Stock Market Rally Roars on Cooling Inflation; Bitcoin, Meta, Tesla in Focus: Weekly Review

The stock rally struggled for much of the week as Bitcoin, midterms and megacaps took a toll. But a tamer-than-expected CPI inflation report sent stocks soaring on Thursday with bond yields and the dollar falling. Meta platforms (META) announced major job and spending cuts. Tesla ( TSLA ) fell amid the Elon Musk stock selloff and the “Twitter circus,” as well as new signs of weak demand in China. Amgen (AMGN), GlobalFoundries (GFS) and Halozyme Therapeutics (HALO) jumped on positive news.

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Stock market rally higher

After struggling earlier in the week, the market rally moved back into “confirmed uptrend” after rising sharply on Thursday’s surprisingly cool CPI inflation data. Treasury yields plunged and the dollar fell. The Dow Jones moved back above the 200-day line to its best levels since August. The S&P 500 vaulted back above the 50-day line while the Nasdaq finally moved above that key level. Bitcoin plunged to a two-year low as crypto exchange FTX neared collapse.

CPI inflation is cooling

The decline in inflation accelerated in October, raising hopes that the Federal Reserve may stop moving before the key rate reaches 5%, which would improve the chances of a soft landing. The consumer price index rose 0.4% on the month and 7.7% from a year ago, slowing from 8.2% in September to the lowest level since January. The best news was that core inflation, excluding food and energy, eased to a monthly increase of 0.3%, while annual core inflation eased back to 6.3% from September’s 40-year high of 6.6%.

Core commodity prices saw deflation in October, falling 0.4% to bring the annual increase down to 5.1%. That included a 2.4% drop in used car prices. Prices for non-energy services, which make up almost 60% of household budgets, still rose a strong 0.5% month-on-month and 6.7% year-on-year. But the tide is turning. Rent increases remained strong but eventually began to slow, and much more decline is expected into 2023. Medical services fell 0.6%, the most since 1971, when health insurance prices fell 4%, the largest monthly decline on record.

The Fed is not just targeting inflation, but underlying inflationary pressures, which come via the tight labor market. The impact of monetary tightening is starting to show, as new jobless claims rose by 7,000 to 225,000 in the week to November 5. The number of people continuing to claim benefits rose to 1.493 million, up around 130,000 since early October, the highest level since late March.

Bitcoin crashes while FTX burns

Bitcoin plunged to a two-year low of $15,554 during the week when FTX collapsed, with major cryptocurrency exchange Binance walking away from a tentative deal to buy rival FTX. Meanwhile, FTX filed for bankruptcy on Friday. That could create further ripples in the cryptocurrency field, which already suffered major failures earlier this year. BlockFi, which FTX agreed to buy earlier this year, stopped withdrawals.

Meta announces big job, cost cuts

Facebook parent Meta platforms (META) announced it would cut 11,000 jobs, or 13% of its workforce, and extend a hiring freeze through the first quarter. CEO Mark Zuckerberg said he grew Facebook too fast after the Covid crisis ended, leading to losses well into the billions as he tries to pivot the company into a new digital world called the metaverse. Zuckerberg also signaled that Meta will rein in spending on infrastructure. Which affected shares of suppliers such as e.g Arista Networks (A WEB), Nvidia (NVDA) and Ciena (CIEN), although they later recovered. The META share jumped, but from the lowest level in several years.

Tesla hits lows amid several headwinds

Tesla ( TSLA ) plunged to a two-year low amid several headwinds, though it bounced back with the market on Thursday. Tesla brought back an insurance subsidy in China for cars in stock, after a price cut in late October to boost demand amid soaring production in China. CEO Elon Musk revealed that he sold nearly $4 billion worth of TSLA stock over Nov. 4, 7, and 8, reportedly telling Twitter employees that he was selling shares to “save” the social media company. President Joe Biden suggested Wednesday night that Musk could be a national security threat. Wedbush analyst Daniel Ives, a longtime Tesla bull, warned that the Twitter “clown show” is hurting the Tesla brand.

Ready, Rivian Stick to production targets

Luxury EV startups Sure (LCID) and Rivian (RIVN) reduced losses for the third quarter and maintained previously reduced production targets for the whole year. Both Lucid and Rivian, which are supported by Amazon (AMZN) and Ford (F), production and deliveries increased in the third quarter despite headwinds. But Saudi-backed Lucid announced a major stock sale and declining reservations for its long-range Air, which competes with the Tesla Model S. Meanwhile, more than 1,000 Rivia electric vans are delivering Amazon holiday packages across dozens of US cities. Lucid shares fell while Rivian shares rose.

GlobalFoundries shows revenue

GlobalFoundries ( GFS ) beat Wall Street’s third-quarter targets and guided much higher than views for earnings in the current period. The Malta, NY-based contract chip maker’s revenue jumped 857% year-over-year, with sales of $2.07 billion, up 22%. For Q4, GlobalFoundries estimates adjusted EPS to rise 644% on direct sales of $2.08 billion, up 13%. GFS stock jumped, removing early buy points.

Solar shares shine on earnings

Array Technologies, a maker of solar trackers, reported third-quarter earnings of 18 cents a share, double what Wall Street expected. Revenue rose 173% to $515 million against impressions of $398.5 million. SolarEdge, which makes solar inverters and power optimizers, missed out on EPS, mainly due to taxes. But earnings beat and SolarEdge led the way for sales in the fourth quarter. Both stocks rose.

Biotechs Shine On Drug, Earnings News

Several biotech stocks shone brightly on earnings and early clinical data. Early in the week, Amgen (AMGN) and Eli Lilly ( LLY ) rose to healthy highs after Amgen said patients receiving its obesity treatment lost an average of 7.2-14.5% of their body weight. Lilly is also testing a treatment for obesity. Both would go up against already approved ones Novo Nordisk (NVO) drugs, Wegovy. In earnings news, Halozyme (HALO) broke out and Catalyst Pharmaceuticals (CPRX) rose on its third-quarter beats. Halozymes’ adjusted EPS grew 35% to 74 cents and sales rose more than 80% to $209 million. The company also announced a partner Johnson & Johnson (JNJ) will test a cancer combination using Halozyme’s delivery system, Enhanze. Catalyst reported a fourth consecutive quarter of accelerating EPS and sales growth.

Disney Revenue Missed While Disney+ Subs Jump

The Dow Jones entertainment giant missed badly on fiscal fourth-quarter earnings, down 18%. Revenue grew 9% to $20.15 billion, which is missing. Still, House of Mouse added 12.1 million new Disney+ subscribers, topping estimates. Walt Disney ( DIS ) has 235 million subscribers across all streaming platforms, including ESPN+ and Hulu, surpassing analyst views. Meanwhile, a Disney+ ad tier and price increase will begin in early December. The DIS share fell, but reduced losses somewhat.

Payment balances diverge

Shift4 Payments ( FIRE ) said its Q3 adjusted EPS rose 65%, while revenue rose 33% to $196.7 million, both slightly better. Shift4, which is expanding its markets, raised its EBITDA targets for the full year. FOUR stocks fell on earnings, but then rallied for a strong week. Verify inventories (AFRM) lowered its full-year outlook due to slowing sales at key customers Peloton Interactive (PTON). The buy now, pay later leader reported a slightly worse-than-expected Q3 loss while revenue rose 34% to $361.6 million, in line. Gross merchandise volume increased by 62%, which tops something. But Affirm slightly cut GMV and revenue targets for the full year. AFRM shares crashed to a record low, but rallied for a modest gain.

Shale producers reported mixed results

Warren Buffett-backed Occidental Petroleum ( OXY ) reported a 180% EPS gain, just missing views, while revenue grew 40% to $9.5 billion. Diamondback energy (FANG) reported that EPS increased by 120%, topping. Third-quarter revenue increased 26% to $2.4 billion, in line. Both oil producers kept production relatively flat, while at the same time returning a hefty chunk of cash back to shareholders.

LNG plays report booming growth

New fortress energy ( NFE ) reported a 140% revenue gain to $731.9 million, but third-quarter EPS was well below views. NFE shares plunged after last week’s rally as New Fortress raised its 2022 and 2023 EBITDA targets. Excelerate energy (EE), an IPO in April, delivered EPS of $1.47 versus 6 cents a year earlier. Revenue increased 318% to $803.3 million. EE stock rallied after earnings, erasing weekly losses and nearing a buy point.

Nuclear leader has surprising loss

Constellation energy ( CEG ) reported a surprise third-quarter loss with revenue up 37% to $6 billion. But the company, fresh from a split from the utility giant Exelon (EXC), remains optimistic about support for nuclear power in the Inflation Reduction Act. Constellation Energy has set a goal of achieving 100% carbon-free power generation by 2040. CEG stock plunged in earnings but roared back to near-highs.

News in brief

Shockwave Medical ( SWAV ) handily beat expectations for the third quarter last week, with adjusted earnings of 92 cents per share vs. 5 cents a year earlier, while sales rose 102% to $131.3 million. The company, which makes devices that burst calcium in blood vessels to remove it from the blood, also raised its outlook for the full year. Shares fell but pared huge weekly losses.

Sanmina (SANM) surged to an 18-year high after delivering a beat-and-raise quarterly report. The electronics contract maker’s EPS jumped 58% as sales grew 34% to $2.2 billion.

apple (AAPL) warned that a Covid outbreak at a factory in China will limit the availability of iPhone 14 Pro and Pro Max phones this holiday season. The Foxconn-owned factory is “operating at significantly reduced capacity” due to Covid restrictions.

Sprouts Farmers Market (SFM) reported a 9% EPS gain with sales up 5% to $1.59 billion, both beat. The natural food merchant also provided guidance. Shares rose.

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