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The Satori Fund founder Dan Niles shares his macro analysis of the large-cap tech sector, when he thinks the market will hit the bottom, and which names he thinks are poised to rebound going into 2023.
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Tag: amazon.com inc
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Amazon closes below $1 trillion valuation for the first time since 2020
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The swift recent decline in Amazon.com Inc.’s stock has brought the company’s closing market value below $1 trillion for the first time in more than two years.
Amazon shares
AMZN,
-0.82%
fell 5.5% in Tuesday action, finishing with a market value of $987 billion. This marked the first time since April 6, 2020 that Amazon closed out of trillion-dollar territory, according to Dow Jones Market Data.Amazon’s valuation fell below the trillion-dollar milestone Tuesday.
Dow Jones Market Data
Amazon shares have tumbled 19.74% over the most recent five-session stretch. That five-day decline was the worst five-day loss for Amazon since its 22.03% plunge during the period that ended Nov. 20, 2008.
The e-commerce giant has come under recent pressure after the company’s latest earnings report highlighted a slowdown in AWS cloud-computing revenue growth. Additionally, Amazon disappointed with the forecast it offered for the holiday quarter.
“Combined with wobbles on revenue momentum for both AWS and retail, and suddenly the Amazon hiding place doesn’t look good,” Bernstein analyst Mark Shmulik wrote following Amazon’s earnings report last Thursday. “The good news here is that the story isn’t broken, it’s just pushed out into 2023, while Q4 may get worse before it gets better.”
When looking at companies worth more than $200 billion, Amazon is currently closest to seeing its stock hit its pandemic-era low, according to Dow Jones Market Data. Amazon shares closed Thursday at $96.79, 15.5% above their pandemic low of $83.83. Only shares of Meta Platforms Inc.
META,
-2.30%
have actually plunged below their pandemic low, among this grouping of the largest U.S. companies.[ad_2]
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Amazon sell-off pushes market cap below $1 trillion for first time since April 2020
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Andy Jassy, chief executive officer of Amazon.Com Inc., speaks during the GeekWire Summit in Seattle, Washington, U.S., on Tuesday, Oct. 5, 2021.
David Ryder | Bloomberg | Getty Images
Amazon has exited the trillion-dollar club.
Shares of the e-retailer plunged 5.9% on Tuesday, falling for a fifth straight day and closing at their lowest since April 2020. The sell-off has erased almost all of the stock’s pandemic surge.
Investors continued to punish the company for last week’s disappointing fourth-quarter forecast. Amazon said revenue during the holiday quarter would grow 2% to 8% over the year-ago period, far below analysts’ estimates. The cloud division, Amazon Web Services, also reported weaker-than-expected sales.
It’s the first time Amazon’s market cap has been below $1 trillion since April 2020. The stock has plunged 42% in 2022 and is on pace for its worst year since 2008, when it dropped 45%. The only other year that was worse was during the dot-com crash of 2000, when the company lost 80% of its value.
Like the rest of Big Tech, Amazon has struggled this year due to a slumping economy, soaring inflation and rising interest rates. On top of that, Amazon has been forced to scale back after expanding dramatically during the pandemic, now that consumers have returned to stores.
Amazon has been the second-worst performer in the Big Tech group this year, behind Facebook parent Meta, which has plummeted 72%. Meta told investors last week that revenue in the fourth quarter would likely decline for a third straight period.
— CNBC’s Annie Palmer contributed to this report.
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Amazon stock falls 14% on light holiday quarter sales forecast | CNN Business
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CNN Business
—
Amazon
(AMZN) stock fell some 14% in after-hours trading Thursday after the company forecast its holiday quarter sales would be lighter than analysts had expected.The e-commerce giant said it expects revenue for the final three months of the year to be between $140 billion to $148 billion, significantly below the $155 billion analysts surveyed by Refinitiv had expected. The weaker forecast comes as rising inflation and looming recession fears weigh on consumer purchasing decisions.
Amazon reported revenue of $127.1 billion for its third-quarter, a 15% increase from the prior year but just missing Wall Street estimates.
“There is obviously a lot happening in the macroeconomic environment, and we’ll balance our investments to be more streamlined without compromising our key long-term, strategic bets,” Amazon CEO Andy Jassy said in a statement accompanying the earnings release.
The company reported its Amazon Web Services segment sales increased 27% year-over-year to $20.5 billion – representing a slower pace of growth for a closely-watched business unit than Wall Street had expected.
But Amazon’s cloud computing division continues to be a strong profit driver for the company. Amazon posted a $2.9 billion profit for the three-month period, much improved from the prior quarter when it posted $2 billion net loss largely due to its investment in electric vehicle maker Rivian.
The latest results comes at a precarious time for the e-commerce giant. Amazon initially saw its business boom during the pandemic, as more consumers relied on online shopping. This year, however, the company is confronting a shift back to in-person shopping as well as a souring economic outlook has hampered consumers’ demand.
Jesse Cohen, a senior analyst at Investing.com, said Amazon’s earnings report “proves it’s not immune to the challenges facing the tech industry at large as it struggles in the face of worsening macroeconomic headwinds, such as soaring inflation and worries about a possible recession.”
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As subscription prices rise, here’s what’s worth streaming in November 2022: ‘The Crown,’ ‘Willow,’ ‘Mythic Quest’ and more
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So here’s some bad news and some, well, slightly less bad news.
First, the bad-bad: Streaming prices are increasing almost across the board (Hulu and Apple TV+ rose in October, Disney+ will rise in December, while Netflix and Prime Video rose earlier this year), putting even more of a crunch on budget-conscious consumers.
But now the less bad: If you can put up with commercials, there are cheaper, ad-supported versions coming your way (Netflix on Nov. 3, Disney+ in December).
Of course, the other money-saving solution is to double down on a churn-and-return strategy and cut down on recurring subscriptions even more.
Each month, this column offers tips on how to maximize your streaming and your budget, rating the major services as a “play,” “pause” or “stop” — similar to investment analysts’ traditional ratings of buy, hold and sell. We also pick the best content to help you make your monthly decisions.
Consumers can take full advantage of cord-cutting by churning and returning — adding and dropping streaming services each month. All it takes is good planning. Keep in mind that a billing cycle starts when you sign up, not necessarily at the beginning of the month, and keep an eye out for lower-priced tiers, limited-time discounts, free trials and cost-saving bundles. There are a lot of offers out there, but the deals don’t last forever.
Here’s a look at what’s coming to the various streaming services in November 2022, and what’s really worth the monthly subscription fee.
Netflix ($6.99 a month for basic with ads starting Nov. 3, $9.99 basic without ads, $15.49 standard without ads, $19.99 premium without ads)
Netflix has another really good month coming up.
“The Crown” (Nov. 9), returns for its fifth season, set this time in the 1990s as scandals involving Charles and Diana plaster London’s tabloids and the role of Britain’s monarchy in modern society is thrown into question. Imelda Staunton takes over the role of Queen Elizabeth, with Dominic West as Prince Charles, Elizabeth Debicki as Princess Diana and Jonathan Pryce as Prince Philip. Controversy has already erupted over the new season, which will include Diana’s tragic death, as some have spoken out about the show’s increasingly blurry line between truth and fiction. Pryce recently told Vanity Fair, ““The vast majority of people know it’s a drama,” not a documentary. And it’s a pretty good drama.
Netflix
NFLX,
-0.41%
hasn’t had much success developing original sitcoms, but is hoping to finally break through with “Blockbuster” (Nov. 3), a workplace comedy set at the last Blockbuster video store in America, starring network sitcom veterans Randall Park (“Fresh Off the Boat”) and Melissa Fumero (“Brooklyn Nine-Nine”). There’s also “Wednesday” (Nov. 23), a horror-comedy series from Tim Burton starring Jenna Ortega as the terrifyingly snarky teen Wednesday Addams, with Catherine Zeta-Jones and Luis Guzman playing her creepy and kooky parents, Morticia and Gomez; and the third and final season of the dark comedy “Dead to Me” (Nov. 17), starring Christina Applegate and Linda Cardellini, which returns after a two-and-a-half-year layoff.On the drama side, there’s “1899” (Nov. 17), a mystery-horror series set aboard a transatlantic steamer ship at the turn of the last century, from the makers of the mind-bending German sci-fi series “Dark” — and if it’s even half as trippy and addictive, it’ll be terrific; Part 1 of the fourth season of the supernatural drama “Manifest” (Nov. 4), which Netflix rescued from NBC’s cancellation; and Season 6 of the soapy Spanish high-school drama “Elite” (Nov 18).
More: Here’s everything new coming to Netflix in November 2022, and what’s leaving
There’s also the timely documentary “FIFA Uncovered” (Nov. 9), digging into the scandal-plagued organization behind the World Cup; “Pepsi, Where’s My Jet” (Nov. 17), a documentary about a man who sued Pepsi in the 1980s to get a free Harrier fighter jet; the fifth installment of “The Great British Baking Show: Holidays” (Nov. 18); and the new standup comedy special from the outgoing “Daily Show” host, “Trevor Noah: I Wish You Would” (Nov. 22).
On the movie front, there’s “Enola Holmes 2” (Nov. 4), a sequel to the hit 2020 movie about Sherlock Holmes’ younger sister, played by Millie Bobby Brown (“Stranger Things”), as young detective Enola sets out to investigate her first case; “Slumberland” (Nov. 18), a comedy adventure about a young girl exploring the dreamworld, starring Mallow Barkley and Jason Mamoa; and Lindsay Lohan is back with a Christmas rom-com, “Falling for Christmas” (Nov. 10).
Who’s Netflix for? Fans of buzz-worthy original shows and movies.
Play, pause or stop? Play. When it’s at the top of its game, as it is again this month, Netflix is a must-have, at whatever price tier.
Disney+ ($7.99 a month)
The TV world has been abuzz about prequels for the past few months, but it’s all about sequels in November for Disney+.
The biggest of the bunch is “Willow” (Nov. 30), a follow-up series to the cult-favorite 1988 fantasy movie of the same name. The magical adventure is set 20 years after the events of the film, and Warwick Davis returns as farmer-turned-sorcerer Willow Ufgood, who leads an unlikely group of heroes on a quest to save their world. It should be fun for the whole family.
Disney
DIS,
+1.45%
also has “Disenchanted” (Nov. 18), a sequel to the 2007 hit movie “Enchanted.” The musical fantasy is set 10 years after the happily-ever-after ending, with Giselle (Amy Adams) questioning her happiness and inadvertently setting her two worlds askew. Patrick Dempsey, James Marsden and Maya Rudolph co-star. And then there’s “The Santa Clauses” (Nov. 16), as Tim Allen reprises his role of Santa Claus, who’s now facing retirement and looking for a replacement, in a new miniseries spinoff of the family-movie trilogy.Also of note: “The Guardians of the Galaxy Holiday Special” (Nov. 25), as Star-Lord and the gang kidnap Kevin Bacon; the live performance “Elton John: Live from Dodger Stadium” (Nov. 20), the pop icon’s final show in North America; and weekly episodes of “Dancing With the Stars” (season finale Nov. 21), the “Star Wars” prequel “Andor” (season finale Nov. 23) and “The Mighty Ducks: Game Changers” (season finale Nov. 30).
And heads up: Prices for the ad-free tier will jump to $10.99 a month in December, after Disney+ launches its ad-supported tier for $7.99 a month.
Who’s Disney+ for? Families with kids, hardcore “Star Wars” and Marvel fans. For people not in those groups, Disney’s library can be lacking.
Play, pause or stop? Play. There’s something for everyone in the household — even grumps who aren’t “Star Wars” fans can get into “Andor,” which absolutely works as a dark, gripping, spy thriller. Meanwhile, fans are realizing it just might be the best “Star Wars” series or movie ever made.
HBO Max ($9.99 a month with ads, or $14.99 without ads)
HBO Max is bringing back “The Sex Lives of College Girls” (Nov. 17) for its second season. Created by Mindy Kaling and Justin Noble (who also teamed on Netflix’s “Never Have I Ever”), the ensemble comedy about four college roommates picks up right after Thanksgiving break, with the girls organizing a “sex-positive” male strip show. It’s sharp, funny, and less cringey than its title suggests.
Then there’s “A Christmas Story Christmas” (Nov. 17), a nostalgic sequel to the 1983 classic, starring Peter Billingsley as a grown-up Ralphie who returns to his hometown to try to give his kids a perfect Christmas. It’s risky reviving such a beloved movie, and this could either be wonderful or terrible, there’s really no middle ground.
HBO Max also has a slew of documentaries, including “Love, Lizzo” (Nov. 24), about the pop superstar’s inspiring life story; “Shaq” (Nov. 23), a four-part docuseries chronicling the rise to superstardom of NBA Hall of Famer Shaquille O’Neal; “Low Country: The Murdaugh Dynasty” (Nov. 3), a true-crime series about a South Carolina lawyer’s scandalous fall; and “Say Hey, Willie Mays!” (Nov. 8), a film exploring the life, career and social impact of the greatest baseball player who ever played the game.
See more: Here’s everything new coming to HBO Max in November 2022, and what’s leaving
And every week brings new episodes of Season 2 of the very dark vacation comedy “The White Lotus,” Season 3 of “Pennyworth: The Origin of Batman’s Butler” and Season 2 of the cult documentary “The Vow.”
Who’s HBO Max for? HBO fans and movie lovers.
Play, pause or stop? Pause and think it over. “The White Lotus” and “The Sex Lives of College Girls” are both worth watching, but beyond that it’s kinda “meh” this month. And Max is too pricey for “meh.”
Amazon Prime Video ($14.99 a month)
Amazon
AMZN,
-6.80%
is bringing the star power in November, starting with the Western drama series “The English” (Nov. 11), starring Emily Blunt as an aristocratic Englishwoman who teams with a Pawnee scout (Chaske Spencer) on a mission to cross the violent 1890s American frontier. It looks stylish and bloody — and promising.Meanwhile, James Corden and Sally Hawkins star in “Mammals” (Nov. 11), a dark comedy series about modern marriage; pop star-turned-actor Harry Styles stars in “My Policeman” (Nov. 4), a drama about forbidden romance that’s getting very “meh” reviews in its theatrical release; and Kristen Bell, Ben Platt and Allison Janney star in “The People We Hate at the Wedding” (Nov. 18), a raunchy comedy set at a dysfunctional family wedding.
More: Here’s what’s coming to Amazon’s Prime Video in November 2022
There’s also NFL Thursday Night Football every week, and new episodes of the intriguing sci-fi drama “The Peripheral,” which is giving very “Westworld”-but-slightly-less-confusing vibes.
Who’s Amazon Prime Video for? Movie lovers, TV-series fans who value quality over quantity.
Play, pause or stop? Pause. There’s good stuff here, but nothing that feels must-see.
Paramount+ ($4.99 a month with ads but not live CBS, $9.99 without ads)
Taylor Sheridan (“Yellowstone,” “1883,” “Mayor of Kingstown”) has another new series: “Tulsa King” (Nov. 13), starring Sylvester Stallone as a former New York mafia capo who gets freed from prison after 25 years and settles in Tulsa, Okla., to build a criminal empire of his own. Showrunner Terence Winter (“The Sopranos,” “Boardwalk Empire”) knows a thing or two about mob shows, and this one could be good.
Paramount+ also has the spinoff series “Criminal Minds: Evolution” (Nov. 24), about an elite team of FBI profilers unraveling a network of serial killers; the family movie “Fantasy Football” (Nov. 25), about a girl who can magically control how her NFL-player dad performs on the field; and the series finale of “The Good Fight” (Nov. 10), which its creators promise will be “cataclysmic.”
There’s also the Thanksgiving Day Parade (Nov. 24) and a ton of live sports, including college football on Saturdays, NFL football on Sundays (and Thanksgiving Day), and group-stage matches for UEFA’s Champions and Europe leagues.
Who’s Paramount+ for? Gen X cord-cutters who miss live sports and familiar Paramount Global
PARA,
+3.37%
broadcast and cable shows.Play, pause or stop? Pause. Besides its solid live-sports lineup, it’s a good time to catch up and binge “The Good Fight,” and “Tulsa King” could be worth a watch too.
Hulu ($7.99 a month with ads, or $14.99 with no ads)
Hulu has a couple of interesting offerings in November, but nothing that screams must-see. Yet, at least.
FX’s “Fleishman Is in Trouble” (Nov. 17) stars Jesse Eisenberg as a newly divorced dad whose promiscuous dive into app-based dating is disrupted when his ex-wife disappears and leaves him with their kids. Claire Danes, Lizzy Caplan and Adam Brody co-star in the eight-episode drama, which is based on Taffy Brodesser-Akner’s best-selling novel.
There’s also “Welcome to Chippendales” (Nov. 22), a true-crime series starring Kumail Nanjiani as the immigrant founder of the 1980s male-stripper franchise, which chronicles his business empire’s rise and fall amid a blizzard of sex, drugs and violence.
Meanwhile, Adam McKay (“The Big Short”) and Billy Corben (“Cocaine Cowboys”) have the documentary “God Forbid: The Sex Scandal That Brought Down a Dynasty” (Nov. 1), about the private life of Christian televangelist and former Liberty University president Jerry Falwell Jr. and his very public downfall.
See: Here’s everything new on Hulu in November 2022 — and what’s leaving
There are also the final two episodes of “Atlanta” (series finale Nov. 10), whose fourth season has returned to brilliance after an underwhelming Season 3 over the summer, and new episodes every week of ABC’s “Abbott Elementary.”
Who’s Hulu for? TV lovers. There’s a deep library for those who want older TV series and next-day streaming of many current network and cable shows.
Play, pause or stop? Stop. While you won’t regret paying for Hulu if you already do, there’s not a lot to lure new subscribers this month.
Apple TV+ ($6.99 a month)
Apple TV+ is too inconsistent to be worth the $2-a-month price hike that was just announced, so it’s best to strategically plan when to stream — wait until a good series or two are completed, for example, and binge them all in a month, then cancel. Repeat as needed.
And it actually is a decent month for Apple. Its second-best comedy, “Mythic Quest” Nov. 11), returns for its third season, with Ian (Rob McElhenny) and Poppy (Charlotte Nicdao) gearing up for war against their old videogame company. With a perfect blend of humor and heart, it’s one of the best workplace comedies on TV.
Meanwhile, Season 2 of “The Mosquito Coast” (Nov. 4) finds the fugitive Fox family finally hiding out in Central America, after a tedious premise-pilot of a first season that wasted good actors (Justin Theroux and Melissa George) and beautiful cinematography with nonsensical plot twists, while the action series “Echo 3” (Nov. 23) stars Luke Evans and Michiel Huisman as former soldiers trying to rescue a kidnapped scientist in the jungles of South America.
Apple
AAPL,
+7.56%
also has a pair of high-profile original movies: “Causeway” (Nov. 3), starring Jennifer Lawrence as a former soldier struggling to adjust to civilian life in New Orleans, co-starring Brian Tyree Henry, and “Spirited” (Nov. 18), a musical twist on “A Christmas Carol” told from the ghosts’ point of view, starring Ryan Reynolds and Will Ferrell.Who’s Apple TV+ for? It offers a little something for everyone, but not necessarily enough for anyone — although it’s getting there.
Play, pause or stop? Stop. There’s just not enough to justify a month-to-month subscription. December is a better bet, with “Mythic Quest” and a new season of “Slow Horses” running concurrently.
Peacock (free basic level, Premium for $4.99 a month with ads, or $9.99 a month with no ads)
The World Cup from Qatar (Nov. 20-Dec. 18) will be broadcast on Fox and FS1, so cord-cutters are out of luck, unless you subscribe to a live-streaming service like Hulu Live or YouTube TV. However, Peacock will stream every match in Spanish, which could be a decent Plan B for soccer fans.
And that “it’ll-do-but-it’s-not-exactly-what-I’m-looking-for” description is the running theme for Peacock. November will bring a handful of originals that are unlikely to move the needle, subscriber-wise: There’s the musical-comedy spinoff series “Pitch Perfect: Bumper in Berlin” (Nov. 23), starring Adam Devine; “The Calling” (Nov. 10), a crime drama about a religious cop, from David E. Kelley and Barry Levinson; the Macy’s Thanksgiving Day Parade (Nov. 24); and the streaming debut of Jordan Poole’s sci-fi/horror hit “Nope” (Nov. 18).
Sports-wise, Peacock has the National Dog Show (hey, it’s a competition!) on Nov. 24, NFL Sunday Night Football every weekend, a full slate of English Premier League matches through Nov. 13, and a ton of golf and winter sports.
Who’s Peacock for? If you have a Comcast
CMCSA,
-0.06%
or Cox cable subscription, you likely have free access to the Premium tier (with ads) — though reportedly not for much longer. The free tier is almost worthless, but the recent addition of next-day streaming of NBC and Bravo shows (like “Saturday Night Live” and “Real Housewives”) bolsters the case for paying for a subscription. Still, Peacock is still not really necessary unless you need it for sports.Play, pause or stop? Stop. There’s not a lot that’s particularly enticing right now, even on the sports side.
Discovery+ ($4.99 a month with ads, or $6.99 with no ads)
More of the same in November for Discovery+, which is a feature, not a bug. Highlights include the vegan cook-and-chat show “Mary McCartney Serves It Up” (Nov. 1); “Tut’s Lost City Revealed” (Nov. 3), about a 3,000-year-old Egyptian city recently discovered by archaeologists; “Vardy vs Rooney: The Wagatha Trial” (Nov. 19), the inside story of the tabloid-fodder “Wagatha” scandal between the wives of English soccer stars; and Season 2 of the excellent CNN food series “Stanley Tucci: Searching for Italy” (Nov. 30). Full disclosure: There are also a handful of sappy holiday movies guest-starring some HGTV and Food Network stars, but they look terrible and I expect better from you, a discerning reader/viewer.
Who’s Discovery+ for? Cord-cutters who miss their unscripted TV or who are really, really into “90 Day Fiancé.”
Play, pause or stop? Stop. Discovery+ is still fantastic for background TV, but it’s not worth the cost. Still, it should add value when the reconfigured Warner Bros. Discovery
WBD,
+3.68%
combines it with HBO Max next summer.[ad_2]
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Big Tech falters on dreary earnings and forecasts for Q4— Meta has worst week ever, Amazon tumbles 13%
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Facebook CEO Mark Zuckerberg
Marlene Awaad | Bloomberg | Getty Images
Other than Apple, it was a brutal earnings week for Big Tech.
Alphabet, Amazon, Meta and Microsoft combined lost over $350 billion in market cap after offering concerning commentary for the third quarter and the remainder of the year. Between slowing revenue growth — or declines in Meta’s case — and efforts to control costs, the tech giants have found themselves in an unfamiliar position after unbridled growth in the past decade.
Third-quarter results this week came against the backdrop of soaring inflation, rising interest rates and a looming recession. Apple bucked the trend after beating expectations for revenue and profit. The stock on Friday had its best day in over two years.
On the opposite end of the spectrum was Meta, which has seen its stock price collapse in 2022. Facebook’s parent came up short on earnings, recorded its lowest average revenue per user in two years and said sales in the fourth quarter will likely decline for a third straight period.
“There are a lot of things going on right now in the business and in the world, and so it’s hard to have a simple ‘We’re going to do this one thing, and that’s going to solve all the issues,’” Meta CEO Mark Zuckerberg said on the company’s earnings call on Wednesday.
Meta’s stock had its worst week since the company’s IPO in 2012, plunging 24% over the past five days. Microsoft fell 2.6% for the week, due to a 7.7% decline on Wednesday after the company gave weak guidance for the year-end period and missed estimates for cloud revenue.
Things were also bleak at Amazon, which dropped 13%. A gloomy fourth-quarter forecast along with a dramatic slowdown in its cloud-computing unit were largely to blame for the sell-off.
While Amazon Web Services saw expansion slow to 27.5% from 33% in the prior period, Google’s cloud group, which is significantly smaller, sped up to almost 38% growth from around 36%. Google plans to keep spending in cloud even as it intends to rein in headcount overall growth in the next few quarters.
“We are excited about the opportunity, given that businesses and governments are still in the early days of public cloud adoption, and we continue to invest accordingly,” Ruth Porat, Alphabet CFO, said on a conference call with analysts on Tuesday. “We remain focused on the longer-term path to profitability.”
However, results from the rest of Google parent Alphabet were less impressive. The company’s core advertising business grew just slightly, and YouTube’s ad revenue dropped from the prior year. The reverse was true for Amazon, which is playing catchup to Google and Facebook in digital advertising. In Amazon’s ad business, revenue growth accelerated to 30% from 21%, topping analysts’ estimates.
“Advertisers are looking for effective advertising, and our advertising is at the point where consumers are ready to spend,” said Brian Olsavsky, the company’s finance chief. “We have a lot of advantages that we feel that will help both consumers and also our partners like sellers and advertisers.”
Analyst Aaron Kessler at Raymond James lowered his price target on Amazon stock to $130 from $164 after the results. But he maintained his equivalent of a buy rating on the stock and said the company’s “robust advertising growth” has the potential to help Amazon fatten up its margin.
As investors continue to rotate away from tech, they’re finding money-making opportunities in other parts of the market that had previously lagged behind software and internet names. The Dow Jones Industrial Average rose 3% this week, the fourth weekly gain in a row for the index. Prior to 2021, the Dow had underperformed the Nasdaq for five straight years.
WATCH: Wall Street set to open in the red as investors digest disappointing tech earnings
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Why the Dow is having a killer month as it heads for best October ever
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The Dow Jones Industrial Average has been criticized by some market watchers for being a poor barometer of equity-market performance given its relatively small sample size of just 30 stocks.
But this quality, along with the paucity of megacap technology names, has helped shepherd the index toward what’s expected to be its biggest October gain in its 126-year history.
With a month-to-date gain of 14%, the Dow
DJIA,
+2.57%
is on track for its best monthly performance since January 1976, when it rose 14.4%, according to Dow Jones Market Data. To clinch its best October ever, it only needs to hang on to a month-to-date gain of 10.65% by the time the U.S. market closes on Monday.The Dow is still in a bear market and remains down more than 10% for the year to date. That compares, however, with year-to-date losses of 18.6% for the S&P 500
SPX,
+2.40%
and 29.6% for the Nasdaq Composite
COMP,
+2.74% .What exactly has made the Dow’s October performance so stellar?
The blue-chip gauge is packed with energy and industrials stocks, which have been among the best performing sectors for the stock market since the start of the year, noted Art Hogan, chief market strategist at B. Riley Wealth Management.
These stocks have performed particularly well since the start of the latest quarterly earnings season, while megacap technology names like Meta Platforms Inc.
META,
+1.14% ,
Amazon.com Inc.
AMZN,
-7.41%
and Alphabet Inc.
GOOG,
+4.28%
have sputtered after delivering results and guidance that disappointed Wall Street this week.“It’s very tech-light, and it’s very heavy in energy and industrials, and those have been the winners,” Hogan said. “The Dow just has more of the winners embedded in it and that has been the secret to its success.”
The Dow is on track to log its highest close in at least two months on Friday as it outperforms both the S&P 500
SPX,
+2.40%
and Nasdaq Composite
COMP,
+2.74% .
Furthermore, it’s on track to climb for a sixth straight session, what would be its longest winning streak since May 27, according to DJMD.Adding to the list of notable factoids, the average is also on track to log a fourth straight weekly gain, which would cement its longest winning streak since Nov. 5, 2021, when the index rose for five straight weeks.
Caterpillar Inc.
CAT,
+3.22% ,
Chevron Corp.
CVX,
+0.75%
And Amgen Inc.
AMGN,
+2.21%
are the top-performing Dow stocks so far this month, having gained 29.3%, 21.2% and 18.3%, respectively, as of Friday.In recent trade, the blue-chip average was up around 700 points, or 2.2%, on track for its biggest daily point and percentage gain in exactly one week.
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Lawmakers urge tech CEOs to do more to help Iranian protesters circumvent internet censorship
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Iranians protest to demand justice and highlight the death of Mahsa Amini, who was arrested by morality police and subsequently died in hospital in Tehran under suspicious circumstances.
Mike Kemp | In Pictures via Getty Images
A bipartisan group of 13 lawmakers urged several U.S. tech CEOs to do more to help Iranian people stay connected to the internet as their government seeks to censor communications amid ongoing protests.
The Iranian regime has taken aggressive measures to block citizens from the internet and anti-government messages as people across the country continue to protest its restrictive standards. The protests began after 22-year-old Mahsa Amini died while in the custody of Iran’s so-called morality police, who had accused her of improperly wearing her hijab, an Islamic head-covering for women.
In the letter to the CEOs of Amazon, Apple, Google, Meta, Microsoft and cloud service DigitalOcean, the lawmakers asked the executives to be “more proactive” in getting important services to Iran. The Treasury Department last month issued guidance on U.S. sanctions on Iran to make clear that social media platforms, video conferencing and cloud-based services that deliver virtual private networks can operate in Iran.
“While we appreciate some of the steps your companies have taken, we believe your companies can be more proactive in acting pursuant to the broad authorization provided in GLD-2,” the lawmakers wrote, referencing the general license used to issue sanctions guidance.
They specifically pointed to four different types of tools they’d like to see the companies work to get into the hands of the Iranian people: cloud and hosting services, messaging and communication tools, developer and analytics tools and access to app stores.
The lawmakers said these types of tools would help Iranian citizens stay connected to the internet in secure ways amid government-imposed shutdowns and reduce their reliance on domestic infrastructure. The availability of multiple secure communications tools would make it harder for the Iranian regime to shut down all of them at once, they wrote.
The lawmakers also said that giving the Iranian people access to developer tools and app stores would allow them to “create and harden” their own communications apps and security tools and give them a place to distribute them without government surveillance.
Reps. Tom Malinowski, D-N.J., Claudia Tenney, R-N.Y., and Sens. Bob Menendez, D-N.J. and Marsha Blackburn, R-Tenn., took the lead in the letter.
“Iranians are fearlessly risking their lives for their fundamental rights and dignity,” they wrote. “Your tools and services may be vital in their efforts to pursue these aspirations, and the United States should continue to make every effort to assist them.”
A Google spokesperson said in a statement the company is working on ways to “ensure continued access to generally available communications tools like Google Meet and our other Internet services.” Google launched location sharing in Iran on Google Maps in September to let people let loved ones know where they are and the Jigsaw team within Google is working to make its tool more widely available so users in Iran can run their own VPNs that resist blocking, the spokesperson added.
Meta did not provide a comment. The Facebook-owner had made Instagram and WhatsApp available in Iran, but the services have been restricted by the government.
The other companies named in the letter did not immediately respond to CNBC’s requests for comment.
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Amazon stock sinks after holiday forecast and cloud growth, profit disappoint; $150 billion in market cap at risk
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Amazon.com Inc. predicted Thursday that holiday sales and profit would come in well lower than analysts expected as cloud growth slowed and Amazon Web Services profit missed expectations by nearly $1 billion, sending shares south in after-hours trading.
Amazon
AMZN,
-4.06%
executives guided for fourth-quarter operating profit of break-even to $4 billion and holiday sales of $140 billion to $148 billion, while analysts on average were expecting operating income of $5.05 billion on revenue of $155.09 billion, according to FactSet. AWS sales of $20.54 billion grew 27.5% from the year before, the lowest growth rate for the pioneering cloud-computing product in records dating back to the beginning of 2014, and lower than analysts’ average estimate of $21.2 billion; AWS operating income of $5.4 billion handily missed analysts’ average estimate of $6.37 billion, according to FactSet.“As the third quarter progressed, we saw moderating sales growth across many of our businesses, as well as increased foreign-currency headwinds … and we expect these impacts to persist throughout the fourth quarter,” Chief Financial Officer Brian Olsavsky said in a conference call Thursday afternoon. “As we have done in similar times in our history we are also taking action to tighten our belt, including pausing hiring in certain businesses and winding down products and services where we believe our resources are better spent elsewhere.”
Shares dove as much as 20% in after-hours trading immediately following the release of the results, after closing with a 4.1% decline at $110.96, but ended the extended trading period down 13%. After-hours prices could chop roughly $150 billion from Amazon’s market capitalization and send it lower than $1 trillion for the first time since April 2020 if they were to persist through Friday’s regular trading session, according to FactSet.
Amazon reported its first quarterly profit of the year for the third quarter, and easily beat analysts’ expectations for the back-to-school period that included the company’s first Prime Day of the year, but earnings still declined from last year. Executives reported third-quarter profit of $2.87 billion, or 28 cents a share, down from 31 cents a share in the year-ago quarter after adjusting for Amazon’s 20-to-1 stock split.
Revenue grew to $127.1 billion from $110.8 billion, in the middle of executives’ forecast for $125 billion to $130 billion but slightly missing analysts’ expectations; executives said revenue would have been $5 billion higher without the effects of the strengthening dollar. Analysts on average expected earnings of 22 cents a share on sales of $127.39 billion, according to FactSet.
“There is obviously a lot happening in the macroeconomic environment, and we’ll balance our investments to be more streamlined without compromising our key long-term, strategic bets,” Chief Executive Andy Jassy said in a statement. “What won’t change is our maniacal focus on the customer experience, and we feel confident that we’re ready to deliver a great experience for customers this holiday shopping season.”
Amazon had reported quarterly losses through the first half of the year, largely because of a rapid post-IPO decline in one of its investments, Rivian Automotive Inc.
RIVN,
+0.17% .
But the Seattle-based company has also been looking to cut costs after spending wildly during the first two years of the COVID-19 pandemic to keep up with spiking demand for its online store and Amazon Web Services cloud-computing products.Amazon’s stock has suffered as it faces comparisons to the headier days of last year, and will do so again in the holiday season, when it faces a comparison with a nearly $12 billion profit from its Rivian investment, which has declined more than 50% from its IPO price and stands at roughly one-fifth its peak post-IPO price.
There were thoughts that Amazon would be cautious with its holiday forecast, as its attempts to cut costs run into the need to keep its giant logistics operation running smoothly. The company is looking to hire 150,000 workers to get through the holiday season, and recently announced increased pay for fulfillment workers.
“On 4Q consensus estimates, we believe AMZN will likely err on the side of being more conservative, given the uncertain consumer spend environment,” MKM Partners Managing Director Rohit Kulkarni wrote in a note. “We believe recently announced wage hike, higher near-term content costs amortization (NFL & Lord Of Rings), and potentially greater merchandise discounting might weigh on 4Q Op Margins.”
Amazon’s e-commerce operations were boosted in the third quarter by the company’s annual Prime Day event in July, and the company tried to replicate the event in October, but analysts saw the second Prime Day as less successful and potentially a sign of weakness.
“We see Amazon’s decision to hold two Prime Day sales in one calendar year as a red flag for weak e-commerce sales; consistent with retailers, in general, holding more sales when their sales are under pressure,” D.A. Davidson analyst Tom Forte wrote in a preview of Amazon’s report.
In the third quarter — with back-to-school sales and the first Prime Day event — quarterly retail sales in North America hit $78.84 billion, while overseas revenue totaled $27.72 billion. Analysts on average were expecting $77.24 billion and $29 billion respectively, according to FactSet. Sales in both locations were unprofitable from an operating perspective for the fourth consecutive quarter, losing a total of $2.88 billion.
Amazon’s profit largely comes from the fat margins of its AWS cloud-computing offering, but there have been concerns about growth leveling off for cloud after rival Microsoft Corp.
MSFT,
-1.98%
reported a deceleration earlier this week and guided for a further decline in growth in the fourth quarter. AWS did provide enough profit in the third quarter to overcome the losses in e-commerce, but the result was the lowest quarterly operating income for Amazon overall since the first quarter of 2018, according to FactSet records.Opinion: The cloud boom is coming back to Earth, and that could be scary for tech stocks
“The ongoing macroeconomic uncertainties have seen an uptick in AWS customers focused on controlling costs and we are proactively working to help customers cost-optimize just as we have done throughout our history, especially in periods of economic uncertainty,” Olsavsky said in Thursday’s conference call, before adding that revenue growth dipped to the mid-20s late in the period from an overall rate of 27.5% for the quarter.
“So carry that forecast to the fourth quarter, we are not sure how it’s going to play out, but that’s generally our assumption,” he said, suggesting that Amazon expects the AWS revenue-growth rate to decline again in the fourth quarter.
Amazon’s other higher-margin business is advertising, which has grown strongly in recent years as companies seeking to sell products on Amazon pay the company to list their products higher when consumers search for them on the e-commerce platform. Amazon reported third-quarter advertising revenue of $9.55 billion, up from $7.61 billion a year ago and topping the average analysts estimate of $9.48 billion.
The results seemed to spread fears to other e-commerce companies and cloud-focused companies. Wayfair Inc.
W,
+0.37% ,
eBay Inc.
EBAY,
+0.71%
and Etsy Inc.
ETSY,
-0.48%
shares all fell roughly 5% or more in after-hours trading, as did cloud-software providers Snowflake Inc.
SNOW,
-0.20% ,
MongoDB Inc.
MDB,
-0.35%
and Datadog Inc.
DDOG,
+0.81%
Microsoft’s stock declined about 1.5%.Amazon stock has fallen 33.5% so far this year, as the S&P 500 index
SPX,
-0.61%
has dropped 19.6%.[ad_2]
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Asian shares mostly lower as Japan preps massive stimulus
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Shares were mostly lower in Asia on Friday after a mixed session on Wall Street, where tech sector losses offset gains in other parts of the market.
Tokyo’s benchmark slipped as the government was preparing about $490 billion in stimulus spending to help the world’s No. 3 economy cope with inflation. As expected, the Bank of Japan wrapped up a policy meeting by keeping its ultra-lax monetary policy unchanged even as it forecast higher inflation.
The Nikkei 225 index lost 0.5% to 27,210.03 while the Hang Seng in Hong Kong sank 2.3% to 15,069.69. The Shanghai Composite index shed 0.8% to 2,958.25.
The Kospi in Seoul declined 0.4% to 2,278.64. Australia’s S&P/ASX 200 dropped 0.8% to 6,788.00.
The economic stimulus package due for approval Friday includes government funding of about 29 trillion yen ($200 billion) in subsidies and other measures to help soften the burden of costs from rising utility rates and food prices. It is also designed to help shore up support for Prime Minister Fumio Kishida, whose popularity has taken a beating due to a scandal over ties between the ruling Liberal Democratic Party and the South Korea-based Unification church.
Thursday on Wall Street, the S&P 500 fell 0.6%, with about 44% of stocks within the benchmark index losing ground. It closed at 3,807.30.
The tech-heavy Nasdaq fell 1.6% to 10,792.67, while the Dow Jones Industrial Average rose 0.6% to 32,033.28.
Smaller company stocks held up better than the broader market. The Russell 2000 index added 0.1% to 1,806.32.
Facebook’s parent company, Meta Platforms, plummeted 24.6% for the biggest drop in the S&P 500 after reporting a second straight quarter of revenue decline amid falling advertising sales and stiff competition from TikTok. It joined other tech and communications stocks, such as Google’s parent company, Alphabet, and Microsoft, in reporting weak results and worrisome forecasts over advertising demand. Alphabet fell 2.9% and Microsoft slid 2%.
Amazon slid 19% in after-hours trading after the retail giant issued an estimate for sales in the last quarter of the year came in well below analysts’ forecasts. The stock fell 4.1% in regular trading before the release of its latest quarterly results.
Construction equipment maker Caterpillar jumped 7.7% after it handily beat analysts’ third-quarter profit forecasts. The big gain helped boost the 30-company Dow.
Another pullback in long-term Treasury yields helped support stocks in companies that weren’t reporting quarterly results. The yield on the 10-year Treasury, which influences mortgage rates, fell to 3.91% from 4.01% late Wednesday. The two-year yield fell to 4.30% from 4.42%.
Excluding the Nasdaq, the major indexes are on pace for weekly gains. And the S&P 500 remains solidly on track to end October in the green.
Markets got some encouraging economic news Thursday as the government reported the U.S. economy returned to growth last quarter, expanding 2.6%. That marks a turnaround after the economy contracted during the first half of the year.
The economy has been under pressure from stubbornly hot inflation and the Federal Reserve’s efforts to raise interest rates in order to cool prices. The central bank is trying to slow economic growth through rate increases, but the strategy risks going too far and brining on a recession.
The rising interest rates have made borrowing more difficult, particularly with mortgage rates. Average long-term U.S. mortgage rates topped 7% for the first time in more than two decades this week.
Central banks around the world also have been raising interest rates in an effort to tame inflation. The European Central Bank piled on another outsized interest rate hike on Thursday. Markets in Europe were mixed.
Wall Street has more earnings to review Friday, including Exxon Mobil, Chevron and Charter Communications.
Meanwhile, S&P Dow Jones Indices said Thursday that insurer Arch Capital Group will replace Twitter in the S&P 500 index before the opening of trading on Tuesday. The move comes ahead of Elon Musk’s acquisition of Twitter in a transaction expected to close Friday.
In other trading, the dollar fell to 146.20 yen from 136.31 late Thursday. The euro
___
AP Business Writers Damian J. Troise and Alex Veiga contributed.
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The biggest tech stocks have lost $3 trillion in market cap the last one year
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FAANG stocks displayed at the Nasdaq.
Adam Jeffery | CNBC
So here’s a good trivia question: Of the “FAANG” megacap tech stocks, which has lost the most market value over the past year?
Amid the earnings-related bloodbath so far this week, there have been huge losses. Alphabet, Microsoft and Meta have already posted their results, and tumbled in the wake of the reports. Thursday afternoon, Amazon and Apple are on tap.
A staggering $3 trillion in combined market cap has been lost in one year. Most of the losses have occurred across six of these stocks, but it’s hard to leave Apple off the list.
Remarkably, Apple shares have basically been flat – losing a measly $35 billion, by comparison.
It’s also worth realizing that the total losses would have been much worse had Netflix shares not rebounded.
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Microsoft stock slammed by cloud-growth fears, taking Amazon down with it
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Microsoft Corp. shares fell more than 6% in after-hours trading Tuesday as the company’s cloud-computing growth hit a sudden deceleration and executives guided for holiday-season revenue to come in more than $2 billion lower than expectations.
The Azure cloud-computing business has grown into the largest and most important business for Microsoft
MSFT,
+1.38% ,
and there have been concerns about cloud growth as the U.S. faces a potential recession for the first time since the technology became ubiquitous. Microsoft executives said that Azure grew by 35% in their fiscal first quarter, a marked slowdown from Azure’s 40% growth rate in the previous quarter, as well as the 50% growth shown in the same quarter last year; analysts on average were expecting 36.5% growth, according to FactSet.Opinion: The cloud boom is coming back to Earth, and that could be scary for tech stocks
In the current quarter, Chief Financial Officer Amy Hood suggested a similar sequential decline is in store for Azure, saying percentage growth should decline by five points on a constant-currency basis. Hood also suggested that more cost cuts could be coming to Microsoft, after the company confirmed layoffs of fewer than 1,000 employees earlier this month.
“While we continue to help our customers do more with less, we will do the same internally,” she said. “And you should expect to see our operating-expense growth moderate materially through the year while we focus on growing productivity of the significant head-count investments we’ve made over the last year.”
Microsoft shares slid to declines of more than 6% in after-hours trading following Hood’s forecast, which was provided in a conference call. Shares closed with a 1.4% increase at $250.66.
Concerns about cloud growth immediately spread to Azure’s biggest competitor, Amazon Web Services, as Amazon.com Inc. stock
AMZN,
+0.65%
fell more than 4% in after-hours trading.Microsoft reported fiscal first-quarter earnings of $17.56 billion, or $2.35 a share, down from $2.71 a share in the same quarter a year ago, when the tech giant disclosed a 44 cent-per-share tax benefit. Revenue increased to $50.1 billion from $45.32 billion a year ago. Analysts on average were expecting earnings of $2.31 a share on sales of $49.66 billion, according to FactSet.
For the fiscal second quarter, Hood guided for revenue of $52.35 billion to $53.35 billion, while analysts on average were expecting sales of $56.16 billion, according to FactSet. Hood said that “Intelligent Cloud” revenue should land from $21.25 billion to $21.55 billion, while analysts on average were projecting $21.82 billion heading into the print; Microsoft’s other revenue-segment forecasts were even further off analysts’ average expectations.
Microsoft has also suffered from the strengthening dollar, as well as a sharp downturn in personal-computer sales, which spiked during the pandemic but are now showing record regression.
For more: The pandemic PC boom is over, but its legacy will live on
Microsoft reported PC revenue of $13.3 billion for the quarter, roughly flat from $13.31 billion a year before and beating the average analyst estimate of $13.12 billion, according to FactSet. While PCs have long been what consumers largely know Microsoft for, their importance to the company’s financials has declined in recent years as cloud computing has grown in importance.
“Historically, Windows was a very large driver of Microsoft revenue and, given its strong margins, a disproportionate driver of earnings,” Bernstein analysts wrote in a preview of the report, while maintaining an “overweight” rating. “Over time other businesses, especially Microsoft’s commercial Cloud, have grown fast while the Windows business has grown quite slower, decreasing the relative impact of Windows.”
The “Intelligent Cloud” segment reported first-quarter revenue of $20.3 billion, up from $16.96 billion a year ago but slightly lower than the average analyst estimate tracked by FactSet of $20.46 billion. Azure’s 35% growth was the slowest Microsoft has reported in records dating back through the prior two fiscal years; Microsoft only reports percentage growth for its Azure cloud-computing product, even as main rivals Amazon.com Inc.
AMZN,
+0.65%
and Alphabet Inc.
GOOGL,
+1.91%
GOOG,
+1.90%
report revenue and profit margin for their cloud-computing products.Microsoft’s other revenue segment, “Productivity and Business Processes,” reported revenue of $16.5 billion, up from $15.04 billion a year ago and higher than the average analyst estimate of $16.13 billion, according to FactSet. That segment includes Microsoft’s core cloud-software properties such as its Office suite of products — which is being officially renamed Microsoft 365 — as well as LinkedIn and some other properties.
Microsoft stock has declined 25.5% so far this year, as the S&P 500 index
SPX,
+1.63%
has dropped 20.3% and the Dow Jones Industrial Average
DJIA,
+1.07%
— which counts Microsoft as one of its 30 components — has declined 13.3%.[ad_2]
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Stocks are having a stellar October. Why the bear-market rally may have more room to run.
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An earlier version of this story misstated the date of the U.S. midterm elections. They will be held Nov. 8, not Nov. 9.
Despite a raft of risky events that investors must face down over the coming weeks, some on Wall Street believe that the latest bear-market rally in stocks has more room to run.
Although the S&P 500
SPX,
+1.50% ,
Dow Jones Industrial Average
DJIA,
+0.97%
and Nasdaq Composite
COMP,
+16.23%
remain mired in bear markets, stocks have been bouncing back from the “oversold” levels when the major indexes fell to their lowest levels in two years. Bear markets are known for sharp bounces, such as the rebound that took the S&P 500 up more than 17% from its mid-June low before sliding back down to set a new 2022 low on Oct. 12.With that said, here are a few things for investors to keep in mind.
There’s plenty of event risk facing markets
On top of a deluge of corporate earnings this week, including some of the biggest megacap tech stocks like Microsoft Corp.
MSFT,
+1.07%
and Amazom.com Inc.
AMZN,
+0.64% ,
investors will also receive some key economic data reports over the next couple of weeks — including a reading from the Fed’s preferred inflation gauge on Friday, and the October jobs numbers, set to be released on Nov. 4.Beyond that, there’s also the Fed’s next policy meeting that concludes on Nov. 2. The Fed is widely expected to hike interest rates by another 75 basis points, the fourth “jumbo” hike this year.
Midterm U.S. elections, which will determine which party controls the House and Senate in the U.S. are slated to take place Nov. 8.
Investors are still trying to parse the Fed’s latest messaging shift
Investors cheered what some market watchers described as a coordinated shift in messaging from the Fed last week, conveyed via an Oct. 21 report from The Wall Street Journal that indicated the size of a December Fed rate increase would be up for debate, along with comments from San Francisco Fed President Mary Daly.
Still, the Fed isn’t expected to materially pivot any time soon.
Because the fact remains: there’s plenty of froth that needs to be squeezed out of markets after nearly two years of extraordinary monetary and fiscal stimulus unleashed in the wake of the COVID-19 pandemic, according to Steve Sosnick, chief strategist at Interactive Brokers.
“It’s easier to inflate a bubble than to pop it, and I’m not using the term ‘bubble’ facetiously,” he said during a phone interview with MarketWatch.
Richard Farr, chief market strategist at Merion Capital Group, played down the impact of the Fed’s latest “coordinated” shift in guidance during an interview with MarketWatch, saying the impact on the terminal fed-funds rate is relatively immaterial.
Fed-funds futures traders anticipate the upper end of the central bank’s key target rate will rise to 5% before the end of the first quarter of next year, and remain there potentially into the fourth quarter, although an earlier cut wouldn’t be a complete surprise, according to the CME’s FedWatch tool.
Market technicians believe stocks might move a little higher
So far, October isn’t shaping up to be anything like September, when stocks fell 9.3% to polish off the worst first nine months of a calendar year in two decades.
Instead, the S&P 500 has already risen more than 5.5% since the start of October despite briefly crashing to its lowest intraday level in more than two years following the release of the September consumer-price index report earlier this month.
Technical indicators suggest the S&P 500 can continue to build on last week’s gain, said Katie Stockton, a market strategist at Fairlead Strategies, in a note she shared with clients and MarketWatch.
According to her, the next key level to watch out for on the S&P 500 is north of 3,900, more than 100 points above where the index closed on Monday.
“Short-term momentum remains to the upside within the context of the year-to-date downtrend. Support near 3,505 was a natural staging ground for a relief rally, and initial resistance is near 3,914,” she said.
A key bear sees a tradeable opportunity
Mike Wilson, Morgan Stanley’s chief U.S. equity strategist and chief investment officer, has been one of Wall Street’s most outspoken bears for more than a year now.
But in a note to clients early this week, he reiterated that stocks were looking ripe for a bounce.
“Last week’s tactical bullish call was met with doubt from clients, which means there is still upside as we transition from Fire to Ice — falling inflation expectations can lead to lower rates and higher stock prices in the absence of capitulation from companies on 2023 EPS guidance,” Wilson said.
This earnings season is off to an good start
At this point, it’s safe to say that the third-quarter earnings season has vanquished fears that the Fed’s interest-rate hikes and gnawing inflation had already dramatically eroded profit margins, market strategists said.
The quality of earnings reported already has surpassed some of the early “whisper numbers” bandied about by traders and strategists, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
In aggregate, companies are reporting earnings 5.4% above expectations, according to data from Refinitiv shared with the media on Monday. This compares to a long-term average — since 1994 — of 4.1%.
However, when the energy sector is removed from the equation, expectations seem much more grim. The blended year-to-year earnings estimate for the third quarter is -3.6%, according to the Refinitiv data.
While investors are still waiting on earnings from roughly three-quarters of S&P 500 firms, according to FactSet data, some — like Morgan Stanley’s Wilson — are already looking toward next year as they expect the outlook for profits will darken substantially, possibly leading to an earnings recession — when corporate earnings shrink for two quarters in a row.
The outlook for the global economy remains dim
Speaking of energy, crude oil prices are flashing an ominous warning about expectations for the global economy.
“A lot of the weak oil reflects expectations that the global economy will be in recession and near recession,” said Steve Englander, global head of G-10 currency strategy at Standard Chartered.
West Texas Intermediate crude-oil futures
CLZ22,
+0.48%
settled lower on Monday, as lackluster import data from China and the end of the Communist Party’s leadership conference hinted at softening demand in the world’s second-largest oil consumer. Prices continued to decline early Tuesday.Be wary of ‘fighting the Fed’
Investors remain worried that “something else might break” in markets, as MarketWatch reported over the weekend.
It’s possible that such fears inspired the Fed’s apparent guidance shift, Sosnick said. But the fact remains: anybody buying stocks while the Fed is aggressively tightening monetary policy should be prepared to tolerate losses, at least in the near term, he said.
“Simplest thing of all is: ‘don’t fight the Fed.’ If you’re trying to buy stocks now, what are you doing? It doesn’t mean you can’t buy stocks overall. But it means you’re fighting an uphill battle,” he said.
The VIX is signaling that investors expect a wild ride
Even as stocks extended their October rebound for another session on Monday, the Cboe Volatility Index
VIX,
-4.49%
remained conspicuously elevated, reflecting the notion that investors don’t anticipate the market’s wild ride will end any time soon.The Wall Street “fear gauge” finished Monday’s session up 0.5% at 29.85 and it was trading just shy of the 30 level early Tuesday.
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Amazon shuts online store fabric.com in cost-cutting move
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NEW YORK — Amazon is shutting down a subsidiary that’s been selling fabrics for nearly 30 years, the latest move by the online retail giant to cut costs.
In a note posted on its website, fabric.com said it will no longer sell products and directed customers to shop on Amazon instead. Thursday is the last day customers can place orders on the fabric site.
“As part of our regular business planning, we continually evaluate the progress and potential of our offerings and have made the decision to close Fabric.com,” Amazon spokesperson Betsy Harden said in a prepared statement.
It’s unclear how many employees will be impacted by the closure. Harden said Amazon will work with staff to help them “identify other opportunities” at the company, including at nearby warehouses. Employees who do not stay with Amazon will be given severance, she said.
News of the closure was first reported by the Craft Industry Alliance.
Georgia-based Fabric.com was founded in 1993 under the name Phoenix Textiles Group. It operated as a wholesale distributor of apparel fabrics for several years before it launched its own website and began selling items directly to consumers.
Amazon acquired the company in 2008. At the time, it said it would help the fabric site expand its selection of items and allow Amazon to offer its customers more sewing and crafting supplies.
The closure of the business comes as Amazon is attempting to cut costs amid worries about the wider economic environment and sluggish online sales. In recent months, it has shuttered its hybrid virtual, in-home care service Amazon Care, implemented a hiring freeze on the corporate side of its retail business and axed some of its other projects.
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Tech earnings are coming and they probably won’t be pretty | CNN Business
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New York
CNN Business
—
After months of layoffs, hiring freezes and other cost-cutting measures, big tech companies are set to provide the most detailed look yet at just how bad things have gotten for their businesses amid fears of a looming recession.
Snapchat’s parent company, which tanked much of the tech sector in May with a warning about a worsening economy, is set to report third-quarter earnings on Thursday. Apple
(AAPL), Amazon
(AMZN), Facebook
(FB)-parent Meta, Microsoft
(MSFT), Twitter
(TWTR) and Google-parent Alphabet
(GOOGL) will each report earnings results the following week.“People probably should be bracing themselves for these results,” said Scott Kessler, technology global sector lead at research firm Third Bridge Group.
For years, the giants of Silicon Valley seemed almost immune to swings in the global economy. Even amid a pandemic, a trade war and other geopolitical uncertainty, the biggest names in tech only seemed to grow bigger and richer. But like other sectors in recent months, they have faced a variety of new challenges.
Rampant inflation is eating away at consumers’ paychecks and reducing their ability to spend freely on tech products and services. Increased costs and recession fears have cut down on demand for online advertising and enterprise tech services. And other macroeconomic issues such as continued supply chain snarls and higher interest rates are stunting growth, analysts say.
To make matters worse, tech companies must also confront the growing strength of the US dollar, which is currently trading at its highest level in two decades. That can mean sales made overseas are not worth as much, according to Angelo Zino, senior industry analyst at CFRA Research. A stronger US dollar may also make hardware products from companies like Apple less affordable for foreign consumers, which, as Zino points out, is problematic given “most of these companies are generating more than half their revenue outside the United States.”
In a striking shift, most of the big tech companies are now expected to report slowing profit and revenue growth, or even year-over-year declines, for the three months ending in September, according to analyst estimates.
Amazon
(AMZN), which is projected to be in the best shape, is expected to post essentially flat sales from the year prior. Meta’s revenue is projected to fall 5% year-over-year, marking the company’s second consecutive quarterly revenue decline. Net income at Meta, Amazon
(AMZN), Google and Snap is also expected to be down from the year prior.These dour projections come after many tech businesses were already showing signs of weakness in the prior quarter. Meta in July posted its first year-over-year quarterly revenue decline since going public in 2012 in large part due to decreased demand in the online advertising market that fuels its core business. Twitter
(TWTR), Snap, Google, Apple and Microsoft all also reported that shrinking ad budgets had taken some toll on their June quarter earnings.“We compare investor negative sentiment on tech today to what we have seen only 2 other times in our decades of covering tech stocks: 2008 and 2001,” Wedbush analyst Dan Ives said in a note to investors this week, referring to two prior recessionary periods.
Many of the issues currently weighing on tech companies are unlikely to let up anytime soon, which is why industry watchers will be paying close attention to the guidance these companies offer for the rest of 2022.
“More than anything, people really want a good understanding about what to expect” from the final three months of this year, which has “historically been the most important quarter for these companies,” Kessler said. Investors will likely want to know, for example, whether the online ad market has begun to stabilize ahead of the crucial holiday season.
Negative results or future outlook could lead to increased pressure on tech firms to focus on their core businesses and cut back on big bets that aren’t expected to quickly product returns. Some of that is already underway.
In recent weeks, Google announced it would shut down its gaming service Stadia, Amazon said it would stop testing a home delivery robot and Meta shut down its newsletter product, Bulletin.
Meta may be in a uniquely difficult position. Last October, Facebook rebranded as Meta and ramped up investments to build a future version of the internet called the metaverse, which isn’t expected to be fully realized for years, if ever. But the Wall Street Journal reported last month the company was quietly reducing staff — and some analysts expect more cuts to come.
“I do think you’ll see them announce cost cuts. I think they’ll reduce the workforce,” Zino said. “Meta is really boxed in a corner here. Their core business is in an environment where they’re not going to see much growth at all … and they don’t have any major revenue center outside of advertising.”
What a difference a year makes.
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Amazon workers vote against forming union in upstate New York, dealing setback to grassroots labor group | CNN Business
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CNN
—
Amazon workers in upstate New York have voted against forming a union, dealing another blow to a grassroots labor group attempting to organize several of the tech giant’s US warehouses.
In total, 406 workers at the Amazon facility near Albany voted against unionizing and 206 voted for it, according to a preliminary tally Tuesday from the National Labor Relations Board. There were some challenged and void ballots, but not a big enough figure to sway the final results.
Workers at the facility, called ALB1, were seeking to organize with the Amazon Labor Union, the same grassroots worker group that successfully formed the first-ever union at a US Amazon facility in Staten Island, New York, earlier this year. The Albany vote was the ALU’s third attempt to unionize an Amazon warehouse, after it fell short of securing a union win at a smaller Amazon facility also located in Staten Island. It also comes as Amazon has still not formally recognized the union in Staten Island or come to the bargaining table.
After the vote count concluded on Tuesday, ALU President Chris Smalls said his labor group is “filled with mixed emotions” over the results and pledged: “This won’t be the end of ALU at ALB1.”
Smalls also accused Amazon of retaliating against union organizers at ALB1, which Amazon has previously denied, and blasted the vote as a “sham election.”
Amazon, meanwhile, welcomed the results of the election in a statement Tuesday.
“We’re glad that our team in Albany was able to have their voices heard, and that they chose to keep the direct relationship with Amazon as we think that this is the best arrangement for both our employees and customers,” Kelly Nantel, a spokesperson for Amazon, said in a statement. “We will continue to work directly with our teammates in Albany, as we do everywhere, to keep making Amazon better every day.”
The Amazon organizing efforts have come amid a broader reawakening of the US labor movement during the pandemic, with some early union victories at companies such as Apple and Starbucks. Smalls, in particular, has emerged as a face of this labor movement since the win in Staten Island, making appearances at the White House and posing with celebrities at the Time 100 summit.
Smalls previously told CNN Business that the ALU has been fielding an explosion of interest from Amazon workers at other facilities since its original victory. In addition to the ALB1 facility, an Amazon fulfillment center in Moreno Valley, California, also recently submitted a petition for a union election with the ALU.
But ahead of the Albany vote last week, Smalls appeared to play down the ramifications of the outcome, suggesting the organizing activity itself is a victory. “The expansion of the ALU is definitely historical by itself,” he previously told CNN. “I don’t think nothing’s up for stake.”
Smalls echoed that sentiment in a tweet on Tuesday before the vote tally kicked off. “Proud of the brave workers of ALB1 regardless of todays results,” he tweeted, adding: “You miss 100% of the shots you don’t take!”
Amazon’s worker-organizers at the Albany facility say they were inspired to form a union after seeing the success of the ALU in Staten Island. Some workers in Albany said they were also motivated to organize after witnessing colleagues get injured on the job. A report from the National Employment Law Project found that the ALB1 facility had the highest rates of “most serious injuries” among all Amazon facilities in the state.
An Amazon spokesperson previously told CNN Business that Amazon ramped up hiring to meet demand from Covid-19 “and like other companies in the industry, we saw an increase in recordable injuries during this time from 2020 to 2021 as we trained so many new employees.” The spokesperson added that the company has invested billions of dollars in new operations safety measures.
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These 11 stocks can lead your portfolio’s rebound after the S&P 500 ‘earnings recession’ and a market bottom next year
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This may surprise you: Wall Street analysts expect earnings for the S&P 500 to increase 8% during 2023, despite all the buzz about a possible recession as the Federal Reserve tightens monetary policy to quell inflation.
Ken Laudan, a portfolio manager at Kornitzer Capital Management in Mission, Kan., isn’t buying it. He expects an “earnings recession” for the S&P 500
SPX,
+2.78%
— that is, a decline in profits of around 10%. But he also expects that decline to set up a bottom for the stock market.Laudan’s predictions for the S&P 500 ‘earnings recession’ and bottom
Laudan, who manages the $83 million Buffalo Large Cap Fund
BUFEX,
-2.86%
and co-manages the $905 million Buffalo Discovery Fund
BUFTX,
-2.82% ,
said during an interview: “It is not unusual to see a 20% hit [to earnings] in a modest recession. Margins have peaked.”The consensus among analysts polled by FactSet is for weighted aggregate earnings for the S&P 500 to total $238.23 a share in 2023, which would be an 8% increase from the current 2022 EPS estimate of $220.63.
Laudan said his base case for 2023 is for earnings of about $195 to $200 a share and for that decline in earnings (about 9% to 12% from the current consensus estimate for 2022) to be “coupled with an economic recession of some sort.”
He expects the Wall Street estimates to come down, and said that “once Street estimates get to $205 or $210, I think stocks will take off.”
He went further, saying “things get really interesting at 3200 or 3300 on the S&P.” The S&P 500 closed at 3583.07 on Oct. 14, a decline of 24.8% for 2022, excluding dividends.
Laudan said the Buffalo Large Cap Fund was about 7% in cash, as he was keeping some powder dry for stock purchases at lower prices, adding that he has been “fairly defensive” since October 2021 and was continuing to focus on “steady dividend-paying companies with strong balance sheets.”
Leaders for the stock market’s recovery
After the market hits bottom, Laudan expects a recovery for stocks to begin next year, as “valuations will discount and respond more quickly than the earnings will.”
He expects “long-duration technology growth stocks” to lead the rally, because “they got hit first.” When asked if Nvidia Corp.
NVDA,
+6.14%
and Advanced Micro Devices Inc.
AMD,
+3.69%
were good examples, in light of the broad decline for semiconductor stocks and because both are held by the Buffalo Large Cap Fund, Laudan said: “They led us down and they will bounce first.”Laudan said his “largest tech holding” is ASML Holding N.V.
ASML,
+3.79% ,
which provides equipment and systems used to fabricate computer chips.Among the largest tech-oriented companies, the Buffalo Large Cap fund also holds shares of Apple Inc.
AAPL,
+3.09% ,
Microsoft Corp.
MSFT,
+3.88% ,
Amazon.com Inc.
AMZN,
+6.63%
and Alphabet Inc.
GOOG,
+3.91% Laudan also said he had been “overweight’ in UnitedHealth Group Inc.
UNH,
+1.77% ,
Danaher Corp.
DHR,
+2.64%
and Linde PLC
LIN,
+2.25%
recently and had taken advantage of the decline in Adobe Inc.’s
ADBE,
+2.32%
price following the announcement of its $20 billion acquisition of Figma, by scooping up more shares.Summarizing the declines
To illustrate what a brutal year it has been for semiconductor stocks, the iShares Semiconductor ETF
SOXX,
+2.12% ,
which tracks the PHLX Semiconductor Index
SOX,
+2.29%
of 30 U.S.-listed chip makers and related equipment manufacturers, has dropped 44% this year. Then again, SOXX had risen 38% over the past three years and 81% for five years, underlining the importance of long-term thinking for stock investors, even during this terrible bear market for this particular tech space.Here’s a summary of changes in stock prices (again, excluding dividends) and forward price-to-forward-earnings valuations during 2022 through Oct. 14 for every stock mentioned in this article. The stocks are sorted alphabetically:
Company Ticker 2022 price change Forward P/E Forward P/E as of Dec. 31, 2021 Apple Inc. AAPL,
+3.09% -22% 22.2 30.2 Adobe Inc. ADBE,
+2.32% -49% 19.4 40.5 Amazon.com Inc. AMZN,
+6.63% -36% 62.1 64.9 Advanced Micro Devices Inc. AMD,
+3.69% -61% 14.7 43.1 ASML Holding N.V. ADR ASML,
+3.79% -52% 22.7 41.2 Danaher Corp. DHR,
+2.64% -23% 24.3 32.1 Alphabet Inc. Class C GOOG,
+3.91% -33% 17.5 25.3 Linde PLC LIN,
+2.25% -21% 22.2 29.6 Microsoft Corp. MSFT,
+3.88% -32% 22.5 34.0 Nvidia Corp. NVDA,
+6.14% -62% 28.9 58.0 UnitedHealth Group Inc. UNH,
+1.77% 2% 21.5 23.2 Source: FactSet You can click on the tickers for more about each company. Click here for Tomi Kilgore’s detailed guide to the wealth of information available free on the MarketWatch quote page.
The forward P/E ratio for the S&P 500 declined to 16.9 as of the close on Oct. 14 from 24.5 at the end of 2021, while the forward P/E for SOXX declined to 13.2 from 27.1.
Don’t miss: This is how high interest rates might rise, and what could scare the Federal Reserve into a policy pivot
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Small businesses brace for cautious holiday shoppers
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NEW YORK (AP) — Small businesses are stocking the shelves early this holiday season and waiting to see how many gifts inflation-weary shoppers feel like giving.
Holiday shopping was relatively strong during the past two years as shoppers flocked online to spend, aided by pandemic stimulus dollars. Sales in November and December have been averaging roughly 20% of annual retail sales, according to National Retail Federation, making the holiday season critical for many retailers.
This year, small businesses are bracing for a more muted season, as some Americans spend more cautiously. AlixPartners, the global consulting firm, forecasts that holiday sales will rise between 4% to 7%, far below last year’s growth of 16%. With inflation running above 8%, retailers would see a decrease in real sales.
To prepare, owners say they’re ordering inventory earlier to avoid the supply-chain snags that frustrated them the past two holiday seasons and to draw in early birds. They’re stepping up discounts as much as they can in the face of their own higher costs. And owners also hope more people will shop in stores and holiday markets after doing more of their shopping online during the pandemic.
Max Rhodes, CEO of Faire, an online marketplace used by small businesses to sell their wares wholesale as well as buy goods for retail shops, said he’s seeing earlier ordering from merchants who for two years had trouble getting enough holiday inventory stocked in time for Christmas. Stores faced shortages of everything from holiday décor to gift items as COVID-19 lockdowns forced factories to shut, costs rose and fewer shipping containers and truckers were available — all causing delivery snarls.
A study for the Council of Supply Chain Management Professionals by global consulting firm Kearney found U.S. business logistics costs surged 22.4% in 2021 to $1.85 trillion.
“There’s a bit of a hangover from that, a bit of fear,” Rhodes said. While it’s too early for sales data, the term “Christmas” was the most searched for term on the site in mid-September. That’s two weeks earlier than last year, and eight weeks earlier than 2020, Rhodes said.
“The one thing we’re certain of is it’s not going to be predictable … We really don’t know what to expect and our retailers feel the same way,” Rhodes said .
Mat Pond operates The Epicurean Trader in San Francisco, including four brick-and-mortar stores, an online shop and a corporate gift basket business. In past years, he started building inventory in November, but this year he’s already stocking up on items such as gourmet food, chocolate, wine and giftware. He’s seeing corporations order holiday gift baskets earlier as well.
“Everyone’s planning ahead,” Pond said. “I think everybody’s learning from the past two years.”
While the pandemic’s economic impact has subsided somewhat, consumers are now being tag-teamed by high inflation and rising interest rates. Overall, spending has held up, although some Americans have been forced to pull back on discretionary items. Any decline can be meaningful because consumer spending makes up 70% of economic activity.
Hannah Nash, the owner of the online jeweler Lucy Nash, expects sales of her earrings, bracelets and other jewelry to slow after two years of strong growth. The main culprit: inflation.
“There is less money going around to the average person and we expect their living expenses to impact how much they can spend on holiday shopping,” Nash said.
Nash also expects more people to shop in stores during these holidays. She started her business, based in Indianapolis, during the pandemic, when online shopping boomed. The percentage of total retail sales done online jumped from 11.5% in 2019 to 17.7% in 2020, then rose again to 18.8% last year, according the Mastercard SpendingPulse, which tracks all kinds of payments, including those by cash and debit card.
Nash is stepping up discounts and offering bundles to attract shoppers: Her plans include a 15% discount for new customers this year, up from 10%, starting in November. And she’ll offer bundles of products that are about 20% cheaper than buying items separately.
Major retailers such as Amazon and Walmart are also offering holiday deals to cash-strapped Americans earlier this year. Amazon held a two-day discount event on Oct. 11-12 where the average order was $46.68, $13 less than what shoppers spent during the company’s Prime Day sales event in July, according to the data group Numerator.
Some business owners are hoping to take advantage of any shift to shopping in holiday markets and in stores.
Kimberly Behzadi operates Read It & Eat Box in Buffalo, N.Y., which sells themed boxes with food and a book in each box. She started the business in 2020, during the pandemic. She has an online shop but is hoping the return of holiday markets to full capacity will boost sales. She depends a lot on the holidays — 40% of her annual revenue comes between October and December.
She’s planning on being at six markets this year, with two more applications pending.
“Last year, holiday markets were still limited by the necessary safety protocols for Covid-19 ,” she said. “This year, gratefully, we are able to attend and sell at more holiday markets locally, so my expectation is to double my holiday revenue this year.”
Behzadi also plans on being more promotional.
“With inflation rates high this year I expect consumers to be looking for deals, so I have adapted my holiday strategy to include more bundles and deals,” she said. She’s offering a $60 box that’s bundled with a blind-date book worth $25 for Black Friday, for example.
Mariana Leung-Weinstein sells alcohol infused jam and marshmallows and other farm-inspired gifts at about 25 stores via her Wicked Finch Farm brand in Pawling, N.Y. that she started in 2019. She’s focusing on stocking up in stores in case online sales slow.
“I expect people will enjoy seeing and touching things in person this time around, which puts more of my focus in getting my products in physical stores in time for the holidays,” she said.
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