A morning in New York: awaiting the Supreme Court's decision

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

After the November 4 sell-off in the technology sector, futures on U.S. stock indices continue to show moderately negative dynamics. The focus of investors' attention on November 5 will be the US Supreme Court hearings on the legality of import duties imposed by the White House on the basis of the IEEPA law. The baseline forecast assumes preservation of the status quo, which would remove legal uncertainty and legitimize the current trade policy. At the same time, we also see a significant likelihood of duties being eliminated. Such a verdict could cause a spike in volatility with multidirectional movements, as it would create uncertainty about already concluded trade deals and a number of other related issues.

The October business activity indices (PMI), indicating a contradictory situation, will be important benchmarks for traders. The consensus for the indicator from ISM suggests a rise to 50.8 points from 50 points in September, which would signal stagnation. However, the preliminary PMI estimate from S&P Global recorded a robust result at 55.2 points. If the price component of the ISM report again shows an acceleration in growth, it could increase concerns about a new round of inflation and risks to corporate margins.

Also on November 5, the new jobs statistics from ADP for October (consensus: +30k, September: -32k) will be released, but due to high volatility this indicator is unlikely to give an accurate picture of the labor market.

A topical item on the agenda for investors will be the results of the previous day's elections. The victory of Democrats in key states, including New Jersey and Virginia, as well as in the fight for the mayor of New York, was perceived as a rejection of the course pursued by the Trump administration. This could strengthen his drive to showcase his successes on the economy. Today, the US president will address a business forum in Miami, where he is expected to talk about deregulation and lower energy prices.

Novo Nordisk (NVO), reporting last quarter, again lowered its revenue forecast for 2025. McDonald's (MCD), Cameco (CCJ), Humana (HUM), Recursion Pharmaceuticals (RXRX), Johnson Controls (JCI) and Unity Software (U) will also report before the main session opens. Robinhood Markets (HOOD), AppLovin (APP), IonQ (IONQ), Qualcomm (QCOM ), Arm Holdings (ARM), Joby Aviation (JOBY ) and DoorDash (DASH ) will release quarterly results after the close of trading.

Futures on US indices show about zero dynamics. We assess the balance of risks as moderately negative with increased volatility. We focus on S&P 500 fluctuations in the range of 6700-6820 points (from -1% to +0.7% to the previous session's closing level).

- Pinterest (PINS) shares are down 18%. The image-sharing platform disappointed investors with its third-quarter results: its adjusted earnings came in at $0.38 per share, compared to the consensus of $0.42.

- Shares of Arista Networks (ANET) are correcting down nearly 13% as the network equipment vendor's fourth-quarter outlook failed to impress investors despite strong third-quarter results. Revenue growth was 27.5% YoY, helped by strong demand for data center solutions. However, the consensus guide for this indicator for the current quarter in the range of $2.3-2.4 bln failed to support further growth of the stock after the rally since the beginning of the year.

- AMD (AMD) shares are down nearly 5% in the premarket despite a strong quarterly report and improved outlook. The company beat expectations, reporting record revenue of $9.25 billion (+36% YoY) and adjusted earnings of $1.2 per share. The growth in these figures was driven by strong results across all segments. In the gaming division, it amounted to an impressive 181% YoY driven by increased production of Microsoft and Sony consoles. In the data center direction, revenues increased by 22% y/y. The company's own revenue guidance for the fourth quarter at $9.6 billion was above consensus. However, it fell short of investors' inflated expectations amid the AI boom. At the same time, the gross margin forecast coincided with the average market benchmarks. An additional negative factor was the news that Amazon sold its entire stake in AMD.

- Shares of Super Micro Computer (SMCI), one of the beneficiaries of the AI boom, are down 9%. The company missed estimates for the year-ago quarter and provided a disappointing outlook for the next one. Adjusted earnings came in at $0.35 per share on revenue of $5.02 billion, while the market was expecting results of $0.4 and $6 billion, respectively.

- Axon Enterprise (AXON) stock collapsed nearly 21% after the law enforcement equipment maker reported adjusted earnings of $1.17 per share with a consensus of $1.52, though its revenue beat expectations.

Trading on November 4 on the U.S. stock exchanges ended in the negative. S&P 500 lost 1.17%, Nasdaq 100 fell by 2.07%, Dow Jones fell by 0.53%, and Russell 2000 - by 1.78%. The market was pressured by selloffs in the technology sector and profit taking after the recent rally. Shares of the "Magnificent Seven" were mostly declining, with Tesla (TSLA: -5.15%) and Nvidia (NVDA: -3.96%) showing the most notable declines. As a result, the technology sector (XLK: -2.64%) was the outsider, while the financial industry (XLF: +0.52%) emerged as the growth leader.

The session was held in the absence of significant macroeconomic publications. In the center of investors' attention were concerns about overvaluations in the technology sector, which were reinforced by comments of heads of major banks at the summit in Hong Kong. Despite the overall decline, the market appears to be entering a phase of more selective upward movement.

Trading sentiment continues to be unfavorably influenced by the shutdown factor, which has already surpassed the 2018-2019 record in terms of duration. The lack of signs of a speedy resolution of the conflict continues to create uncertainty and delays the publication of key macroeconomic data.

- Denny's (DENN: +50.4%) has reached an agreement to be bought out by an investment consortium at $6.25 per share in cash, a 52% premium to the previous close. Thus, the transaction value will amount to about $620 mln including debt.

- Starbucks (SBUX: -1.68%) is selling up to 60% of its China business (over 8,000 outlets) to local investment firm Boyu Capital, retaining 40% and continuing to license the brand. The decision comes amid a 1% drop in comparable sales in China in FY2025, driven by fierce competition in the local market, including with Luckin Coffee, and a shift in consumer preferences towards cheaper domestic brands.

- The escalating battle for Metsera (MTSR: +20.5%) fueled demand for its securities. Novo Nordisk (NVO: -1.75%) raised its offer to $62.5 in cash plus CVR $24 per share, calling it superior to Pfizer's (PFE: -1.46%) offer of $60 and CVR $10, which has only two business days left to improve terms.

- Biotech came under pressure after Sarepta Therapeutics (SRPT: -33.7%) failed in the confirmatory ESSENCE study. Amondys 45 and Vyondys 53 failed to meet the primary endpoint, which management attributed in part to dosing failures during the pandemic.

- Shopify (SHOP: -6.9%) shares came under pressure due to weaker-than-expected gross margins. Investors were locking in gains after the stock surged more than 60% since the beginning of the year. The company beat forecasts, reporting revenue of $2.84 billion (forecast: $2.76 billion) and its total merchandise turnover (GMV) increased 32% YoY. Investors' concerns were sparked by a drop in gross margin to 48.9% from 51.7% a year earlier, and even a positive revenue guidance for the fourth quarter couldn't offset them.

- Uber (UBER: -5.1%) reported operating profit below expectations and gave a cautious EBITDA outlook, falling short of the market's average guidance for the current quarter. Meanwhile, the company's revenue for the quarter was up 20% YoY to $13.47 billion (forecast: $13.28 billion) and its net income came in at $6.6 billion, although $4.9 billion of that amount was a one-time tax benefit. Total trips were up 22% YoY.

This article was AI-translated and verified by a human editor