Market Overview:
Stocks ended their worst week in a month with more losses Friday, marking the third straight daily loss for the Dow Jones average and the fourth for the S&P 500, weighed by spiking Treasury yields and concerns that Israel's conflict with Hamas could escalate into a wider Middle East war. Also adding to the gloomy atmosphere on Wall Street was hotter-than-expected retail sales data along with mixed commentary from a host of Federal Reserve speakers, chief among them being chair Jerome Powell's remarks at an event at the Economic Club of New York. Most of the officials hinted that interest rates could be kept steady, leading the market to bolster their bets for no more rate hikes this year. For the week, the Dow dropped 1.6%, the S&P slipped 2.4%, and the Nasdaq Composite closed down 3.2%.
News:
Netflix stock surges 16% after earnings: Netflix's shares soared by 16% following a strong quarterly earnings report, which revealed a 70% increase in its ad-supported subscription tier and the addition of 8.76 million subscribers in the third quarter, surpassing Wall Street's estimates. This marked the most significant subscriber growth since the second quarter of 2020, driven by stay-at-home restrictions during the COVID-19 pandemic. After experiencing its first net subscriber loss in over a decade in April 2022, Netflix's return to growth was met with enthusiasm from analysts. Morgan Stanley upgraded the stock to overweight with a price target of $475, and Truist analyst Matthew Thornton upgraded Netflix to a buy rating, citing ongoing benefits from password sharing, the potential for advertising growth, and promising content, including "Squid Game" and "Stranger Things."
Tesla shares plummet 9% after earnings: Tesla's stock fell 9% after the company released third-quarter results that missed Wall Street estimates for both revenue and earnings, marking the first time this has happened since Q2 2019. During an investor call, CEO Elon Musk expressed concerns about the global economy, particularly high-interest rates affecting consumer car purchases. Musk emphasized the need to make Tesla's products more affordable before fully pursuing a new factory in Mexico. Analysts from Bank of America and Morgan Stanley were surprised by Musk's focus on the economic environment, with the latter considering it one of the most cautious Tesla conference calls in years. Musk also tempered expectations for the Cybertruck, saying it would take over a year before it becomes a significant positive cash flow contributor. This caution led to concerns among analysts at Deutsche Bank, who remain skeptical about Tesla's 2024 growth prospects.
TSMC earnings: Taiwan Semiconductor Manufacturing Company (TSMC) reported a third-quarter profit of 211 billion New Taiwan dollars ($6.69 billion), marking the largest profit decline since the first quarter of 2019, but still surpassing analysts' expectations. Weak demand for consumer electronics contributed to the decline, with TSMC's revenue dropping by 10.83% from the previous year to NT$546.73 billion. CEO C.C. Wei mentioned that customers remained cautious about inventory control due to persistently weak macroeconomic conditions and slow demand recovery in China. Despite this, there were early signs of demand stabilization in the PC and smartphone markets. TSMC expects inventories to continue declining in the fourth quarter, but its strong technology offerings, including 3-nanometer chips, are helping to maintain business performance. The demand for AI chips is growing, driven by large language models, but it is not sufficient to fully offset the declining demand in consumer electronics. Despite the challenges, TSMC expects fourth-quarter revenue to range from $18.8 billion to $19.6 billion. The extension of TSMC's exemption from U.S. trade sanctions on China allows the company to continue shipping advanced chip equipment for its operations there.
Weekly ETF:
The ProShares Short 20+ Year Treasury ETF (TBF) is an exchange-traded fund designed to provide investors with inverse exposure to the daily performance of long-term U.S. Treasury bonds. This means that as long-term Treasury bond prices fall due to rising interest rates, TBF aims to increase in value. TBF is used by investors as a potential hedge against rising interest rates and as a way to profit from declining bond prices. It is essential to note that TBF is a short-term trading tool and may not be suitable for long-term investment strategies, as its value can fluctuate significantly based on daily changes in bond prices.
Earnings this week:
Monday, October 23 - Packaging Corporation of America (PKG) and Brown & Brown (BRO).
Tuesday, October 24 - Microsoft (MSFT), Alphabet (GOOG), Visa (V), Coca-Cola (KO), Texas Instruments (TXN), and General Electric (GE).
Wednesday, October 25 - Meta Platforms (META), T-Mobile US (TMUS), Thermo Fisher Scientific (TMO), Boeing (BA), and General Dynamics (GD).
Thursday, October 26 - Amazon.com (AMZN), Mastercard (MA), Merck & Co. (MRK), Intel (INTC), Altria (MO), Chipotle Mexican Grill (CMG), Northrop Grumman (NOC), and United Parcel Service (UPS).
Friday, October 27 - Exxon Mobil (XOM), Chevron (CVX), AbbVie (ABBV), and Charter Communications (CHTR).
