Galt&Taggrt published Global Markets Weekly Update. According to the document:
USA
Stock Market Overview:
The benchmark S&P 500 index (SP500) on Friday notched a six-week win streak, its longest weekly advance of 2024. It also notched its 46th and 47th record close of the year. Meanwhile, it was a historic week for the venerable Dow Jones Industrial Average (DJI). The blue-chip gauge surpassed the 43,000 points mark for the first time ever while posting its 37th through 40th record close of the year.
With the third year of Wall Street's bull run kicking off, markets continue to march upward. This week's advance was driven by a combination of strong earnings, a continued rotation into all corners of the market, a robust retail sales report, and increased hopes that the Federal Reserve would be able to deliver a soft landing.
The tech sector went through a bit of a roller-coaster following contrasting quarterly results from two high-profile companies. Dutch computer chip equipment supplier ASML (ASML) on Tuesday sent shivers through chip stocks after missing quarterly bookings expectations. However, just two days later, sentiment in the chip space sharply reversed course after Taiwan Semiconductor Manufacturing (TSM), the world's largest contract chipmaker, announced a blowout quarterly report and reinvigorated the artificial intelligence trade.
Financials continued to advance after Morgan Stanley (MS) joined peers JPMorgan (JPM) and Goldman Sachs (GS) in delivering results that showed a rebound in investment banking and dealmaking activity in the quarter. Finally, Netflix (NFLX) cheered investors by easily topping profit and subscriber growth expectations.
The earnings season becomes a deluge next week, with some of the world's biggest and most well-known firms announcing their financials, including electric vehicle giant Tesla (TSLA).
For the week, the S&P (SP500) added +0.9%, while the Nasdaq Composite (COMP:IND) gained +0.8%. The blue-chip Dow (DJI) rose +1.0%.
Corporate News:
TSMC Earnings:
Taiwan Semiconductor Manufacturing has ridden to the rescue. The chip manufacturer’s earnings, often seen as a bellwether for semiconductor demand, should reassure investors about the artificial-intelligence trade but it’s a reminder of the U.S. technology sector’s heavy reliance on the Taiwanese company. TSMC’s third-quarter profit crushed expectations while the company raised its revenue guidance for the year. That should be enough to reassure stockholders in Nvidia and other AI plays that there’s no sign of a popping bubble yet. How to square TSMC’s results with disappointing guidance from chip-making equipment provider ASML is now the question. The answer seems to be that TSMC is increasing its dominance over rivals Samsung Electronics and Intel as it takes the majority of the market share in AI chips. From a purely free-market perspective, that’s not an issue. But from a geopolitical perspective, having a company headquartered roughly 100 miles off the shore of China as the single crucial supplier to the U.S. tech industry, given the tensions between the two countries, is an uncomfortable situation. TSMC is building factories in Arizona, with initial production expected next year. However, it won’t be producing its current most advanced chips on American soil until 2028 at the earliest, by which time they could be outdated. Even with tens of billions of dollars’ worth of subsidies, the U.S. only aims to have a 20% share of global leading-edge chip production by the end of the decade compared with a 37% share of semiconductor manufacturing in 1990. In the short term, TSMC’s results are a boost for the market. In the long term, they expose the soft underbelly of the AI-chip boom. TSMC gained almost 5% on Friday, meanwhile ASML was down almost 14% during the week.
NFLX Earnings:
Netflix beat expectations and raised its outlook as efforts to focus on profit rather than growth in net subscribers paid off in the third quarter. Net subscribers rose, but at a slower pace than one year ago, when the streaming giant started a password-sharing crackdown. It is focused on building its advertising business.
• Netflix’s fourth quarter outlook sees revenue of $10.13 billion versus the $10.04 billion estimated, and it sees net subscriptions rising more than the third quarter. For 2025, it forecast a revenue range of $43 billion to $44 billion, in line with Wall Street’s expectations.
• For the third quarter, Netflix reported earnings of $5.40 a share and revenue of $9.83 billion. Total paid subscribers came in at 282.7 million, and net subscriber adds were a little over five million, compared with the 8.7 million in the third quarter last year.
• Netflix executives cited the viewership success of new series, including The Perfect Couple, Nobody Wants This, and Tokyo Swindlers, along with older franchises Emily in Paris and Cobra Kai. Each paid member watches Netflix for two hours a day on average, the company said.
• Price hikes are boosting profit. Netflix increased prices in a few countries in Japan, Europe, the Middle East, and Africa this month. In the U.S. and France, Netflix recently phased out its low end Basic plan and will phase the Basic plan out in Brazil during the fourth
quarter.
What’s Next: Netflix introduced a $6.99 a month ad-supported subscription tier in late 2022 and it is showing signs of gaining momentum. More than half of new subscribers in the markets where the ad tier is offered selected the plan during the third quarter. Ad-tier membership rose 35% from the second quarter. NFLX stock gained more than 11% on Friday.
AMZN goes nuclear:
It looks like Big Tech is going big on nuclear power. Amazon (AMZN) has joined other tech giants Google (GOOGL) and Microsoft (MSFT), announcing $500M of investments in atomic energy in a bid to satiate its data center demands and artificial intelligence ambitions while continuing to meet its clean energy goals. Amazon (AMZN) on Wednesday said it signed a deal with Dominion Energy (D) to explore building a small modular nuclear reactor near the North Anna station. Amazon would also invest in reactor developer X-energy and collaborate with regional utility consortium Energy Northwest. Just days before, Google (GOOGL) announced an agreement to purchase power generated from multiple small modular reactors to be built by nuclear energy startup Kairos Power. Not only this, Microsoft (MSFT) has also teamed up with Constellation Energy (CEG) to resurrect a unit of the Three Mile Island nuke plant in Pennsylvania. The fact of the matter is that AI models require loads and loads of electricity. This is because of the vast amount of data that these models have to compute to generate responses. To give an idea, a basic text response from these AI models can consume enough energy to power a 10-watt LED bulb for an hour. In comparison, a typical Google search can consume electricity equivalent to powering a 10-watt LED bulb for about two minutes. In that context, nuclear energy appears favorable over wind or solar, as nuclear
creates a larger amount of power that is stable and consistently available on demand. The recent nuclear bids from technology firms have raised the prospects of an entire sector. Nuclear power plant developers Oklo (OKLO +100% during the week) and NuScale Power (SMR +40% during the week) saw their stocks jump over 40% on Amazon's news. Similarly, investors bought shares of established independent power producers with nuclear footprints like Vistra (VST), Constellation Energy (CEG), and Dominion Energy (D). Even uranium-related names joined the party, with Centrus Energy (LEU), Energy Fuels (UUUU), and Denison Mines (DNN) gaining.
USA
The Weak Ahead:
Wall Street's focus next week will be almost entirely on the earnings season, which will turn into a veritable deluge of reports from high-profile names.
Some of the biggest companies in the world will be announcing their results, including electric vehicle leader Tesla (TSLA), troubled planemaker Boeing (BA), telecom giant Verizon (VZ), industrial heavyweights such as GE Aerospace (GE) and Honeywell (HON), economic bellwether UPS (UPS), and consumer behemoths such as Coca-Cola (KO) and Philip Morris (PM).
Tesla (TSLA), in particular, will receive a lot of attention, especially after its recent highly anticipated robotaxi reveal disappointed investors.
Aside from the earnings season, the economic calendar is fairly busy next week. Market participants will receive flash PMI readings on manufacturing and the services sector, durable goods orders, some housing market data, and the Federal Reserve's Beige Book on regional
economic activity.
Earnings Calendar:
Monday, October 21 - Nucor (NUE) and Logitech (LOGI).
Tuesday, October 22 - General Electric (GE), Philip Morris (PM), Verizon (VZ), Texas Instruments (TXN), Lockheed Martin (LMT), General Motors (GM), and 3M (MMM).
Wednesday, October 23 - Tesla (TSLA), Coca-Cola (KO), T-Mobile (TMUS), IBM (NYSE:IBM), AT&T (T), and Boeing (BA).
Thursday, October 24 - Valero (VLO), UPS (UPS), Honeywell (HON), American Airlines (AAL), Northrop Grumman (NOC), Southwest
Airlines (LUV), and Dow (DOW).
Friday, October 25 - Centene (CNC), HCA (HCA), and Colgate-Palmolive (CL).
Europe
ECB cuts rates for second consecutive meeting:
In local currency terms, the pan-European STOXX Europe 600 Index ended 0.58% higher as a second consecutive interest rate cut by the European Central Bank (ECB) stoked expectations for further easing of monetary policy. Major stock indexes rose. Italy’s FTSE MIB gained 2.61%, Germany’s DAX added 1.46%, and France’s CAC 40 Index tacked on 0.46%. The UK’s FTSE 100 Index advanced 1.27%.
As expected, the ECB lowered its key deposit rate by a quarter of a percentage point to 3.25%, the first back-to-back reduction in 13 years. ECB President Christine Lagarde said that the disinflationary process seemed to be “well on track,” citing recent downside surprises in economic activity data. Although the ECB reiterated that it would not pre-commit to a particular rate path, financial markets appeared to expect the ECB to reduce rates in December to support the economy.
Eurozone inflation lower than first thought:
The European Commission’s statistics office reported that annual inflation came in at 1.7% in September—a downward revision from its initial estimate of 1.8% and well below the ECB’s stated target of 2%. The ECB forecasts that inflation will rise again before falling back toward the 2% target next year.
UK inflation rate drops, wage growth slows:
Slower-than-expected UK inflation and a further decline in wage growth appeared to open the door for the Bank of England (BoE) to lower borrowing costs again.
The consumer price index rose 1.7% in the year through September, the lowest rate since April 2021 and below forecasts for 1.9%. Services inflation, which is closely watched by the BoE, decelerated to a more than two-year low of 4.9%. The largest downward contribution to both measures came from transport costs, as air fares and motor fuel costs declined sharply.
Wage data indicated that upward pay pressure—a driver of still elevated levels of underlying inflation—may be easing. In the three months through August, regular pay, which excludes bonuses, increased 4.9% year over year, down from 5.1% in the previous period and the slowest rate of growth in more than two years. There were signs that the labor market may have loosened as well, with tax records showing a fall in payroll employment and job openings in July and August.
Japan
Inflation eases, while exports decline:
Japan’s stock markets fell in local currency terms, with the Nikkei 225 Index down 1.58% and the broader TOPIX Index losing 0.64%. Easing domestic inflation in September, although expected, led to some speculation that the Bank of Japan (BoJ) may be less likely to raise interest rates again this year.
The latest comments from BoJ officials emphasized that while the prerequisite conditions for beginning monetary policy normalization have already been met—with BoJ Board Member Seiji Adachi citing the breadth of items undergoing price increases—rate hikes should be implemented at a very gradual pace. Adachi warned that the BoJ must avoid a drastic change in policy given uncertainties about the outlook for the global economy and domestic wage growth. The yield on the 10-year Japanese government bond rose to 0.97% from 0.94% at the end of the previous week.
In the currency markets, the yen weakened from the low to the high end of the JPY 149 range relative to the U.S. dollar. Recent moves in the yen were described as “somewhat one-sided and rapid” by Japan’s top currency diplomat, Atsushi Mimura. He said that authorities continue to closely watch foreign exchange moves, including speculative ones, with a high sense of urgency. The yen is approaching levels where authorities intervened earlier in the year to stem the currency’s decline.
Japan’s core consumer price index (CPI) showed inflation easing in September, as had been widely expected on the reinstatement of electricity and gas subsidies. The core CPI, which excludes fresh foods but includes oil products, rose 2.4% year on year, compared with 2.8% in August. Separate data showed that Japan’s exports in September fell 1.7% from year-ago levels, the first decline in 10 months, which reflected weakness in Chinese demand. Imports grew 2.1%, partly due to the impact of the weak yen, which inflates their value.
China
Economic growth surprises to the upside but remains below target:
Chinese equities rose as the central bank unveiled more support measures after data showed that deflationary pressures grew more entrenched in the economy. The Shanghai Composite Index gained 1.36% in local currency terms, while the blue chip CSI 300 added 0.98%. In Hong Kong, the benchmark Hang Seng Index fell 2.11%, according to FactSet.
China’s economy in the third quarter expanded 4.6% from year-ago levels, beating a consensus estimate. This growth rate was slightly lower than the 4.7% expansion recorded in the second quarter and below the government’s stated target of “around 5%.” On a quarter-over-quarter basis, the economy grew 0.9%.
Other economic data showed signs of improvement. Industrial production rose a better-than-expected 5.4% in September from a year earlier, up from August’s 4.5% increase. Retail sales grew an above-forecast 3.2% year over year, an acceleration from the 2.1% increase logged in August. Higher sales of household appliances were a contributing factor.
Inflation cools:
Annual inflation came in at a below-consensus 0.4% in September, the lowest level in three months and a slowdown from the 0.6% rate recorded in August. Core inflation, which strips out volatile food and energy costs, increased 0.1%, the lowest since February 2021, according to Bloomberg. The producer price index fell a bigger-than-expected 2.8% from a year ago, deepening from August’s 1.8% drop.
