Market Update
Tech and Broad Indexes Falter After Muted Guidance from Microsoft
Barry Adams
25 Jan, 2023
New York City
Stocks accelerated declines in the week on the rising worries about the corporate earnings outlook.
Tech stocks turned lower after Microsoft reported weakest quarterly revenue growth in several years and earnings declined more-than-expected.
Microsoft weakness spread to the semiconductor sector and dragged stocks in several sectors after investors downgraded corporate earnings outlook for the year.
Moreover, higher rates will only negatively impact earnings in the year as consumers struggle to adjust to price inflation and businesses struggle to contain input costs.
The S&P 500 index fell 1.6% to 3,953.22 and the Nasdaq Composite index dropped 2.2% to 11,087.50.
Energy Prices Traded Sideways
Crude oil price was nearly unchanged at $80.12 a barrel and natural gas futures contract price eased 10 cents to $3.15 a thermal unit.
Treasury Yields Hovered Near Recent Lows
The yield on 2-year Treasury notes decreased to 4.14%, 10-year Treasury notes eased to 3.45% and 30-year Treasury bonds declined to 3.62%.
U.S. Stock Movers
Boeing Company decreased 1.1% to $209.56 after the company said rising operating costs impacted quarterly results.
Boeing Company said revenue in the December quarter soared 35% to $20 billion and net loss shrank to $663 million from $4.2 billion.
Diluted loss per share fell to $1.06 from $7.02 a year ago.
Microsoft Corp decreased 1.5% to $238.45 after the software developer reported weak quarterly revenue growth and earnings fell.
Microsoft said revenue in the December quarter increased 2% to $52.7 billion and net income declined 12% to $16.4 billion and diluted earnings share fell to $2.20 from $2.48 in previous year.
European Indexes In Negative Territory
European indexes declined on rate hike worries led by losses in tech stocks after Microsoft reported weaker-than-expected revenue growth and earnings.
Recession worries dominated market sentiment after recent layoffs from large tech companies, slower global economic growth outlook and weak outlook for corporate earnings growth kept investors on the sidelines.
The DAX index fell 0.3% to 15,044.0, the CAC-40 index declined 0.4% to 7,020.27 and the FTSE 100 index dropped 0.5% to 7,719.55.
Euro Extend Recent Gains
The euro extended recent gains to a fresh 9-month high after investors anticipated aggressive rate hikes from the ECB to continue and the U.S. Federal Reserve to slow rate hikes.
The euro edged higher to $1.089, the British pound rebounded $1.235 and the Swiss franc edged higher to 91.99 U.S. cents.
Natural Gas Prices Sink Near 16-month Low
Natural gas prices eased for the third day in a row and inched closer to the price last seen in September 2021 amid warmer weather conditions, near-full storage and rising supply.
Brent crude oil increased 45 cents to $86.55 a barrel, the Dutch TTF natural gas futures contract price inched lower 5% to €55.10 per MWh.
Tokyo Stocks Advanced On Rate Optimism
Stocks in Tokyo traded higher on rate optimism and investors reacted to corporate earnings.
The Nikkei 225 average increased 0.3% to 27,395.01 and the yen edged higher to 129.77 against the U.S. dollar.
Nidec Corporation declined 5.4% to ¥7,145.0 after the maker of spindle motors used in electronic devices reported weaker-than-expected earnings.
Disco Corp declined 3.5% to ¥39,000.0 after the maker of precision tools reported weaker-than-anticipated quarterly results.
Net sales in the nine-month period ending in December rose 13.8% to 205 billion yen and net income increased 25.7% to 57.2 million yen.
Earnings per share increased to 1,585 yen from 1,261 yen in the previous year.
Weakness In Adani Group Drags Lower India Indexes
Stocks in Mumbai traded lower ahead of the Republic Day holiday and Adani Group stocks declined after the U.S.-based research company published negative comments ahead of the $2.5 billion secondary offering.
Hindenburg Research alleged that Adani Group operates multiple entities in tax havens and siphons revenue from the publicly listed entities.
The research note also alleges that the company is involved in "brazen stock manipulation and accounting fraud scheme," without citing any specific transaction.
Hindenburg holds short positions in the group's stocks and debts and the short seller is looking for a decline in valuation as much as 85%.
"The report is a malicious combination of selective misinformation and stale, baseless and discredited allegations that have been tested and rejected by India's highest courts," Adani Group refuted in a statement Wednesday.
The Sensex declined 1.3% or 773.69 points to 60,205.06 points and the Nifty index dropped 1.3% or 226.35 points to 17,891.95.
The Indian rupee inched lower to 81.49 against the U.S. dollar.
Tokyo Stocks Advanced, India Indexes Trended Lower
Arjun Pandit
25 Jan, 2023
New York City
Stocks in Tokyo traded higher on rate optimism and investors reacted to corporate earnings.
The Nikkei 225 average increased 0.3% to 27,395.01 and the yen edged higher to 129.77 against the U.S. dollar.
Nidec Corporation declined 5.4% to ¥7,145.0 after the maker of spindle motors used in electronic devices reported weaker-than-expected earnings.
Disco Corp declined 3.5% to ¥39,000.0 after the maker of precision tools reported weaker-than-anticipated quarterly results.
Net sales in the nine-month period ending in December rose 13.8% to 205 billion yen and net income increased 25.7% to 57.2 million yen.
Earnings per share increased to 1,585 yen from 1,261 yen in the previous year.
Weakness In Adani Group Drags Lower India Indexes
Stocks in Mumbai traded lower ahead of the Republic Day holiday and Adani Group stocks declined after the U.S.-based research company published negative comments ahead of the $2.5 billion secondary offering.
Hindenburg Research alleged that Adani Group operates multiple entities in tax havens and siphons revenue from the publicly listed entities.
The research note also alleges that the company is involved in "brazen stock manipulation and accounting fraud scheme," without citing any specific transaction.
Hindenburg holds short positions in the group's stocks and debts and the short seller is looking for a decline in valuation as much as 85%.
"The report is a malicious combination of selective misinformation and stale, baseless and discredited allegations that have been tested and rejected by India's highest courts," Adani Group refuted in a statement Wednesday.
The Sensex declined 1.3% or 773.69 points to 60,205.06 points and the Nifty index dropped 1.3% or 226.35 points to 17,891.95.
The Indian rupee inched lower to 81.49 against the U.S. dollar.
Earnings Worries Keep Wall Street Indexes In Check
Barry Adams
24 Jan, 2023
New York City
Stocks rested after two days of solid gains and chip stocks led the decliners.
Market sentiment was also weak after the U.S. Department of Justice and several other states filed an antitrust lawsuit against Google's parent Alphabet Inc and sought separation of certain of its advertising businesses.
Investors also worried about the implications of the U.S. debt ceiling delays and how the government will cope with spending cuts.
Investors also digested a fresh batch of earnings from Verizon, Johnson & Johnson, 3M, Lockheed Martin and await earnings from 300 companies this week.
Microsoft surged 4% in extended trading hours after the software developer reported better-than-expected earnings.
On the economic front, investors are also looking to gain clues on the economy after the release of durable goods orders, fourth quarter GDP, new home sales and personal income and spending later in the week.
The S&P 500 index fell 2.86 points to 4,016.95 and the Nasdaq Composite index decreased 30.14 to 11,334.27.
Energy Prices Lacked Direction
Energy prices closed down in volatile trading as traders awaited weekly inventories data on Thursday.
Crude oil decreased $1.69 to $79.93 a barrel and natural gas futures decreased 17 cents to $3.26 a thermal unit.
Treasury Yield Hovered Near Recent Lows
Bond yields were under pressure after the S&P Global US Composite PMI weakened to 46.6 in January from 45.0 in December.
The private sector activities contracted for the seventh month in a row, the flash estimate showed.
While the input price inflation picked up pace in January, the rate of final output price charged to customers was unchanged.
The yield on 2-year Treasury notes inched lower to 4.21%, 10-year Treasury notes hovered near 3.46% and 30-year Treasury bonds traded down to 3.62%.
US Stock Movers
Johnson & Johnson declined 1% to $166.71 after the healthcare company reported quarterly results that met investors expectations but the company's forward guidance was weaker-than-anticipated.
Sales in the quarter declined 4.4% to $23.71 billion from $24.80 billion in the similar quarter last year, primarily because of lower Covid-19 vaccine sales and unfavorable exchange rate.
Net earnings declined 25.9% to $3.52 billion or $1.33 per share from $4.74 billion or $1.77 per share in the quarter a year ago.
US sales rose 2.9% to $12.52 billion and international sales dropped 11.5% to $11.19 billion from last year.
The company estimated adjusted earnings per share in a range of $10.45 to $10.65 and adjusted operating earnings per share in a range of $10.40 to $10.60.
Verizon Communications Inc increased 80 cents to $39.75 after the company reported mixed quarterly results.
Lockheed Martin Corp gained 1.4% or $5.98 after the defense contractor reported sales and adjusted earnings ahead of expectations.
Raytheon Technologies Corp increased 1.8% or $1.69 to $97.92 after the defense contractor benefitted from arms sales for Ukraine and the company said it plans to reorganize in three business units.
European Markets Pause On Rate Hike Worries
European markets were on the backfoot after aggressive rate hike worries returned following the release of business activities index.
Stocks lacked direction in choppy trading after natural gas prices plunged but the rebound in business activities rekindled the worries of aggressive rate hikes at the next policy meetings in February and March.
European Business Activities Rebound
The S&P Global Composite Purchasing Managers' Index increased to 50.2 in January 2023 from 49.3 in December 2022 after falling for six months in a row.
The rebound in service activities in pharmaceuticals, healthcare and technology and smaller contraction in manufacturing activities improved the index.
European Market Indexes Paused
European indexes paused as investors weighed earnings optimism and weakening energy prices against the rate hike worries.
The DAX index decreased 0.3% to 15,057.73, the CAC-40 index traded up a fraction to 7,032.26 and the FTSE !00 index decreased 0.4% to 7,755.79.
Dollar Hovers Near 9-month Low
The U.S. dollar hovered near a 9-month low on the hopes that the Federal Reserve will moderate its aggressive rate hike posture and pivot to smaller rate increases at the meeting next week.
The euro inched lower to $1.08, the British pound traded near $1.228 and the Swiss franc hovered near 92.63 U.S. cents.
Bond Yields Advanced On Rate Hike Worries
The yield on 10-year German Bunds increased to 2.20%, French bonds to 2.64%, the UK Gilts to 3.33% and Italian bonds to 3.997%.
Natural Gas Prices Drops 10%
Natural gas prices fell for the second day in a row and dropped near a 16-month low as cold snap faded and warmer-than-usual temperatures are expected to return this week.
Brent crude oil decreased 12 cents to $88.06 a barrel and the Dutch TTF natural gas dropped 9.7% to €59.60 per MWh.
French Services Contracted In January
The French service sector contracted for the third month in a row, S&P Global Service PMI data showed Tuesday.
French Service PMI declined to 49.2 in January 2023 from 49.5 in December 2022, third monthly decline in a row and the sharpest pace since March 2021.
New order flows declined on the persistent economic uncertainties and higher inflation and rising borrowing costs but on the positive side new job addition rate improved.
British Manufacturing Weakness Persists
The British manufacturing sector continued to face headwinds amid persistent high inflation and energy prices and economic uncertainties, data from the Confederation of British Industries showed Tuesday.
The order book balance declined 11 points in January to -17 from December, the weakest since February 2021 according to the latest Industrial Trends Survey.
The price expectations for the next three months eased to +41 from +52 in December on the easing of supply chain constraints and labor shortages and falling natural gas prices.
UK Borrowings Soared In December
The UK budget deficit widened to the record December-level after the government revved up energy subsidies and higher rates lifted interest payments.
Public sector net borrowing, excluding government controlled banks, increased to £27.4 billion, record high since monthly records began in January 1993, the Office for National Statistics reported Tuesday.
December’s borrowing was £16.7 billion higher from the previous year and £9.8 billion higher than the latest official forecast published by the Office for Budget Responsibility.
Central government debt interest payable increased to £17.3 billion in December 2022, the highest December payment since monthly records began.
Europe Stock Movers
Associated British Foods Plc declined 2.2% to 1,829.0 pence after the owner of Primark said revenue in the 16-week period ending on January 7 rose 20% to £6,698 million.
Revenue in constant currency rose 16% and the stronger U.S. dollar drove the nominal exchange rate based revenues.
"We continue to encounter significant cost pressures but inflation has become less volatile and recently some commodity costs have declined.
Consumer spending has proven to be more resilient in this trading period than anticipated at the start of the financial year," the company said in its latest trading update.
For the full year, the company estimated "result overall is unchanged with a significant growth in sales, and adjusted operating profit and adjusted earnings per share to be lower than the previous financial year."
Technip Energies NV declined 1.9% to €16.93 despite the company winning a contract in Saudi Arabia.
Saudi Arabia-based Aramco awarded a contract to modernize sulfur recovery facilities to the French engineering and technology company.
Marston's Plc increased 6.2% to 43.42 pence after the pubs operator said sales increased during holiday period.
Comparable sales in the 16-week period ending on January 21 increased 20% from the previous year.
Comparable sales in the five-day holiday period, Christmas Eve, Christmas Day, Boxing Day, New Year’s Eve and New Year’s Day, jumped 26% and sales in the similar period two-years ago rose 12.9%.
The company said total retail sales at the company owned and managed and franchised pubs were up 14.0% on last year and up 7.3% from the fiscal year 2020.
Beverage sales continued to outperform food sales.
Tech Stocks Drive Nikkei Higher Second Day In a Row
Benchmark index in Tokyo closed higher following a surge in tech stocks tracking gains in New York trading.
The Nikkei index closed at 5-week high on the back of a rebound in tech stocks and investors awaited corporate earnings.
The Nikkei 225 index increased 1.5% to 27,299.19 and the yen firmed 18 cents to 130.48 against the U.S. dollar.
GS Yuasa Corp increased 3.8% to ¥2,255.0 after the company announced a joint venture with Honda Motor Corp to make advanced Lithium-Ion batteries.
Honda Motor Corp increased 1.2% to ¥3,129.0.
Most markets in the region were closed to celebrate the Lunar New Year.
Markets in mainland China, Hong Kong, Taiwan, Singapore, Malaysia and South Korea were closed.
India Awaits Union Budget Measures
Indian stocks lacked direction ahead of the Republic day holiday on Thursday and investors reacted to latest earnings from vehicles makers Maruti Suzuki and TVS Motor.
Investors are also awaiting the central government budget next week and looking for clues on incentives to accelerate the manufacturing sector and infrastructure spending.
The Sensex index increased 0.06% or 37.08 to 60,978.75 and the Nifty index traded down 0.25 points to 18,118.30.
The rupee closed down 11 paisa to 81.59 against the U.S. dollar.
Maruti Suzuki said revenue in the December quarter increased 27% to ₹29,905 crore and net income rose 66.4% to ₹2,135 crore and diluted earnings per share jumped to ₹77.84 from ₹33.48 a year ago.
TVS Motor said the December quarter revenue increased 15% to ₹6,076 crore and net income increased to ₹352 crore from ₹288 crore and diluted earnings per share rose to ₹7.42 from ₹6.07 a year ago.
Movers: 3M, Alphabet, DR Horton, J&J, Lockheed Martin, Raytheon, Verizon
Scott Peters
24 Jan, 2023
New York City
3M Company declined 5.5% to $115.85 after the company posted mixed quarterly results.
Fourth quarter revenue declined 6% to $8.1 billion, reflecting impacts of negative 2% from divestitures and negative 5% from foreign currency translation on the strong U.S. dollar.
Net income in the quarter declined to $541 million from $1.3 billion and diluted earnings per share dropped to 98 cents from $2.31 in the previous year.
In the quarter, the company returned $1.4 billion to shareholders through dividends and stock repurchases.
In December 2022, 3M announced it will exit per- and polyfluoroalkyl substance manufacturing by the end of 2025 and the company is also facing investigations from California's Attorney General office.
The company estimated full-year 2023 sales to fall between 2 % and 6% and adjusted earnings per share between $8.50 and $9.0 including a pre-tax restructuring charge between $75 million and $100 million.
Alphabet Inc declined 1.4% to $99.85 after the parent of Google was sued by the U.S. Justice Department for the second time in as many years.
The latest suit targets its advertising business which generated a total of $54.6 billion and seeks the company to divest part of its operations.
The company is also facing antitrust lawsuits from several other states and California, Colorado, New York, New Jersey, Rhode Island and Connecticut joined the latest DOJ suit.
D.R. Horton Inc increased 2% to $97.68 after the homebuilder reported better-than-expected earnings.
Revenue in the fiscal first quarter ending in December increased 3% to $7.3 billion and net income decreased 16% to $958.7 million from $1.1 billion and diluted earnings per share fell to $2.76 from $3.17 in the previous year.
Home building revenue increased 1% to $6.74 billion from $6.68 billion in the same quarter of fiscal 2022.
Homes closed in the quarter decreased 6% to 17,340 homes compared to 18,396 homes closed in the same quarter a year ago.
Net sales orders for the fiscal first quarter decreased 38% to 13,382 homes and 40% to $4.9 billion compared to 21,522 and $8.3 billion in the same quarter of the prior year.
Order cancelation rate increased to 27% in the first quarter from 15% in the prior-year quarter.
Johnson & Johnson declined 1% to $166.71 after the healthcare company reported quarterly results that met investors expectations but the company's forward guidance was weaker-than-anticipated.
Sales in the quarter declined 4.4% to $23.71 billion from $24.80 billion in the similar quarter last year, primarily because of lower Covid-19 vaccine sales and unfavorable exchange rate.
Net earnings declined 25.9% to $3.52 billion or $1.33 per share from $4.74 billion or $1.77 per share in the quarter a year ago.
US sales rose 2.9% to $12.52 billion and international sales dropped 11.5% to $11.19 billion from last year.
The company estimated adjusted earnings per share in a range of $10.45 to $10.65 and adjusted operating earnings per share in a range of $10.40 to $10.60.
Lockheed Martin Corp gained 1.4% or $5.98 after the defense contractor reported sales and adjusted earnings ahead of expectations.
Lockheed said revenue in the fourth quarter increased to $19.0 billion from $17.7 billion but net income declined to $1.9 billion from $2.0 billion or diluted earnings per share fell to $7.40 from $7.47 in the previous year.
In full-year 2022, sales decreased to $66 billion from $67 billion and net income declined to $5.7 billion from $6.3 billion and diluted earnings per share dropped to $21.66 from $22.76 in the previous year.
Raytheon Technologies Corp increased 1.8% or $1.69 to $97.92 after the defense contractor benefitted from arms sales for Ukraine and the company said it plans to reorganize in three business units.
Fourth quarter revenue increased 6% to $18.1 billion from $17.04 billion and net income doubled to $1.4 billion from $685 million and diluted earnings per share rose to 96 cents from 46 cents a year ago.
Backlog at the end of the fourth quarter was $175 billion, of which $106 billion was from commercial aerospace and $69 billion was defense orders.
Verizon Communications Inc increased 80 cents to $39.75 after the company reported mixed quarterly results.
Fourth quarter total operating revenue increased 3.5% to $35.25 billion from $34.1 billion and net income increased 41% to $6.7 billion from $4.7 billion and diluted earnings per share rose to $1.56 from $1.11 in the previous year.
Broadband Internet accounts increased 416,000 and wireless postpaid connections increased 217,000 to 143 million and churn rate was 1.14%.
The company guided total wireless revenue growth in 2023 between 2.5% and 4.5% and capital expenditure between $18.25 billion and $19.25 billion.