The stock market rally showed volatile, divergent action. The Federal Reserve raised rates on Wednesday and signaled one more hike, noting banking woes. The Nasdaq, buoyed by big techs, continued to advance, while the S&P 500 and Dow hit key resistance. Bank stocks continued to plunge. Nvidia kept running as it made big AI announcements. On Holding sprinted to record highs on strong growth and guidance, while Nike margins were a concern.
Stock Market Split, Volatile
The Nasdaq, buoyed by megacaps such as Meta Platforms and Nvidia, rose modestly, but was well off weekly highs, with even chips struggling Friday. The S&P 500 and Dow Jones erased big early gains. The Russell 2000 hit 2023 lows as bank stocks continued to plunge, with regional banks, investment banks and European banks among the many decliners. Overall, losers dominated winners during the week. Treasury yields reversed lower, with the 10-year yield hitting a six-month low. Crude oil rose solidly.
Fed Signals One More Rate Hike
The Federal Reserve hiked its key interest rate a quarter-point and signaled that one last hike is likely on May 3, as long as the bank crisis remains contained. However, Fed chair Jerome Powell said that policymakers now see risks to the economy clearly tilted to the downside. Tighter bank credit for consumers and businesses, exacerbated by the recent banking crisis, will weigh on the economy, though the extent and timing of the hit is "guesswork," Powell said. Powell said that monetary policy won't have to work as hard to curb inflation, because more risk-averse banks will help rein in growth. Since it may take a few months before tighter bank credit really starts to bite, this may turn out to be a feel-good moment for stock market investors, though one that could prove to be short-lived. Still, the bond market might be getting ahead of itself, pricing in less than a 10% chance of a rate hike on May 3. Initial jobless claims for the week through March 18 dipped to 191,000, a very low level. Indications point to a solid March jobs report, which is based on a midmonth employer survey.
Bank Woes Continue
Bank stocks continued to struggle as investors worried about the next domino to fall. On Sunday, March 19, Swiss bank UBS agreed to purchase Credit Suisse for $3.24 billion. Roughly $17 billion in Credit Suisse contingent debt will be wiped out. Treasury Secretary Janet Yellen assured the public the "banking system is sound." She said regulators are ready to do more to support bank deposits but not offer a "blanket" guarantee to all deposits and all banks. The Fed did go ahead with a rate hike Wednesday but acknowledged banking stress. First Republic and PacWest Bancorp are California banks under the microscope. But Germany's Deutsche Bank tumbled Friday on default insurance costs while U.S. investment banking giants such as Morgan Stanley broke lower as well.
Adobe, Nvidia Tout AI Advances
Media and marketing software firm Adobe and graphics-chip maker Nvidia announced advances in artificial intelligence for their products. Adobe added generative AI services for its Creative Cloud software, including the ability to make images from text descriptions. Plus, it introduced AI innovations for its Experience Cloud to power end-to-end marketing workflows. Elsewhere, Nvidia announced a wide-ranging portfolio of products to address the burgeoning AI market. Those products included new graphics processing units, data center hardware, AI software models and AI as a service. Nvidia showcased AI-powered solutions for companies in health care, biotech, automotive, semiconductor and other industries.
Nike Margins A Stock Market Concern, On Holding On Fire
Nike hiked full-year revenue guidance after easily beating quarterly estimates on the top and bottom lines. Year over year, earnings fell 9%, while revenue jumped 14% to $12.39 billion. Sales fell 8% in China but grew double digits in other markets. Gross margins fell significantly due to higher markdowns to liquidate inventory. The Dow Jones footwear and apparel giant expects to exit fiscal 2023 with healthy inventory levels, it said. NKE stock fell on earnings but rose for the week. Upscale Swiss athletic shoe maker On Holding nearly doubled fourth-quarter sales and gave a strong outlook for 2023. ONON stock skyrocketed to a new high.
Crypto Extends Gains; SEC Warns Coinbase
Cryptocurrency prices added to the prior week's huge gains as bank crisis fears weighed on financial stocks and Treasury yields. Retail and institutional investors have been dumping fiat-backed stablecoins like USDC in favor of Bitcoin and Ethereum. Coinbase tumbled after the SEC issued a Wells notice, a formal warning that it may take action for potential securities violations by the crypto exchange.
Tesla China Sales Keep Rising
Tesla China EV insurance registrations rose for a fourth straight week, to 18,712. Meanwhile, Moody's upgraded Tesla's credit rating to investment grade, following S&P Global's upgrade last year. Tesla stock jumped on those reports, rising solidly for the week.
Stock Market News In Brief
Chinese EV giant BYD has reduced shifts at two assembly plants in China, sources told Reuters, in the latest sign of weaker demand in the world's largest auto market. Warren Buffett-backed BYD, now China's biggest automaker, has been growing fast and is stepping up exports, but output and sales are still below their late 2022 peak.
Foot Locker crushed quarterly earnings expectations and unveiled a new three-year growth strategy, but its 2023 guidance was weaker than expected.
Darden Restaurants again raised its revenue outlook for fiscal 2023 after the Olive Garden parent beat earnings and revenue views for the third quarter. Year over year, sales rose nearly 14% and EPS jumped 21%.
Regeneron Pharmaceuticals and Sanofi jumped Thursday after they said their blockbuster drug Dupixent reduced exacerbations by 30% in patients with COPD, or chronic obstructive pulmonary disease. The progressive condition impacts lung function and is prominent in former smokers. Dupixent also led to improvements in lung function, quality of life and respiratory symptoms.
Square-parent Block plunged after Hindenburg Research disclosed a short position in the digital payments company while claiming it inflates its Cash App user metrics and facilitates fraud. Square said it plans to work with the SEC and will explore legal action against Hindenburg Research for the "factually inaccurate and misleading report."
Commercial Metals narrowly topped fiscal Q2 views, reporting a 6% EPS drop and a fractional revenue gain. The metals products maker, which was upbeat about Q3, rose on the results.
KB Home reported 1% declines in fiscal Q1 EPS and revenue, but topped views. The homebuilder also gave bullish guidance. Shares jumped.
General Mills reported a 15% EPS gain and 13% revenue rise in fiscal Q3, both picking up from the prior quarter. Shares rose.
PDD Holdings, which owns discount China e-commerce giant Pinduoduo and U.S.-based Temu, missed fourth-quarter earnings expectations, as China's post-reopening consumer recovery remains spotty. PDD revenue jumped 46% to $5.79 billion.
Canadian Solar reported fourth-quarter earnings surged 185%, topping estimates, as solar module shipments climbed 68%. CSIQ stock soared on the news.
Snapchat parent Snap, Facebook and Instagram parent Meta Platforms, and Google and YouTube parent Alphabet rose as TikTok CEO Shou Zi Chew testified before a House Committee on topics that ranged from data security to concerns about child safety. Washington lawmakers want to ban TikTok unless its parent, China-based ByteDance, sells the video sharing app.
Tencent Holdings rallied after stronger-than-expected results, boosting confidence as the China messaging and gaming giant saw increased online ad sales.
Ollie's Bargain Outlet jumped 10% Wednesday after Q4 results easily beat expectations. Adjusted EPS leapt 22% to 84 cents as revenue climbed 9.7% to $549.8 million. For fiscal 2023, The closeout retailer projects 12% revenue growth, with same-store sales rising 2% after declines in the prior two years.
