What moved
Wall Street finished the regular session firmly higher, with technology in front. The Nasdaq Composite gained 1.05% to 26,702.86, the S&P 500 rose 0.58% to 7,757.17, leaving it about 1.1% below its 52-week high, and the Dow added 0.69% to 52,856.09. European indices closed with bigger gains: the DAX rose 1.35%, the Euro Stoxx 50 1.4% and the CAC 40 1.06%. The FTSE 100 managed only 0.19%.
Asia was the weak spot. The Hang Seng fell 2.21%, the Shanghai Composite 0.48%, the Nikkei 0.46% and the Kospi 0.56%. Taiwan edged up 0.14%.
Why
Two things drove the US gain. SpaceX rallied after quarterly results in which AI revenue made up nearly half of sales. Elon Musk then said SpaceX and Tesla have each set up special committees to discuss a merger, which lifted Tesla ahead of its own numbers. Super Micro raised its revenue forecast on demand for AI systems, and that pulled server, networking and software names up with it. Communication services went the other way. Meta slipped before its report, Netflix fell on a light forecast, and AT&T dropped on worries about competition from satellite mobile services even though its earnings beat.
Europe's rally came from company results rather than economic data. EssilorLuxottica jumped 15.48% after its third-quarter revenue beat forecasts. Solid results generally outweighed worries about oil and the Gulf, and Brent gave up some of its early gains after Iran's president set conditions for talks with Washington. France also had a big faller: Carrefour sank 13.80% after warning that looting during the recent violent protests will cut its profit this year.
In Asia, CATL fell 12.03% in Shenzhen after a disappointing quarter. Its Hong Kong shares were the worst performer among the Hang Seng's main stocks, and Tencent also weighed on the index. In oil, Brent rose 0.67% to $109.52 on supply risks in the Gulf. US crude (WTI) appears to have fallen 4.11%, but that is mostly a contract switch, not a real sell-off: the November contract expired on Tuesday, and quotes now refer to the cheaper December contract.
Sentiment & risk appetite
Investors were more willing to take risk, but the gains were concentrated. The VIX, Wall Street's main gauge of expected volatility, fell 0.63 points to 16.68. The MOVE index, its equivalent for bonds, has dropped to 95.9 from 101.7. Smaller US companies lagged, though: the Russell 2000 rose only 0.27%. US sectors were widely spread, with technology up 1.67% and communication services down 1.11%, while consumer staples and real estate also fell. By PrimerIQ's own count, gains were broader in Europe, with 2,109 shares rising against 1,532 falling. Traditional safe havens were quiet: gold rose 0.21% and the dollar index barely moved. The US 10-year Treasury yield rose 2.9bp to 5.146%. A yield that high works against growth stocks, because it lowers the present value of profits they are expected to earn years from now.
Economic calendar
UK inflation for September, published this morning, came in higher than expected. Annual CPI rose to 3.5% from 3.1%, against a 3.4% forecast. Core inflation, which strips out energy, food, alcohol and tobacco, rose to 2.8%, and motor fuel was the main driver. The figures add to speculation that the Bank of England will raise rates in November. Sterling rose 0.18% to $1.3397.
The US calendar was light: weekly crude inventories from the Energy Information Administration at 10:30 EDT and a 20-year Treasury auction at 13:00 EDT. The Federal Reserve's next decision is on 28 October, and futures pricing earlier this week gave a small but real chance of a rate rise. Thursday brings US weekly jobless claims at 08:30 EDT.
Earnings
Meta's reported earnings per share of $3.83 were well short of the $4.98 consensus, but the shortfall comes from a $9.9bn legal charge. Without the charge, EPS was $7.40, revenue beat forecasts, and the shares rose in extended trading. Tesla's adjusted EPS of $0.48 beat estimates even though operating income fell sharply, and its shares edged up after hours. Texas Instruments, Lam Research and IBM all beat, and Texas Instruments forecast next-quarter revenue above what analysts expected.