The bear market intensified this past week, with the Dow Jones, S&P 500, Nasdaq composite and Russell 2000 all undercutting 2022 lows following the hot CPI inflation report, as Treasury yields spiked to 13-year highs. But the major indexes soon rebounded for major gains. A new market rally is underway, but faces a lot of headwinds. Earnings season kicked off, including JPMorgan Chase, UnitedHealth, Taiwan Semiconductor and Delta Air Lines.
Stock Market Bounces From Lows
The major indexes hit bear market lows, but rebounded powerfully from Thursday's lows. That starts a market rally attempt, but only a start. Stocks faded again on Friday. The 10-year Treasury yield surged to a 13-year high above 4% on Thursday but didn't close above that key level. Earnings season is getting underway, with JPMorgan Chase, UnitedHealth, Taiwan Semiconductor and Delta Air Lines reporting.
Consumer Inflation Still Too Hot
Yet another unexpectedly hot inflation report on Thursday jolted Federal Reserve rate-hike expectations higher. While the annual CPI inflation rate dipped to 8.2%, core prices, excluding food and energy, accelerated to a 40-year-high 6.6%. The strength came despite lower gas prices vs. the prior month and flat prices for core goods. That's because prices for nonenergy services, which account for 57% of household spending, rose 6.7%, also the highest since 1982. That category includes rent, transportation and medical care. The broad strength seems to confirm that inflation won't come down a whole lot until the job market cracks. The Federal Reserve is determined to make that happen. Minutes from the Sept. 20-21 meeting indicated that "many participants" argued that "the cost of taking too little action" outweighed the risk of not tightening enough.
September retail sales out Friday were flat on the month, though the softer-than-expected reading was offset by upward revisions to August data. The consumer is muddling through for now, while drawing down savings. However, tax rebates from states, including checks that just went out in California, could provide a lift in Q4.
The Federal Reserve Race To Take Down The S&P 500 And Break The World
Bank Earnings Generally Top
Big banks kicked off earnings Friday. Wells Fargo, JPMorgan Chase, Citigroup and PNC Financial topped views, though many showed declining EPS amid inverted yield curves, higher capital requirements, a struggling housing market and lower noninterest income. But revenue tended to show positive growth due to higher interest income. PNC posted the best results, with its earnings jumping 14.5% to $3.78 and revenue increasing 6.7% to $5.55 billion. Morgan Stanley missed EPS views with revenue falling.
Delta Air Bullish Now And Beyond
Delta Air Lines earnings surged 403% but just missed views, partly on Hurricane Ian impacts. Revenue grew 40% to $12.8 billion, beating. The carrier guided Q4 EPS views higher, predicting revenue will rise 5%-9% vs. the pre-Covid Q4 2019. It cited corporate travel and "robust domestic and international demand." Delta is working to restore its full destination network by summer 2023, spurring a bullish 2024 forecast. Shares popped, but are near two-year lows. United Airlines is increasing its European flights for next summer while American Airlines said preliminary Q3 revenue grew 13%, slightly topping. Both report full Q3 results next week.
UnitedHealth Earnings Strong
UnitedHealth reported a 28% EPS rise, the second quarter in a row of faster gains. Revenue climbed 12% to $80.894 billion, also beating, but the second straight quarter of slightly slowing growth. The Dow Jones health insurance giant cited growth across its main UnitedHealthcare Optum Health units. UnitedHealth raised its full-year EPS guidance, largely on the Q3 beat. UNH stock rose.
TSMC Bucks Chip Sales Downturn
Taiwan Semiconductor Manufacturing beat Wall Street's Q3 targets, with EPS surging 67% as sales leapt 36% to $20.23 billion. The world's largest contract chipmaker guided higher for the current Q4, but sees sales growth slowing to 28%. It also cut its planned 2022 capital expenditures by at least 10% amid slowing sales. TSM stock bounced Thursday from a two-year low.
Commercial Metals Earnings Jump
The steel and metal products maker reported fiscal fourth-quarter earnings jumped 94% to $2.45 a share, modestly beating. Sales grew 20% to $2.41 billion just beating. Commercial Metals strong market conditions in North America while Europe remains volatile. For fiscal year 2023, CMC believes it is well positioned with contract backlog and average pricing at "historically high levels." CMC stock jumped on earnings, running above its 50-day line. Steel Dynamics, which reports Oct. 19, also regained its 50-day.
Pepsi Pops On Profit
PepsiCo reported Q3 earnings rose 10% vs. a year earlier while revenue climbed 9% to $21.97 billion, both beating analyst views, as the snack and beverage giant raised prices sharply, more than offsetting higher costs. The company hiked its full-year forecast. Shares rose sharply.
Labor Rule Slams Gig Delivery Firms
The Labor Department unveiled a much-anticipated proposal that could reclassify millions of independent contractors, known as gig workers, as employees. The news took a heavy toll on shares of Uber, Lyft and DoorDash as it could upend their business model. Gig workers, or drivers, perform income-earning activities outside of the traditional, long-term relationship between employers and employees. Companies are required to provide certain benefits and protections to employees but not to contractors.
News In Brief
Dice Therapeutics skyrocketed more than 62% on Tuesday after unveiling promising results for a psoriasis pill. After four weeks of treatment, patients showed a 43.7% decline in symptoms vs. just a 13.3% decline for placebo recipients.
Merck signed on to help Moderna develop and commercialize a personalized cancer vaccine for high-risk melanoma patients. Moderna stock surged over 8% on Wednesday. The vaccine isn't preventative. Rather, it helps patients develop tumor-fighting immune cells.
Intel is planning a major reduction in head count, Bloomberg reported. The job cuts likely will number in the thousands, as the chipmaker looks to cut costs amid slumping PC demand.
Uranium miner Cameco and Brookfield Renewable Partners will buy nuclear power giant Westinghouse for nearly $8 billion, taking 49% and 51% stakes, respectively. CCJ stock plunged while Brookfield rose slightly on the news.
Kroger will buy fellow grocery operator Albertsons for $24.6 billion, or $34.10 a share
