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Welcome to Equity Espresso’s Market Recap.

The Australian stock market declined on Thursday, with the S&P/ASX 200 Index falling 0.3% to 8,160 points, as Consumer Staples (-1.64%) and Utilities (-0.92%) sectors led the downturn. Major retailers faced significant pressure, with Woolworths dropping 2.8% following a trading update yesterday, while Coles slipped 0.62% after reporting lower-than-expected quarterly sales of $10.55 billion. The Utilities sector fell thanks to AGL Energy's (-6.01%) decline after Barrenjoey downgraded the stock due to expiring cheap energy contracts,

Three sectors closed the day in the green, with Technology (+0.52%) the best performer with Wisetech Global (+2.51%) and Nuix (+8.40%) the notable movers. Gold continues to shine as the precious metal hit a record $US2,790.10 per ounce. Gold Road Resources (+4.17%), Ramelius Resources (+2.14%) and De Grey Mining (+2.35%) were some of the notable movers.

Mineral Resources (+9.20%) was on the right side of the ledger today after agreeing to sell its Perth Basin oil and gas assets to Hancock Prospecting for $1.1 billion while maintaining its FY25 operational guidance. Separately, the company will release findings on Monday from its investigation into managing director Chris Ellison's tax affairs, which has been ongoing for over two years.

Company News

• Bubs Australia (-) reported Q1 FY25 group gross revenue of $24.2 million with a 43% gross profit margin, maintaining its guidance for FY25 of $102 million net revenue.

• Coles (-0.62%) reported a 2.9% rise in first-quarter sales to $10.55 billion, though shares fell marginally. The company announced plans for an $880 million automated distribution centre in Truganina, Victoria, increasing FY25 capital expenditure to $1.3 billion.

• JB Hi-Fi (+5.29%) reported a strong third-quarter performance with total sales up 4.9%, driven by significant growth in New Zealand operations, which surged 19.6%, while The Good Guys segment grew by 5.3%.

• Origin Energy (+1.37%) reported a 1% increase in Australia Pacific LNG revenue to $2.64 billion in the September quarter despite a slight production decline.

Wall Street

U.S. stock markets experienced a downturn on Wednesday, with all major indexes closing lower - the Dow Jones fell 0.22%, the S&P 500 dropped 0.33%, and the Nasdaq declined 0.56%. The decline was particularly driven by weakness in semiconductor stocks, even as technology giant Alphabet saw its shares rise 2.8% following strong third-quarter results.

The market's performance came on a significant day for tech earnings, with Microsoft and Meta Platforms both reporting better-than-expected quarterly revenue after the closing bell. Investors remained cautious as they continued to assess corporate earnings from major companies, particularly focusing on results from the influential "Magnificent Seven" megacap stocks.

Alphabet's (+2.92%) stock rose after Google's parent company exceeded Q3 earnings expectations, bolstered by impressive cloud revenue performance, which showed a 35% year-over-year increase. Visa (+2.94%) demonstrated strong fiscal Q4 performance with adjusted earnings of $2.71 per share on $9.62 billion revenue, surpassing analyst expectations of $2.58 per share and $9.49 billion. Payment volumes grew 8%, while cross-border volume increased 13% on a constant-currency basis.

Reddit (+42.04%) exceeded expectations in Q3 2024, with shares surging to break $100. The social platform reported earnings of 16 cents per share on revenue of $348.4 million, significantly beating estimates of a 7-cent loss and $312.8 million in revenue. Super Micro Computer (-32.68%) stock plunged following the resignation of its auditor EY, who cited concerns regarding board independence and accounting practices in a regulatory filing.

After Hours

Companies who reported after the market close on Wednesday

Microsoft exceeded Q1 expectations with earnings of $3.30 per share on $65.59 billion revenue, showing 16% year-over-year growth and net income of $24.67 billion. However, shares fell 3.7% after hours as Q2 guidance of $68.1-69.1 billion fell short of analysts' $69.83 billion forecast, partly due to data centre supply delays. Starbucks reported disappointing Q4 results, with earnings of 80 cents per share on revenue of $9.07 billion, falling short of the expected $1.03 per share and $9.36 billion. Global same-store sales dropped 7%, with U.S. traffic declining 10%. Shares were up 0.37% in after-hours trading after an initial drop.

Meta surpassed earnings expectations with $6.03 per share on revenue of $40.59 billion, showing 19% year-over-year growth and net income of $15.7 billion. However, shares dipped 3.18% after hours as daily active users fell short at 3.29 billion. The company warned of increased infrastructure spending, raising its 2024 capital expenditure guidance to $38-40 billion.

S&P500 Sector Performance

Economic Data

• Australia’s Retail sales edged up 0.1% MoM in September 2024, missing market forecasts of 0.3% and sharply slowing from a 0.7% growth in the previous month.

• China’s Manufacturing PMI rose to 50.1 in October 2024, up from September’s 49.8 and above market expectations of 50.

• The Bank of Japan (BoJ) unanimously maintained its key short-term interest rate at around 0.25% during its October meeting, keeping it at the highest level since 2008 and matching market estimates.

• U.S. GDP grew 2.8% annualised in Q3 2024, missing the 3.0% forecast and showing a slowdown from Q2's 3.0% expansion.

• U.S. Private Businesses added 233,00 workers in October 2024, the highest since July 2023, much more than the 159,000 in September, smashing forecasts of 115,000.

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Quick Singles

🌎️ Around The Globe

• Adidas and Ye (formerly Kanye West) have settled all legal disputes without financial exchange, ending two years of litigation that began when the company terminated their partnership over his antisemitic remarks.

• GitHub is expanding beyond OpenAI exclusivity, integrating Anthropic's Claude and Google's Gemini into its coding platform while launching Spark for natural language app development.

• LinkedIn launched Hiring Assistant, its first AI agent, designed to help recruiters streamline tasks from writing job descriptions to candidate sourcing and engagement.

• Netflix will expand its Universal partnership beyond animation, securing U.S. rights to stream live-action films from Universal Pictures and Focus Features starting in 2027, with exclusive 10-month windows following initial Peacock releases.

• OpenAI is developing custom AI chips with Broadcom and has secured TSMC manufacturing capacity for 2026 production. The project involves a 20-person team, including former Google Tensor engineers, focusing on handling large AI inference workloads.

• Russia imposed an absurd fine of $20 decillion (33 zeros) on Google for removing Russian TV channels from YouTube. This penalty grew over four years, vastly exceeding the global GDP of $110 trillion.

• TGI Fridays abruptly shut down 50 locations amid financial struggles, reducing its U.S. presence from 270 to 164 restaurants in 2024. The chain reportedly considers bankruptcy as it faces competition and debt issues, joining other struggling casual dining brands.

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

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