The stock market had a mixed week heading into the Christmas holiday weekend. The S&P 500 briefly regained its 50-day, but then tumbled to recent lows. The Dow Jones tested its 50-day successfully, while the Nasdaq tumbled. Micron Technology results and outlook hit chip stocks, while CarMax affordability concerns rocked the auto sector. Tesla continues to dive. That offset positive reaction to FedEx and especially Nike earnings, which lifted related names as well.
Stock Market Mixed
The major indexes rallied midweek, but backed off in a mixed week. The S&P 500 briefly reclaimed its 50-day line but then fell back. Megacaps such as Apple, Nvidia and Tesla were big losers, but the weakness was broad-based. The 10-year Treasury yield rose solidly, partly as the Bank of Japan turned slightly hawkish.
Inflation Cools, Economic Data Mixed
PCE inflation fell to 5.5% in November, down from 6%, while core PCE inflation retreated to 4.7%, both roughly in line. The PCE inflation report is the Fed's favorite inflation gauge. PCE services excluding energy and housing, cited recently by Fed chief Jerome Powell, came down to 4.3%. Separately, the one-year inflation expectation tumbled to an 18-month low in December, according to the University of Michigan sentiment gauge. Meanwhile, other economic data was mixed. Q3 GDP growth was revised up to 3.2%, while jobless claims were lower than expected. Durable goods orders fell more than expected, but unexpectedly rose excluding transportation items. The Conference Board's index of leading economic indicators fell solidly, offering further evidence for a recession in early 2023.
Nike, FedEx Earnings Top, Trump Fears
Two bellwether companies raised hopes that corporate earnings may be better than feared even as a potential recession looms. Nike EPS increased 2%, defying views for a fourth straight decline. Revenue rose 17% to $13.3 billion, also ahead of views and marking the second straight quarterly gain. The company touted growth across global markets and in digital sales. Nike's key China sales continue to improve and the Dow footwear and apparel giant continues to clear out excess inventory. FedEx earnings slid 34% but beat estimates. Revenue decreased 3%, missing, as package volumes fell across the Express and Ground segments. But the delivery giant reinstated full-year guidance and announced a further $1 billion in cost savings. NKE stock sprinted above the 50- and 200-day moving averages. FDX stock rebounded from the 50-day.
Micron Misses, Guides Low, Plans Cuts
Micron Technology reported a wider-than-expected loss with fiscal Q1 revenue tumbling 47% to $4.085 billion, both worse than expected. The memory chip giant also guided low on the current quarter. Micron will cut 10% of staff and suspend bonuses, while also announcing further capital spending cuts. The grim results and forecast slammed chip stocks, especially memory-exposed semiconductor-equipment makers such as Lam Research.
Tesla Is A Global EV Giant, But Its Two Megamarkets Face Distinct Challenges
Tesla Plunges Again
Tesla suffered its worst weekly decline since the Covid crash for a second straight week, amid ongoing concerns about demand and Elon Musk's impact on the EV giant's brand. Musk said he would look for a new CEO for Twitter, which he recently bought, following a poll of Twitter users. And later said he would not sell any more TSLA stock until at least 2024. But he won't curb his political tweets. Tesla on Wednesday doubled its year-end delivery discount in the U.S. to $7,500 to buoy Q4 sales, ahead of new U.S. tax credits on Jan. 1. Tesla China sales disappointed yet again in weekly data. Six analysts cut price targets during the week, but they were still well above the current price.
Biotechs Boom, Flop On Drug News
Madrigal Pharmaceuticals and Verona Pharma surged last week on promising news from studies in nonalcoholic steatohepatitis and chronic obstructive pulmonary diseases — respectively, NASH and COPD. Madrigal shares skyrocketed 268% in a single day after its NASH drug hit both goals of a final-phase study. Verona's COPD drug improved lung function and shares soared almost 38%. On the flip side, Arcus Biosciences and Gilead Sciences skidded on mixed results for their cancer treatment regimen. Overall, 41% of patients with a form of lung cancer responded to treatment, but the results paled in comparison to Roche's rival combination. Arcus stock lost close to 33%, while Gilead fell roughly 2%.
News In Brief
L3Harris Technologies will buy Aerojet Rocketdyne for $58 a share, or $4.7 billion including debt. Lockheed Martin scrapped a planned Aerojet purchase in February amid regulatory objections to the deal.
General Mills reported an 11% EPS gain and a 4% revenue rise, both topping fiscal Q2 views. But shares fell solidly from near record highs.
Toro topped fiscal Q2 EPS views with a 98% gain, but revenue just missed with a 22% rise to $1.17 billion. The lawn equipment maker guided low on full-year EPS. Shares wobbled but ultimately rose.
Cintas earnings rose 13% per share, while Q2 revenue also climbed 13% to $2.17 billion, both modestly beating. The corporate uniform and supplies firm raised its full-year outlook.
Carnival reported a Q4 loss that wasn't quite as large as expected, but a 198% revenue gain fell short. The cruise line operator sees 3% capacity growth in 2023, at the low end of prior guidance.
Paychex slightly beat EPS views but the 7% revenue gain fell just short for the payroll processor. PAYX stock fell.
CarMax reported an 85% EPS drop with revenue down 24% to $6.51 billion, both well below views. The used-car dealer giant cited auto affordability issues amid higher loan rates. Prices rose 1% vs. a year earlier in the October quarter with other reports showing used-car prices are now falling sharply.
