the 120-year old footwear brand deserves a higher multiple, suggesting the company and the banks that advised it on its listing set the bar far too high. Even after the slump yesterday, Birkenstock is trading at a sales ratio of over 6.0x – while others like Nike, Puma, Deckers, Crocs and Skechers all trade at between 1.0x to 3.0x. Birkenstock’s PE ratio is also higher.
You can find out more in Everything You Need to Know About Birkenstock.
While none of the major IPOs in recent weeks and months have set the market alight, Birkenstock is the first major addition that has slumped immediately upon trading and will add to woes that appetite for new listings remains subdued. Grocery tech firm Instacart continues to trade below its IPO price, while Arm and Klaviyo have struggled to gain significant ground since going public.
Eli Lilly pops to all-time highs on weight-loss drugs
Eli Lilly is up 0.2% and set to open at a fresh all-time high today as markets get increasingly excited about the prospects for diabetes drugs. The stock has spiked higher for seven consecutive sessions, during which it has popped 16%.
The renewed optimism we have seen has been largely driven by its European rival Novo Nordisk, which is down 0.3% today after surging higher yesterday when it revealed a recent trial of its blockbuster Ozempic drug showed early success in treating kidney failure in patients with diabetes. That has also raised hopes that Eli Lilly, which makes its own diabetes drug named Mounjaro, will also benefit.
The emergence of drugs like Ozempic and Mounjaro is not good news for all. News that Ozempic could treat kidney failure delivered a heavy blow to companies that provide dialysis treatment over fears they will see fewer patients as the drugs take-off, causing DaVita to suffer its biggest daily fall in over a year and sink to six-month lows while Baxter International also took one of its biggest daily hits on record and closed at levels not seen since 2015! DaVita is rebounding 2.1% this morning while Baxter International is up 0.2%.
UAW strike hit Ford’s biggest plant
Ford shares are down 2.4% today after the United Auto Workers union expanded strike action to the company’s largest and most profitable plant in Kentucky, raising the stakes as the big three automakers in Detroit continue negotiating.
Almost one-quarter of the UAW’s 150,000 members that work at Ford, General Motors and Stellantis are now on strike and reports suggest the walk-out in Kentucky serves as a warning to GM and Stellantis as talks continue. That suggests strike action could continue to escalate unless the big three manage to strike a deal.
General Motors is down 0.9% while Stellantis is down 0.8%.
Streaming stocks fail to strike deal with Hollywood actors
Netflix and Disney are both up 0.2% to 0.4% this morning despite the latest talks held between studios and actors that are part of the striking SAG-AFTRA union breaking down yesterday.
The Alliance of Motion Picture & Television Producers, which represents both streaming stocks and other media companies, said the gap between the companies and the union is “too great, and conversations are no longer moving us in a productive direction”. The union responded and said it negotiated in “good faith”, claiming an offer that was tabled last week was less valuable than a previous offer. SAG-AFTRA said “industry CEOs have walked away from the bargaining table after refusing to counter our latest offer”.
Actors have been on strike since July. Studios have managed to get writers back to work after striking a deal last month but needs to get actors back on side to get Hollywood roaring again.
Delta Air Lines lowers outlook on higher fuel costs
Delta Air Lines is up 2.4% after it trimmed its full year guidance because of higher fuel costs, although investors were pleased with a beat in the latest quarter thanks to the buoyancy in demand for travel.
The airline said it now expects adjusted EPS of $6.00 to $6.25 this year, narrowing the range from its previous goal of $6.00 to $7.00. All major US airlines lowered their guidance to reflect rising fuel costs in recent weeks.
Adjusted EPS came in at $2.03 in the third quarter, which was ahead of the $1.94 forecast. Delta said demand remains high and that its customers are in a “very healthy position” in response to woes that travel spending is starting to slow as household budgets are stretched. It forecast adjusted EPS of $1.05 to $1.30 in the fourth quarter, which was favourable compared to the $1.11 forecast.
Notably, rival American Airlines is up 1% at $12.60 after Susquehanna slashed its target price on the stock this morning to $13 from $19.
Domino’s Pizza demand falls due to higher prices
Domino’s Pizza is down 2.1% after reporting a fall in sales in the latest quarter, as higher prices and delivery charges put customers off splashing out on pizza.
Revenue was down 3.9% in the third quarter to $1.03 billion and came in short of the $1.05 billion pencilled-in by analysts. Same-store sales were down 0.6%, which was a surprise considering Wall Street expected mild growth. EPS of $4.18 came in well above the $3.30 forecast, although this was driven by a one-time pretax gain.
Walgreens earnings disappoint as new CEO steps up
Walgreens Boots Alliance is up 1.2% after earnings in the latest quarter and its outlook for the new financial year disappointed markets, heaping pressure on its new incoming CEO that was appointed just yesterday.
The pharmacy chain said annual adjusted EPS plunged over 20% to $3.98, coming in below its promise to deliver earnings of at least $4.00. That was after the fourth quarter figure came in lower than anticipated despite a sales beat. Walgreens said it is aiming for $3.20 to $3.50 in adjusted EPS in the coming 12 months, which was also short of the $3.70 forecast by Wall Street.
New CEO Tim Wentworth will officially join on October 23 after being appointed just yesterday. Still, management outlined plans to cut costs by $1 billion and capital expenditure by $600 million, which it expects will benefit results starting from the second quarter of the recently-started financial year.
Tesla to source Cybertruck steel from Outokumpu
Tesla shares are down 0.4% in premarket trade. The stock hit a three-week high yesterday before pulling back and closing down.
The electric carmaker is sourcing some of the stainless steel panels needed for the exterior of the new Cybertruck from Europe’s largest stainless steel maker Outokumpu, according to Bloomberg, sending shares in the Finnish company to a three-week high. The Cybertruck has faced several lengthy delays but investors are expecting it to enter full production before the end of the year, and they will be anticipating a positive update when Tesla releases quarterly results next week.
US chip stocks hit 1-month highs
US semiconductor shares have been pushing higher this month and the Philadelphia Semiconductor Index has climbed to its highest level in a month. NVIDIA is trading broadly flat this morning and has continued to outperform in recent weeks and is at a five-week high, with the chipmaker only 7% away from the all-time highs hit back in August.
Microsoft to appeal $29 billion tax bill
Microsoft shares are down 0.9% this morning after the Internal Revenue Service said it owes a whopping $28.9 billion in back taxes, penalties and interest because of the way it allocated income and expenses among global subsidiaries between 2004 to 2013.
Microsoft said it disagrees with the claims and will “vigorously contest” them by appealing, but said it does not expect a resolution within the next 12 months. Importantly, Microsoft said the figure does not take taxes that have been paid under the Tax Cuts & Jobs Act which, when reflected, could reduce the figure by up to $10 billion.
Microsoft said it has paid over $67 billion in US taxes since 2004.
Meta stock: Winning streak sends it to 21-month high
Meta shares are up 0.2% and set to gain ground for a fifth consecutive session today as the social media giant hits its highest level since January 2022! The stock had pulled back after peaking in July but has ripped 9% higher in less than a week as investors eye its discounted valuation within the Big Tech space.
Tech stocks are still trading at quite lofty valuations considering the economic picture, with the Nasdaq 100 trading at 32x forward earnings. But Meta is currently trading at less than 20x forward earnings. That is in part because advertising-reliant stocks have been trading at discount to other Big Tech peers like Apple and Microsoft because of soft conditions, with Google-owner Alphabet trading at a PE ratio of 20.8x. However, markets now appear to be regaining confidence in both Meta and Alphabet, which is up 0.2% and also at 21-month highs this morning. That could also reflect investors repositioning themselves ahead of earnings season for Big Tech, which will kick-off in just a couple of weeks.
Lockheed Martin stock may tread water until earnings
Lockheed Martin shares are up 0.2% today at $437.50. The rally in defence stocks this week, prompted by the conflict in the Middle East, has now tempered but it has still helped Lockheed Martin rebound from the one-year lows it hit at the end of last week.
UBS was one of the reasons the stock has failed to rebound further, having downgraded the stock to Neutral yesterday and cutting its target price to $470, which still suggests there is some significant upside from here. Still, the sharpness of the rebound may leave Lockheed Martin vulnerable as markets await for third quarter results out next week. Still, Lockheed Martin’s valuation multiple is in-line with the industry average but below its five-year historical average.
Meanwhile, other defence stocks are following a similar path after popping this week. RTX Corp, which UBS also rated as Neutral, is up 0.4% today while Northrop Grumman, which received the most bullish view from UBS this week, is testing recent highs.
Palantir stock hits 5-week high
Palantir shares are up 0.5% and set to test fresh five-week highs today. The company has pushed higher this week due to its ties to the US military, allowing it to benefit from the increased appetite for defence stocks, and news that it has won a new contract to help the US Army test out new AI and machine learning capabilities.
Visa and Mastercard can hit new all-time highs, says Barclays
Visa is trading higher this morning at $236.52 after Barclays trimmed its target price on the payments giant this morning to $285 from $287, although that still shows the broker believes it can hit new all-time highs within the next 12 months.
Barclays said it is keeping its Overweight rating as a result. It said the focus at the upcoming results from Visa will be on the 2024 outlook, which it warned may see the company adopt a conservative attitude given the macro-economic challenges. Visa releases results on October 24.
Rival Mastercard will report on October 26 and is trading at $400 this morning after Barclays maintained its Overweight rating and nudged down its target price to $479 from $480, also implying it can hit all-time highs over the next year.
Watch US banks ahead of Q3 earnings
US banks are also on the radar this week as JPMorgan, Wells Fargo and Citigroup will kick-off the third-quarter earnings season this Friday, with others like Bank of America, Morgan Stanley and Goldman Sachs to follow next week.
It is expected to be a tough quarter, with most expected to report a decline in earnings. We also expect commentary about consumer health and the economic outlook to be more cautious, especially as we approach 2024. However, markets have priced-in a bleaker outlook looking at the declines in share prices and valuation multiples trending below historical averages, with some having recently hit multi-year lows.
You can find out what to expect from the industry as a whole in our US Banks Q3 Earnings Preview.
Meanwhile, we have also taken a look at the largest bank in the US, JPMorgan, which is the only major player that has gained ground this year. We believe it will continue to outperform in an otherwise muted sector considering it is expected to report the best improvement in earnings and isn’t trading at a premium.
You can find out more in our JPMorgan Q3 Earnings Preview.
Foot Locker downgraded to Sell
Foot Locker shares are down 2.6% at $20.44 after CFRA told investors to sell the sneaker retailer over concerns about its valuation, sales outlook and inventory trends. Analyst Zachary Warring said Foot Locker’s valuation multiple sits much higher than the five-year average at a time when the outlook is much more challenging, which in turn is prompting fears it could be forced to offer more discounts and lower margins to shift inventory. It cut its price target to $15.
Beyond Meat falls on downgrade
Plant-based burger maker Beyond Meat is down over 6% today at $8.29 after Mizuho Securities downgraded the stock to Underperform from Neutral, citing a “lack of disruptive innovation” across the entire sector. It slashed its target price to just $5 from $12.