Tech sector rally saves Wall Street from semiconductor crisis

In the world of finance, the little stories are often just as important as the big stories about economic cycles and capital flows. Investors thrive on drama and extremes. Tuesday was a day of despair, with fears of the demise of the semiconductor industry, or as it is called, the “golden chip.” The unexpected warning from Dutch company ASML cast a shadow over the bullish AI frenzy. But the darkness was short-lived. By Thursday morning, the mood had changed, thanks to TSMC’s “crazy” financial performance, as one analyst put it. This is crucial because ASML is the top supplier to TSMC, which in turn supplies Nvidia, which in turn supplies OpenAI. It is a supply chain with high expectations. TSMC’s stellar results helped offset ASML’s misstep and allowed stock indices to continue their upward trend, with some hitting new highs. The technology sector did its part to lift the indices, but it wasn’t enough for the S&P 500, which fell slightly (-0.02%) due to declines at health insurers Molina, Centene and Elevance Health after the latter issued worrisome earnings forecasts .

This morning, futures for the S&P 500 and Nasdaq are up 0.3% and 0.5%, respectively, while the Dow Jones appears to be holding steady. The technology sector is shining globally. In the US, Netflix shares rose 5.8% in premarket trading after adding 5.1 million new subscribers in the third quarter, beating Wall Street forecasts. The company expects stronger subscriber growth during the holiday season. Apple shares rose 2% after news that the iPhone 16 is selling better than its predecessor in China. FactSet reports that about 80% of the 67 S&P 500 companies that have reported so far have beaten analysts’ expectations.

Across the pond, European markets are also on the rise, buoyed by a rise in Chinese stocks following Beijing’s latest stimulus measures.

Today’s session will actually be dominated by China’s third quarter growth numbers. They met expectations and even slightly exceeded forecasts, some economists say. However, growth was the weakest since the start of 2023, leaving the need for further support measures in focus. Nine-month growth was 4.8%, keeping Beijing’s annual target of “around 5%” within reach.

In other news, Israel announced the death of Yahya Sinouar, the Hamas leader described as the “architect of the October 7, 2023 attack.” Israel said the conflict could end if Hamas gave up its weapons and released the remaining hostages. Gold exceeded $2,700/ounce for the first time.

In the corporate sector, Procter & Gamble and American Express will report their results today.

In Asia Pacific, China ended the week on a high note according to the latest statistics and announcements from the PBOC. The Hang Seng gained 3.6%. This enthusiasm was not shared by either South Korea (-0.6%) or Australia (-0.9%). Japan ended the week up 0.1%. European markets are bullish.

Today’s economic highlights:

Building permits and construction starts in the USA are on the calendar today.

The dollar fell to EUR 0.9211 and GBP 0.7665. The ounce of gold rose to $2,710. Oil prices fell, with North Sea Brent at $74.12 a barrel and light U.S. crude WTI at $69.88. The 10-year US Treasury yield is 4.08%. Bitcoin is hovering around USD 67,800.

In company news:

• Netflix rose 5% after quarterly results.
• Apple shares rose 2% after reports that the iPhone 16 is selling faster in China than its predecessor.
• Procter & Gamble reported first-quarter revenue that fell short of Wall Street expectations.
• Amex reported third-quarter profit that beat Wall Street estimates due to higher card spending.
• Intuitive Surgical rose 6% after reporting its quarterly results.
• Despite competition and communication obstacles, Alimentation Couche-Tard continues to consider the acquisition of Seven & i.
• Berkshire Hathaway continues to reduce its stake in Bank of America.
• Deere is being investigated by the FTC for unfair repair policies.
• Flagstar, a subsidiary of New York Community Bancorp, is expected to lay off around 1,900 employees.
• Schlumberger sells stake in Palliser block.
• Autonomous driving specialist Pony.ai files for an IPO on Nasdaq.

Today’s most important releases: Procter & Gamble, American Express, Schlumberger, Fifth Third Bancorp…

Analyst Recommendations:

• Bank of America: Phillip Securities downgrades from Neutral to Accumulate, lowering price target to $44 from $45.
• Coherent Corp.: B Riley Securities Inc. downgraded the stock to Neutral from Buy with an $86 price target.
• Ecolab Inc.: Jefferies upgraded the stock to “Buy” from “Hold” and increased its price target to $310 from $235.
• Micron Technology, Inc.: Baptista Research downgraded the stock to Buy from Outperform, with the price target lowered to $143.60 from $158.40.
• Netflix, Inc.: Phillip Securities downgraded to Neutral from Accumulate with price target raised to $695 from $675.
• Old Dominion Freight Line, Inc.: BMO Capital Markets downgraded the stock to “Market Perform” from “Outperform” and lowered its price target to $210 from $214.
• Sealed Air Corporation: Baptista Research downgraded the stock from Buy to Outperform, with the price target lowered to $40.60 from $43.60.
• Allison Transmission Holdings, Inc.: Raymond James maintains its Outperform rating and increases its price target to $115 from $95.
• Applovin Corporation: Jefferies maintains its Buy rating and increases its price target from $108 to $175.
• Bwx Technologies, Inc.: Baird maintains its Outperform rating and increases its price target to $166 from $123.
• Curtiss-Wright Corporation: Baird maintains its Outperform rating and increases its price target to $432 from $312.
• Enphase Energy, Inc.: Daiwa Securities maintains a Neutral rating with a price target reduced from $135 to $101.
• First Solar, Inc.: Daiwa Securities maintains its Outperform rating and lowers its price target to $230 from $300.
• Five9, Inc.: Baptista Research maintains its Buy rating and lowers its price target from $79.20 to $52.
• Klaviyo, Inc.: Piper Sandler & Co maintains its Overweight rating and increases its price target to $45 from $34.
• Lockheed Martin: Baird maintains a neutral rating with a price target raised from $519 to $626.
• M&T Bank: Barclays maintains its Equal Weight recommendation and increases its price target from $170 to $228.
• Nextracker Inc.: Daiwa Securities maintains its Outperform rating and lowers its price target to $39 from $53.
• Stellantis Nv: Goldman Sachs sticks to its buy recommendation and lowers its price target from 23 to 16 euros.
• Bellway Plc: Peel Hunt is downgraded from Add to Hold with the price target raised to GBX 3160 from GBX 3020.
• Compass Group Plc: Deutsche Bank downgraded the stock to “Hold” from “Buy” with a price target of GBX 2500.
• Greencore Group Plc: Deutsche Bank upgrades the stock to “Hold” from “Sell” and increases the price target from GBX 130 to GBX 195.