Article published at 4:50 p.m. CT
JJ Kinahan is Senior Vice President, Head of Retail Expansion and Alternative Investment Products at Cboe Global Markets, Inc. (Cboe).
Key Takeaways:
- Investors are likely waiting on earnings for market direction
- SpaceX posts first quarterly profit
- Netflix beats expectations but shares fall on lower ad revenue guidance
Most stocks recovered from their opening lows through a choppy day of trading that also saw crude oil prices fall in tandem with Treasury yields.
Mixed reports of ongoing talks in the Middle East appeared to give some investors hope for an end to the conflict. WTI Crude Oil prices fell below $100 per barrel in early trading but ended just above $101-per-barrel. The 10-year yield fell to 5.11% while the 30-year moved lower to 5.42%.
The CME FedWatch tool is still holding steady at a near-83% expectation that the Federal Reserve will keep interest rates firm at 3.75% to 4.0% when it meets next week. However, the December expectation of a 25-basis point raise inched up to 73.7%.
The three major indices stayed in the green throughout the bulk of the day, but the Nasdaq Composite lost its upward momentum in the final hour to end just barely in the red. The Dow Jones Industrial Average was the biggest mover, up 1.02% at the close, while the S&P 500 Index finished higher by 0.28%.
The question is how do we define this shift in the trading? Many investors still appear to be cautious about technology stocks, particularly those tied to artificial intelligence (AI), rotating out of that sector to others including healthcare and energy. We expect the results from the multitude of earnings on the calendar in coming days might help solidify the AI spending story or continue to question how investors feel about it.
SpaceX earnings came out after the bell and showed an uptick in capital expenditures – dollars spent on AI investments – to $19.59 billion, a bit below Wall Street’s $19.6 billion projections but well above the $6.9 billion spent in the second quarter. The overall results also topped estimates as SpaceX posted $4.4 billion in earnings, its first quarterly profit. Shares climbed above 4.5% in after-hours trading. Investors are now likely to turn their attention toward Tesla’s earnings tomorrow.
Netflix shares were heading nearly 5% lower in after-hours trading after the streaming video service turned in earnings that bested Wall Street’s expectations but appeared overshadowed by weak ad revenue guidance, which was cut to $2.7 billion from $3 billion.
United Airlines shares gave back 1.5% in after-hours trading after it missed third-quarter estimates on the top and bottom lines. The carrier also lowered its fourth-quarter and full-year guidance, blaming a sharp increase in jet fuel costs. United estimated its fuel costs will increase to $4.80 a gallon, notably above the third-quarter costs of $3.90 a gallon.
Elsewhere, shares of Braze, a real-time customer engagement platform, leapt by nearly 52% after Salesforce agreed to pay $5.66 billion to purchase the company. The buy follows other companies Salesforce has taken to step up its AI transition. Salesforce shares ended flat.
3M shares closed higher by 5.8% after turning in sales and profits that outpaced Wall Street’s expectations and expanding its guidance expectations. The diversified industrial conglomerate also said it is issuing a warrant to an Amazon subsidiary for 3.2 million shares after Amazon spent $6 billion on “optical connectivity and other data center products,” according to 3M, in a deal that is expected to help expand 3M’s data center.
Hasbro shares topped 11% after the toy giant’s earnings outperformed Wall Street’s projections thanks to a 34% year-over-year sales increase of its Magic – The Gathering, a tabletop and digital game based on fantasy creatures, according to the company. The maker of Play-Doh, Peppa Pig and Monopoly games, toys and collectibles raised its guidance and doubled its share repurchase program. After hitting a midyear low in early July, Hasbro shares are up 44% year-to-date.
Happy Trading!
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