The stock market rebounded this week, recouping some of the prior weeks' huge losses. But the major indexes haven't confirmed the new rally attempt, while few leading stocks are in position. Fed chief Jerome Powell reiterated his commitment to fight inflation aggressively, and cautioned that a soft landing will be difficult. Oil, copper and crop prices tumbled on recession fears, slamming commodity-related stocks. Li Auto surged past a buy point after unveiling a new hybrid SUV and amid expectations for extended EV subsidies, leading a big week for China EV makers. FedEx soared on strong earnings guidance.
Stocks Snap Losing Streak
The major indexes rose strongly for the week, following several big weekly losses, with a market rally gaining momentum. Beaten-down tech names led the advance. Drug and other medical stocks showed strength, along with China EV makers and internet sites. But commodity stocks tumbled as copper, crop and oil prices retreated with economic growth slowing and recession risks rising. Treasury yields fell sharply.
Powell Inflation Fight 'Unconditional'
Federal Reserve chief Jerome Powell stressed in two days of congressional testimony that the Fed's commitment to tame inflation is "unconditional." Wall Street interpreted that as a sign that the Fed will keep aggressively tightening policy into a slowdown, raising the odds of higher unemployment and recession. Financial markets reacted to the hawkish message from Powell by pricing in 100% odds of a 75-basis-point rate hike at the Fed's July meeting.
Li Breaks Out As China EV Stocks Rise
China EV startups Li Auto, Nio and Xpeng surged amid strong signals that China is considering a move to extend EV subsidies, set to expire by year-end. Sales of electric cars more than doubled in 2021 in the world's largest EV market but have come under some strain this year, amid Covid lockdowns and supply disruptions. IBD 50 stock Li Auto broke out past a 37.75 buy point as it unveiled the L9, the second hybrid EV in its lineup. Homegrown EV and battery giant BYD also briefly topped a 39.81 buy point.
FedEx Raises Guidance
FedEx gave stronger-than-expected 2023 guidance after narrowly missing fiscal Q4 revenue and earnings views. EPS rose 37% to $6.87 with revenue up 8% to $24.4 billion. Wall Street awaits details on the strategic direction and capital allocation at the delivery giant's June 29 investor day. CEO Raj Subramaniam has outlined a new focus on revenue quality and lowering costs amid the rapid rise in inflation. FedEx stock jumped Friday, easily clearing the 200-day moving average.
Meta Settles With DOJ Over Ad Bias
Facebook parent Meta Platforms, reached a settlement with the Justice Department over its targeted advertising practices, agreeing to pay a civil fine of $115,054 and change its algorithm. Meta's ad systems directed housing ads based on race, religion, gender and ZIP code, even when advertisers were not aiming to do so. Separately, CEO Mark Zuckerberg said Meta will continue to invest heavily into the metaverse.
Homebuilders Beat, But Note Slowing
KB Home and Lennar reported quarterly results that beat expectations. But both noted a slowdown in home sales, as swelling home prices, rising mortgage rates and recession fears steer potential homebuyers away. U.S. existing-home sales fell 3.4% in May, the National Association of Realtors said. But that was a smaller decline than expected. New-home sales jumped to an annual rate of 696,000 in May from April's upwardly revised 629,000. Analysts expected a drop to 587,000.
Altria plunged as the FDA ordered Juul vaping products off the market for safety reasons. Altria's Juul asked a court to stay the FDA ruling. It comes as the FDA reportedly is close to ordering tobacco companies to remove most nicotine from cigarettes.
Kellogg said it will spin off its U.S. cereal and plant-based brands into independent companies. It plans to focus on global snack sales, which drive 80% of its revenue. K stock climbed 2.6% during the week.
DaVita plunged after the Supreme Court ruled against the kidney dialysis center provider regarding outpatient reimbursement rates for end-stage kidney dialysis treatment.
CarMax earnings fell 41%, but still topped views. Revenue rose 21% to $9.3 billion. Vehicle sales fell 5.5%, with used-vehicle sales down 11%. But used-vehicle revenues jumped 13.9% on soaring prices with gross profit per used vehicle up $134. Shares jumped.
Carnival reported a wider-than-expected Q2 loss and weaker revenue. But the cruise line operator said booking volumes for future trips were nearly double those of Q1, and the best since the start of the pandemic. CCL stock jumped.
Darden Restaurants reported Q4 EPS fell 19% while revenue rose 14% to $2.6 billion, both narrowly beating. The Olive Garden parent raised guidance, hiked its dividend 10% and announced a $1 billion buyback.
Mondelez will buy Clif Bar for $2.9 billion, the latest acquisition for the global snack giant.
