Wall Street shares fall amid earnings deluge

Good morning. Here's what happened overnight and what you need to know today.

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1.

Earnings jolt: Wall Street shares fell on Wednesday (Thursday morning AEDT) as earnings reports took centre stage while rising bond yields pressured key sectors. The S&P 500 was down 1.08%, the Dow 30 down 0.98% and the Nasdaq 1.80% lower in late trading. Boeing posted a staggering USD6 billion ($9 billion) loss, exacerbated by ongoing strikes, pushing its shares down 2.3%. McDonald’s plunged as an E. coli outbreak linked to its Quarter Pounders caused one death. Despite reporting higher-than-expected third-quarter revenue, Coca-Cola shares were trading over 2% lower as CEO James Quincey flagged weak demand in China and the Middle East. AT&T beat expectations, adding 403,000 new wireless subscribers, but shares were down due to a USD4.4 billion impairment. Meanwhile, tech giants Nvidia and Apple also declined, contributing to a 1.09% drop in the Nasdaq. Tesla and IBM are due to report earnings after the market close.(Reuters)

2.

Tax squeeze: Australia’s tax revenue will hit a record 36.4% of GDP in 2024, according to the IMF's Fiscal Monitor, but the tax windfall won’t be enough to prevent six years of forecast budget deficits. High iron ore and coal prices, rising house prices and increased workforce participation have boosted government’s coffers. That has helped drive back-to-back budget surpluses. But the lucky country is also facing continued spending pressures from health, aged care the NDIS and an ageing population, leading to expected deficits. With a deficit of 1.7%, Treasurer Jim Chalmers, who is in Washington for meetings with finance ministers and central bankers on the sidelines of the IMF and World Bank conference, said the figures showed Australia had the third-strongest budget balance out of G20 countries, up from 14th in 2021. (Capital Brief)

3.

Design flaw: Nvidia CEO Jensen Huang said a design flaw in the company's latest Blackwell AI chips which delayed production has been fixed with assistance from Taiwanese partner TSMC, Reuters reported citing Huang speaking at the launch of the Gefion supercomputer in Denmark, which was built in partnership with the Novo Nordisk Foundation, Denmark's Export and Investment Fund and Nvidia. The flaw, which Huang said was "100% Nvidia's fault," resulted in low production yields but has been resolved, allowing manufacturing to resume at a faster pace. Nvidia’s shares were over 4% lower after the news in US afternoon trading. The Blackwell chips, which are designed to be 30 times faster than previous models, are expected to ship in the fourth quarter. Huang also addressed rumours of tensions with TSMC, dismissing them as "fake news." He was in Denmark to unveil a new supercomputer, Gefion, built in partnership with local institutions. (Reuters)

4.

Card fines: Goldman Sachs and Apple will pay a combined USD89 million ($134.55 million) for violations of consumer protection laws in their joint credit card business that impacted hundreds of thousands of people, the US Consumer Financial Protection Bureau said. The fines follow a CFPB investigation that found both companies allegedly misled customers about interest-free Apple device payments and mishandled transaction disputes. The CFPB said consumers were wrongly charged interest, had their credit reports damaged, and faced long delays in refunds. As part of the settlement, Goldman will pay USD19.8 million in consumer redress and a USD45 million fine, while Apple will pay USD25 million. Goldman also faces restrictions on issuing new credit cards unless it submits a compliance plan. Apple disagrees with the agency's findings but has agreed to the settlement. (Reuters)(Bloomberg)

5.

Kelly’s warning: Donald Trump’s former chief of staff, retired General John Kelly, labelled the former president a fascist who would govern as a dictator if given the chance. In interviews with The New York Times, Kelly said Trump praised Hitler several times, viewed military veterans as "losers and suckers," and sought personal loyalty over the Constitution. Troubled by Trump's comments on using the military against domestic opposition, Kelly felt compelled to speak out, citing Trump’s authoritarian tendencies. Trump's campaign dismissed Kelly’s claims as “debunked”. Kelly’s remarks are some of the strongest yet from a former White House insider, painting a grim picture of Trump’s leadership style as the election nears. (The New York Times)

6.

Serious issue: The US and South Korea said North Korea has sent around 3,000 troops to Russia, likely to support its war in Ukraine, according to media reports citing US Defence Secretary Lloyd Austin and South Korean lawmakers. A total of 10,000 troops are expected by December, the lawmakers told reporters, and Austin said it would be “very, very serious” if the North Koreans were preparing to fight alongside Russia in Ukraine, as previously claimed by Kyiv, although their exact role remains unclear. Moscow and Pyongyang have dismissed the accusation, although they signed a defence treaty in June, deepening military cooperation. “If they’re co-belligerents, if their intention is to participate in this war on Russia’s behalf, that is a very, very serious issue,” Austin said. Seoul warned Russia to withdraw the troops, and NATO allies are consulting on the deployment, a spokesperson told Reuters. (The Washington Post)(Reuters)

7.

Quarter crisis: McDonald’s shares dropped as much as 7.5% as the company grapples with an E. coli outbreak tied to its Quarter Pounder burgers, which has caused one death and sickened nearly 50 people across 10 US states. On Wednesday (US time), McDonald’s said it was notified by the Centres for Disease Control and Prevention (CDC) last week about the outbreak and said a fifth of its 14,000 US restaurants were no longer selling Quarter Pounders. The CDC suspects slivered onions as the source, but they have not ruled out beef contamination. The company’s stock had its worst day since March 2020, as investors brace for potential Q4 sales pressure. McDonald’s USA President Joe Erlinger said the world’s biggest fast-food chain could rebuild public trust while collaborating with the CDC. (Reuters)(Bloomberg)

8.

Bot battleground: Microsoft identified a Chinese-controlled network of social media bots targeting Republican down-ballot candidates and members of Congress that advocate for anti-Chinese policies. The troll network has “parroted antisemitic messages, amplified accusations of corruption and promoted opposition candidates,” according to Microsoft. The bots denigrated Republican lawmakers Barry Moore, Marsha Blackburn and Marco Rubio. The group responsible is known as Taizi Flood, which has been previously associated with China’s Ministry of Public Security, researchers told Reuters. China’s embassy denied involvement. Meanwhile, the Microsoft report also said Russian operatives continue efforts to undermine the Harris-Walz campaign. Russian operatives have been producing AI-generated and staged videos spreading false claims about Harris and her running mate, including allegations like Harris killing an endangered rhino in Zambia and an AI-generated video of a former student spreading misinformation about Walz. (Microsoft)(Reuters)