Weekday edition
Smartphone margin warning, Shopify slide, and the jobs report
Advanced Micro Devices rallied after hours as data center sales lifted its results.
At Tuesday’s close: S&P 500 +0.36%, Nasdaq-100 +0.68%, Dow −0.38%
Apple slides after warning memory costs may keep rising
Apple Inc. slid 1.9% on Tuesday after warning that memory chips will keep getting pricier. On Monday's earnings call, Chief Financial Officer Kevan Parekh said gross margin, the share of sales left after production costs, would land between 45% and 46% in the December quarter. Analysts expected 46.3%. He blamed mainly higher memory costs. CEO John Ternus said: "Looking beyond the December quarter, we see the pricing for memory purchases continuing to increase."
For the companies that sell Apple its memory, the same comments read as pricing power. Chief Operating Officer Sabih Khan said Apple expects Mac and iPad supply to be constrained in the December quarter, mainly because of memory. He also cited a $33 billion increase in purchase obligations, money Apple has promised suppliers, from the June to the September quarter. Sandisk Corp. climbed 4.8%, Micron Technology Inc. jumped 2.6%, Western Digital Corp. 2.6% and Seagate Technology Holdings 2.1%. Apple lost $94 billion in market value.
For readers
What it means for you: Apple accounts for 5.4% of the value of the 500 largest U.S. companies, and Micron for 1.1%. That gap explains why the memory rally barely registers in a broad fund. Sandisk's gain added $9 to $100,000 spread across those companies by size. Western Digital's added $4. A Nasdaq-100 fund still ended higher: on $100,000, Tuesday added $680. The October jobs report, Friday at 8:30 a.m. ET, may move nearly every holding in that fund, not just Apple and its suppliers.
Read the full story, MU price history and analyst ratings, AAPL price history and analyst ratings
Markets
Tuesday’s close
| Market | Level | Change |
|---|---|---|
| S&P 500 | 7,568.92 | +0.36% |
| Nasdaq-100 | 28,180.26 | +0.68% |
| Dow | 51,786.72 | −0.38% |
| 10-Yr | 4.95% | +4 bp |
| Bitcoin (24 hr)As of this edition | $78,276 | +1.73% |
The day ahead
Wednesday’s setup
Earnings from CVS Health, Uber, Arm and Qualcomm fill Wednesday, ahead of Friday's October jobs report and next Tuesday's inflation report, the releases that could shape the Fed's next rate decision.
Before open CVS Health earnings. The results arrive with CVS stock 17.4% below its 52-week high of $110.60. For an index fund it is a small slice: CVS accounts for 0.13% of the value of the 500 largest U.S. companies. The questions are whether the company keeps or changes its full-year outlook, and whether its profit margins held up in the latest quarter.
Before open Uber earnings. Uber shares stand 33.2% below their 52-week high of $99.72 going into the report. The company makes up 0.15% of the value of the 500 largest U.S. companies. The questions are whether Uber's forecast for the current quarter points to faster or slower growth, and how much of the latest quarter's revenue turned into profit.
8:30 a.m. ET U.S. International Trade in Goods and Services, September. The line that matters is the goods deficit, because the trade gap feeds into the government's estimate of economic growth. A wider gap could trim third-quarter growth estimates and add to the case for lower rates, which could ease borrowing costs over time. A narrower gap could work against it. The 2-year Treasury yield, which tracks rate expectations closely, edged up 2 basis points to 4.61% on Tuesday.
After close Arm Holdings earnings. Arm stock sits 53.9% below its 52-week high of $439.46, and the company accounts for 0.24% of the value of the 500 largest U.S. companies. Apple said Tuesday that memory prices will keep rising past the holidays, squeezing its margins. The questions are whether Arm's revenue growth held up last quarter, and whether its outlook for the next quarter reflects those higher costs for device makers.
After close Qualcomm earnings. Qualcomm stock stands 34.5% below its 52-week high of $251.02. It makes up 0.20% of the value of the 500 largest U.S. companies. Apple's statement Tuesday that memory prices will keep rising leads to one question: whether Qualcomm's forecast for the current quarter assumes fewer phones sold. The other is how fast its business outside phones grew.
If you own
Materials sector funds lost $2,010 on every $100,000 held on Tuesday, as the fund slid 2.0%. The same $100,000 in an S&P 500 fund gained $360. Consumer staples funds fell 2.1% that day, while technology funds rose 1.3%. For holders of chemical, metal and packaging companies, the question is whether the slide stays inside a few sectors or spreads to the rest of the market.
Oracle shares added $5,850 on every $100,000 held on Tuesday as the stock rose 5.8%. The company added $21 billion in market value and is now worth $380 billion. Oracle accounts for 0.43% of the value of the 500 largest U.S. companies, so its gain added $25 to $100,000 spread across them by size. If you own the stock directly, the question is whether one day's jump leaves more of your money in a single company than you intended.
Bond funds lose value when yields climb, because older bonds paying less become worth less. The 10-year Treasury yield rose 4 basis points on Tuesday to 4.95%. The 3-month bill yield was little changed at 4.21%. Mortgage quotes often follow the 10-year, so new home-loan rates could inch higher. The question is whether the extra yield on longer bonds is worth their bigger price swings.
Need to know
Top stories
- 1
AMD · +3.65% AMD rallies after hours as data center sales lift quarterly results. AMD shares rose 5.0% after hours on Tuesday once the chipmaker reported third-quarter revenue of $13.38 billion, above analyst estimates of $13.09 billion. Data center sales reached $8.5 billion. AMD forecast fourth-quarter revenue of about $17 billion, against estimates of $16.23 billion. Chief executive Lisa Su said AMD expects growth to accelerate as it scales production of its Helios and Venice products. AMD makes up 0.89% of the 500 largest U.S. companies' combined value. Its 3.7% gain in regular trading added $32 to $100,000 spread across them by size. Read more
- 2
ORCL · +5.85% Oracle rallies after pricing stock and bond sales for spending. Oracle shares surged 5.8% on Tuesday, recovering from a premarket dip, the day the company priced stock and bond sales totaling about $20 billion. New shares sold at $116 each, and the bonds carry interest rates from 7.000% to 8.650%. Oracle said it may use the money for capital spending, debt repayment, acquisitions, dividends and buybacks. The raise fits Oracle's plan to cap new outside funding for fiscal 2027 through fiscal 2030 at $20 billion. Read more
- 3
SHOP · −8.74% Shopify tumbles as thinner margins and slower growth outlook overshadow earnings beat. Shopify shares tumbled 8.7% on Tuesday even though the company reported third-quarter adjusted earnings of 49 cents a share, above the 46 cents analysts expected. Shopify said revenue reached $3.742 billion, just under the $3.747 billion consensus estimate. Gross margin, the share of sales left after direct costs, narrowed to 47.6% from 48.9% a year earlier. Shopify also forecast slower revenue growth for the holiday quarter than earlier this year. A $100,000 stake in Shopify lost $8,740. Read more
AI corner
Three changes that matter
Topics: Big Tech, Startups
Amazon filing shows its Anthropic stake gaining value ahead of the IPO
Amazon's September-quarter filing valued its Anthropic convertible notes at $146.2 billion as of Sept. 30, up from $97.9 billion in June. The figures are accounting estimates, not cash, and an Anthropic listing could test them at a company worth 3.0% of the 500 largest U.S. companies' combined value.
Topics: Security, Deals
CrowdStrike agrees to buy Fiddler and Dreadnode to police AI agents
CrowdStrike said it agreed to buy Fiddler and Dreadnode, whose tool tests AI against more than 100 known attack strategies, and launched a kill switch for rogue agents. Terms were not disclosed, and the stock rose 1.2% on Tuesday as the company bets businesses will pay to secure AI agents.
Topics: Energy
Eaton posts record orders as data center power demand grows
Eaton reported sales up 28% to $8.947 billion, topping the $8.506 billion consensus, and agreed to buy COL Group for about $921 million to expand its European power business for data centers. Its electrical backlog grew 46%, a sign that spending on AI power equipment could keep supporting industrial stocks, not just chipmakers.
How it works
Read-through
Why Apple's warning on memory costs lifted the companies that make memory. A read-through is when one company's report moves other companies before they report. Apple said memory prices would keep rising and shrink the profit it keeps on each sale, and its stock slid 1.9%. Micron jumped 2.6% and Sandisk climbed 4.8%, because a customer's rising costs are a supplier's higher prices. On $100,000 spread across the 500 largest U.S. companies by size, Apple's drop took $103 and Micron's gain added back $28.
The close
The big picture. Big technology names did the heavy lifting in both directions. The Nasdaq-100 tumbled 6.7% in October yet has gained 11.6% this year. The S&P 500 fell 0.9% last month and is up 10.6% for the year. The Dow rose 1.7% in October and 7.7% this year. Tuesday kept the split: Apple warned on memory costs, AMD and Oracle rallied, and 604 stocks fell while 488 rose.
On the calendar. October consumer prices arrive Tuesday, Nov. 10, 8:30 a.m. ET. Producer prices follow Friday, Nov. 13, 8:30 a.m. ET. Between them, they could help settle whether money-market funds keep paying close to today's rates. They may also show whether credit-card and home equity line rates, which move with the Fed, might ease.
Not investment advice.