#5things: Before The Bell

Bank of Canada decision day, McDonald's & Starbucks lower, AT&T pops

Forgive my absence this week. I was dealing with my annual October cough. Today I am back in the mix hosting the annual Capitalize for Kids investor conference. This year’s line-up is stellar: Jeff Gundlach, Jeff Smith, Stephen Harper, Raquel Urtasun, Richard Handler, Stephen Smith and John Graham are all slated. But I’m really there for the cause. The conference raises money for children’s mental health. As a mom of three, it is close to my heart. Naturally I am constantly worried about my kids. Am I raising them right? What if they fall into drugs? What if they fall into the wrong crowd? Or worse…what if they become management consultants? Alas, must shake off those intrusive thoughts. Let’s get to it.

In flux: Futures are fluctuating this morning as earnings season ramps up. There are more than 40 companies reporting on the S&P 500 today including Boeing and AT&T. Today the Bank of Canada will also make its rate announcement at 9:45amET followed by a press conference at 10:30amET. The BOC is widely expected to cut interest rates by 50 basis points after three successive 25 basis point rate cuts. Weaker than expected GDP and back-to-back soft inflation prints are expected to give them cover for the outsized cut. Key earnings to watch after the bell today will be Tesla, IBM and Canadian Pacific Kansas City.

Food stuffs: Shares of McDonald’s are plunging nearly 7% in pre-market after a severe E. Coli outbreak. The CDC warned that 49 people from 10 states have been infected, with 10 hospitalizations and one fatality. McDonald’s says it is temporarily removing the Quarter Pounder from restaurants from Colorado, Kansas, Utah and Wyoming, as well as portions of Idaho, Iowa, Missouri, Montana, Nebraska, Nevada, New Mexico, and Oklahoma. Naturally the fear for investors is the chill on sales beyond those states. Indeed, when I first read about the outbreak my first move was to tell my family there would be no trips to McDonald’s anytime soon. However, McDonald’s Canada said this morning they are not affected by any outbreak. I’m also watching Starbucks which is plunging after warning sales would be much worse than expected. Starbuck’s says Q4 sales will be down 7% which is much worse than the 3.5% decline analysts were forecasting. It is also suspending its forecast for 2025. However, it is increasing its dividend. Recall, there is a new CEO at that helm. Brian Niccol is the star CEO poached from Chipotle that led to a huge rally in Starbuck’s shares when the announcement was made. Today he is ripping the Band-Aid off signaling there is a lot of work to be done.

Semi-charmed: The semiconductor space is a bit of a hot mess this morning. Shares of Qualcomm and Arm holdings are down right now as they feud over chip design licenses. Arm sent a cancellation notice for a license that Qualcomm used to make chips for smartphones. Unclear if this is just a warning as the two companies have eight weeks to figure this out before the cancellations comes into effect. Meanwhile shares of Texas Instruments are up 3% before the bell as earnings beat expectations. I’ll watch for if the gains hold as the Q4 outlook was weaker than expected.

Please hold: Shares of AT&T are up about 3% before the bell. The telecom added more subscribers than expected and had a low churn rate of existing customers. While revenue growth was flat, it was in line with expectations. While the stock is up, I did note that equipment sales were lower. That means that customers aren’t upgrading their phones as often. Is that a read-through for Apple? Something to keep an eye on. Shares of AT&T have had a great run this year up nearly 25% for 2024.

All aboard: Shares of CN Rail are up 2% right now after a small earnings beat and higher than expected sales. The railway also maintained its full year forecast. On the negative side, the operating ratio was higher than expected (a lower number is always better). But most analysts are taking comfort in the results as the stock is down 10% so far in 2024. BMO’s Fadi Chamoun isn’t worried about this quarter saying the focus is now shifting to 2025 as headwinds from the wildfires and labour disruptions are now in the rear view. “We believe the EPS framework for double-digit growth in 2025 remains intact and achievable,” he wrote to clients.