The stock market rally advanced last week, with the major indexes moving above key levels amid a barrage of earnings and economic data. The indexes did hit some resistance later in the week. Tesla jumped on earnings, as Elon Musk was bullish about 2023 targets. Boeing reported a surprise loss, but stuck to upbeat guidance. American Express soared on a bullish forecast. But many companies gave cautious guidance, including Microsoft, Lam Research, 3M and some rail operators. The Justice Department filed a new antitrust suit vs. Google, this one focused on its digital ad dominance.
Stock Market Rally Extends Gains
The major indexes continued to rally, closing near session highs multiple times. The Nasdaq moved above its 200-day moving average on Friday, with the other indexes coming up to or clearing key resistance. Earnings reports were mixed, but the market generally responded well. More leading stocks from a variety of sectors flashed buy signals. Crude oil prices kept rising, though natural gas futures tumbled to their lowest levels since May 2021. Treasury yields rose but are still near recent lows.
Inflation Continues To Slow
The Fed's preferred inflation index, the personal consumption expenditures price index, rose 0.1% in December as the annual inflation rate eased to 5% from 5.5%. Core PCE prices, excluding food and energy, rose 0.3%, pushing the annual core inflation rate down to 4.4% from 4.7%. Q4 GDP grew at a 2.9% annual rate, topping views, but almost half that gain was due to a buildup in inventories amid slower consumption. Personal spending fell 0.2% in December, a second straight monthly decline, as consumers turned a bit more cautious. Yet despite the softening economy and broad-based corporate layoff announcements, the job market isn't yet flashing weakness. New claims for jobless benefits in the week through Jan. 21 slipped 6,000 to 186,000, not far off historic lows. Meanwhile, pending home sales unexpectedly rose 2.5% in December amid less-steep mortgage rates, snapping a six-month losing streak, but still remained down by one-third from a year ago.
Tesla Soars On Bullish Musk
Tesla earnings jumped 40% to $1.19, slightly beating views. Revenue grew 37% to $24.32 billion, beating some estimates and not others. Gross margins fell again, and more than expected. Margins are expected to tumble in Q1 following big price cuts worldwide. CEO Elon Musk said orders have boomed, but the question is how well will demand hold up in the coming months. Tesla says it expects to make 1.8 million EVs in 2023, up 37%, with Musk saying the internal goal is abut 2 million. He also said Cybertruck volume production may not happen until 2024. Tesla will provide more details about an upcoming vehicle platform at a March 1 Investor Day event. TSLA stock surged, continuing a huge move since hitting a bear market low on Jan. 6.
Microsoft Azure Growth Slowing
Microsoft reported mixed results for the December quarter and forecast sales for the March quarter that missed estimates. The company's growth engine, Azure cloud infrastructure services, is seeing decelerating growth. Azure sales rose 38% year over year in constant currency in the December quarter, down from 42% in the September quarter. And Microsoft forecast Azure growth of 30% to 31% for the current quarter. Microsoft said customers are reducing their spending in a difficult macroeconomic climate. Meanwhile, Microsoft confirmed a new investment, reportedly worth $10 billion, in artificial intelligence startup OpenAI. Shares initially tumbled on weak guidance, but rose modestly for the week.
Intel Gives Weak Outlook
Chipmaker Intel missed Wall Street's targets for the fourth quarter and guided for a loss in Q1 as it deals with weak PC sales, production problems and market share losses to rival AMD. Other chipmakers lowering their outlook for the current period included Texas Instruments and Wolfspeed. But Mobileye and STMicroelectronics delivered beat-and-raise quarterly reports thanks to strong automotive chip sales.
Meanwhile, semiconductor equipment makers KLA, Lam Research and Teradyne slashed their forecasts for the March quarter. Chip gear leader ASML was an outlier, delivering a beat-and-raise report.
Oil Earnings
Chevron earnings rose 60% per share, but missed views, though revenue topped views. The Dow Jones oil major earlier announced a $75 billion stock buyback and a 6% dividend increase. Hess reported a 109% EPS gain, topping views. Amid oil services firms, Baker Hughes missed views but was bullish on 2023, while Halliburton's EPS doubled, beating. Refining giant Valero Energy reported Q4 EPS skyrocketing 242%, with the refining giant seeing fat margins holding through 2023. Meanwhile, crude oil prices continued to trend higher.
DOJ Files Second Antitrust Suit Vs. Google
The Justice Department filed antitrust charges vs. Google, saying its digital advertising dominance hurts competition. The DOJ wants Google to divest some of its ad tech. In October 2020, Justice filed an antitrust lawsuit vs. Google over its search-related dominance. That case is scheduled to go to trial in September. Google stock fell.
Boeing Reports Surprise Loss
Boeing reported a loss of $1.95 a share, defying views for a 20-cent gain. Revenue jumped 35% to nearly $20 billion, but slightly missed. Free cash flow is picking up, and the Dow Jones aerospace giant reaffirmed bullish guidance. BA stock initially fell on earnings but rose that day and for the week.
AT&T Bullish On Future
AT&T reported Q4 earnings from continuing ops rose 9%, topping views. Ongoing revenue edged up 0.8% to $31.3 billion, just missing. AT&T reported full-year free cash flow of $14.1 billion, slightly topping views. For fiscal 2023, AT&T predicted free cash flow of $16 billion vs. Wall Street estimates of $16.2 billion. Free cash flow growth supports AT&T's dividend. AT&T did not provide a 2023 revenue forecast. Verizon Communications reported Q4 adjusted earnings fell 10%, meeting views, while revenue grew 3.5% to $35.3 billion, just topping. More-aggressive wireless promotions, mainly smartphone subsidies, are expected to impact 2023 profit. AT&T stock jumped while Verizon edged up on a wild swing down and then up on Friday.
ServiceNow Earnings Up 46%
That beat views comfortably but the 20% revenue rise to $1.94 billion was in line. Current remaining performance obligations, or CRPO, bookings grew 26% to $6.94 billion, just below the software maker's target. CRPO combines deferred revenue and order backlog. ServiceNow guided 2023 subscriber revenue targets slightly higher. Shares came off post-earnings highs but still rose for a third straight week.
Steelmakers Bullish On Future
Nucor and Steel Dynamics easily beat Q4 estimates, though EPS fell 39% and 24%, respectively, amid lower steel prices. Both offered positive takes on the outlook, despite growing economic headwinds. Nucor said its steel mills are enjoying higher margins and output in Q1. Demand drivers including reshoring of manufacturing, large infrastructure investments and grid modernization are "gathering momentum," CEO Leon Topalian said. Steel Dynamics said it expects higher steel consumption vs. 2022 and lower imports to support pricing. STLD stock surged to an all-time high, while NUE hit a nine-month peak.
Copper Giant Tops Views
Freeport-McMoRan's earnings fell 46% vs. a year earlier on lower copper prices and higher costs, but that topped estimates. Freeport sees flat copper production and higher costs in 2023, but copper prices have rallied strongly, boosted by China's reopening, better economic prospects in Europe and growing demand from the green energy transition.
Rail Earnings Mixed, Outlooks Weak
Union Pacific reported flat EPS while Norfolk Southern posted a 10% gain, both missing views. Norfolk Southern noted macroeconomic "pressure" on a variety of fronts. Canadian National Railway topped profit views with a 23% rise, but also gave a cautious outlook. CSX narrowly topped views with EPS up 17% and revenue 9%. Rail stocks fell sharply.
Credit Card Giants Report
American Express earnings fell 5% while revenue popped 17%, both missing views. But the credit card giant guided higher for 2023, sending shares soaring. Capital One also, missed views, with EPS down 46%, but shares surged. Mastercard earnings rose 13% and Visa EPS grew 20%, both topping slightly. Each reported 12% revenue gains, led by cross-border transactions.
Airlines
American Airlines reported strong Q4 earnings and bullish guidance, following relatively upbeat reports from Delta and United earlier this month. Shares were little changed this past week after a big run to start 2023. Southwest Airlines reported a wider-than-expected loss, reflecting its holiday travel meltdown. JetBlue narrowly beat while Alaska Air missed on the top and bottom line. LUV stock fell hard for the week, JBLU declined and ALK rose.
Medical Giants See Post-Covid Blues
Abbott Laboratories beat views, but EPS fell 22% as sales sank 12% to $10.09 billion. Revenue largely beat on strong diagnostic sales, which are expected to tumble this year as Covid test demand wanes. Johnson & Johnson reported a 10% EPS gain, beating views. Sales fell 4% to $23.71 billion, with Covid vaccine revenue plunging 57%.
Defense Giants' Results Mixed
Lockheed Martin earnings edged lower, just missing views, while revenue rose 3%, topping. Raytheon earnings climbed 18%, with sales up 6%, missing. Northrop Grumman reported 25% adjusted EPS growth as sales advanced 16% to $10 billion, both topping. That topped expectations of a 9.7% earnings increase to $6.58 per share on 11.8% revenue growth to $9.66 billion. Textron reported an 11% EPS gain, just missing, while revenue rose 14%.
Teledyne topped views an 8% gain and 3% revenue rise, while also guiding high. TDY stock jumped.
Hexcel earnings soared 150% with sales up 19%. Shares gapped higher.
GE Earnings Jump
General Electric earnings leapt 60% with revenue up 6% to $21.56 billion, both beating. Aerospace revenue grew 25%. GE issued 2023 guidance with GE HealthCare spun off. GE stock rose solidly.
News In Brief
United Rentals missed EPS views with a 32% gain while 19% revenue growth was in line. But the heavy equipment rental firm gave bullish guidance, initiated a dividend and announced a $1 billion stock buyback. URI stock soared.
3M reported a 7% EPS decline, missing views, and gave weak guidance. The diversified manufacturer will cut 2,500 jobs. Shares fell.
Intuitive Surgical tumbled after dashing investor hopes for a new multi-port surgical system launch this year. That came as adjusted EPS fell 5%, missing views. Sales climbed 7% to $1.66 billion, in line with preannounced results.
Catalyst Pharmaceuticals plummeted after Teva Pharmaceutical said it hopes to launch a generic version of its drug, Firdapse. Teva claims the patents covering Firdarpse are invalid and not enforceable. Firdapse treats a muscle condition often associated with lung cancer. Shares recovered somewhat when Catalyst said it acquired the U.S. rights to an anti-seizure drug called Fycompa from Eisai.
Tractor Supply reported 26% EPS growth on a 21% sales gain, both the best percentage increases in several quarters. Shares of the farm and rural lifestyle products retailer jumped.
Comcast reported Q4 profit rose 6% with revenue up nearly 1% to $30.6 billion, both beating slightly. The company lost 26,000 broadband subscribers. Analysts had predicted a loss of 40,000. CMCSA stock hit a six-month high.
Paccar reported a 77% EPS jumped with revenue up 21.5% to $7.73 billion. Shares of the heavy-duty truck maker surged.
Water technologies provider Xylem will buy Evoqua Water Technologies in a $7.5 billion all-stock deal.
Flex topped estimates for the December quarter but the electronics contract manufacturer gave mixed guidance for the current quarter.
