U.S. stocks were mixed in subdued action during Black Friday trading, with many market participants still out for the Thanksgiving holidays. The Dow (DJI) climbed 0.45%, while the S&P 500 (SP500) inched 0.03% lower and the Nasdaq Composite (COMP.IND) slid 0.52%. Of the 11 S&P 500 sectors, seven traded in the green, led by Utilities and Real Estate. Communication services sector topped the losers' list, with Activision Blizzard declining as the FTC is reportedly looking to block its $69B acquisition by Microsoft. Apple, the top loser on the Dow, slipped on Friday off a report that iPhone production could be hit by worker unrest at Foxconn's plant in Zhenghzou, China. All three major indices ended the holiday-shortened week higher, while the 10-year Treasury yield ended the week at 3.72% and the 2-year yield clocked in at 4.48%. Investors will come back from the holiday break to an action-packed calendar. "Next week's events will be a crucial test for the sustainability of the rally in rates, which looks to have its roots not just in markets' fundamental reassessments but is also seeing technical factors at play," noted ING. Read a preview of next week's events in Seeking Alpha's Catalyst Watch.
Bob Iger returned to the CEO position at Walt Disney (DIS) - a shocking development after the surprise exit of Bob Chapek from the top spot. The move sent shares of the entertainment giant up 6.3% on Monday, marking their biggest one-day gain in nearly two years. Iger will serve as Disney's CEO through 2024, "with a mandate from the board to set the strategic direction for renewed growth and to work closely with the board in developing a successor to lead the company."
Backdrop: Iger departed Disney as executive chairman 11 months ago, though he delayed a long-planned exit from Disney amid the disruption of the COVID-19 pandemic. His continued tenure at the company also reportedly caused friction as Disney tried to move forward with new leadership. A Disney legend, Iger was CEO/Chairman for 15 years (from 2005-2020) and then executive chairman and chairman of the board through 2021.
The latest news translates into the second time that Iger has unsuccessfully attempted a succession. A seeming heir apparent in Chief Operating Officer Tom Staggs didn't work out (amid "differences with the board"), with Staggs electing to leave Disney in 2016. Iger also stayed on at Disney as executive chairman following Chapek's appointment, a move seen by some insiders as a way to keep a heavy hand on operations and a potential hurdle for Chapek as he worked to build an identity in leadership.
Outlook: Disney posted a strong earnings report in the fiscal third quarter in June, but the fiscal fourth quarter brought a new stock slide. Ongoing parks strength couldn't offset declines in revenues and profits on the media side, which is currently struggling with the high cost of investing in its direct-to-consumer unit. (272 comments)
The trend of layoffs in the tech sector is continuing with the axe falling at HP (HPQ). The company will shed between 4,000 and 6,000 jobs by the end of its 2025 fiscal year as part of its "Future Ready" strategy. CEO Enrique Lores admitted that after a difficult fiscal fourth quarter, and not-so-great outlook, cutting potentially more than 10% of HP's workforce was necessary.
Commentary: "Wage growth data indicates that highest wage earnings saw the largest decline in real wages, whereas lowest earners’ wage growth largely matched inflation," BofA wrote in a note. "As a result, companies are seeing high-income consumers trading down for cheaper goods/services - mentions of 'trade down' during earnings calls soared to a record level, topping the GFC level."
Discussing HP's results and outlook, Lores said that the "ultimate goal" of the company was to develop its product portfolio and "operational capabilities to drive sustainable growth" and save as much money as possible during what is expected to be a prolonged period of economic uncertainty, inflation and some declines in customer demand.
Conference call: "We take (job) reductions very seriously," CFO Marie Myers declared, adding that the steps HP was taking were "critical to the long-term health" of the long-time PC and printing technology leader. In the meantime, factors such as "headwinds to long-term growth" are going to be around for a while. (32 comments)
Stocks had a happy session going into Thanksgiving and the sentiment may hold up after the turkey. Equities edged higher on the idea that central banks will have to respond to a growth slowdown as risks of financial system instability grow louder. The need to moderate on aggressive monetary policy was present in Wednesday's release of the minutes from the Fed's latest meeting, though some caution that it was the same usual chatter and only a perceived shift in tone.
Quote: "A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate," according to records from the Nov. 1-2 gathering. "A slower pace in these circumstances would better allow the Committee to assess progress toward its goals of maximum employment and price stability."
"Various" Fed officials still said the persistence of inflation meant that the federal funds rate may have to go higher than they previously expected to achieve the central bank's goal of bringing down price pressures. The word "inflation" was even mentioned 95 times in the minutes, remaining the primary focus on the gathering. While the Consumer Price Index rose less than expected in October (headline inflation +7.7% Y/Y and core at +6.3% Y/Y), only time will tell if the central bank has really decided it's time to loosen the belt.
Commentary: "The big picture remains in our view that the Fed intends to slow down in order to allow more time for lags to operate and cumulative tightening to date to show up in the data," wrote Krishna Guha, head of central bank strategy at Evercore. "The hawkish talk from Powell in the press conference and many Fed officials subsequently is intended to provide air cover for the slowing to take place without an excessive easing of financial conditions." (31 comments)
Black Friday marked the unofficial start of the holiday shopping season as investors size up sentiment to determine the current mood of the U.S. consumer. With an inflationary backdrop overshadowing the shopping bonanza, consumers looked around for bargains to take advantage of the value pricing. While strong balance sheets are said to be the norm for many households, others will supplement spending with savings and credit, in a holiday season cycle that is being described as anything but typical.
Snapshot: There are many economic indicators out there for gauging the power of the consumer, like retail sales data, corporate retail earnings and the closely-followed University of Michigan Consumer Sentiment Index. All these can help forecast the future trajectory of the sector and broader economic landscape following a bruising year for the industry. The S&P 500 Consumer Discretionary Index Sector (SP500-25) - a group of companies that reflect spending on items from apparel and home improvement to restaurants and vacations - is down 33% YTD, more than double the 16% decline of the broader S&P 500 Index (SP500).
"These stocks are a clue as to how fast the economy is slowing and whether slowing inflation is lifting confidence on Main Street," noted Jim Paulsen, chief investment strategist at the Leuthold Group.
Go deeper: Holiday shopping trends are also flashing mixed signals this year, with 166.3M people (almost 8M more people than last year) expected to shop from Thanksgiving Day through Cyber Monday. That's according to the latest report from the National Retail Federation, which estimates consumers will shell out an average of $832.84 on gifts and holiday items, down from the $997.73 seen in 2021 (and less purchasing power because of inflation). Holiday retail sales during November and December are forecast to grow between 6% and 8% over 2021, compared to the 13.5% jump seen last year, though some of the results may be skewed as deals and promotions continue to be pulled forward. (6 comments)
It has now been three years since the first COVID-19 case was reported in Wuhan, but China doesn't seem to be letting up on its strict coronavirus policies. In fact, quarantine facilities and makeshift hospitals are expanding across the mainland to deal with the largest surge of cases on record. Panic buying is also taking place among supermarket delivery apps as lockdown-like restrictions take hold in Beijing, while Nomura estimates that more than a fifth of the country is under some sort of restricted movement.
Discontent is growing: Apple (NASDAQ:AAPL) supplier Foxconn's (OTCPK:FXCOF) iPhone factory in the city of Zhengzhou has drawn outsized attention as videos of worker riots were shared on social media. Foxconn has since offered a 10,000 yuan payment, equivalent to $1,400, to workers who want to leave, as well as free transportation to return home. It's unclear how many of the 200,000 employees at "iPhone City" were involved, but Apple has flagged "lower iPhone 14 Pro and iPhone 14 Pro Max shipments" due to prior curbs at the complex, which includes dormitory accommodations and is responsible for 70% of global iPhone output.
"The real hurdle for the economy lies in local officials' more zealous implementation of COVID restrictions rather than insufficient loanable funds," wrote Ting Lu, chief China economist at Nomura. Concerns are growing as infections rise in the manufacturing province of Guangdong and megacity of Chongqing, as well as the financial hub of Shanghai and the logistics heavy Zhengzhou. At the end of the third quarter, China's GDP was up by only 3% Y/Y, well below the official target of around 5.5% announced in March.
Thought bubble: China's central leaders have seen the zero-COVID policy as a source of national pride, which could showcase the superiority of their system, compared with the death tallies and infections seen in many Western nations. There are also fears that any major outbreaks could overwhelm China's healthcare system (especially given the population's low natural immunity), mobilizing public anger and undermining confidence in the government. Earlier this month, officials said they would be more specific and targeted in implementing pandemic controls, but there would be no fundamental change to the overall zero-COVID stance. (15 comments)
Dow +1.8% to 34,347. S&P 500 +1.5% to 4,026. Nasdaq +0.7% to 11,226. Russell 2000 +1.1% to 1,869. CBOE Volatility Index -11.3% to 20.5.
S&P 500 Sectors
Consumer Staples +2.1%. Utilities +3%. Financials +2.2%. Telecom +1%. Healthcare +1.9%. Industrials +1.9%. Information Technology +1%. Materials +2.9%. Energy +0.3%. Consumer Discretionary +1.1%.
London +1.4% to 7,487. France +1% to 6,712. Germany +0.8% to 14,541. Japan +1.4% to 28,283. China +0.1% to 3,102. Hong Kong -2.3% to 17,574. India +1% to 62,294.
Commodities and Bonds
Crude Oil WTI -4.4% to $76.55/bbl. Gold flat at $1,755./oz. Natural Gas +7.9% to 6.802. Ten-Year Bond Yield -0.2 bps to 3.691.
Forex and Cryptos
EUR/USD +0.76%. USD/JPY -0.88%. GBP/USD +1.78%. Bitcoin -0.4%. Litecoin +16.9%. Ethereum -0.3%. XRP +6.2%.
Top S&P 500 Gainers
Ross Stores (ROST) +18%. Best Buy (BBY) +16%. STERIS (STE) +9%. Agilent Technologies (A) +9%. Becton, Dickinson and Company (BDX) +8%.
Top S&P 500 Losers
Diamondback Energy (FANG) -8%. Dollar Tree (DLTR) -8%. Autodesk (ADSK) -7%. PayPal Holdings (PYPL) -6%. Live Nation Entertainment (LYV) -5%.
Where will the markets be headed next week? Current trends and ideas? Add your thoughts to the comments section.