Bill Gross warns on gold momentum as regional bank stocks tumble
Investing.com - Stock futures on Wall Street dip, with worries around potential weakness in American regional lenders combining with ongoing fears over trade tensions between the U.S. and China. Oracle provides long-term financial guidance powered by soaring artificial intelligence-driven demand, while railroad CSX’s quarterly profit slumps, but still tops estimates. Elsewhere, Micron reportedly plans to cease server chip supply to Chinese data centers and gold’s record run higher marches on.
1. Futures drop
U.S. stock futures pointed lower on Friday, suggesting an extension to losses posted in the prior session, as investors fretted over the credit health of the country’s regional lenders.
By 03:46 ET (07:46 GMT), the Dow futures contract had inched down by 546 points, or 1.2%, S&P 500 futures had fallen by 96 points, or 1.5%, and Nasdaq 100 futures had dipped by 382 points, or 1.5%.
The main averages on Wall Street slumped on Thursday, with a negative credit update from Zions Bancorporation adding further fuel to growing concerns around the fallout of the high-profile collapses of U.S. auto parts supplier First Brands and car dealership TriColor in September.
Along with a 13% tumble in shares of Zions, peer Western Alliance also shed more than 10% of its value on an announcement that it had initiated a fraud lawsuit against one of its borrowers. The updates pushed up U.S. Treasury yields, heaping more pressure on the wider stock market.
In a note, analysts at Vital Knowledge flagged that "people [are growing] more concerned about a potential systemic problem," although they said "based on all the bank reports thus far, it does seem like First Brands and TriColor are isolated, as credit quality in aggregate remains healthy."
2. Oracle guidance
Oracle provided the latest glimpse into the state of the artificial intelligence euphoria, unveiling a soaring long-term financial outlook that the software group said was being powered by sky-high demand that is "really hard to comprehend."
At a meeting with financial analysts on Thursday, the company’s finance chief said overall revenue and adjusted profits are anticipated to stand at $225 billion and $21 per share, respectively, by its fiscal 2030. Both metrics surpassed Wall Street estimates.
Of its total sales by that time, almost two thirds will be made up by Oracle’s AI-enhanced cloud infrastructure service, executives predicted. CEO Clay Magouyrk added that new bookings are coming in from a wide swath of customers, not only ChatGPT-maker and AI bellwether OpenAI.
However, analysts suggested that, given the hype around AI, such bullish guidance was widely expected. Oracle, meanwhile, sought to assuage investor fears around its gross margins, which are predicted to decline slightly in its fiscal 2027 as the firm targets heavy spending on AI, according to LSEG estimates cited by Reuters.
Shares of Oracle were lower in extended hours trading on Friday.
3. CSX earnings
Meanwhile, CSX’s stock price ticked higher in after-hours dealmaking.
The railroad operator posted a steep slide in third-quarter profit compared to a year ago to $694 million, or $0.37 per share. But, when discounting one-time impairment charges of $164 million, income would have stood at $818 million, or $0.44 a piece, just above Wall Street forecasts.
Investors were focused around potential mergers, with newly-installed CEO Steve Angel hinting that he would be considering any strategic options for the firm which made sense. Rumor has surrounded a possible tie-up between CSX and Berkshire Hathaway-owned BNSF, particularly in the wake of an as-yet unapproved $85 billion deal earlier this year bringing rival Union Pacific and Norfolk Southern together.
However, a partnership announced in August between CSX and BNSF to fuse routes between the U.S. West and East Coasts quelled some of the speculation. Such arrangements have become more common in the rail industry, because they allow firms to expand services without having to undergo profound operational or structural changes to their businesses.
Still, CSX has faced pressure from activist investor Ancora Holdings to secure a merger with another railroad. CSX recently named Angel as a replacement for former boss Joe Hinrichs after Ancora called on the company to either pursue a tie-up or part with Hinrichs.
4. Micron plans to cease server chip supply to Chinese data centers - report
Micron Technology plans to stop supplying server chips to data centers in China after the business was slapped with a government ban in 2023, Reuters reported on Friday, citing two people briefed on the decision.
The company will continue to sell chips to two Chinese customers with large data center operations outside the country, one of which is PC maker Lenovo Group, Reuters reported.
Micron will also continue to sell chips to the automobile and mobile phone sectors in China, Reuters reported. China accounted for roughly 12% of Micron’s revenue in its prior financial year.
China in 2023 banned the use of Micron chips in “critical infrastructure,” a move then viewed as retaliation for Biden-era curbs on chips and artificial intelligence technology exports to the country.
Server chips are an important component of AI development, given their use in the data centers that run advanced AI programs.
5. Gold extends record run
Gold prices climbed to fresh record highs, now approaching the $4,400 per ounce mark, as growing expectations of a Federal Reserve rate cut this month and renewed U.S.-China trade tensions drove investors toward safe-haven assets.
Spot gold rose 0.3% to $4,339.28 per ounce as of 03:33 ET, after briefly touching a new peak of $4,379.29/oz earlier in the session. U.S. gold futures for December jumped 1.0% to $4,348.86/oz.
The yellow metal is now on track to deliver its ninth consecutive weekly gain, and has extended its record-breaking rally to a fifth straight session.
Beyond Fed rate expectations, gold was supported by robust central bank purchases, inflows into gold ETFs, and elevated demand in Asia. A broader safe-haven rally was also supported by renewed trade tensions between the U.S. and China as well as a prolonged U.S. government shutdown.