Stocks rebounded from Tuesday's sell-off to post across-the-board gains Wednesday, as investors re-embraced the long-term promise of the artificial intelligence (AI) revolution. The main U.S. equity indexes were choppy early but surged late, and eight of the 11 stock market sectors closed in the green despite murky incoming labor market data.
The ADP National Employment Report showed private employers added 42,000 jobs in October, marking the first monthly gain since July, to top a consensus forecast of 30,000. September's net job loss was revised higher to 29,000.
The report divided labor market observers, even those in different parts of the same house. "Employment is stagnating in the fall," writes Comerica Bank Chief Economist Bill Adams, "according to data available during the shutdown." Adams emphasizes that overall employment was likely "about flat" in October "after accounting for federal layoffs, which aren't measured by ADP."
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The economist adds that the three-month moving average of 3,000 for the ADP data is "basically a rounding error." According to Adams, "The economy seems to have hit an air pocket in the fourth quarter as the government shutdown compounded headwinds from tariffs and a weak housing market." The shutdown is now the longest on record.
But Comerica Wealth Management Chief Investment Officer Eric Teal sees a different picture: "The job market is firming, despite some notable downsizing from Fortune 500 companies." Teal expects the job market to improve for entry-level workers and service industries as Trump administration immigration policies take effect, though he warns of potential for renewed wage-related inflation pressures.
Meanwhile, the Supreme Court heard oral arguments today in a case about President Donald Trump's tariffs. Justices questioned the legality of using emergency powers to impose his new levies. The Court, which agreed to hear the case at issue on an expedited basis, could issue a ruling before the end of 2025.
At the closing bell, the tech-heavy Nasdaq Composite had risen 0.7% to 23,499, the broad-based S&P 500 was up 0.4% at 6,796, and the blue-chip Dow Jones Industrial Average had added 0.5% to 47,311.
Lemonade is making insurance from artificial intelligence
Lemonade (LMND) was up 34.1% and closed near its intraday high after management of the insurance company said third-quarter revenue grew by 42.4% to $194.5 million. Its loss of 51 cents per share was better than the 70 cents Wall Street forecast. And it's fair to call LMND another smart AI stock to buy.
"The use of artificial intelligence has been significantly booming over the last few years in the insurance world," Claims Journal reported in March, "but for the people at Lemonade, artificial intelligence has been a mainstay in automating claims and processes since its inception in 2015."
Management highlighted "AI-powered improvements in segmentation and pricing" and said AI also helped keep operating expenses, excluding growth spend, almost flat.
Lemonade (pdf) reported a 46.3% year-over-year increase in net premiums earned, a key measure of core insurance operations. Management also raised full-year revenue guidance to a range of $727 million to $732 million from $710 million to $716 million and narrowed its adjusted EBITDA loss guidance to $127 million to $130 million from $135 million to $140 million.
I'm a No. 9 guy now
McDonald's (MCD) survived another renumbering of its iconic two-cheeseburger "extra value" meal (it used to be the No. 2, then it was the No. 7, now it's the No. 9) and saw accelerating third-quarter sales growth as budget-conscious consumers turned to cheaper options amid persistent economic uncertainty. The burger giant missed analyst estimates, but MCD was still among the top Dow Jones stocks on Wednesday with a gain of 2.2%.
McDonald's reported earnings of $3.22 per share vs $3.23 a year ago and a Wall Street forecast of $3.33. Revenue was in line with expectations at $7.08 billion (+3.0% year over year). McDonald's added new items and value deals to its menu, highlighted by a 15% price cut on eight combo meals.
"We increased global systemwide sales by 6% and grew comp sales across all segments, a testament to our ability to deliver sustainable growth even in a challenging environment," CEO Chris Kempczinski said, underscoring the importance of "delivering everyday value and affordability, menu innovation, and compelling marketing."
And maybe AMGN will fix it
Amgen (AMGN) led the Dow after the drugmaker reported third-quarter EPS of $5.64 (+1.1% YoY) on revenue of $9.56 billion (+12.4% YoY), topping consensus estimates of $5.02 and $8.97 billion, respectively, and raised full-year guidance. The health care stock rose 7.8%.
Management now expects 2025 EPS of $20.60 to $21.40, up from $20.20 to $21.30, on revenue of $35.8 billion to $36.6 billion up from $35 billion to $36 billion. CEO Bob Bradway cited strong volume growth for results and disciplined investment as well as "a pipeline of first-in-class medicines" for the updated guidance.
Amgen expects to report trial data for two weight-loss drug studies by the end of December, one testing MariTide in obese or overweight adults with or without type 2 diabetes, another as a treatment for type 2 diabetes. Management has completed enrollment in two Phase 3 studies for similar patients.
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