Global stock indexes edged lower on Wednesday as a disappointing forecast from Advanced Micro Devices weighed on chipmakers, while gold prices rose to a record high as uncertainty ahead of next week's U.S. presidential election drove safe-haven demand.
Market Snapshot
The Dow Jones Industrial Average fell 91.51 points, or 0.22%, to 42,141.54, the S&P 500 fell 19.25 points, or 0.33%, to 5,813.67 and the Nasdaq Composite fell 104.82 points, or 0.56%, to 18,607.93.
Market Movers
SUPER MICRO COMPUTER INC plummeted 33% after Ernst & Young, the company's accountant, resigned, according to a securities filing. "We are resigning due to information that has recently come to our attention which has led us to no longer be able to rely on management's and the Audit Committee's representations and to be unwilling to be associated with the financial statements prepared by management, and after concluding we can no longer provide the Audit Services in accordance with applicable law or professional obligations," EY said in its resignation letter. Super Micro said it disagreed with EY's decision to resign.
Alphabet rose 2.8% after the parent of Google posted third-quarter earnings and revenue that topped analysts' estimates, driven by cloud revenue that jumped 35% from a year earlier to $11.35 billion and beat consensus of $10.88 billion. The company's cloud division has benefited from the trend to artificial intelligence, and Alphabet has spent big on its own generation-AI technology, with capital spending in the quarter rising to $13.1 billion from $8.01 billion a year earlier and higher than estimates of $12.66 billion.
Advanced Micro Devices fell 11% after the chip maker reported third-quarter earnings that met expectations but gave a revenue forecast for the fourth quarter that slightly missed expectations. AMD said it expects fourth-quarter revenue of $7.5 billion at the midpoint of its range, compared with estimates of $7.55 billion. On a conference call, CEO Lisa Su said AMD now expects data-center AI GPU revenue to "exceed" $5 billion in 2024, up from the $4.5 billion forecast she made in July, but it appeared investors wanted a larger guidance boost.
Caterpillar dropped 2.1% after the construction-equipment maker reported third-quarter earnings that missed Wall Street estimates. Sales dropped 4% from a year earlier "primarily due to lower sales volume," the company said. For 2024, Caterpillar expects sales to be slightly lower than 2023; prior guidance called for flat sales.
Eli Lilly dropped 6.3% after the pharmaceutical company posted third-quarter earnings that missed analysts' expectations. The company reported adjusted earnings in the third quarter of $1.18 a share on revenue of $11.44 billion, compared with analysts' estimates for earnings of $1.45 a share on revenue of $12.1 billion. Sales of the company's obesity drugs, Zepbound and Mounjaro, missed estimates.
AbbVie rose 6.4% after the drugmaker posted third-quarter earnings that surpassed analysts' expectations and increased its quarterly dividend.
Visa reported fiscal fourth-quarter adjusted earnings of $2.71 a share, better than analysts' predictions of $2.58. Revenue rose 12% to $9.62 billion, topping estimates of $8.9 billion. Payments volume rose 8% from a year earlier, better than forecasts of 6.8%. Separately, The Wall Street Journal reported Visa was planning to lay off about 1,400 employees and contractors by the end of the year. Shares were up 3%.
Snap Inc posted a third-quarter loss of nine cents a share, narrower than expectations that called for a loss of 14 cents, and revenue of $1.37 billion topped forecasts of $1.36 billion. The company said daily active users in the period rose 9% to 443 million. The parent company of Snapchat also said its board authorized a stock buyback of up to $500 million. The stock rose 16%.
Chipotle Mexican Grill declined 7.8% after the burrito chain reported third-quarter revenue that rose 13% to $2.8 billion but was shy of expectations of $2.82 billion. Same-store sales also missed projections, rising 6% from a year earlier but below expectations of 6.3%.
Reddit surged 42% after the social-media company reported third-quarter earnings of $29.9 million, up from a year-earlier loss of $7.4 million. It was Reddit's first profitable quarter since it went public in March. Revenue jumped 68% to $348.4 million, easily topping Wall Street estimates of $314 million, behind increases in advertising and data-licensing sales.
Market News
Microsoft Forecasts Slower Cloud Business Growth in Second Quarter
Microsoft predicted increased spending on artificial intelligence this quarter but slower growth in its cloud business Azure, signaling that big AI investments were not enough to keep pace with capacity constraints at its data centers.
Shares of the Redmond, Washington-based company dipped 3.6% in after-market trading, giving up earlier gains. The company beat Wall Street's estimates for first-quarter revenue and profit.
Microsoft forecast second-quarter Azure revenue growth of 31% to 32%, lagging the 32.25% growth expected on average by analysts, according to Visible Alpha. Azure revenue rose 33% in its fiscal first quarter ended Sept. 30, slightly ahead of estimates.
Coinbase Drops After Quarterly Results Fall Short of Estimates
Shares of Coinbase Global, Inc. dipped in late trading after the largest US crypto exchange posted results below Wall Street expectations even though revenue almost doubled.
Total revenue increased to $1.21 billion, less than analysts’ forecast of $1.25 billion. Net income was $75 million, below $112.2 million expected by analysts surveyed by Bloomberg. The company lost $2.3 million in the year-ago period. An accounting change first adopted in the second quarter resulted in Coinbase pricing its digital assets to market value, resulting in a $121 million pre-tax loss in the most recent quarter, according to the company.
Meta Sales Narrowly Beat as AI Spending Continues to Rise
Meta Platforms, Inc. warned investors that losses from its division focused on artificial intelligence and augmented reality will continue to widen “meaningfully” this year, putting pressure on its core advertising business to fund the effort.
Meanwhile, the ads business, even with recent AI improvements, isn’t generating the kind of momentum Wall Street expected. Meta told investors Wednesday that revenue for the current quarter would be between $45 billion and $48 billion. Analysts were expecting fourth-quarter revenue of $46 billion. Shares fell 3% in late trading.
MicroStrategy, the Largest Corporate Bitcoin Holder, to Raise More Than $40 Billion to Buy More Bitcoin
MicroStrategy, an enterprise-software company that holds more than 1% of the supply of bitcoin on its balance sheet and calls itself the largest corporate holder of the cryptocurrency, said late Wednesday it plans to raise $42 billion over the next three years to buy more bitcoin.
MicroStrategy posted third-quarter results as well, unveiling a net loss of $340.2 million, or $1.72 a share, compared with a net loss of $143.4 million, or $1.01 a share, in the third quarter of 2023.
FactSet consensus called for a loss of 12 cents a share.