A stock market rally attempt got underway, building some momentum, helped by Treasury yields backing off long-term highs. Earlier in the week, the correction deepened as the Nasdaq fell below its August lows and later briefly undercut the 13,000 level. Energy stocks fared well as crude oil kept running higher. Tech stocks battled back despite an FTC antitrust suit vs. Amazon as well as weak guidance from Micron Technology and Workday. Meta Platforms rose following big VR and AI announcements. Nike soared on earnings and was upbeat on the future.
Stock Market Rally Attempt Underway
It's still a correction, but a market rally attempt is underway. The Nasdaq and Russell 2000 reversed higher for modest weekly gains, while the S&P 500 and Dow Jones were still down. Investors could look for a follow-through day to confirm the rally attempt in the coming week. The 10-year Treasury yield rose once again, and came well off Thursday's peak of 4.69%, the highest point since October 2007. Crude oil futures hit a fresh 2023 high, but pulled back late in the week.
Economic Growth, Inflation Slowing
The recent good news on inflation got even better while hot consumer spending has downshifted and signs of life in the housing market are fading. The Fed's most important inflation gauge, the core PCE price index, rose just 0.1% in August. That lowered the 12-month inflation rate to 3.9%. Fed chair Jerome Powell said policymakers want to see six months of tame inflation to gain confidence, and we're getting close. The six-month annualized core inflation rate eased to 2.9% from 3.4%. Meanwhile, the Commerce Department reported that consumer spending rose 0.4% on the month after July's sizzling 0.9%. Inflation-adjusted spending rose just 0.1% in August. New-home sales fell 8.7% in August to a 675,000 annual pace. Pending-home sales, which predict existing-home sales a month or two out, fell 7.1% on the month and 18.7% from a year ago. That's all good for the Fed interest-rate outlook, though the job market has yet to roll over: Initial claims for unemployment benefits edged up to 204,000, near the lowest level since January.
Facebook Parent Pushes Metaverse, AI
Mark Zuckerberg launched his latest campaign to bring the metaverse to reality at the Meta Connect conference. The Facebook parent announced its latest virtual-reality headset, the $499 Quest 3, and Ray-Ban Meta smart glasses. In his keynote speech, Zuckerberg said the new VR headset is focused on mixed-reality, which imposes virtual images in the physical world. Meta Platforms also announced a series of generative AI integrations for its Facebook, Instagram, WhatsApp and Messenger products. That includes chatbots styled after celebrities such as Snoop Dogg. Investors appeared unenthused about the metaverse and intrigued by AI. Meta shares fell as much as 4% as Zuckerberg spoke about the new VR headset, but rallied to close a little flat, rising slightly for the week.
Amazon Faces Antitrust Suit
Amazon is on offense in the generative AI arms race, and on defense with regulators. Amazon was hit with a long-anticipated antitrust lawsuit from the Federal Trade Commission. The suit accuses Amazon of engaging in anti-competitive practices in its retail business, driving up costs for customers and third-party merchants. Amazon said the FTC is "wrong on the facts." AMZN stock fell 4% after the lawsuit. Separately, Amazon said it will invest up to $4 billion in AI startup Anthropic, creator of the Claude generative AI assistant. The deal is similar to the one struck between Amazon's cloud competitor Microsoft and ChatGPT creator OpenAI.
Micron Slides As Stock Market Downturn Isn't Over
The memory-chip giant reported a big fiscal-quarter loss while revenue tumbled 40% to $4.01 billion, but both beat lowered expectations. Micron Technology sees fiscal Q1 revenue of $4.4 billion, up vs. a year earlier and slightly above views. But it guided to a wider-than-expected loss. MU stock tumbled on Thursday but closed the week with just a slim loss.
Nike Jumps On Surprise Profit, Strong Guidance
The Dow Jones shoe and apparel giant reported a 1% EPS gain to 94 cents, defying views for a drop to 76 cents. Revenue growth slowed for a third straight quarter, with the 2% gain to $12.94 billion just falling short. Nike brand revenues rose 3% to $12.4 billion, driven by a 12% gain in China. Nike expects Q2 revenue to increase slightly compared to last year. It expects gross margins will expand by about 100 basis points, amid generally upbeat comments from executives. NKE stock jumped Friday after hitting a 2023 low earlier in the week.
Biotechs Swing On Drug News
Soleno Therapeutics, Immunovant and Biohaven enjoyed double- and triple-digit gains last week. Soleno surged 505% in a single day after saying patients who switched off its treatment for Prader Willi syndrome experienced a return to strong hunger signals. This suggests the company's pill is, indeed, controlling the hyperphagia associated with the genetic disease. Immunovant and Biohaven soared a respective 97% and 33% on promising results for autoimmune disease treatments. The companies are both targeting an antibody called immunoglobulin G, or IgG. IgG is tied to numerous autoimmune conditions. Immunovant's drug pulled IgG levels down by 63% in healthy adults, while Biohaven's led to a 90% decrease in nonhuman primates. But that good news for IMVT and BHVN hit Argenx, which is working on a similar treatment. Morphic gave back 55% over two days after its ulcerative colitis treatment didn't show as big of a benefit as a rival drug from Takeda Pharmaceutical.
Costco Earnings Top
Costco reported a 16% earnings per share gain. Revenue rose 9.5% to $78.94 billion, ending a four-quarter string of slowing growth. Both topped views. Costco said it'll likely raise membership prices at some point. Executives added that thefts haven't affected the wholesaler as much as other retailers. COST stock rose, flirting with a breakout.
Workday Lowers Growth Targets
The business software giant, with a new CFO, now expects subscription revenue growth of 17%-19% in the next three fiscal years, down from its earlier target of 20%. The analyst day coincided with a customer conference in San Francisco. At Workday Rising, the company touted opportunities in artificial intelligence and international expansion. Workday sold off.
Carnival Reports Post-Pandemic Profit
The cruise line giant reported its first quarterly profit since the pandemic, while revenue leapt 59% to a record $6.85 billion. Both beat fiscal Q3 views. Bookings and occupancy rates also were strong. Carnival guided an adjusted loss of 4-to-12 cents for the fiscal year. Shares initially jumped, but then reversed sharply lower.
CarMax Sees Weak Used-Car Demand
The market for used cars remains depressed, the latest CarMax earnings report showed. The nation's No. 1 used car seller posted a 5% EPS decline, in line with views, on a 13% revenue drop, slightly better than feared. CarMax earnings fell for the seventh quarter in a row. Retail unit sales slumped 7% during the quarter, with average used car prices at $27,500. Widespread inflation, higher interest rates and tightened lending standards curbed consumer confidence and demand, the company said. The prolonged autoworkers' strike could hurt new car production and lift used car values further, analysts warned. CarMax stock plunged below the 200-day moving average. Online-only car seller Carvana fell in sympathy.
Stock Market News In Brief
Cintas earnings rose 9%, edging past fiscal Q1 views. Revenue climbed 8% to $2.34 billion, in line. Shares fell solidly.
Accenture topped fiscal fourth-quarter earnings targets while revenue missed amid weak bookings. Adjusted EPS rose 4%, with sales also up 4% to $16 billion. Accenture guided low on Q1 revenue and gave a full-year forecast that was mostly below consensus. Shares tumbled.
Jabil skyrocketed nearly 19% Thursday after adjusted EPS grew nearly 6%, topping fiscal Q4 views while sales fell 6% to $8.54 billion, missing. The electronics contract manufacturer guided higher earnings for the current Q1 and boosted its stock buyback by $2.5 billion.
