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Stocks retreated on Wednesday after Wall Street’s string of bullish gains, as investors digested another round of corporate results amid a quiet week on the economic calendar.
The S&P 500 Index (^GSPC) fell 0.3 percent, after closing higher on Tuesday for the seventh consecutive day, marking the benchmark’s longest winning streak since 2021. The Dow Jones Industrial Average (^DJI) and Nasdaq Composite also advanced, both down nearly 0.4 percent (^IXIC).
Warnings from several Fed members put a damper on optimism about the interest rate cap, undermining the momentum of the stock market rally. However, 90% of traders are still betting that there will be no increase this year, and 25% expect a rate cut in March, according to CME’s FedWatch tool.
Oil prices, one of the main drivers of inflation, fell on Wednesday, after hitting their lowest level in three months the previous day, due to growing concerns about demand from China and the United States. Futures for West Texas Intermediate crude oil (CL=F) and Brent crude oil (BZ=F) fell by almost 1%, to $75.55 and $79.77 a barrel respectively.
S&P 500 hits milestone not seen in two years
The S&P 500 index closed higher on Wednesday, recording its eighth consecutive day of gains. This is the longest string of consecutive up days since November 2021.
The S&P 500 Index (^ GSPC) gained 0.1%. The Dow Jones Industrial Average (^DJI) was down 0.1%, while the Nasdaq Composite (^IXIC) was also up around 0.1%.
Here comes Disney…
The House of Mouse is due to publish its quarterly results after the bell.
Yahoo Finance’s Alexandra Canal brings you the numbers you need to know:
Disney (DIS) will release its fiscal fourth-quarter and full-year 2023 results after the bell on Wednesday, following the official unveiling of its next CFO and the commitment to buy Comcast’s 33% stake in Hulu.
This is the first time the media giant will report results under its new reporting structure, after CEO Bob Iger reorganized the company into three major business segments: Disney Entertainment, which includes its entire media and streaming portfolio; Experiences, which encompasses the parks business; and Sports, which will include the ESPN and ESPN+ networks.
Here’s what Wall Street expects from the media giant, according to consensus estimates compiled by Bloomberg:
Total sales: $21.43 billion
Adjusted earnings per share: 0.69
Entertainment revenues: $13.23 billion
Sports revenues: $3.89 billion
Experience revenues: $8.19 billion
Disney+ subscribers: 2.68 million net additions expected
Disney’s shares are in trouble and have fallen by around 3% since the start of the year. Last month, shares hit a nine-year low and activist investor Nelson Peltz launched a new attack on the media giant.
Google launches Gen AI search in 100 more countries
Google launches Gen AI search in 100 additional countries
Alphabet shares rose slightly after the tech giant announced the expansion of its AI search.
Google (GOOG, GOOGL) announced Wednesday that it is expanding its AI-generated search platform, Search Generative Experience, to more than 100 countries and territories and adding support for four new languages.
The move underlines the company’s efforts to rapidly roll out its AI-generated search and steal a march on Microsoft’s Bing (MSFT) and OpenAI’s ChatGPT.
Google’s Search Generative Experience (SGE) is a version of Google search that incorporates generative AI features, enabling users to ask questions and receive conversational text answers, as well as images and videos.
SGE is separate from Google Bard. SGE works as a version of Google Search powered by generative AI, while Bard is a chatbot powered by generative AI. You can ask both types of questions, but SGE focuses primarily on providing answers to search queries.
As part of Wednesday’s announcement, Hema Budaraju, senior director of product management and search at Google, said that SGE was expanding to 126 new regions, including Brazil, Indonesia, Mexico, Nigeria, South Africa and South Korea.
The company now offers EMS in a total of 129 countries and territories. Users can now search in Spanish, Portuguese, Korean and Indonesian.
Technology leads sectors as S&P looks to extend streak
The S&P 500 is once again approaching the positive zone this Wednesday, with technology leading the sectors with a rise of almost 0.5%.
This has been the trend in the market over the past week, with the S&P 500 rising for seven consecutive days. Technology led the way, rising 7.8%, the most of any sector over the period.
According to Keith Lerner, Co-CIO of Truist, this is abnormal for a recovery after a down month in October.
“Often, when we have this kind of recovery after a downturn, we expect the sectors of the market that suffer the most from the upturns to be the best performers. And initially, it was the small caps that performed well, wasn’t it? But what’s interesting is that technology hasn’t fallen much more than the market in general”.
He adds: “It’s almost as if people think the market is returning to the strategy it adopted at the beginning of the year”.
See below for seven-day sector performances, courtesy of YFinteractive.
Eli Lily gets key prescription weigh-loss approval
The U.S. Food and Drug Administration on Wednesday approved Eli Lily’s weight loss drug.
The approved drug, tirzepatide, had already been approved for type 2 diabetes under the trade name Mounjaro. The drug has recently helped boost Eli Lily’s sales prospects, as demand for prescription weight-loss drugs is a hot topic on Wall Street. Goldman Sachs has estimated that 15 million Americans will be taking weight-loss drugs by 2030.
Shares in Eli Lily (LLY) rose more than 1% on the news, while those in rival Novo Nordisk (NVO) fell more than 1%.
Wednesday’s stock action shows investors aren’t ‘praising every single stock’
Warner Bros. Discovery (WBD), Toast (TOST) and Upstart (UPST) Holdings are all in free fall, with each share losing at least 16% by mid-day.
These moves reinforce a trend seen throughout earnings season: in the current climate, it’s harder than usual to miss Wall Street’s earnings estimates. Stocks that fail to meet Wall Street’s earnings-per-share expectations are being sold off, with the biggest drop seen since 2011.
Data released by FactSet on Tuesday shows that S&P 500 companies that announced lower-than-expected earnings per share during the third quarter saw their shares fall by an average of 5.2% over the following two days. This is more than double the five-year average and is the worst performance since shares fell 8% over the next two days in the second quarter of 2011.
“Investors aren’t praising all stocks,” Callie Cox, investment analyst at eToro US, told Yahoo Finance. “They’re focusing on fundamentals and trying to understand what’s advantageous and what’s not in a high rate environment.
For Cox, this market shift shows that investors are becoming more selective, focusing on companies likely to be more affected by the Fed’s stance on “higher interest rates for longer”.
Warner Bros. Discovery nosedives on weak ad commentary
Shares in Warner Bros. Discovery (WBD) plunged more than 15 percent in early trading Wednesday after the company noted continued weakness in the advertising market, saying it could affect visibility for 2024.
CFO Gunnar Wiedenfels told the company’s post-earnings conference call that 2024 “will have its share of complexity, particularly with regard to the possibility of a continued slowdown in advertising trends”.
He added that “it is unlikely, from today’s perspective, that we will achieve our leverage target by the end of 2024 without a significant recovery in the TV advertising market”.
WBD, like other media companies, is facing an unfavorable advertising environment. Earlier this summer, the company said it would realign its advertising sales division, including its management team, due to weak demand for advertising.
The network’s advertising revenues fell by 13% in the third quarter compared with the same period last year, matching the decline seen in the second quarter.
The company posted a third-quarter loss of $0.17 per share, above the $0.08 per share loss expected by analysts, but an improvement on the $0.95 loss of the previous year. Sales of $9.98 billion were in line with consensus estimates compiled by Bloomberg, and increased by 1%, excluding currency effects, compared with the third quarter of 2022.
Free cash flow jumped to over $2 billion, stronger than analysts had expected, largely due to lower content spending from Hollywood strikes and continued post-merger synergies.
The company’s total number of streaming subscribers in the third quarter was 95.1 million, down 700,000 subscribers since the end of the second quarter. The streaming losses were offset, however, by the fact that WBD reported third-quarter adjusted EBITDA (direct-to-consumer) of $111 million, a year-on-year improvement of $745 million.
Cleveland Fed opens search for new president
Cleveland Fed President Loretta Mester’s term will end on June 30, 2024, the Fed announced Wednesday. Mester will step down in accordance with the Federal Reserve’s mandatory age and length-of-service policies, which prohibit presidents from serving past the age of 65.
The committee announced Wednesday that it had begun the search for its next president and CEO. The Cleveland Fed is expected to become a voting member of the Federal Open Markets Committee in 2024.
Trending tickers in morning trade
Shares in Roblox (RBLX) topped the Yahoo Finance trends page Wednesday morning after the company reported better-than-expected third-quarter results. Roblox’s sales of $839 million were higher than the $830 million expected by Wall Street. Shares rose by almost 20%.
Rivian (RIVN) shares fell by around 2%, although the company raised its vehicle production forecast to 2023.
Upstart (UPST) fell by over 23%, as the company’s third-quarter results were weaker than expected. Quarterly sales of $135 reflected a 14% year-on-year decline, and fell short of the $140 million expected by Wall Street.
Shares in Robinhood (HOOD) fell by more than 12%, as the company’s revenues fell short of Wall Street expectations due to a slowdown in business activity.
Stocks edge higher at the open
After a speech by Federal Reserve Chairman Jerome Powell, who said little about the way forward on monetary policy, stocks rose at the open.
The S&P 500 (^GSPC) rose 0.2 percent, after closing higher for the seventh consecutive day, in the benchmark index’s longest winning streak since 2021. The Dow Jones Industrial Average (^DJI) and Nasdaq Composite also advanced by around 0.2% (^IXIC).
Stocks in holding pattern with Powell comments ahead
US stock futures were virtually unchanged on Wednesday, as investors awaited comments from Federal Reserve Chairman Jerome Powell for information on the trajectory of interest rates.
Dow Jones Industrial Average (^DJI) futures were up 0.06 percent, or 20 points, while S&P 500 (^GSPC) futures were up 0.02 percent. Contracts on the high-tech Nasdaq 100 (^NDX) were down 0.06 percent.
