The stock market rally struggled for much of the week as Bitcoin, midterm elections and megacaps took a toll. But a tamer-than-expected CPI inflation report sent stocks skyrocketing Thursday with bond yields and the dollar tumbling. Meta Platforms announced big job and spending cuts. Tesla tumbled amid Elon Musk stock sales and the "Twitter circus," as well as fresh signs of weak China demand. Amgen, GlobalFoundries and Halozyme Therapeutics jumped on positive news.
Stock Market Rally Revs Higher
After struggling earlier in the week, the market rally moved back into "confirmed uptrend" after soaring on Thursday's surprisingly cool CPI inflation data. Treasury yields plunged and the dollar tumbled. The Dow Jones moved back above the 200-day line to its best levels since August. The S&P 500 vaulted back above the 50-day line while the Nasdaq finally moved above that key level. Bitcoin dived to a two-year low as crypto exchange FTX neared collapse.
CPI Inflation Cools
The comedown in inflation picked up speed in October, fueling hopes that the Federal Reserve may stop hiking before its key interest rate hits 5%, which would improve the chances of a soft landing. The consumer price index rose 0.4% on the month and 7.7% from a year ago, slowing from 8.2% in September to the lowest level since January. The best news was that core inflation, excluding food and energy, slowed to a 0.3% monthly gain, while the annual core inflation rate backed down to 6.3% from September's 40-year-high 6.6%.
Core goods prices saw deflation in October, falling 0.4% to bring down the annual increase to 5.1%. That included a 2.4% drop in used car prices. Nonenergy services prices, which make up nearly 60% of household budgets, still rose a strong 0.5% on the month and 6.7% from a year ago. But the tide is turning. Rent increases remained hefty, but finally began to slow, and much more slowing is expected into 2023. Medical services prices fell 0.6%, the most since 1971, as health insurance prices slid 4%, the largest-ever monthly decline.
The Fed isn't just targeting inflation, but underlying inflation pressures, which come via the tight labor market. The impact of monetary tightening is starting to show, as new claims for jobless benefits rose 7,000 to 225,000 in the week through Nov. 5. The number of people continuing to claim benefits increased to 1.493 million, up about 130,000 since the start of October, at the highest level since late March.
Bitcoin Crashes As FTX Burns
Bitcoin plunged to a two-year low of $15,554 during the week as FTX collapsed, with larger cryptocurrency exchange Binance walking away from a tentative deal to buy rival FTX. Meanwhile, FTX filed for bankruptcy on Friday. That could create further ripples in the cryptocurrency field, which already suffered big failures earlier this year. BlockFi, which FTX agreed to buy earlier this year, halted withdrawals.
Meta Announces Big Job, Cost Cuts
Facebook-parent Meta Platforms announced it would slash 11,000 jobs, or 13% of its workforce, and extend a hiring freeze through the first quarter. CEO Mark Zuckerberg said he grew Facebook too fast after the Covid crisis ended, leading to losses well into the billions as he tries to pivot the company into a new digital world called the metaverse. Zuckerberg also signaled that Meta will rein in infrastructure spending. That hit shares of suppliers such as Arista Networks, Nvidia and Ciena, though they later rebounded. META stock jumped, but from multiyear lows.
Tesla Hits Lows Amid Several Headwinds
Tesla plunged to a two-year low amid several headwinds, though it bounced back with the market on Thursday. Tesla brought back an insurance subsidy in China for cars in inventory, following a late October price cut to boost demand amid soaring production in China. CEO Elon Musk disclosed he sold nearly $4 billion worth of TSLA stock over Nov. 4, 7 and 8, reportedly telling Twitter staff that he sold shares to "save" the social media firm. President Joe Biden suggested Wednesday night that Musk might be a national security threat. Wedbush analyst Daniel Ives, a longtime Tesla bull, warned that the Twitter "clown show" is hurting the Tesla brand.
Lucid, Rivian Stick To Production Targets
Luxury EV startups Lucid and Rivian narrowed losses for the third quarter and maintained previously lowered full-year production targets. Both Lucid and Rivian, which is backed by Amazon and Ford, ramped up Q3 production and deliveries despite supply headwinds. But Saudi-backed Lucid announced a big share sale and declining reservations for its long-range Air, which competes with the Tesla Model S. Meanwhile, more than 1,000 Rivian electric vans are delivering Amazon holiday packages across dozens of U.S. cities. Lucid stock sank while Rivian stock rose.
GlobalFoundries Pops On Earnings
GlobalFoundries beat Wall Street's third-quarter targets and guided much higher than views for profits in the current period. The Malta, N.Y.-based contract chipmaker's earnings soared 857% year over year, on sales of $2.07 billion, up 22%. For Q4, GlobalFoundries forecasts adjusted EPS surging 644% on in-line sales of $2.08 billion, up 13%. GFS stock jumped, clearing early buy points.
Solar Stocks Shine On Earnings
Array Technologies, a maker of solar trackers, reported third-quarter earnings of 18 cents a share, double what Wall Street expected. Revenue soared 173% to $515 million vs. views for $398.5 million. SolarEdge, which makes solar power inverters and power optimizers, missed on EPS, mostly due to taxes. But revenue beat and SolarEdge guided up for Q4 sales. Both stocks soared.
Biotechs Shine On Drug, Earnings News
Several biotech stocks shined bright on earnings and early-stage clinical data. Early in the week, Amgen and Eli Lilly surged to fresh highs after Amgen said patients who received its obesity treatment lost, on average, 7.2%-14.5% of their body weight. Lilly is also testing a treatment for obesity. Both would go up against already-approved Novo Nordisk drug, Wegovy. In earnings news, Halozyme broke out and Catalyst Pharmaceuticals rose on their third-quarter beats. Halozyme's adjusted EPS grew 35% to 74 cents and sales rocketed more than 80% to $209 million. The company also announced partner Johnson & Johnson will test a cancer combination using Halozyme's delivery system, Enhanze. Catalyst reported a fourth straight quarter of accelerating EPS and sales growth.
Disney Earnings Miss While Disney+ Subs Jump
The Dow Jones entertainment giant badly missed on fiscal Q4 earnings, down 18%. Revenue grew 9% to $20.15 billion, slightly missing. Still, the House of Mouse added 12.1 million new Disney+ subscribers, topping estimates. Walt Disney has 235 million subscribers across all its streaming platforms, including ESPN+ and Hulu, outpacing analyst views. Meanwhile, a Disney+ ad tier and price hike will kick in in early December. DIS stock tumbled, but did pare losses somewhat.
Payment Stocks Diverge
Shift4 Payments said Q3 adjusted EPS jumped 65% while revenue climbed 33% to $196.7 million, both slightly beating. Shift4, which is expanding its markets, raised full-year EBITDA targets. FOUR stock tumbled on earnings but then surged for a strong week. Affirm Holdings lowered its full-year outlook amid slowing sales at key customer Peloton Interactive. The buy now, pay later leader reported a Q3 loss that was slightly worse than expected while revenue rose 34% to $361.6 million, in line. Gross merchandise volume rose 62%, slightly topping. But Affirm slightly cut full-year GMV and revenue targets. AFRM stock crashed to a record low, but rallied for a modest gain.
Shale Producers Reported Mixed Results
Warren Buffett-backed Occidental Petroleum reported a 180% EPS gain, just missing views, while revenue grew $40% to $9.5 billion. Diamondback Energy reported EPS increasing 120%, topping. Q3 revenue grew 26% to $2.4 billion, in line. Both oil producers kept production relatively flat, while returning a hefty lump of money back to shareholders.
LNG Plays Report Booming Growth
New Fortress Energy reported a 140% revenue gain to $731.9 million, but Q3 EPS was well below views. NFE stock plunged after rallying in the prior week as New Fortress upped 2022 and 2023 EBITDA targets. Excelerate Energy, an April IPO, delivered blowout EPS of $1.47 vs. 6 cents a year earlier. Revenue surged 318% to $803.3 million. EE stock rebounded following earnings, erasing weekly losses and near a buy point.
Nuclear Power Leader Has Surprise Loss
Constellation Energy reported a surprise Q3 loss with revenue up 37% to $6 billion. But the company, fresh off a split from utility giant Exelon, remains optimistic about support for nuclear power in the Inflation Reduction Act. Constellation Energy has set a goal to achieve 100% carbon-free power generation by 2040. CEG stock plunged on earnings but roared back to near highs.
News In Brief
Shockwave Medical handily beat third-quarter expectations last week, with adjusted profit of 92 cents per share vs. 5 cents a year earlier, while sales leapt 102% to $131.3 million. The company, which makes devices that crack calcium in the blood vessels to clear it from the bloodstream, also raised its full-year outlook. Shares fell but slashed huge weekly losses.
Sanmina surged to an 18-year high after delivering a beat-and-raise quarterly report. The electronics contract manufacturer's EPS leapt 58% as sales grew 34% to $2.2 billion.
Apple warned that a Covid outbreak at a factory in China will limit its availability of iPhone 14 Pro and Pro Max handsets this holiday season. The Foxconn-owned factory is "operating at significantly reduced capacity" because of Covid restrictions.
Sprouts Farmers Market reported a 9% EPS gain with sales up 5% to $1.59 billion, both beating. The natural foods grocer also raised guidance. Shares surged.
