The stock market is euphoric.
As former President Donald Trump won back the White House, futures for the Dow Jones Industrial Average were up around 1,200 points, or more than 2% first thing Wednesday. The S&P 500 jumped by about the same amount.
There has been a lot of discussion about particular Trump trades this election -- stocks set to benefit from the former president winning such as Trump Media & Technology, Tesla, and Bitcoin -- but that's a pretty sweeping move for the market as a whole. At the very least, investors are expecting his tax and regulation policies will be good for companies' balance sheets.
Government bonds are falling. The 10-year Treasury yield, which moves inversely to prices, topped 4.4% -- higher than the 4% seen at the beginning of October, but not a huge recalibration.
It is, however, a reminder that market moves aren't a sign that investors are cheering for one side in elections -- they're just trying to protect their portfolios. And while stocks are clearly getting a boost from Trump's win, there are already problems on the horizon.
His plan to raise tariffs will inevitably fan inflation, which is why bond yields are rising. The Federal Reserve, which starts a two-day rate-setting meeting today, may not be able to lower interest rates as much as it would otherwise if price gains pick up again.
The dollar was also rising. While that may appear to be a sign of strength, it's bad for companies that sell goods and services overseas. And if the next administration radically reduces immigration, companies will have a harder time finding workers, which will also hurt their profitability.
This isn't an argument that investors shouldn't be buying now. But the upside will have limits that could show up sooner than they expect.
-- Brian Swint
***
Former President Defeats Harris After Winning Battleground States
Donald Trump won the presidential election early Wednesday as the Associated Press projected he will secure more than the 270 electoral votes needed to win the White House.
-- Trump won a series of key battleground states, including Pennsylvania,
North Carolina, and Georgia, before a projected victory in Wisconsin gave
him the win over Vice President Kamala Harris.
-- In a speech to supporters in Florida, Trump claimed a "magnificent
victory for the American people," and pledged to "help our country heal."
He also praised Tesla CEO Elon Musk, who has been present on the campaign
trail.
-- World leaders began congratulating Trump early in the day. France's
President Emmanuel Macron said he was ready to work together "with
respect and ambition," while Israel's Prime Minister Benjamin Netanyahu
called it "history's greatest comeback."
-- Bank stocks had an early boost amid optimism that a Trump presidency
would lead to an easing of regulation on financial firms. Traditional
auto makers such as Ford and General Motors were also speeding ahead,
given Trump's plan to eliminate electric-vehicle tax credits.
What's Next: The official government confirmation of Trump's win usually takes some days to come. While the market reacted strongly first thing, over time investors must assess several risks including inflationary pressures and the impact of tariffs.
-- Callum Keown
***
Bitcoin, Other Cryptos Surge After Election Result
Bitcoin soared to a record high, while other tokens and crypto stocks jumped as former President Donald Trump won the U.S. election.
-- The largest cryptocurrency briefly topped $75,000 in early trading
Wednesday to pass the previous intraday high it hit in March, according
to Dow Jones Market Data, before retreating slightly. Where the election
could make a bigger long-term difference is for crypto trading platforms
such as Coinbase Global. The exchange's shares were also up in premarket
trading.
-- Coinbase wants Congress to clarify rules that crypto platforms like
itself must follow to facilitate crypto trading in the U.S. Securities
and Exchange Commission Chair Gary Gensler sued Coinbase and other
trading platforms for allegedly operating as unregistered exchanges.
Coinbase denies that it is breaking the law.
-- Nearly half of all the corporate money raised in this election came from
crypto firms, CNBC reported. The pro-crypto Fairshake super PAC told CNBC
it raised $170 million this election, including about $50 million from
Ripple Labs, which has spent more than $100 million fighting Gensler.
-- Coinbase was one of the top corporate donors in this election, giving
more than $75 million to Fairshake and affiliate PACs, CNBC reported. CEO
Brian Armstrong donated more than $1.3 million to candidates.
What's Next: Bitcoin and other cryptocurrencies have had other reasons for gaining ground recently, some are careful to note. Stéphane Ouellette, CEO of digital assets platform FRNT Financial, said Bitcoin's gains have been driven much more by macroeconomic catalysts, such as the Federal Reserve, than by politics.
-- Joe Light, Janet H. Cho, and George Glover
***
Plane Part Supplier Spirit AeroSystems Raises Going Concern Issues
The aircraft parts supplier Spirit AeroSystems said in a filing that there was substantial doubt about its ability to continue as a going concern after raking up $1.5 billion in net losses for the first nine months of this year as major customer Boeing undergoes its own painful transformation.
-- Spirit Aero said it has developed a plan to improve its liquidity,
depending on the outcomes of active discussions related to the timing or
amounts of repayment for customer advances, the timing and expected
proceeds from divestitures, and the outcome of a merger with Boeing.
-- The company outlined three years of losses, cash burn over that time and
a debt balance of around $4.4 billion as of Sept. 26. It had cash and
equivalents of $217.6 million as of that date, down from $823.5 million
at the end of 2023.
-- Additional layoffs or furloughs of workers could be needed. Spirit Aero
said it would require additional liquidity to continue its operations
over the next 12 months. Boeing in July said it planned to buy Spirit for
$4.7 billion in an all-stock deal.
-- Spirit Aero's own business has suffered under Boeing's production
constraints, including a nearly two-month strike by Boeing machinists in
the Pacific Northwest. It is in talks with Boeing about amending an
agreement under which Boeing advanced more than $400 million to Spirit, a
fraction of which has been repaid.
What's Next: Spirit Aero said it was looking at other options to boost liquidity, including a restructuring of operations in an effort to increase efficiency and decrease expenses, but added there was no guarantee the strategy would be sufficient.
-- Liz Moyer
***
Super Micro's Pressure Builds After Disappointing Guidance
Server maker Super Micro Computer offered a disappointing preliminary business update, including a weaker than expected sales outlook for the current quarter and an open ended question about the timing of its annual report filing for the fiscal year that ended in June, as scrutiny of its accounting heats up.
-- The company's independent special committee said its investigation found
that Super Micro's audit committee acted independently, with no evidence
of fraud or misconduct by management or the board, and that it is
recommending remedial measures to strengthen its internal governance and
oversight.
-- Super Micro said it expects fiscal first-quarter adjusted earnings of 75
cents to 76 cents a share, which would be higher than Wall Street's
expectation. But revenue of $5.9 billion to $6 billion would be lower
than analysts' expectations for $6.44 billion.
-- Super Micro's accounting firm Ernst & Young resigned last week, saying it
could no longer rely on management's and the Audit Committee's
representations and didn't want to be associated with their financial
statements. Super Micro said it disagreed with E&Y.
-- CEO Charles Liang said on a conference call that Super Micro was actively
in the process of engaging a new auditor. Executives didn't provide an
update on the timeline for naming that auditor, but the company doesn't
expect its issues to affect its ability to serve customers.
What's Next: Super Micro also offered a weaker current-quarter outlook, guiding for sales of $5.5 billion to $6.1 billion and adjusted earnings of 56 cents to 65 cents a share. It has until Nov. 16 to say when it will file its annual report or risk being delisted.
-- Tae Kim and Janet H. Cho
***
Amazon's Drone Deliveries Expand After FAA Greenlight
Amazon has begun making small same-day drone deliveries to customers in the West Valley Phoenix area in Arizona, expanding its service from central Texas. The faster Amazon can promise deliveries, the more frequently customers will shop on Amazon, CEO Andrew Jassy said during a recent earnings call.
-- The Federal Aviation Administration granted Amazon permission to conduct
package delivery operations beyond the visual line of sight, meaning past
where a remote pilot could track it directly. Amazon started deliveries
in the Phoenix area after a rigorous evaluation of its on-board safety
systems.
-- Amazon unveiled its MK30 drones two years ago. They can transport
packages weighing up to five pounds from Amazon's same-day delivery site
in Tolleson, Ariz., which is west of Phoenix, or other warehouses and
drop them off in less than an hour to nearby customers.
-- The drones can fly twice as far as previous drones, are about 50% quieter
(MORE TO FOLLOW) Dow Jones Newswires
November 06, 2024 07:08 ET (12:08 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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