US futures higher, Salesforce & Marvell surge, Royal Bank & National beat
I am early for once.
Glass half full: Futures are perky this morning, shrugging off some wild geopolitics and getting a lift from AI-infused tech stocks. South Korea shocked yesterday when its President suddenly imposed martial law only to lift it several hours later after its National Assembly revolted against the measure. It created a lot of intra-day volatility with Samsung plunging as much as 7%. But as lawmakers regained control and the Finance Minister vowed to stabilize markets, the sell-off has abated (Samsung is actually higher in London trading right now). Earnings from Salesforce and Marvell are helping to keep the AI trade alive with both stocks surging in the pre-market (more on that below). This morning, we got earnings from Royal Bank and National Bank (details below). In the US, we get a read of the services sector and investors will be watching the employment component. As we march toward jobs data on Friday, yesterday’s job openings data caused a bit of a sell-off in treasuries because they were higher than expected. However, TD notes this is not an indication of an overheating labour market “but rather the mean-reversion of the data after a very soft September report that had overstated the signal of weakness.” Fed Chair Jerome Powell will be speaking this afternoon at the New York Times dealbook summit and investors will look for insights into the next rate move with the market pricing in a 74% chance of a rate cut in December.
The force is strong: Salesforce is rocketing up 13% in the premarket and poised to open at a record high. Sales growth came in higher than expected and the software company boosted its forecast for the year. While earnings missed expectations, investors like the traction they are getting with their AI offering. Salesforce unveiled “Agentforce” in September which allows customers to use AI agents for certain sales and marketing tasks. It seems like the company is getting early traction with a measure of its future revenue increasing by 10%, more than expected. Evercore’s Kirk Materne calls the results “good enough” to alleviate growth concerns. “No major surprises but a second consecutive well executed quarter supporting the recent rally in the shares,” Materne wrote in a note to clients.
Superhero results: Shares of Marvell are also pumping, trading up 12% in the pre-market and poised to open at a record. The AI chip maker which focuses on making custom chips also said they are poised to beat expectations going forward by “100s of millions”. They’ve got a key deal to supply Amazon Web Services with custom chips for 5 years. They are also working on a new customer they say could be larger than their Amazon deal. Evercore’s Mark Lipacis suspects it is Microsoft. One wildcard to watch for is reports that Marvell’s CEO Matt Murphy is on the list of contenders to replace Intel’s CEO Pat Gelsinger. Although Murphy, who has been CEO since 2016, said he is “100% focused on Marvell” on the earnings call last night.
Royal treatment: Royal Bank beat earnings expectations and boosted its dividend 4%, which was more than expected. If weren’t for a legal provision, earnings would have been even higher. The acquisition of HSBC, smaller growth in provisions for credit losses than expected and profit growth in every bank line helped to boost results. Overall, looks like a clean quarter with very few blemishes. However, the stock is near an all -time high and trading at the upper end of its historical trading range. While you can argue that consistent results support higher valuation, I’ll watch to see how much gas is in the tank for investors.
Small but mighty: National Bank reported better than expected profit and boosted its dividend. However, provisions for credit losses grew 41% from last year and this was higher than expected. Profit in personal and commercial banking was also less than expected, offset by better capital markets. National Bank closed at a record high yesterday so we will see whether these misses amount to anything. National Bank agreed to buy Canadian Western Bank back in June and says they are expected to close the deal in 2025.
