The bear market intensified, with the S&P 500 joining the Dow Jones in undercutting their June lows and the Nasdaq composite sitting just above that level. The 10-year Treasury yield continued to rise amid hawkish Fed plans and strong economic data, though it backed off from 4% as the Bank of England resumed bond-buying. Biogen skyrocketed on positive trial data for a new Alzheimer's drug, with Eli Lilly gapping up to record highs on hopes for a similar treatment. Nike plunged on soaring inventories is spurring margin-killing liquidations. Micron reported weak guidance and slashed capital spending. Tesla hit resistance ahead of big news.
Stock Market Keeps Falling
The S&P 500 index undercut its bear market lows, following the Dow Jones. The Nasdaq is just above those levels. The 10-year Treasury yield rose for a ninth straight week, but backed off 4% as the Bank of England abruptly resumed bond buying. Biogen skyrocketed on late-stage Alzheimer's treatment data, also lifting Eli Lilly and other pharma players working on similar drugs.
Inflation, Jobless Claims Aren't Fed Friendly
The Federal Reserve's favorite inflation gauge, the personal consumption expenditures price index, showed sharper-than-expected price increases in August. The overall PCE price index rose 0.3% on the month, while core prices, excluding food and energy, rose 0.6%. The annual inflation rate eased to 6.2%, still higher than expected. Core inflation rose to 4.9% from 4.7%.
Personal spending rose 0.4% on the month, but just 0.1% adjusted for inflation, as real spending on goods declined, offsetting service spending growth. The inflation report and a drop in new jobless claims to a five-month-low 194,000 in the Sept. 24 week both seemed to show that the Federal Reserve has made little progress in its battle to rein in the job market and tame price pressures.
Still, there are some signs of growing fragility. Households saved just 3.5% of disposable income in August, down from 7.5% in December. That suggests less wherewithal to withstand high prices and any pickup in unemployment. The Fed also is beginning to reverse the boom in home prices. The S&P CoreLogic Case-Shiller index of home prices in 20 major cities fell 0.44% in July, its first decline since 2012.
Amid tumultuous currency markets Fed vice chair Lael Brainard in a Friday speech highlighted the importance of "cross-border spillovers and financial vulnerabilities" in the Fed's monetary policy deliberations. If conditions worsen, the Fed may have to slow rate hikes sooner than expected.
Biogen Rockets On Alzheimer's Drug
Biogen rocketed 40% Wednesday after the biotech said its experimental Alzheimer's treatment, lecanemab, succeeded in a final-phase test. The drug removed built-up plaque called beta amyloid in the brains of patients with early-stage Alzheimer's disease and, importantly, that led to a benefit on cognition. Patients who received lecanemab had a 27% slower decline in cognition vs. placebo recipients. Eli Lilly surged 7.5% as Roche popped nearly 7%. Both are working on late-stage drugs using the same mechanism. Prothena skyrocketed almost 88% on renewed hopes for its amyloid-targeting Alzheimer's drug.
Micron Sales, Outlook Disappoint
Micron Technology missed Wall Street's already lowered expectations for sales in its fiscal fourth quarter and guided much lower than views for the current quarter. EPS fell 40%, but topped views. However, sales declined a steeper-than-expected 20% to $6.64 billion. The memory-chip industry is experiencing a cyclical downturn. For its fiscal first quarter, Micron predicted adjusted earnings would drop 98% to 4 cents a share, with sales sinking 45% to $4.25 billion. Micron will halve capital spending in the current year.
Nike Dives On Weak Margins, Inventory Surge
Nike earnings fell 20% while revenue grew 4% to $12.69 billion, both slightly beating views. Gross margins fell significantly as inventories jumped 44% to $9.7 billion. For Q2, Nike expects reported revenue to grow in the low double digits while gross margin declines 350 to 400 basis points vs. a year earlier due to inventory liquidation efforts. NKE stock, already at two-year lows, plunged.
Cal-Maine Earnings, Sales Surge
America's largest egg producer reported booming earnings that just beat views vs. a year earlier loss. Revenue leapt 103% to $658.3 million, comfortably beating and the fifth straight quarter of accelerating top-line growth. The industry is starting to recover from last year's outbreak of bird flu, which reduced supply and sent egg prices flying. CALM stock rose on earnings, but then sold off, back below a buy point.
Tesla, China EV Sales
Registrations of Tesla vehicles in China last week increased 46% vs the week prior to 23,109, according to the China Passenger Car Association. Still, there are signs that China demand will not match newly increased Shanghai production capacity. BYD new-vehicle registrations jumped to 44,960 in the latest week, while Nio, Li Auto and Xpeng reported modest registrations. The latest weekly data came ahead of September monthly deliveries from China EV makers and Q3 global deliveries from Tesla. Those reports were expected over the weekend.
News In Brief
Cintas reported EPS grew 9% as revenue rose 14% to $2.17 billion. The Cincinnati-based provider of corporate uniforms and business services, also increased its full year guidance, but largely in line with Wall Street consensus.
Vertex Pharmaceuticals and Crispr Therapeutics jumped Tuesday after the duo said they would begin submitting their application for FDA approval of a sickle cell disease and beta thalassemia treatment in November. They plan to finish that process in the first quarter. If approved, the treatment would be the first drug that uses CRISPR gene editing to hit the market.
CarMax earnings tumbled 54%, far below views, with a 1.9% sales gain also missing. The used-car deal cited "affordability challenges." Meanwhile, Moody's downgraded the auto industry to negative, citing inflation pressures on manufacturers and potential buyers. Other auto dealers sold off, as well as automakers such as General Motors.
Paychex raised full-year earnings outlook after beating first-quarter estimates on both the top and bottom lines. Q1 EPS grew 16% while sales rose 11% to $1.21 billion. Businesses continue to look for HR technology to streamline payroll and benefits, as well as to more effectively recruit and retain talent.
Jabil easily beat expectations for its fiscal fourth quarter and guided higher for the current period. The contract manufacturer's EPS leapt 63% with sales up 22% to $9.03 billion.
