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US stocks were mixed on Wednesday, with the Nasdaq looking to build on its latest record as Alphabet's (GOOG, GOOGL) strong earnings boosted optimism for Big Tech results. Meanwhile, crucial GDP and labor market data continued to add data pieces to the Federal Reserve's puzzle ahead of its next interest-rate decision.
The Dow Jones Industrial Average (^DJI) and the S&P 500 (^GSPC) were marginally lower. Meanwhile, the tech-heavy Nasdaq Composite (^IXIC) rose just above the flat line as a fresh batch of earnings rolled in.
Fresh government data on Wednesday showed that US economic growth slowed slightly last quarter to a 2.8% annualized pace. That was slightly lower than economists had forecast. The data revealed, however, that consumers have kept spending at a robust pace as inflation continues to fall.
Also, data from ADP found US private payroll growth surged in October, adding a curveball into the mix ahead of the all-important monthly jobs report set for release Friday.
Read more: What the Fed rate cut means for bank accounts, CDs, loans, and credit cards
At the same time, megacaps are in the spotlight after Alphabet's quarterly results showed its high-spending push into AI is starting to pay off. Shares of the Google parent jumped over 6%, alongside smaller gains for Amazon (AMZN), Meta (META), and Microsoft (MSFT).
The wait is on for after-hours earnings from Meta and Microsoft, next up in the five-strong parade of "Magnificent Seven" reports this week. For the stock rally, a lot is riding on how Big Tech earnings fare — which will be paramount even amid a packed two weeks of data and other market-moving news, according to analysts.
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Stocks open mixed
US stocks traded mixed on Wednesday, with the Nasdaq looking to build on its latest record as Alphabet's (GOOG, GOOGL) strong earnings boosted optimism for Big Tech results.
Meanwhile, crucial GDP and labor market data continued to add data pieces to the Federal Reserve's puzzle ahead of its next interest-rate decision.
The Dow Jones Industrial Average (^DJI) fell more than 60 points, or more than 0.1%, while the the S&P 500 (^GSPC) also slid about 0.1%. The tech-heavy Nasdaq Composite (^IXIC) rose just above the flat line as a fresh batch of earnings rolled in.
Super Micro Computer stock tanks after accounting firm resigns
Shares of Super Micro Computer (SMCI) cratered in premarket trading, falling over 30% after a filing revealed accounting firm Ernst & Young (EY) has resigned from its accounting duties with the tech company.
In a resignation letter, EY said, in part: “We are resigning due to information that has recently come to our attention which has led us to no longer be able to rely on management's and the Audit Committee’s representations and to be unwilling to be associated with the financial statements prepared by management, and after concluding we can no longer provide the Audit Services in accordance with applicable law or professional obligations.”
EY quit while conducting the audit for Super Micro's fiscal year that ended on June 30, 2024. The resignation comes two months after a short report from Hindenburg Research alleged, among other things, "accounting manipulation" at the AI high flyer.
GDP: US economy grows at slower-than-expected pace in third quarter as inflation falls
The US economy grew at a slightly less rapid pace in the last quarter than expected.
The Bureau of Economic Analysis's advance estimate of US gross domestic product showed GDP grew at an annualized pace of 2.8% in the third quarter, below the 2.9% growth expected by economists surveyed by Bloomberg. The reading also came in lower than the 3% growth seen in the second quarter.
Meanwhile, the "core" Personal Consumption Expenditures index — a measure of price pressures that excludes the volatile food and energy categories — grew by 2.2% in the second quarter. That topped estimates of 2.1% but was significantly lower than the 2.8% gain in the prior quarter.
Here's what's happening today
Economic data: MBA Mortgage Applications, (week ended Oct. 25); ADP private payrolls, (October); GDP annualized; Pending home sales, September
Earnings: ADP (ADP), Caterpillar (CAT), Carvana (CVNA), Coinbase (COIN), Etsy (ETSY), Eli Lilly (LLY), Microsoft (MSFT), Meta (META), Roku (ROKU), Robinhood (HOOD), Starbucks (SBUX); Humana (HUM); Biogen (BIIB); Kraft Heinz (KHC)
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Google parent's stock surges on strong earnings fueled by AI
Shares of Google parent Alphabet (GOOG, GOOGL) jumped 7% premarket Wednesday after the company reported earnings that beat Wall Street's expectations.
Here's a look at how its performance compared to forecasts, according to Bloomberg consensus estimates:
Google's better than expected growth was all thanks to AI. Quarterly sales within the company's robust Cloud unit, for example, grew 35% to $11.4 billion, Yahoo Finance's Hamza Shaban reports.
“This business has real momentum, and the overall opportunity is increasing as customers embrace gen. AI," Google CEO Sundar Pichai said in a call with investors Tuesday evening.
Jefferies analyst Brent Thill wrote on Wednesday: "AI feels increasingly like a well-managed tailwind, improving effectiveness of ads, drawing in Cloud customers, and driving internal efficiencies."
In notes to investors with titles like "Gem of a Quarter," "Ice in its veins," and "Come At The Search King," Wall Street analysts raised their price targets and earnings outlooks for Google, with bullish Thill seeing shares rise as high as $235. On average, analysts forecast shares rising to about $209 over the next 12 months, according to Bloomberg consensus estimates.
Private payroll additions surprise Wall Street in October
The latest data from ADP out Wednesday showed the private sector added 233,000 jobs in October, above economists' estimates for 111,000 and significantly higher than the 159,000 seen in September.
September's number of job additions was revised up from a prior reading of 143,000.
"Even amid hurricane recovery, job growth was strong in October," ADP chief economist Nela Richardson said in a release. "As we round out the year, hiring in the U.S. is proving to be robust and broadly resilient"
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