WSJ What’s News - What’s News in Markets: Super Micro Plunges, Tech Worries, Amazon Rallies

Episode Date: November 2, 2024

Why are investors concerned about Super Micro Computer? And what caused the sharpest tech selloff in months? Plus, why Amazon’s earnings impressed. Host Jack Pitcher discusses the biggest stock moves of the week and the news that drove them. Sign up for the WSJ's free Markets A.M. newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

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brokerage services provided by FREC Securities LLC, member FINRA, SIPC, and advisory services provided by affiliate. Freq Advisors LLC and SEC Registered Investment Advisor. Hey listeners, it's Saturday, November 2nd. I'm Jack Pitcher for The Wall Street Journal and this is What's News in Markets, our look at the biggest stock moves of the week and the news that drove them. Let's get to it. A stock market rally on Friday helped stem the bleeding from a volatile week as investors assessed earnings reports and braced for Tuesday's election. On Thursday, the tech-heavy Nasdaq had its worst sell-off in more than two months, dropping almost 3%. The culprit?

Earnings reports from Microsoft and meta-platforms that highlighted the steep costs of AI spending. Then the monthly jobs report and strong quarterly results from Amazon helped calm investors' nerves on Friday. While the U.S. economy added fewer jobs than expected in October, likely due to a major strike at Boeing and two destructive hurricanes, the unemployment rate stayed steady at 4.1%. It was the latest sign that the soft landing investors are hoping for, where the Federal Reserve lowers interest rates without a recession, is coming to fruition. Even with

Friday's gains, the indexes ended down for the week. The S&P 500 fell 1.4% while the Nasdaq was 1.5% lower. The Dow Jones Industrial Average slipped 0.2 percent. One of this year's hottest stocks had a spectacular collapse this week. Supermicro Computer is a server maker that has benefited from the AI boom. But then on Wednesday, Supermicro said its auditor, Ernst & Young, has resigned. According to a filing by Supermicro, the Big Four accounting firm said that it was no longer willing to be associated with financial statements prepared by Supermicro's management. It's a rare step for an accounting firm to take. Supermicro said it doesn't agree with the UI's decision to resign, but takes the firm's concerns seriously.

The server maker has been facing some legal issues. The Wall Street Journal reported in September that the Justice Department is probing the company. Prosecutors have asked for information that appeared to be connected to a former employee who accused the company of accounting violations. Spokespeople for Supermicro and the U.S. Attorney's Office declined to comment at the time. Supermicro shares plunged 33 percent on Wednesday and fell 45 percent at the time. Super micro shares plunged 33% on Wednesday and fell 45% for the week.

AI was also in the spotlight as tech earnings rolled in this week and forecasts from some of the biggest companies gave investors pause. Microsoft and Meta Platforms, the parent company of Facebook, both reported better than expected results after trading hours on Wednesday. Shares of both companies sold off the next day anyway. Microsoft forecast slower future growth for its cloud business

and higher expenses, while Meta said it expects significant growth in its capital expenditures, as it spends big on AI. Their earnings reports also caused a sell-off in AI darling Nvidia. Bullishness over AI has powered stocks higher this year, but some analysts are sounding the alarm over the high cost of developing AI systems. By the end of the week, Microsoft and Nvidia had both shed more than 4%, while Meadow was around 1% lower. But it's not all bad news in the mega cap tech world. Amazon said sales were strong for both its cloud computing and online shopping businesses

when it reported earnings after the closing bell on Thursday. Profits grew too, but so did capital expenditures to a record amount as Amazon, like its peers, spends big on AI systems. Amazon shares soared 6.2% Friday and ended the week 5.4% higher. And now you know what's news in markets this week. Today's show is produced by Trina Menino with supervising producer, Tali Arbel.

I'm Jack Pitcher. Have a great weekend and see you next Saturday. This podcast is brought to you by CME Group, the world's leading derivatives marketplace, offering the widest range of global benchmark products across all major asset classes. CME Group, where risk meets opportunity.