US equity benchmarks rose slightly on Thursday ahead of the outcome of the US Federal Reserve’s policy meeting later in the day. 

Benchmark averages extended gains from Wednesday and hit new record highs after Donald Trump won the 2024 US presidential elections. 

At the time of writing, the S&P 500 index rose 0.5%, while the Nasdaq Composite advanced more than 1%.

The Dow Jones Industrial Average was largely steady from the previous close. Earlier in the session, the three benchmarks hit their respective record highs. 

Trump’s victory on Wednesday led the Dow Jones index to climb over 1,500 points. The S&P 500 rose 2.5% to clock its best post-election day in history, according to CNBC. 

“The results are in and the financial markets can breathe a little easier without concern over a prolonged election process,” Scott Helfstein, head of investment strategy at Global X ETFs, told CNBC. 

Investors should still be cautious about over- and underreaction to geopolitical news. These events can typically cause large swings in asset prices, but fundamentals will win out over time.

Meanwhile, gold prices recovered from Wednesday’s sharp declines, while oil prices fell more than 1% as investors assessed the fallout from the US elections. 

Financial stocks that surged on Wednesday fell slightly in today’s session. 

Shares of JPMorgan Chase fell 2%, while those of American Express dropped 1.7%, which weighed on the Dow Jones benchmark today. 

Tech stocks rise

Meanwhile, big tech stocks climbed as Apple and NVIDIA Corporation each gained more than 1%. 

Shares of Apple were up 1.3%, while chip giant NVIDIA climbed more than 2% at the time of writing. 

VanEck Semiconductor ETF (SMH) rose more than 2%, while Arm Holdings jumped over 6.5%. Shares of Intel were trading 3.4% higher during the session. 

Share of Arm Holdings gained after the company posted better-than-expected earnings results. 

Lyft shares rally

Shares of ride-hailing company, Lyft, jumped 28% on Thursday as the company posted positive earnings results for the third quarter.

The company’s revenue and forward guidance beat estimates of analysts. 

The ride-hailing company is now forecasting bookings of $4.28 billion to $4.35 billion in the fourth quarter, while FactSet consensus estimates called for $4.23 billion, according to CNBC. 

Additionally, Bank of America retained its buy rating on the stock, following its positive earnings, and also highlighted the company’s discounted valuation compared with Uber shares. 

Meanwhile, shares of Trump Media and Technology gave up gains from the election day on Thursday. 

President-elect Donald Trump’s company plunged by 16% to below $30 per share. The stock had surged over the last couple of sessions as Trump won the 2024 election. 

Fed meeting eyed

The focus now shifts to the meeting of the US Fed later in the day. The two-day meeting, which comes to its conclusion today, is likely to see the US central bank cutting interest rates. 

Traders have priced in a 98.7% probability of the Fed cutting rates by 25 basis points. 

This will follow the central bank’s massive cut of 50 bps in September. 

“It’s difficult to say whether this easing will continue in the coming months until the dust settles following the US election and the implications for inflation and currencies become clear,” Richard Flynn, Managing Director at Charles Schwab UK told CNBC. 

But in the short term, we expect that today’s announcement should provide investors with a snippet of clarity in the outlook after a fortnight chock-full of market moving events.

Meanwhile, people filing for unemployment benefits for the first time in the US last week came in line with expectations at 221,000. Analysts with Dow Jones had expected claims at 220,000 in the week ending November 2. 

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The Bank of England reduced interest rates by 25 basis points on Thursday, even as Labour’s expansive budget announcement complicates the prospects for future policy easing.

The decision to lower the bank’s main rate to 4.75% was supported by an 8-1 vote among policymakers.

This marks the central bank’s second rate cut this year, following the start of its easing cycle in August.

Financial markets had already anticipated a 97% likelihood of this quarter-point cut at the November meeting.

However, analysts have cautioned that further cuts might be postponed due to the government’s new tax-and-spend budget.

Investors are now eager for insights from Governor Andrew Bailey and other bank officials on their updated economic projections, especially in light of the budget and the U.S. presidential election.

Goldman Sachs noted last Thursday that “the outlook for stronger growth in 2025 could lessen the urgency for continuous rate cuts in the short term.”

After pausing rate changes at their September meeting, policymakers indicated a “gradual approach” to easing. However, a significant drop in inflation to 1.7% and slowing wage growth had led economists to anticipate a quicker pace of cuts before the budget was unveiled.

These expectations shifted after U.K. Finance Minister Rachel Reeves introduced £40 billion ($51.41 billion) in tax increases and revised the U.K.’s debt guidelines. The Office for Budget Responsibility (OBR) has warned that these measures could lead to higher short-term growth and inflation.

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Japan’s Nissan Motor has announced a series of aggressive cost-cutting measures, including laying off 9,000 employees and reducing its global production capacity by 20%.

This marks the second time this year that the automaker has revised its profit outlook downwards as it contends with slowing demand, particularly in key markets like China.

The company’s revised forecast for operating profit now stands at 150 billion yen (approximately $975 million), a significant drop from the previous estimate of 500 billion yen.

In a bid to stabilize its financial footing, Nissan’s CEO Makoto Uchida shared that the company’s “turnaround measures” are designed to make it more resilient amid evolving market conditions, without necessarily shrinking its operations.

By restructuring management and enhancing its operational efficiency, Nissan aims to navigate an increasingly competitive global automotive landscape while maintaining flexibility in its production approach.

Demand for vehicles facing a slump

Nissan’s revised profit outlook reflects the company’s broader strategy to combat challenges in the global automotive industry.

With the demand for vehicles facing a slump across multiple markets, particularly in China, Nissan is refocusing its resources to improve its core operations.

As part of this restructuring, the company will also streamline its production facilities worldwide, targeting a 20% reduction in capacity.

This initiative aligns with the company’s commitment to optimize resources while remaining competitive against rivals in a volatile market.

The cuts in both workforce and production are expected to yield significant cost savings.

The impact of these changes is already evident in Nissan’s recent financial performance.

For the July-September period, the automaker reported an operating profit of 32.9 billion yen – a sharp 85% decline compared to the 208.1 billion yen reported during the same period last year.

This fall in profit underscores the urgency for Nissan to implement cost-saving measures as it seeks a sustainable path forward.

Turbulent automotive market

Nissan’s recent actions highlight the tough reality of an industry facing mounting pressures from economic uncertainty, rising material costs, and shifting consumer preferences.

For Nissan, the strategic restructuring is part of a larger turnaround plan aimed at building a leaner, more efficient operation capable of adapting to changing global market demands.

The company’s emphasis on management flexibility and quick responsiveness to market shifts is expected to play a key role in this transformation.

In response to these changes, Nissan’s leadership reiterated that these measures do not signal a retreat but rather an effort to fortify the company’s position.

As Nissan braces for continued challenges, the company is determined to remain resilient, adapting its business model to ensure long-term stability and success.

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ON Semiconductor, the $31 billion chip manufacturer based in Scottsdale, Arizona, has faced significant challenges lately.

Despite the broader market momentum, with the S&P 500 index climbing 29% from July 2023, ON Semi’s stock has plummeted 31%, reaching $72 from its record high.

The chipmaker’s primary customers, auto manufacturers, and industrial firms, have struggled amid a slowing market, impacting ON’s financial performance.

The company’s dependence on automotive semiconductors, which make up over half of its revenue, has been a double-edged sword.

Sales in this segment fell 21% to $907 million in the second quarter of 2024 from a high of $1.16 billion in the third quarter of 2023.

This slump came as automakers, previously concerned about supply shortages post-pandemic, overstocked chips during stagnating car production.

The pullback in purchases, combined with a subdued industrial market, squeezed ON Semi’s profit margins, pushing them down to 45% from 47.3% in the prior year and contributing to a 31% drop in earnings.

ON Semiconductor on the cusp of a resurgence?

Despite these challenges, analysts believe ON Semiconductor is on the cusp of a resurgence, according to a Barron’s report.

The company’s automotive sales have already shown a 4.9% recovery in the third quarter, climbing to $951 million from the second-quarter trough.

Margins also improved slightly to 45.5%, hinting that the worst might be behind the firm.

Economic factors could further catalyze this rebound.

With the Federal Reserve and other central banks expected to reduce interest rates, there is potential for economic growth, which could boost consumer spending and auto sales.

Moreover, Donald Trump’s recent election victory might create favorable conditions for traditional auto markets, although it could temper the growth of electric vehicle (EV) sales, an essential area for ON.

Piper Sandler’s Harsh Kumar reassures in a report that automakers remain committed to EVs in the long term, suggesting that ON’s EV-focused product lines may not suffer as much as some fear.

Auto makers ramp up production: good news for ON

As auto manufacturers ramp up production to meet rising demand, their need for semiconductors will naturally increase.

This could result in a positive cycle for ON, where chip sales and prices gain momentum.

B. Riley Securities analyst Craig Ellis likens the potential surge in chip orders to “flipping a light switch,” emphasizing the rapidity with which recovery could take hold.

The industrial market, another vital revenue stream for ON, is also expected to see a gradual uptick.

With automation and advanced manufacturing processes becoming more integral to the industry, the company’s industrial chip sales are projected to grow at an annual rate of 6% over the next three years.

To bolster its production capabilities, ON Semiconductor acquired GlobalFoundries’ East Fishkill, New York, plant.

This facility provides additional chip production capacity at similar costs to existing plants, improving ON’s efficiency without proportionately increasing expenditure.

This strategic move supports the company’s goal of reaching 53% gross margins, a target it reiterated during its third-quarter earnings presentation.

Why to buy ON stock

ON Semi’s management continues to generate robust free cash flow, topping $1 billion annually.

The company has committed to using half of each quarter’s cash flow for share repurchases, which is expected to enhance shareholder value.

Analysts anticipate annual earnings per share (EPS) growth of 21%, projecting EPS to reach $7.11 by 2027, up from $4.01 this year.

If the auto market recovers faster than expected, these estimates could be conservative, with Charter Equity’s Jack Egan pointing out “more risk to the upside.”

Valuation-wise, ON Semiconductor’s current trading multiple of 17 times forward earnings is notably lower than the S&P 500’s 22 and the chip sector’s average of 23.8.

Holding this multiple would imply a stock price of around $112 by the end of 2026, representing an impressive 25% annualized gain.

While ON Semiconductor may not boast the AI-focused allure of industry giants like Nvidia, it has the makings of a strong investment as demand recovers.

With the right economic tailwinds and strategic execution, ON Semi stock could offer significant returns for long-term investors.

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Moderna reported a surprising third-quarter profit on Thursday, driven by cost reductions and stronger-than-expected sales of its COVID-19 vaccine, despite lower-than-anticipated revenue from its new respiratory syncytial virus (RSV) vaccine.

Shares of the Cambridge, Massachusetts-based company jumped 11% in premarket trading.

For the quarter, Moderna posted a profit of $13 million, or 3 cents per share, compared to a loss of $3.6 billion in the same period last year.

Analysts had expected a loss of $753 million, or $1.90 per share, according to LSEG data, Reuters reported.

Sales of its Spikevax COVID vaccine reached $1.8 billion, up 3.5% year-over-year, surpassing analysts’ expectations of $1.38 billion.

The company attributed this strong performance to increased sales in the US following an early launch of the vaccine this year.

The US Food and Drug Administration approved updated versions of Spikevax and Pfizer’s Comirnaty nearly three weeks earlier than in 2023.

Moderna noted that international sales of Spikevax were lower compared to the same period in 2023 when sales were boosted by deferred orders from 2022.

Operating expenses for the quarter totaled $1.93 billion, nearly 50% lower than the previous year, largely due to reduced unused manufacturing capacity and fewer inventory write-downs.

RSV vaccine, mRESVIA, generate $10 million in sales

The company’s new RSV vaccine, mRESVIA, generated $10 million in sales, falling significantly short of the $135 million analysts had expected. Despite this, Moderna reaffirmed its annual sales forecast of $3 billion to $3.5 billion.

“This guidance looks well within reach, especially with strong expected sales in Q4 from the COVID vaccine,” said TD Cowen analyst Tyler Van Buren.

Moderna is increasingly relying on revenue from newer mRNA vaccines, such as mRESVIA and an experimental COVID-19 combination vaccine, to offset declining demand for COVID-19 products post-pandemic.

Mock explained that the company struggled to compete during the peak of the RSV contracting season because mRESVIA was approved later in the year, and many contracts and inventory had already been secured.

US market share for Spikevax fell to 40%, down from 45% in Q3 2023. Moderna reported that 7.5 million patients received Spikevax this year, compared to nearly 11 million people who received Pfizer’s COVID-19 vaccine during the same period, according to IQVIA data.

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