The stock market rally retreated this week, with the S&P 500 falling back below the 200-day moving average, as recession fears took hold. China stocks continued to bounce as Covid rules eased. But crude oil and gasoline futures tumbled to one-year lows. Treasury yields slumped to their worst levels in nearly 3 months. Tesla (TSLA) sold off on China production concerns.
Market Rally Pulls Back
The S&P 500 and Russell 2000 fell below their 200-day moving averages as the major indexes declined significantly as recession fears grew. The market rally has trended higher, but the choppy action has been difficult to navigate. Crude oil prices plunged, while Treasury yields hit their lowest levels since September.
Jobless Claims Rise, PPI A Little Hot
New claims for jobless benefits rose 4,000 to 230,000 in the week through Dec. 3, while continuing claims rose 62,000 to 1.671 million, the highest since January. While the job market is cooling, it’s still quite warm as the levels remain historically very low. Meanwhile, the producer price index rose a bit faster than expected in November, with 0.3% gains overall and excluding food, energy and trade services. Still, the annual wholesale inflation rate eased to 7.4% from 8.1%, while the core rate fell to 4.9% from 5.4%. Q3 GDP growth of 2.9% is on track to be revised up to 3.6%, S&P Global Market Intelligence figures, citing new data on services spending.
Tesla China Woes Continue
Tesla sold 62,493 vehicles in China in November, with its Shanghai plant also exporting exported 37,798 EVs. A late October price cut and some other incentives helped. Tesla ramped up incentives for inventory cars in early December. Meanwhile, Tesla reportedly will cut production shift times at Shanghai amid widespread reports of output cuts. Expiring China EV subsidies on Dec. 31 raise further concerns about 2023 demand, as the aging Model 3 and Y face growing competition. Tesla stock tumbled, nearing November’s two-year low.
BYD (BYDDF) said it aims to have at least one European EV plant, and will likely build a U.S. battery plant, a top exec told Bloomberg. The China EV giant launched a new plug-in hybrid SUV, entered the Malaysia market and rolled the first Atto 3 off its India production line. BYD stock jumped.
Li Auto (LI) reported a wider-than-expected third-quarter loss while revenue growth came up short. But the maker of SUV hybrids implied December deliveries of 19,914-22,914, a big jump from November’s record 15,034. LI fell sharply on earnings, down modestly for the week.
Mobileye Earnings Strong
Mobileye Global (MBLY) beat estimates for revenue and earnings in its first quarterly report after going public in October. The Intel spinoff benefited from strong demand for its self-driving technology from carmakers. EPS rose 8% while revenue grew 38% to $450 million. Mobileye guided solidly higher for Q4 revenue.
Exxon, Chevron Offer 2023 Plans
Exxon Mobil (XOM) and Chevron (CVX) provided investors a glimpse into 2023 and beyond. Exxon announced its five-year corporate plan Thursday, with plans for annual capital spending at $20 billion-$25 billion through 2027. The oil giant is also planning to increase its share buyback program to $50 billion through 2024, up from $30 billion through 2023. Chevron it expects $14 billion in capital spending next year, a 25% increase. President Biden has criticized Exxon, Chevron and oil producers for focusing on shareholder returns instead of upping production. But U.S. crude oil and gasoline prices hit 2022 lows as recession fears grow, even as China reopens its economy.
Discount Retailers Miss Views
Costco Wholesale (COST) and Ollie’s Bargain Outlet (OLLI) reported weaker-than-expected reported third-quarter earnings and sales. Closeout retailer Ollie’s reported a 9% EPS gain, the first year-over-year increase in six quarters. Revenue climbed 9.2% to $418.1 million. Meanwhile, Costco reported a 3% rise in EPS on an 8% revenue bump to $53.44 billion. Ollie’s stock plunged while COST fell solidly.
News In Brief
Amazon.com (AMZN), Google parent Alphabet (GOOGL), Microsoft (MSFT) and Oracle (ORCL) won cloud-computing contracts that could each reach $9 billion through 2028. In 2019, the Defense Department awarded a $10 billion cloud-computing contract, but canceled that deal in 2021 amid Amazon’s objections.
Academy Sports & Outdoor (ASO) surged to a record high on bullish full-year profit guidance. ASO’s Q3 earnings fell 3%, beating views, while a 6% sales gain mixed. But profit margins impressed.
Dexcom (DXCM) rose as the FDA OK’d its latest continuous glucose monitor for patients with diabetes. The G7 is already approved in several countries.
AutoZone (AZO) topped earnings and revenue views with its first quarter results, even as the wheels have started coming off the used car market. EPS grew 9%. Sales climbed nearly 9% to $3.9 billion while U.S. same-store sales increased 5.6%. But AZO tumbled as inventories jumped nearly 18% vs. a year earlier.
Thor Industries (THO) reported fiscal Q1 EPS tumble 42% while revenue fell 21.5% to $3.11 billion, but that beat views. The RV and towables maker’s fiscal 2023 EPS guidance midpoint was slightly below consensus. THO stock plunged.
Broadcom (AVGO)earnings rose 34% per share, with revenue up 21%, both beating. The chip-and-software giant guided up on Q1 and raised its quarterly dividend by 12% to $4.60 a share.
Lululemon Athletica (LULU) slightly beat views with a 23% EPS gain and 28% revenue rise. The yoga athletic apparel maker and retailer guided lower on the holiday Q4.
MongoDB (MDB) reported third-quarter results that crushed estimates, with a bullish outlook. Q3 EPS spiked 667% with revenue jumped 47%. The database software company is said to be well positioned to benefit from secular trends around next-gen databases, the cloud, and digital transformation. MDB stock skyrocketed.
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