From Bankers to Barrels: Macquarie Drops While Oil Pops

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Welcome to Equity Espresso’s Market Recap.

Australian shares hit a seven-week low on Friday, with the S&P/ASX 200 index falling 0.5% to 8,118.8, marking its second consecutive week of losses. The decline was primarily driven by the Health Care (-1.11%) and Financials (-0.92%) sector. Macquarie Group (-3.59%) dropped after reporting disappointing first-half profits and reducing its dividend. This weakness spread to other major banks, with National Australia Bank declining 1.5%.

The Energy (+1.06%) sector emerged as the day's strongest performer, benefiting from rising oil prices amid reports of potential Iranian strikes against Israel. Brent crude futures rose 1.80% to $US74.12 per barrel, boosting energy stocks like Woodside (+1.14%), Santos (+0.74%) and Ampol (+1.47%).

Materials (+0.20%) stocks managed to reverse early losses and end higher, supported by improved Chinese manufacturing data that indicated Beijing's stimulus measures were taking effect. The major miners BHP Group (+0.33%), Rio Tinto (+1.69%), and Fortescue (+1.67%) all posted gains despite iron ore futures in Singapore falling 0.6% to $US103.05 per tonne.

Company News

• Amcor (-4.30%) reported quarterly earnings of US$365 million, up 2% year-on-year, despite a 3% drop in net sales to US$3.35 billion. The packaging company increased its quarterly dividend to US12.75¢ per share and maintained its fiscal 2025 outlook of US72-76¢ adjusted earnings per share.

• Capricorn Metals (+3.01%) completed a $200 million capital raise through a placement priced at $6 per share, a 4.9% discount to its previous close.

• Macquarie Group (-3.59%) reported a half-year net profit of $1,612 million, up 14% from the previous year but down 23% from the last half. The company's annualised ROE was 9.9%, with international income making up 65% of total income. Assets under management reached $A916.8 billion, while the interim dividend was $2.60 per share.

• Fletcher Building (+0.74%) rose despite the news that the New Zealand Commerce Commission is suing its Winstone Wallboards unit for allegedly using rebates to secure supply deals.

Wall Street

U.S. stocks experienced a Halloween sell-off, with the Dow falling 0.9%, S&P dropping 1.86%, and Nasdaq declining 2.76%. The downturn was primarily driven by tech giants Microsoft and Meta Platforms, which, despite beating earnings estimates, saw their shares drop 6.05% and 4.09%, respectively, after warning about increasing AI investment costs that could impact future profitability.

The sell-off extended across the Technology (-3.57%) sector, with chip stocks falling. However, there were some bright spots in the market, as both Amazon and Apple beat their quarterly expectations. Amazon showed strong growth in cloud services, while the Energy (+0.66%) and Utilities (+1.04%) sectors saw gains following positive results from ConocoPhillips and Entergy.

Peloton's (+27.82%) stock surged after posting a strong first-quarter result and an optimistic raise in its annual profit guidance. The company also revealed a leadership change, appointing Ford executive Peter Stern as its new CEO, effective January. Estée Lauder (-20.90%) shares plummeted after the luxury beauty company withdrew its annual financial forecast, citing weak demand in China, and announced a reduction in its quarterly dividend payment.

Microsoft's (-6.05%) stock fell despite exceeding analyst expectations in its fiscal first quarter with a 16% revenue increase to $65.59 billion and a 33% growth in Azure cloud services. However, despite beating earnings targets, the company's stock declined due to lower-than-expected revenue guidance for the next quarter, partially attributed to delays in supplier data centre infrastructure delivery. Uber's (-9.29%) third-quarter results were strong, with revenue climbing 20% to $11.19 billion and earnings per share significantly beating expectations at $1.20 compared to the predicted $0.41. The company's shares fell as gross bookings of $40.97 billion fell short of analyst expectations.

After Hours

Companies that reported after Thursday’s market close.

Amazon exceeded third-quarter expectations with earnings of $1.43 per share and revenue of $158.88 billion, causing its stock to rise over 6% in after-hours trading. While the company's cloud division (AWS) slightly missed estimates with $27.4 billion in revenue, it showed improved growth at 19% year-over-year.

Intel's shares jumped almost 7% in after-hours trading following stronger-than-expected third-quarter results, with earnings of 17 cents per share beating forecasts of a 2-cent loss, and revenue reaching $13.28 billion. However, despite the positive market response, the company reported a significant net loss of $16.99 billion, largely due to $2.8 billion in restructuring charges and $15.9 billion in impairment charges.

Apple exceeded market expectations in its fiscal fourth quarter with revenue of $94.93 billion and adjusted earnings of $1.64 per share, driven by strong iPhone sales, which grew 6% to $46.22 billion. While the company's shares fell by almost 2% in after-hours trading, CEO Tim Cook reported positive momentum for the iPhone 15 launch and high adoption rates for iOS 18.1. However, net income declined to $14.73 billion due to a one-time European tax charge.

S&P500 Sector Performance

Economic Data

• Australia's Producer Price index rose by 0.9% quarter-on-quarter in Q3 of 2024, following a 1.0% gain in the previous period, faster than market forecasts of 0.7%.

• China’s General Manufacturing PMI rose to 50.3 in October 2024 from 49.3 in the prior month, beating market forecasts of 49.7.

• U.S. Core PCE prices increased 2.7% year-on-year in September 2024, the same as in August, but above forecasts of 2.6%.

• U.S. Initial Jobless claims fell by 12,000 from the previous week to 216,000 during the period ending October 26th, reaching the same level of mid-May of this year

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Quick Singles

🌎️ Around The Globe

• Boston Dynamics demonstrated its latest Atlas humanoid robot using machine learning and upgraded sensors to autonomously sort engine covers in a simulated factory.

• Chat GPT has launched its AI-powered web search engine for paid subscribers with free users set to gain access in the following weeks. It matches competitors like Microsoft Copilot and Google Gemini in offering internet-connected AI conversations.

• Dropbox is cutting 528 employees (20% of its workforce) during a "transitional period," aiming for a more efficient structure. The layoffs will cost $63-68 million in severance and benefits, mostly paid out in Q4 2024.

• McDonald's deadly E. coli outbreak linked to Quarter Pounders has infected 90 people across 13 states, causing 27 hospitalisations and one death in Colorado. The CDC says the public risk is "very low.

• Starbucks is discontinuing its Oleato olive oil-infused coffee line less than a year after its launch by former CEO Howard Schultz, as customers showed little interest in starting their mornings with olive oil coffee.

• Scott Murray, received a 10-month prison sentence for securities fraud after launching a fake $4 billion Getty Images takeover bid to inflate stock prices following his purchase of 300,000 shares.

• Spirit Airlines announces 330 pilot furloughs for January 2025 amid financial struggles following 186 recent layoffs. The struggling carrier plans to reduce capacity by 20% after its failed JetBlue merger and 84% stock decline.

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