The stock market rally is now in a confirmed market uptrend after staging a follow-through day Wednesday on upbeat corporate news, ebbing bank fears and relatively tame inflation data. The Nasdaq topped 12,000 while the S&P 500 reclaimed its 50-day line. Micron Technology buoyed chips despite terrible results and near-term guidance. Alibaba boomed on a major restructuring. Lululemon Athletica and China EV giant BYD were earnings winners.
Stock Market Rally In Confirmed Uptrend
The stock market rally staged a follow-through day on Wednesday, confirming the rally. Banking fears waned, while earnings and other corporate news were positive and inflation cooled more than expected. The Nasdaq led the way, but the S&P 500 reclaimed its 50-day line while the Dow Jones Industrial Average moved toward that key level. Treasury yields rose but didn't soar, while the U.S. dollar weakened.
Inflation, Spending Tame
The Fed has somewhat less reason to be worried about both inflation and consumer spending after the latest data and past revisions. Inflation cooled more than expected in February after a couple of hot readings had seen the Fed turn more hawkish. The personal consumption expenditures price index rose 0.3% after a 0.6% rise in January. Core PCE prices, excluding food and energy, also rose 0.3%, slowing from 0.5%. The core PCE inflation rate eased to 4.6% from 4.7%. Prices for non-housing services, a key concern for the Fed because of the link with wage growth, also rose 0.3%. Meanwhile, consumer outlays rose a mild 0.2% in February. While January's gain was revised up to 2%, spending in Q4 was revised lower.
Markets are still split on a Fed rate hike in early May.
Alibaba Soars On Six-Way Split
The Chinese internet giant soared after announcing a groundbreaking move to split itself into six different companies that will operate independently and are free to raise funds and explore initial public offerings. Alibaba CEO Daniel Zhang will continue to serve as chairman and CEO of parent Alibaba Group. The six business units, mostly carve-outs from its e-commerce businesses, will each be managed by their own CEO and board of directors.
JD.com jumped Thursday after its JD Property and JD Industrial units filed for Hong Kong IPOs.
Micron Offers Hope, Aehr Tops Views
Micron Technology missed Wall Street's low expectations for its fiscal second quarter and guided below views for the current Q3 as it struggles with a cyclical downturn in memory-chip demand. But CEO Sanjay Mehrotra said he sees a "gradually improving supply-demand balance in the months ahead." MU stock jumped on the news, but fell Friday as China's cybersecurity regulator launched a review of Micron products. Meanwhile semiconductor equipment vendor Aehr Test Systems beat fiscal Q3 targets, thanks to strong demand for gear to test power chips for EVs. In other chip news, Intel detailed its server processor road map and talked about its play in artificial intelligence at an investor event.
BYD Profit Skyrockets
China's BYD posted a fourth-quarter net profit of 7.3 billion yuan ($1.06 billion), vs. 602 million yuan a year earlier. For all of 2022, net profit vaulted 446% as revenue nearly doubled, said the Warren Buffett-backed company. BYD's revenue comes mostly from electric vehicles, but also from mobile phone parts and batteries. In Q4, BYD auto revenue surged 152%. Last year BYD, the runaway leader in China's mass market for electric cars, tripled its EV sales, including hybrids, capped by a strong Q4. But the EV giant is facing headwinds in 2023: Tesla triggered a China EV price war amid slowing EV growth there. China's EV sales are set to continue to recover in March, on a month-over-month basis, the China Passenger Car Association said. Sales tumbled in January due in part to Covid issues and the Chinese New Year holiday. Still, BYD stock rose solidly.
Tesla China Sales Dip, But Still Strong
Tesla insurance registrations in China fell modestly to 15,866 in the week ended March 26, after four straight weeks of increasing sales. The U.S.-based EV giant is still likely to reach record monthly China deliveries, helped by big price cuts. China EV giant BYD had 43,490 total insurance registrations, its best showing this year. Its premium Denza unit had 2,227 registrations, a new high. BYD and Denza will unveil several models at the Shanghai Auto Show in April. Li Auto saw registrations fall 6% to 5,081. Nio registrations grew 7% to 1,909 and XPeng registrations jumped 20% to 1,564. All appear to be on track for March and Q1 delivery targets. The Chinese EV makers will release those figures over the weekend, while Tesla will unveil global Q1 deliveries.
Lululemon Soars On Earnings, Guidance
Lululemon Athletica raised 2023 guidance after topping earnings and revenue estimates for the holiday fourth quarter. Year over year, earnings jumped nearly 31% to $4.40 a share. Revenue popped 30% to $2.8 billion. Both slightly accelerated from the prior quarter. Notably, the yogawear retailer made progress clearing out excess inventory, but that took a toll on margins, which got hit again in the quarter. LULU stock gapped higher.
Bank Fears Ebb, SVB Sold
Systemic fears eased, lifting bank stocks, as regulators faced Capitol Hill hearings. First Citizens Bancshares purchased nearly all the deposits and loans for SVB Financial's Silicon Valley Bank on Monday. FCNCA stock catapulted higher. The FDIC said the deposit insurance fund will take a $20 billion hit. It reportedly aims to levy a special fee on banks, weighted toward financial giants. Regulators told lawmakers in two days of hearings that the SVB failure was a "textbook case of mismanagement." The FDIC, Fed and Treasury will review the bank failures and stress-test requirements, with Treasury Secretary Janet Yellen calling for stricter oversight on banks with $100 billion to $250 billion in assets.
Regulators Go After Binance, But Bitcoin Gains
The Commodities Futures Trading Commission sued Binance and CEO Changpeng Zhao for alleged trading and derivatives violations on Monday, just days after the SEC issued a Wells notice warning of possible enforcement action vs. Coinbase. Investors pulled more than $1.6 billion in crypto from the exchange within 48 hours following the lawsuit. Bitcoin and ethereum retreated on the news before recovering back to multi-month highs by Wednesday. Elsewhere, disgraced former FTX CEO Sam Bankman-Fried pled not guilty to additional fraud and conspiracy charges Thursday after being accused of paying a $40 million bribe to Chinese officials to unlock frozen bank accounts.
News In Brief
Walgreens Boots Alliance reported a 27% EPS decline with sales up nearly 8% to $34.9 billion, both beating Q2 views.
Progress Software easily beat fiscal Q1 views but shares tumbled on weak Q2 EPS guidance.
Paychex topped fiscal Q3 estimates on Wednesday, with diluted EPS up 8% and sales also rising 8%, to $1.38 billion.
Cintas fully diluted earnings per share climbed 11.3% in fiscal Q3 with revenue increasing 12% to $2.19 billion. The provider of uniforms and other business products guided up for the full year, implying a slight beat in Q4.
Lovesac earnings fell 14% vs. a year earlier, just missing views. Sales grew 22%, beating. Shares of the furniture retailer jumped. RH Inc. fell to a fresh 2023 low after EPS and revenue declined more than expected with the upscale chain also giving weak sales guidance.
Carnival reported a smaller-than-expected Q1 loss while revenue surged 167%, slightly beating. Bookings were strong, but the cruise line operator warned of higher costs. CCL fell on that guidance, but rose modestly for the week.
PVH Corp. earnings fell 16% per share, but beat views. Revenue for the apparel giant, which makes Calvin Klein and many other clothing brands, climbed 2% to $2.49 billion vs. views for a 2.9% drop. Gross margins fell while inventories swelled 34%. PVH stock jumped.
Cal-Maine reported a 717% EPS gain while revenue soared 109%, both beating fiscal Q3 views as egg prices remained high due to avian flu outbreaks over the past year. Shares jumped.
BioNTech crumbled Monday after guiding for roughly $5.4 billion in full-year sales of its Covid vaccine, missing forecasts. The came after the biotech reported Q4 EPS fell 24% and sales tumbled 23% to $4.61 billion, both topping forecasts.
Novartis surged Monday after an independent panel said the drug giant could stop a breast cancer study early due to strong signs of effectiveness. The regimen includes Kisqali and endocrine therapy, and could rival Eli Lilly treatment Verzenio.
Viking Therapeutics rocketed after phase 1 trial data showed recipients of its experimental obesity treatment lost up to 18 pounds. Viking is the latest company to use drugs that, in part, target a hormone called GLP-1 for weight loss. Viking's drug also activates a second hormone known as GIP.
