The stock market rally marched higher as the Fed took a slightly more dovish stance, even though it said rate hikes will continue. Friday's superhot jobs report failed to derail the uptrend. Big earnings or guidance continued to be mixed, but Meta Platforms skyrocketed on cost cuts, revenue guidance and a big buyback. AMD also was a big winner, while Apple rallied despite missing views. Google parent Alphabet and Amazon.com had solidly weekly gains. General Motors soared on strong earnings, though Ford tumbled on its results. Oil stocks skidded as energy prices retreated.
Market Rally Decisively Clears Key Resistance
The market rally continued rising, as investors hailed Fed chief Jerome Powell's comments and often-mixed earnings, taking a strong jobs report in stride. The Nasdaq and small-cap Russell 2000 moved decisively above their late 2022 highs. The S&P 500 also cleared its recent peaks, while the Dow Jones faced some struggles. Crude oil futures retreated significantly, while natural gas continued to tumble. Treasury yields tumbled to their lowest levels in several months.
Fed Tame As Jobs Roar
The Federal Reserve hiked its key rate a quarter-point and signaled at least two more hikes still to come. With Wall Street betting that the Fed will pause after just one more hike in March, that guidance could have been a downer. But Fed Chair Jerome Powell seemed to fire up animal spirits by hailing disinflationary trends, while sounding upbeat about a soft landing for the U.S. economy and expressing no qualms about easing financial conditions. However, the January jobs report out on Friday showed hiring surged in January with unemployment falling to the lowest level since 1969. However, wage gains slowed to 4.4%, lowest since August 2021. Still, hiring strength and a new rock-bottom for unemployment have shifted odds slightly in favor of two more rate hikes. Meanwhile, the ISM U.S. manufacturing index was weak, but the ISM's service-sector gauge showed a big jump.
Meta Platforms Surges On 2023 Outlook
Meta Platforms reported a 52% EPS decline, in line with views, while revenue fell 4%, slightly topping. Shares surged as the Facebook parent vowed to make 2023 a "year of efficiency" following massive spending on the metaverse in 2022. Meta guided up on Q1 revenue and slashed capital spending and other planned expenses for the year. It also announced a $40 billion buyback.
Apple Misses Holiday-Quarter Targets
Consumer electronics giant Apple missed its December-quarter sales and earnings targets amid supply constraints and foreign exchange headwinds. Fiscal Q1 EPS fell 10% as sales sank 5% to $117.2 billion. Apple's iPhone revenue sank 8% to $65.8 billion after it couldn't make enough iPhone 14 Pro models to meet demand. Apple's Mac computer sales tumbled 29% to $7.7 billion. And revenue from Apple's wearables, home and accessories unit declined 8% to $13.5 billion. However, iPad sales rose 30% to $9.4 billion in the holiday quarter. And services revenue increased 6% to $20.8 billion.
Amazon EPS Dives, Outlook Weak
Q4 EPS crashed 98%, well below views. Revenue rose nearly 9% to $149.2 billion, topping views, but slowing from Q3's 15%. Amazon Web Services revenue popped 20%, slowing from Q3's 27.5% and slightly below views. Amazon guided Q1 revenue forecasts lower, with high-margin AWS expected to show further deceleration in growth. Shares fell Friday but rose solidly for the week.
Google Misses As Ad Revenue Falls
Google-parent Alphabet reported Q4 earnings and revenue that missed Wall Street targets amid slowing growth in internet search advertising, YouTube ads and cloud-computing services. Q4 earnings tumbled 31%. Gross revenue rose 1% to $76.05 billion. Advertising revenue fell 3% to $59.04 billion, missing estimates. In addition, ad revenue at Google's YouTube fell more than 7% to $7.96 billion. Google said cloud-computing revenue rose 32% to $7.32 billion, missing estimates of $7.44 billion. In Q3, cloud revenue rose 38%.
Chipmakers Offer Weak Outlook
Semiconductor manufacturers mostly guided Wall Street lower for the current period as they delivered earnings reports in the past week. Chipmakers offering a weak outlook included those exposed to personal computers and smartphones, such as Advanced Micro Devices, Qorvo and Qualcomm. Bucking the trend with beat-and-raise earnings reports were Allegro MicroSystems, Microchip Technology and Silicon Labs. They have greater exposure to automotive, industrial and Internet-of-Things markets.
Oil Majors' Results Mixed
Exxon Mobil reported a 66% EPS gain, though the 12% revenue rise missed. Amid surging cash, Exxon plans on returning up to $35 billion to shareholders through dividends and buybacks in 2023. Shell EPS swelled 67% due to strong LNG and gas trading and refining margins, while revenue increased 19% to $101.3 billion. ConocoPhillips missed earnings and revenue views, though EPS was up 19% and sales 21%. It plans to return $11 billion to shareholders in 2023. Oil stocks generally fell amid skidding oil and gas prices.
GM Crushes Views, Ford Leaves $2 Billion 'On The Table'
General Motors crushed earnings and revenue estimates for the fourth quarter, while guiding for another solid year in 2023. Year over year, EPS grew 57%, accelerating from a 48% gain the prior quarter. Revenue rose 28%, but margins fell. Demand and pricing for GM vehicles "remain strong," CFO Paul Jacobson said, amid recession fears. The auto giant also announced a hefty investment in Lithium Americas, as it ramps up on electric vehicles and lithium-based EV batteries. Ford went the opposite way, missing Q4 earnings estimates and losing $2 billion for the full year due to poor execution, while giving a downbeat outlook for 2023. GM jumped, flashing a buy signal. Ford tumbled on results, slashing weekly gains.
Meanwhile, new U.S. vehicle sales were stronger than expected in January as supply disruptions continue to ease.
More crossover SUVs will be eligible for tax credits at prices up to $80,000, the U.S. government announced Friday in a reversal. That should benefit Tesla and Ford in particular.
Homebuilders Rally On Earnings
Pulte Group, NVR and Meritage topped EPS and revenue views, with solid growth, though orders point to weaker results ahead. M.D.C. Holdings missed on revenue. But all four homebuilders rallied solidly for the week, along with other builders and many other housing-related stocks. One outlier: Beazer Homes reported mixed results and tumbled Friday.
Drug Earnings Mixed
Pfizer beat adjusted earnings expectations at $1.14 per share, up 45%, but sales rose just 2% and the drug giant projected massive declines for its Covid products this year. Merck, Eli Lilly and Bristol Myers Squibb all beat quarterly expectations. But Lilly shares fell on lighter-than-expected sales for its newest diabetes treatment, Mounjaro. Bristol Myers' sales of generics-facing Revlimid plummeted 32% with declines expected to continue. Merck's 2023 outlook lagged. GSK and Novo Nordisk, on the other hand, topped sales and per-share earnings forecasts, but Novartis reported light profit. Sanofi met EPS views but sales were light.
Biotech Earnings
Amgen fell 7%, just missing, while flat sales missed. Shares fell on its 2023 outlook, which didn't include Amgen's looming Horizon Therapeutics takeover. Gilead Sciences popped after its earnings report, with EPS surging 142% and overall sales 2%, both easily beating. Regeneron also beat forecasts, though sales tumbled 31% due to a downfall in Covid antibody sales, with adjusted EPS off 46%. Amgen fell sharply, while Gilead and Regeneron rose, with REGN flirting with a breakout.
Caterpillar Profit Disappoints
Caterpillar earnings for Q4 rose 43% to $3.86, but missed estimates. Revenue climbed 20% to $16.6 billion, ahead of views. CAT stock, a global bellwether, has surged on a better global economic outlook led by China and Europe. Yet Caterpillar says it's not yet seeing higher demand in China. CAT stock tumbled to its 50-day line, but bounced somewhat Friday.
Trucking Earnings On Different Roads
Old Dominion Freight Line earnings rose 21%, well above views. But ArcBest and Saia missed, with modest year-over-year EPS declines. ArcBest and Saia both noted that shipping tonnage fell and volume slowed during a "softer freight environment." Still, revenue per shipment grew due to pricing increases. ODFL spiked. ArcBest and Saia initially tumbled on Friday, but rebounded to continue strong weekly gains.
Footwear Makers Step Up
Deckers Outdoor reported a 24% EPS gain with revenue up 13%, both beating. Hoka running shoe sales spiked 91% to $352 million. But Deckers' guidance implied a slight Q4 miss. Skechers posted an 18% per share profit decline with sales up 14%. The shoe maker guided low on revenue.
Health Insurers Slide On Outlook Concerns
Cigna edged past Q4 estimates with 4% growth, but the big commercial health insurer offered below-expected guidance for 2023, despite predicting a boost of 1.2 million members. CI stock sold off toward a three-month low. Leading Medicare Advantage player Humana cruised past EPS estimates with 31% growth, while saying it'll earn at least as much as the consensus view in 2023. HUM stock rallied on the report, but it didn't last. That's because the government agency that oversees Medicare Advantage proposed the smallest increase since 2016 for next year.
News In Brief
GE HealthCare Technologies reported a 4% EPS drop with revenue up nearly 8% in its report since its spinoff from General Electric. GEHC guided for modest growth in 2023.
UPS reported a 1% EPS gain, slightly beating, while revenue fell 3% to $27 billion, missing. The shipping giant announced a $5 billion buyback and hiked its dividend nearly 7%.
McDonald's reported 16% EPS growth while revenue dipped 1%, both beating. But shares fell as the fast-food giant warned that inflation concerns will affect margins.
ChampionXtopped EPS views, but the drilling tech firm missed on revenue and guided low. CHX stock tumbled. Helmerich & Payne beat first-quarter 2023 earnings estimates Monday, with revenue up 76% to $720 million.
World Wrestling Entertainment reported a 22% EPS drop while revenue rose 5%, both slightly missing views.
Dynatrace reported fiscal Q3 EPS rose 38% while revenue climbed 24% to $297.5 million, both beating. Annual recurring revenue, or ARR, rose 25% to $1.163 billion, just topping estimates. The app monitoring software maker guided higher for current quarter revenue.
