ASX Set to Edge Up as Wall Street Drifts; Tesla Surges, IBM Tumbles

On October 25, 2024, Wall Street concluded its trading day with mixed results. This came after Tesla experienced a remarkable surge, marking one of its strongest days ever, while IBM faced significant losses, suffering its largest decline in six months.

Wall Street Performance Overview

The S&P 500 index managed to gain 0.2 percent, breaking a three-day losing streak that had persisted since early September. Throughout the day, the index fluctuated between minor losses and gains, with an approximately balanced number of stocks advancing and declining.

In contrast, the Dow Jones Industrial Average dropped by 140 points, or 0.3 percent, while the Nasdaq composite index increased by 0.8 percent. As a ripple effect, the Australian stock market is projected to open positively, with futures indicating a potential rise of 15 points, or 0.2 percent, at the start of trading. Previously, the ASX saw a slight decrease of 0.1 percent on Thursday.

Tesla's Significant Surge

Tesla was the clear standout, with its stock climbing 21.9 percent after the company announced stronger quarterly profits than analysts had predicted. CEO Elon Musk expressed optimism, forecasting sales growth between 20 percent and 30 percent for the following year, despite the company’s revenue for the recent quarter falling short of expectations. This marked Tesla's best performance in the stock market since 2013.

Other companies, such as UPS, also reported positive outcomes, with stock climbing 5.3 percent after exceeding profit expectations. The financial health of UPS can provide insights into the broader economy due to its diverse customer base, and its revenue also surpassed analysts' forecasts.

ServiceNow, a company focused on automating and connecting business processes, supported the S&P 500's increase with a 5.4 percent rise after it reported better-than-expected profit and revenue, fueled by rising interest in artificial intelligence.

IBM's Struggles

However, the gains in the market could not completely counterbalance IBM’s downfall. The company’s shares fell by 6.2 percent after reporting quarterly revenue that did not meet analysts' expectations. This decline was a significant factor in the Dow's poorer performance compared to other indexes.

Boeing also faced challenges, with its shares declining by 1.2 percent as machinists voted to extend their strike, which has severely affected aircraft production. More than 60 percent of those who voted rejected the proposed contract, prolonging their strike into the sixth week.

Union Pacific saw a drop in its stock by 4.4 percent after reporting slightly weaker-than-expected profit and revenue.

Market Influences and Economic Outlook

Overall, the S&P 500 rose by 12.44 points to close at 5,809.86, while the Dow fell by 140.59 points to 42,374.36. The Nasdaq composite gained 138.83 points to finish at 18,415.49.

This period has reflected a broad regression in stocks after both the S&P 500 and Dow set record highs at the end of the previous week, influenced by rising Treasury yields in the bond market. Higher yields can deter investors from paying high prices for stocks, especially since many have noted that stock prices have increased more rapidly than corporate profits.

Interestingly, while rising yields are generally seen as a negative indicator, they also suggest that the U.S. economy remains stronger than expected. This resilience is a positive sign for Wall Street, as it raises the hope that the economy might navigate through ongoing inflation challenges without facing a severe recession.

Traders have had to adjust their expectations about the Federal Reserve's ability to cut interest rates deeply. The Fed is now more focused on sustaining economic growth rather than solely addressing inflation. This shift has led to a rebound in Treasury yields after a period of decline.

A mixed report on unemployment claims released Thursday described a lower number of workers applying for benefits, indicating fewer layoffs. However, it also noted a rise in the overall number of people collecting benefits, reaching the highest level seen in almost three years.

Experts concluded that while these figures suggest a slowing economy, there are no alarming signs of significant layoffs or labor market crashes.

Global Market Responses

After the release of unemployment claims, Treasury yields, which had seen some easing, pulled back slightly. The yield on the 10-year Treasury fell to 4.20 percent from 4.25 percent, although it remains above the 4.08 percent level from late last week.

A preliminary report also indicated that U.S. business activity might have seen slight growth last month, as strengths in the service sector offset weaknesses in manufacturing. Additionally, confidence among companies has reportedly improved as they look forward to more stability following the upcoming presidential election.

Another report indicated that new home sales exceeded economists' expectations last month, presenting a mixed but generally encouraging view of economic activity.

Summary of International Markets

In global markets, European indexes were modestly higher, while Asian markets finished mixed.

WallStreet, Tesla, IBM