My top 10 things to watch Wednesday, Nov. 4
1. Were the midterms a clearing event on Wall Street? Enough big money was waiting for the election to come and go that it might serve as such, even as the Democrats taking the House and Senate was seen as bad for the AI trade. Futures tell the story, with the Dow heading for a sharply higher open and the Nasdaq poised for a modest open. Nasdaq futures had been over 2% last night.
2. The election was, in many ways, a referendum on the AI buildout. While there were very few actual moratoriums, the Democratic sweep embodied voter frustrations over the proliferation of data centers. Slowing the buildout could actually be very good for the stocks of well-entrenched companies. Is that what the market is saying with this morning's rallies in Microsoft and Amazon?
3. Advanced Micro Devices has given up last night's big post-earnings gains, with chip stocks under pressure. That, however, doesn't take anything away from the stunning quarter AMD delivered. It was so much better than thought even 90 days ago. Dramatic gains and a crushing of Intel in servers. Confirming what Intel signaled, AMD CEO Lisa Su sees tough times ahead for PCs. She said she expects shipments to be down double digits next year.
4. Exorbitant memory prices are causing that demand destruction in PCs. Could that free up some memory supply and help Club name Apple? Maybe a potential slowdown in the data center buildout could do the same. In the wake of Monday's earnings print, Bernstein raised its price target on the iPhone maker to $380 from $370. Kept its buy rating.
5. Arista Networks turned in another blowout quarter, sending shares up more than 5%. Third-quarter revenue, operating margin, and EPS all beat, and fourth-quarter guidance was also well above consensus. Fervent demand for networking switches. Arista is also pushing into "scale-up" networking within server racks. The data center trade is too strong to be overcome by the election.
6. Strong beat and raise from Club name Qnity Electronics, the DuPont spin-off that sells chemicals and other products used to manufacture semiconductors. Organic revenue growth of 22%, driven by strength in advanced nodes, thermal management, advanced packaging, and AI printed circuit boards. Also raised its full-year revenue and adjusted EPS outlooks.
7. CVS Health is breaking itself up into two pieces. CEO David Joyner, who's engineered a great turnaround, said this is coming "from a position of strength." The retail pharmacy is the last man standing (Walgreens was taken private, Rite Aid went bankrupt). So, now insurer Aetna and pharmacy benefit manager Caremark are free to go their own way. Then again, Democrats are historically tough on the health insurers, so maybe difficult to game. CVS also reported a big third-quarter beat this morning, though shares are down 4%.
8. Novo is up 6% after the Danish drugmaker boosted its full-year sales and operating profit guide, thanks to better sales of its GLP-1s for diabetes and obesity. The Wegovy pill crushed estimates. Been an impressive launch for the pill, and Novo really needed it after losing so much ground to Club name Eli Lilly in injectables. Lilly reported a knockout quarter of its own last week and closed at a record high Friday.
9. Constellation Brands was upgraded to hold from sell at Bank of America following the election. Not changing any estimates for the Modelo brewer, but analysts believe that "immigration is less likely to be an incremental negative, reducing downside risk to beer volumes and creating a more balanced risk/reward." Really like this call. Beer is better than it was, and the immigration crackdown was a major problem for Constellation.
10. Mixed quarter for McDonald's: earnings and same-store sales growth beat estimates, but overall revenue came in light. Still, shares are up more than 2.5%. Good enough to keep the recent momentum going after a terrible seven months for the stock? Up 14% since Oct. 7 close. This thing had gotten too cheap. Just need to execute better.
