☕️ Qantas Quivers as Qatar Courts Virgin

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Welcome to Equity Espresso’s Market Recap.

The Australian share market retreated on Tuesday, starting the new month lower and ending a three-session winning streak. The S&P/ASX 200 Index fell 60.9 points, or 0.7%, to close at 8,208.9, pulling back from Monday's record high. This downturn was primarily driven by a sharp reversal in the mining sector, a key driver of the market's recent gains.

Materials (-2.28%) were the day's worst performers, dropping by over 2% after an impressive 10% gain in September. This sector had benefited from renewed Chinese stimulus efforts, attracting investors last week. However, the momentum abruptly shifted, with BHP closing 2.9% lower at $44.64, erasing much of its 15% gain from the previous five sessions. Iron ore futures in Singapore also ended their six-session rally, slipping 0.5% to US$109.30 per tonne, further contributing to the broader market decline.

Financials (-1.19%) continue to lose ground, down by over 4% in the last week. Commonwealth Bank (-1.51%) fell, as did fellow heavyweights Westpac (-1.67%) and Macquarie Group (-1.73%)

Company News

• REA Group (+4.88%) shares jumped on the news that it had ceased pursuing Rightmove, the U.K. real estate platform after its fourth bid in recent weeks was rejected.

• Sigma Healthcare (+22.57%) shares spiked after the company proposed data-sharing rules to address regulatory concerns about its $700 million merger with Chemist Warehouse. The company offered to allow franchisees to terminate agreements and restrict confidential data use for three years.

• Qantas (-3.37%) shares fell on the news that Qatar Airways will buy 25% of Virgin Australia from private equity company Bain Capital. The deal still requires approval from the Foreign Investment Review Board.

Wall Street

The S&P 500 (+0.4%) and Dow Jones (+0.04%) closed at record highs on Monday, capping off a strong month and quarter for U.S. equities. The Nasdaq also rose 0.38% to 18,189.17, around 2.5% off its record close. This performance came despite Federal Reserve Chair Jerome Powell's comments indicating the central bank is not rushing to implement further interest rate cuts. Powell suggested two more rate cuts totalling 50 basis points this year as a baseline, assuming the economy evolves as expected.

For September, the S&P 500 posted its best performance since 2013, rising 2% and marking its fifth consecutive month of gains. The quarter saw even stronger results, with the S&P 500 up 5.5%, the Nasdaq gaining 2.6%, and the Dow climbing 8.2%. However, Powell's speech did impact market expectations for future rate cuts, with traders now pricing in a 35% chance of a 50 basis point reduction in November, down from 53% on Friday.

Stellantis' (-12.52%) stock plummeted to a 52-week low after the automaker issued a profit warning for 2024. The automaker cited a deteriorating global industry backdrop and increased Chinese competition. It lowered its adjusted operating income margin forecast to 5.5-7.0% from a previous "double-digit" outlook and revised industrial free cash flow projections to negative €5-10 billion. EchoStar's (-11.48%) stock fell after announcing the sale of its Dish TV and Sling businesses to rival DirecTV for a nominal $1 fee, with DirecTV assuming $9.75 billion in debt. The deal, expected to close in Q4 2025, will create a combined entity serving nearly 20 million customers.

S&P500 Sector Performance

Economic Data

• Australian Retail Sales rose by 0.7% MoM in August 2024, picking up from an upwardly revised 0.1% growth in the prior month and exceeding market forecasts of 0.4%. It was the fifth straight month of increase and the fastest pace since January.

• Australian Building Permit Approvals fell 6.1% month-on-month to 13.991 units in August 2024, reversing from an 11.0% spike in July and missing forecasts of a 4.4% fall.

• U.S. Manufacturing PMI fell to 47 in September of 2024 from 47.9 in the previous month, contrasting with market expectations that it would rise to 48.5

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Quick Singles

🌎️ Around The Globe

• Apple has reportedly withdrawn from negotiations to participate in OpenAI's $6.5 billion funding round, which is set to close next week. Microsoft and Nvidia remain in talks, with Microsoft expected to invest about $1 billion, adding to its previous $13 billion investment. The reasons for Apple's exit from the discussions were not disclosed.

• Acadia Healthcare's shares dropped sharply following news of a federal investigation into its "admissions, length of stay and billing practices." The company received information requests from U.S. Attorney's Offices in New York and Missouri, including a grand jury subpoena. Acadia anticipates further inquiries from the SEC and other agencies and stated it is cooperating with the investigations.

• The International Association of Machinists and Aerospace Workers reported a breakdown in pay deal talks with Boeing, with no future negotiations scheduled. Boeing expressed willingness to continue discussions. The ongoing strike of 33,000 production workers has reportedly impacted U.S. GDP by $1 billion.

• The FDA has approved Bristol Myers Squibb's Cobenfy, a groundbreaking schizophrenia treatment and the first novel drug for the disorder in over 70 years. The twice-daily pill will be available in late October, priced at $1,850 for a month's supply or $22,500 annually before insurance and rebates.

• OpenAI reported $300 million in monthly revenue for August and projects $3.7 billion in annual sales for the year. However, the company anticipates a $5 billion loss due to operational costs, primarily computing power from Microsoft.

• WeightWatchers International announced the immediate departure of CEO Sima Sistani, replacing her with board member Tara Comonte as interim CEO. The company cited a focus on improving operational and financial performance. Sistani, who led WeightWatchers' expansion into prescription weight loss drugs during her two-year tenure, oversaw the $106 million acquisition of Sequence, now WeightWatchers Clinic.

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*1-year, 3-year and 5-year returns are calculated as of August 31 2024.

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