The stock market rally showed volatile action amid an earnings crush and more hopes for a Fed pivot to smaller rate hikes. The Dow Jones, Russell 2000 and finally the S&P 500 cleared their 50-day moving averages. The Nasdaq swung on big results, but ultimately rose solidly for the week. Meta Platforms, Google parent Alphabet, Microsoft and Amazon.com all sold off hard. But Apple jumped on its earnings.
Chinese stocks plunged after President Xi Jinping tightened his grip, followed by concerns about renewed Covid restrictions in many cities there.
Stock Market Rally Split
The Dow Jones, S&P 500 and especially the small-cap Russell 2000 rose strongly this week, but the Nasdaq erased early gains amid weak earnings from megacaps Meta Platforms, Google parent Alphabet, Microsoft and Amazon.com. Apple topped views, but was cautious about holiday-quarter growth.
Crude oil and natural gas prices rose. Treasury yields tumbled, with the 10-year yield moving back below 4% as Fed-friendly data and other central bank moves and hints bolster hopes for a Fed pivot toward lower rate increases.
Apple Beats September-Quarter Goals
The consumer electronics giant topped Wall Street's targets for its fiscal fourth quarter ended Sept. 24. Apple earnings climbed 4% while sales rose 8% to $90.1 billion. Apple's iPhone revenue increased 10% to $42.6 billion, while services revenue rose 5% to $19.2 billion, both missing views. But Mac computer sales popped 25% to $11.5 billion. Apple sees revenue growth slowing in Q1.
Meta Crashes On Earnings, Guidance
Meta stock plummeted after the company reported third-quarter results that fell far short of earnings estimates and offered a revenue outlook that missed the mark. After years of unprecedented revenue and profit growth, Meta's ad business is beginning to slow, thanks to increased competition from TikTok and Apple, as well as overall economic uncertainty. Meta is spending massively on its metaverse ambitions, with little to show for it yet. But that's good news for Arista Networks and various data center suppliers.
Amazon Dives On AWS, Grim Guidance
Amazon earnings topped views while revenue came in a little light as its high-margin Amazon Web Services grew slightly less than expected. The e-commerce and cloud-computing giant sees Q4 revenue of $140 billion-$148 billion, far below estimates of $155.1 billion.
Microsoft Gives Weak Guidance
The software leader reported a 4% EPS gain with revenue up 11% to $50.1 billion, both topping. Cloud computing led the gains, but its Azure infrastructure business grew at a slightly lower-than-expected rate. For the current quarter, Microsoft expects sales of $52.85 billion, well below views for $56.2 billion.
Google Earnings Miss On Weak Ad Revenue
Google-parent Alphabet said Q3 profit fell 24% while gross revenue rose 6% to $69.09 billion amid currency headwinds, both well below views. YouTube ad revenue fell nearly 2% to $7.07 billion, missing estimates of $7.5 billion. Overall Google advertising revenue rose 2.5% to $54.48 billion, missing estimates of $56.58 billion. Google said cloud-computing revenue rose 37% to $6.87 billion, edging by estimates of $6.7 billion. Alphabet repurchased $15.39 billion of its own stock, about the same as in Q2. Shares tumbled.
Enphase Shines, First Solar Partly Cloudy
Enphase Energy surged above key levels after reporting booming, accelerating growth, with EPS up 108% and revenue 81%. Demand for its solar microinverters was strong in markets worldwide, particularly in North America and Europe. First Solar reported a wider-than-expected Q3 loss while revenue slightly missed, but the solar power producer gave solid full-year sales. FSLR stock rose for the week, but fell Friday on its results.
Exxon, Chevron Beat
Exxon Mobil and Chevron solidly beat views as Exxon reported record profits on the back of higher oil and gas prices. Exxon earnings soared 181% while revenue jumped 52% to $112.1 billion. Capital and exploration expenditures came in at $5.7 billion in the third quarter. Chevron EPS surged 88% as sales grew 59% to $66.6 billion. Chevron's capital spending came in at $3 billion.
Boeing Sees Longer Recovery
Boeing reported a big, surprise loss for the third quarter and warned its recovery will take longer than expected. Revenue rose 4%, returning to growth after three straight quarters. The Dow Jones giant took a $2.8-billion hit on loss-making defense contracts and cut delivery outlook for its 737 Max jet, due to engine shortages. A GE joint venture supplies Max engines. General Electric EPS tumbled 39%, mostly due its struggling renewables business. Revenue grew 2.8% to $19 billion, with its jet-engine unit a standout again. GE remains on track to emerge as an aviation company in early 2024, after spinning off lower-growth businesses. GE stock rose solidly. Boeing stock plunged on earnings, falling slightly for the week.
GM Earnings Strong, Ford Struggles
General Motors delivered a 48% EPS rebound, well ahead of views. Revenue rose 56% as supply chains improved, but slightly missed forecasts. GM backed its full-year earnings target but dialed back an EV sales target, citing battery supply issues. Ford EPS fell 41%, just beating lowered views. Revenue rose 10% to $39.4 billion, amid headwinds from supply disruptions and inflationary costs. Ford still expects to complete and ship 40,000 vehicles in inventory this quarter but guided to the low end of its prior full-year earnings range. Both stocks jumped.
Wingstop Flies On Blowout Earnings
The chicken wings takeout specialist reported a 55% EPS gain and 41% revenue rise to $92.7 million, far above views. Wingstop gapped out of a base. McDonald's reported single-digit EPS and sales declines, but shares rose solidly for the week, toward highs. Chipotle Mexican Grill topped EPS and sales views, but shares fell on concerns about weakening transactions.
Medicaid Health Insurers Beat
Centene and Molina Healthcare, both with heavy exposure to Medicaid contracts, topped Q3 views. Centene's EPS grew 3%, while Molina Healthcare profit jumped 54% to $4.36 a share. Molina stock rallied into earnings on Medicaid contract wins, but tumbled back below a buy point on results. Centene stock leapt on earnings and cost savings, after being hurt recently by the loss of Medicaid contracts in several California counties and a revenue-negative hit to its Medicare Advantage rating. Both firms face headwinds in 2023 due to the looming end of the public health Covid emergency. That will cut Medicaid enrollment.
Chipmakers Diverge Over Forecasts
Semiconductor stocks broadly beat analyst estimates for the September quarter in the past week. But they split when it came to guidance. Chipmakers posting beat-and-raise reports included Allegro MicroSystems, Impinj and MaxLinear. Of those, tracking-chip maker Impinj got the most lift. It gapped out of a 10-week base to a record high on the news. Chipmakers delivering beat-and-miss reports included Intel, Monolithic Power Systems, Silicon Labs, STMicroelectronics, Texas Instruments and Wolfspeed. Of that pack, Wolfspeed was the biggest loser. It plunged over 18% after it badly missed views with its outlook for the current quarter.
Drug Giants Easily Beat
Vertex Pharmaceuticals, Merck and Biogen easily topped third-quarter expectations last week. Vertex's adjusted EPS climbed 14% and sales advanced 18% to $2.33 billion. Merck boosted its sales and earnings outlook after Q3 sales grew 14% to $14.96 billion and adjusted profit rose 4%. Biogen earnings were flat while sales fell 10% to $2.51 billion. But Biogen raised its full-year guidance, while enthusiasm grows for Biogen's potential approval for a second Alzheimer's drug. Merck and Biogen shares rose. Vertex edged lower for the week but after tumbling just before earnings.
Defense Earnings Mixed
Defense contractors reported soft third quarters and were mixed against analyst estimates, despite revenue increases across the board. Raytheon earnings slid 4% on 4.6% revenue growth to $16.95 billion. General Dynamics earnings grew 6% while revenue rose 4.6% to $10 billion, topping predictions. Northrop Grumman earnings fell 11% and revenue advanced 3.2% to $9 billion, both missing forecasts.
O'Reilly Automotive grew EPS 13% as revenue rose 9%, with earnings accelerating for the second straight quarter. Commercial auto parts sales increased double digits, outpacing DIY sales. Shares jumped to a new high.
Calix reported Q3 EPS dipped 3% vs. a year earlier, but easily beat views. Revenue rose 37% to $236.3 million, also topping. The rural computer networking firm guided higher for Q4.
Tesla faces a criminal probe of its self-driving claims, Reuters reported Wednesday, saying the Justice Department investigation began last year. The SEC has opened a similar civil probe, The Wall Street Journal reported Thursday. Tesla stock rose for the week after hitting a 16-month low on Monday.
Coca-Cola earnings rose 6% as revenue climbed 10%, helped by higher prices and volume. The drinks giant raised full-year guidance.
Murphy USA reported a 133% EPS gain with revenue up 35%, both beating. The gas station and convenience store operator gapped up to a new high.
Medpace, which conducts clinical trials for mostly small and midsize biotech firms, reported Q3 EPS rose 59% from a year ago, crushing views. Revenue grew 30% to $383.7 million, easily beating the consensus. Medpace stock surged 37% on signs that a weaker biotech venture funding environment may not hurt results as much as feared.
AbbVie reported a 29% EPS gain, topping views. Revenue grew 3% to $14.81 billion, missing. It raised its dividend 5% to $1.48 a share.
Mobileye soared 37% on its first day of trading, with an IPO that raised $861 million and gave the provider of advanced driver-assistance systems an initial valuation of $17 billion. The IPO was a spinoff by Intel, which bought Mobileye for $15.3 billion in 2017.
Elon Musk completed his $44 billion, $54.20-a-share deal to buy Twitter, reportedly firing several top executives and raising questions about content regulation.
