Update (Nov. 16, 2023): For today's live markets coverage, see here.
Stocks eked out gains Wednesday after data showed a big drop in gas prices last month contributed to a decrease in both wholesale prices and retail sales.
The Dow Jones Industrial Average rose 0.5%, while the S&P 500 added 0.3% and the Nasdaq ticked up about 0.1%. Treasury yields rebounded somewhat after plummeting yesterday on expectations of a more accommodative Fed.
Wholesale prices fell 0.5% last month, a bigger-than-expected drop that was mostly attributed to falling gas prices. Excluding volatile food and energy prices, the Producer Price Index increased 0.1%.
U.S. retail sales totaled $705 billion in October, down 0.1% from September's revised total of $705.7 billion. It's a smaller drop than expected—economists were forecasting a 0.2% drop from September's advance estimate of $704.9 billion.
After yesterday's inflation data, stocks soared, with the Nasdaq jumping to a 3-month high and Treasury yields falling to their lowest in over a month.
More Positive Inflation News Drives Dow to Fourth Straight Winning Session
Walt Disney Company (DIS) shares jumped 3.2% following reports that activist investment firm ValueAct Capital had built a significant stake in the media giant.
Shares of Intel (INTC) rose 3.1% after a regulatory filing revealed board member Lip-Bu Tan had bought $2.5 million worth of the chipmaker’s shares last week.
Walgreens Boots Alliance (WBA) shares gained 2.2%, rising for the second consecutive session after hitting its lowest closing price since 1998 on Monday.
Nike (NKE) shares climbed 2% after it announced former executive Nicole Hubbard Graham would return to the company to serve as chief marketing officer starting in January.
Walmart (WMT) shares rose 1.3% ahead of its earnings report before markets open tomorrow.
Salesforce (CRM) shares dropped 0.8%, making it the worst-performing stock in the index along with Merck & Co. (MRK), shares of which also fell 0.8% today on reports that staff at the US Food and Drug Administration have raised concerns about the efficacy of Merck's chronic cough drug gefapixant.
Procter & Gamble (PG) shares fell 0.5% after Berkshire Hathaway (BRK.B) revealed in a filing that it had offloaded its entire stake in the company. The firm, headed by Warren Buffett, also dumped Johnson & Johnson (JNJ), shares of which rose 0.8% today.
Oil Falls as Crude Inventories Rise, Economy Cools
Futures contracts for West Texas Intermediate (WTI), the benchmark U.S. crude oil, fell more than 2% Wednesday as data showed U.S. inventories rose nearly 1% last week.?
WTI traded at about $76.50 a barrel late in the day Wednesday, as economic data showed the U.S. economy's growth slowing, with both consumer spending and inflation moderating.
Oil prices can be volatile, and often rise and fall on news that could affect supply and demand. For example, prices climbed for a little over a week after Hamas launched its attack against Israel on Oct. 7 and raised concerns about the conflict disrupting crude exports out of the oil-rich Middle East. Prices have since resumed the decline that started at the end of September as expectations for global economic growth were lowered.?
Cryptocurrencies Surge as SEC Delays Decision on Two Crypto ETFs
Bitcoin jumped 5% to more than $37,500 Wednesday after the Securities and Exchange Commission delayed a decision on crypto asset manager Hashdex’s application to convert its Bitcoin futures trust into an exchange-traded fund (ETF).
The SEC similarly delayed a decision on the Grayscale Ethereum Futures Trust, which the asset manager applied in October to have converted into a spot ETF.
Bitcoin has surged in the last month as investors have come to see the approval of a Bitcoin spot ETF as all but certain. Ethereum also gained Wednesday, rising more than 3% to nearly $2,050.
Goldman Sachs Sees Modest Gains for S&P 500 Next Year
Goldman Sachs analysts see the S&P 500 rising about 5% over the next year to end 2024 at 4700.
The forecast assumes the U.S. economy grows at a modest pace throughout the year and avoids a recession, helping grow S&P 500 earnings by about 5%. Goldman sees little reason for the index’s current P/E ratio of 18x to change given that the Fed, they say, is unlikely to start cutting rates until the fourth quarter of next year. The market, by their calculations, is currently pricing in cuts starting in Q2.
Elevated expectations are part of the reason the firm sees the index underperforming the typical presidential election year return of 8%. Opportunities, they say, lie below the surface in beaten-down cyclicals and growth stocks with high return on invested capital.
JD.com Beats Quarterly Estimates on Lower Prices and Cost Cutting Moves
American depositary receipts (ADRs) of JD.com advanced over 7% in early trading Wednesday after the Chinese e-commerce firm posted better-than-expected results as it attracted customers with lower prices while cutting costs.
JD.com reported it achieved record profitability in the third quarter of fiscal 2023, with earnings per share (EPS) of 6.70 Chinese yuan ($0.92). Revenue rose 1.7% from a year ago to 247.7 billion Chinese yuan ($34.2 billion). Both were better than estimates.
CFO Ian Su Shan explained that JD.com has continued to expand its market share in its core categories of home appliances and electronics. He added that general merchandise sales “gradually ramped up momentum in the quarter.”
ADRs of JD.com have slumped this year. Even with Wednesday’s gains, they were down more than 50% for 2023.
VF Corp. (VFC): Shares of the maker of Vans, North Face, and Supreme apparel rose more than 12% after JPMorgan upgraded the stock to neutral from underperform following a sell-off at the end of last month that sank the stock to its lowest point since 2009.
JD.com (JD): American depositary receipts of the Chinese e-commerce company gained more than 7% after its third-quarter earnings topped Wall Street estimates, giving investors hope the company can weather the headwinds of China’s economic slowdown.
Expedia Group Inc. (EXPE): The online travel booking site’s shares rose more than 7% after activist investor ValueAct revealed it had built up a stake in the company, citing its potential to benefit from better pricing and cost management. ValueAct also took a stake in Walt Disney Co. (DIS), shares of which rose 3%.
Nu Holdings Ltd. (NU): Shares of the Brazilian digital banking company fell nearly 9% despite third-quarter earnings coming in above expectations. Expectations were high, however, given the stock’s more than 110% rise year-to-date.
TJX Companies Inc. (TJX): Shares of the T.J. Maxx and HomeGoods operator fell more than 3% after it forecast fourth-quarter earnings of between 97 cents and $1 per share, less than analysts expected.
Seth Klarman's Baupost Exits Amazon, Loads Up on Dollar General
Billionaire hedge fund investor Seth Klarman's Baupost Group had another change of heart on Amazon Inc. (AMZN), choosing to focus instead on infrastructure in the third quarter.
Baupost exited from a 963,000-share position worth $125 million in Amazon Inc., according to its latest 13F filing posted on Monday for the three months ended Sept. 30.
New positions were acquired by the firm in Israel-based Tower Semiconductor (TSEM) and Texas-based engineering firm Jacobs Solutions (J). Baupost also added 685,000 Dollar General Corp (DG) shares, bringing the value of its stake to about $98 million.
Target Shares Soar as Third-Quarter Earnings Blow Past Expectations
Net income (NI) surged 36% from a year ago to $971 million, or $2.10 per share. That was above the high end of the company's guidance range, and well above the $1.46 analysts were expecting according to estimates compiled by Visible Alpha.
The beat comes despite revenue declining 4.2% to $25.4 billion. driven by a 4.9% decline in Comparable store sales fell 4.9% as consumers, feeling the pinch of inflation, pulled back on discretionary spending.
However, weak discretionary sales were offset by strong spending in "frequency" categories like beauty products.
Despite Wednesday's gain, Target shares were still down roughly 12% for the year. They've far underperformed the broader S&P 500 Consumer Discretionary sector, which is up by almost a third so far this year.
Retail Sales Fell Less Than Expected in October
U.S. retail sales fell just 0.1% in October from September’s upwardly revised level of $705.7 billion, a sign consumers are still able and willing to spend, if not quite as freely as in the pandemic years.
Retail sales totaled $705 billion in October, a slight increase from September’s advance estimate of $704.9 billion. Economists were expecting spending to fall 0.2% from that level.
Some of the decrease was from gas stations, where falling gas prices led to a 7.5% decrease in spending. Meanwhile spending at non-store retailers rose 7.6%, boosted by Amazon’s two-day Prime Big Deal Days event.?
Wholesale Prices Fell the Most in 3 Years in October
The Producer Price Index (PPI), a measure of inflation at the wholesale level, showed that prices fell 0.5% in October, a bigger-than-expected drop from the prior month's 0.5% increase. Today's data represents the largest drop in PPI since April 2020 when prices fell 1.2%.
Year-over-year, the PPI increased 1.3%, while the core PPI, which excludes volatile food and energy prices, rose 2.9%.
The index for final demand goods—a measure of the prices domestic producers get for selling goods—fell 1.4%, while the services index was unchanged. More than 80% of the decline in the goods index was attributed to a 15% decline in gas prices.
Stock futures moved higher immediately following the release before giving up some ground as Treasury yields ticked up.
Stock Futures Continue to Climb Ahead of PPI, Retail Sales
Futures contracts connected to the Dow Jones Industrial Average climbed more than 0.3% in premarket trading Wednesday, shortly before the release of October's Producer Price Index and retail sales data.
S&P 500 futures were up about 0.5%.
Nasdaq 100 futures surged 0.7% in early trading.