U.S. Market Performance
On Wednesday, Wall Street suffered its steepest losses in more than a month as rising Treasury yields and a strengthening dollar weighed on investor sentiment. The S&P 500 dropped by 53.78 points (-0.92%) to close at 5,797.42, while the Dow Jones Industrial Average lost 409.94 points (-0.96%), ending the day at 42,514.95. The Nasdaq Composite experienced the largest percentage drop, falling 296.47 points (-1.60%) to 18,276.65. The sell-off was driven by concerns over inflationary pressures, with higher Treasury yields reducing the appeal of equities, especially in the tech sector.
European Stocks and Corporate Earnings
European markets also closed lower on Wednesday, impacted by weaker-than-expected corporate earnings results. The Eurozone’s Stoxx 50 index fell by 0.3%, closing at 4,922. A notable contributor to the decline was L’Oreal, whose shares dropped by 2.5% due to sluggish demand in China. However, Iberdrola offered a positive note, as its earnings exceeded expectations, resulting in a 1.5% rise in its stock price, providing some relief amid broader market concerns.
Asian Markets Struggle, Japan and Australia Buck the Trend
On Thursday, most Asian equities followed the global trend of decline as rising U.S. Treasury yields placed pressure on tech stocks, and weak economic data from several regional economies dampened investor confidence. Key indices included:
- South Korea’s KOSPI: Declined by 0.2%.
- Hong Kong’s Hang Seng: Fell by 0.7%.
- China’s Shanghai Composite: Dropped by 0.4%.
However, Japan’s Nikkei 225 managed to rise slightly, supported by a mix of economic indicators. Meanwhile, Australia’s ASX 200 gained 0.3%, showing resilience amid the regional downturn.
European Futures and Wall Street Prospects
Despite the losses, European equities are expected to open higher on Thursday, partially recovering from the previous day’s declines. U.S. futures for the S&P 500 and Nasdaq also showed signs of recovery, buoyed by stronger-than-expected third-quarter earnings from Tesla. These earnings boosted overall market sentiment, shifting Wall Street’s focus towards upcoming tech earnings reports and key economic data.
Tesla’s Strong Q3 Results Boost Market Sentiment
Tesla’s Q3 results exceeded market expectations, reporting an adjusted earnings per share (EPS) of $0.72 and revenue of $25.18 billion. The strong performance was driven by improved margins and robust automotive sales. Notably, Tesla’s gross margins increased to 17.05%, and its energy business achieved a record margin of 30.5%. Despite concerns over increasing competition, Tesla expects modest delivery growth for 2024 and aims to introduce more affordable models by 2025. Following the announcement, Tesla’s shares surged by 12% in after-hours trading.
Rising Oil Prices Amid Middle East Tensions
In the commodities market, oil prices rose during Thursday’s Asian trading session. Tensions in the Middle East escalated after Israel’s Defence Minister suggested possible strikes on Iran, heightening concerns about disruptions in the region. This geopolitical tension continues to be a key factor supporting crude prices, even as U.S. inventory builds and demand concerns persist. Traders are now focusing on upcoming U.S. and EU business activity data, which could impact the outlook for economic strength and oil demand.
Boeing Workers Extend Strike, Halting Production
In corporate news, Boeing continues to face challenges as its factory workers rejected a contract offer, prolonging a five-week strike that has halted production of key aircraft models, including the 737 MAX, 777, and 767. Boeing CEO Kelly Ortberg highlighted the company’s nearly $8 billion in losses this year and emphasized the need for a “fundamental culture change” to address its financial struggles. He hinted at potential asset sales, downsizing efforts, and equity offerings to navigate the crisis, acknowledging the damage done to Boeing’s reputation.
Apple and Nvidia Struggle with Supply Chain Issues
Shares of Apple fell by over 2% following reports from analyst Ming-Chi Kuo, who indicated that Apple is reducing iPhone 16 orders by 10 million units through the first half of 2025, with non-Pro models most affected. The company is also scaling back production of its Vision Pro headset, citing weaker demand and excess inventory. A more affordable version of the headset is expected by late 2025, as high initial prices hindered sales.
Nvidia shares dropped by 2.8% after CEO Jensen Huang confirmed a design flaw in its Blackwell AI chips, which delayed production. The issue, related to low yields, has now been resolved with the help of TSMC. Despite earlier tensions, Huang praised TSMC for assisting in the resolution, and Nvidia expects to ship the improved Blackwell chips by Q4, with performance up to 30 times faster than previous versions.
Corporate Earnings Highlights: Lam Research, ServiceNow, IBM, and More
Several companies reported stronger-than-expected quarterly earnings:
- Lam Research Corp posted adjusted earnings of $0.86 per share, with revenue of $4.17 billion, exceeding analyst expectations. Shares rose by 5.6% after the report.
- ServiceNow raised its full-year guidance after reporting Q3 earnings of $3.72 per share, surpassing Wall Street estimates. Revenue reached $2.79 billion, beating forecasts, and the company expects Q4 subscription revenue between $2.875 billion and $2.880 billion.
- International Business Machines (IBM) reported Q3 adjusted earnings of $2.30 per share, above expectations. However, revenue of $15 billion fell short of projections, leading to a 4.5% drop in its share price. IBM maintained its growth outlook for 2024 but raised free cash flow guidance to over $12 billion.
Additional Earnings Reports: Kering, Coca-Cola, T-Mobile, and More
- Kering reported a 16% decline in Q3 revenue to €3.8 billion, hit by weaker demand in Asia-Pacific and Japan. Gucci sales fell by 25%, while Yves Saint Laurent dropped by 12%, though Bottega Veneta saw a 5% rise.
- Coca-Cola aimed for the upper end of its 2024 sales forecast after reporting a slight 0.3% rise in Q3 revenue to $11.95 billion, driven by robust demand in North America. However, shares fell by 2% due to volume declines in China and the Middle East.
- T-Mobile added 865,000 postpaid subscribers in Q3, exceeding expectations and raising its forecast for net customer additions to between 5.6 and 5.8 million for the year.
Other Corporate Developments
- Boeing continues to struggle with production delays due to an ongoing worker strike.
- Hilton Worldwide cut its room revenue growth forecast due to declining demand in China, despite steady demand in Europe. Shares fell by 2%, and rival Marriott dropped 3%.
- AT&T reported 403,000 net wireless subscribers for Q3, surpassing expectations, though total revenue of $30.2 billion missed forecasts.
- Thermo Fisher Scientific raised the lower end of its annual profit forecast, driven by strong sales in its laboratory products division.
Final Thoughts
Global financial markets continue to experience heightened volatility due to a combination of rising U.S. Treasury yields, mixed corporate earnings, and geopolitical tensions. Investors remain cautious as they await further economic data and key earnings reports from major tech companies in the coming weeks.
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