MarketLens
Market Overview
The next three weeks promise to be flooded with political, economic, and geopolitical developments. By Nov. 8, 79% of S&P 500 companies will have reported Q3 earnings, which will provide a better picture of U.S. corporate health.
Markets remain mixed this week amid earnings season.
More than 100 companies will be reporting Q3 earnings, with Apple, Microsoft, Amazon, Google, and Meta leading the way.
Economic Insights You Need to Know
In the coming weeks, investors will gain a better understanding of how America's largest companies are performing as more Q3 earnings roll out. Keep an eye on these factors in earnings reports for companies in your portfolios:
Operating income growth and revenue growth
Revenue growth year-over-year
Positive free cash flow (FCF) and FCF year-over-year growth
Market volatility may increase with Q3 earnings, the upcoming U.S. election, and ongoing geopolitical events. With North Korea’s involvement in the Ukraine conflict, continued tensions in the Middle East, and China's reiterations regarding Taiwan, fluctuations may arise. Staying calm as investors is key to avoiding knee-jerk investment decisions.
The price of gold reached $2,700 per ounce on Monday for a new record high. With a rise in geopolitical tensions and 2024 being an election year, investors are looking for a safe asset class.
The Congressional Budget Office (CBO) estimates that the U.S. national debt could reach $153 trillion by 2025, a rise of 78 times since 1970. This number underscores potential inflationary pressures and outpaces economic growth. This is just a prediction, meaning that national debt could end up being a higher number. Increased federal spending may indicate that along with inflation, the value of the U.S. dollar has the potential to decrease. Staying committed to dollar-cost averaging in portfolios and exploring alternative assets, like cryptocurrency, could be beneficial.
Stock of the Week: UPS
UPS (NYSE: UPS) rose 9% following its strong Q3 earnings, reporting $22.25 billion in revenue and an 8.9% operating margin, beating analyst expectations. E-commerce partnerships, particularly with Temu and Shein, have driven this growth. Additionally, a new air transportation contract with USPS is expected to yield profits within its first year, making UPS a standout this week.
U.S. Business News
Tesla had a historic earnings report this week with Q3 revenues increasing by 8% and their profits mounting to over $2.1 billion. Likewise, Tesla’s operating income also increased to $2.7 billion resulting in a 10.8% operating margin. In response to its Q3 numbers, its stock jumped 22% Thursday. This was Tesla’s best day in over a decade in which it added $150 billion in market cap. To put this in perspective, the $150 market cap is more than the market cap of Ford, GM, and Stellantis combined. Notably, Elon Musk’s net worth increased by $34 billion. Decreased raw material costs contributed to this record quarter. Elon Musk mentioned that Tesla plans to increase their focus on fully automated driving and expects to grow by 20% to 30% next year.
Boeing and its 30,000+ union workers could not reach an agreement this week, with 64% of union members rejecting a deal that would have increased wages by 35% over four years. The strike is estimated to cost Boeing $1 billion per month. Boeing recently reported Q3 earnings and saw a $6 billion loss. The company currently has about $10.5 billion in cash and short-term investments, and they have access to a $10 billion credit line from a new equity offering.
Apple has announced a reduction in Vision Pro headset production following lower-than-expected sales, shifting its focus toward next week's anticipated MacBook updates. Apple reported to have sold 370,000 headsets in Q1 2024 and has since only sold about 50,000.
Nvidia continues to impress, with its market cap crossing $3.5 trillion for the first time.
Nike continues to cement its influence in sports apparel, renewing its jersey partnership with the NBA and WNBA for 12 more years until 2037.
Southwest Airlines released Q3 earnings, citing a 5.3% revenue increase. However, its adjusted operating income decreased to $32 million, due to a 14.3% increase in operating expenses. Additionally, Southwest reached a deal with investment group Elliott Management where it will appoint 5 new board directors. Gary Kelly, former CEO and current Executive Chairman who was originally scheduled to leave the company at next year's annual meeting will now exit the company by November 1 2024.
Shares of Spirit Airlines were up more than 20% Friday morning in response to the news that Frontier Airlines has considered purchasing Spirit. Spirit Airlines has been on the verge of filing for bankruptcy. Earlier in 2024, the DOJ blocked a merger that would have taken place between JetBlue and Spirit. The potential merger between Spirit and Frontier has created anticipation among investors.
McDonald’s has made headlines this week for all the wrong reasons. McDonald’s shares dropped as much as 6% in response to the news of a reported E. coli outbreak linked to the company’s quarter pounders. So far there have been 49 total cases resulting in 10 hospitalizations and one death. The outbreak stemmed from one of the company’s onion suppliers. McDonalds has since taken the quarter pounder off its menu in the affected states, and has stopped offering onions from the linked supplier.
A federal judge blocked a $8.5 billion acquisition between fashion giants Capri and Tapestry. After the deal was rejected, Capri’s stock plummeted about 50%. Tapestry owns notable brands including Coach and Kate Spade while Capri owns Versace, Michael Kors, Jimmy Choo, etc. If this deal were to have gone through, Tapestry would have been in line to control 59% of the market. The judge claimed that the deal would have eliminated competition.
Overseas Update
North Korea and Russia
The U.S. confirmed that North Korea has sent troops to join Russian soldiers in Russia’s war on Ukraine. The U.S. and its allies have expressed concern and have communicated that this move indicates an escalation in the conflict and proposes a security risk for North Korea’s neighbors, especially South Korea. North Korea's involvement indicates that Russia would also be willing to defend North Korea to the same degree.
This satellite image from Airbus shows North Korean troops at Ussuriysk military facility in Russia.
China has been dragged into the drama as well. China has long been a notable influencer and supporter of the communist nation of North Korea. Therefore, the increasingly growing relationship between the two dictators Kim Jong Un and Vladamir Putin may create some level of discomfort. China has consistently emphasized it remains neutral regarding Russia’s war on Ukraine. Ian Bremmer, who recently met with Chinese leaders and the Chinese Foreign Minister, reported that China was not thrilled about the direction of Russia’s war and North Korea’s involvement. Bremmer also reported that Russia communicated with China that the war was initially supposed to be finished in a matter of a few weeks. The increasing tension has potentially put a strain on China’s perspective of its North Korean and Russian allies.
Defense analysts report that North Korea’s move to supplement Russia with troops exposes Valdamir Putin and the Kremlin’s desperation. Putin is certainly looking to make up for some of the Russian frontline losses. Ukrainian soldiers were able to intercept audio from Russian soldiers on October 23 and Bremmer reported that they heard Russian soldiers asking “What the f**k to do with them [North Korean Soldiers]?”. Analysts who have been tracking the war in Ukraine have emphasized that North Korean troops are not likely to add value to Russia’s army, as they have no reliable training in today’s era of modern battle.
News in Sports
MLB
The World Series will feature an iconic matchup between the Los Angeles Dodgers and the New York Yankees. The World Series begins on Oct. 25 and will be played in a best-of-seven format with the Dodgers having home-field advantage.
NFL
Thursday Night Football: The Los Angeles Rams upset the Minnesota Vikings 30-20.
Sunday Night Football: The San Francisco 49ers will host the Dallas Cowboys
Monday Night Football: The Pittsburgh Steelers face off against the New York Giants
NCAA Football
SEC: No. 8 LSU vs. No. 14 Texas A&M, No. 5 Texas vs. No. 25 Vanderbilt
Big-10: No. 1 Oregon vs. No. 20 Illinois
ACC: No. 6 Miami vs. Florida State
Big-12: No. 11 BYU vs. UCF
Stay with us for more insights next week.
Disclaimer: This is not financial advice or a recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
Ashlyn Haringa