MARKET WRAPS
STOCKS: Stocks rose as strong earnings from SpaceX quelled fears about the profitability of the artificial-intelligence business.
TREASURYS: Treasury yields rose as risk appetite recovered, draining safe-haven demand.
FOREX: The U.S. dollar rose slightly as traders recalibrated interest-rate bets.
COMMODITIES: U.S. oil futures fell slightly as traders weighed reports about the recovery of flows through the Strait of Hormuz.
HEADLINES
Tesla Reports Flat Revenue, Increased Cash Flow as SpaceX Merger Talk
Looms
Tesla reported flat revenue in the third quarter but a surprise
positive free cash flow despite its heavy investments on AI and robotics,
all while talk of a merger with SpaceX raises questions about the future
of the electric carmaker.
Tesla generated free cash flow of $1.5 billion in the quarter, while
analysts expected the company's cash burn to expand to $4.3 billion,
according to estimates compiled by FactSet.
Wall Street expected capital expenditures to accelerate from last
quarter's $5.8 billion, but they declined to $4.7 billion-still more than
twice the company's spend a year earlier.
Meta Will Create New Stock Class to Fund AI Spending
Meta Platforms is getting creative to fund its massive investments in
artificial intelligence.
The company reported record revenue for the third quarter and said it
would create a new class of nonvoting stock to raise the capital it needs
for developing and serving AI models. The new stock will have an
effective date in January 2027 and won't affect Chief Executive Mark
Zuckerberg's voting control.
The company said it brought in $64.2 billion in sales, a 26%
year-over-year increase, and net income of $9.8 billion. The revenue
figure exceeded the expectations of analysts surveyed by FactSet. The net
income total was considerably below analysts' forecast of $17.2 billion,
dragged down by a $9.9 billion legal charge related to the company's
settlement of social-media harm lawsuits.
IBM Reports Higher Profit as Some Delayed Deals Come Through
International Business Machines reported a higher third-quarter profit
and growing revenue across its software and infrastructure segments, as
the company looks to prove to investors that its disappointing
second-quarter showing was just a blip.
IBM's second-quarter profit was hit by mainframe deals that fell
through, weighing on the company's software and infrastructure segments.
Around two-thirds of those deals have since closed during the third
quarter, and IBM is optimistic about most of the rest, Chief Financial
Officer Jim Kavanaugh said.
"We feel pretty good," he said in an interview. "With the exception of
maybe one or two, they're all still in play."
Texas Instruments Posts Higher Profit, Revenue
Texas Instruments logged higher profit and revenue in its latest
quarter on broad based growth led by industry, automotive and data
center.
The Dallas-based semiconductor company on Wednesday posted a profit of
$2.43 billion, or $2.62 a share, compared with a profit of $1.36 billion,
or $1.48 share, a year earlier. Analysts expected $2.44 a share,
according to FactSet.
Revenue rose 28% over the year to $6.06 billion, topping the $5.94
billion forecast by analysts.
CSX Logs Higher Profit, Revenue on Rising Freight Volumes
CSX reported a higher profit and revenue in the third quarter, driven
by fuel surcharges and higher freight volumes.
The railroad operator on Wednesday reported a profit of $1.05 billion,
or 57 cents a share. That compares with a profit of $694 million, or 37
cents a share, a year earlier. Analysts surveyed by FactSet were
expecting a profit of 53 cents a share.
Revenue was up 12% to $4.02 billion. Analysts were expecting $3.96
billion in revenue.
Abbott to Carve Out Nutrition Business Into Independent Company
Abbott Laboratories plans to separate its nutrition business into an
independent company by the end of next year, distancing itself from an
embattled unit that has dragged down earnings and been the subject of
years of litigation.
The newly created company, set to house brands including Pedialyte
electrolyte beverages and Similac infant formula, is expected to generate
about $8.5 billion in annual sales.
Chief Executive Robert Ford said the separation will allow both
companies to sharpen focus and direct resources more effectively. Abbott
will dial in on its core portfolio, which includes higher-growth
categories such as medical devices and diagnostics, while the nutrition
company will aim to capitalize on growing demand in the global nutrition
market.
AT&T Lifts Profit Outlook on Continued Postpaid Phone, Internet Growth
AT&T boosted its full-year profit outlook and posted continued revenue
growth in the third quarter, but shares fell as some on Wall Street were
disappointed by its core wireless-subscriber numbers and rising expenses.
AT&T's stock was down as much as 6% in morning trading before
rebounding slightly.
For the full year, AT&T now expects adjusted earnings per share of
about $2.40, compared with a prior forecast of $2.25 to $2.35. Analysts
polled by FactSet project $2.34.
EBay to Cut 9% of Workforce in Latest Round of Layoffs
EBay plans to cut about 9% of its workforce, marking the second round
of layoffs at the e-commerce platform this year.
The company said the move aims to help it focus its resources on its
top priorities, and that it would continue to hire in certain areas
aligned with its strategy.
"This step was taken to ensure we continue to operate from a position
of strength," a company spokesperson said.
Philip Morris Doubles Down on Zyn, Despite Mounting Cost Pressures
Philip Morris International isn't slowing down efforts to grow its Zyn
nicotine-pouch brand, even as geopolitical tensions disrupt operations
and pressure its earnings outlook.
The tobacco company said Wednesday it will continue to step up
investments to support its Zyn brand, aiming to meet rising demand. In
the recent quarter, U.S. shipments of the nicotine pouches climbed 4.2%
to 3.2 billion pouches.
Beyond launching new products and variants, Philip Morris plans to
transition most of Zyn's portfolio to 20-pouch cans from the current
15-pouch format, a move executives called a significant investment in
consumer value. The company is also expanding its marketing efforts,
preparing to launch a national Zyn brand campaign in the current quarter.
TALKING POINT Want to Short the AI Boom? She Wants to Give You a Way to Bet on 'Compute' Prices
Carmen Li knows more about the price of AI computing power than pretty much anyone else on Wall Street. Soon, she hopes to make it an asset class like oil or gas that investors can bet on-or against.
Li is the 40-year-old founder of Silicon Data, a startup that compiles indexes tracking the rental prices of Nvidia chips. As early as next month, Silicon Data is joining with CME Group to launch futures contracts based on the indexes.
The idea is to bring pricing transparency to what's quickly becoming the most coveted and costly resource powering the AI boom: computing power, or compute, as it is known in the industry. Anthropic, OpenAI and Google are among the AI giants scrambling to secure it, with the country's data-center build-out expected to take years. Li says the futures contracts will give companies a way to hedge a huge business cost and traders a way to speculate on the AI boom.
"The goal of Silicon Data is to become a referee," Li said in an interview.
The contracts are poised to debut as investors worry that AI won't be able to deliver on the hundreds of billions of dollars being poured into it, with prices of stocks and bonds of AI companies recently stumbling as traders try to anticipate where a shakeout might happen.
Compute futures would offer a cleaner way to bet on or against the AI boom by focusing on the rental prices companies would need to pay for the technology. Already, futures contracts have expanded from a way for farmers to lock in prices for corn and other agricultural products to span every corner of the economy, letting traders bet on price moves for everything including gold, interest rates and cryptocurrencies.
Skeptics abound when it comes to compute futures, with some critics comparing the idea to internet bandwidth futures launched in the dot-com era, which failed after a supply glut of fiber-optic networks sent prices plunging.
--Peter Rudegeair and Candice Choi, The Wall Street Journal
Expected Major Events for Thursday 05:00/JPN: Sep Steel Production
06:45/FRA: Oct Monthly business survey (goods-producing industries)
10:00/UK: Oct CBI Industrial Trends Survey
12:30/CAN: Sep Industrial product and raw materials price indexes
12:30/CAN: Aug Employment Insurance
12:30/US: 10/17 Unemployment Insurance Weekly Claims Report - Initial Claims
12:30/US: U.S. Weekly Export Sales
12:30/CAN: Sep New Housing Price Index
13:00/RUS: Weekly International Reserves
14:00/US: Sep Leading Indicators
14:30/US: 10/16 EIA Weekly Natural Gas Storage Report
15:00/US: Oct Federal Reserve Bank of Kansas City Survey of Tenth District Manufacturing
20:30/US: Foreign Central Bank Holdings
20:30/US: Federal Discount Window Borrowings
23:01/UK: Oct UK Consumer Confidence Survey
23:30/JPN: Aug Final Labour Survey - Earnings, Employment & Hours Worked
23:30/JPN: Sep CPI (Nation), CPI ex-food (Nation)
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Expected Earnings for Thursday Amalgamated Financial Corp (AMAL) is expected to report $1.12 for 3Q.
American Airlines Group Inc (AAL) is expected to report $-0.36 for 3Q.
Badger Meter Inc (BMI) is expected to report $1.23 for 3Q.
BancFirst Corp $(BANF)$ is expected to report $1.94 for 3Q.
Blackstone Inc (BX) is expected to report $1.24 for 3Q.
Bread Financial Holdings Inc $(BFH)$ is expected to report $3.31 for 3Q.
Carpenter Technology Corp $(CRS)$ is expected to report $3.02 for 1Q.
Cass Information Systems Inc $(CASS)$ is expected to report $0.80 for 3Q.
Delcath Systems Inc (DCTH) is expected to report $-0.09 for 3Q.
Dover Corp $(DOV)$ is expected to report $2.52 for 3Q.
FirstCash Holdings Inc $(FCFS)$ is expected to report $2.44 for 3Q.
FirstService Corp (FSV,FSV.T) is expected to report $1.41 for 3Q.
Heritage Financial Corp $(HFWA)$ is expected to report $0.51 for 3Q.
Honeywell International Inc (HON) is expected to report for 3Q.
Huntington Bancshares Inc $(HBAN)$ is expected to report $0.35 for 3Q.
Insteel Industries Inc $(IIIN)$ is expected to report $0.41 for 4Q.
Integer Holdings Corp $(ITGR)$ is expected to report $1.04 for 3Q.
Kearny Financial Corp $(KRNY)$ is expected to report $0.17 for 1Q.
Lindsay Corp (LNN) is expected to report $1.00 for 4Q.
Lockheed Martin Corp (LMT) is expected to report $7.52 for 3Q.
MSC Industrial Direct Co - A Share (MSM) is expected to report $1.39 for 4Q.
Mullen Group Ltd (MLLGF,MTL.T) is expected to report $0.42 for 3Q.
Nasdaq Inc $(NDAQ)$ is expected to report $0.91 for 3Q.
Norfolk Southern Corp $(NSC)$ is expected to report $3.42 for 3Q.
Old Republic International Corp (ORI) is expected to report $0.77 for 3Q.
Pool Corp (POOL) is expected to report $3.36 for 3Q.
Popular Inc $(BPOP)$ is expected to report $3.97 for 3Q.
PulteGroup Inc $(PHM)$ is expected to report $2.64 for 3Q.
Quest Diagnostics Inc $(DGX)$ is expected to report $2.61 for 3Q.
Roper Technologies Inc $(ROP)$ is expected to report $4.13 for 3Q.
Ryder System Inc (R) is expected to report $3.92 for 3Q.
S&T Bancorp Inc $(STBA)$ is expected to report $0.99 for 3Q.
Snap-On Inc (SNA) is expected to report $4.91 for 3Q.
Tractor Supply Co $(TSCO)$ is expected to report $0.41 for 3Q.
TriCo Bancshares (TCBK) is expected to report $1.09 for 3Q.
Union Pacific Corp $(UNP)$ is expected to report $3.47 for 3Q.
United Bankshares Inc $(UBSI)$ is expected to report $0.93 for 3Q.
Valero Energy Corp $(VLO)$ is expected to report $21.21 for 3Q.
Valley National Bancorp $(VLY)$ is expected to report $0.33 for 3Q.
Visteon Corp (VC) is expected to report $2.15 for 3Q.
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