WASHINGTON (Reuters) – U.S. President Joe Biden’s administration is expected to unveil its long-awaited artificial intelligence executive order on Monday, according to media reports.

The Washington Post, citing several people familiar with the matter, on Wednesday said the order would require “advanced AI models to undergo assessments before they can be used by federal workers.” It would also help ease barriers for highly skilled workers seeking to immigrate to the United States, in order to boost the country’s technological competitiveness.

Axios also reported on the expected order, citing an invitation it obtained for a White House event scheduled for Monday afternoon and multiple unnamed sources familiar with the planned announcement.

The White House did not immediately respond to a request for comment.

(Reporting by Kanishka Singh, Susan Heavey and Chris Sanders in Washington; Editing by Richard Chang)

By Aditya Soni and Krystal Hu

(Reuters) -Alphabet shares slumped on Wednesday after its cloud unit’s growth fell to near a three-year low, paling in comparison to Microsoft’s relative success as the tech giants race to make money from generative artificial intelligence.

Shares of Alphabet fell 9.6% on Wednesday, compared with a healthy 2.8% gain in Microsoft, on investor worries that the Google parent could lose share in the cloud-computing market to Microsoft.

Cloud spending by businesses preparing to roll out AI features powered a rebound in growth for Microsoft’s Azure platform in its first quarter. Growth at Alphabet’s cloud unit was dampened by its big exposure to smaller clients.

Microsoft currently trades at 28.5 times its 12-month forward earnings estimates, compared with the Google parent’s 24.93.

In the battle to tap the next growth driver for the cloud business, Microsoft has focused on its core business clients that already use many of its software services, while Google has turned to startups.

“Demand for artificial intelligence drove Microsoft’s growth. Demand among Google’s larger clients was similar, but the firm is more exposed to high-growth and startup clients, which have been more aggressive with cost-control efforts,” Morningstar analyst Ali Mogharabi said.

The share losses suggest investors are concerned that Alphabet’s focus on startups and slower roll-out of AI services was delaying the earnings boost from the new technology.

Google Cloud offers AI capabilities through its Vertex platform. Through the DeepMind team, the company is trying to switch focus from research to product releases in the tight generative AI race with rivals such as Microsoft, which says its partnership with OpenAI allows it to move faster.

Google plans to launch a series of AI models including the much-anticipated Gemini next year, CEO Sundar Pichai said on Tuesday’s earnings call.

That timeline makes analysts wonder if it leaves a vacuum for Microsoft to grab more market share in the AI cloud with OpenAI’s GPT-4 model already available for months.

Besides its in-house model solutions, Google has also invested in AI startup Anthropic and partnered with Meta’s Llama models to offer a variety of models to its cloud users.

The company said more than half of funded AI startups are using Google Cloud, but whether its strong research and technical capability can win over big-ticket enterprise customers from the turf of Microsoft and AWS remains to be seen.

“Microsoft is using its incumbent software relationships, whereas Google is coming in as a little bit of a challenger here,” said Krishna Chintalapalli, portfolio manager at Parnassus Investments, an investor in Alphabet and Microsoft.

The results show cloud spending is coming from enterprise clients, whereas smaller businesses are reducing their expenditure, he said.

Strong AI use was responsible for a 3 percentage point boost to the Microsoft’s cloud business in the September quarter.

CEO Satya Nadella said about 40% of the Fortune 500 companies were using the test version of its “Copilot” AI service powered by OpenAI’s technology.

The company will launch the $30-a-month offering next month for its 365 service that can summarize a day’s worth of emails into a quick update.

Analysts said that will further drive up adoption of its AI services. Alphabet has also deployed AI in products such as its flagship Pixel phones and more recently tested adding generative AI to its search engine.

“Unlike many others who are touting their AI story, Microsoft is capable of delivering meaningful AI products to their customers,” brokerage D.A. Davidson said.

At least 22 brokerages raised their price targets on the software giant, pushing their median view to $400, compared with Wednesday’s price of $340 a share.

Many analysts were also optimistic about strength in Alphabet’s core search business, but they warned the weakness in the cloud business would continue.

“It’s unclear just how widespread Google Cloud optimization efforts are and how far along customers are in the journey, but expect these headwinds to persist for at least a few more quarters,” Bernstein analysts said.

AI is expected to become more of a growth driver in 2023 for Alphabet after the expected roll out of Gemini, which is a collection of large-language models.

“Early results are very promising (for Gemini),” CEO Sundar Pichai said.

(Reporting by Aditya Soni in Bengaluru and Krystal Hu in New York; additional reporting by Akash Sriram; Editing by Arun Koyyur and Anil D’Silva)

By Arriana McLymore

NEW YORK (Reuters) – Investors will look for signs that Amazon’s aggressive expansion of same-day delivery services helped increase its third-quarter profit margin by spurring shoppers to place more frequent and bigger orders.

Same-day delivery is now offered in at least 90 cities, free for Prime members while non-members pay $9.99. The retailer invested heavily in 2020 and 2021 in logistics to make same-day delivery, which it introduced in 2015, available in more places.

When Amazon reports earnings on Thursday, investors and analysts anticipate gross profit margins will rise 2.67% from last year to 47.37%, according to LSEG.

Fast delivery “drives more frequency to Amazon’s website,” CFRA analyst Arun Sundaram said.

“It drives larger basket sizes for Amazon. Now that Amazon is introducing a lot more everyday essential items, people are finding it very convenient to go on Amazon and buy things like paper towels, food or packaged goods,” he said.

Amazon packs its same-day delivery centers with its top 100,000 products. The company in April said it completed a reorganization of its fulfillment network, dividing the U.S. into eight regions to shorten delivery distances and get merchandise to shoppers faster.

“What we find is when we open up same-day (delivery), you generally see customer engagement go up and purchasing go up,” Sarah Mathew, vice president of global delivery experience at Amazon, told Reuters in a recent interview. “But the lift of how much it goes up varies from product to product.”

The company will continue to build fulfillment centers, expanding same-day service, Mathew said.

Same-day delivery also boosts Amazon.com’s website traffic. This positions the retailer to bring in more advertising revenue, which has grown at least 20% each quarter this year compared to 2022.

Columbia Threadneedle Investments analyst Mari Shor said Amazon and its top competitor, Walmart.com, have become go-to destinations for online shopping because of their investments in fulfillment centers, warehousing and speedy deliveries.

Sundaram said that same-day and one-day delivery is key to e-commerce growth, which along with advertising revenue will improve Amazon’s margins over the next three to five years.

Scott Devitt, an analyst at Wedbush, said that he expects Amazon’s fast delivery will help it maintain or grow its market share as well as fend off newer e-commerce players such as Shein, PDD Group’s Temu and ByteDance’s TikTok Shop.

“Next-day and same-day (delivery) is going to be much more beneficial to Amazon’s volume growth than any degradation that we see from Temu,” Devitt said.

Analysts expected Amazon’s North American retail business to show $85.9 billion in third-quarter revenue, up 9% compared to last year, according to a LSEG estimate.

By comparison, analysts forecast Walmart will show a 1% decline in e-commerce revenue for the third quarter when it reports in November.

(Reporting by Arriana McLymore in New York; Editing by Cynthia Osterman)

By Seher Dareen

(Reuters) -Oil and gas producer Hess Corp on Wednesday beat Wall Street estimates for third-quarter profit on higher production, days after agreeing to be bought by larger U.S. rival Chevron Corp for $53 billion.

New York-based Hess’s net production was 395,000 barrels of oil equivalent per day (boepd) in the quarter and it forecast production to be around 410,000 boepd in the fourth quarter.

It reported an adjusted net income of $1.64 per share for the quarter, compared with analysts’ average estimate of $1.15, according to LSEG data.

Shares of the company were 0.3% lower, at $154.82.

“Overall, Hess reported a good quarter. Earnings and cash flow was better than estimates and guidance due to higher production and higher commodity prices,” said Simon Wong, research analyst at Gabelli Funds.

“The share price is down because it is now tied to Chevron’s stock price, and Chevron’s stock is down currently. Hess’s shareholders will receive 1.025 Chevron shares for each Hess share.”

Chevron’s shares were down 0.6%, to $155.94.

Hess said its worldwide average realized crude oil selling price, excluding hedges, fell 4.4%, to $81.53 per barrel in the quarter, compared to last year.

Production from Guyana totaled 108,000 boepd, 10.2% higher compared with the prior-year quarter. The third oil project in the country, Payara, is expected to start in the fourth quarter.

Chevron is set to get Hess’s 30% stake in Guyana in which larger rival Exxon Mobil and China’s CNOOC are partners. Production at the Stabroek oil block is expected to triple to more than 1.2 million barrels per day (bpd) by 2027.

Production at the Bakken shale field in North Dakota stood at 190,000 boepd, up 14.4% from the third quarter of 2022, the company said, helped by increased drilling and well completion activity and higher natural gas volumes.

(Reporting by Seher Dareen in Bengaluru; Editing by Sriraj Kalluvila and Pooja Desai)

LOS ANGELES (Reuters) – FedEx Corp on Wednesday said its U.S. Express deliveries could be delayed due to an overnight Federal Aviation Administration (FAA) information technology system outage.

FedEx’s signature Express service uses planes to provide overnight deliveries. The company said shipments delayed due to the outage are not eligible for a refund or credit.

“Potential delays are possible for package deliveries across the U.S. with a delivery commitment of October 25, 2023,” FedEx said in a service alert.

In an email to Reuters, FedEx said the IT outage at its Memphis, Tennessee, air hub was an “FAA issue.” 

FAA did not immediately comment on the matter.

FedEx competitor United Parcel Service (UPS), whose air hub is located in Louisville, Kentucky, told Reuters that its flights “have been operating as expected with nothing to report regarding delays.”

(Reporting by Lisa Baertlein in Los Angeles and David Shepardson in Washington DC; Editing by Alexander Smith)

BERLIN (Reuters) – German defence contractor Rheinmetall said on Wednesday its third-quarter profitability jumped on strong demand for weapons and ammunitions, with operating profit expected to top consensus estimates by 15%.

The company, which will report full results on Nov. 9, did not specify which orders helped it beat expectations, but Russia’s invasion of Ukraine has led to a dramatic increase in demand for munitions across the industry.

Rheinmetall said it expected third-quarter profit of 191 million euros ($201.89 million), above a consensus estimate of 165.4 million euros, and an operating profit margin of 10.9%, compared with a consensus of 9.4%, citing economies of scale from increased volumes.

It affirmed a full-year forecast of sales of 7.4 billion to 7.6 billion euros, with an operating profit margin of around 12%.

For the first time, the results included recently acquired Spanish munitions maker Expal.

“The significantly higher than expected operating profit is mainly due to strong market dynamics in the security technology business – especially in the division Weapon and Ammunition,” the company said in a statement.

Defence contractors have reaped windfall profits as European Union countries scramble to supply Ukraine for its defence against Russia, and replenish stocks of munitions allowed to diminish since the Cold War.

Several of Rheinmetall’s flagship systems have been deployed in Ukraine, while neighbouring countries have backfilled weapons systems they have donated to their eastern neighbour.

($1 = 0.9461 euros)

(Reporting by Thomas Escritt; Editing by Richard Chang)

By Lawrence Delevingne

(Reuters) -Stocks slipped on Wednesday after the latest round of earnings prompted concern among investors over the economic outlook, adding to the angst over painfully high interest rates, while benchmark U.S. Treasury yields and the dollar ticked up.

Weighing on the indexes were shares in Alphabet, which fell 9.5% after the company reported another slowdown in its cloud business, while Microsoft shares rose 2.9% after it beat estimates.

The Dow Jones Industrial Average fell 0.27%, to 33,051, the S&P 500 lost 1.36%, to 4,189 and the Nasdaq Composite dropped 2.29%, to 12,838.65.

“Tech earnings got off to a mixed start last night thanks to a focus on cloud computing, one of the big money spinners for the sector,” Chris Beauchamp, IG Group chief market analyst, said.

“Stocks have picked up somewhat in the past 24 hours, but it’s now up to Meta tonight and Amazon tomorrow to provide the kind of good news that might give stocks a reason to rally into month-end.”

In Europe, the STOXX 600 was little changed, after coming under pressure from a near-60% slump in shares of Worldline after the French payments company cut its financial targets. In a heavy day for bank earnings, Deutsche Bank was an outlier, with a 8% rise in its shares.

Overnight, Asian stocks rose from 11-month lows as investors cheered China’s approval of a 1 trillion yuan ($137 billion) sovereign bond issue as a harbinger of stimulus, although MSCI’s broadest index of Asia-Pacific shares outside Japan were little changed.

The MSCI All-World index fell 0.9%, heading for a third straight monthly decline in October, with a loss of 2.8%, largely as a function of the surge in U.S. Treasury yields.

HIGH RATES, MIXED DATA

U.S. Treasuries held onto a bounce-back after the 10-year yield breached 5% on Monday. The 10-year note last yielded 4.942%, up 10.2 basis points.

The interest rate on the most popular U.S. home loan last week jumped to the highest since September 2000 – 7.9% – driving mortgage applications to a 28-year low, a survey showed on Wednesday.

Separately, fresh data on U.S. business output showed higher levels in October, as the manufacturing sector pulled out of a five-month contraction on a pickup in new orders, and services activity accelerated modestly amid signs of easing inflationary pressures.

Strategists at Citi said the Purchasing Managers Index data was “yet another sign that a recession is not imminent.”

“We continue to think the US economy will enter recession next year, but in the meantime, risks are balanced toward further Fed hikes, rather than cuts,” they wrote in a note Wednesday.

Several of Wall Street’s biggest names called a top on longer-dated Treasury yields, including strategists at UBS and investor Bill Ackman.

In currency markets, the dollar index gained 0.2%, while the yen was steady versus the dollar and the euro fell 0.2% on the day.

Oil prices dipped on Wednesday as demand worries stemming from gloomy economic prospects in Europe offset concerns about war escalating in the Middle East. U.S. crude <CLc1> rose 1.52% to $85.01 per barrel and Brent was at $89.68, up 1.83% on the day.

The United States and Russia were among several nations pushing for a pause in fighting between Israel and Hamas to allow aid into the besieged Gaza Strip.

After touching $1,997 an ounce last week, spot gold traded at $1,982, up 0.6%.

Bitcoin is up about 29% this month mostly thanks to recent speculation that ETF applications from BlackRock and others will succeed and drive capital into cryptocurrencies. Bitcoin last bought $34,672.

The U.S. Securities and Exchange Commission has declined to comment on the speculation.

(Reporting by Lawrence Delevingne in Boston and Amanda Cooper in London. Additional reporting by Tom Westbrook in Singapore; Editing by Sharon Singleton, Mark Potter and Diane Craft)

By Carolina Mandl

NEW YORK (Reuters) -Hedge funds have been buying consumer staple stocks in Europe in October while dumping the sector in the U.S., driven by concerns about the impact of weight-loss drugs on food habits, Goldman Sachs showed in two different reports about trading flows.

The bank said investors have added consumer staples to portfolios in Europe as part of a more defensive strategy amid the Hamas-Israel war and continued uncertainty about future economic growth.

“Consumer staples (are) among the most net bought sectors in October so far, while discretionary names are being net sold,” the bank added. Consumer discretionary products are more prone to suffer in economic downturns, as they are non-essential.

In the U.S., however, investors have sold and shorted consumer staples. “Consumer staples is among the most net sold sectors in October, driven by short sales outpacing long buys,” the bank said in a different note earlier this week, citing increased concerns about the class of drugs known as GLP-1 used in weight-loss and diabetes treatments.

For every two U.S. consumer staples stocks that hedge funds have shorted, they have bought one, Goldman Sachs said.

U.S. companies ranging from supermarkets to beer have been under pressure on concerns about the impact of weight-loss drugs like Ozempic, Wegovy and Mounjaro. Prescriptions for the drugs are soaring.

Wegovy has been a phenomenal success in the United States and is now being rolled out in some European markets including Norway, Denmark and Germany.

Shares in the U.S. consumer staples sector are down roughly 8% this year, which some investors see as an overreaction to the new weight-loss drugs.

“Consumer staples has been ignored and beaten up,” said Bryant VanCronkhite, equities senior portfolio manager at Allspring Global Investments LLC. “The market has grabbed on to this and pushed down stock prices as though everyone in the world is going to be taking these drugs and that they’re going to work forever.”

PORTFOLIO ROTATION

European hedge funds have bought defensive stocks in October, while selling cyclicals, according to Goldman Sachs.

“From the start of October, we have observed a sharp rotation from cyclicals into defensives, arguably as a reaction to the macroeconomic/geopolitical environment,” the prime services strategies team wrote.

Goldman Sachs said that, besides consumer staples, healthcare and utilities are part of the defensive stocks group, while cyclicals incorporate energy, materials, industrials, financials and real estate.

Since the beginning of October, European hedge funds’ allocation to cyclicals has declined to below 2% from 7%, a graphic showed, and defensive stocks now account for almost 7% of their market value versus 6% earlier.

(Reporting by Carolina Mandl, in New York; Editing by Sharon Singleton and Leslie Adler)

By Gilles Guillaume and Giulio Piovaccari

(Reuters) -Stellantis NV is nearing a deal to acquire a stake in electric vehicle company Zhejiang Leapmotor <9863.HK>, a source close to the matter said on Wednesday, and the car maker said it would give an important update on Thursday.

Earlier on Wednesday, Bloomberg reported that Stellantis was close to agreeing the purchase of a stake of roughly 20% in Leapmotor.

Stellantis and Leapmotor are also discussing setting up a joint venture as part of the transaction, the Bloomberg report said, adding that a partnership could allow Stellantis to manufacture and sell some Leapmotor cars outside China.

The partnership would give Stellantis access to the EV maker’s parts and certain technologies, Bloomberg said.

Stellantis, whose brands include Fiat and Peugeot, has only a very small presence in China, the world’s largest auto market. The group and rivals such as Renault are concerned about growing competition from cheap Chinese electric cars in Europe.

In a statement, Stellantis said it had previously announced it was “studying scenarios to seize business opportunities linked to the dynamics of Chinese manufacturers in the context of the electrification of the global automobile market”. It did not elaborate.

On Wednesday, the company sent out an invitation to journalists for Thursday morning for an “important update,” without giving details.

Leapmotor, which has a market value of around 42 billion Hong Kong dollars ($5.4 billion), declined to comment. Its shares have gained some 22% this year.

Stellantis is due to publish its third-quarter revenue figures next Tuesday.

The group said a year ago it was closing its joint venture that makes Jeeps in China with local partner Guangzhou Automobile Group amid disappointing results.

Leapmotor said last week its gross margin in the third quarter had turned positive, the first time for the startup even though the industry has been suffering a price war this year.

It is a goal the company has been striving for this year, mainly to improve its valuation with a view to a further fundraising, a person with direct knowledge of the matter said.

($1 = 7.8215 Hong Kong dollars)

(Reporting by Akanksha Khushi in Bengaluru, Gilles Guillaume in Paris and Giulio Piovaccari in Milan; additional reporting by Zhang Yan in Shanghai; Writing by Keith Weir and Silvia Aloisi; Editing by Shilpi Majumdar, Shweta Agarwal, Mike Harrison, Jan Harvey and David Gregorio)

(Reuters) – An artificial intelligence safety forum launched by companies including OpenAI, Microsoft and Google named its first director on Wednesday, and said it would create an advisory board in the coming months to help guide its strategy.

The Frontier Model Forum also said it created a fund to back research into the technology, with initial funding commitments of more than $10 million from its backers and partners.

It said its first-ever director would be Chris Meserole, who most recently served as director of AI and emerging technology initiative at the Brookings Institution, a Washington-based think tank.

He joins a forum launched in July with a focus on “frontier AI models” that exceed the capabilities present in the most advanced existing models. Industry leaders have warned that such models could have dangerous capabilities sufficient to pose severe risks to public safety.

Many countries are planning AI regulation and Britain is hosting a global AI safety summit in November, focusing on understanding the risks posed by the technology and how national and international frameworks could be supported.

The Frontier Model Forum is backed by ChatGPT-owner OpenAI, Microsoft, Google’s parent Alphabet and AI startup Anthropic.

(Reporting by Juby Babu in Bengaluru; Editing by Savio D’Souza)