The Nasdaq Composite closed higher on Wednesday after SpaceX reported sharp revenue growth and Elon Musk confirmed that his rocket company and Tesla have set up committees to explore a merger, according to CNBC. The tech-heavy index added 0.4%, while the S&P 500 finished roughly where it started. The Dow Jones Industrial Average lost 26 points, or 0.1%.
SpaceX shares jumped 11% after the company said third-quarter revenue climbed 161%, CNBC reported. Musk also said the two companies he leads have formed special committees to discuss combining them. Tesla, which was scheduled to report earnings later in the day, gained more than 2%.
Why it matters
The session showed how quickly sentiment can turn in a market that has spent weeks fretting over whether spending on artificial intelligence can justify itself. SpaceX's AI unit grew ninefold in the quarter, and that figure pulled money back into chip stocks that had been under pressure.
Advanced Micro Devices and Nvidia each rose nearly 2%, and Broadcom added about 1%, per CNBC. The VanEck Semiconductor ETF gained more than 1%.
The broader question hanging over the market is whether the AI buildout is being financed in a way that can be sustained. Traders have been focused on debt-backed AI investments and on whether demand for infrastructure will be large enough to justify what companies are spending, CNBC reported.
Christian Mueller-Glissmann, head of asset allocation for Goldman Sachs Research, wrote in a note that the near term could bring more turbulence from AI worries, Middle East tensions and midterm elections. Even so, he argued that earnings support, lighter positioning and lower valuations should help equities through the end of the year, according to CNBC.
Earnings in focus as investors hunt for AI clues
Investors were looking for more evidence on the AI trade on Wednesday. Meta Platforms was due to report after the closing bell. Earlier this month the company released its newest AI model, Muse Wonder, which is available only to paying users, CNBC reported.
IBM and Southwest Airlines were also on the Wednesday schedule, per CNBC.
Not every name in the session moved with the rally. Netflix fell more than 5% after its full-year revenue forecast landed below what analysts had expected, and the company also trimmed its advertising revenue guidance for the year, CNBC reported.
CME Group rose almost 1% after third-quarter earnings and revenue beat Wall Street estimates. The exchange operator posted adjusted earnings of $3.02 per share on revenue of $1.74 billion, against the $2.99 per share and $1.71 billion that analysts surveyed by FactSet had projected, according to CNBC.
Thermo Fisher Scientific gained more than 1% in morning trading, reversing a decline of more than 2% in premarket action. The life sciences company reported adjusted earnings of $6.69 per share on revenue of $12.14 billion, ahead of the $6.40 per share and $11.95 billion that FactSet-polled analysts had forecast, CNBC reported. The stock had climbed more than 31% in the three months through Tuesday's close and was up more than 18% for the year.
Danaher dropped nearly 4% before the opening bell after third-quarter revenue of $6.55 billion came in just under the $6.56 billion analysts had expected, per CNBC. The company did report adjusted earnings of $2.11 per share, beating the $1.92 analysts had penciled in, and it raised its full-year earnings guidance.
AT&T slid 4% even though the telecom company beat expectations. It reported adjusted earnings of 65 cents per share on revenue of $32.3 billion, compared with the 60 cents per share and $31.69 billion that analysts polled by LSEG had forecast, according to CNBC.
Rates steady, mortgages still weak
Treasury yields held roughly flat early Wednesday as investors waited for economic data ahead of next week's Federal Reserve rate decision, CNBC reported. The 10-year note, the benchmark that feeds into mortgage, auto loan and credit card costs, sat at 5.1190%. The 2-year yield, which tracks short-term Fed expectations more closely, was at 4.7889%, and the 30-year yield was at 5.4264%.
Mortgage demand kept falling even as borrowing costs eased. Total application volume dropped 5.3% week over week on the Mortgage Bankers Association's seasonally adjusted index, per CNBC. The average contract rate on a 30-year fixed conforming loan of $832,750 or less slipped to 7.41% from 7.50%, with points down to 0.75 from 0.83, including the origination fee, for loans with a 20% down payment.
Joel Kan, an MBA economist, said in a release that rates had fallen for the first time in more than two months but that the relief did not translate into more applications, with both purchase and refinance activity continuing to decline, CNBC reported.
In Asia, Japan's Nikkei 225 closed up 0.85% at 64,621.24, and the Topix added 0.86% to finish at 4,043.73.
What to watch next: Meta's results after the bell and the Fed's rate decision next week, with SpaceX's merger discussions likely to stay in the spotlight in the meantime.
