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Earnings Turbulence: Trade Desk Plunges 24%, Plug Power Stumbles, Diageo Faces Sales Warning

By:JJ Kinahan

Rates are rising as Fed Chair Jerome Powell signals vigilance, which is affecting markets

  • Rates are rising as Powell signals vigilance, which is affecting markets; Gold is falling, hinting at eased inflation fears.
  • Meta's China deal is reshaping the markets. Meanwhile, earnings shocks from Trade Desk, Plug Power and Diageo are sending ripples through the markets.
  • Washington shutdown looms, and the S&P is testing 4400; Bond yields are spiking, signaling investor caution amid uncertainties.

It has been a notably subdued week for the stock market, following the substantial movements observed in the previous week. Both the S&P 500 and the Nasdaq Composite have experienced minimal shifts, each moving less than 0.5% since a week ago. Yesterday, in particular, marked one of the more significant movements of the week, with the S&P declining by 0.8%, and the Nasdaq dropping by 0.9%.

The current lack of notable earnings reports and economic data has left investors in a state of anticipation, awaiting fresh insight to interpret. In the absence of data, markets often attempt to quantify qualitative statements, such as those recently made by Federal Reserve Chairman Jerome Powell. While cautioning that the recent pause in raising interest rates shouldn't be seen as a victory, Powell emphasized the Fed stands ready to resume rate hikes if inflation signals intensify.

As Powell delivered his remarks, the Treasury simultaneously encountered challenges in selling $24 billion worth of long-term debt. While such auctions typically don't draw much attention, yesterday's proved weaker than anticipated. This resulted in a drop in bond prices and an increase in yields. The 10-year note hit a peak yesterday at 4.65%, closing slightly below at 4.64%. This represented a significant uptick from the previous day's low of 4.48%.

Despite the higher rates and Powell's cautious stance, the market has seen a retreat from inflation hedge trades, such as gold. Over the past few weeks, gold prices have declined by 3.5%. In times of inflation concerns, a shift toward commodities like precious metals is common. The decrease in gold prices may signal the market's belief that the peak of inflationary pressure is now behind us.

Among the individual stocks making headlines today is Meta Platforms (META), the parent company of Facebook. It secured a deal with Tencent (TCEHY) to sell Meta's headset in China, marking Meta's return to Chinese markets after a 14-year absence.

On the downside, shares in Trade Desk (TTD) are down 24% in premarket trading following its third-quarter earnings report, which exceeded estimates but forecasted fourth-quarter revenues well below expectations. Plug Power (PLUG) is also down by 38% in premarket after missing both earnings and revenue projections. Supply chain issues have plagued the once-thriving company, with shares falling significantly from their high of $46.50 just two years ago. Lastly, Diageo (DEO) shares have dipped by 14% after the beverage company warned of lower sales in Latin America and the Caribbean. Diageo, known for brands like Johnnie Walker, Tanqueray and Guinness, is feeling the impact of economic challenges in those regions.

As the week concludes, a couple of focal points include whether the S&P 500 can break and sustain 4400, a critical technical level discussed in the past. Additionally, attention is on Washington, where the government has until next Friday to devise a solution and avert a potential shutdown. While this story garnered more attention a few months ago, especially with the potential removal of Kevin McCarthy as speaker of the House, the expectation now is that another continuing resolution will be adopted. Nonetheless, it remains a story worth monitoring. In navigating these market dynamics, it is advisable to adhere to your investing strategy and long-term plans.

JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan 

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