The stock market has shown a typical level of volatility in October, as market indexes have tried to rebound from steep losses in September. Yet there's plenty of uncertainty still out there, and that has investors trying to figure out the best strategy to follow. With ongoing worries about interest rates, stock index futures fell slightly in premarket trading early Wednesday.
Earnings season has kicked off, and now, the flood of companies reporting their latest financial results is growing. Some investors have looked to artificial intelligence (AI) stocks to help them find long-term growth prospects in their portfolios, but as the latest results from ASML Holding (ASML 2.04%) show, having exposure to artificial intelligence doesn't guarantee endless gains. Elsewhere, shares of United Airlines Holdings (UAL -1.25%) also lost altitude, showing that the long rebound in travel stocks might be giving way to geopolitical concerns.
ASML sees sluggishness ahead
Shares of ASML Holding were down more than 3% in premarket trading. The maker of lithography equipment for production of high-end semiconductors reported third-quarter results that showed signs of a slowdown in the industry, which could bode ill for a wider range of companies providing key materials for AI development.
ASML's year-over-year numbers weren't bad, with revenue climbing 15% to 6.67 billion euros and net income seeing an 11% gain to 1.89 billion euros. However, both of those figures dropped from the second quarter of 2023. ASML sold 105 new lithography systems in the quarter, down from 107 in the April to June quarter.
Some investors weren't entirely pleased with ASML's guidance as well. The company expects fourth-quarter sales of between 6.7 billion and 7.1 billion euros, but it expects that its gross margin will fall by about a percentage point to between 50% and 51%. That should keep net sales growth rates at around 30% for the full year, but CEO Peter Wennink warned that 2024 would be a "transition year" in which sales could be flat compared to 2023.
ASML's equipment is a key building block for the chips that go into AI systems, and so the news came as a bit of a shock to those who had hoped that heavy demand for those semiconductors could spur more growth for ASML. The company is optimistic about big growth in 2025, but the stock's move suggests that plenty of shareholders aren't patient enough to wait.
United hits some bumps
Elsewhere, shares of United Airlines dropped almost 6% early Wednesday. The airline reported encouraging results for the third quarter of 2023, but it warned that conflict in the Middle East could hurt some elements of its international travel business.
The numbers from United were generally good. Total operating revenue hit record levels, rising 12.5% year over year to $14.5 billion. Some efficiency measures were slightly lower, including revenue per available seat mile, but that was partially due to an increase in capacity as United flew nearly 70 additional planes on domestic routes than it did 12 months earlier. Adjusted net income came in at $1.2 billion, working out to $3.65 per share in adjusted earnings.
However, some headwinds are affecting United's future prospects. Fuel costs have risen by more than 20% since mid-July and are likely to rise by double-digit percentages in the fourth quarter compared to year-earlier levels. That had United projecting fourth-quarter adjusted earnings of just $1.50 to $1.80 per share, down year over year and below what most of those following the stock had expected.
In addition, the suspension of flights to Israel could add to other costs. That's an issue that every major airline with international service to the Middle East will have to grapple with, although United has a more extensive schedule than many of its peers.
