The stock market rally suffered a sharp sell-off Wednesday, but the major indexes were flat to slightly higher for the week.Micron Technology (MU) jumped on strong earnings and guidance, lifting key chip-gear makers and other semiconductor plays. FedEx (FDX) tumbled on weak results and forecasts, while Nike (NKE) dived on a revenue warning. Crude oil prices rebounded on Red Sea shipping fears. Adobe (ADBE) canceled a $20 billion Figma deal amid regulatory action. Inflation data was tame.
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Stock Market Rally Near Highs
The major indexes suffered a sharp, abrupt loss Wednesday with the S&P 500 near record highs and the Nasdaq around the 15,000 level. But the indexes held up for the week. Treasury yields continued to slide, aided by more tame inflation data. Crude oil prices rebounded on shipping concerns. Micron was an earnings winner, while FedEx (FDX) and Nike (NKE) sold off.
Economic Data Point To Rate Cuts
The latest batch of economic data showed that inflation is ending the year like a lamb, making Fed policy look aggressively tight and setting the stage for rapid rate cuts starting in March. Friday's personal income and outlays report showed that the Fed's primary inflation gauge, the core PCE price index, rose less than one-tenth of a percent in November, bringing the annual core inflation rate down to 3.2%. Over the past six months, core PCE inflation has run at just a 1.9% annualized rate, below the Fed's 2% target. Further lowering inflation concerns, consumer spending appears to be moderating after a strong Q3. However, business spending may be picking up. New-home sales tumbled in November, but lower mortgage rates should buoy demand. Single-family housing starts leapt 18% in November to the highest rate since April 2022.
Micron Beats And Raises
Micron Technology (MU) reported a smaller-than-expected loss for its fiscal first quarter with sales up 16% to $4.73 billion, the memory-chip maker's first year-over-year sales gain in six quarters. Additionally, Micron guided higher on Q2. It sees an improving business climate and expects to benefit from sales of high-bandwidth memory for AI data centers. Micron projected fiscal 2024 capex of $7.5 billion to $8 billion, slightly higher than last year's levels and its prior plans. That's good news for memory-exposed chip-equipment makers such as Lam Research (LRCX) and Applied Materials (AMAT).
Nike Plunges On Revenue Warning
Nike (NKE) reported a 21% EPS gain, beating fiscal Q2 estimates on improved gross margins. But revenue rose just 1% to $13.39 billion, in line. The Dow giant warned on full-year revenue, citing weaker consumer demand and other factors. Nike is looking to deliver up to $2 billion in cost savings through 2026. NKE stock plunged, with several other related stocks retreating Friday.
U.S. Steel Takeover Faces Objections
Nippon Steel (NPSCY) of Japan won the bidding war for U.S. Steel (X) with an all-cash offer of $55 per share, valuing the once-mighty company at $14.9 billion, including debt. Now Nippon has to win the political battle. X stock jumped but remains 12% below the offer price, reflecting risk that the deal closing will drag out. U.S. and Pennsylvania lawmakers are speaking out against it, as is the United Steelworkers union, which worries Nippon will phase out blast furnace operations. The White House said the deal deserves serious scrutiny.
Oil Prices Rebound On Red Sea Fears
Crude oil prices rebounded, hitting two-week highs, as Houthi militants in Yemen attack shipping in the Red Sea. The Red Sea allows oil originating in the Persian Gulf access to the Mediterranean and Atlantic sea lanes, via the Suez Canal, as well as allowing traffic between Europe and Asia. BP and container-shipping giant AP Moller Maersk are among those that have halted shipments through the Red Sea. That will mean much-longer and more-expensive, deliveries. Energy shipping stocks such as Scorpio Tankers (STNG) and Dorian LPG (LPG) were stock market winners. So were non-energy shipping stocks such as ZIM Integrated Shipping (ZIM) and Golden Ocean Group (GOGL).
Adobe Cancels Figma Deal
Digital media and marketing software firm Adobe (ADBE) called off its $20 billion acquisition of Figma after hitting regulatory roadblocks. Adobe said it saw "no clear path" to receiving the necessary regulatory approvals from the U.K. and European Union. Figma and Adobe mutually agreed to end their planned merger, which they announced in September 2022. Adobe will pay Figma a termination fee of $1 billion. Figma provides a web-first collaborative design platform.
Carnival Cruises On Earnings
Carnival (CCL) reported a smaller-than-expected fiscal fourth-quarter loss with revenue jumping 41% to $5.4 billion, topping views. Occupancy was more than 101%, in line with Carnival's expectations and historical levels. Total customer deposits reached $6.4 billion, up 25%. For 2024, Carnival predicts adjusted EBITDA of approximately $5.6 billion, which would be up more than 30%. For Q1 2024, the cruise line giant predicts adjusted EBITDA of $800 million, more than double a year earlier, Chief Executive Josh Weinstein said in the earnings release. CCL stock jumped on results, flirting with buy signals.
FedEx Tumbles On Stock Market Amid Weak Earnings, Guidance
The shipping giant reported a 25% EPS gain for fiscal Q2, but fell short of views. Revenue fell 3%, the fifth straight year-over-year decline and also missing estimates. FedEx (FDX) also guided low on full-year forecasts. FDX stock plunged in stock market trading. UPS (UPS) also declined.
Tesla Mixed Amid Flurry Of News
Tesla reported strong China EV registrations, a bright spot. The EV giant announced it would cover a 4,500-euro German EV subsidy — abruptly cut off Sunday — through year-end. Tesla has aggressively cut prices throughout the year, with speculation that margins will continue to fall in Q4 as it pushes for a full-year goal of 1.8 million deliveries. Meanwhile, Reuters reported this week that tens of thousands of Tesla owners have experienced suspension and steering failure, dating back at least seven years. The EV giant often blamed drivers for what it knew were faulty parts, the report said. Tesla reportedly is scrapping stock merit pay for salaried workers in 2023, even as it reportedly hikes pay for hourly workers at its Reno plant.
Accenture Guides Low
The global tech services and consulting firm reported adjusted EPS grew 6%, slightly beating fiscal Q1 views. Revenue rose 3% to $16.2 billion, just ahead of consensus. But Accenture (ACN) guided lower for Q2 revenue.
Stock Market News In Brief
Affirm Holdings (AFRM), one of the biggest providers of buy now, pay later payment services, unveiled expanded ties to Walmart (WMT). An online partner of Walmart since 2019, Affirm will now provide its BNPL services at self-checkout kiosks at more than 4,500 U.S. Walmart stores. That follows media reports that consumer use of BNPL services has increased during the current holiday shopping season.
Illumina (ILMN) inched ahead in stock market trading Monday after the genome sequencing machine maker said it would divest its cancer detection outfit, Grail. Illumina acquired Grail for $7.1 billion in 2021 despite regulatory scrutiny in the U.S. and Europe. An appellate court recently sided with the Federal Trade Commission, saying the agency was right to challenge the deal.
Argenx (ARGX) plunged 25% Wednesday after its treatment for an autoimmune disease that causes skin blisters flopped in a Phase 3 study. It was the second failure in a month for Vyvgart Hytrulo in an autoimmune disease.
Immunovant (IMVT), which has some rival drugs, tumbled. But IMVT stock bounced back Thursday on promising results for a Graves' disease treatment.
Structure Therapeutics (GPCR) plummeted 43% Monday after its experimental drug showed mixed results in patients with type 2 diabetes and obesity. After eight weeks, patients with obesity lost 4.74% more weight than placebo recipients. After 12 weeks, diabetics lost 3.26%-3.51% more weight than the placebo group. Both results trailed a rival pill from Eli Lilly (LLY) that helped patients with diabetes lose 5% to 6% more weight than placebo recipients over 12 weeks.
Alteryx (AYX) agreed to be taken private by Clearlake Capital Group and Insight Partners in a deal valued at $4.4 billion. The private equity deal values AYX stock at $48.25 per share, a 59% premium to the data analytics software company's Sept. 5 closing price on the stock market. That was the last trading day before media reports about a potential sale.
Winnebago (WGO) reported fiscal Q1 EPS tumbling 49%, while sales skidded 20% to $763 million, both the fifth straight quarter of year-over-year declines. EPS fell short while revenue topped. Motor home RV revenue tumbled 28%. Shares fell in stock market trading on results after hitting a 23-month high.
Heico (HEI) reported a 6% EPS gain while sales leapt 54% to $936.5 million, buoyed by an acquisition. The aerospace and defense components maker briefly hit a record high, but reversed lower in stock market trading for the week.
Worthington Enterprises (WOR) beat views with a 77% EPS gain. Revenue fell 8% to $1.09 billion. Shares rose modestly, continuing a huge run over the past two months.
Cintas (CTAS) popped to a record high after reporting a 16% EPS gain with revenue up 9%, both beating Q3 views. The uniform giant guided up slightly.
CarMax (KMX) reported a 117% EPS gain, easily beating views. Revenue fell 5.5%, slightly missing views for the used car dealer giant.
AAR Corp. (AAR) just beat fiscal Q2 EPS views, but a 16% sales gain fell short. The aerospace parts and services firm also will pay $725 million for the product support business of Triumph Group (TRI).
Bristol Myers Squibb (BMY) will buy neuroscience drug developer Karuna Therapeutics (KRTX) for $14 billion, or $330 a share cash. Karuna has a schizophrenia drug up for FDA approval. KRTX skyrocketed on the stock market.
NetEase (NTES) plunged in U.S. trading, along with Tencent Holdings (TCEHY) and Bilibili (BILI), as China imposed new gaming restrictions. Chinese e-commerce firms and for-production education stocks also fell amid fears of a new wave of government restrictions.
BYD (BYDDF) confirmed Friday that it will build its first European plant for passenger electric vehicles in Hungary, as the Tesla (TSLA) rival continues a rapid overseas expansion.
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