Markets News, October 9, 2024: S&P 500, Dow Hit Record Closing Highs as Stock Market Rally Continues

Biggest S&P 500 Movers on Wednesday

Advancers

• Shares of cruise operators sailed higher following positive comments from Citi analysts. According to Citi, the cruise industry saw record traffic in December, and pricing data suggests a strong performance into next year and beyond. Norwegian Cruise Line Holdings (NCLH) shares led the S&P 500 higher with gains of 10.9%, while shares of Royal Caribbean Cruises (RCL) and Carnival (CCL) were up 5.3% and 7.0%, respectively.

• Upbeat analyst commentary also helped lift shares of specialty glass maker Corning (GLW), which added 4.8% on Wednesday. Deutsche Bank boosted its price target on Corning stock, pointing to a reacceleration of growth in the company's fiber optics business. Fiber optic cables are an important part of artificial intelligence (AI) infrastructure, linking users to the data centers that process AI queries. Based on Corning's significant share in the fiber optics market, the company stands to benefit from the expansion of AI. 
• Super Micro Computer (SMCI) stock was up 4.3% on the day. Shares of the server and data storage provider have seen significant volatility this week, soaring on Monday after the company touted strong deliveries of its graphics processing units but giving back some of those gains on Tuesday. Supermicro also highlighted this week that it has recently deployed a new liquid cooling technology for servers and AI data centers.

Decliners

• Shares of several utility companies moved lower on Wednesday, receding from the all-time highs they posted last week amid enthusiasm for their opportunity to provide power for energy-intensive AI processes. Several analysts pointed to high valuations following the massive rally, suggesting it may be difficult for the utility stocks to maintain their momentum. Constellation Energy (CEG) shares dropped 6.1%, marking the steepest loss of any stock in the S&P 500. Shares of NRG Energy (NRG) and Vistra (VST) fell 5.3% and 3.0%, respectively. 
• Boeing (BA) shares lost altitude, descending 3.4% after the aircraft manufacturer withdrew its contract offer for machinists who went on strike starting last month. S&P Global said the strike was affecting Boeing's financial position and warned that it may lead the ratings agency to downgrade the company's debt.
• Match Group (MTCH) shares sank 2.3% Wednesday. The operator of online dating platforms announced earlier this week that it will be transitioning to a new chief financial officer (CFO) early next year.

-Michael Bromberg

Utility Stocks Come Down From AI-Driven Highs

Shares of power generators Constellation Energy (CEG), NRG Energy (NRG), and Vistra (VST) posted some of the steepest losses in the S&P 500 on Wednesday. The declines came after all three stocks ended last week with record highs on enthusiasm about opportunities to benefit from growing energy demand for data centers to support artificial intelligence (AI).

The retreat for the red-hot electric utility stocks came as several analysts expressed concerns about the sustainability of their valuations following massive AI-driven gains this year.

Constellation Energy was the weakest performer of any S&P 500 stock Wednesday, plunging 6.1%. NRG Energy shares dropped 5.3%, while Vistra stock slipped almost 3%.

Despite the declines, all three stocks remained solidly in positive territory for 2024. Constellation shares have more than doubled in value since the start of the year, while NRG stock is up more than 70%. Vistra, meanwhile, remains the S&P 500's top-performing stock this year, having more than tripled in value over the period.

Read the full article here.

-Michael Bromberg

What to Expect from AMD's AI Event on Thursday

Advanced Micro Devices (AMD) is gearing up to showcase new tech at its 2024 Advancing AI event on Thursday, which Bank of America analysts said could be a "catch-up catalyst" for the chipmaker.

AMD is expected to highlight its line of Instinct GPU accelerators and EPYC server processors at the event, and could potentially offer a glimpse into how it plans to capture a larger share of the AI accelerator market. 

Analysts expect a followup to AMD’s MI300 series of accelerators launched in the fourth quarter of 2023. The company is off to a strong start in its first year of accelerator sales, Bank of America analysts said in a note Wednesday, guiding for more than $4.5 billion in sales this year. 

The big question is how large of a market share can it command with Nvidia (NVDA) dominating the AI sector. The current analyst consensus suggests that AMD is expected to hold a roughly 5% to 7% share of the AI accelerator market over the next couple years (while Nvidia's share is north of 80%). However, if it could show a path to 10% by the end of 2026, the company would add about $5 billion in sales, Bank of America said. 

What could help is the announcement of high-profile companies that use AMD's MI300 series accelerators. Analysts said they believe AMD's MI300X is already used by Microsoft (MSFT), Oracle (ORCL), and Meta (META), and others could be announced at the event. 

Shares of AMD jumped nearly 10% the day after last year’s AI event in December. The stock fell 1% on Wednesday.

-Andrew Kessel

Some Fed Officials Were on Fence About Jumbo Rate Cut

Officials at the Federal Reserve were divided about whether to cut its benchmark interest rate by a large or small amount in September, and ultimately decided on a large cut.

Although only one member voted for the smaller cut, "some" of the FOMC's 12 voting members could have gone with the smaller one, according to minutes released Wednesday.

The minutes shed light on the attitude of Fed officials who must decide whether to cut interest rates further at their next meeting in November.

Read the full article here.

-Diccon Hyatt

What to Expect From Tesla's Robotaxi Event Thursday

Tesla (TSLA) shares fell on Wednesday ahead of a highly anticipated event tomorrow when the company is expected to unveil its autonomous "robotaxi."

Deutsche Bank and Wedbush analysts wrote recently that they expect to see a demo of the vehicle, rumored to be called the "Cybercab," along with projections of how much the robotaxi will cost to operate, where it will be produced and be available, and what Tesla's version of a ride-sharing app could look like.

The analysts also said they expect that Tesla could show a new, lower-cost vehicle that has been a company goal for years, along with other updates on its self-driving software, its Optimus humanoid robot, and more.

Wedbush analysts, reiterating an "outperform" rating with a $300 price target, said they "continue to believe Tesla is the most undervalued AI name in the market," and see the robotaxi unveiling as a "seminal and historical day" in its history. Deutsche Bank analysts, who have a "buy" rating and a $295 price target, said they are optimistic headed into the event, but recognize that high expectations could lead investors to "sell the news" following the event.

Overall, analysts are more divided on Tesla stock. Of the 19 analysts tracked by Visible Alpha, nine have "buy" ratings, seven have "hold," and three have "sell" ratings. 

Tesla shares fell 1.4% to close Wednesday at $241.05

-Aaron McDade

Oracle Hits Record High on AI Enthusiasm

Oracle (ORCL) shares hit a fresh record high on Wednesday, lifted by indications that the cloud computing company may be becoming a favorite of a giant in the artificial intelligence (AI) industry: ChatGPT developer OpenAI.

The tech news site The Information reported that executives at OpenAI aren’t happy with the speed at which Microsoft (MSFT) is moving to supply servers. It said the leadership told employees that the company would be taking on a larger role in securing data centers and AI chips, rather than depending solely on Microsoft.

That may have opened the door further for Oracle. The site pointed to OpenAI’s June deal to rent Oracle servers at a new data center in Texas with limited input from Microsoft, even though Microsoft with its Azure cloud services was OpenAI's exclusive cloud provider. While OpenAI is independent from Microsoft, the companies have a "strategic partnership."

At the time, OpenAI CEO Sam Altman said the company “was delighted” to be working with both firms, and that the Oracle Cloud Infrastructure (OCI) “will extend Azure’s platform and enable OpenAI to continue to scale.”

Shares of Oracle, recently up nearly 2% to above $177, have risen about 70% this year. They're among the best-performing tech shares in the S&P 500.

-Bill McColl

S&P 500 and Dow on Pace for Record Closing Highs

The S&P 500 surged to a record high Wednesday morning, while the Dow Jones Industrial Average is just 0.5% away from a record of its own and on pace to finish the session at a record closing high.

The Dow's previous record close was 42,352.75 last Friday. The S&P 500's record close was 5,762.48 on Sept. 30.

So far this year, the S&P 500 and Nasdaq Composite have both gained more than 21%, while the Dow has added 12%.

Jefferies Calls Reddit a 'Buy' on AI Strengths

Reddit (RDDT) shares climbed Wednesday after analysts at Jefferies initiated coverage of the social media platform with a "buy" rating, citing its success within Google search results and its AI use cases.

The firm issued a price target of $90 per share, a 27% premium over Tuesday's closing price and well above the analyst consensus from Visible Alpha.

The stock was up another 2% at $72.15 in recent trading on Wednesday afternoon. The shares have gained about 43% since the company's IPO in March.

Reddit's user growth accelerated to 51% in the second quarter, the firm noted, its highest level in four years. A big reason for that is the success of a revamped web platform the company debuted last year, which has led to "deeper integration into Google search." The company's average revenue per user is actually well below rivals Pinterest (PINS) and Snapchat (SNAP), which suggests a "long runway for increased monetization," analysts said. 

Reddit’s large library of user posts are a valuable resource for companies developing generative AI models, Jefferies said. The company has established about $325 million in contract licensing revenue over the next three years, led by deals with Alphabet's (GOOGL) Google and OpenAI. Going forward, the firm suggested that partnerships with companies such as Amazon (AMZN) and Anthropic could be in the cards, which would mean more high-margin revenue streams. 

-Andrew Kessel

Boeing Leads Dow Decliners as Machinists' Strike Continues

Boeing (BA) shares fell Wednesday after the plane maker withdrew its contract offer for its striking machinists and S&P Global put its bond rating on a watch list.

In a note to employees, Stephanie Pope—who serves as both Boeing COO and Boeing Commercial Airplanes CEO—wrote the company's leadership team "has been doing all we can to find common ground with the union." However, after a third round of negotiations with a federal mediator, "the union did not seriously consider our proposals," and instead made "non-negotiable demands" that the company could not meet.

Because of this, Pope said, "further negotiations do not make sense at this point and our offer has been withdrawn."

The 33,000 members of the International Association of Machinists and Aerospace Workers walked off the job last month after the rank and file voted to reject a contract agreement hammered out days earlier. 

S&P Global warned the strike was "increasing financial risk for the company," and estimated Boeing will have a $10 billion cash outflow this year as a result. The agency put its ratings on Boeing's debt on "CreditWatch with negative implications." S&P explained that reflects "the increased likelihood of a downgrade if the strike persists toward the end of the year."

Boeing shares recently were down 2.4%, trading near their lowest level in two years.

-Bill McColl

What's Next for Chinese Stocks After Stimulus Rally Stumbles?

U.S.-traded Chinese stocks tumbled on Tuesday and fell again in early trading Wednesday after a disappointing update from the government tempered exuberance that propelled Chinese equities out of a bear market in recent weeks. 

The country’s economic planning agency said Tuesday it would accelerate some planned investments meant to help the country meet its 2024 growth goals but abstained from outlining new stimulus measures. Late last month, the Chinese government announced a spate of monetary stimulus measures including lowering banks’ reserve requirements, cutting interest rates, and supporting equity markets. 

Most experts agree that sustainably turning around China’s flagging stock market will require doing more to support the real economy. 

“So far, the approach is more directly beneficial for Chinese equities than for real growth and commodity demand,” wrote V22 Research analysts Michael Hirson and Houze Song in a note on Saturday. The government, they said, will need to unveil more robust measures to boost consumer spending and support the property sector for the wider economic outlook to improve.

Read the full article here.

-Colin Laidley

Palantir Price Levels to Watch as Stock Hits Record High

Palantir Technologies (PLTR) jumped more than 6% Tuesday to a record high following bullish commentary from Ark Invest, which pointed out that the analytics software provider could have further potential upside from the AI boom.

The stock was up 0.5% at $41.66 in recent premarket trading Wednesday.

After breaking out above an ascending triangle in early July, the stock has continued to trend higher apart from a brief early-August correction, with gains accelerating last month after the software vendor’s inclusion into the S&P 500 index.

During retracements, investors should watch important support levels on Palantir's chart around $32.70, $29, and $25.50.

A bars pattern, which extracts Palantir’s trend higher from May to August last year and positions it from the early-August low, forecasts a potential bullish price target in the stock of around $55.

Read the full technical analysis piece here.

-Timothy Smith

Major Indexes Poised to Open Slightly Lower

Futures tied to the Dow Jones Industrial Average were down less than 0.1%.

S&P 500 futures were down also down less than 0.1%.

Nasdaq 100 futures were off 0.14%.