Market Overview
The stock market began the fourth quarter on a weak note. Expectations for consolidation activity grew after a strong third quarter. Initial reports suggested the White House was concerned about a potential Iranian strike on Israel. This concern materialized, but subsequent reports indicated that most of Iran’s missiles were destroyed by Israel’s defense system.
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Today’s News
Nike (NKE, Financial) reported Q1 GAAP EPS of $0.70, surpassing estimates by $0.18. However, revenue of $11.6 billion fell short by $50 million, marking a 10.4% year-over-year decline. Direct revenues were down 13% at $4.7 billion, and wholesale revenues dropped 8% to $6.4 billion. Despite these declines, gross margin improved by 120 basis points to 45.4%. The company postponed its previously announced Investor Day. Inventories decreased by 5% to $8.3 billion, while cash and equivalents rose by $1.5 billion to $10.3 billion.
Semiconductor stocks faced significant pressure due to escalating geopolitical tensions between Israel and Iran. Nvidia (NVDA, Financial) shares dropped 3.7%, while Intel (INTC, Financial) and Micron (MU, Financial) saw losses of 4.5% and 3.7%, respectively. Nvidia halted the development of its GB200 NVL36*2 dual-rack 72 GPUs. Apple (AAPL, Financial)-related semiconductor stocks also fell, with Qualcomm (QCOM, Financial) losing 2.8%, Skyworks Solutions (SWKS, Financial) down 3.9%, and Qorvo (QRVO, Financial) dropping 3.3%. Analog suppliers like Texas Instruments (TXN, Financial), NXP Semiconductors (NXPI), and Analog Devices (ADI) also experienced declines between 3% and 4%.
The conflict in the Middle East intensified as Israel’s defense forces reported that Iran launched about 200 missiles at the country. The Biden administration is working to defuse tensions. While most missiles were intercepted, Israel plans to retaliate. Gold prices (GLD) neared record highs, rising 1.1% to $2,663.20 an ounce, and crude oil (USO) erased earlier losses.
Apple (AAPL, Financial) is set to unveil a new iPhone SE and iPad Air next year. The new iPhone SE will be based on the iPhone 14, featuring an edge-to-edge screen and no home button. The new iPad Air models will include internal improvements and support for the Magic Keyboard. Apple is also expected to introduce new versions of several Mac computers this month.
U.S. aerospace and defense companies like Lockheed Martin (LMT), Northrop Grumman (NOC), and RTX (RTX) saw gains as Iran attacked Israel with ballistic missiles. The attack followed Israel’s killing of Hezbollah leader Hassan Nasrallah and an Israeli military invasion of southern Lebanon. The U.S. has pledged to support Israel in its defense efforts.
LPL Financial Holdings (LPLA, Financial) terminated its President and CEO Dan Arnold for violating the company’s commitment to a respectful workplace. Rich Steinmeier, Managing Director and Chief Growth Officer, has been appointed interim CEO.
Tesla (TSLA, Financial) shares traded lower ahead of its Q3 deliveries report, expected to be around 462,250 vehicles. The company faces rising competition from Chinese EV makers like NIO (NIO), XPeng (XPEV), BYD Company (BYDDF), Li Auto (LI), and ZEEKR Automotive (ZK), all of which reported strong year-over-year delivery growth.
Ovintiv (OVV, Financial) rose 5% amid takeover speculation involving Coterra Energy (CTRA). Ovintiv is reportedly exploring a sale of its Uinta Basin operations, potentially fetching up to $2 billion.
Diamondback Energy (FANG) revised its Q3 production and capital guidance following its merger with Endeavor Energy Resources. The company now expects Q3 oil production of 319K-321K bbl/day and capital spending of $675M-$700M.
Longboard Pharmaceuticals (LBPH) jumped 11.5% amid speculation of takeover interest from a U.S. West-coast biotech company. The company has a market cap of $1.3 billion and a short interest of 12%.
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