U.S. Oil Reserves at 40-Year Low, Prices Skyrocket

U.S. stocks tumbled Wednesday as the price of oil climbed to a 10-month high, raising concerns about the impact surging energy costs could have on inflation.

The Nasdaq dropped 1.1% as tech mega caps stumbled, while the S&P 500 lost 0.7% and the Dow Jones Industrial Average fell 0.6%.

Oil futures rose more than 1.3% today to about $87.70 a barrel, a 10-month record briefly touched yesterday when Saudi Arabia, one of the world's largest producers and exporters of crude, said it was extending its voluntary production cut of 1 million barrels a day through December. The cuts were first implemented in July and have been extended on a monthly basis ever since. The extension will continue to prop up oil and gas prices, upward pressure the U.S. government may have trouble controlling with strategic reserves at a 40-year low.

Stocks fell yesterday, pressured by the jump in oil prices and the effect it could have on consumer prices. The Dow Jones Industrial Average led markets lower, falling 0.6%. The S&P 500 lost 0.4% and the Nasdaq dipped 0.1%.

S&P 500's Biggest Gains and Losses Today

Here are the S&P 500 stocks that gained and lost the most today:

Dow Falls on Apple Drop, Interest Rate Fears

Concerns about continued high interest rates sent the Dow Jones Industrial Average lower for the second consecutive session, with the index giving up almost 0.6%, or about 199 points.

Apple (AAPL) shares dropped 3.6% after the Wall Street Journal reported China banned central government officials from using iPhones for work or bringing them to the office, part of its efforts to reduce reliance on foreign technology. Apple was also named a “gatekeeper” subject to enhanced regulatory requirements under a new European Union law.

Microsoft (MSFT) was also included in the EU’s list of “gatekeepers,” sending its shares down 0.2%. 

Aircraft maker Boeing (BA) dropped 2.1% as airlines warned that higher fuel prices would add to costs, prompting Southwest Airlines (LUV) to narrow its unit revenue outlook for the current quarter and sending its shares lower by 2.6%.

Verizon (VZ) shares dipped 0.4% after it agreed to pay a $4.1 million settlement to the U.S. Justice Department after allegations that it failed to meet cybersecurity standards.

Salesforce (CRM) and Dow Inc. (DOW) gained 1.3%, while Walmart (WMT) rose 0.8%. 

Intel (INTC) shares rose 0.7% a day after it announced a deal with Tower Semiconductor (TSEM) that will see Tower invest $300 million in Intel’s New Mexico factory. Intel was forced to scrap its acquisition of the Israeli chipmakerin August when it failed to secure approval from Chinese regulators.

Chevron (CVX) shares gained 0.1% as crude oil prices resumed their climb after dipping slightly this morning.

Mega Caps Drag on S&P 500, Nasdaq

The S&P 500’s eight largest holdings all fell Wednesday as investors worried rising oil prices could counter some of the headway the Federal Reserve has made in its year-and-a-half-long effort to tame price growth.

The tech-heavy Nasdaq 100 was hurt even more, with its 10 largest constituents all dropping. Tech stocks are particularly sensitive to rising interest rates, which reduce the value of future earnings and limit growth by raising borrowing costs. 

The stocks leading markets lower today are: 

• Apple (AAPL): -4%
• Microsoft (MSFT): -0.4%
• Amazon (AMZN): -1.5%
• NVIDIA (NVDA): -3.4%
• Meta Platforms (META): -0.6%
• Alphabet (Class C shares; GOOG): -1%
• Alphabet (Class A shares; GOOGL): -1%
• Tesla (TSLA): -1.9%

Private Equity Firm Thoma Bravo Acquires NextGen Healthcare for $1.6 Billion

NextGen Healthcare Inc. (NXGN), an Atlanta, GA-based healthcare data provider, has agreed to be acquired by private equity firm Thoma Bravo in a deal valued at $1.6 billion.1

Once completed, NextGen Healthcare, which has traded on the Nasdaq since 1982, will become a privately held company. The company's shareholders will receive $23.95 per share in cash—a 46.4% premium to the stock's closing price on August 22, just before news about a potential sale of the company became public.

NextGen shares surged more than 14% Wednesday. They've risen more than 40% over the past two weeks, and 30% since the start of September.

Midday Market Movers

HealthEquity Inc. (HQY): Shares gained more than 4% after the healthcare tech company’s sales and earnings for the most recent quarter beat Wall Street’s estimates. Earnings per share grew 60% year-over-year to $0.53.

DexCom Inc. (DXCM): Shares of the continuous glucose monitor manufacturer gained 7%, making it the S&P 500’s best-performing stock midday. It was joined by fellow medical device makers Insulet Corp. (PODD) and Zimmer Biomet Holdings Inc. (ZBH), up 5% and 4%, respectively. 

AMC Entertainment Holdings Inc. (AMC): Shares of the theater chain lost more than 30% after it announced its plan to sell up to 40 million common shares. The company converted preferred shares to common shares and conducted a reverse stock split last month. 

Albemarle Corp. (ALB): Shares fell 6% two days after the mining giant raised its offer to acquire Australian lithium miner Liontown Resources in a deal that values the company at $4.3 billion.

SolarEdge Technologies Inc. (SEDG): Shares of the solar energy company slipped 4% after analysts at Morgan Stanley lowered their price target to $240 from $334. Other solar stocks followed, with Enphase Energy Inc. (ENPH) down 4% and First Solar (FSLR) falling 3%.

Roku Rises on Impending Layoffs and Higher Guidance

Roku Inc. (ROKU) shares were up more than 2% midday Wednesday after the company said it would lay off 10% of its staff as a part of a broader cost-cutting strategy.

The projected cost of severance and benefits to laid-off workers is $45 million to $65 million. Roku anticipates a cost of $160 million to $200 million related to breaking office leases and another $55 million to $65 million related to content taken off the platform.2

Nonetheless, Roku raised its third-quarter revenue guidance to a range of $835 million and $875 million from its earlier estimate of $815 million.

Shares of the company jumped 8% early Wednesday before paring its gains.

Top Analyst Calls Today

AeroVironment Inc. (AVAV): Baird upgraded the drone maker to outperform after the company reported earnings of $1 per share in the most recent quarter, topping analysts' estimates of 26 cents a share. The company also raised its full-year sales outlook, which is completely covered by its order backlog.

Constellation Brands Inc. (STZ): TD Cowen upgraded the alcoholic beverage maker to outperform and raised its price target to $300 from $240, citing growth in its beer segment.

Toast Inc. (TOST): UBS upgraded the restaurant tech company to buy and raised its price target by 25% to $30. Analysts forecast a 30% increase in gross profit in the next two years as restaurants continue to embrace integrated software solutions. 

First Solar Inc. (FSLR): Morgan Stanley upgraded the solar company to equalweight from underweight and raised its price target to $206 from $180, citing its substantial order backlog.

Block Inc. (SQ): UBS downgraded the fintech company to neutral from buy and lowered its price target to $65 from $102. Analysts see profit and payment volume growth slowing in the second half of this year and 2024 as consumers pull back on discretionary spending. 

GitLab Shares Rise After Surprise Profit on IT Security

Shares of GitLab (GTLB) jumped more than 2% Wednesday after the tech firm posted a surprising quarterly profit on soaring sales of its information technology (IT) security platform.

GitLab reported fiscal 2024 second-quarter earnings per share (EPS) of 1 cent. Analysts had been anticipating a loss. Revenue was up 38% to $139.6 million, also more than expected.

The company anticipates current-quarter revenue of between $140 million and $141 million, beating estimates.

GitLab shares have rallied after hitting an all-time low in May. They’re up about 15% for the year.

Airline Stocks Sink on Warnings of Higher Fuel Costs

Shares of U.S. airlines took a nosedive Wednesday after three major carriers warned an unexpected jump in jet fuel prices this quarter could hit profits. 

United Airlines (UAL), Alaska Air Group (ALK), and Southwest Airlines (LUV) all raised their estimates of average fuel costs in the current quarter. United expects to pay an average of $2.95 to $3.05 a gallon of fuel, up from its earlier estimate of $2.80. Alaska expects fuel costs to average between $3.15 and $3.25, also up from $2.80. Southwest Airlines raised its forecast by 15 cents to between $2.70 and $2.80 per gallon.345 

Southwest also lowered its operating revenue outlook, while Alaska Air trimmed its margin forecast. 

Airline stocks sank on the revisions with the U.S. Global Jets ETF (JETS) dropping more than 1% Wednesday morning. Southwest and Hawaiian Holdings Inc. (HA) both lost 3%, and JetBlue Airways Corp. (JBLU) dropped 4%. 

EU Says Apple and Amazon Among Big Tech ‘Gatekeepers' Subject to New Regulations

The European Commission (EC) on Wednesday designated six tech giants as “gatekeepers” under its Digital Markets Act (DMA), one of its most comprehensive efforts yet to rein in big tech.

Five U.S. companies including Apple (AAPL), Amazon (AMZN), Meta Platforms (META), Microsoft (MSFT), and Alphabet (GOOGL), as well as one Chinese company, TikTok owner ByteDance, have been designated as gatekeepers under the DMA, which came into effect this year. They will each have six months to fully comply with the obligations of the new law.6

Failure to comply could lead to fines of up to 10% of the company's total worldwide turnover, or 20% in the event of repeated violations. The EC can also mandate that a gatekeeper sell off a business or parts of it, or prevent them from acquiring another firm.

Shares of all five U.S. companies were down Wednesday. Still, the tech giants have had a red-hot year—all have handily outdone the S&P 500's 16% year-to-date return.

Chip Designer Arm Locks Apple As A Customer Until After 2040

Arm Holdings has locked in Apple (AAPL) as a customer beyond 2040 via a long-term agreement, the British chip design company revealed Wednesday in a regulatory filing related to its initial public offering (IPO).7

The company filed Tuesday for its IPO, which is expected to value the company at up to $52 billion and net it nearly $5 billion in proceeds. If the debut lives up to expectations, it will be the biggest IPO of the year so far and the Nasdaq's third-largest ever.

Arm designs chips that power about 99% of the world's smartphones and last year the company shipped about 30 billion chips to 260 companies across the globe.

Stocks Making the Biggest Moves Premarket

Gainers:

• Roku Inc. (ROKU): Shares of the streaming company gained more than 9% after it raised its sales and earnings outlook for the current quarter while also announcing it would cut 10% of staff in an effort to control costs.
• Gitlab Inc. (GTLB): Shares of the software development platform rose more than 5% after it topped analysts’ revenue estimates for the most recent quarter and offered higher-than-expected current-quarter guidance.
• Toast Inc. (TOST): The restaurant payment tech firm's stock gained more than 4% after it announced co-founder and chief operating officer Aman Narang will take over from current chief executive officer Chris Comparato on Jan. 1, 2024.

Losers:

• Enbridge Inc. (ENB): Shares of the oil and gas distributor lost 7% after it offered to buy several natural gas distribution assets from Dominion Energy (D) for $9.4 billion. Shares of Dominion slipped more than 2% premarket.
• Asana Inc. (ASAN): Shares fell 4% even though the project management software provider beat Wall Street’s top and bottom line estimates for last quarter and modestly raised the low end of its current quarter guidance. 
• Southwest Airlines Co. (LUV): The airline’s shares lost almost 4% after it narrowed its revenue outlook for the current quarter and warned of higher-than-expected fuel costs. Most major U.S. airlines were also lower in premarket trading. 

5 Things to Know Before Markets Open

Here's what investors need to know to start their day:

1. The FTC is reportedly set to file an antitrust lawsuit against Amazon (AMZN) later this month after Amazon officials failed to offer concessions to the regulatory agency at a key meeting in August.
2. The European Union has listed several tech giants, including Apple, Microsoft, and Google-parent Alphabet, as “gatekeepers” under its Digital Markets Act, subjecting the companies to a new set of rules designed to open up more competition.
3. With the backing of SoftBank Group, C&S Wholesale Grocers is reportedly near a deal to acquire stores that Kroger (KR) and Albertsons Companies (ACI) are attempting to sell in order to meet the regulatory requirements for their proposed $25 billion merger.
4. GitLab (GTLB) shares jumped more than 5% in pre-market trading after the software development platform outperformed analyst estimates in its quarterly earnings report on the strength of its artificial intelligence (AI)powered DevSecOps platform.
5. Investors will get a look at the Federal Reserve’s latest data on economic conditions when it releases the quarterly Beige Book today at 2 p.m. ET, ahead of its next meeting in two weeks.

Stock Futures Fall for a Second Day

Futures contracts connected to the Dow Jones Industrial Average were down 0.2% in premarket trading Wednesday.

S&P 500 futures were also 0.2% lower.

Nasdaq 100 E-mini contracts slumped 0.3%.

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Originally published on Investopedia.com