Market Update
Asian Markets Down, China Trade Surplus Shrinks to 7-month Low
Arjun Pandit
07 Dec, 2022
Mumbai
Asian markets traded lower amid global recession worries and China trade data also weighed on the market sentiment.
Japanese indexes declined on the rising U.S. recession worries and Chinese indexes dropped after the international trade surplus in November fell to the level last seen in mid-2020.
Indexes in India declined for the third day after advancing for eight rates in a row on the optimism of domestic economic growth and rising consumption.
Separately, the Reserve Bank of India increased its key lending rate as expected by 35 basis points on Wednesday.
The Nikkei 225 average declined 0.3% to 27,686.40, the Shanghai Composite index dropped 0.4% to 3,199.62, the Hang Seng index plunged 3.3% to 18,814.82 and the Sensex index eased 0.3% to 62,410.68.
China's Trade Surplus Shrinks to 7-month Low
China's trade surplus fell to the smallest level since April and exports declined for the second month in a row.
China's international trade surplus shrank to $69.8 billion in November from $71.7 billion in October, exports fell 8.7% and imports declined 10.6%.
Imports fell at a faster rate on the weakening of demand after widespread Covid-restrictions cut in the mobility and economic activities.
India Lowers Key Lending Rate
The RBI lifted its key rate by 35 basis points to 6.25%, the fifth rate hike in a row following the 50 basis points increase in September. GDP growth estimate was revised lower to 6.8% from 7.0%.
Movers: Carvana, Dave & Buster's. Lowe's, MongoDB, Thor Industries, Toll Brothers
Scott Peters
07 Dec, 2022
New York City
Carvana Co plunged 43.2% to $3.83 on growing fears that the used car dealer may have to seek bankruptcy protection.
The stock collapsed in trading today after a Bloomberg report indicated that unsecured creditors, including PIMCO and Apollo Global Management signed a deal to cooperate in negotiating with the company.
However, JPMorgan analyst Rajat Gupta said in a research note to investors that the company has "enough cushion through short term revolvers" and liquidity till the end of 2023.
Dave & Buster's Entertainment Inc fell 3.9% to $34.77 despite the restaurant operator reported better-than-expected quarterly results.
Revenue in the the fiscal third quarter increased 51.3% to $481.2 million, including the acquisition of Main Event.
Net income in the quarter ending in October declined to $1.9 million from $10.6 million and diluted earnings per share fell to 4 cents from 21 cents a year ago.
Including the pro forma contribution of Main Event stores in the prior periods, total revenue increased 20.6% from a year ago and rose 32.5% from the similar pre-pandemic quarter in 2019.
Lowe's Companies Inc announced a new $15 billion stock repurchase program with no expiration date in addition to the previous program's balance of $6.4 billion as of December 6, 2022.
The company is set to present its long-term outlook with analysts and investors at 8:00 a.m. ET Wednesday.
MongoDB Inc soared 27% to $184.32 after the database developer said the fiscal third quarter revenue increased 47% to $333.6 million and net income rose to $84.8 million from $81.3 million or $1.23 from $1.22 a diluted share a year ago.
Non-GAAP net income increased to $18.7 million or $0.23 per share based on 80.4 million diluted weighted-average shares outstanding from $2.6 million or $0.03 per share in the year-ago period.
Toll Brothers Inc rose 1.6% to $46.70 after the luxury home builder said the fiscal fourth quarter sales increased 23.3% to $3.7 billion and net income rose to $640.5 million from $374.3 million or $5.63 from $3.02 a share from a year ago.
Home sales gross margin increased to 26.9% from 23.5% a year ago and Net signed contract value was $1.3 billion, down 56% and contracted homes were 1,186, down 60% from a year ago.
The company recorded a pre-tax gain of $148.4 million, or $195 million gross, after it settled with Southern California Gas Company for a gas leakage near its community located in Aliso Canyon.
The average price of a home sold increased to $951,100 from $883,100.
Thor Industries, Inc increased 3.5% to $87.10 after the recreation vehicle maker said net sales in the fiscal first quarter increased 21.5% to $3.11 billion and net income declined to $136.2 million from $242.2 million or $2.53 from $4.34 a year ago.
Recession Fears Drag Stocks and Bonds and Oil Falls to 11-month Low
Barry Adams
07 Dec, 2022
New York City
Stocks on Wall Street traded lower in early trading as investors debated future rate-hike size and the nature of the economic slowdown in 2023.
U.S. Treasury bond yields dropped and crude oil prices dropped to a 11-month low on the worries that a global recession may dampen the demand for crude oil and natural gas.
Investors are increasingly worried that the Federal Reserve may not be able to engineer soft landing while trying to lower inflation from near 8% to its preferred level of 2%.
Stock Market Indexes
The S&P 500 index declined 0.2% to 3,936.11 and the Nasdaq Composite index fell 0.5% to 11,513.24.
Bond Yields
The yield on U.S. Treasuries drifted lower as rate-path worries and economic slowdown worries overshadowed elevated inflation anxieties.
The yield on 2-year Treasury notes decreased to 4.30%, 10-year Treasury notes eased to 3.47% and 30-year Treasury bonds declined to 3.47%.
Commodities and Energy
Crude oil traded near a 11-month low as investors debated the rising prospects of a global economic slowdown.
Crude oil inched 2 cents higher to $74.11 a barrel and natural gas edged up 11 cents to $5.58 a thermal unit.
Mortgage Rates Ease
The average mortgage rate fell 8 basis points to 6.41% for 30-year fixed-rate mortgages for conforming loan balances with 20% down payment, the Mortgage Bankers Association said Wednesday.
U.S. Stock Movers
Lowe's announced a new $15 billion stock repurchase program with no expiration date in addition to the previous program's balance of $6.4 billion as of December 6, 2022.
Toll Brothers rose 1.6% to $46.70 after the luxury home builder said the fiscal fourth quarter sales increased 23.3% to $3.7 billion and net income rose to $640.5 million from $374.3 million or $5.63 from $3.02 a share from a year ago.
Thor Industries increased 3.5% to $87.10 after the recreation vehicle maker said net sales in the fiscal first quarter increased 21.5% to $3.11 billion and net income declined to $136.2 million from $242.2 million or $2.53 from $4.34 a year ago.
MongoDB soared 27% to $184.32 after the database developer said the fiscal third quarter revenue increased 47% to $333.6 million and net income rose to $84.8 million from $81.3 million or $1.23 from $1.22 a diluted share a year ago.
Non-GAAP net income increased to $18.7 million or $0.23 per share based on 80.4 million diluted weighted-average shares outstanding from $2.6 million or $0.03 per share in the year-ago period.
European Markets Extend 4-day Losses
European market indexes declined for the fourth session in a row on the rising prospects of a global recession in 2023 and weak resource stocks led the decliners.
Asian Markets Look Down
Japanese indexes declined on the rising U.S. recession worries and Chinese indexes dropped after the international trade surplus in November fell to the level last seen in mid-2020.
Indexes in India declined for the third day after advancing for eight rates in a row on the optimism of domestic economic growth and rising consumption.
Separately, the Reserve Bank of India increased its key lending rate as expected by 35 basis points on Wednesday.
The Nikkei 225 average declined 0.3% to 27,686.40, the Shanghai Composite index dropped 0.4% to 3,199.62, the Hang Seng index plunged 3.3% to 18,814.82 and the Sensex index eased 0.3% to 62,410.68.
China's International Trade Surplus Shrinks
China's international trade surplus shrank to $69.8 billion in November from $71.7 billion in October, exports fell 8.7% and imports declined 10.6%.
India Lowers Key Lending Rate
The RBI lifted its key rate by 35 basis points to 6.25%, the fifth rate hike in a row following the 50 basis points increase in September. GDP growth estimate was revised lower to 6.8% from 7.0%.
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.