The stock market rally struggled for much of the week as Bitcoin, midterm elections and megacaps took a toll. But a better-than-expected CPI inflation report sent stocks soaring on Thursday with bond yields and the dollar tumbling. Meta platforms (META) announced major job and spending cuts. Tesla (TSLA) tumbled amid Elon Musk stock selloff and the “Twitter circus,” as well as fresh signs of weak China demand. Amgen (AMGN), GlobalFoundries (GFS) and Halozyme Therapeutics (HALO) jumped on positive news.
Stock market rally turnover higher
After struggling earlier in the week, the market rally moved back to ‘confirmed upside’ after Thursday’s surprisingly cool CPI inflation data rose. Treasury yields fell and the dollar tumbled. The Dow Jones moved back above the 200-day line to its best levels since August. The S&P 500 returned above the 50-day line while the Nasdaq finally moved above that key level. Bitcoin plunges to a two-year low as crypto exchange FTX crashes.
CPI inflation is cooling
The decline in inflation picked up speed in October, fueling hopes that the Federal Reserve may stop hiking before its key interest rate reaches 5%, improving the chances of a soft landing. The consumer price index rose 0.4% on the month and 7.7% from a year ago, slowing from 8.2% in September to the lowest level since January. The best news was that core inflation, excluding food and energy, slowed to a 0.3% monthly gain, while the annual core inflation rate eased back to 6.3% from September’s 40-year high of 6.6%.
Core commodity prices experienced deflation in October, falling by 0.4% to reduce the annual increase to 5.1%. This included a 2.4% drop in used car prices. The prices of non-energy services, which make up almost 60% of household budgets, were still up a strong 0.5% on the month and 6.7% on a year ago. But the tide is turning. Rent increases have remained large, but have finally begun to slow, and much more slowing is expected in 2023. Medical services prices fell 0.6%, the most since 1971, as health insurance prices fell 4%, the biggest monthly drop ever.
The Fed targets not just inflation, but underlying inflationary pressures, which come through the tight labor market. The impact of monetary tightening is starting to show, as new claims for jobless benefits rose by 7,000 to 225,000 in the week to November 5. at the highest level since late March.
Bitcoin crashes while FTX burns
Bitcoin fell to a two-year low of $15,554 during the week as FTX collapsed, with larger cryptocurrency exchange Binance walking away from a tentative deal to buy rival FTX. Meanwhile, FTX filed for bankruptcy on Friday. This could cause further ripples in the cryptocurrency field, which has already suffered major failures earlier this year. BlockFi, which FTX agreed to buy earlier this year, has stopped withdrawals.
Meta Announces Big Job, Cost Cuts
Facebook parent Meta platforms (META) announced it will cut 11,000 jobs, or 13% of its workforce, and extend a hiring freeze through the first quarter. CEO Mark Zuckerberg said he grew Facebook too fast after the Covid crisis ended, leading to losses well into the billions as he tries to navigate the company into a new digital world called the metaverse. let spin Zuckerberg also indicated that Meta will rein in infrastructure spending. This affects stocks of suppliers such as Arista Networks (N NET), Nvidia (NVDA) and Ciena (CIEN), although they later recovered. META stock jumped, but from multi-year lows.
Tesla hits lows amid various headwinds
Tesla ( TSLA ) fell to a two-year low amid several headwinds, though it bounced back with the market on Thursday. Tesla has brought back an insurance subsidy in China for cars in stock, after cutting prices in late October to boost demand amid rising production in China. CEO Elon Musk revealed that he sold nearly $4 billion worth of TSLA stock over November 4, 7 and 8, reportedly telling Twitter staff that he sold shares to “save” the social media firm. President Joe Biden suggested on Wednesday night that Musk could be a national security threat. Wedbush analyst Daniel Ives, a longtime Tesla bull, warned that the Twitter “clown show” was hurting the Tesla brand.
Clearly, Rivian is sticking to production targets
Luxury EV startups Bright (LCID) and Rivian (RIVN) trimmed losses for the third quarter and maintained previously lowered full-year production targets. Both Lucid and Rivian, which are backed by Amazon (AMZN) and Ford (F), increased production and deliveries for the third quarter despite supply headwinds. But Saudi-backed Lucid announced a major share sale and reduced bookings for its long-range Air, which competes with the Tesla Model S. Meanwhile, more than 1,000 Rivian electric vans deliver Amazon vacation packages across dozens of US cities. Clear stock fell while Rivian stock rose.
GlobalFoundries appears on earnings
GlobalFoundries ( GFS ) beat Wall Street’s targets for the third quarter and led much higher than earnings views in the current period. The Malta, NY-based contract chip maker’s earnings rose 857% year-over-year, with sales of $2.07 billion, up 22%. For the fourth quarter, GlobalFoundries forecasts adjusted EPS that rose 644% on in-line sales of $2.08 billion, up 13%. GFS stock jumped, clearing early buy points.
Sun stocks shine on earnings
Array Technologies, a maker of solar trackers, reported third-quarter earnings of 18 cents per share, double Wall Street’s expectations. Revenue rose 173% to $515 million versus views for $398.5 million. SolarEdge, which makes solar inverters and power optimizers, missed on EPS, mostly due to taxes. But revenue beat and SolarEdge led for sales in the fourth quarter. Both stocks soared.
Biotechs Shine On Drug, Earnings News
Several biotech stocks shone brightly on earnings and early-stage clinical data. early in the week, Amgen (AMGN) and Eli Lilly ( LLY ) rose to fresh highs after Amgen said patients who received the obesity treatment lost an average of 7.2%-14.5% of their body weight. Lilly is also testing a treatment for obesity. Both would act against already-approved Novo Nordisk (NGO) drug, Wegovy. In earnings news, Halozyme (HALO) broke out and Catalyst Pharmaceuticals (CPRX) rose on their third quarter beats. Halozyme’s adjusted EPS grew 35% to 74 cents and sales rose more than 80% to $209 million. The company also announced partner Johnson and Johnson (JNJ) will test a cancer combination with Halozyme’s delivery system, Enhanze. Catalyst reported a fourth consecutive quarter of accelerated EPS and sales growth.
Disney Earnings Miss While Disney+ Subs Jump
The Dow Jones entertainment giant missed big on fiscal Q4 earnings, down 18%. Revenue grew 9% to $20.15 billion, missing slightly. Still, the House of Mouse added 12.1 million new Disney+ subscribers, beating estimates. Walt Disney ( DIS ) has 235 million subscribers across all of its streaming platforms, including ESPN+ and Hulu, beating analysts’ views. Meanwhile, a Disney+ ad tier and price increase will begin in early December. DIS stock tumbled but pared losses somewhat.
Payment supplies vary
Shift4 Payments (FOUR) said third-quarter adjusted EPS rose 65% while revenue rose 33% to $196.7 million, both beating slightly. Shift4, which is expanding its markets, has raised its EBITDA targets for the full year. FOUR stocks tumbled on earnings, but then rallied for a strong week. Confirm Holdings (AFRM) lowered its full-year outlook amid slowing sales at key customers Platoon Interactive (PTON). The buy now, pay later leader reported a third-quarter loss that was slightly worse than expected, while revenue rose 34% to $361.6 million on a consistent basis. Gross merchandise volume was up 62%, up slightly. But Affirm slightly cut GMV and revenue targets for the full year. AFRM stock fell to a record low but rebounded for a modest gain.
Shale producers reported mixed results
Warren Buffett supports Occidental Petroleum (OXY) reported a 180% EPS gain, just missing views, while revenue grew $40% to $9.5 billion. Diamondback Energy (FANG) reported EPS increased 120%, which was on top of Third-quarter revenue grew 26% to $2.4 billion, in line. Both oil producers kept production relatively flat, while returning a hefty chunk of money to shareholders.
LNG plays report booming growth
New Fortress Energy ( NFE ) reported a 140% revenue gain to $731.9 million, but third-quarter EPS was well below views. NFE stock fell after rising in the previous week as New Fortress raised EBITDA targets for 2022 and 2023. Increases energy (EE), an April IPO, delivered blowout EPS of $1.47 versus 6 cents a year earlier. Revenue rose 318% to $803.3 million. EE stock rebounded after earnings, erasing weekly losses and nearing a buy point.
Nuclear power leader has surprising loss
Constellation Energy ( CEG ) reported a surprise loss in the third quarter with revenue rising 37% to $6 billion. But the company, fresh from a split from the utility giant Exelon (EXC), remains optimistic about support for nuclear power in the Inflation Reduction Act. Constellation Energy has set a goal of achieving 100% carbon-free power generation by 2040. CEG stock fell on earnings but rebounded to near highs.
News in brief
Shockwave Medical ( SWAV ) handily beat expectations for the third quarter last week, with adjusted earnings of 92 cents per share versus 5 cents a year earlier, while sales rose 102% to $131.3 million. The company, which makes devices that crack down on calcium in blood vessels to remove it from the bloodstream, also raised its full-year outlook. Stocks fell, but pared big weekly losses.
Sanmina (SANM) rose to an 18-year high after delivering a beat-and-raise quarterly report. The electronics contract manufacturer’s EPS rose 58% as sales grew 34% to $2.2 billion.
appeal (AAPL) has warned that a Covid outbreak at a factory in China will limit the availability of iPhone 14 Pro and Pro Max devices this holiday season. The Foxconn-owned factory is “operating at significantly reduced capacity” due to Covid restrictions.
Sprouts Farmers Market ( SFM ) reported a 9% EPS gain with sales up 5% to $1.59 billion, both beats. The natural foods grocer also provided guidance. Stocks rose.
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