Thursday's Final Takeaways: Samsung & TSM Earnings Insights, Equity & Bond Gap Narrows

Marley Kayden (0:00)

Here are some final thoughts on the session today. I went a whole day without having oil in my takeaways, but it is back. As we saw oil prices surging again earlier in the session, we saw Brent crude rise a little more than 5 percent to above $105 a barrel. US-West Texas intermediate was up roughly 5 percent as well to about $93.

We did see some pullback though after some commentary from President Trump, but those pops came amid renewed attacks on shipping.

They're raising some fresh concerns about Middle East supply. We had nine tankers come under attack in and around the Strait of Hormuz just over the past week. That's the most we've seen in that time frame since the conflict began. The supply concerns are also being compounded by Hurricane Isaias, which has forced US producers to shut in offshore output in the Gulf of Mexico with more than 25 percent of US Gulf oil production offline. The jump in crude also adding another inflation risk for the markets, particularly with the 10-year treasury yield just below 5.3 percent. That's raising the stakes for the Fed and potentially putting additional pressure on stocks and consumers. We also got a warning from Ray Dalio today. Stocks are losing the cushion that has protected them from rising bond yields as the gap between expected equity returns and treasury yields narrows. He says that the bond bear market has further to run as governments and companies compete for capital with higher borrowing costs eventually weighing on credit and spending. That's a similar sentiment to what Thomas Uranus said to me earlier today on Trading 360 Now, Dalio also cautioning investors to look beyond earnings and focus on free cash flow, which he expects to deteriorate as companies continue investing heavily. For now, he says that strong earnings growth is allowing stocks to absorb higher rates, but that cushion is shrinking, potentially leaving equities more vulnerable if yields keep climbing. Now, we did see yields come off a bit, Sam. But what caught your eye during the session?

Sam Vadas (1:53)

Certainly, a lot of high-profile warnings right now. But yeah, look, the tech trade appears to be getting a bit more demanding at this stage. We got two solid reports, as we mentioned, that apparently weren't enough for investors. Samsung expecting its third-quarterly profit to jump to a record $80 billion as it continues to benefit from this insatiable demand for memory. The nine-fold jump would just be a touch higher than the street estimates and marks the fourth straight quarter of record profit. Samsung shares fell today though, adding to the more than 25% slump from its record high in June. So analysts say the reaction tells you just how challenging this trade has become, even though the story remains intact and those multi-year supply deals are giving Samsung much greater visibility. Now the company will release a full report on October the 29th, but TSMC was also out with monthly figures overnight. The world's biggest contract chip maker raking in $512 billion in revenue in September. That's a 55% jump in growth on the year, but down 0.6% on the month. The company, which of course we know counts Nvidia and Apple as its biggest customers, is also benefiting from the growing demand we've seen for advanced chips. It's expected to report its third quarter results next week, but Taiwan shares traded lower despite that report, and we saw the ADRs obviously down today as well.

But heading into tomorrow, Marley, what are you going to be looking out for?

Marley Kayden (3:13)

We'll hear from Delta Airlines before the bell tomorrow. Wall Street is expecting adjusted earnings of about $1.93 per share and roughly $17.72 billion in revenue. The big focus here is whether the strong travel demand, particularly premium and corporate travel, can offset sharply higher fuel costs and pressure on margins. Delta could provide us with an early read on consumer resilience when it comes to travel and spending, corporate pricing power, and also the impact of the elevated oil prices on profits, while investors will be watching specifically whether the airline maintains its full year EPS outlook. We won't hear from United and Southwest until the 20s of October and American also then, but Sam, what will you be watching?

Sam Vadas (3:53)

Well, I guess we're going to get a read on what the consumer is doing and what they are saying tomorrow as well, Marley, because we've got those preliminary results coming out from the University of Michigan on sentiment. So let's see how people are feeling about the economy right now.

Marley Kayden (4:07)

We shall see, but we don't listen to what they say, we watch what they do. That seems to be the ongoing conversation.