Love, Lithium, and Loopholes: When CEOs Make Headlines (For All the Wrong Reasons)

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Welcome to Equity Espresso’s Market Recap.

The Australian share market started the new week positively, with the S&P/ASX 200 Index gaining 0.7% to close at 8,344.4, just 11.5 points shy of its record high. It was almost a clean sweep, with 10 out of 11 sectors finishing higher, with Materials (+1.44%) the biggest mover thanks to a rebounding Iron Ore price and Gold exceeding $2,700 per ounce. The day’s gain followed another positive night on Wall Street, where the S&P 500 reached its 47th record, bolstered by strong U.S. earnings reports.

All the mining heavyweights saw gains, with Rio Tinto (+1.88%) the best performer of the giants, followed by BHP Group (+1.45%) and Fortescue (+1.59%). Some of the big movers in the gold sector included Evolution Mining (+5.36%), Genesis Minerals (+7.39%) and West African Resources (+7.52%).

WiseTech Global plunged 14.56%, pulling down the Technology (-2.97%) sector following allegations of inappropriate behaviour against CEO Richard White. The board said it is investigating claims from a former sexual partner that led to a multi-million dollar settlement.

Bitcoin neared US$70,000 on Monday, buoyed by $2.4 billion in ETF inflows over the last six days and expectations of friendlier U.S. crypto regulations post-election.

Company News

• Amotiv (+10.21%) held its AGM today, where it said it expects further growth in group revenue and underlying EBITDA in FY25, with the second-half margin to be slightly stronger than the first-half. The company also announced a share-buyback of around 5% of its shares.

• Core Lithium (+14.29%) shares saw a lift after the Lithium miner reported additional high-grade gold assay results from drilling at its Shoobridge Project.

• Mineral Resources (-13.76%) stock fell 11.4% after an AFR investigation alleged CEO Chris Ellison evaded taxes for years. The board expressed "full confidence" in Ellison but has engaged external legal counsel to investigate and advise on the matter.

• Nick Scali's (-4.10%) shares dropped after warning of reduced profit margins due to higher freight rates. The furniture retailer expects first-half net profit for Australia and New Zealand to be $30-33 million, with gross profit margins down by at least 240 basis points from FY24's 66%.

• Stockland (+0.75%) maintained its funds from operations guidance at 32-33 cents per security post-tax for FY25 in its latest quarterly update. The company reported strong performance across investment management and development segments, with 1,121 masterplanned community sales and 135 land lease community sales.

• WiseTech (-14.56%) slumped following allegations against CEO Richard White by a sexual partner, leading to a multimillion-dollar settlement. The company's board said it's reviewing the matters raised in the media reports and is actively seeking further information and taking external advice. Meanwhile, White sold 351,038 shares at $131.22 each, according to a directors notice filed on Friday.

Wall Street

Wall Street ended the week on a high note, with the Dow Jones (+0.09%) & S&P 500 (+0.4%) reaching fresh record closing highs on Friday. The Technology (+0.48%) sector saw a lift, thanks to a surge in Netflix (+11.09%) shares following impressive earnings results. Apple and Nvidia also contributed to the gains, with Apple benefiting from increased iPhone sales in China and Nvidia seeing a price target hike from BofA Global Research.

For the week, the S&P 500 was up 0.9%, the Nasdaq 0.8%, and the Dow Jones 1.0%. However, the Energy sector was the sole S&P sector to decline, dropping 0.4% due to lower oil prices and disappointing earnings from SLB (-5.92%), negatively impacting other oilfield services providers like Baker Hughes (-2.83%) and Halliburton (-2.11%).

Netflix's (+11.09%) third-quarter results exceeded expectations, with earnings of $5.40 per share on $9.83 billion in revenue. The streaming giant saw a 35% quarter-over-quarter increase in ad-tier memberships, which accounted for over 50% of sign-ups in available countries. With plans to expand this service, Netflix projects 2025 revenue between $43-44 billion, driven by membership growth and investments in content and new initiatives.

S&P500 Sector Performance

Economic Data

• China's central bank cut key lending rates to record lows in October. The one-year loan prime rate dropped 25bps to 3.1%, while the five-year rate fell to 3.6%. These reductions aim to bolster the struggling economy and support the property sector.

• U.S. Housing Starts eased by 0.5% from August to an annualised rate of 1.354 million units in September of 2024, which was in line with market expectations.

• U.K. Retail Sales unexpectedly increased 0.3% month-over-month in September 2024, beating forecasts of a 0.3% drop following a 1% surge in August.

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🌎️ Around The Globe

• Amazon is enforcing a full return-to-office policy by 2025. At a recent AWS meeting, CEO Matt Garman reportedly suggested that employees unhappy with this mandate could consider working elsewhere, emphasising Amazon's commitment to in-office collaboration despite potential staff dissatisfaction.

• CVS has replaced CEO Karen Lynch with David Joyner, warning of lower earnings due to medical cost pressures. The company abandoned plans for a breakup despite activist investor Glenview Capital's push for changes.

• Google has won a temporary reprieve as Judge Donato postponed an order to open its Android app store to competitors. The decision, stemming from a 2023 antitrust ruling, awaits appeals court review. Google argued the changes would compromise security and increase costs.

• Meta fired about two dozen Los Angeles employees for misusing $25 meal vouchers to buy non-food items like toothpaste and tea. Some employees, earning up to $400,000, had abused the system for a long time. This action is part of Meta's ongoing restructuring efforts, including multiple layoffs over the past two years.

• Microsoft is negotiating stake as OpenAI transitions to a for-profit model. With OpenAI's valuation at $157 billion, Microsoft, having invested $13.75 billion since 2019, may seek expanded governance rights following recent leadership turmoil.

• Spirit AeroSystems, a major Boeing supplier, is furloughing about 700 workers due to Boeing's ongoing machinist strike, now in its sixth week. The furloughs, affecting 5% of Spirit's U.S. workforce, impact employees working on Boeing's 777 and 767 aircraft, but not the 737 Max.

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*1-year, 3-year and 5-year returns are calculated as of September 30 2024.

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