Dow Gains 529 Points on 3M Data Center Deal: Stock Market Today
Declining Treasury yields and oil prices boosted the broad market Tuesday, while several stocks rose on solid earnings.
Stocks finished mostly higher Tuesday as long-term Treasury yields retreated and oil prices eased back. A round of well-received earnings reports helped offset disappointing housing data, with more corporate reports due out after tonight's close — including results from mega caps Netflix (NFLX, -1.7%) and SpaceX (SPCX, -0.1%).
At the end of Tuesday's session, the blue-chip Dow Jones Industrial Average was up 1% at 52,495, the broader S&P 500 was 0.3% higher at 7,712, and the tech-heavy Nasdaq Composite was marginally lower at 26,424.
Yields on the 10-year (-2.1 basis points to 5.115%) and 30-year (-5 bps to 5.423%) Treasury notes helped lift the main equity benchmarks, as did falling oil prices. Front-month West Texas Intermediate crude futures shed 0.9% to $102.75 per barrel, though they remain nearly 14% higher month to date.
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3M jumps on Amazon data center deal
3M (MMM) was the best Dow Jones stock on Tuesday, rising 5.8% for its best day since July, after the industrial conglomerate's beat-and-raise quarter.
In Q3, the company said earnings grew 14.2% year over year to $2.50 per share — more than Wall Street expected — while revenue was up 4.2% to $6.6 billion, slightly below analysts' estimates. 3M also expects full-year earnings per share of $9.10 to $9.15, up from its previous forecast of $8.80 to $8.95.
While earnings were impressive, Wall Street also cheered a separate announcement from 3M regarding "an expanded strategic commercial relationship with Amazon (AMZN, +0.07%) to deploy and scale 3M's optical connectivity and other Data Center related products."
According to a regulatory filing (pdf), the deal gives Amazon the option to purchase 3.2 million MMM shares over the next seven years, contingent upon several milestones, including $6 billion in sales of 3M's optical connectivity and other data center-related products.
Ally Financial hikes its dividend by 17%
Elsewhere on the earnings calendar, Ally Financial (ALLY) rose 1.0% after the top online bank reported third-quarter earnings of $1.34 per share, up 16% year over year, on revenue of $2.3 billion (+9% YoY). The results surpassed Wall Street's expectations.
Separately, the financial firm said its board of directors approved a 17% increase to its quarterly dividend. This marks the first time since late 2021 that Ally Financial hiked its payout.
Braze soars 52% on Salesforce buyout
In non-earnings news, Braze (BRZE) shares shot up 51.7% Tuesday on news that Salesforce (CRM, -0.01%) will buy the customer engagement platform in an all-cash deal valued at roughly $5.66 billion.
Salesforce says the transaction is expected to close in fiscal 2028, and upon completion, "Braze's real-time engagement and AI decisioning capabilities are expected to complement all four layers of Salesforce's architecture — Data 360, Customer 360, Agentforce, and SIForce."
Earlier this month, BofA Securities analyst Tal Liani double-upgraded Salesforce to Buy from Underperform (the equivalent of Sell).
"Our prior concern centered on AI-driven disintermediation," Liani wrote in a note about the blue chip stock. "However, conversations with CIOs and other market participants suggest that large enterprises (more than small-to-medium-sized businesses) are unlikely to replace platforms that house their business logic, data, workflows and compliance frameworks."
And AI, he adds, "should deepen dependence on these platforms." He believes that Salesforce has a credible AI strategy and is poised for strong free cash flow generation.
Housing starts, pending home sales fall short
In economic news, data from the Census Bureau showed building permits slipped 0.2% from August to September to a seasonally adjusted 1.4 million. Housing starts, meanwhile, plunged 5.2% month over month in September to 1.2 million.
"The affordability challenges hurting transaction momentum have builders significantly slowing their construction pace, as this morning's September housing starts data posted the second-worst number since the pandemic recession in 2020," says José Torres, senior economist at Interactive Brokers.
Building permits, he adds, were "less dim," with construction companies focused "on apartment rentals rather than single-family projects."
Separate data from the National Association of Realtors showed that pending home sales slumped 7.3% from August to September, and were down 11.3% year over year. Torres points to "elevated mortgage rates and lofty valuations," which are offsetting "the positive impacts of buoyant stock market performance, healthy hiring and subdued unemployment."
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