Stocks Close Out Historic Month
The Dow Jones Industrial Average hit new 2023 highs as the stock market indexes closed out one of their best months in decades. Let’s see what you missed.
Today’s issue covers retailer Express remaining a mess, Tesla unveiling its Cybertruck, and why some analysts say the record run can continue.
Here’s today’s heat map:
9 of 11 sectors closed green. Healthcare (+1.26%) led, & communications (-0.58%) lagged.
The Fed’s favorite inflation gauge, core PCE, rose less than expected at 0.2% MoM and 3.5% YoY. Services remain the main culprit, with prices rising 0.2% and goods prices declining 0.3%. Personal income and spending both rose 0.2% MoM, meeting expectations that consumers would at least keep pace with inflation. Eurozone core inflation also sank to 3.6% in October.
Initial jobless claims remain subdued, but continuing claims are at two-year highs as the labor market slowly softens. October’s pending home sales fell 1.5% MoM and 8.5% YoY to their lowest level on record, with low affordability and inventory weighing on transactions. And November’s Chicago PMI soared to a 17-month high, driven by autoworkers returning to work.
OPEC+ agreed to deepen its product cuts to combat slumping crude prices and fears of surplus supply next year. The members agreed to make 1 million barrels per day of additional oil supply cuts, supplementing the extension of Saudi Arabia’s voluntary output curb of the same size.
Famous shoe brand Dr Martens saw shares plunge to all-time lows after challenges in the U.S. market caused its profits to fall by 55% through the first half of its fiscal year.
Disney shares popped then dropped after activist investor Nelson Peltz re-launched a proxy fight against the company, seeking multiple board seats.
Shares of cancer drug developer ImmunoGen jumped over 80% after AbbVie said it would buy the company for $10 billion.
Other symbols active on the streams: $FSR (-11.24%), $PATH (+11.36%)
Here are the closing prices:
| S&P 500 | 4,568 | +0.38% |
| Nasdaq | 14,226 | -0.23% |
| Russell 2000 | 1,809 | +0.29% |
| Dow Jones | 35,951 | +1.47% |
Express Remains A Mess
Earnings have been a mixed bag for retailers this year, but it seems mall retailer Express always knows how to make a mess. Let’s see what the company did this time…
Its adjusted loss per share of $9.83 was worse than the $7.18 expected, while revenues of $454.1 million came in shy of the $471.2 million consensus estimate. Executives don’t expect the sales picture to improve, forecasting fourth-quarter revenues of $565 to $590 million. That’s well below the $633 million Wall Street anticipated.
A 10% YoY increase in e-commerce sales helped boost results and offset a 16% YoY decline in retail stores’ comparable sales. Comparable outlet sales also fell 13% YoY. Gross margins were another issue, falling by 370 bps YoY, driven by higher promotional activity and royalty expenses. The company is reducing costs, but not quickly enough to offset weak sales.
Investors remain rightfully concerned about the retailer’s ability to turn itself around in this challenging environment. Despite vigorous promotional activity, it’s been unable to drive revenues to the extent management and analysts hoped.
$EXPR shares fell 12% on the day and remain stuck below broken support near $11.50. Technical analysts suggest the stock remains in a long-term downtrend until it breaks above that level.
Can The Record Rally Continue?
We joked about “No Sell November” earlier in the month, but it really did come true in markets.
All U.S. major indexes were up between 8% and 12%, with other asset classes participating in the rally. The Dow Jones Industrial Average closed at its highest level of the year. Heck, the traditional 60% equities and 40% bond portfolio had its second-best month in 30 years, according to Bespoke Investment Group.
Despite the broad optimism in prices, some are still concerned about the breadth of the market. They suggest that mega-cap technology stocks dubbed the “Magnificent Seven,” are the only thing pulling the market higher. However, some technical analysts shared a chart today that could suggest that it may be changing.
Below is a ratio chart of the equally-weighted S&P 500 ETF ($RSP) divided by the cap-weighted S&P 500 ETF ($SPY). These types of charts are nothing more than a fraction plotted over time, so when the line rises, it means that $RSP is outperforming $SPY. And when the line falls, it’s underperforming.
What the chart below shows is that after a long 2023 of underperformance by the equal-weighted S&P 500, it could be turning a corner. That’s because prices have stabilized at around the same levels they did during 2020 and are beginning to turn higher.
Now, technical analysts argue that this shows an improvement in breadth, meaning that more stocks are beginning to participate in the rally.And that’s a good thing because other stocks are rising to offset weakness in the mega-cap tech names that have already risen so much (and may need to rest or correct).
While this theory still needs time to prove itself, we wanted to highlight the chart and concept because they’ll be a big part of the conversation through the year’s end and into 2024.
Tesla Unveils Its Cybertruck
Elon Musk has been in the news quite a bit recently. But today, he was back in the headlines for better reasons, delivering the company’s first Cybertrucks at its Austin headquarters.
The live event comes after roughly four years of delays and missteps. In it, Musk touted the truck’s towing abilities, bulletproof doors, and straight-line speed, with the event ending with several customers taking delivery of their vehicles.
As for pricing, the cheapest rear-wheel drive model will start at $60,990 before discounts and won’t be available until 2025. However, its top-of-the-line “Cyberbeast” will cost $99,990 and deliver roughly 320 miles of range.
Investors and customers alike have been waiting anxiously for the release, as production was slated to begin in late 2021 but was delayed by supply chain and manufacturing issues. But in terms of business and financial impact, that will have to wait. Production is still ramping up, and this is not expected to be a mass-market product given its high price point and “interesting” design.
As a result, $TSLA shares saw little reaction around the event and were down a few percent on the day. As for the Stocktwits community, message volume soared today as investors discussed the event. But overall sentiment leaned bearish.
Bullets From The Day:
📝 X CEO Linda Yaccarino deals with Musk’s comment to advertisers. She addressed Elon Musk’s explicit comments to advertisers during what she called a “wide-ranging” and “candid” interview at The New York Times’ DealBook Summit. She framed what X is doing as “meaningful work” in operating as a platform that allows people to make their own decisions and thanked brands who support it in that mission. That’s an optimistic way to put him telling advertisers concerned about his (and some users’) behavior on the platform to “go f— yourself.” But we’ll have to see how it plays out with advertisers going forward. CNBC has more.
🛒 Jack Ma urges reform as e-commerce rivals gain ground. Alibaba’s founder called for change as PDD Holdings, which operates Pinduoduo and Temu, gains ground in the e-commerce market. The company saw revenues soar 94% YoY, with operating profit jumping 60% YoY. Its recent stock rally has pushed its market cap to $188.3 billion, just below Alibaba’s $189.9 billion, showing Alibaba may be failing to keep pace. In a post on the company’s internal forum, Ma asked staff to provide more constructive comments and suggestions, ending with “I firmly believe that Alibaba will change…” More from CNN Business.
📰 Google to pay Canada’s “link tax” after threatening to remove news. The company has agreed to pay Canadian news businesses C$100 million annually to comply with the country’s Online News Act, which requires large search engines and social media services to negotiate payments with news businesses. While Google had said it would not pay and instead remove links to Canadian news sources from its Search and News functions, it had a last-minute change of heart. Meanwhile, Meta ended its talks with the government last summer and chose to end news availability for Canadians. Ars Technica more.
🧑💼 Microsoft joins OpenAi’s board as Sam Altman retakes CEO helm. After a failed attempt by OpenAI’s board to oust Altman, the company’s largest investor is getting a non-voting observer seat. With three of the four board members who decided to fire Altman now gone, its new board consists of Bret Taylor, Larry Summers, and Adam D’Angelo. Microsoft’s 49% ownership prompted it to ask for a seat to have more visibility into the company’s inner workings (but not have a vote in big decisions). More from The Verge.
🧑⚖️ Meta challenges the FTC’s authority in a new suit. The social media giant is suing the Federal Trade Commission (FTC), challenging the constitutionality of its in-house enforcement powers. It’s doing so to prevent the agency from unilaterally changing the terms of a 2020 privacy settlement, which would reopen the enforcement order that accused Meta of privacy violations against children. Other companies have made similar arguments to restrict regulatory agencies, with mixed success. Politico has more.