Wall Street Lunch: Not Spooked By Apple's "Scary Fast" Event

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Analysts say timing Mac announcement right before earnings is odd. (0:15) Stanley Druckenmiller slams Janet Yellen. (3:04) Morgan Stanley stands firm with prediction of S&P drop to close out year. (5:25)

This is an abridged transcript of the podcast.

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Apple (AAPL) unveiled several updated Mac computers as part of its “scary fast” promo for Halloween. That included new versions of the MacBook Pro with updated M3 processors.

Apple showed off the new M3, M3 Pro, and M3 Max processors, which use 3 nanometer technology to increase performance and bring new advancements to the chips, including GPU upgrades.

The new 14-inch MacBook Pro starts with the M3 chip and is 60% faster than the 13-inch MacBook Pro with the M1. The 16-inch MacBook Pro is available with the M3 Pro or M3 Max chips and is 40% faster than the 14-inch MacBook Pro with the M1.

The new MacBook Pro laptops have 22 hours of battery life and come with up to 128GB of unified memory. Both MacBook Pros are available in different colors, including in space black.

While consumers may be looking forward to getting an Apple as a Halloween treat instead of candy, Wall Street’s sell-side reaction was fairly ho-hum.

Needham called the timing three days ahead of earnings odd and raised concerns that laptop and iMac sales were "weak" in the September quarter.

"That would suggest that last night's launch was a way to mitigate any negative share price reaction, because AAPL can focus on the future and reiterate how optimistic it is about unit sales of its new laptops and iMac products,” they said.

Bernstein noted that there were no surprises in the announcement and perhaps even some disappointment.

The equity analysts said: “The new processors and Macs were widely anticipated by Apple watchers, though some had hoped/speculated that Apple could introduce a larger M3 iMac, an upgraded iPad mini, new AirPods, or upgraded Mac accessories with USB-C connectors.”

In today’s trading

Stocks are struggling for direction in choppy trading after a strong start to the week on Monday.

The major averages are mixed and have been bouncing around most of the morning. Rates are a little lower as the Fed starts its two-day meeting.

In today’s data, the Q3 employment cost index came in a little hotter than expected, up +1.1%. October consumer confidence fell for the third straight month, but not as much as economists predicted. And the Chicago PMI fell unexpectedly last month.

Yesterday, the U.S. Treasury lowered its federal borrowing estimate for the current quarter on higher revenue expectations. That potentially offers a reprieve amid fiscal deficit concerns. But this would still be a record amount of borrowing compared to prior fourth quarters.

The Treasury expects to borrow $776 billion during October–December, $76 billion lower than the amount it forecast in July. The new estimate assumes a December-end cash balance of $750 billion, the same as its prior outlook.

Famed investor Stanley Druckenmiller called out Secretary of Treasury Janet Yellen, saying she made “the biggest blunder in the history of the Treasury” when she did not secure long-term U.S. debt at low interest rates in 2021.

The former chairman of Duquesne Capital said at the J.P. Morgan Robin Hood Investors Conference that while every American household and business managed to refinance their homes or businesses, locking in lower rates before the Fed hiked them early last year, one institution did not, “and that was the U.S. Treasury.”

Among active stocks

Caterpillar (CAT) shares slumped after its weak sales forecast for the ongoing Q4. CAT reported upbeat Q3 earnings, driven by higher prices and volumes, but machinery and engine sales in Latin America declined by 13%. CEO Jim Umpleby attributed the decrease in order backlogs to shorter lead times, emphasizing that it doesn't suggest a slowdown in machinery demand.

Pfizer (PFE) recorded its first quarterly revenue miss in more than two years with its Q3 2023 financials as it grapples with a sharp decline in demand for its COVID-19 products. But the company reaffirmed the 2023 outlook it slashed on October 13, citing lower-than-expected uptake for Paxlovid pills and disappointing COVID vaccination rates.

Pinterest (PINS) soared after its third-quarter results, which handily topped expectations, leaving Wall Street firms impressed with its turnaround strategy. Bank of America analyst Justin Post upgraded Pinterest to Buy from Neutral and said his growth outlook for Pinterest is now "favorable" compared to other social networking peers.

In other news of note

The latest U.S. export restrictions on high-end chips may force Nvidia (NVDA) to cancel billions of dollars worth of orders to China due next year, That’s according to the Wall Street Journal.

The company already delivered advanced AI chip orders to China earmarked for this year and had planned to deliver next year's orders before the new curbs became effective in mid-November. But the Biden administration informed Nvidia last week that the export controls were effective "immediately."

Alibaba (BABA), TikTok owner ByteDance (BDNCE), and Baidu (BIDU) had all made large orders for delivery in 2024, according to the report. Next-year orders from major Chinese firms are said to have exceeded $5 billion.

And in the Wall Street Research Corner

Morgan Stanley’s Mike Wilson predicts a mild retreat in the S&P 500 (SP500) over the final months of the year, more than reversing the 3.5% advance seen in October. Wilson is sticking with his 3,900 year-end target for the benchmark equity index.

He says, "We think the S&P 500 price action into year-end is more likely to come down to where the average stock is trading rather than rallying to higher levels." "Based on our fundamental and technical analysis, we remain comfortable with our long-standing 3,900 year-end target for the S&P 500, which implies a 17x multiple on our 2024 EPS forecast of approximately $230."