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Moody’s Reassesses China, GitLab Exceeds Estimates, Twilio Plans Major Layoffs, and More

Fernanda T
Latest News
December 05 2023 01:25AM

U.S. index futures are falling in the pre-market on Tuesday as investors eagerly await the first in a series of labor data. These numbers are likely to influence the atmosphere surrounding the Federal Reserve meeting scheduled for next week.

At 05:20 AM, Dow Jones futures (DOWI:DJI) dropped 64 points, or 0.18%. S&P 500 futures declined 0.32%, and Nasdaq-100 futures fell 0.58%. The yield on 10-year Treasury bonds stood at 4.251%.

In the commodities market, West Texas Intermediate crude oil for January rose 1.03% to $73.79 per barrel. Brent crude oil for February increased 0.99%, nearing $78.80 per barrel. Iron ore with a 62% concentration, traded on the Dalian exchange, fell 0.36% to $136.38 per ton.

On the economic calendar for Tuesday, investors are watching the revised Purchasing Managers’ Index (PMI) for the November services sector activity by S&P Global at 09:45 AM. At 10:00 AM, the ISM (Institute for Supply Management) will release the ISM Services PMI for November. At the same time, the Department of Labor will report on job openings and labor turnover for October. At 4:30 PM, the American Petroleum Institute (API) will release Crude Oil Inventory data.

European markets showed mixed performances as the momentum that drove a positive November began to weaken. The Stoxx 600 index recorded a slight decline of 0.10% at the start of trading, with different sectors showing varying results. The oil and gas sector saw an increase of 0.35%, while the mining sector suffered a 1.15% decline. The telecommunications sector had significant movements, with Ericsson (NASDAQ:ERIC) rising 9% after reaching an agreement with AT&T (NYSE:T) to build an extensive telecommunications network using ORAN technology, while Nokia (NYSE:NOK) registered a sharp decline.

Asian stock markets had a negative day with significant losses in Shanghai (-1.67%) and Tokyo (-1.37%). The Reserve Bank of Australia maintained interest rates but did not rule out future increases, leading to a drop in the Sydney Stock Exchange (-0.89%). Concerns about economic growth in China persist despite recent government measures to support the economy. Moody’s reaffirmed China’s rating but changed the outlook to negative due to the indebtedness of local and state governments.

US stocks fell on Monday following a strong performance on Friday. The Dow Jones fell 0.11% to 36,204.44 points, the S&P 500 declined 0.54% to 4,569.78 points, and the Nasdaq lost 0.84% to 14,185.49 points. The initial decline was attributed to profit-taking after recent gains. Gold prices dropped, while airline company stocks rose with the news of Alaska Air Group (NYSE:ALK) acquiring Hawaiian Airlines (NASDAQ:HA).

In the corporate earnings front for Tuesday, investors will be attentive before the market opens to the reports from Nio (NYSE:NIO), AutoZone (NYSE:AZO), Signet (NYSE:SIG), J.M Smucker (NYSE:SJM), America’s Carmart (NASDAQ:CRMT), Ferguson (NYSE:FERG) ZeroFox (NASDAQ:ZFOX), and more. After the closing, the reports from MongoDB (NASDAQ:MDB), SentinelOne (NYSE:S), Toll Brothers (NYSE:TOL), Asana (NYSE:ASAN), HealthEquity (NASDAQ:HQY), Box (NYSE:BOX), Stitch Fix (NASDAQ:SFIX), among others, will be awaited.

Wall Street Corporate Highlights for Today

Alphabet (NASDAQ:GOOGL) – Wall Street has high estimates for Alphabet’s fourth quarter, with concerns about the cloud division and costs of the NFL Sunday Ticket streaming package. Analyst James Lee from Mizuho maintains a buy rating, but has concerns about cloud spending, legal expenses, losses on Sunday Ticket, and investments in infrastructure.

Meta Platforms (NASDAQ:META) – Mark Zuckerberg and entities linked to him sold about 682,000 shares of Meta Platforms, valued at nearly $185 million, after a tumultuous year in 2022. Meta saw a 172% increase in its shares in 2023, aiding in maximizing Zuckerberg’s returns on his activities outside the company. This is the first time in two years that entities related to Zuckerberg have sold Meta shares.

International Business Machines (NYSE:IBM) – IBM unveiled a new chip and quantum computing system, aiming to be the foundation for larger systems in a decade. This advancement is part of the global race to develop quantum computing, which promises processing speeds superior to traditional computers. IBM’s new technology, including an innovative method of connecting chips and error correction, aims to overcome current challenges and achieve effective quantum machines by 2033.

Meta Platforms (NASDAQ:META), International Business Machines (NYSE:IBM) – IBM and Meta lead the AI Alliance, an initiative with over 50 entities, including major companies and academic institutions, to promote open and responsible AI. The group, with members like Intel (NASDAQ:INTC), Sony (NYSE:SONY) and Yale, plans to develop standards and tools for AI systems. Meta has already made its Llama 2 model open source, while IBM, owner of Red Hat, supports the open-source approach. The alliance aims to create an open AI ecosystem, focusing on challenges like climate and education, comparable to IBM’s role in forming the Linux Foundation.

Nvidia (NASDAQ:NVDA) – Nvidia plans to collaborate with Japanese organizations to build an AI ecosystem in Japan. The California-based company will invest in AI research, AI factories, local startups, and public education about AI in Japan. The initiative aims to boost Japan’s technological leadership in artificial intelligence.

Twilio (NYSE:TWLO) – Cloud communication services provider Twilio plans to lay off about 5% of its workforce, or 295 employees, by the first quarter of 2024, seeking profitable growth. The company estimates restructuring costs between $25 million and $35 million by the end of 2023. This follows earlier layoffs this year and office closures.

GitLab (NASDAQ:GTLB) – Shares of GitLab rose 16.2% in pre-market trading after the announcement of third-quarter results and quarterly projection, exceeding Wall Street expectations. The adjusted profit was 9 cents per share, while revenue reached $149.7 million. The company recorded its first adjusted operating profit and continued to grow responsibly, with non-GAAP operating margin expansion. Revenue grew 32% year-over-year, with 874 customers contributing more than $100,000 in annual recurring revenue.

Disney (NYSE:DIS) – The Florida governor-appointed board overseeing Walt Disney’s theme parks accused the company of providing millions of dollars in benefits, like passes and hotel discounts, to employees of a previous local board, characterizing them as “public employee bribes.”

AT&T (NYSE:T), Ericsson (NASDAQ:ERIC) – AT&T chose Ericsson to build an ORAN network, covering 70% of U.S. wireless traffic by 2026. This milestone in ORAN technology, which reduces costs using software and equipment from multiple vendors, marks a significant advancement.

Verizon Communications (NYSE:VZ) – Verizon Communications announced that it will include streaming subscriptions to Netflix (NASDAQ:NFLX) and Warner Bros Discovery’s Max (NASDAQ:WBD) in its “myPlan” package for customers. Starting Thursday, subscribers can access both ad-supported services for a combined value of $10 per month.

Telefonica (NYSE:TEF) – Telefonica, Spain’s largest telecommunications company, plans to eliminate about 5,100 jobs in the country by 2026. The goal is to cut costs and adjust the size of the company to the current market, according to UGT, a Spanish union. Telefonica, with 21,000 employees in Spain and over 103,000 globally, justifies the decision with productivity and organizational reasons. The company confirmed the personnel adjustment but did not specify the number of cuts. The next round of negotiations with the union will take place the following week.

Frontier Communications (NASDAQ:FYBR) – Activist investor Jana Partners is pressuring Frontier Communications to consider a strategic review, including a potential sale. Jana suggests selling the company, partnerships, or divesting non-essential assets to improve the company’s stock performance.

Take-Two Interactive (NASDAQ:TTWO) – Rockstar Games, a subsidiary of Take-Two Interactive, released a trailer for the new “Grand Theft Auto VI,” ending years of anticipation. The release is planned for 2025, revealed after a leak, and coincides with the 25th anniversary of Rockstar.

NetEase (NASDAQ:NTES) – NetEase lost about $7 billion in market capitalization this week due to investor concern over competition from Tencent Holdings Ltd’s (USOTC:TCEHY) upcoming game Dream Star. Shares fell 11% this week due to direct competition with NetEase’s hit game Eggy Party. Tencent plans to invest $196 million in developing Dream Star.

Eli Lilly (NYSE:LLY) – Eli Lilly extended until December 15 the deadline for shareholders of Point Biopharma (NASDAQ:PNT) to accept its purchase offer. The offer remains at $12.50 per share, despite low uptake due to investors considering the price low.

EyePoint Pharmaceuticals (NASDAQ:EYPT) – EyePoint Pharmaceuticals initiated a public offering of $175 million in common stock, with an option for underwriters to purchase up to an additional $26.25 million in shares. This follows a 177% increase in shares on Monday after announcing promising data for its macular degeneration treatment EYP-1901, the biggest single-day gain ever recorded for the company. The proceeds will be used to advance the clinical development of EYP-1901 and support early-stage pipeline projects.

Caterpillar (NYSE:CAT) – Caterpillar invested in Nth Cycle, a recycling technology developer, aiming to promote the reuse of metals in batteries and construction equipment. The investment is part of a Series B funding round of $44 million for Nth Cycle, seeking to commercialize recycling methods for the green energy transition. Nth Cycle’s technology uses an electrochemical process to extract nickel and cobalt, targeting mining and electric vehicle markets.

Kinder Morgan (NYSE:KMI) – Kinder Morgan forecasts an 11% increase in net income per share for 2024, driven by growth in its natural gas pipelines and energy transition projects. The U.S. pipeline operator expects earnings of $1.21 per share for 2024, compared to the $1.09 forecast for 2023. The growth will be aided by increased contract rates and demand for renewable diesel and renewable natural gas.

Chevron (NYSE:CVX) – John Kerry, the U.S. climate envoy, criticized oil companies, including Chevron, for not fulfilling environmental commitments. He emphasized the industry’s leadership importance in fighting climate change, praised commitments at COP28, and expressed support for the gradual elimination of fossil fuels.

3M (NYSE:MMM) – Barclays upgraded 3M’s stock rating on Monday. Analyst Julian Mitchell cited expected progress in increasing legal responsibilities as the reason for the upgrade from “underweight” to “equal weight”. Mitchell pointed to the expected update on the 3M litigation agreement and improved prospects in electronics and consumer markets in 2024. He also predicts a possible operational margin expansion after years of decline.

Joann (NASDAQ:JOAN) – After reporting a larger fiscal loss in the third quarter and sales below Wall Street’s expectations, shares of Joann Inc. fell 11.6% in Tuesday’s pre-market. The craft retailer had a loss of $21.6 million, or 51 cents per share, worsening from the previous year. Total sales fell 4.1% to $539.8 million, with same-store sales also reduced. Joann projects a sales drop of 1% to 2% for fiscal 2024, with its shares accumulating a 69% loss on the year.

Barclays (NYSE:BCS) – The Qatar Investment Authority (QIA) announced the sale of almost half of its stake in the bank. The sale comes as Barclays prepares for a strategic review in 2023.

Moody’s (NYSE:MCO) – Moody’s downgraded China’s credit outlook from stable to negative, citing reduced medium-term economic growth and risks in the vast real estate sector. This reflects the need for financial support to indebted local governments and state-owned enterprises, increasing fiscal and economic risks. Additionally, Moody’s predicts a negative outlook for banks in 2024, citing slow economic growth, default risks, and pressures on profitability. Previous interest rate hikes and rising unemployment in advanced economies may weaken asset quality, especially with real estate exposures in the US and Europe.

Blackstone (NYSE:BX) – Blackstone, a private equity firm, is considering selling Anthos Therapeutics, a developer of a new generation of anticoagulants founded four years ago with support from Novartis (NYSE:NVS). Anthos, which has no products on the market yet, could be worth billions, well above Blackstone’s initial investment of $250 million. Its main product, abelacimab, is in advanced clinical trials, increasing its potential value. Blackstone is working with investment bankers on the sale, but there’s no certainty of a deal. Additionally, Blackstone acquired the Moxy Kyoto Nijo, a hotel in Kyoto, Japan, from Goldman Sachs Group (NYSE:GS) for $54 million as tourism in Japan recovers quickly, boosting the hospitality sector.

American Express (NYSE:AXP) – Vanguard ended its automated financial advisory offer with American Express, halting new enrollments on November 15 and ending the service on February 29. Customers will be transferred to the Vanguard Digital Advisor or Vanguard Personal Advisor Service. The reason was not explained.

Palantir Technologies (NYSE:PLTR) – Client concerns about data ownership may limit the growth of Palantir Technologies, according to William Blair. Doubts emerged following a presentation by the US Army, indicating a possible smaller contract. Palantir faces competitive pressures, with its shares recently falling.

Virgin Galactic (NYSE:SPCE) – Founder Richard Branson indicated he will no longer invest in the space tourism company. While Branson’s lack of future investment may seem concerning, it’s common for founders to turn to capital markets for additional financing. Virgin Galactic, still unprofitable, has about $1.1 billion in cash and expects to generate positive free cash flow by 2026. Branson has already invested tens of millions in the company, and his reluctance for future financing doesn’t necessarily reflect a lack of confidence.

Tesla (NASDAQ:TSLA) – Tesla’s sales of electric vehicles made in China fell 17.8% year-on-year in November to 82,432 cars, the biggest drop since December 2022, according to data from the China Passenger Car Association. Tesla adjusted production and prices in response to increased inventory and weakened demand, facing strong competition in the Chinese market. Elsewhere, the Danish union 3F announced support for Swedish mechanics on strike against Tesla, refusing to unload or transport Tesla cars to customers in Sweden. The action is a global effort to protect workers’ rights and responds to a request from the Swedish union IF Metall.

General Motors (NYSE:GM) – General Motors CEO Mary Barra emphasized the company’s commitment to resolving issues with its autonomous unit, Cruise, but postponed discussions about funding until the completion of ongoing safety evaluations, expected in early 2024.

Ford Motor (NYSE:F) – In November, Ford Motor recorded a slight 0.5% drop in new vehicle sales in the US, following a long strike that affected production. On the other hand, Ford’s electric vehicle sales, including the F-150 Lightning and Mustang Mach-E, grew 43.2%, totaling 8,958 units. The company resumed production at its main factories after resolving the strike with the United Auto Workers union at the end of October.

Nio (NYSE:NIO) – Nio, the Chinese electric vehicle manufacturer, was included in a database by China’s Ministry of Industry, an important step towards vehicle production in the country. Nio, which has been producing electric vehicles in partnership with JAC since 2018, has not yet released details on obtaining a manufacturing license. The potential approval would alleviate uncertainties about the impact of JAC’s asset sales on factories producing Nio vehicles.

Vinfast (NYSE:FSR) – Vietnamese electric vehicle manufacturer VinFast announced that the US International Development Finance Corporation (DFC) will consider its $500 million loan application for expansion. The funding would be aimed at constructing lithium-ion battery manufacturing facilities in Vietnam, subject to DFC review and approval. VinFast, which began delivering electric vehicles in California and is listed on Nasdaq, sees this project as an initial step in a series of future initiatives.

Fisker (NYSE:FSR) – Fisker received a downgrade from Wall Street on Monday, part of a trend of analysts moving away from unprofitable electric vehicle startups. This also affects other companies in the sector, highlighting the importance of profitability in an environment of rising interest rates.