Get all your news in one place.
100’s of premium titles.
One app.
Start reading
The Street
The Street
Business
Martin Baccardax

Stocks Edge Higher, Amazon, Gap, Applied Materials, Visa - Five Things To Know

Five things you need to know before the market opens on Friday November 18:

1. -- Stock Futures Cautiously Higher Amid Inflation Re-Think  

U.S. equity futures moved cautiously higher Friday as investors looked to claw back losses from a muted week for stocks while closely tracking both the dollar and Treasury bond markets amid a seemingly renewed hawkish stance from the Federal Reserve.

Stocks are on pace for a modest weekly decline, pushed lower by rising bond yields and bets on a longer series of rate hikes from the Fed as its toughens its inflation stance in the face of a resilient jobs market and robust consumer spending.

St. Louis Fed President James Bullard, in fact, said that not only have the current run of rate hikes -- the most in more than a generation -- had only "limited" impact on inflation, but the current policy rate remains a long way from being "sufficiently restrictive" to bring inflation back to the Fed's preferred 2% target.

The comments, while perhaps outside the Fed's central thesis, have nonetheless sparked a change in bets as to when, and at what level, the central bank will stop raising rates next year, with new estimations of a 5.25% 'terminal' Fed funds rate now taking shape.

That will ostensibly add pressure on stocks in the weeks ahead, particularly given next week's Thanksgiving Day holidays and the lack of market liquidity, and the following weeks before the Fed's next policy meeting in December,

For the time being, however, a modest overnight pullback in the U.S. dollar, which traded 0.28% lower against its global peers at 106.397, as well as steadying Treasury yields has stocks on the move.

Futures contracts tied to the S&P 500 are priced for a modest 13 point opening bell gain while those linked to the Dow Jones Industrial Average are indicating a 70 point bump. The tech-heavy Nasdaq is priced for a 50 point advance.

Overnight in Asia, rising Covid infections in China, as well as an unnerving missile launch from North Korea during the Asia-Pacific Economic Cooperation (APEC) summit in Bangkok, kept a lid on regional gains, with the MSCI ex-Japan index rising 0.22% into the close of trading. 

Japan's Nikkei 225 closed 0.11% lower following data showing the country's inflation rate hit a forty-year high of 3.6% last month. 

In Europe, stocks were modestly firmer, but still on pace for a weekly decline, as European Central Bank President Christine Lagarde said raising rates "may not be enough" to slow the region's record-high inflation rates during an address in Frankfurt, suggesting moves to restrict growth could follow. The region-wide Stoxx 600 was marked 0.95% higher in the opening hours of trading. 

2. -- Applied Materials Leaps On Solid Q4 Earnings, Solid Outlook

Applied Materials (AMAT) shares moved higher in pre-market trading following a fourth quarter earnings beat paired with a solid near-term demand outlook for the semiconductor equipment maker.

Applied Materials, which lowered its fourth quarter profit outlook last month after President Joe Biden unveiled new restrictions on the export of high-tech semiconductors and chipmaking equipment to China-based companies, said adjusted earnings for the three months ending in October came in at $2.03 per share, firmly ahead of Street forecasts, with revenues rising 10% to $6.75 billion.

Looking into the group's fiscal first quarter, Applied Materials said it sees sales in the region of $6.7 billion, with a margin for error of $400 million, a figure it says includes the impact of U.S. export restrictions. 

"We expect 2023 to be a down year for wafer fab equipment spending, but we believe that Applied's business will be more resilient, thanks to our large backlog, growing service business, and strong customer demand for our leadership products that enable key technology inflections," CEO Gary Dickerson told investors on a conference call late Thursday. 

Applied Materials shares were marked 4.1% higher in pre-market trading to indicate an opening bell price of $108.72 each..

3. -- Visa Taps President Ryan McInerney As New Group CEO

Visa (V) shares edged lower in pre-market trading after the credit card group announced changes to its senior leadership team, naming long-time president Ryan McInerney as new CEO.

McInerney will replace Al Kelly, who has lead Visa since 2016, staring on February 1. Kelly will transition to the role of executive chairman, the company said.

Last month, posted better-than-expected third quarter earnings powered in part by a surge in travel-related spending that offset weakness in Europe. 

"We are extremely grateful for Al’s leadership over the past six years. His deep industry expertise and eye for the future have positioned Visa as a leader in payments in an evolving and increasingly challenging external environment,” said lead board director John Lundgren. “Visa’s success will continue to accelerate with Ryan assuming this new role. He is an experienced leader who has played an integral role in Visa’s growth and innovation."

Visa earned $1.993 per share over the three months ending in September, well ahead of the Street consensus forecast of $1.86, per share, as group revenues jumped 19% to a Street-beating $7.8 billion. Cross border spending was up 36%, Visa said, with payments volume up 10% on a constant-currency basis.

Visa shares, a Dow component, were marked 0.32% lower in pre-market trading to indicate an opening bell price of $210.32 each.

4. -- Gap Surges On Surprise Q3 Profit, Books $53 Million Yeezy Gap Hit

Gap (GPS) shares surged higher in pre-market trading after the clothing retailer swung to profit over the third quarter thanks in part to firmer demand for its higher-end clothing.

Gap, which also operates the Old Navy and Banana Republic brands, said adjusted earnings for the three months ending in October were pegged at 77 cents per share, with revenues up 2.5% to a Street-beating $4.04 billion.

The group also booked a $53 million impairment changed linked to its decision to sever a partnership with Kanye West, known as Yeezy Gap, following the singer's anti-Semitic remarks last month. Looking into the holiday quarter, Gap said it sees net sales down by 'mid-single digits', in percentage terms, from last year's levels. 

"We saw consistent category strength in dresses, sweaters, pants and woven tops across the portfolio, with active underperforming across the board as consumers continue to shift away from the cozy at-home lifestyle," CEO Bobby Martin told investors on a conference call late Thursday. 

Gap shares were marked 7.8% higher in pre-market trading to indicate an opening bell price of $13.70 each.

5. -- Amazon CEO Says Jobs Cuts Will Extend Into 2023 

Amazon (AMZN) shares moved higher in pre-market trading after CEO Andy Jassy cautioned that the online retailing giant will likely need deeper job cuts, extending into next year, amid a 'challenging' global economy.

Amazon, which unveiled its first round of job cuts this week, largely targeted within its Devices & Services business, said its annual planning exercise will take longer than normal to complete, "which means there will be more role reductions as leaders continue to make adjustments".

"I've been in this role now for about a year and a half, and without a doubt, this is the most difficult decision we've made during that time (and, we've had to make some very tough calls over the past couple of years, particularly during the heart of the pandemic)," Jassy said in a letter to the group's 1.6 million global employees.

"We are working to support those who are affected and trying to help them find new roles on teams that have a need; and in cases where that's not possible, we are offering packages that include a separation payment, transitional health insurance benefits, and external job placement support."  

Amazon issued a disappointing holiday revenue forecast in late October, and unveiled slowing growth in its lucrative Web Services business, both of which clouded a better-than-expected third-quarter earnings report.

Amazon shares were marked 0.7% higher in pre-market trading to indicate an opening bell price of $95.52 each.

Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.