- Dow Jones Industrial Average is up 0.1%
- S&P 500 is up 0.1%
- Nasdaq 100 is up 0.1%
Markets are bracing for the Federal Reserve interest rate decision tomorrow, when markets are betting it will hold interest rates steady as inflation continues to ease, although there are some worrying signs that it could make a comeback as oil prices continue to climb. US CPI posted the largest jump in 14 months last month and rose for a second straight month. However, this was largely down to higher petrol costs. Core inflation cooled to its slowest pace in almost two years.
In the meantime, for today we have US housing starts, while over in Canada there is inflation data and a speech from the Bank of Canada’s deputy governor Sharon Kozicki.
Rising oil prices stoke inflation fears
The ongoing surge in oil prices is stoking further fears about inflation ahead of the central bank meetings this week, with both Brent ($94) and WTI ($91) at fresh 10-month highs. Markets are betting that the market will tighten and that we could enter a deficit before the end of the year thanks to extended production cuts by Saudi Arabia and declining inventories and shale output in the US.
“Prince Abdulaziz bin Salam, Saudi Arabia's energy minister, said on Monday that the decision to extend oil output cuts was not about lifting prices but stabilising the oil market. Since oil prices were stable at around $70 a barrel in June, his comments have been taken with a pinch of salt,” said our analyst Fiona Cincotta. “On the demand side, optimism that China’s economy could be turning a corner, after more robust than forecast data last week is also helping to buoy the oil prices, along with stimulus measures from Beijing.”
You can read Fiona’s analysis on oil, as well as the German DAX, in Two Trades to Watch.
Most discussed Reddit stocks
Below is a list of the top 10 most mentioned US stocks on the WallStreetBets thread on Reddit over the last 24 hours, according to data from Quiver Quantitative. Exchange-Traded Funds (ETFs) and other instruments have been excluded:
- Advanced Micro Devices
- General Motors
Most active US stocks before the bell
Below are the most active stocks with a valuation of at least $500 million before the bell, based on trading data taken from Bloomberg:
- Rocket Lab USA
- Marathon Digital
- Lucid Group
- Riot Platforms
- CNH Industrial
US premarket winners and losers
Here are the stocks worth at least $500 million experiencing the sharpest movements in premarket trade, according to data from Bloomberg:
Rocket Lab USA
P3 Heath Partners
Better Home & Finance
Day One Biopharmaceuticals
Top US stocks to watch
Let’s have a look at the top stocks to watch today.
Instacart IPO: Will markets embrace its valuation?
Instacart, officially trading as Maplebear, is today set to become the second company to test the IPO market, hot on the heels of Arm after the British semiconductor designer completed its blockbuster listing less than a week ago.
Instacart priced its IPO at $30, at the top end of its revised range that was lifted from an initial target range of $26 to $28 following strong demand. It will start trading at some point today.
That means Instacart is coming to market with a valuation of $9.9 billion and has a price-to-sales ratio within the ballpark of rivals like DoorDash and Uber. Still, that is down heavily from the $39 billion valuation Instacart earned at its peak during the pandemic, and the $24 billion price tag it had after completing a fundraising in mid-2022.
The fact Instacart has been profitable at the bottom-line for the past 18 months while its rivals remain in the red should help support its valuation and could draw interest from investors seeking fast-growing tech stocks that can also turn a profit and sustain itself. However, it is not all sunshine and roses. Instacart is facing slower growth, more intense competition and will not remain profitable for very long – all of which could hurt demand for the stock.
Arm stock struggling to maintain gains after IPO
The jury is still out on Arm’s IPO that was completed last week, but the mood has turned bearish this week. Shares are down 2.6% this morning at $56.69 and set to lose ground for a third consecutive session today, edging back toward its IPO price of $51.
The chip designer came to market with a very lofty valuation, one that is underpinned by a new strategy rather than the business as it is today. With that in mind, Bernstein said today that Arm’s premium is down to hopes it can be a big winner from AI, but said it is too early to judge what sort of success it will have as it issued an Underperform rating and set a price target of just $46.
The fact we have also seen a decline in other major chip stocks, with the Philadelphia Semiconductor Index hitting one-month lows yesterday before rebounding, won’t be helping Arm’s performance.
You can read more in Can Arm Stock Maintain or Grow its Premium Valuation?
Autozone expects growth to accelerate
Autozone shares are down over 2% today despite smashing expectations in the latest quarter and pointing toward an acceleration in growth over the coming 12 months.
The company, which supplies car parts to the automotive aftermarket, said same-store sales were up 4.5% in the fourth quarter, well ahead of the 2.5% growth expected by analysts. Revenue also grew more than expected, while adjusted EPS of $46.46 blew the $40.51 estimate out of the water. Autozone has made a name for itself for reliably growing EPS, partly thanks to its dedication to keep buying back shares – which continues with about $1.8 billion left to return under the current programme.
“Despite lower than expected growth in domestic Commercial, we believe that the initiatives we have in place and are implementing will drive stronger growth in fiscal 2024. Additionally, we continued to be pleased with our International stores’ performance and we are excited about future growth prospects across both
Wall Street debates strength of Apple iPhone 15 orders
Apple shares are up 0.5% and building on the gains we saw yesterday after analysts offered differing opinions on how pre-order figures for the new iPhone 15 are faring.
On the bullish side of things, Morgan Stanley and Wedbush said pre-orders for the new handset are running ahead of expectations, with more consumers shifting toward its pricier models, particularly the Pro Max that saw its price tag increased by $100. They both see this as a tailwind and see upside potential for the share price if demand remains at these levels or improves further.
Among those striking a more bearish tone was JPMorgan, which said demand is “very similar” to what we saw for iPhone 14 last year. Barclays also said this could be a “difficult” cycle for the iPhone 15 in China “with a negative mix shift due to weakening consumer spend and macro pressure”. Bernstein said Apple shares tend to tread water after releasing a new iPhone and that it sees the risk-reward profile as “neutral to modestly negative” given its premium valuation over its rivals.
Tesla price cuts results in lower earnings estimates
Tesla shares are up 0.4% after tumbling yesterday, when Goldman Sachs lowered its earnings estimates for this year and next as the electric carmaker continues to cut prices and sacrifice margins in order to keep demand growing. Analyst Mark Delaney said we could see Tesla continue cutting prices into 2024.
The broker cut its EPS estimate for 2023 to $2.90 from $3.00, and lowered its 2024 forecast to $4.15 from $4.25.
Meanwhile, CEO Elon Musk denied reports from the Wall Street Journal yesterday that Tesla is holding talks about building a factory in Saudi Arabia.
Block stock chopped as Square CEO leaves
Block is down 0.8% this morning and at levels not seen since April 2020 after announcing that Alyssa Henry, the chief executive of Square, will leave the company after nine years on October 2. That will see chair Jack Dorsey also take on the top job at Square.
The general consensus from Wall Street analysts today was that the news will knock confidence, but they welcomed Dorsey taking charge of Square and are optimistic about the change that could be delivered.
US automakers fail to end UAW strike action
General Motors, Ford and Stellantis are trading up to 2.1% higher this morning as the strike by the United Auto Workers union enters a fifth day and threatens to escalate if a breakthrough isn’t made by the end of this week.
UAW president Shawn Fain has threatened to expand the strike, which is currently only affecting three factories, unless the “Big Three get down to business and work with us to make progress in negotiations”. He has set a deadline of noon on Friday. This is the first ever strike undertaken by the UAW as it pushes for inflation-busting pay rises and better conditions while automakers fret over their costs.
There are some green shoots. Reuters reported that the UAW has already extended that deadline by 24 hours after receiving a “substantive offer” from Ford, while simultaneously warning members to “maintain strike readiness”.
Any expansion of the strike would be significant as it would cause more widespread disruption and could hurt output of more profitable cars for the big three.
Target begins hiring for holiday shopping season
Target shares are up 0.3% before the bell and rebounding from their lowest level in over three years after announcing it will hire almost 100,000 workers for the busy holiday shopping season.
Target and other big box stores hire large numbers of temporary workers to meet heightened demand and, despite softer conditions today compared to recent years, Target is hiring the same number of workers as it has previously. That comes despite a prediction from Deloitte that sales growth in the overall retail sector this holiday season will come in at just 3.5%, marking the weakest growth in five years.
Notably, smaller rival Macy’s said yesterday it was only hiring 38,000 seasonal workers this year, down from 41,000 last year.
Carnival: Truist says “rising tides will lift all boats”
Cruise line operator Carnival is up 2.1% at $15.35 after Truist Securities upgraded the stock to Hold from Sell and bumped-up its target price to $17 from $16.
Analyst Patrick Scholes said Carnival is “still a relative underperformer” in the cruise line market, but that it was “difficult to defend a ‘Sell’ rating when one thinks rising tides will lift all boats”.
That is also feeding through to rivals, with Norwegian Cruise Line and Royal Caribbean Cruises trading up 1.3% and 1.7%, respectively.
Can FedEx deliver first EPS growth in a year?
FedEx shares are trading higher ahead of first-quarter earnings out after the closing bell today. The business remains under pressure, but this could be a turning point for the company following the fall in profits we saw in the recently-ended financial year.
Revenue is forecast to be down 5.8% from last year in the first quarter at $21.85 billion, marking the fourth consecutive quarter of declines. Volumes are set to fall at all three units, with FedEx Express and Freight forecast to be the biggest drags on the topline.
One potential upside could come from the collapse of Yellow Corp, which halted operations at the end of July and filed for bankruptcy in August. That will have left a sizeable hole in the ‘less-than-truckload’ market that carries goods for different customers on one truck. That could provide an opportunity for FedEx Freight to surprise on volumes, which is significant considering it is seeing the sharpest decline with analysts anticipating daily shipments will be down over 10% from last year.
On a brighter note, FedEx is expected to report an 8.6% rise in adjusted EPS to $3.74, marking the first growth in a year as comparatives iron-out and a sharper focus on costs improves margins, with FedEx attempting to shave $6 billion off its cost-base by fiscal 2027.
This will be the first set of results since John Dietrich was promoted from running Atlas Air Worldwide to chief financial officer at the start of August, having replaced Michael Lenz after he retired.
Bitcoin rally helps Marathon Digital and Riot
Bitcoin has continued to gain ground and has broken above $27,000 for the first time since the start of September, helping provide support to cryptocurrency stocks like Marathon Digital and Riot Platforms, which are trading up 1.7% and 2.6%, respectively.
C3.ai stock hits 4-month lows
C3.ai shares closed at their lowest level in four months yesterday and are up 0.4% before the bell today.
The stock has been under pressure since the broader rally in AI stocks began to temper at the start of August, with investors left disappointed that C3.ai isn’t seeing as big of a tailwind from the technology as hoped when it released its last set of quarterly results. This is turning it into a ‘show me’ story, with investors refusing to assign any more value to its prospects considering it is still trading almost 2.5x higher today than at the start of 2023.
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