The stock market rally made a choppy advance this week, with the major indexes moving above their 50-day moving averages at various times but struggling to hold it. The Russell 2000 also advanced, but only after closing below its 200-day line on Wednesday. Stocks rallied despite rises for Treasury yields and the dollar. Inflation and economic data overall lowered fears of another Fed rate hike. Crude oil prices rallied to fresh 2023 highs.
The Apple iPhone 15 unveiling failed to wow investors, while Adobe gave mixed guidance and Oracle disappointed. Arm Holdings jumped in its IPO debut. A United Auto Workers strike began Friday vs. General Motors, Ford Motor and Stellantis.
Stocks Rise Around Key Levels
The Dow Jones, S&P 500 and Nasdaq had some ups and downs, rising slightly as of Friday morning but struggling to hold the 50-day line. The Russell 2000 rebounded from a midweek drop below the 200-day. But the market rally remains under pressure. Tesla surged past an early buy point with some other megacaps also flashing buy signals, but breadth remains weak. Energy stocks kept rising as U.S. crude oil topped $90 a barrel. Treasury yields rebounded back toward long-term highs.
Economic Details Trump Headlines
This week's economic headlines showed the consumer price index and retail sales for August coming in above expectations, but the details were quite positive for the Federal Reserve rate outlook.
The CPI rose a hefty 0.6% on the month amid a jump in gas prices, while core prices, excluding food and energy, rose 0.3% vs. 0.2% forecasts. That doesn't sound encouraging, but details in the CPI and producer price index point to good news for the Fed's primary inflation rate, the PCE price index. Wall Street economists now expect about a 0.15% rise in core PCE prices for August. That could lower the 12-month core inflation rate to 3.8% and the 3-month annualized trend to around 2.3%, not far off the 2% target.
August retail sales rose 0.6%, both overall and excluding autos. Those were above views, but more than offset downward revisions in the prior two months. Excluding gas station sales, which jumped 5% as fuel prices shot up, retail sales rose a modest 0.2% in August. With payments on $1.7 trillion in federal student loans now resuming, the long-awaited cooling in retail sales could be at hand.
Apple Unveils iPhone 15 Smartphones
The consumer electronics giant introduced its iPhone 15 series smartphones and Apple Watch Series 9 smartwatches at a media event. Apple fell after the relatively surprise-free event. The iPhone 15 handsets are largely incremental upgrades to the current iPhone 14 series, with the two high-end Pro models getting the best new features. Those features include a new processor and a redesign with a titanium frame and customizable "action button." The iPhone 15 Pro Max got a $100 increase with its starting price at $1,199. The new smartphones go on sale Sept. 22.
Arm Stock Surges After IPO
Chip designer Arm jumped 25% in its trading debut Thursday, after its IPO priced at $51 a share, the high point of its expected range. Wall Street analysts questioned ARM's high valuation given its current lack of sales growth. Arm's chip designs are used by every major semiconductor designer including Apple, Nvidia, Qualcomm and many more. They are used in virtually every smartphone.
Adobe Beats Goals, Gives Mixed Outlook
The digital media and marketing software firm beat fiscal third-quarter estimates slightly, with EPS up 20% as revenue grew 10% to $4.89 billion. Adobe guided modestly higher for Q4 earnings but only in line for sales. Analysts were hoping for a bigger sales boost from Adobe's new Firefly generative AI offerings. Shares fell.
Oracle Dives On Revenue, Guidance
Oracle reported a 16% EPS gain for fiscal Q1, slightly beating. but sales rose 9% to $12.45 billion, slightly missing and with growth slowing for a second straight quarter, as cloud-related growth slowed. The database software and cloud-computing giant guided for Q2 revenue growth of 6%, below views. Shares plunged 13.5% on Tuesday.
UAW Auto Strike Begins
The United Auto Workers began a strike Friday vs. Ford, General Motors and Chrysler-Jeep parent Stellantis, as the deadline for new labor contracts passed with the two sides far apart. UAW members walked off the job at three U.S. auto plants on Friday, one for GM, Ford and Stellantis' Jeep vs. a full walkout. Wall Street is betting on a relatively short auto strike with minimal disruptions to production and the economy.
Airlines Warn On Fuel Costs
American Airlines, Spirit Air and Delta Air Lines slashed their earnings outlooks, warning the surge in jet fuel prices will bite into results. Spirit and American cut their guidance for margins and revenue per available seat mile according to Wednesday announcements. American will also recognize $230 million in retroactive payments for a late-August labor deal with pilots. Spirit noted increased promotional activity and steep discounts in the second half of Q3 through the pre-Thanksgiving travel period as flight demand dipped. On Thursday, Delta cut the midpoint of its Q3 EPS guidance by 40 cents but sees total revenue in the "upper half" of its 11% to 14% growth forecast. Airline stocks continued their slide.
Lennar Tops Views
Lennar reported smaller-than-expected declines in fiscal third-quarter earnings and revenue late Thursday, buoyed by increased home deliveries as the new-home housing market remains hot. EPS fell 23% with revenue down nearly 3% to $8.73 billion. Deliveries increased 8% to 18,559 homes, helping to offset an average sales price of $448,000 vs. nearly $500,000 a year earlier. New orders jumped 37% to 19,666 homes, totaling $8.6 billion. Miami-based Lennar also reported that its backlog at the end of fiscal Q3 was 21,321 homes, worth $9.9 billion. Lennar stock fell, as the housing sector has struggled in recent weeks amid rising mortgage rates.
News In Brief
Salesforce touted artificial intelligence initiatives at its Dreamforce customer conference in San Francisco. The software maker did not hold an investor day to update financial targets in tandem with the conference. Salesforce announced the launch of the Einstein 1 platform and Einstein Copilot feature. Einstein 1 will embed AI into all Salesforce products by mid-2024. Copilot is a conversational AI assistant that is integrated within the user interfaces of all Salesforce apps. Salesforce announced new cloud computing-based services targeting the life sciences market, taking on Veeva Systems, a former partner.
The Justice Department's antitrust trial vs. Google-parent Alphabet began on Sept. 12. The trial is expected to take 10 weeks. The DOJ alleges that Google maintains a monopoly "through exclusionary distribution agreements that steer billions of search queries to Google each day." The judge could order a Google breakup or change how Google promotes its search engine.
J.M. Smucker agreed to buy Twinkies owner Hostess Brands for $5.6 billion according to a Monday announcement. J.S. Smucker will pay $34.25 per share, mostly in cash, and assume roughly $900 million in debt. The deal is expected to close in Smucker's third quarter. SJM stock plunged to a 52-week low while TWNK shares soared.
Disney ended its blackout fight with Charter Communications on Monday and restored its channels after pulling its content over a payment dispute in late August. Specific terms were not disclosed. In the coming months, certain tiered Spectrum subscribers will have access to paid Disney content including Disney+ and ESPN+. Elsewhere, reports Thursday said Disney was in early discussions to sell its ABC network assets to local TV giant Nexstar. Disney CEO Robert Iger on Friday denied the reports.
Boeing landed a $7.8 billion deal with Vietnam Airlines, the White House announced Monday as President Biden visited Hanoi. Vietnam Air, which has an Airbus-only fleet, will buy 50 737 Max jets.
Netflix fell after CFO Spence Neumann said the internet television network won't see a near-term sales and earnings lift from its advertising-supported service levels. He also said operating margins will increase slower than expected.
