After a mixed day for stocks yesterday, we’re seeing modest pressure on equities this morning. Crude oil is rising, gold and silver are slumping, and Treasuries are rallying.
The AI trade took another hit overnight when the South Korean neocloud company Elice Inc. went public...then proceeded to tank 32%! The data center and AI cloud services firm raised $150 million in the Initial Public Offering (IPO), and unlike some global competitors, it is profitable. But that didn’t stop the stock from trading down sharply amid souring sentiment in the AI sector. For its part, the iShares MSCI South Korea ETF (EWY) has lost 16.3% in the last month – but remains up 53.1% year-to-date.
EWY (Red), GM (Black), XHB (Green) – YTD % Change
Source: TradingView
Meanwhile, crude oil prices are marching higher again as the midterm elections near and global investors prep for a resumption in the Middle East war. Tanker crossings in the Strait of Hormuz are also slipping a bit, even as overall traffic is running at about 82% of pre-war levels. US WTI futures were recently trading around $105, up more than 11% in just five trading days.
On the earnings front, General Motors Co. (GM) reported better-than-expected third-quarter profit – and said it would buy back $20 billion of its shares on an open-ended basis. But GM stock dropped 7% anyway after the company tightened its full-year adjusted EBIT and earnings per share guidance, disappointing investors. The automaker also warned that higher commodity and chip prices were pressuring margins. GM stock was up 2.1% YTD heading into today.
Lastly, does anyone want to buy a house? Anyone? Because home builders just aren’t seeing the demand they hoped for. The National Association of Home Builders/Wells Fargo Housing Market Index dropped another three points to 29 in October. That’s the lowest level in 14 years. Rising mortgage rates are hurting demand, while higher commodity, materials, and labor costs are crimping margins. The State Street SPDR S&P Homebuilders ETF (XHB) is down 9.9% YTD.