Market Update
German Factory Orders Drop, Russian Tankers Face Delays Through Turkey Straits
Bridgette Randall
06 Dec, 2022
New York City
European markets closed lower after the U.S. Fed-rate jitters rattled the market sentiment after recent data on monthly jobs, service sector growth and new goods orders supported the case for aggressive rate hike.
Market sentiment was weak on twin worries of a looming economic slowdown and rate hikes and worries that 4-decade high inflation may keep consumer spending in check.
Moreover, German factory orders declined in October on a weakness in domestic orders.
The European Central Bank chief economist Philip Lane said interest rates are still too low and rates have to be lifted several times to become sufficiently restrictive.
Lane also cautioned that the inflation in the eurozone is nearing a peak in an interview with Milano Finanza.
The yield on 10-year German Bunds eased to 1.79%, French bonds fell to 2.24%, the UK gilts declined to 3.08% and the Italian bonds decreased to 3.64%.
The euro edged lower to $1.042 and the British pound declined to $1.213.
Stock Market indexes Overview
The DAX index declined 0.5% to 14,343.19, the CAC-40 index fell 0.1% to 6,687.79 and the FTSE 100 index dropped 0.6% to 7,521.39.
Brent Crude at 11-month Low
Brent crude oil dropped for the second week and fell to a 11-month low, below the price before Russia's invasion of Ukraine in late February.
Brent crude closed down 2.5% to $79.81 a barrel and DUTCH TTF natural gas rose 2.8% to 138.49 euros per MWh.
German Factory Orders Fall
Germany's factory orders declined 0.8% in October from September when orders fell downwardly revised to 2.9% and declined 3.2% from a year ago. Export orders rose 2.5% and domestic orders fell 1.9%.
Russian Ruble Drop After Sanctions Kicked In
The Russian ruble falls to a two-month low below 63 against the U.S. dollar after the EU oil embargo kicked in.
Oil carried on tankers leaving Russian ports in Black Sea were held up on the Turkish side near the Bosphorus and Dardanelles straits to the Mediterranean, after Turkish controllers demanded insurance proof that complies with the recently imposed sanctions.
Tankers carrying oil to Kazakhstan and other countries face additional delays after the Turkish maritime authorities demanded higher coverage of protection & indemnity insurance that complied with the new rules under the EU sanction regime.
Europe Stock Movers
Phoenix Group Holdings PLC rose 3.1% to 614.49 pence after the UK-based retirement and savings plan operator lifted its target for incremental long term cash generation target.
Mondi Plc declined 4.6% to 1,468.84 pence after Credit Suisse lowered its view on the company's stock.
Resource sector stocks declined after commodities prices eased for the second week in a row.
Fresnillo PLC, Glencore PLC, BP Plc and TotalEnergies SE declined between 2% and 6%.
Rolls Royce Holding increased 3.5% to 93.81 pence.
Adidas, Infineon, Siemens Healthineers, SAP, Fresenius Medical Care and Continental AG declined between 2% and 4%.
Signet Same Store Sales Drop 7.6%, Quarterly Sales Rise 2.9%
Scott Peters
06 Dec, 2022
New York City
Signet Jewelers Ltd surged 18.7% to $68.61 after the retailer posted stronger-than-anticipated quarterly results.
Sales in the fiscal third quarter ending in October rose 2.9% to $1.58 billion from $1.53 billion a year ago.
Net income in the fiscal third quarter dropped to $28.8 million from $83.9 million and diluted earnings per share fell to 60 cents from $1.45 a year ago.
Total sales in North America increased 5.1% to $1.5 billion and same stores sales declined 7.6% from a year ago reflecting higher average transaction value but fewer number of transactions.
Operating Income
In the quarter, operating income was $48.4 million or 3.1% of sales, compared to $106.9 million, or 7.0% of sales a year ago.
Cash Declined
Cash and cash equivalents declined to $327.3 million from $1.2 billion a year ago reflecting share repurchases and inventory replenishment, as well as the acquisition of Diamonds Direct and Blue Nile.
The retailer also revised higher its non-GAAP operating margin to increase in double-digit, inclusive of the recent acquisition Blue Nile.
Dividend
The company declared a quarterly cash dividend on common shares of 20 cents a share for the fourth quarter of fiscal 2023, payable February 24, 2023 to shareholders of record on January 27, 2023.
Share Repurchase
The retailer in the quarter repurchased $20.2 million of its shares.
For the year-to-date, through December 2, the retailer repurchased approximately 5.6 million shares at an average cost of $70.28 a share or $393.0 million.
The purchase amount includes $20.2 million during the third quarter and $50 million from the completion of the accelerated share repurchase program from the fiscal 2022.
Approximately $570.3 million remains under the Company's multi-year authorization.
Guidance & Outlook
Total sales in the fourth quarter are estimated between $2.59 billion and $2.66 billion and adjusted non-GAAP operating income between $363 million and $404 million.
Sales in the fiscal year 2023 are estimated between $7.77 billion and $7.84 billion, adjusted non-GAAP operating income between $809 million and $850 million and adjusted diluted earnings per share between $11.40 and $12.0.
Capital Expenditure Plan
The company lowered its invest plan to $215 million in the current fiscal year after supply chain delays related to differentiated banner investment in stores.
NRG Agreed to Acquire Vivint Smart Home for $5.2 Billion
Scott Peters
06 Dec, 2022
New York City
NRG Energy dropped 17.1% to $33.89 after the company said it plans to acquire Vivint Smart Home for $12 a share or $2.8 billion and assumption of $2.4 billion in debt net of cash.
Vivint soared 32.5% to $11.90.
NRG also said it plans to complete its remaining $360 million of its stock purchase under the $1.0 billion plan and use the excess free cash flow in 2023 to fund the acquisition and the related debt.
Movers: AutoZone, BuzzFeed, GitLab, Herbalife, NRG Energy, Signet, Sumo Logic, Textron
Scott Peters
06 Dec, 2022
New York City
AutoZone Inc declined 3.2% to $2,450.65 after the auto parts retailer reported better-than-expected quarterly results but inventories rose more-than-expected.
Revenue in the fiscal first quarter increased 8.6% to $4.0 billion and domestic same store sales increased 5.6%.
Net income in the fiscal first quarter plunged to $539.5 million from $555.2 million and diluted earnings per share declined to $27.45 from $25.69.
Net inventories, merchandise inventories less accounts payable, increased 17.6% to negative $249,000 from negative $207,000 a year ago.
BuzzFeed Inc declined 3.5% to $1.10 after the company announced its plan to eliminate 180 positions or cut 12% of its staff by the end of the first quarter.
The company blamed its recent woes on challenging macroeconomic conditions, ongoing shift to short-form and vertical video and recent acquisition of Complex Networks.
Gitlab Inc jumped 8.1% to $41.43 after the software developer said the fiscal third quarter loss narrowed to 33 cents from 62 cents a year ago and sales rose 69% to $113 million.
Herbalife Nutrition Ltd plunged 23.5% to $13.35 after the multi-level marketing company announced an offering of $250 million convertible senior notes due in 2028.
NRG Energy dropped 17.1% to $33.89 after the company said it plans to acquire Vivint Smart Home for $12 a share or $2.8 billion and assumption of $2.4 billion in debt net of cash.
Vivint soared 32.5% to $11.90.
NRG also said it plans to complete its remaining $360 million of its stock purchase under the $1.0 billion plan and use the excess free cash flow in 2023 to fund the acquisition and the related debt.
Signet Jewelers Ltd surged 18.7% to $68.61 after the retailer posted stronger-than-anticipated quarterly results.
Sales in the fiscal third quarter ending in October rose 2.9% to $1.58 billion from $1.53 billion a year ago.
Net income in the fiscal third quarter dropped to $28.8 million from $83.9 million and diluted earnings per share fell to 60 cents from $1.45 a year ago.
Total sales in North America increased 5.1% to $1.5 billion and same stores sales declined 7.6% from a year ago reflecting higher average transaction value but fewer number of transactions.
The retailer also revised higher its non-GAAP operating margin to increase in double-digit, inclusive of the recent acquisition Blue Nile.
Sumo Logic soared 11.4% to $8.03 after the cloud company said the fiscal third quarter sales rose 27% to $79 million and loss narrowed to $26.3 million or 22 cents from $30.8 million or 28 cents a year ago.
Textron Inc rose 4.9% to $73.40 after the company won a contract to provide advanced helicopters to the U.S. Army. The contract could be worth as much as $70 billion.
International Trade Deficit Expands In October
Brian Turner
06 Dec, 2022
New York City
The U.S. international trade deficit in goods and services was $78.2 billion in October, an increase of 19.9% from a year ago and 5.4% from September, BEA reported Tuesday.
Exports declined 0.7%, second monthly fall in a row, to $256.6 billion and imports increased 0.6%, the largest since June, to $334.6 billion on higher imports of automobiles, nuclear materials, travel and pharmaceutical preparations.
Resilient Economy and Tight Labor Market Worry Investors
Barry Adams
06 Dec, 2022
New York City
Stocks on Wall Street struggled after rate hike worries resurfaced following fresh economic data suggesting that the U.S. economy and labor markets are stronger than anticipated.
Despite multiple rate hikes this year, the economy is still showing no signs of cooling and labor market conditions remain tight.
The debate rages on about the size of the rate increase at the next Fed's policy meeting, but the rate increases are likely to continue for several more meetings in 2023.
The Federal Reserve has reiterated its goal of bringing down the inflation to 2.0%, but inflation has hovered above 7.5% and the PCE Price index above 5%, the Fed's preferred measure of inflation.
The S&P 500 index dropped 1.7% to 3,931.46 and the Nasdaq Composite index declined 2.2% to 3,931.46.
Crude oil declined $2.23 to $74.63 a barrel and natural gas fell 15 cents to $5.42 a thermal unit.
The yield on 10-year Treasury notes fell to 4.37%, 10-yearTreasury notes dropped to 3.54% and 30-year Treasury bonds dropped to 3.56%.
International Trade Deficit Expands
The U.S. international trade deficit in goods and services was $78.2 billion in October, an increase of 19.9% from a year ago and 5.4% from September, BEA reported Tuesday.
Exports declined 0.7%, second monthly fall in a row, to $256.6 billion and imports increased 0.6%, the largest since June, to $334.6 billion on higher imports of automobiles, nuclear materials, travel and pharmaceutical preparations.
Stock Movers
BuzzFeed Inc declined 3.5% to $1.10 after the company announced its plan to eliminate 180 positions or cut 12% of its staff by the end of the first quarter.
The company blamed its recent woes on challenging macroeconomic conditions, ongoing shift to short-form and vertical video and recent acquisition of Complex Networks.
Textron Inc rose 4.9% to $73.40 after the company won a contract to provide advanced helicopters to the U.S. Army. The contract could be worth as much as $70 billion.
Signet Jewelers Ltd surged 18.7% to $68.61 after the retailer posted stronger-than-anticipated quarterly results.
Sales in the fiscal third quarter ending in October rose 2.9% to $1.58 billion from $1.53 billion a year ago.
Net income in the fiscal third quarter dropped to $28.8 million from $83.9 million and diluted earnings per share fell to 60 cents from $1.45 a year ago.
Total sales in North America increased 5.1% to $1.5 billion and same stores sales declined 7.6% from a year ago reflecting higher average transaction value but fewer number of transactions.
The retailer also revised higher its non-GAAP operating margin to increase in double-digit, inclusive of the recent acquisition Blue Nile.
NRG Energy dropped 17.1% to $33.89 after the company said it plans to acquire Vivint Smart Home for $12 a share or $2.8 billion and assumption of $2.4 billion in debt net of cash.
Vivint soared 32.5% to $11.90.
NRG also said it plans to complete its remaining $360 million of its stock purchase under the $1.0 billion plan and use the excess free cash flow in 2023 to fund the acquisition and the related debt.
The Russian ruble falls to a two-month low below 63 against the U.S. dollar after the EU oil embargo kicked in.
06 Dec, 2022
S&P 500, Nasdaq Down 1.8%; Natural Gas Plunged 10%
Barry Adams
05 Dec, 2022
New York City
Rate path worries resurfaced on Wall Street and bond yields rose and natural gas prices plunged 10%.
Investors feared that the Federal Reserve may hike rates at a slower pace but rates may peak at levels above 5.25% and the economy may dip into a recession.
The latest economic data on the service sector and manufacturing industry showed stronger-than-expected activities.
New orders for goods in October were ahead of expectations and the service sector index rebounded in November, fueling worries that the economy is too strong and the Federal Reserve may delay its plan to slow down rate moderation.
The on-again-off-again recession and rate path worries gripped the market sentiment and indexes accelerated the decline as the session progressed.
Bond Yields Rise
The yield on 2-year U.S. Treasury notes increased to 4.39%, 10-year Treasury notes inched higher to 3.58% and 30-year Treasury bonds edged up to 3.58%.
Markets Overview
The S&P 500 index fell 1.8% to 3,998.84 and the Nasdaq Composite index dropped 1.9% to 11,239.94.
Crude Oil Fell, Natural Gas Plunged 10%
Crude oil traded volatile with an upward bias after more cities in China relaxed coronavirus linked mobility restrictions, raising hopes of a rebound in China's import.
In addition, premier Xi Jinping is scheduled to commence his travel to Saudi Arabia on Wednesday this week and hold a summit with Arab leaders in Riyadh on Friday.
Natural gas prices plunged on the expectations of milder weather conditions over the next two weeks and rising supply.
Crude oil decreased $2.77 to $77.20 a barrel and natural gas plunged more than 10% or 67 cents to $5.80 a thermal unit.
U.S. New Orders for Goods Rise
The new orders for manufactured goods in October, up twelve of the last thirteen months, increased 1.0% to $556.6 billion, the U.S. Census Bureau reported today.
This followed a 0.3% September increase.
New orders for manufactured durable goods in October, up seven of the last eight months, increased 1.1% to $277.4 billion, up from the previously published 1.0 percent increase.
This followed a 0.2% September increase.
Shipments increased 0.7% in October after rising 0.3% in September and unfilled orders, up twenty-six consecutive months, increased 0.6% to $1,144.0 billion.
U.S. Service Sector Growth Rebounds
The ISM Services Purchasing Managers' Index unexpectedly jumped to 56.5 in November of 2022, rebounding from a more than two-year low of 54.4 reached in October.
U.S. Stock Movers
Tesla Inc dropped 5.7% to $183.11 on the reports that the company is looking to cut Model Y production by more than 20% in its Shanghai factory this month. The news was first reported by Bloomberg.
China-linked stocks opened higher but gave up early gains on the hopes that China's relaxation of Zero-covid policy may revive travel and business activities.
Alibaba soared 9% and Baidu gained 4.5%.
China-based casino operators soared and Melco Resorts & Entertainment and Wynn Macau soared between 5% and 13%.
Marriott International declined 1.4% to $163.28 after the company announced its plan to sell $500million convertible senior notes due in 2027 in a private offering.
VF Corp declined 10.4% to $29.77 after the company said its chief executive plans to retire. Steve Rendle retired immediately from the positions of Chairman, President and Chief Executive Officer.
The apparel maker also lowered its sales growth outlook to between 3% and 4% in the second-half from the previous estimate of between 5% and 6% increase.
The company blamed the weakness on a higher-than-expected promotional environment in the U.S. and ongoing weakness in China and higher inflation impacting retail sales in Europe.
Activision Blizzard gained 0.9% to $76.44 on the news that Microsoft is ready to defend its $69 billion acquisition of the company against the U.S. antitrust ruling.
Science Applications International Corp increased 4.4% to $114.55 after the company reported quarterly results ahead of market expectations and the company lifted its estimate of sales and earnings for the full-year.
European Markets Fall On Weak Economic Data
Stocks in Europe turned lower on the ongoing economic slowdown and rate path worries after the release of the latest batch of economic data.
In the region's economic news, the eurozone business activities declined for the fifth month in a row in November and retail sales in October unexpectedly declined from the previous month.
Eurozone Retail Sales Fall
Eurozone retail sales declined 1.8% from the previous month in October and 2.7% from a year ago, extending five months of weakness, Eurostat said Monday.
Eurozone Business Activities Fall
S&P Global confirmed its estimate of a slow down in business activities in November in the eurozone.
The final composite Purchasing Managers' Index inched higher to 47.8 in November from 47.3 in October, when it was at a 23-month low.
EU Sanction On Russia Oil Kicked In
Over the weekend, the European Union agreed to impose a price cap on Russian oil shipped using tanker companies based in the region beginning Monday.
The move is expected to cut into Russia's finances by limiting the price it can charge for the sale of energy, adding an incentive for the resource-rich nation to unwind its military operations in Ukraine.
Analysts are divided over the effectiveness of the Russian sanctions and Russia has other ways to profit from its sale of energy products in international markets.
The European Union agreed to cap the price for Russia's seaborne oil to $60 a barrel in an effort to punish President Vladimir Putin for invading Ukraine.
OPEC+ Confirmed Production Cut
OPEC+, a group of 23 oil producing nations, confirmed to cut December production by 2 million barrels a day at its monthly meeting on Sunday.
Despite the resumption of activities in China, investors remained skeptical of the rise in global demand for crude oil.
Brent crude oil declined $2.55 to $83.01 a barrel and Dutch TTF natural gas eased 0.6% to 134.70 euros MWh.
In a boost to Germany's efforts in diversifying its energy supply base, Qatar agreed to provide natural gas to Germany on a long term contract basis, but the supplies are not expected to arrive till 2026.
Qatar signed a 15-year contract to deliver 2 million tons a year of LNG to Germany through ConocoPhillips beginning 2026, supplying 3% of Germany's needs.
Europe Bond Yields Slightly Edge Up
The yield of 10-year German Bunds inched up to 1.89%, French bonds rose to 2.33%, the UK Gilts fell to 3.05% and Italian bonds edged up to 3.75%.
Europe Market Indexes
Stock indexes across the eurozone traded lower on the worries that the region's economy may be heading for a mild recession, after business activities slumped for the fifth month in a row.
The DAX index declined 0.6% to 14,447.61, the CAC-40 index fell 0.7% to 6,696.96 and the FTSE 100 index increased 0.1% to 7,567.54.
Europe Stock Movers
Nestle SA declined 1.3% to 111.30 Swiss francs after the consumer products company said it plans to restrict its marketing of food products in high sugar content to children under the age of 16.
Vodafone Plc increased 0.5% but closed nearly unchanged at 91.13 pence after the telecom group said its chief executive Nick Read will step down after four years in the position.
Glencore Plc increased 1.4% to 566.18 pence after the company settled a corruption inquiry for $180 million with Democratic Republic of Congo.
National Grid plc inched up 0.6% to 1,025.98 pence after the UK-based power distribution company completed the sales of its 60% equity stake in gas transmission business to a consortium of investors for