Wall Street is on track to close higher this week as the US corporate reporting season has been better than many people expected.
More than three-quarters of S&P 500 companies reporting have exceeded earnings expectations, although the market estimates were relatively conservative.
By the end of the week, the broad market index was 1.3% higher.
General Motors was among the standout performers, as the company raised its full-year guidance after beating Wall Street’s profit and revenue expectations, while lowering the expected hit from tariffs.
The strong quarterly result saw the company’s stock jump 15% earlier in the week, as it posted its best day since 2020 and its second-best day since it emerged from bankruptcy in 2009.
Harbour Asset Management’s Shane Solly.
The company also lowered its forecast tariff hit to between US$3.5 billion ($6.1b) and US$4.5b, down from between US$4b and US$5b.
Harbour Asset Management portfolio manager Shane Solly told NBR a lot of the corporate results that have flowed through have been better than markets expected. “One of things we’re continually observing is that impact of tariffs and, so far, it’s been lower than expected based on economic activity and costs.”
But, as he points out, it has not all been one-way traffic, with the likes of Mattel, Texas Instruments, Netflix, and Tesla reporting results that have not met analysts’ expectations.
Tesla tumble
Tesla reversed two straight periods of declines to post a 12% lift in third-quarter revenue. However, the company failed to hit analysts’ targets and was punished accordingly, with its share price falling 3% in after-hours trading on Thursday.
The company’s bottom line disappointed, with its net income falling to US$1.37b from US$2.17b in the prior year due to lower EV prices and a 50% jump in operating expenses.
The end of the quarter also coincided with the end of federal tax credits for EVs, which pulled sales forward for the quarter.
“While we face near-term uncertainty from shifting trade, tariff, and fiscal policy, we are focused on long-term growth and value creation,” the company said.
While Tesla increased sales overall, the company has seen sales retreat in Europe amid increased competition from EV makers such as Volkswagen and BYD, and what some have attributed to a consumer backlash against founder Elon Musk’s political rhetoric.
Tesla Model S.
Warner Bros Discovery
Earnings aside, one of the biggest developments in corporate America was news that media and entertainment giant Warner Bros Discovery was putting itself up for sale.
The company announced plans in June to separate its growing streaming business from its lagging cable network division, but the news that it was considering an outright sale of the business caused its shares to spike 10% earlier in the week.
A sale of the company would likely reshape the media landscape and potentially prompt other legacy media firms to consider their own structures.
The likes of Comcast, Netflix, and Apple are reportedly interested in the company, but Reuters reported on Thursday that Paramount Skydance is seen by analysts as the front-runner to acquire the firm.
Warner Bros rejected a US$60b approach earlier in the week from Paramount, which is owned by David Ellison, son of the world’s second-richest man, Larry Ellison.
Bank of America analyst Jessica Reif Ehrlich was quoted by Reuters as saying she estimated that Warner Bros could fetch US$30 a share in a sale, which would value the company at US$74b. This figure was seen as being high enough to deter some bidders but within reach for Ellison.
Apple has US$36.3b in cash at June-end and is seen as being able to easily raise debt to fund a takeover, but has historically avoided large deals.
Meanwhile, Netflix holds about US$9.3b in cash and has never done a deal exceeding US$1b. Comcast’s US$9.7b cash pile suggests any bid would lean heavily on debt or outside partners.
The entrance to Warner Bros Discovery’s Making of Harry Potter studio in London.
Commodity watch
Gold also continues to be in the news. The yellow metal – which is regarded by some as a safe haven – has been on a tear this year, soaring almost 50% to more than US$4000 an ounce.
Investors have flocked to gold amid concerns about the debasement of the US dollar, geopolitical tensions, trade tariffs, and rising sovereign debt levels.
However, gold had its biggest one-day fall since 2020 on Monday, as its price slid more than 4%. It has continued to slide and is now down about 6% for the week.
Solly suspects more “constructive thinking” about the US dollar has led investors to take a less negative view of it, and has prompted more people to hold it.
Meanwhile, Capital.com senior market analyst Daniela Sabin Hathorn was quoted in The Guardian as saying the fall was not out of the blue.
“The upside in gold and silver seems to have run out of steam at the start of the week ... The trade had become quite overcrowded and was running a little hot considering the levels both markets were at, so a reversal is not entirely out of the blue. The catalyst for the pullback has been the perception of easing tensions between China and the US after Trump said that he expects to make a trade deal after meeting with President Xi Jinping at a Pacific Rim summit in South Korea later this month.”
Staying with commodities, oil prices shot up this week after Trump hit Russia’s two biggest oil companies – which account for more than 5% of global output – with sanctions over Moscow’s war on Ukraine.
The news sent the price of Brent Crude oil up 5% to US$65.99 a barrel on Friday, as Russian President Vladimir Putin warned a sharp drop in supply would push up prices for other countries.
AGM season
Closer to home, New Zealand’s corporates have started to hold their annual meetings, giving them an opportunity to update the market on trading since they reported their profits for the June year in August.
There was a fair bit of caution from company management teams then, with many saying they were not seeing signs of the economy improving and were hesitant about investing, Solly said.
“The updates we’ve had this week haven’t really provided the boost that perhaps many investors would like to see – they’ve continued with this theme of ‘things aren’t getting worse, but we’re still pretty cautious’,” he said.
Case in point is Michael Hill Jeweller. The dual-listed retailer – which has described FY24 and FY25 as being worse than the global financial crisis – reported a 1.3% decline in total group sales through the first 16 weeks of the current financial year this week, although its gross margins have recovered 100 basis points.
At the same time, Skellerup was forecasting another record profit in FY26.
The industrial products manufacturer, which generates 80% of its revenue in overseas markets, said demand had been “reasonably robust” in the three months ended September, with trading up 10% on the same period a year ago.
