Chapter 1: What caused the Cloudflare outage and its impact on major apps?
Welcome to Seeking Alpha's Wall Street Lunch, our afternoon update on today's market action, news, and analysis. Good afternoon. Today is Tuesday, November 18th, and I'm your host, Kim Kahn. Our top story so far, a major outage at internet security company Cloudflare has disrupted major apps, including X, ChatGPT, and others.
Cloudflare is aware of and investigating an issue which impacts multiple customers, widespread 500 errors, Cloudflare dashboard and API also failing, the company said in a post on its system status page. We are working to understand the full impact and mitigate this problem. Shares of Cloudflare are in the red. Other apps such as PayPal, Uber, and League of Legends have also been impacted.
It's unclear what the root cause of the issue is, but Cloudflare said it was going to be performing a scheduled maintenance at its Santiago data center today. The company says it was starting to see some services recover, but customers may continue to observe higher-than-normal error rates as we continue remediation efforts.
Chapter 2: How is the S&P 500 responding to recent market changes?
A spokesperson told Seeking Alpha the company saw an unusual spike in traffic to one of its services around 1120 UTC, causing elevated errors across parts of its network. That cause of the spike is still unknown. Looking to the markets amid the recent risk-off move in stocks, traders are watching a key level on the benchmark index. On Monday, the S&P 500 ended below its 50-day moving average.
It was the first time the S&P closed below that momentum indicator in 139 sessions, the longest such streak since 2007, and the second longest run of this century. The S&P is currently trading around 6,600 in the red for the day, with a 50-day moving average at around 6,708. But Blue Kurdic Market Insights points out that after long streaks above the 50-day, brief breaks tend to resolve quickly.
On average, it takes just eight days to reclaim the level, with an average max drawdown of just 1%. Among active stocks, no singing in the rain for Home Depot. CEO Ted Decker said the company's results missed expectations primarily due to the lack of storms in the quarter, which resulted in greater-than-expected pressure in certain categories.
Chapter 3: What factors contributed to Home Depot's weak sales performance?
Comparable sales rose 0.2%, missing the consensus expectation for an increase of 1.4%. EPS of 374 missed by 9 cents. But looking ahead, Home Depot expects total sales to increase 3% for the year versus prior expectation for a rise of 2.8%.
In healthcare, Roche unit Genentech announced breast cancer drug Girodestrant reached the main goal in a Phase 3 trial, boosting shares of Alema Pharmaceuticals, which is advancing a similar treatment. And Medtronic is up after it raised full-year outlook following fiscal Q2 numbers that exceeded street forecasts, driven mainly by its cardiovascular division.
In other news of note, Alphabet CEO Sundar Pichai sounded cautiously optimistic about AI, echoing other hyperscaler predictions and indeed Alan Greenspan. In an interview with the BBC, he said the boom in investment has been extraordinary, but there is some irrationality. We can look back at the internet right now.
There was clearly a lot of excess investment, but none of us would question whether the internet was profound, he said. I expect AI to be the same, so I think it's both rational and there are elements of irrationality through a moment like this.
Chapter 4: What are the implications of an AI bubble burst according to Google’s CEO?
He warned an AI bubble burst would create broad vulnerability across industries, adding, no company is going to be immune, including us, but he voiced confidence Google would weather any turbulence.
And in the Wall Street Research Corner, Goldman Sachs has identified a new group of AI productivity beneficiaries, highlighting companies' best position to see earnings lift from automation-driven efficiency gains. Strategist David Koston screened Russell 1000 stocks with both high exposure to AI-automatable wage bills and high labor cost intensity.
Then he narrowed the list to companies that discussed AI-driven productivity on their most recent earnings calls. Among the standouts are Keycorp, Bank of America, Twilio, IBM, and Zillow. The full list of stocks is in our story on Seeking Alpha, and yes, the 20% Black Friday sale is still running. That link will be at the top of show notes.
That's all for today's Wall Street Lunch. Look for links for stories in the show notes section. Don't forget, these episodes will be up with transcriptions at seekingalpha.com slash WSB.
Chapter 5: Which companies are identified as AI productivity beneficiaries by Goldman Sachs?
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