- Dow Jones Industrial Average is down 0.5%
- S&P 500 is down 0.5%
- Nasdaq 100 is down 0.6%
US 10-year treasury yield breaches 5%
The 10-year yield on US government bonds breached 5% for the first time since 2007 today, sapping energy out of stocks. That is being fuelled by the higher for longer interest rate narrative from the Federal Reserve. Chair Jerome Powell hinted that the Fed may leave rates alone when they meet early next month, but left the door open to more hikes further down the line if necessary.
Bitcoin hits 3-month high
Bitcoin is gaining ground for a fifth consecutive session today and has surpassed $30,500 for the first time in over three months, propelled higher by hopes that a Bitcoin exchange-traded fund will eventually be approved. The cryptocurrency has just booked its strongest weekly gain since June.
That is providing support to crypto stocks, with Marathon Digital, Riot Platforms and Coinbase trading 2.5% to 4% higher in premarket trade today.
The Week Ahead
Following a volatile week characterised by geopolitical tension, an ongoing rout in US Treasuries and enough Fed speak to last a lifetime ahead the FOMC meeting blackout, the event risk picks up as we enter late October with big tech earnings, inflation reports from the US and Australia, rate decisions from the Eurozone and Canada and latest batch of PMI reports joining the mix, creating an environment that should provide ample opportunities for traders.
The economic calendar is quiet today, headlined by the Chicago Fed national activity index, but picks up later this week. Find out what to expect over the coming days in The Week Ahead.
Earnings This Week
US earnings approaches its peak this week. We have results due out from Big Tech stocks Microsoft, Alphabet, Meta and Amazon.
An array of other big-name stocks will be providing updates, including social media platform Snap, music streaming giant Spotify, airplane maker Boeing, beverage behemoth Coca-Cola, delivery firm UPS and media outfit Comcast. There are also reports due out from payments giants Visa and Mastercard, defence firms RTX and Northrop Grumman, telecoms business Verizon and AT&T, automakers General Motors and Ford and travel operators Southwest Airlines and Royal Caribbean Cruises. There will also be results out from oil giants Exxon Mobil, Chevron and Italian firm Eni.
Find the full calendar and our mini previews on the top results to watch in Earnings This Week.
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:
- American Strategic Investment
- Grupo Televisa
- Lockheed Martin
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:
- Roivant Sciences
- Marathon Digital
- Lucid Group
- Plug Power
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:
Top US stocks to watch
Let’s have a look at the top stocks to watch today.
Chevron to buy Hess for $53 billion
Chevron is down 2.9% after announcing it will buy Hess Corp, which is up 0.4% at $163.71 this morning.
The all-stock deal is worth $53 billion, making it the latest major deal within the oil sector following Exxon Mobil’s acquisition of Pioneer Natural Resources announced earlier this month. Hess shareholders will receive 1.0250 shares in Chevron for each share, which is equal to $171 per share based on Chevron’s closing price on Friday. Hess boasts a valuation of $60 billion under the deal when debt is included.
Chevron said the combination will allow it to grow production and free cashflow at a faster pace, which Chevron said should see it “return more cash to shareholders with higher dividend per share growth and higher share repurchases”. The deal is expected to close in the first half of 2024.
Chevron is splashing out on Hess to grow its international and domestic operations. The highlights are the Stabroek block in Guyana and the projects within the Permian basin. Notably, Pioneer’s Permian portfolio was the main asset that attracted Exxon Mobil.
Is Disney set to sell Indian operations?
Disney is down 0.6% today after Bloomberg reported that Reliance Industries is close to striking a cash-and-stock deal to buy the House of Mouse’s operations in India, according to unnamed sources.
This could see Disney sell a controlling stake in its Disney Star business, rather than smaller stakes that were being considered earlier. Disney Star is thought to be valued at around $10 billion and Reliance is looking for a price tag of $7 billion to $8 billion for the assets it has its eyes on, the report said.
A deal could be announced in November and see Reliance merge some of its own media assets into Disney Star. Disney could retain a minority stake after the transaction, although no final decision on the deal or the valuation have been made yet.
Roche strikes deal for inflammatory bowel disease drug
Swiss outfit Roche is in play after striking a deal to sell a new drug that it hopes can treat inflammatory bowel disease owned by Roivant and Pfizer, which are up 4.2% and 1.1%, respectively.
Roche is paying $7.1 billion upfront to Roivant and Pfizer, which could receive up to another $150 million in near-term milestone payments. That will let Roche to develop and manufacture a drug named RVT-3101 and sell it in the US and Japan once it is approved. Roche said it plans to conduct a Phase 3 trial of the drug “as soon as possible”. Pfizer will continue to sell the drug outside of the US and Japan.
Roche also has the option to collaborate with Pfizer on the next generation of the drug, which is currently undergoing a Phase 1 trial.
“Inflammatory bowel disease is a group of chronic gastrointestinal disorders with almost 8 million people diagnosed worldwide and 80% of all individuals not experiencing lasting remission.1 Given the antibody’s novel mode of action targeting both inflammation and fibrosis, it has potential to be applied in multiple other diseases,” said Roche.
Big Tech stocks take centre stage
The largest publicly-listed stocks take centre stage this week when Microsoft, Alphabet, Meta and Amazon report their latest quarterly earnings. All four of them are forecast to report earnings growth, led by the recovery in advertising plays Meta and Alphabet, and outperform the S&P 500.
It is unsurprising that all of them are trading at a premium to the S&P 500, although some are trading at a discount to the tech-heavy Nasdaq 100. With that in mind, there is a chance that Big Tech could outperform and help prop-up indices this season, although the uncertain economic outlook does pose a threat going forward.
In other Big Tech news, Japanese regulators have launched an investigation into Alphabet amid concerns it may have breached anti-monopoly laws due to its dominance in search. We also saw Bernstein raise its target price on the stock to $140 from $135 this morning.
Apple stock hits October-lows
Apple shares are down 1.2% today and set to open at three-week lows after reports that major Chinese retailers are selling the latest iPhone 15 at a discount, raising fears that the model is not selling as fast as hoped in the country.
Reuters reported that some companies like Pinduoduo and Alibaba are selling the model at up to $123 below the recommended retail price. That comes after reports that iPhone 15 sales in China during the first 17 days of launch were down some 4.5% from the previous model, marking its worst debut in the country since 2018.
Tesla stock hits 4-month low
Tesla shares are down 1.4% at $209.19 and poised to open at their lowest level since the start of June today, with the stock on course to lose ground for a fourth consecutive session as markets fret over softer demand and the pressure price cuts are having on profitability.
Tesla has been slashing prices to help keep demand growing. This has hammered margins. Plus, while a big sequential fall in output in the third quarter was put down to factory downtime, deliveries also suffered and inventory levels remain elevated to keep investors worried that demand is softening. That is fuelling fears that more price cuts will be needed to keep its factories busy, and that profitability will come under further strain.
“Tesla is an incredibly capable ship,” Musk said. “We’re not going to sink, but, even a great ship in a storm has challenges.”
The weaker outlook has led to Wall Street downgrading their expectations. Tesla’s average target price today sits at $228.50, down from $254.50 before it released its quarterly results last week.
Tesla said today that it expects capital expenditure to exceed $9 billion in 2023 and then drop to a range of $7 billion to $9 billion in the following two years. That is not the first time Tesla has upped its budget for this year. It started with a budget of $6 billion to $8 billion in January.
Chip stocks hit 5-month lows
US semiconductor stocks remain under pressure as markets evaluate what rising geopolitical tensions and tighter US curbs on exports of advanced chips to China will mean for the industry. The Philadelphia Semiconductor index closed at its lowest level in almost five months on Friday.
NVIDIA is down 1% and set to open at a two-month low. AMD and Intel are down 0.6% to 1% and testing October-lows.
Okta sinks in wake of data breach
Okta is down over 3% at $73 this morning as it continues to lose ground after revealing that hackers accessed its support case management system using stolen credentials, which allowed them to view some customer files. About 1% of its customers are thought to have been affected, but this is not the first breach.
Brokers are wary of the potential consequences. Evercore ISI added Okta to its tactical underperform list and that it could have an impact on Okta’s sales pipeline in the near-term and that this could hurt estimates for 2024 and 2025. Citi said multiple breaches over the last 18-or-so months will hurt sentiment as it opened a downside 90-day catalyst watch. Morgan Stanley said it sees Okta stock bottoming-out “towards our $62 bear case until there’s more clarity on demand impacts”. Piper Sandler was more optimistic and said the “small scope” of the intrusion should lead to “minimal disruption to the business and impact on forward demand”, but conceded sentiment will be hurt in the short-term.
Walgreens Boots upgraded
Walgreens Boots Alliance is up over 3% at $21.95 after JPMorgan raised the pharmacy chain to Overweight from Neutral and set its target price at $30.
The broker said there is work to be done but that it has an opportunity to address several issues hanging over the stock and improve its performance. JPMorgan analyst Lisa Gill said new management have a chance to impress, helped by a “lowered but credible bar”. It said a dividend cut is on the cards as it focuses on reducing debt, but that cashflow could improve in 2024.
Price target raised at Lockheed Martin
Lockheed Martin is trading broadly flat at $444.10 before the bell. The stock hit its highest level in almost two months on Friday before pulling back. Jefferies raised its price target on the defence stock to $485 from $455 this morning.
The company and other defence stock have rallied amid the conflict in the Middle East and Lockheed Martin has managed to maintain some momentum after releasing results last week, but will RTX and Northrop Grumman follow suit when they report results this week?