Stocks rose again Wednesday with the S&P 500 making a new record high as tech stocks drove the rally and investors seemed to dismiss geopolitical concerns. The index added 0.6%, while the 30-stock DJIA surged 1%. The Nasdaq gained half a percent. Mega-cap tech stocks Amazon, Apple and Microsoft were up 1% each, while Super Micro Computer rallied 7%. Wednesday’s gains helped erase a rough start to the quarter and pushed the averages into the green for the month.
Investors are awaiting the September CPI and PPI data which are released Thursday and Friday respectively. Earnings season kicks of for real on Friday with the release of banking giants JP Morgan Chase and Wells Fargo Q3 reports.
S&P 500
sources: Bloomberg, CNBC
Closing snapshot
source: MarketWatch
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“You must unlearn what you have learned.” — Yoda
Breaking up is hard to do
Late on Tuesday, the Department of Justice (DOJ), indicated that it was considering a possible breakup of Google as an antitrust remedy. The DOJ said it was considering “behavioral and structural remedies that would prevent Google from using products such as Chrome, Play, and Android to advance Google search and Google search-related products and features – including emerging search access points and features, such as artificial intelligence – over rivals or new entrants.”
The DOJ also suggested limiting or prohibiting default agreements and “other revenue-sharing arrangements related to search and search-related products.” This would include Google’s search agreements with Apple’s iPhone and Samsung devices. The agency suggested one way to do this would be to require a “choice screen,” which could allow users to select other search engines. The DOJ stated that such remedies would end “Google’s control of distribution today”, while ensuring the company “cannot control the distribution of tomorrow.”
The DOJ recommendations follow a ruling by a U.S. judge in August the Google holds a monopoly in the search market. This ruling followed the 2020 filing by the government of a landmark case that Google has retained its share of the general search market by creating formidable barriers to entry and a feedback loop that sustained its dominance.
Google plans to appeal the ruling. Though Judge Amit Mehta said he’ll aim to rule on the remedies by August 2025, and appeal by Google would likely draw the case out for years.
In the second quarter of this year “Google Search & Other” accounted for $48.5 billion in revenue of 57% of Alphabet’s total revenue. The company has 90% of the the search market share.
sources: CNBC, Bloomberg, WSJ, Barrons
Milton threatens GDP
While the main concern over Hurricane Milton is of course the health and safety of citizens, the storm is likely to wreak havoc on U.S. economic data, at least in the short-term. Coming just two weeks after Hurricane Helene ravaged Florida, the twin storms could distort October’s labor-market data, slow consumer spending and economic growth in the affected regions, and send food prices higher.
According to Andrew Hollenhorst, chief economist at Citigroup, “the October jobs report is likely to be significantly affected.” This is because the reference period under review by the Bureau of Labor Statistics (BLS) for the monthly jobs report is the pay period that includes the 12th of the month. In an article in Barron’s, Megan Leonhardt writes:
Oct. 12 will fall on a Saturday and will count as the last day of the pay period measured. The BLS counts as employed any individuals who work at least one hour during the reference period. Thus, at least some residents of the areas affected by the storms will be counted as working this week.
Yet, with residents evacuating the Tampa area, many more workers could be off the entire week. Employers across the region were closing ahead of Milton’s expected landfall. Orlando-based Disney,Universal, SeaWorld , Busch Gardens, and Legoland theme parks all announced they were closing early on Wednesday. And, many workers might still be off in the parts of North Carolina devastated by Helene. That could lead to an elevated unemployment rate in the October jobs report, and restrict hiring.
Helene’s hit to employment could range from “a very small drag” to the loss of more than 100,000 jobs in October, J.P. Morgan’s Abiel Reinhart estimates.
source: Barrons
Chinese stocks tumble
Onshore Chinese shares suffered their biggest losses since 2020 as investors grew impatient with the pace of the government’s stimulus measures and weak holiday spending data dampened sentiment. The CSI 300 index plunged 7.1% in Wednesday’s trading, erasing gains made on Tuesday when the market reopened after the Golden Week holidays. Though the initial decline was pared somewhat after the Ministry of Finance said it would hold a briefing on monetary policy, selling pressure quickly resumed. An index of Chinese stocks listed in Hong Kong fell further after dropping over 10% on Tuesday.
Equities rallied the past few weeks after a series of policy announcements designed to support the economy. But enthusiasm over a stimulus-driven rally is fading due to a lack of any major initiatives during Tuesday’s policy meeting. A growing number of participants have said that Beijing needs to back up talk of pledges with real money, though others worry the rally had move too far too fast after major indexes rose over 30% in only a few days.
Equity investors are counting on greater fiscal spending to halt an economic slowdown that endangers China’s 2024 target of 5% growth out of reach.
source: Bloomberg, CNBC, WSJ
Movers
Bayer shares dropped almost 7% on Wednesday after a U.S. court said it would review a case alleging that exposure to products of the company’s Monsanto unit harmed individuals.
Boeing shares fell 1.8% after the company withdrew a pay raise offer it made to 33,000 machinists on strike since mid-September. The continued strike will cost the company more than $1 billion per month, S&P Global Ratings said as part of a negative outlook for Boeing’s credit ratings.
Reddit shares rose more than 2% after Jefferies began research coverage with a buy rating, citing advertising and data licensing tailwinds.
Arcadium Lithium up, Rio Tinto down as the companies’ shares moves in opposite directions after a deal was announced for Rio Tinto to buy Arcadium for $5.85 per share.
Norwegian Cruise Line shares were up 3.1% after Citigroup upgraded the stock to buy from neutral. Citi believe the stock could rally 44% as the company pivots its strategy.
Chewy shares rose almost 2% after TD Cowen initiated research coverage with a buy rating. The firm envisions Chewy rallying over 25% on the heels (pun intended) of strong demand for pet products.
sources: IBD, WSJ, Barrons, Schwab, CNBC
Chart of the day
GitLab (GTLB)
GitLab shares popped 5% early Wednesday after Morgan Stanley initiated research coverage with an overweight rating. Morgan’s analyst said that GitLab would emerge as a key consolidator in the market due to its variety of product offerings across the software delivery pipeline.
Technically GTLB is in no man’s land. There’s resistance up at 56.88 and 59.46 with support down below around 51.65, 48.58 and between 46.05 – 44.48.
The cost of employer health insurance has risen 7% for a second straight year, maintaining a growth rate not seen in more than a decade.
Roblox stock dropped as much as 9% Tuesday after a report from noted short seller Hindenburg Research accused the gaming platform of misleading investors and regulators about the number of its users.
McDonald’s is suing top meat suppliers over what it says has been collusion to raise beef prices. (Associated Press)
German industrial production rose at its fastest pace this year in August, largely a result of a rebound in the country’s key car industry.
sources: WSJ, CNBC, Bloomberg, Forbes, IBD, Reuters, Schwab Center for Financial Research
The stinger
Disclaimer
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