MarketLens
Market Overview
The S&P 500’s 5-month win streak snapped on Thursday after a massive AI sell-off, finishing the month of October in the red for the first time in 5 months. The S&P 500 was down 1.9%, marking the index’s worst day since early September of this year.
The NASDAQ also fell by 2.8% in response to big tech earnings reports.
Big-tech Q3 earnings reports sparked concern among investors, creating a massive sell-off on Thursday. Investors have expressed decreased enthusiasm about future development and the economic impacts of AI. Additionally, a handful of big-tech companies have heavily invested in AI infrastructure through CapEx spending, reducing net income for these firms.
Economic Insights You Need to Know
The U.S. economy added just 12,000 jobs in October, well shy of the 100,000 jobs that were expected. This employment data is expectedly underwhelming due to the impacts of Hurricanes Helene and Milton, as well as the ongoing Boeing strike.
Payroll firm ADP reported that private companies added 233,000 jobs in October, more than twice the 159,000 jobs that were predicted.
U.S. job layoffs have increased to their second-highest level in four years. In September of 2024, layoffs jumped by 160,000, totaling 1.83 million. Since 2020, the labor market has significantly decreased after the post-pandemic spike, with monthly layoffs increasing by 42% over the past three years. The current layoff rate stands at 1.2%.
Here’s what this layoff data means:
Remember that the Federal Reserve has started lowering interest rates. The Fed is attempting to balance low inflation and strong employment - both typically do not coexist and have an inverse relationship. With inflation coming in at 2.1%, the focus shifts to employment data.
The status of the labor market holds even more weight regarding the growth of the stock market. As generally strong earnings reports continue to roll out and indicate optimistic growth, employment data will likely become the primary factor that decides stock market growth.
Consumer spending increased 3.7% in Q3, fueling solid GDP results.
U.S. GDP Data indicated that GDP grew by 2.8% in Q3 missing the forecast of 3.1%
The PCE inflation report was released this week. Inflation came in at 2.1%, on par with estimates and the Fed's target rate of 2%.
Next Tuesday, Nov. 5 marks Election Day in the U.S., with a Fed meeting following on Wednesday the 6th. Jerome Powell and the Fed are expected to cut interest rates by 25 basis points after the 50 bps slash that came in September.
Stock of the Week: Lululemon Athletica
Lululemon (NASDAQ: LULU) saw its shares quietly soar 7.81% on Nov. 1. Lululemon last released its Q2 earnings report in late August and will not be releasing Q3 earnings until December. In its Q2 earnings report, the company saw its revenue up by 9.1% compared to Q2 2023. Lululemon has seen volatility this year. At one point, its stock price hit a high of 516.39 and has since tumbled as low as 226.01. After today's 7% spike, Lululemon’s stock price sits at 321.17.
U.S. Business News
Google reported Q3 earnings this week. Its profits were up 34% and revenues were up 15%. Google’s core business which includes search advertising was up 10%. Google’s Cloud business also saw its revenue hit $11.4 billion this quarter, marking a 35% increase in revenue from a year ago. Although its cloud business is still behind Amazon and Microsoft regarding market share in the cloud business, its growth acceleration has surpassed these two tech giants. Google continues to invest in AI development, increasing its Q3 CapEx spending to $13 billion, up 62% from 2023. Its stock was up over 6% on Wednesday morning.
Apple released its quarterly earnings, reporting a 6% revenue increase to $94.9 billion, a record high. Apple’s CEO Tim Cook emphasized the strong sales of the iPhone 16, which account for just under 50% of its total revenues. The company's net profit amounted to $14.7 billion, even after taking a blow in Q3 from paying the EU $10.2 billion after losing a lawsuit over tax benefits in Ireland. Apple’s stock was down about 2% after its Q3 earnings report. Apple also released its AI software, Apple Intelligence, via a software update this week. Apple Intelligence includes key features in which it summarizes notifications, including emails, and helps write text messages.
Amazon reported Q3 earnings, citing an 11% growth in revenue and a 19% growth in its cloud business. Amazon’s cloud division alone accounts for about 60% of the company's operating profit. Investors were impressed by improvements to Amazon’s profit margins, which are on track to increase to over 10% this year. Amazon’s overall operating income grew by 19% in Q3. Its International Retail Division and AWS saw record-high operating margins, while its North American Retail Division posted its second-highest profit margin in five years. As far as investing in AI, Amazon continues to take an aggressive approach, with its CapEx spending increasing by 81% in Q3. Its stock was up over 6% in response.
Microsoft saw its revenues and profits increase 16% and 11% year over year in Q3. However, Microsoft forecasted lower-than-expected growth for Q4, in which its shares decreased by just under 5%
Meta saw its revenues increase by 19% and net income by 35% in Q3. Meta is expected to reach about $40 billion in CapEx spending by the end of this year to fuel its AI operations. Investors voiced their concerns on Meta’s AI spending, despite the company seeing its AI developments pay off. Investors also noted Meta missed on user growth expectations. Meta saw user growth increase 5% to 3.29 billion daily active users, which was less than the 3.31 billion predicted. Its stock was down 3%.
Chip maker AMD released Q3 earnings and surpassed expectations, boasting an 18% increase in revenue, a 158% increase in net income, and an 11% increase in profit margin, all up from Q3 2023. However, shares of AMD were down Wednesday after AMD's projections for Q4 were lower than Wall Street’s growth predictions, marking another tech company with weaker-than-expected guidance.
Uber’s stock was down 8% after its earnings report. Despite Uber's revenue growth of 20% and user growth of 13% in Q3, investors were unimpressed by its Q4 growth forecast.
Intel’s stock was up over 7% after releasing its Q3 earnings report. As the company continues to restructure around semiconductor manufacturing, its revenues for the quarter decreased by 6% – still a loss, yet better than analysts’ predictions for the company
Starbucks’ biggest competitor in China may be looking to begin operating in the U.S. Luckin Coffee has been referred to as ‘the Starbucks of China’ for several years and is China’s largest coffee chain with 20,000 operating stores. Analysts note this is an interesting development, as the market for coffee in the U.S. is saturated by popular chains, including Starbucks, Dunkin, Peet’s, Dutch Bros., and other local businesses. Luckin has proposed a strategy to undercut its U.S. competitors by offering lower prices. It plans to sell coffee for around $2-$3 per cup in U.S. cities with high Chinese populations. More recently, in 2020, Luckin had an accounting scandal in which the company inflated its sales by over $300 million to drive its numbers and stock price.
Overseas Updates
U.S. intelligence agencies and cyber experts have expressed that Russia, Iran, and China are contributing to U.S. election misinformation through social media content enhanced by artificial intelligence. U.S. election officials have reiterated that these specific outside countries have been creating false content hoping to create division and election mistrust among U.S. voters.
Despite the death of Hamas’ Yahyah Sinwar, Israel is adamant about defending itself and is committed to staying invested in the conflict in the Middle East. Global oil prices rose this week after Iran vowed to respond to Israeli strikes on Iran’s air defense systems from last week.
The EU implemented a 45% tariff on imports of Chinese-made EVs in an attempt to boost European-made vehicle sales. The movie was made after Volkswagen announced it could be closing three of its plants in Germany and laying off hundreds of employees.
From an international perspective, all eyes will be on the U.S. Presidential Election next Tuesday, Nov. 5. The next administration will have the greatest impacts on the conflict between Israel and Hamas, Russia’s war on Ukraine, tariffs on Chinese exports, China’s increasing threats toward Taiwan, and the United States’ level of involvement with NATO.
News in Sports
MLB
The Los Angeles Dodgers are the 2024 MLB World Series Champions after defeating the New York Yankees 4 games to 1. The Dodgers completed the gentleman’s sweep powered by Freddie Freeman's 4 HRs and 12 RBIs, earning him the Willie Mays World Series MVP Award.
NFL
Thursday Night Football: The New York Jets defeated the Houston Texans 21-13.
Sunday Night Football: The Minnesota Vikings will host the Dallas Cowboys
Monday Night Football: The Kansas City Chiefs face off against the Tampa Bay Buccaneers
NCAA Football
SEC: No. 2 Georgia vs. Florida
Big-10: No. 3 Penn State vs. No. 4 Ohio State
ACC: No. 18 Pitt vs. No. 20 SMU
Big-12: No. 11 Iowa State vs. Texas Tech
NBA
Western Conference Standings
Oklahoma City Thunder
Phoenix Suns
Golden State Warriors
Eastern Conference Standings
Cleveland Cavaliers
Boston Celtics
Chicago Bulls
This Week's Closing Remarks
U.S. Election Day is Tuesday, Nov. 5.
Daylight savings time ends Nov. 3 on Sunday at 2 a.m. Clocks will roll back one hour. U.S. states Arizona and Hawaii are the two U.S. states that do not adhere to DST.
The World Series between the Los Angeles Dodgers and the New York Yankees had the best viewership numbers since 2017 when the Dodgers faced the Astros. The economic impact of the 2024 World Series is expected to have generated well over $107 million.
The National Retail Federation expects Americans to have spent $11.6 billion on Halloween in 2024.
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