November 12 Market Recap
November 12 Market Recap – Markets consolidate after huge rally to begin the quarter. Inflation shows no sign of abating. Big miss at Disney. GE and JNJ splitting up. Next week big box store earnings, retail sales and a virtual summit between President Biden and Chines President Xi Jinping.
Dow 36,100 (227) or 0.62%
Nasdaq 15,860 (111) or 0.69%
S&P 4,682 (15) or 0.31%
U.S. 10 Year Treasury Yield 1.576%, 12.5 bp or 8.6%
Earnings data this week was much more mixed than it has been since the 3rd quarter reporting session started. Disney (DIS) had a massive miss across multiple metrics and suffered their worst trading day since 2020. However, the market moving data points this week were the inflation numbers (discussed below) and the split up of General Electric (GE) and Johnson and Johnson (JNJ). After decades of building itself into a global conglomerate, suffering a huge meltdown stemming from its finance business during the subprime mortgage crises, and its subsequent reorganization and rebirth, General Electric is tearing it all down and splitting into three companies over the next three years; aviation, power and energy, and healthcare. Likewise, Johnson and Johnson will be splitting into separate drug and consumer products companies. Still to be decided at JNJ, how to split the massive legal liabilities between the two companies as a result of the dual opioid and talcum powder settlements.
The inflation numbers starting with Tuesday’s Wholesale Prices and continuing with the CPI and Core CPI numbers on Wednesday spooked the markets and were mostly to blame for the poor performance of the indices this week. How soon before the Fed’s tapering starts to affect these data points? Or will the Fed’s tapering not be sufficient to cool these inflationary pressures as the crux of the problem is more supply side-oriented vs demand-oriented? Jobless claims were for all intents and purposes in line with expectations.
While the 3rd quarter earnings season is almost over, the retail big box stores will report this week: Walmart (WMT), Target (TGT), Home Depot (HD), etc. This will lend more insight as to the financial condition of the consumer as well as how these companies are handling their supply chain and labor issues.
Monday President Biden virtually meets with Chinese President Xi Jinping.
The press hasn’t picked back up on it yet, but a reminder that volatility should pick back up as we approach the December 3rd deadline to raise the debt ceiling.
Market Data Points Next Week
- Monday – Empire State Manufacturing. Earnings: Tyson Foods (TSN), WeWork (WE), Rackspace (RXT), Lucid Group (LCID).
- Tuesday –Retail Sales. Multiple Fed Presidents speak. Earnings: Walmart (WMT), Home Depot (HD).
- Wednesday – Chicago Fed President Charles Evans speaks. Earnings: NVIDIA (NVDA), Target (TGT), Cisco Systems (CSCO), Lowe’s (LOW).
- Thursday – Initial Jobless Claims, Philly Fed. Earnings: Alibaba (BABA), Applied Materials (AMAT), Macy’s. (M), Kohl’s (KSS), BJ’s Wholesale (BJ), Ross Stores (ROST), Nuance Communications (NUAN), JD. Com (JD), Workday (WDAY), Williams-Sonoma (WSM).
- Friday – Fed Governor Christopher Waller and Fed Vice Chairman Richard Clarida speak.
November 12 Market Recap Trading…
Monday– Dow +104 to 36,432 (record close), Nasdaq +10 to 15,982 (record close), S&P +4 to 4,701 (record close).
- All three indices closed at record highs for the second consecutive session.
- Six of the eleven S&P sectors traded higher today with Materials, Energy and Tech leading the rally.
- Earnings: PayPal (PYPL) beat earnings but missed on revs and still traded up 3.26% post close. AMC Entertainment (AMC) beat but fell 4% after hours. Neither Advanced Micro Devices (AMD) nor Nvidia (NVDA) announced earnings but had major announcements with regard to chip sales agreements and traded up 10.14% and 3.54% respectively. Gaming company Roblox (RBLX) soared 21.71% post close after beating their numbers. Oddly (because the majority of travel firms have had solid quarters), TripAdvisor (TRIP) missed and traded down 3.08% intraday.
- RobinHood (HOOD) announced they were hacked, compromising the personal information of five million customers. HOOD traded down 3.4% post close.
- The 10-year U.S. Treasury gained nearly 5 bp 1.498%.
Tuesday – Dow (112) to 36,319, Nasdaq (95) to 15,886, S&P (16) to 4,685.
- After a dizzying rally over the last eight trading sessions, investors took some profits and awaited two big data points tomorrow; CPI and weekly initial jobless claims.
- October Wholesale Prices didn’t help sentiment, jumping 8.6% year over year and continuing to stoke inflation fears.
- Six of the eleven S&P sectors traded in the green today led by Utilities, Materials and Consumer Staples.
- Corporate Bombshell! General Electric (GE) announced plans to split into three separate companies, healthcare (to be spun off in 2023), energy and power (2024), and aviation. GE traded up 2.65% on the news.
- Earnings: Wynn Resorts (WYNN) reported earnings and announced their CEO would be stepping down. WYNN traded up slightly post-close. Coinbase (COIN) missed on both revenues and earnings and traded down 13.24% after hours. DoorDash (DASH) lost more than expected but announced the acquisition of a Finland based delivery app, Wolt, for $8.1 billion. The Street applauded the deal as DASH traded up 19.26% post-close.
- The 10-year U.S. Treasury yield traded down 5.6 bp to 1.442% on a weak 10-year treasury auction of new notes floated by the government. Unsurprisingly, with foreign yields of decent credit still hovering near zero (Germany –0.30%, France 0.04%, UK 0.82%), foreign buyers made up 71% of the demand.
Wednesday – Dow (240) to 36,079, Nasdaq (263) to 15,622, S&P (38) to 4,646.
- The headline inflation number was not good today. CPI surged 6.2% year over year, the fastest pace since December 1990. Core CPI (ex food and energy) was up 4.6% year over year, the fastest pace since August of 1991 and month over month Core CPI was up 0.6%, higher that the expected 0.4% print. Energy, shelter, and food costs led the surge.
- The 10-year U.S. Treasury yield rose nearly 12.1 bp to 1.563% in response to the inflation data.
- Initial Jobless Claims were slightly worse than expected at 267,000 vs expectations of 265,000 and last week’s slightly revised higher 271,000 print.
- Eight of eleven S&P sectors traded down today led by Energy, Tech and Communication Services. Only the defensive sectors led by Utilities, Consumer Staples and Healthcare traded positively today.
- Earnings: Disney (DIS) missed the Street’s earnings, revenues and subscriber estimates. DIS traded down 4.56% after hours. Mastercard (MA) guided the Street higher today and the stock rose 3.86% during the regular session.
Thursday – Dow (158) to 35,921, Nasdaq +81 to 15,704, S&P +2 to 4,649.
- Six of the eleven S&P sectors traded positively today led by Materials, Technology, and Energy.
- Disney (DIS) had its worst day since 2020 (it missed its earnings, revenue, and subscriber numbers last night), trading down 7% and accounting for nearly ½ of the Dow Jones loss on the day.
- The 10-year U.S. Treasury yield was unchanged as fixed income markets were closed in observance of Veteran’s Day.
Friday – Dow +179 to 36,100, Nasdaq +156 to 15,860, S&P +33 to 4,682.
- All three indices bounced higher after a tough three days of trading.
- September Job Openings and Labor Turnover Survey (JOLTS) printed at 10.4 million job openings, slightly lower than the 10.6 million expected.
- The more surprising JOLTS number was the job quits number which set a second consecutive record at 4.2 million vs 4.1 million last month.
- November University of Michigan consumer sentiment printed at 66.8, a 10-year low, vs 71.7 in October.
- Johnson and Johnson (JNJ) announced plans to split the company into two: a consumer products company and drug company.
- Nine of eleven S&P sectors traded positively today led by Communication Services, Technology and Industrials.
- The 10-year U.S. Treasury yield rose 1.3 bp to 1.576%.
P.S. If you know of any friends or family members who could benefit from our services and these types of communiques during these unique times, we are accepting new clients and offer a complimentary one-hour review.
Disclaimer: This is not a recommendation to buy or sell any of the securities listed above. I personally, or a family member whose account I control, have positions in the following securities/assets…Bitcoin, Cardano, Chainlink, Ethereum, ETHE, GBTC, and TSLA.