#5things to Know Before The Bell

China slowdown, Apple gains, Netflix pops

Did you get a look at that moon? If it looked brighter than usual, it wasn’t your imagination. Last night’s full moon was a “super moon” – meaning it is closest to the Earth and appears 14% brighter that normal. If you missed it, never fear. There will be another one next month – the last of the year. This one was called “Hunter’s Moon” because it occurs at a time when hunters used to be most active. I should warn you now that this newsletter will likely feature a lot of moon talk and I’m grateful for the outlet. My husband has made it clear there is only so much he can say about the moon before 7am.

Friyay: The TSX hit another all-time high while the rally on the S&P 500 faded. Futures are mildly higher right now. China is top of mind once again as economic data came in better than feared. While economic growth was the slowest since Q1 2023, investors took comfort that it was better than expected. To be sure, there are still signs of distress. Real estate is quite ugly with a 22% drop in new construction starts and a 17% drop in property sales. But markets rallied overnight on more stimulus measures aimed at the stock market. Chinese President Xi Jinping also said he would support the tech sector and shares of Alibaba, Baidu and JD.com are all rallying in the pre-market.

Safe and sound: The translation of the word apple in mandarin is peace and tranquility. I’m sure Apple investors feel that way about China right now. Sales of the iPhone 16 rose 20% in the first three week of sales in China compared to the last model released in 2023. “We believe China sales for iPhone 16 will show a strong rebound over the next year,” says Dan Ives of Wedbush in a note to clients, “with the beginning of this AI driven super cycle led by iPhone 16”. He expects Apple to partner with Baidu in China for AI growth the way Apple has partnered with OpenAI in the US. Shares of Apple are up nearly 2% in the pre-market.

Netflix & Chill: Two years ago Netflix was in trouble. It was losing subscribers and growth had stalled. Today’s Netflix demonstrates those days are firmly in the past. Netflix added 5 million new paying subscribers this quarter, well above expectations. It delivered 15% sales growth which was stronger than expected while also topping bottom line estimates.  “Netflix is poised to remain the largest and fastest growing streaming service in the world,” gushed Morgan Stanley in a note to clients this morning. “It’s ability to grow earnings 20-30% annually over time stems from layering on additional growth levers,” wrote the analyst highlighting things like paid sharing, ads, live and games. Shares of Netflix are up 6% in the pre-market and poised to open at a record high.

A bitter pill to swallow: Shares of CVS are plunging in the pre-market after warning profit is going to fall short of expectations and ousting CEO Karen Lynch. The company is also pulling its forecast for the year as it continues to see pressure in its health benefits business. While changing CEOs in troubled times has been something of a winning recipe (think Starbucks, Nike), clearly investors are rattled. Lynch has only been in the job since February 2021 and the shares have lost 20% since then if you include today’s losses. The company also announced it was no longer pursuing a breakup of its businesses. Shares are down 11% in the pre-market.