Nvidia crushed Wall Street expectations in its much-anticipated quarterly earnings, though the response was somewhat muted as the company noted US curbs on chip exports to China would weigh on results. The stock slipped more than 2% in afternoon trading.
In commodities, oil prices sank more than 4% as the group of oil-producing countries known as OPEC+ delayed a meeting that was scheduled to discuss output. West Texas Intermediate (WTI) crude futures eventually recovered though, slipping about 1% to just below $77 per barrel.
AI drama kept its grip on the market when, in a stunning reversal, OpenAI said Sam Altman will return as its CEO just days after he was ousted. The ChatGPT maker is also bringing in new board members, including former Treasury Secretary Larry Summers, as it tries to quell a staff mutiny.
In individual stocks, shares of Deere (DE) fell about 3% in the wake of a downbeat profit forecast from the farm equipment giant. Its warning that high borrowing costs would pinch demand echoed a common theme in retailers' results.
Stocks float higher into the holiday break
US markets were higher across the board on Wednesday ahead of the market's closure on Thursday for the Thanksgiving holiday.
The Dow rose 0.5% while the S&P 500 and Nasdaq rose closer to 4%. Oil prices — which fell as much as 5% early Wednesday — closed down about 1.8%.
Markets will be open for a half day on Friday with the closing bell on Wall Street ringing at 1:00 p.m. ET.
Nvidia offered investors the biggest corporate event of the week, and while its results for the third quarter topped estimates some caution on China saw investors temper enthusiasm, sending shares down about 2.5%. Earlier this week, Nvidia stock closed at a record high.
It's time for a 'Turkey Wrap'
OK, it's not actually time to grab the gravy just yet. But as Yahoo Finance's Jared Blikre noted, the Thanksgiving holiday is typically a good time of year for stocks.
And with about 30 minutes left in the trading day before markets take a breather on Thursday things appear to be going to plan with all three major averages in the green.
Fundstrat head of research Tom Lee wrote in a note today that "probabilities favor a rally into Friday." He cited a tweet from Wayne Whaley that showed when the Nasdaq is positive for a week straight entering the Wednesday before Thanksgiving, the Nasdaq is typically positive on Wednesday and Friday combined too, creating a nice "Turkey Wrap" for tech investors.
Below is the tweet, which Lee said Fundstrat individually verified with its own research team too.
Oil prices slip as OPEC delays meeting
Oil futures took a dive on Wednesday after OPEC pushed back an upcoming meeting but recovered throughout the afternoon. West Texas Intermediate (CL=F) futures slipped less than 1%, settling above $77 a barrel.
OPEC+, a consortium of the world's largest oil producers led by Saudi Arabia, announced it would push back its upcoming meeting to Nov. 30 from Nov. 26, raising uncertainty about the group's plans for additional output cuts.
"They [OPEC] do like to have consensus before they see each other," Ed Hirs, senior fellow at the University of Houston, told Yahoo Finance on Wednesday morning.
The announced delay could be a sign that member countries are not in sync about their next steps.
"I think this means they are having a hard time getting everyone to buy in to the notion of more cuts across the board," Stewart Glickman, energy equity analyst at CFRA Research, told Yahoo Finance on Wednesday regarding the delay.
Saudi Arabia, which has unilateral reductions in place of one million barrels per day through year-end, is reportedly pressuring smaller OPEC+ members to take a bigger part in reductions.
This year's cuts have been aimed at constraining global supply and keeping a floor under oil prices, which are down about 20% from the average price that prevailed in 2022.
"We see some scope for the group to do a deeper reduction, but we would anticipate that Saudi Arabia would seek additional barrels from other members to share the burden of the adjustment," wrote Helima Croft, head of global commodity strategy at RBC Capital, in a note this week.
Market fundamentals may also be contributing to uncertainty among OPEC+ members after a bearish oil market outlook was presented to the group this week. The materials from a top financial dealer reviewed by Reuters show November's recent sell-off was prompted by downbeat sentiment from oil producers and airlines.
"Raising the price in the face of softening demand could knock down demand further, resulting [in] lower prices regardless," noted the University of Houston's Hirs.
Disney hopes Thanksgiving will reverse box office slump
Disney (DIS) is hoping to reverse its Thanksgiving slump at the box office this year.
The media giant, which just saw its latest Marvel film bomb, will debut its new animated title "Wish" on Wednesday. So far, reviews have been lukewarm with critics assigning the film a mere 49% on Rotten Tomatoes.
"I tend to think that on some level 'Wish' is going to be a little critic proof, maybe not entirely, but it's certainly appealing to families and kids," Box Office Pro chief analyst Shawn Robbins told Yahoo Finance.
Robbins said he would consider a $40 million-$50 million debut over the five-day Thanksgiving period a win considering the circumstances as Disney CEO Bob Iger attempts to revamp the company's film division following multiple box office disappointments.
Iger said recently that one of Disney's "key building opportunities" includes "the need to strengthen the creative output of our film studio."
"To achieve this, we are focusing heavily on the core brands and franchises that fuel all of our businesses and reducing output overall to enable us to concentrate on fewer projects and improve quality, while continuing our effort around the creation of fresh and compelling original IP," he said on the company's earnings call earlier this month.
Iger stressed a strategy of "quality over quantity," citing an overproduction of content amid the 2019 Disney+ debut.
"I've always felt that quantity can be actually a negative when it comes to quality," he said. "I think that's exactly what happened. We lost some focus."
Box office watchers and Wall Street analysts alike believe the journey to recover won't be easy.
"I don't think the studio is going to be an engine that's going to help Disney grow for the next 18 months," Doug Creutz, analyst at TD Cowen, told Yahoo Finance. "I don't think it's going to get worse, but I don't think it's going to get better either."
Robbins warned a dismal debut for "Wish" will "reaffirm" just how much work Disney has ahead of itself, adding: "It's an uphill fight not just for this movie, but for Disney in particular right now."
Indexes maintain gains in afternoon trade
Stocks were still in the green near 1 p.m. ET on Wednesday.
One chart shows why bond yields matter to stocks
Bonds have been a major story for stocks over the past several months, as rising yields weighed on stock prices during much of September and October.
As of late that narrative has shifted, with the 10-year Treasury yield falling about 60 basis points from its highs in mid-October and the S&P 500 rallying 10% during that time period.
In their 2024 outlook — which forecasts the S&P 500 to hit 5000 by the end of 2024 — RBC Capital Markets showed how a higher yield on the 10-year Treasury could impact their call for next year.
In short, higher yields are bad, lower yields are good, all else being equal.
This makes sense, of course — lower yields generally makes investors more willing to pay a premium for stocks (or other assets), therefore lifting what valuation investors might find acceptable. RBC's work shows the straightforward relationship not only to a higher level for the S&P 500 if yields fall, but a P/E multiple for the stock market (as opposed to an earnings boost lifting stock prices).
Nvidia falls as China concerns outweigh strong earnings
Nvidia earnings crushed Wall Street estimates yet again, but in the short term the company's warning on how new export restrictions could impact business with China seem to be the key concern for investors as shares have slipped 3% on Wednesday.
The company noted new restrictions on chip exports to China would weigh on results.
"Our sales to China and other affected destinations, derived from products that are now subject to licensing requirements, have consistently contributed approximately 20-25% of Data Center revenue over the past few quarters," Nvidia CFO Colette Kress said in a release.
"We expect that our sales to these destinations will decline significantly in the fourth quarter of fiscal 2024, though we believe the decline will be more than offset by strong growth in other regions."
Kress expanded on the impact of export restrictions to Asia when addressing investors on Tuesday night. She noted that the fourth quarter guidance could've been higher if not for the restrictions but there is a possibility Nvidia could launch new products in coordination with the US government.
"The export controls will have a negative effect on our China business, and we do not have good visibility into the magnitude of that impact even over the long term," Kress said.
The news overshadowed an otherwise robust report for the AI leader. The chipmaker reported adjusted earnings per share of $4.02 on revenue of $18.12 billion, both of which topped analyst expectations. Analysts had expected adjusted earnings per share to tally $3.36 on revenue of $16.1 billion, according to data from Bloomberg.
Third quarter revenue increased 34% from the prior quarter and 206% from year ago, reflecting how increased demand for AI has boosted the company's sales throughout 2023.
The company's revenue guidance for the current quarter also topped estimates, coming in at $20 billion, plus or minus 2%; analysts had been projecting fourth quarter guidance of $17.8 billion.
"Net/net, we think it is still too early to get off this train - especially as NVDA becomes the de-facto global platform for what might be one of the most transformational technologies of our lifetime (AI)," UBS analyst Timothy Arcuri wrote in a note to clients. Following the results, Arcuri moved his price target up to $580 from $560.
Consumer sentiment falls for fourth straight month
The final November release of the University of Michigan's consumer sentiment index came in with a reading of 61.3, a slight uptick from the preliminary reading of 60.4 but still lower than October's 63.8.
Survey of Consumers director Joanne Hsu said the drop in November reflects a mix of factors at play for consumers.
"More favorable current assessments and expectations of personal finances were offset by a notable deterioration in expected business conditions," Hsu said. "In particular, long-run business conditions plunged by 15% to its lowest since July 2022."
"Younger and middle-aged consumers exhibited strong declines in economic attitudes this month, while sentiment of those age 55 and older improved from October."
Also notable were consumer expectations for long-run inflation, which steadied at a level not seen since 2011. Consumers see inflation at 3.2% over the next five years, a move up from the 3% seen as of last month.
In the short-term, consumer inflation expectations pressed higher to 4.5%, up from 4.2% in October. That marked the highest one-year inflation expectation since April 2023.
Altman back at OpenAI a welcome sign for Microsoft investors, analysts say
Microsoft shares were up more than 1.5% in early trade on Wednesday after OpenAI announced Sam Altman would be returning as the company's CEO.
This tentative resolution to the biggest personnel drama in the tech world in years still appears to leave Microsoft set to emerge as the imbroglio's biggest winner, even if Altman won't be directly working for Microsoft after all.
"From a Microsoft perspective, it’s back to business as usual on the AI front and Satya Nadella and team deserve a lot of credit for allowing this outcome to come about," Evercore ISI analyst Kirk Materne wrote in a research note on Wednesday morning.
"By offering to hire Altman and team, it forced the OpenAI Board to act quickly and kept the situation from unravelling to a point that it would be difficult to put the band back together."
The moves at OpenAI also included a shakeup on the board that initially fired Altman.
Former Salesforce (CRM) co-CEO Bret Taylor will be the chair of a new board, which will also include former Treasury Secretary Larry Summers and current director Adam D'Angelo, the CEO of Quora.
Jefferies equity analyst Brent Thill described the scenario as one of the "best possible outcomes."
"We believe the additions to the board will help to establish investor stability," Thill wrote in a note to clients on Wednesday. "We expect this 4-day situation to have a limited impact on MSFT and will continue to monitor it closely."
Tech leads stocks higher at the open
All three of the major averages were higher on Wednesday as another blowout earnings report from Nvidia and Sam Altman's return to OpenAI brought confidence to investors after days of uncertainty in the AI space.
In commodities, Oil prices sank as OPEC+ delayed a meeting that was scheduled to discuss output. West Texas Intermediate (WTI) crude futures were down more than 4% to just above $74 per barrel.