A stock market rally attempt got underway, with strong gains for the major averages to start the week. But the major indexes hit resistance at key levels, as Treasury yields and the dollar rebounded, in part on a strong jobs report. Crude oil prices soared on a big OPEC+ production cut, with Exxon Mobil signaling strong Q3 results. Elon Musk said he's ready to buy Twitter for $44 billion, while the takeover trial was delayed. Tesla tumbled on disappointing Q3 deliveries, while EV giant BYD rose on surging sales and a big rental car deal. China EV startups fell following September deliveries. AMD guided Q3 revenue sharply lower.
Stock Market Rally Attempt Begins
The Dow Jones, S&P 500 and Nasdaq composite leapt early in the week, rebounding from bear market lows to kick off a rally attempt. But they pared gains significantly as Treasury yields and the dollar rebounded from initial pullbacks. Crude oil prices leapt on an OPEC+ production cut, sending energy stocks sharply higher. Tesla tumbled on disappointing deliveries and Elon Musk's renewed intention to buy Twitter. AMD warned, hitting chip names.
Jobs Report Still Too Hot For Fed
Employers added 263,000 jobs in September, the smallest gain in over a year, but still far too strong for the Federal Reserve. The jobless rate fell back to 3.5%, a long-term low. However, the annual gain in hourly wages slowed to 5%. Still, earlier in the week, the Labor Department reported that the number of job openings tumbled by over 1.1 million in August. Meanwhile, factory activity continues to lose steam. The Institute for Supply Management's manufacturing index fell 1.9 points to 50.9 in September, not far above the 50 neutral level. The forward-looking new orders subindex fell 4.2 points to 47.1.
Crude Jumps On OPEC+ Production Cut
The Organization of the Petroleum Exporting Countries and its key allies including Russia agreed to cut production quotas by 2 million barrels per day, the largest reduction since April 2020. OPEC+ aims to support oil prices, despite White House pressure and recession risks around the world. Several OPEC+ nations have already been struggling to reach existing quotas, so the true output reduction may be just north of 1 million. Still, crude oil prices surged for the week after four straight monthly declines.
Exxon Mobil signaled natural gas prices would support already strong third-quarter expectations. Shares of the diversified oil giant jumped on the Q3 update and rebounding energy prices.
Musk Says He Wants To Buy Twitter, Wins Trial Delay
Tesla CEO Elon Musk reversed course and said he now wants the social media company for $44 billion, or $54.20 a share, a deal he originally made in April, then tried to withdraw. Musk wants some new conditions, and didn't offer new assurances to Twitter. But the Delaware Court of Chancery gave him until Oct. 28 to close the deal. That effectively puts the Twitter trial, set to start on Oct. 17, on hold. Twitter stock soared on Musk saying he wants to buy the company, but then pared gains with the deal still not finalized.
AMD Misses Q3 Sales Goal By Wide Margin
Advanced Micro Devices announced preliminary results for the third quarter that were much weaker than expected. It now expects revenue of $5.6 billion, vs. its prior target of $6.7 billion. It blamed soft PC chip sales, which fell 40% year over year in the quarter. AMD said data center, gaming and embedded chip sales grew significantly year over year and were in line with expectations. Total revenue is seen rising 29% in Q3. It also guided lower for its adjusted gross profit margin. It will report official results on Nov. 1. AMD stock plunged Friday, with many other chip names retreating.
Record Tesla Deliveries Miss Views
Tesla reported deliveries of 343,830 EVs in Q3, up 42% vs. a year earlier and topping Q1's record 310,048. But analysts had expected roughly 360,000. Tesla produced 365,923 vehicles in the latest quarter, more than 22,000 above deliveries. The EV giant cited logical challenges and an increased number of vehicles in transit, but insufficient China demand seems to be the root cause. With the Shanghai plant expanded and the Berlin and Austin plants slowly picking up, Tesla production should be much higher in Q4. Can demand, especially in Eurasia, keep up? Elon Musk tweeted that Tesla Semi production is starting. But Tesla stock sold off hard on the weak deliveries as well as concerns that Musk will sell more Tesla stock to finance a Twitter deal.
GM Sales Stand Out
General Motors grew U.S. new vehicle sales 24%, year over year, in the third quarter. Ford grew Q3 sales 16%. The auto giants said consumer demand remains strong and GM also said vehicle inventories are modestly improving. But Stellantis, Toyota and Honda reported Q3 sales fell in the U.S. vs. a year earlier and vs. Q2. Market tracker Cox Automotive cut its 2022 sales forecast, predicting a 9% drop in auto sales vs. 2021 and the lowest level in a decade. While supplies slowly improve, rising interest rates could make car loans more costly and turn off buyers, industry experts say.
BYD Sales Surge, China EV Startups In Transition
China's EV giant BYD pegged a seventh straight month of record sales for electric and hybrid vehicles in September. It sold over 200,000 EVs for the first time, with exports a small but fast-growing segment. BYD's third-quarter sales nearly tripled to 538,704 EVs, crushing the Tesla tally of 343,830 fully-electric vehicles. BYD also announced a deal to sell more than 100,000 EVs to German rental car giant SIXT, with the first deliveries in Q4. Chinese EV startups Nio, Xpeng and Li Auto all grew Q3 sales year over year. Still, product transitions and supply issues weighed on delivery volumes, analysts said, with Xpeng lagging. Nio officially kicked off a much-wider European expansion on Friday, roughly a week after BYD made a similar move. BYD stock rose, but from six-month lows. Nio and Li Auto tumbled to multimonth lows, while Xpeng skidded to fresh record lows, amid broader China EV market concerns.
News In Brief
Lamb Weston earnings per share surged 317%, beating views, while the frozen potato giant's sales grew 14% to $1.13 billion, in line. LW stock ran past a buy point. Packaged food stocks have been holding up well despite economic headwinds and a difficult market environment.
Aehr Test Systems beat Wall Street's estimates for its fiscal first quarter and kept its robust growth targets for the full year. The semiconductor equipment maker cited strong sales of gear to test and process silicon carbide power chips used in electric vehicles. Shares soared.
CVS Health said the Centers for Medicare & Medicaid Services downgraded its Aetna national preferred provider organization plan to 3.5 stars. That means it won't be eligible for bonus payments in 2024.
Acuity Brands Q4 earnings grew 20% on 11% revenue growth to $1.11 billion. The lighting and building management company topped estimates.
Constellation Brands reported a 33% jump in adjusted EPS with revenue up 12% to $2.66 billion for the beer behemoth, beating views.
