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24.10.2024 10:37 AM
On Wednesday, trading on Wall Street ended with a decline in the indices, amid rising Treasury bond yields, which negatively affected large-cap companies. Investors lost confidence in a rapid rate cut by the Federal Reserve, while corporate news added tension, hitting McDonald's and Coca-Cola stock prices.
The yield on 10-year U.S. Treasury bonds reached its highest point in three months. Investors are reconsidering their expectations for future Fed decisions, given steady economic indicators and the upcoming presidential elections.
"The market is struggling to digest this latest rise in yields," noted Adam Turnquist, chief technical analyst at LPL Financial, emphasizing that higher rates are putting additional pressure on stocks.
Shares of large-cap companies sensitive to interest rate changes were in decline: Nvidia dropped 2.81%, Apple lost 2.16%, Meta Platforms (an organization banned in Russia) fell by 3.15%, and Amazon saw a decrease of 2.63%. These tech giants dragged down the tech-heavy Nasdaq index.
Among the 11 sectors in the S&P 500 index, only utilities and real estate showed positive momentum. All other sectors finished the day in negative territory.
The Dow Jones Industrial Average fell by 409.94 points, or 0.96%, to 42,514.95. The S&P 500 lost 53.78 points, or 0.92%, to 5,797.42, and the Nasdaq Composite dropped by 296.47 points, or 1.60%, closing at 18,276.65.
McDonald's stock dropped by 5.12% amid alarming news of an E. coli outbreak linked to its Quarter Pounder burgers. The incident resulted in one death and numerous illnesses, dealing a significant blow to the company. Coca-Cola also came under pressure, with its shares falling by 2.07%, despite confirming its annual profit forecast. Investors were disappointed as the expected revenue didn't meet higher expectations.
The broader consumer goods sector saw a 1.82% decline. The information technology sector followed suit, with a drop of 1.68%, adding to the overall negative market trend.
"The market recently reached new all-time highs, and many portfolio managers have decided to lock in profits," noted Thomas Martin, senior portfolio manager at Globalt Investments. He added that the current market sentiment is contributing to mass selling as investors seek to secure gains amid growing uncertainty.
Boeing shares fell by 1.76% following the announcement of $6 billion in quarterly losses due to a prolonged production halt caused by a strike. Later that day, Boeing workers were set to vote on a new contract proposal that could end the five-week-long standoff.
Despite the overall negative market trend, Texas Instruments posted positive results, with its shares rising by 4% after third-quarter earnings exceeded analyst expectations. AT&T also pleased investors, with its stock climbing 4.60% as the company's wireless subscriber growth in the third quarter outpaced forecasts.
The S&P 500 index recorded its third consecutive daily decline, highlighting the market's growing tension and investor concerns.
U.S. stock markets are hovering near record levels, but analysts warn that a combination of earnings reports, shifts in monetary policy expectations, and the upcoming presidential election could test the rally and spark volatility.
Richmond Federal Reserve President Thomas Barkin noted that the Fed's battle to bring inflation back to its 2% target may take longer than expected, which could limit the potential for rate cuts in the near future.
The latest report from the Federal Reserve, known as the Beige Book, showed that U.S. economic activity has remained largely unchanged from September to early October. However, companies continue to increase hiring, offering some optimism for the labor market.
On the New York Stock Exchange, declining stocks significantly outnumbered gainers, with a ratio of 3.27 to 1. The exchange recorded 102 new highs and 59 new lows, illustrating mixed market performance.
The S&P 500 index registered 28 new 52-week highs and 4 new lows, while the Nasdaq Composite saw 60 new highs but also recorded 90 new lows, indicating ongoing risks in the market.
Trading volume on U.S. exchanges for the day totaled 11.83 billion shares, surpassing the 20-day average of 11.29 billion shares. This increased investor activity could signal that the market is preparing for significant changes in the near future.
Shares of Tesla's smaller electric vehicle competitors, Rivian and Lucid, both rose by 2% after trading hours, reflecting growing confidence in the electric vehicle market. This growth underscores the attention to the sector, where Tesla remains the dominant player.
Elon Musk confirmed Tesla's plans to launch self-driving cars with paid rides as early as next year. The company is awaiting approval from regulatory authorities in California and Texas, which could pave the way for the commercialization of this technology.
Following the robotaxi presentation, demand for Tesla's Full Self-Driving (FSD) software surged. In response to the growing interest, the company offered existing users free access to FSD for one month, marking the second time this year that such an offer was made. This reflects increasing adoption of Tesla's technologies and supports confidence in its long-term strategy.
Despite uncertain demand for electric vehicles and the withdrawal of some competitors from the market, Tesla continues to expand its product line and reduce production costs. The company is also investing heavily in artificial intelligence projects and manufacturing capacity. Tesla plans to release new, more affordable models within the next two years, with the first sales expected in the first half of 2025.
Tesla's third-quarter results impressed analysts: the company's automotive profit margin, excluding regulatory credits, reached 17.05%, up from 14.6% in the previous quarter. This figure exceeded Wall Street's forecast of 14.9%. These results highlight the company's financial resilience, even amid market challenges and competition in the industry.
Tesla announced that the cost of producing a single electric vehicle reached a historic low, at about $35,100. This was achieved through reduced labor and material costs. Moreover, the company reported an adjusted profit of 72 cents per share for the third quarter, significantly surpassing analysts' expectations of 58 cents.
Falling raw material prices, especially those used in battery production, have further reduced Tesla's costs. The company noted that this would positively affect its financials this year, though the effect may gradually decrease over time.
Tesla is planning a significant increase in capital expenditures for the coming year. CFO Taneja projected over $11 billion in capital investments, highlighting the company's serious intentions to expand its production capabilities and technological developments.
After lowering prices last year, Tesla introduced favorable financing options this spring to stimulate demand. This move was part of a broader strategy to remain competitive as other automakers also vie for market share in the electric vehicle space.
In the first nine months of 2024, Tesla has already delivered 1.29 million vehicles. To break last year's record, the company needs to sell an additional 514,925 vehicles by the end of the year. This sets Tesla on a path to achieving another milestone in terms of sales volume.
Tesla's third-quarter revenue reached $25.18 billion, slightly below analyst expectations of $25.37 billion. However, the company improved its performance compared to the same quarter in 2023, when revenue was $23.35 billion.
Additionally, Tesla reported its second-highest quarterly income from regulatory credits, which grew by 33% year-over-year to $739 million, although it declined from $890 million in the second quarter.
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