Nasdaq Jumps 1% After Microsoft Hovers Near Record High Amid OpenAI Drama

Barry Adams
20 Nov, 2023
New York City

Benchmark indexes on Wall Street extended the 3-week rally, and growth stocks led the gainers.

U.S. markets will be closed Thursday to celebrate the Thanksgiving holiday, and trading will close early on Friday.

High-growth companies dominated Monday's trading.

Microsoft struck a deal with ousted OpenAI chief executive Sam Altman to lead the company's AI research team, and Nvidia and Zoom were in focus ahead of their earnings results.

In the previous three weeks in a row, investors bid up growth stocks after the Federal Reserve held rates steady for the second time in a row, and markets continued to advance after consumer price, producer price, and import price inflation slowed.

The weakening inflationary forces raised hopes that the central bank has greater-than-expected flexibility in keeping economic growth intact while cooling inflation and supporting labor market expansion.

After consumer price inflation dropped to 3.2% in October, investors raised the possibility of a rate cut in early 2024 and drove growth stocks higher for the third week in a row.

But there are warning signs on the horizon, and despite resilient consumers, retail sales declined 0.1% in October unadjusted for inflation, the first decline in seven months.

Moreover, the largest U.S. retailers, Walmart, Home Depot, and Macy's, also offered a cautious outlook for holiday sales.

 

German Producer Prices Drop 4th Consecutive Month, China Holds Rates

On the global economic front, the People's Bank of China held its 1-year loan prime rate at 3.45% and its 5-year rate at 4.2%.

The one-year rate has been held steady since August, when it was lowered from 3.55%, and the 5-year rate has been held steady since June, when it was lowered from 4.3%.

Germany's producer prices fell 11% from a year ago in October, Destatis reported today.

 

U.S. Indexes and Yields

The S&P 500 index edged up 0.7% to 4,544.49, and the Nasdaq Composite increased 1.1% to 14,278.45.

The yield on 2-year Treasury notes increased to 4.92%, 10-year Treasury notes inched higher to 4.42%, and 30-year Treasury bonds edged higher to 4.57%.

Crude oil increased $2.36 to $78.41 a barrel, and natural gas prices fell 6 cents to $2.90 a thermal unit.

Gold decreased $2.33 to $1,977.48 an ounce on the receding fears of inflation.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 103.41.

 

U.S. Stock Movers

Microsoft increased 2.2% to $377.95 after chief executive Satya Nadella said ousted OpenAI chief Sam Altman will lead a new AI research team at Microsoft.

At least 500 OpenAI employees have threatened to resign if the current board fails to resign and reinstate former chief executive Sam Altman.  

Nvidia gained 1.6% to $501.0 ahead of the company's quarterly results on Tuesday.

The advanced chipmaker is estimated to report at least $3.08 per diluted share on revenue of $14.89 billion, compared to 58 cents a share and $5.93 billion in revenue a year ago.

Zoom Video Communications Inc. rose 2.5% to $65.70 ahead of the company's quarterly results after the close on Monday.

The video communication company estimated revenue in the fiscal third quarter ending in October between $1.15 billion and $1.2 billion and non-GAAP adjusted earnings between $1.07 and $1.09.

Previously, Zoom had estimated revenue in fiscal 2024 ending in January to range between $4.485 billion and $4.495 billion and adjusted earnings per share between $4.63 and $4.67.

 

Volatile Trading In European Markets, Euro Approaches 3-moth High

European markets traded with a downward bias in Monday's trading, and bond yields continued to drift lower.

Benchmark indexes in Frankfurt, London, and Paris headed lower following gains in the previous week after inflation in advanced economies fell in October.

The lower inflation supported the case of central banks holding rates steady for a couple of months.

Markets are also awaiting comments later today from the heads of the central banks of France, Spain, and the U.K.

Moreover, the U.S. Federal Reserve is scheduled to release its minutes of the last meeting on Tuesday and provide additional clarity in the policymakers decision.

Germany's producer prices fell 11% from a year ago in October, Destatis reported today.

The measure of producer inflation decreased for the fourth month in a row due to the sharp decline in energy prices.

The annual decline in inflation in September was 14.7%, which was the largest fall since record-keeping began in 1949.

 

Europe Indexes and Yields

The DAX index decreased 0.1% to 15,901.33, the CAC-40 index rose 0.2% to 7,246.94, and the FTSE 100 index fell 0.1% to 7,496.36.

In the previous week, the DAX index increased 4.2%, the CAC-40 index advanced 2.2%, and the FTSE 100 index inched higher by 1%.

The yield on 10-year German bonds increased to 2.59%; French bonds traded higher to 3.15%; the UK gilts eased to 4.09%; and Italian bonds inched higher to 4.33%.

The euro continue to rebound and approached the high last seen in late August after the U.S. rate hike worries receded. 

The euro rebounded to $1.093, the British pound at $1.248, and the U.S. dollar at 88.32 Swiss cents.

Brent crude increased $2.27 to $82.90 a barrel, and the Dutch TTF natural gas edged higher by €0.74 to €45.82 per MWh.

 

Europe Stock Movers

Energy stocks traded higher after crude oil prices extended Friday's sharp jump of 4% on reports that Saudi Arabia is looking to extend voluntary production cuts into next year.

BP, Shell, Repsol, Eni, and TotalEnergies gained between 0.4% and 1.5%.

Bayer AG plunged 19.4% to €33.85 after the German pharmaceutical and biotech company lost a key U.S. trial against its weed killer Roundup.

Moreover, the company also stopped the main study of its top experimental drug.

A Missouri jury ordered the company to pay $1.56 billion to four plaintiffs who successfully argued in court that the company's weed killer caused health injuries, including cancer.

After the trial, the jury found the company's Monsanto business liable for negligence, design defects, and the company's failure to inform customers of the potential dangers of using Roundup.

Julius Baer Gruppe AG dropped 10.6% to CHF 49.81 after the Swiss financial service company lowered its annual profit expectations.

The company said its 2023 net income is expected to be lower than in the previous year because of a higher year-to-date effective income tax rate and higher loan loss provisions in November.

Net assets under management in the first ten months to October increased by 3%, or CHF 11 billion, to CHF 435 billion.

Ashtead Group plc dropped 10.1% to 4,712.10 pence after the UK-based power equipment rental company said its annual profit is likely to fall short of market expectations.

Compass Group plc declined 4.5% to 1,999.50 pence after the UK-based catering service provider reported lower-than-expected earnings.

Halma plc advanced 2.4% to 2,101.0 pence after the UK-based safety equipment company agreed to acquire the TeDan group of companies for $89.1 million with additional milestone payments.