Wall Street experienced a turbulent start to November, marked by investor anxieties and economic uncertainties. The Nasdaq Composite took a significant hit, plummeting just over 3% – its worst weekly performance since early April. The S&P 500 also retreated, declining 1.6% for the week, effectively ending a three-week winning streak for both indices.
This week’s market downturn, following a robust October, can be attributed to a confluence of factors, primarily centered around concerns regarding the lofty valuations of stocks linked to the artificial intelligence (AI) sector. Nvidia, a bellwether in the AI chip market, saw its market capitalization dip below the $5 trillion mark, experiencing a weekly loss of 7%. This decline was compounded by the realization that substantial access to the Chinese market, a key growth driver in previous years, remains uncertain for the AI chip giant.
While Nvidia’s management has strategically omitted Chinese sales from its near-term outlook, many investors were still expecting improved geopolitical environment. The ongoing U.S.-China trade tensions, coupled with export restrictions on advanced technology, pose a significant challenge to Nvidia’s revenue streams and future growth. Analysts suggest that diversification of markets and exploration of alternative revenue models are crucial for Nvidia to maintain its leadership position in the AI space. Despite these short-term pressures, long-term growth expectations are still favorable.
Adding to market unease, emerging signs suggest that the recent partial government shutdown, the longest in U.S. history, may be starting to negatively impact the economy. Job cuts reached a 22-year high for any October, according to data from outplacement firm Challenger, Gray & Christmas. The University of Michigan’s latest monthly consumer sentiment survey also registered a near-record low. With government economic data delayed due to the shutdown, these private sector reports were closely scrutinized for insights into the economy’s health.
During this period of market volatility, strategic trading decisions were made. An increased position was taken in Starbucks, whose stock has been pressured alongside other restaurant names amid fears of weakening consumer spending. The company’s turnaround story under CEO Brian Niccol is showing signs of real improvement, making the move a worthwhile long-term play. Niccol has been implementing an ambitious Green Apron operating model designed to improve performance.
Boeing’s stock was also targetted. Share prices dropped significantly after the aircraft maker’s last earnings report, largely driven by a larger-than-expected charge related to its 777X program. While the quarter was undeniably disappointing, this market reaction presented a compelling opportunity for investors to take a postition in a fundamentally sound company.
Furthermore, GE Vernova stock was added to amid the broader market pullback and valuation concerns surrounding AI-related companies. GE Vernova, as a leading producer of gas-fired turbines used in data centers and for electricity generation, directly benefits from the growing demand for power fueled by rapid AI infrastructure development.
Eli Lilly grabbed headlines as well. President Trump announced a GLP-1 pricing agreement with Lilly and rival Novo Nordisk. This is expected to open up the market for Lilly’s Zepbound, expanding the drug’s reach via Medicare and Medicaid. The company also reported encouraging mid-stage trial results for its amylin obesity drug, eloralintide, showing weight-loss benefits while preserving muscle mass. Shares of Eli Lilly concluded the week with a 7% gain.
On the earnings front, Eaton released a mixed third-quarter report, surpassing expectations for adjusted earnings per share (EPS) but falling short on revenue and organic sales. Segment profit and profit margin, however, exceeded forecasts and reached new quarterly highs. DuPont delivered strong top- and bottom-line results, following the recent spin-off of Qnity Electronics. While initial share price weakness was attributed to noise surrounding quarterly financials stemming from the Qnity separation and the divestiture of its Aramids business, the core fundamentals of the “new” DuPont appear robust.
Solstice Advanced Materials, recently spun off from Honeywell, shared earnings with no major surprises. Texas Roadhouse reported mixed earnings, with better-than-expected comps offset by concerns around rising beef prices and their impact on profitability. The club also heard from Qnity on Thursday night as management delivered a business update after the close, which made investors confident of the company’s position to keep growing from secular trends like AI in the years ahead.
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