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October 27, 2022

1/ What's Happening

2/ Today's Headlines

3/ Meta Meltdown

4/ Mobileye Shares Soar in Trading Debut

5/ World Market Indices

1/ FROM THE EDITOR'S DESK

What's Happening

U.S. stock futures are mixed as technology stocks move lower after disappointing earnings from Meta Platforms. Meta (META) shares are tumbling over 20% in pre-market trading after its results (more below).

Apple and Amazon will release their latest reports after the close of trading today. Altria Group, Comcast, Honeywell International, Intel, International Paper, Mastercard, McDonald’s, Merck, Northrop Grumman, Southwest Airlines, T-Mobile, and Vertex Pharmaceuticals also report results today.

Yesterday, the S&P 500 ended a three-day winning streak as weak earnings guidance from Google parent Alphabet and Microsoft weighed on stocks. The Dow ended flat, while the S&P 500 lost 0.7%, and the Nasdaq slumped 2%. Treasury yields fell, with the 10-year Treasury note now yielding 4.07%.

In Europe, the European Central Bank announced an interest rate hike by 75 basis points in an effort to cool inflation there. The Europe Stoxx 600 is down about 0.7%. In Asia, Japan's Nikkei fell 0.3%. In China, the Shanghai Composite fell 0.5%. The Hang Seng Index rose 0.7%, 

Oil prices surged, boosted by record U.S. crude exports and as U.S. refiners operated at higher-than-usual levels for this time of year. Light sweet crude is now just below $88 per barrel.

The Bureau of Economic Analysis released its first estimate of GDP for the third quarter, showing the economy grew more than expected by 2.6% after contracting 0.6% in the second quarter. Economists had forecasted a growth rate of 1.7%. Separately, the Labor Department's weekly report on initial claims for state unemployment benefits showed claims rose by 3,000 to 217,000 for the latest week, less than the gain of 6,000 economists anticipated. 

U.S. Bureau of Economic Analysis

2/ QUICK HITS

Today’s Headlines

• Credit Suisse announced a major restructuring plan cutting thousands of jobs and raising about $4 billion in fresh capital as it seeks to recover from a financial crisis. The bank said it will have around 9,000 fewer staff in three years and sell $1.5 billion in new shares to the Saudi National Bank.
• Shell will boost its dividend and buy back another $4 billion of its stock in the coming months. The energy giant continues to benefit from strong demand for natural gas and oil.
• Ford Motor (F) shares are down over 2% in pre-market trading after posting a third-quarter loss because of a large charge tied to its shutdown of the automaker’s autonomous driving venture, Argo AI. Ford and Germany’s Volkswagen each have a 40% stake in Argo and both will absorb some employees from the company.
• Another railroad union has rejected a labor contract on wages and work conditions reached in September. The move by the Brotherhood of Railroad Signalmen raises the chances of a labor strike after the White House brokered the deal last month.
• In the latest sign that Elon Musk’s $44 billion deal for Twitter is on track, banks have begun funding the takeover offer. Musk visited Twitter headquarters and sought to reassure employees he would not cut 75% of the social media company’s workforce.
• ESPN is selling a majority stake in the X Games to private equity firm MSP Sports Capital. The firm will handle day-to-day operations while ESPN will continue to broadcast the competition.

3/ THE BIG STORY

Meta Meltdown

After already losing two-thirds of their value this year, shares of Meta Platforms (META) are tumbling over 20% in pre-market trading after the company posted its second straight decline in quarterly revenue and forecasted another drop in the fourth quarter.

Meta reported quarterly revenue of $27.7 billion, down more than 4% from a year ago after posting a 1% decline in the previous quarter. The company faces a challenging environment amid a slowing economy, increasing competition from rivals like TikTok, and the fallout from Apple’s privacy changes that include updates to ad-tracking software. Meta says revenues for the fourth quarter will be $30 billion to $32.5 billion compared to analyst estimates of $32.2 billion.

The company also continues to spend heavily on the metaverse. Its Reality Labs unit  posted revenue of $285 million for the quarter, a decline of nearly 49% compared to a year ago. The metaverse unit posted a loss of $3.7 billion and the company said it expects Reality Labs losses will grow significantly next year.

Advertising revenue came in at $27.2 billion, down nearly 4% from a year ago and a bit ahead of analyst estimates. Advertising revenue represents about 98% of Meta Platforms’ total revenue.

YCharts

4/ THE BIG NUMBER

$23 Billion

Shares of Mobileye (MBLY) rose nearly 38% to $28.97 per share on its trading debut, valuing the self-driving technology unit of Intel at $23 billion as investors bought up what could be the last major initial public offering (IPO) of this year. 

The trading debut came after Mobileye settled for merely a third of the $50 billion valuation it was targeting earlier in the year. The shares were sold at $21 per share, above the target range of $18 to $20 a share. The stock represents about 6% of the total shares that will ultimately be outstanding.

It was a bright spot in what has been a dismal year for IPOs. Companies in the U.S. raised $7.4 billion so far this year, making 2022 the worst year for new issues in decades.

Mobileye was founded in 1999 and developed technology to help alert drivers to potential collisions with other cars or pedestrians. It made its first debut on the stock market in 2014 with an IPO that valued the company at $5 billion. Three years later, Intel bought the company for around $15 billion. 

YCharts

5/ Thursday, October 27, 2022

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