Markets News, Oct. 17, 2024: Dow Notches 39th Record Close of the Year; TSMC Soars on AI Demand
· InvestopediaU.S. stocks were little changed on Thursday after a morning chip rally, spurred by solid quarterly results from the world's largest contract chipmaker, lost steam.
The Dow Jones Industrial Average rose 0.4% to close at a record high for the third time this week. The S&P 500 opened at a record high before paring gains to close unchanged. The Nasdaq Composite also finished flat.
Shares of Taiwan Semiconductor Manufacturing Co. (TSM), a major chip manufacturer for tech giants like Apple (AAPL) and Nvidia (NVDA), surged after the company reported strong quarterly results and offered an upbeat outlook on the strength of demand for artificial intelligence (AI). Thursday's jump put TSMC about 5% away from a $1 trillion market capitalization.
TSMC's results lifted the shares of other semiconductor and AI-related companies like Nvidia, which rose to a record high in early trading before retreating a bit, and Broadcom (AVGO). The PHLX Semiconductor Index (SOX) climbed about 1%.
Travelers Cos. (TRV) propelled the Dow to a fresh record after the insurer reported that profit tripled in the third quarter as underwriting and investment income surged.
Shares of Expedia (EXPE) jumped amid reports that Uber (UBER) executives had considered making a takeover bid, though no discussions are currently underway. Uber shares slid. Netflix (NFLX) stock dipped ahead of its earnings report after the closing bell.
Treasury yields climbed after consumer spending and unemployment data came in stronger than expected. U.S. retail sales increased by 0.4% in September, slightly ahead of expectations. Initial jobless claims for the week ending Oct. 12 totaled 241,000, about 20,000 below estimates and the prior week's total.
Yields have ticked up since the Federal Reserve began cutting interest rates last month as a string of strong economic reports have tempered Wall Street's expectations for more aggressive interest rate cuts in the months ahead. The yield on the 10-year Treasury, which had declined in each of this week's previous sessions but held above the psychologically significant 4% level, climbed to 4.1% on Thursday.
Stocks rose yesterday as Nvidia led a rebound from Tuesday's chip stock sell-off, which followed disappointing results from chipmaking equipment manufacturer AMSL (ASML). Bank stocks also advanced yesterday after strong results from Morgan Stanley (MS), offsetting a decline among tech mega caps.
Biggest S&P 500 Movers on Thursday
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Decliners
- Health insurer shares moved lower after industry player Elevance Health (ELV) missed profit estimates with its third-quarter results and lowered its guidance for the full year. The company attributed the shortfall to declines in Medicaid enrollments stemming from eligibility redeterminations and other changes. Elevance shares dropped 10.6%, while losses spread to other health insurance stocks with Medicaid exposure. Shares of Molina Healthcare (MOH) plunged 12.6%, the steepest drop in the S&P 500, while Centene (CNC) stock lost 9.1%.
- CSX (CSX) shares tumbled 6.7% after the freight shipper's quarterly sales and profits fell short of analysts' expectations. Hurricanes Helene and Milton weighed on the company's results, while a decline in coal revenue and lower fuel charges also restrained revenues.
Advancers
- Shares of Snap-On (SNA), a provider of tools and equipment for professional users across various industries, soared 10% to notch Thursday's top performance in the S&P 500. The gains came after Snap-On released its third-quarter financial results, matching analysts' revenue forecasts but exceeding earnings per share (EPS) expectations. In its largest segment, which sells tools and services to auto repair shops, Snap-On posted 4% quarter-over-quarter sales growth, suggesting a potential turnaround in that key market.
- The Travelers Companies (TRV) shares surged 9% following the insurer's third-quarter earnings report. Despite a year-over-year uptick in catastrophe losses stemming from Hurricane Helene and other severe weather events, Travelers more than tripled its net income compared with the year-ago period, boosted by higher premiums and increased investment income. The company also reported an improvement in its consolidated combined ratio—a key gauge of profitability for insurance companies.
- Investment management firm Blackstone (BX) reported better-than-expected profits alongside an increase in assets under management for the third quarter, and its shares jumped 6.3%. Blackstone's CEO noted that the firm invested or committed more than $54 billion during the quarter—the highest amount in more than two years. Blackstone's overall fund appreciation during the quarter also reached its strongest level in three years.
Expedia Stock Jumps on Reports Uber Has Explored Takeover
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Expedia (EXPE) shares rose, while those of Uber Technologies (UBER) moved lower Thursday morning following a report from the Financial Times that the ridesharing giant has explored acquiring the travel booking company.
A third party brought the idea to Uber, which has not yet made any official approach or offer to Expedia, the FT reported, citing "three people familiar with the process."
Uber and Expedia did not immediately respond to Investopedia's requests for comment. Expedia shares were up 5% Thursday afternoon, while Uber's stock was down 2%.
Acquiring Expedia—which operates its namesake platform along with brands like Hotels.com and Vrbo—would help expand Uber's efforts into travel booking as it aims to transform itself into a "super app," the FT reported.
In Uber's second-quarter earnings call in August, Chief Financial Officer (CFO) Prashanth Mahendra-Rajah said investing in growth remained Uber's "top priority," including "through acquisition opportunities that are aligned with our strategy."
Blackstone Stock Hits Record High as Assets Under Management Jump
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Blackstone (BX) shares soared to a record high Thursday after the world's largest alternative asset manager reported its profit skyrocketed as a result of bringing in more investments.
Net income for the third quarter soared 41.5% from a year ago to $780.8 million, or $1.02 per share. Revenue from management and advisory fees was 8.4% higher at $1.79 billion.
Assets under management (AUM) at Blackstone jumped 9.9% to $1.11 trillion, exceeding analyst expectations, with total inflows of $40.5 billion for the quarter. The gains were led by Blackstone’s credit and insurance unit, which had inflows of $21.4 billion.
Blackstone shares were up about 7% at more than $170 a share in Thursday afternoon trading, and have added nearly one-third of their value so far in 2024.
What Wall Street Thinks of Netflix Stock Ahead of Earnings
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Netflix (NFLX) earnings are coming after the bell Thursday, with analysts generally bullish on the streamer's stock—though they aren't currently calling for large price appreciation.
Of the 20 analysts covering Netflix tracked by Visible Alpha, 15 have "buy" ratings on the shares; there's only one "sell" rating.
The consensus price target is $732.26, about a 4% premium to Wednesday's $702 close. The price targets used to determine that average vary from $550 to $820.
Analysts expect the streaming giant to post year-over-year revenue, profit, and subscriber growth ahead of the final quarter of 2024. Netflix shares dipped following the company's quarterly reports in April and July.
The shares were down about 1% Thursday afternoon, leaving the stock up more than 40% this year.
TSMC Earnings Signal Strong AI Demand, Boosting Chip Stocks
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Chip stocks rose Thursday after the world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Co. (TSM), reinvigorated Wall Street’s AI enthusiasm with better-than-expected quarterly results and a rosy financial outlook.
The PHLX Semiconductor Index (SOX) advanced about 2% on Thursday morning, led by TSMC, up 12%. Shares of Broadcom (AVGO) climbed more than 3%, while Nvidia (NVDA), the chip designer at the heart of the AI craze, rose 2%, as did chip designer Arm Holdings (ARM).
TSMC on Thursday morning said net income increased by more than 50% in the third quarter, far exceeding Wall Street’s estimates. CFO Wendell Huang attributed the company’s results to “strong smartphone and AI-related demand.” CEO C.C. Wei estimated that the contribution of AI processor sales to TSMC’s total revenue would triple this year.
The results underscored the diverging fortunes of companies within the broader semiconductor industry. "While there continue to be strong developments and upside potential in AI, other market segments are taking longer to recover,” said Christophe Fouquet, CEO of Dutch chipmaking equipment manufacturer ASML Holding (ASML), earlier this week.
ASML’s warnings sparked a semiconductor sell-off, sinking the SOX index more than 5% on Tuesday. Despite Thursday’s TSMC-led rally, the index remained 3% below its Monday close.
Euro Declines as ECB Cuts Rates Amid Weakening Economy
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The euro declined against the U.S. dollar on Thursday after the European Central Bank (ECB) cut interest rates for the third time this year as the world's third-largest economy shows signs of weakening.
The ECB cut its benchmark rate to 3.25% from 3.5% on Thursday, following up on a similar cut at its last meeting in September. The euro declined 0.2% against the dollar.
"Inflation is expected to rise in the coming months, before declining to target in the course of next year," the ECB said in a statement.
The reduced rate widens the gap between borrowing costs in the European Union and the U.S., where the benchmark federal funds rate stands between 4.75% and 5%.
Elevance Health Stock Plunges on Fall in Medicaid Memberships
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Elevance Health (ELV) shares cratered Thursday after the insurer posted a lower-than-expected profit and slashed its outlook on falling Medicaid enrollments.
The company reported third-quarter earnings per share (EPS) of $4.36, missing analysts' estimates compiled by Visible Alpha. Revenue was up 5.3% from a year ago to $45.11 billion, which was higher than expected.
Medical membership dropped 3.3% to 45.76 million. Medicaid membership plunged 19% to 8.93 million, which the company blamed on eligibility redeterminations in the government-sponsored health program and other changes in several states.
Elevance said that given its third-quarter results and "the timing mismatch between Medicaid rates and acuity," it now anticipates full-year adjusted EPS of $33, down from its earlier outlook of $37.20.
Shares of Elevance Health sank over 13% in early trading Thursday, sending them into negative territory for 2024.
TSMC Stock Jumps on AI-Fueled Earnings Beat
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U.S.-listed Taiwan Semiconductor Manufacturing Co. (TSM) shares jumped 9% Thursday morning after the chipmaker posted robust quarterly earnings and projected a buoyant outlook on the back of the artificial intelligence (AI) boom.
The company, which supplies tech heavyweights such as Apple (AAPL) and Nvidia (NVDA), reported a 54% year-over-year rise in third-quarter net income of 325.26 billion New Taiwan dollars ($10.12 billion), up from NT$211 billion. The profit figure beat the NT$300.78 billion consensus estimate of analysts polled by Visible Alpha.
TSMC also reported a 39% jump in revenue to NT$759.69 billion ($23.64 billion) for the quarter and a 57.8% gross margin, above analysts' estimates and the guidance it gave for both in the second quarter.
TSMC's upbeat earnings, in contrast to Dutch semiconductor equipment manufacturer ASML Holding's (ASML) downbeat outlook earlier in the week, bolstered investor faith in the AI boom, sending shares of AI chip giants Nvidia (NVDA), Arm Holdings (ARM), and Advanced Micro Devices (AMD) higher.
With Thursday's gains, TSMC shares have doubled this year.
Stock Futures Advance as TSMC Fuels Chip Stock Rebound
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Futures contracts connected to the Dow Jones Industrial Average were up 0.2% in premarket trading on Thursday.
S&P 500 futures advanced 0.5%.
Nasdaq 100 futures were nearly 1% higher, lifted by rising semiconductor stocks.