The stock market rally had another big week, fueled by a tame CPI inflation report that sent Treasury yields plunging, closing the book on further Fed rate hikes. The Nasdaq moved up to September short-term highs. The Russell 2000 led weekly gains, but fell back from key resistance. More leading stocks flashed buy signals, but many are getting stretched.
Cisco Systems, Palo Alto Networks and Alibaba tumbled on earnings or guidance, but there was relatively little spillover into related stocks. Microsoft hit record highs as it unveiled in-house AI chips.
Market Rally Keeps Rising
The major indexes staged strong weekly gains, though there were some signs of a pause late in the week. Small caps had the biggest gains, but also fell back from resistance. Treasury yields plunged on a weaker-than-expected CPI inflation report, with other economic data generally coming in soft. Crude oil prices tumbled to a four-month low.
Inflation, Economic Data Close Door On Fed Hikes
Tame consumer inflation and generally soft economic data appeared to close the book on further Fed rate hikes, with markets starting to price in rate cuts next spring. Consumer prices were flat in October and up just 3.2% vs. a year earlier, lower than expected. Core inflation ticked down to 4%. Meanwhile, initial jobless claims hit a three-month high while continuing claims are the highest in nearly two years. October retail sales pointed to slowing consumer spending, while manufacturing reports pointed to continued contraction.
Microsoft Unveils AI Chip
Microsoft showed off a homegrown artificial intelligence processor that it will use to supplement chips from AMD and Nvidia. The Azure Maia AI Accelerator will run generative AI workloads in Microsoft's cloud data centers. The processor also will lessen the company's dependence on third-party chips. Microsoft plans to roll out Maia to its data centers early next year. Meanwhile, Nvidia launched new data center processors optimized for AI applications. Nvidia introduced its HGX H200 AI computing platform and GH200 Grace Hopper Superchip.
Walmart, Target Switch Places
Walmart reported Q3 EPS rose 2% to $1.53, beating by a penny. Revenue grew 5.2% to $160.8 billion, slightly topping. But the Dow Jones giant gave full-year guidance that was below Wall Street consensus. The discounter said it's seeing deflation in general merchandise prices. WMT stock tumbled Thursday, falling below a buy point. A day earlier, Target earnings swelled 36%, easily beating, while a 4.2% revenue drop to $25.4 billion edged past views. Margins and inventories improved. The discounter gave Q4 EPS guidance that was about in line with the midpoint. Shares spiked 18% on Wednesday, rebounding from a long downtrend.
BJ's Wholesale slightly topped Q3 EPS views with revenue just beating with a 2.9% rise to $4.92 billion, with core same-store sales flat. The Costco rival made some cautious comments about consumer behavior. BJ's stock reversed lower for the week in reaction to Walmart and its own results.
Home Depot Earnings, Sales Fall Again
Dow Jones hardware heavyweight Home Depot reported third-quarter EPS fell 10% while revenue slipped 3% to $37.71 billion, the third straight quarter of year-over-year declines. Same-store sales shrank 3.5%, the fourth straight decline. But all that beat views. Home Depot stock jumped on the week, helped by lower Treasury yields.
Palo Alto Skids On Billing Guidance
Palo Alto Networks reported fiscal Q1 earnings and revenue that rose 66% and 20%, respectively, topping Wall Street targets amid slowing growth in its core network firewall market. But billings rose 16%, slightly missing. Billings guidance in the current January quarter and full-year fiscal 2024 fell short of estimates. Palo Alto forecast current-quarter revenue of $1.97 billion at the midpoint of guidance, only in-line. PANW stock tumbled, but other cybersecurity stocks held up.
Cisco Guidance Slams Dow Giant
Cisco Systems topped fiscal Q1 estimates, with EPS up 29% and revenue up 8% to $14.7 billion, though product orders fell again. The networking giant guided earnings and sales for the current quarter well below consensus. CSCO stock dived, but didn't have much impact on other networking stocks.
Boeing Scores Big Air Show Wins
The Dow Jones aerospace giant dominated orders at the Dubai Airshow. Emirates airline on Monday announced a $52 billion order for 95 Boeing widebody jets. Meanwhile, flydubai announced an $11 billion order for 30 787-9 Dreamliners. Elsewhere, SunExpress Airlines placed a firm order for 45 Boeing 737 MAX jets with an additional purchase option for another 45 planes. Boeing also landed a deal with Ethiopian Airlines Tuesday for 11 Dreamliner jets and 20 737 MAX planes. European rival Airbus secured smaller orders from Ethiopian Airlines and airBaltic for its A350 and A220 planes earlier in the week. On Thursday, Airbus sealed a $6 billion deal with Emirates for 15 additional A350 jets following a public rift over Rolls-Royce engine issues. Separately, there were reports that China would OK Boeing 737 Max sales to Chinese carriers this past week, but that hasn't happened yet. BA stock still rallied, while jet-engine maker General Electric hit a long-term high. Airbus shares rose solidly.
Applied Materials Under Investigation
The Justice Department reportedly is investigating Applied Materials for possible unauthorized exports of chipmaking gear to China's top chipmaker, SMIC. Sources told Reuters that the chip-equipment maker might have violated trade restrictions covering advanced semiconductor technology. News of the criminal probe overshadowed Applied Materials' beat-and-raise quarterly report. AMAT stock tumbled Friday.
Chinese Internets
Alibaba reported an 18% EPS gain that topped views, while a 6% revenue rise to $30.8 billion slightly missed. The Chinese internet giant also said it no longer planned to spin off its cloud services business, citing uncertainty from U.S. restrictions on exporting high-performance chips. Earlier, JD.com topped views with an 8% EPS gain while revenue edged up 2% to $34.2 billion. Gaming and messaging giant Tencent reported adjusted earnings swelled 45% while revenue climbed 10% to $21.4 billion. The WeChat parent cited high-margin gaming growth. Mobile gaming giant NetEase topped EPS views but slightly missed on revenue and trimmed its dividend. Tencent and JD stock jumped within long downtrends. BABA stock tumbled. NetEase fell modestly on results but held in a buy range.
Off-Price Retail
TJX Cos. reported a 20% EPS gain with revenue up 9%, both beating views. But the off-price apparel and home goods retailer guided low on Q4 earnings. Apparel rival Ross Stores reported a 33% EPS gain and an 8% sales gain, while giving so-so guidance. TJX stock tumbled. ROST stock fell on TJX and Walmart guidance, but rebounded back into a buy zone on its own earnings.
News In Brief
Monday.com reported Q3 earnings of 64 cents a share on an adjusted basis. Revenue rose 38% to $189.2 million. Analysts had predicted adjusted profit of 21 cents on revenue of $182.4 million. A year earlier, Monday.com earned 5 cents on revenue of $136.9 million. For the current quarter ending in December, Monday.com predicted revenue of $197 million vs. estimates of $195 million.
On Holding reported a 208% EPS gain while revenue growth slowed to a still-swift 58%. The upscale Swiss athletic shoe maker raised full-year revenue guidance, but with Q4 sales growth set to keep cooling. Shares initially tumbled on results but then rebounded.
Williams-Sonoma revenue fell 16% to $1.85 billion, just missing views. EPS slipped 2%, but comfortably beat estimates. The upscale home furnishings retailer also raised its 2023 operating margin target. Shares jumped, blasting out of a base.
XPeng delivered a 62-cent loss, worse than feared. Revenue rose 22%, the first gain in four quarters, but slightly missed amid China's EV price war. The automaker, which already reported record deliveries in October, gave a somewhat mixed outlook for Q4. Shares rose but were well off weekly highs.
Amazon.com will allow auto sales on its platform starting next year, with Hyundai the first brand to take part. Carvana stock, AutoNation and CarMax tumbled.
