A stock market rally attempt is underway as the Nasdaq and Russell 2000 reversed higher for modest weekly gains. However, the S&P 500 and Dow Jones were still down. Investors are waiting for a follow-through day to confirm the rally attempt in the coming week. Treasury yields have backed off from their long-term highs, providing some momentum to the market. The 10-year Treasury yield rose once again but came off its peak of 4.69% on Thursday. Crude oil futures hit a fresh high for 2023 but pulled back later in the week.
Economic Growth, Inflation Slowing
There have been some positive developments on the inflation front, with the core PCE price index rising just 0.1% in August and lowering the 12-month inflation rate to 3.9%. The Fed chair, Jerome Powell, stated that policymakers want to see six months of tame inflation to gain confidence, and this seems to be happening as the six-month annualized core inflation rate eased to 2.9% from 3.4%. On the other hand, consumer spending has downshifted, with inflation-adjusted spending rising just 0.1% in August after July’s strong performance. Furthermore, the housing market is showing signs of fading, as new-home sales fell 8.7% in August and pending-home sales dropped 7.1% on the month and 18.7% from a year ago. These developments align with the Fed’s interest-rate outlook, although the job market remains strong, with initial claims for unemployment benefits staying near the lowest level since January.
Facebook Parent Pushes Metaverse, AI
The parent company of Facebook, Meta Platforms, has made some significant announcements in the field of virtual reality (VR) and artificial intelligence (AI). Mark Zuckerberg unveiled the new virtual-reality headset, the $499 Quest 3, which focuses on mixed-reality, blending virtual images with the physical world. Additionally, Meta Platforms announced generative AI integrations for its Facebook, Instagram, WhatsApp, and Messenger products, including chatbots styled after celebrities. While investors were initially unenthused about the metaverse announcement, they were intrigued by the AI developments. Meta Platforms’ shares fell during Zuckerberg’s speech but ultimately closed the week slightly higher.
Amazon Faces Antitrust Suit
Amazon has found itself facing an antitrust lawsuit from the Federal Trade Commission (FTC). The suit accuses the company of engaging in anti-competitive practices in its retail business, leading to increased costs for customers and third-party merchants. Amazon has vehemently denied these allegations. The news of the lawsuit caused a 4% drop in Amazon’s stock price. In addition to the legal challenge, Amazon also announced a significant investment of up to $4 billion in AI startup Anthropic, which is known for its generative AI assistant, Claude.
Micron Slides As Stock Market Downturn Isn’t Over
Micron Technology, a major player in the memory-chip industry, reported a big loss in its most recent fiscal quarter. However, both the loss and revenue decline of 40% were better than lowered expectations. Micron expects to see improved revenue in the next fiscal quarter but has guided for a larger-than-expected loss. While the stock initially tumbled on the news, it managed to close the week with only a small loss.
Nike Jumps On Surprise Profit, Strong Guidance
Nike, a well-known shoe and apparel giant, exceeded expectations by reporting a 1% gain in earnings per share, defying predictions of a drop. Revenue growth has slowed for the third consecutive quarter, with a 2% increase falling slightly short of expectations. Nike’s strong performance in China, with a 12% gain in Nike brand revenues, helped offset the overall slower growth. The company expects to see a slight increase in revenue in the next quarter, with gross margins expanding by about 100 basis points. This positive outlook for Nike led to a jump in its stock price.
Biotechs Swing On Drug News
Soleno Therapeutics, Immunovant, and Biohaven experienced significant gains last week on positive news related to their drug treatments. Soleno saw its stock surge 505% in a single day after announcing that patients switching off its treatment for Prader Willi syndrome experienced a return to strong hunger signals, suggesting the effectiveness of the company’s pill. Immunovant and Biohaven both saw their stocks soar on promising results for autoimmune disease treatments targeting the antibody immunoglobulin G. However, this good news for Immunovant and Biohaven had a negative impact on Argenx, which is working on a similar treatment. Another company, Morphic, saw its stock decline by 55% over two days after its ulcerative colitis treatment did not show as much benefit as a competing drug from Takeda Pharmaceutical.
Costco Earnings Top
Costco reported a 16% increase in earnings per share and a 9.5% rise in revenue, ending a period of slowing growth. The company also mentioned the possibility of raising membership prices in the future and stated that thefts have had a lesser impact on their business compared to other retailers. The positive earnings report led to Costco’s stock price rising and flirting with a breakout.
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