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  • U.S. stocks end higher after blockbuster September jobs report as S&P 500 snaps 4-week losing streak

    U.S. stocks end higher after blockbuster September jobs report as S&P 500 snaps 4-week losing streak

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    U.S. stocks closed higher Friday, with the S&P 500 eking out a modest weekly gain, as investors assessed a monthly jobs report that showed both a blockbuster surge in jobs created along with a slowdown in wage pressures.

    How stock indexes traded

    • The Dow Jones Industrial Average
      DJIA
      rose 288.01 points, or 0.9%, to close at 33,407.58.

    • The S&P 500
      SPX
      gained 50.31 points, or 1.2%, to finish at 4,308.50.

    • The Nasdaq Composite
      COMP
      climbed 211.51 points, or 1.6%, to end at 13,431.34.

    For the week, the Dow slipped 0.3% while the S&P 500 edged up 0.5% and the Nasdaq gained 1.6%. The Dow fell for a third straight week, while the S&P 500 snapped a four-week losing streak and the Nasdaq saw back-to-back weekly gains, according to Dow Jones Market Data.

    What drove markets

    U.S. stocks climbed Friday, after reversing course from their slide earlier in the session as investors parsed a U.S. employment report that was stronger than forecast.

    “Wages slowed down,” said José Torres, senior economist at Interactive Brokers, in a phone interview Friday. “That was a great development” as the Federal Reserve aims to bring down inflation through monetary tightening.

    Investors have worried that a hot labor market will keep wage growth elevated, adding to inflationary pressures that could see the Fed keep interest rates higher for longer or potentially hike its benchmark rate one more time this year.

    A report Friday from the Bureau of Labor Statistics showed the U.S. economy created 336,000 jobs in September, far surpassing economists’ expectations for 170,000 new jobs. Also, the report said job gains in August and July were revised higher.

    See: Jobs report shows big 336,000 gain in hiring in September. Labor market still hot.

    But other details from the report were slightly more favorable in terms of monetary policy concerns.

    For example, average hourly wages rose a mild 0.2% in September, bringing the 12-month rate of change through September to 4.2%, a slower pace than the prior month’s year-over-year rate of 4.3%.

    “Even though the headline number was 2.5 times what Wall Street had anticipated, the more important detail below the surface was that wage inflation actually cooled,” said Sam Stovall, chief investment strategist at CFRA, during a phone interview with MarketWatch.

    Renaissance Macro Research’s Neil Dutta said in a note that the jobs report was consistent with a soft landing for the economy and the Fed’s objective to lower the inflation rate back to 2%.

    Also see: Why another Fed rate hike this year ‘still a close call’ after jobs report, according to JPMorgan’s David Kelly

    “The strong labor market gives credence to the base case still being a soft landing,” said Yung-Yu Ma, chief investment officer at BMO Wealth Management, in a phone interview Friday. But that soft-landing narrative is “somewhat fragile and data dependent,” he said.

    See: U.S. stocks stage a surprising rally on Friday. But can the party last?

    Investors will be watching for data scheduled to be released next week on September inflation from the consumer-price index and producer-price index.

    Meanwhile, economists from Goldman Sachs Group said in a note Friday that “the continued rebalancing of the labor market” is consistent with their expectation that the Fed is done raising rates this year, despite senior Fed officials projecting another hike in their latest batch of forecasts, released last month.

    Federal-funds-futures traders are expecting the Fed will keep its benchmark rate at the current range of 5.25% to 5.5% at its policy meetings in November and December, according to the CME FedWatch Tool.

    “I’m of the belief that the Fed will not hike again this year,” BMO’s Ma said. “I don’t think it needs to.”

    Meanwhile, the yield on the 10-year Treasury note
    BX:TMUBMUSD10Y
    climbed 6.8 basis points to 4.783%, rising for five straight weeks, according to Dow Jones Market Data.

    Rising Treasury yields, particularly on the long end of the yield curve, have been blamed for a selloff in stocks over the past couple months. But the S&P 500 is now up so far in October, with a small gain of 0.5%, according to FactSet data.

    Companies in focus

    Steve Goldstein contributed to this report.

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  • Exxon expects profit bump from oil prices of around $1 billion in third quarter

    Exxon expects profit bump from oil prices of around $1 billion in third quarter

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    Exxon Mobil Corp. said in a filing late Wednesday that its third-quarter profit is likely to get a bump of around $1 billion from rising crude prices.

    Exxon
    XOM,
    -3.74%
    estimated between $900 million and $1.3 billion more than second-quarter profit due to crude-price changes, and between $200 million and $400 million in gas-price changes.

    The energy giant is expecting $600 million to $400 million less as a result of thinner margins for its chemicals, however.

    Exxon shares dropped 0.5% in the extended session after ending the regular trading day down 3.7%. The stock late last month ended at a record, according to data going back to November 1972.

    Oil futures prices on Wednesday ended at their lowest in about five weeks, but had been inching closer to $100 a barrel recently.

    Exxon is slated to report third-quarter earnings in early November, with FactSet consensus calling for adjusted earnings of $2.35 a share on sales of $85.6 billion. That would compare with adjusted EPS of $4.45 on sales of $112 billion in the third quarter of 2022.

    So far this year, Exxon shares have gained nearly 2%, compared to an advance of around 10% for the S&P 500 index
    SPX.

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  • Clorox slashes forecast due to effects of cyberattack; stock falls

    Clorox slashes forecast due to effects of cyberattack; stock falls

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    Clorox Co. shares fell in the extended session Wednesday after the company slashed its outlook stemming from the impact of a cybersecurity attack over the summer.

    Clorox
    CLX,
    +1.21%
    shares fell about 3% after hours, following a 1.2% gain to close the regular session at $131.83. At Wednesday’s close, Clorox shares were down 6.1% for the year, while the S&P 500 index
    SPX
    has gained 11.1%.

    The company forecast a loss of 75 cents to 35 cents a share, or a loss of 40 cents to break-even per share on an adjusted basis, for the quarter ending Sept. 30.

    Also see: A stranger in your hotel room? Kitty-litter shortages? Online attacks are causing real-world effects.

    Clorox said sales are expected to decrease by 28% to 23% from the year-ago first quarter of $1.74 billion, or in a range between $1.25 billion and $1.34 billion.

    Analysts surveyed by FactSet had forecast first-quarter earnings of $1.29 a share on revenue of $1.77 billion.

    In a statement late Wednesday, Clorox said the reduced outlook was “due to the impacts of the recent cybersecurity attack that was disclosed in August, which caused wide-scale disruption of Clorox’s operations, including order-processing delays and significant product outages.”

    The company said shipment and consumption trends prior to the cyberattack factored in its prior forecast.

    In early August, Clorox forecast sales in 2024 would be flat to 2% higher than 2023’s $7.39 billion, and adjusted earnings between $5.60 and $5.90 for the year, while analysts had expected $5.62 a share on revenue of $7.4 billion at the time.

    Analysts currently forecast, on average, adjusted earnings of $5.78 a share on revenue of $7.5 billion.

    Based on the company’s current assessment, Clorox said it expects “to experience ongoing, but lessening, operational impacts in the second quarter as it makes progress in returning to normalized operations,” and restocking retailers.

    Analysts also forecast second-quarter earnings of $1.18 a share on revenue of $1.77 billion.

    Clorox said it was “in the process of assessing the impact of the cybersecurity attack on fiscal-year 2024 and beyond,” and said it would provide an update during its first-quarter earnings call scheduled in November.

    Back in mid-September, Clorox said the cyberattack would weigh on its results, and by the end of the month shares were on their longest losing streak since 2009.

    Clorox shares have fallen nearly 18% since the company first disclosed the attack in a filing with the Securities and Exchange Commission on Aug. 14.

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  • What McCarthy ouster means for markets as investors fret over congressional ‘dysfunction’

    What McCarthy ouster means for markets as investors fret over congressional ‘dysfunction’

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    Another round of political infighting that ended up spelling the end of Kevin McCarthy’s short tenure as House speaker on Tuesday wasn’t the primary driver of a selloff in stocks and bonds — but it didn’t help, analysts said.

    Continued dysfunction in Congress goes a long way toward explaining why the bond market has been ”out of sorts,” said Jamie Cox, managing partner for Harris Financial Group, in emailed comments.

    As the House began to vote on a motion by Republican Rep. Matt Gaetz of Florida to remove McCarthy from the speakership, stocks closed sharply lower. The Dow Jones Industrial Average
    DJIA
    fell more than 430 points, or 1.3%, to wipe out its 2023 gain, while the S&P 500
    SPX
    posted its lowest close since June 1.

    The drop came in response to a continued surge in Treasury yields that saw the rate on the 10-year note
    BX:TMUBMUSD10Y
    end above 4.80% at its highest since August 2007. Yields and debt prices move opposite each other.

    See: Rising Treasury yields are upsetting financial markets. Here’s why.

    McCarthy, a California Republican, lost the gavel as 216 members of the House voted in favor of ousting him while 210 supported him in a historic challenge.

    Read: Kevin McCarthy ousted as House speaker, falling after historic challenge by Matt Gaetz

    Analysts have pointed to a number of factors behind the continued climb in yields, including the Federal Reserve signaling last month that rates could stay high through 2024 and beyond.

    But market watchers said continued drama in Washington is doing nothing to soothe market volatility, with the showdown over McCarthy’s fate the result of a last-minute deal over the weekend that saw lawmakers temporarily avert a government shutdown. The latest turmoil comes just months after a debt-ceiling showdown that put the U.S. government on the brink of a first-ever default.

    “Investors are sick and tired of being jerked around with out of control spending, the inability to govern, and the constant dragging of markets to the edge of economic calamity with shutdowns and debt ceiling nonsense,” Cox wrote.

    McCarthy’s removal means a mid-November government shutdown, when stopgap funding runs out, is now an 80% probability, said Terry Haines, founder of Pangaea Policy, in a note.

    “[I]t’s not a one-off shutdown markets should be concerned about, but increased volatility for at least 3 months where markets won’t know final decisions on U.S. government annual spending, particularly in government-dependent sectors including defense, semiconductors, and healthcare,” Haines said.

    Tom Essaye, founder of Sevens Report Research, warned that the ”more dysfunctional” Congress appears, ”the higher yields go and the more stocks drop.”

    ”So, while congressional dysfunction isn’t the main reason yields are volatile, it is a contributor and the sooner Washington removes itself from the market dialogue, the better,” he said in a Tuesday morning note.

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  • These 20 stocks in the S&P 500 are expected to soar after rising interest rates have pushed down valuations

    These 20 stocks in the S&P 500 are expected to soar after rising interest rates have pushed down valuations

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    Two things investors can be sure about: Nothing lasts forever and the stock market always overreacts. The spiking of yields on long-term U.S. Treasury securities has been breathtaking, and it has led to remarkable declines for some sectors and possible bargains for contrarian investors who can commit for the long term.

    First we will show how the sectors of the S&P 500

    have performed. Then we will look at price-to-earnings valuations for the sectors and compare them to long-term averages. Then we will screen the entire index for companies trading below their long-term forward P/E valuation averages and narrow the list to companies most favored by analysts.

    Here are total returns, with dividends reinvested, for the 11 sectors of the S&P 500, with broad indexes below. The sectors are sorted by ascending total returns this year through Monday.

    Sector or index

    		 2023 return

    		 2022 return

    		 Return since end of 2021

    		 1 week return

    		 1 month return
    Utilities

    		 -18.4%

    		 1.6%

    		 -17.2%

    		 -11.1%

    		 -9.6%
    Real Estate

    		 -7.1%

    		 -26.1%

    		 -31.4%

    		 -3.0%

    		 -8.8%
    Consumer Staples

    		 -5.4%

    		 -0.6%

    		 -6.0%

    		 -2.2%

    		 -4.4%
    Healthcare

    		 -4.2%

    		 -2.0%

    		 -6.1%

    		 -1.7%

    		 -3.3%
    Financials

    		 -2.5%

    		 -10.5%

    		 -12.7%

    		 -2.5%

    		 -4.7%
    Materials

    		 1.3%

    		 -12.3%

    		 -11.2%

    		 -1.9%

    		 -7.0%
    Industrials

    		 3.5%

    		 -5.5%

    		 -2.1%

    		 -1.8%

    		 -7.3%
    Energy

    		 4.0%

    		 65.7%

    		 72.4%

    		 -1.9%

    		 -1.4%
    Consumer Discretionary

    		 27.0%

    		 -37.0%

    		 -20.0%

    		 -0.6%

    		 -5.2%
    Information Technology

    		 36.5%

    		 -28.2%

    		 -2.0%

    		 0.8%

    		 -5.9%
    Communication Services

    		 42.5%

    		 -39.9%

    		 -14.3%

    		 1.1%

    		 -1.3%
    S&P 500
    		 13.1%

    		 -18.1%

    		 -7.4%

    		 -1.1%

    		 -4.9%
    DJ Industrial Average
    		 2.5%

    		 -6.9%

    		 -4.5%

    		 -1.7%

    		 -4.0%
    Nasdaq Composite Index
    COMP     		28.0%

    		 -32.5%

    		 -13.7%

    		 0.3%

    		 -5.1%
    Nasdaq-100 Index
    		 36.5%

    		 -32.4%

    		 -7.7%

    		 0.5%

    		 -4.2%
    Source: FactSet

    Returns for 2022 are also included, along with those since the end of 2021. Last year’s weakest sector, communications services, has been this year’s strongest performer. This sector includes Alphabet Inc.
    GOOGL
    and Meta Platforms Inc.
    META,
    which have returned 52% and 155% this year, respectively, but are still down since the end of 2021. To the right are returns for the past week and month through Monday.

    On Monday, the S&P 500 Utilities sector had its worst one-day performance since 2020, with a 4.7% decline. Investors were reacting to the jump in long-term interest rates.

    Here is a link to the U.S. Treasury Department’s summary of the daily yield curve across maturities for Treasury securities.

    The yield on 10-year U.S. Treasury notes

    jumped 10 basis points in only one day to 4.69% on Monday. A month earlier the 10-year yield was only 4.27%. Also on Monday, the yield on 20-year Treasury bonds

    rose to 5.00% from 4.92% on Friday. It was up from 4.56% a month earlier.

    Market Extra: Bond investors feel the heat as popular fixed-income ETF suffers lowest close since 2007

    The Treasury yield curve is still inverted, with 3-month T-bills

    yielding 5.62% on Monday, but that was up only slightly from a month earlier. An inverted yield curve has traditionally signaled that bond investors expect a recession within a year and a lowering of interest rates by the Federal Reserve. Demand for bonds pushes their prices down. But the reverse has happened over recent days, with the selling of longer-term Treasury securities pushing yields up rapidly.

    Another way to illustrate the phenomenon is to look at how the Federal Reserve has shifted the U.S. money supply. Odeon Capital analyst Dick Bove wrote in a note to clients on Friday that “the Federal Reserve has not deviated from its policy to defeat inflation by tightening monetary policy,” as it has shrunk its balance sheet (mostly Treasury securities) to $8.1 trillion from $9 trillion in March 2022. He added: “The M2 money supply was $21.8 trillion in March 2022; today it is $20.8 trillion. You cannot get tighter than these numbers indicate.”

    Then on Tuesday, Bove illustrated the Fed’s tightening and the movement of the 10-year yield with two charts:


    Odeon Capital Group, Bloomberg

    Bove said he believes the bond market has gotten it wrong, with the inverted yield curve reflecting expectations of rate cuts next year. If he is correct, investors can expect longer-term yields to keep shooting up and a normalization of the yield curve.

    This has set up a brutal environment for utility stocks, which are typically desired by investors who are seeking dividend income. In a market in which you can receive a yield of 5.5% with little risk over the short term, and in which you can lock in a long-term yield of about 5%, why take a risk in the stock market? And if you believe that the core inflation rate of 3.7% makes a 5% yield seem paltry, keep in mind that not all investors think the same way. Many worry less about the inflation rate because large components of official inflation calculations, such as home prices and car prices, don’t affect everyone every year.

    We cannot know when this current selloff of longer-term bonds will end, or how much of an effect it will have on the stock market. But sharp declines in the stock market can set up attractive price points for investors looking to go in for the long haul.

    Screening for lower valuations and high ratings

    A combination of rising earnings estimates and price declines could shed light on potential buying opportunities, based on forward price-to-earnings ratios.

    Let’s look at the sectors again, in the same order, this time to show their forward P/E ratios, based on weighted rolling 12-month consensus estimates for earnings per share among analysts polled by FactSet:

    Sector or index

    		 Current P/E to 5-year average

    		 Current P/E to 10-year average

    		 Current P/E to 15-year average

    		 Forward P/E

    		 5-year average P/E

    		 10-year average P/E

    		 15-year average P/E
    Utilities

    		 82%

    		 86%

    		 95%

    		 14.99

    		 18.30

    		 17.40

    		 15.82
    Real Estate

    		 76%

    		 80%

    		 81%

    		 15.19

    		 19.86

    		 18.89

    		 18.72
    Consumer Staples

    		 93%

    		 96%

    		 105%

    		 18.61

    		 19.92

    		 19.30

    		 17.64
    Healthcare

    		 103%

    		 104%

    		 115%

    		 16.99

    		 16.46

    		 16.34

    		 14.72
    Financials

    		 88%

    		 92%

    		 97%

    		 12.90

    		 14.65

    		 14.08

    		 13.26
    Materials

    		 100%

    		 103%

    		 111%

    		 16.91

    		 16.98

    		 16.42

    		 15.27
    Industrials

    		 88%

    		 96%

    		 105%

    		 17.38

    		 19.84

    		 18.16

    		 16.56
    Energy

    		 106%

    		 63%

    		 73%

    		 11.78

    		 11.17

    		 18.80

    		 16.23
    Consumer Discretionary

    		 79%

    		 95%

    		 109%

    		 24.09

    		 30.41

    		 25.39

    		 22.10
    Information Technology

    		 109%

    		 130%

    		 146%

    		 24.20

    		 22.17

    		 18.55

    		 16.54
    Communication Services

    		 86%

    		 86%

    		 94%

    		 16.41

    		 19.09

    		 19.00

    		 17.43
    S&P 500
    		 94%

    		 101%

    		 112%

    		 17.94

    		 19.01

    		 17.76

    		 16.04
    DJ Industrial Average
    		 93%

    		 98%

    		 107%

    		 16.25

    		 17.49

    		 16.54

    		 15.17
    Nasdaq Composite Index
    		 92%

    		 102%

    		 102%

    		 24.62

    		 26.71

    		 24.18

    		 24.18
    Nasdaq-100 Index
    		 97%

    		 110%

    		 126%

    		 24.40

    		 25.23

    		 22.14

    		 19.43

    There is a limit to how many columns we can show in the table. The S&P 500’s forward P/E ratio is now 17.94, compared with 16.79 at the end of 2022 and 21.53 at the end of 2021. The benchmark index’s P/E is above its 10- and 15-year average levels but below the five-year average.

    If we compare the current sector P/E numbers to 5-, 10- and 15-year averages, we can see that the current levels are below all three averages for four sectors: utilities, real estate, financials and communications services. The first three face obvious difficulties as they adjust to the rising-rate environment, while the real-estate sector reels from continuing low usage rates for office buildings, from the change in behavior brought about by the COVID-19 pandemic.

    Your own opinions, along with the pricing for some sectors, might drive some investment choices.

    A broader screen of the S&P 500 might point to companies for you to research further.

    We narrowed the S&P 500 as follows:

    • Current forward P/E below 5-, 10- and 15-year average valuations. For stocks with negative earnings-per-share estimates for the next 12 months, there is no forward P/E ratio so they were excluded. For stocks listed for less than 15 years, we required at least a 5-year average P/E for comparison. This brought the list down to 138 companies.

    • “Buy” or equivalent ratings from at least two-thirds of analysts: 41 companies.

    Here are the 20 companies that passed the screen, for which analysts’ price targets imply the highest upside potential over the next 12 months.

    There is too much data for one table, so first we will show the P/E information:

    Company

    		 Ticker

    		 Current P/E to 5-year average

    		 Current P/E to 10-year average

    		 Current P/E to 15-year average
    SolarEdge Technologies Inc.

    		 SEDG 89%

    		 N/A

    		 N/A
    AES Corp.

    		 AES 66%

    		 75%

    		 90%
    Insulet Corp.

    		 PODD 18%

    		 N/A

    		 N/A
    United Airlines Holdings Inc.

    		 UAL 42%

    		 50%

    		 N/A
    Alaska Air Group Inc.

    		 ALK 51%

    		 57%

    		 N/A
    Tapestry Inc.

    		 TPR 39%

    		 49%

    		 70%
    Albemarle Corp.

    		 ALB 39%

    		 50%

    		 73%
    Delta Air Lines Inc.

    		 DAL 60%

    		 63%

    		 21%
    Alexandria Real Estate Equities Inc.

    		 ARE 59%

    		 68%

    		 N/A
    Las Vegas Sands Corp.

    		 LVS 96%

    		 78%

    		 53%
    Paycom Software Inc.

    		 PAYC 61%

    		 N/A

    		 N/A
    PayPal Holdings Inc.

    		 PYPL 33%

    		 N/A

    		 N/A
    SBA Communications Corp. Class A

    		 SBAC 27%

    		 N/A

    		 N/A
    Advanced Micro Devices Inc.

    		 AMD 58%

    		 39%

    		 N/A
    LKQ Corp.

    		 LKQ 92%

    		 44%

    		 78%
    Charles Schwab Corp.

    		 SCHW 75%

    		 54%

    		 73%
    PulteGroup Inc.

    		 PHM 94%

    		 47%

    		 N/A
    Lamb Weston Holdings Inc.

    		 LW 71%

    		 N/A

    		 N/A
    News Corp Class A

    		 NWSA 93%

    		 73%

    		 N/A
    CVS Health Corp.

    		 CVS 75%

    		 61%

    		 67%
    Source: FactSet

    Click on the tickers for more about each company or index.

    Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

    News Corp
    NWSA
    is on the list. The company owns Dow Jones, which in turn owns MarketWatch.

    Here’s the list again, with ratings and consensus price-target information:

    Company

    		 Ticker

    		 Share “buy” ratings

    		 Oct. 2 price

    		 Consensus price target

    		 Implied 12-month upside potential
    SolarEdge Technologies Inc.

    		 SEDG 74%

    		 $122.56

    		 $268.77

    		 119%
    AES Corp.

    		 AES 79%

    		 $14.16

    		 $25.60

    		 81%
    Insulet Corp.

    		 PODD 68%

    		 $165.04

    		 $279.00

    		 69%
    United Airlines Holdings Inc.

    		 UAL 71%

    		 $41.62

    		 $69.52

    		 67%
    Alaska Air Group Inc.

    		 ALK 87%

    		 $36.83

    		 $61.31

    		 66%
    Tapestry Inc.

    		 TPR 75%

    		 $28.58

    		 $46.21

    		 62%
    Albemarle Corp.

    		 ALB 81%

    		 $162.41

    		 $259.95

    		 60%
    Delta Air Lines Inc.

    		 DAL 95%

    		 $36.45

    		 $58.11

    		 59%
    Alexandria Real Estate Equities Inc.

    		 ARE 100%

    		 $98.18

    		 $149.45

    		 52%
    Las Vegas Sands Corp.

    		 LVS 72%

    		 $45.70

    		 $68.15

    		 49%
    Paycom Software Inc.

    		 PAYC 77%

    		 $260.04

    		 $384.89

    		 48%
    PayPal Holdings Inc.

    		 PYPL 69%

    		 $58.56

    		 $86.38

    		 48%
    SBA Communications Corp. Class A

    		 SBAC 68%

    		 $198.24

    		 $276.69

    		 40%
    Advanced Micro Devices Inc.

    		 AMD 74%

    		 $103.27

    		 $143.07

    		 39%
    LKQ Corp.

    		 LKQ 82%

    		 $49.13

    		 $67.13

    		 37%
    Charles Schwab Corp.

    		 SCHW 77%

    		 $53.55

    		 $72.67

    		 36%
    PulteGroup Inc.

    		 PHM 81%

    		 $73.22

    		 $98.60

    		 35%
    Lamb Weston Holdings Inc.

    		 LW 100%

    		 $92.23

    		 $123.50

    		 34%
    News Corp Class A

    		 NWSA 78%

    		 $20.00

    		 $26.42

    		 32%
    CVS Health Corp.

    		 CVS 77%

    		 $69.69

    		 $90.88

    		 30%
    Source: FactSet

    A year may actually be a short period for a long-term investor, but 12-month price targets are the norm for analysts working for brokerage companies.

    Don’t miss: This fund shows that industry expertise can help you make a lot of money in the stock market

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  • Japanese yen sees wild swing amid intervention fears after falling to nearly 1-year low versus dollar

    Japanese yen sees wild swing amid intervention fears after falling to nearly 1-year low versus dollar

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    The Japanese yen roared back violently against the dollar Tuesday amid fears of intervention by Tokyo after trading at its weakest in nearly a year after a round of strong U.S. employment data.

    The U.S. dollar fetched 148.92 Japanese yen
    USDJPY,
    -0.42%    ,
    down 0.6%, after trading as low as 147.415 yen in a sharp tumble from a session high of 150.18 yen. The dollar hadn’t traded above the 150-yen level since Oct. 21, 2022, according to FactSet data.

    Japanese authorities in the fall of 2022 intervened in the market, selling dollars and buying yen as the Japanese currency slumped. Currency traders had been on the lookout for renewed intervention as the yen extended its recent weakness. Japan’s Ministry of Finance has issued several verbal warnings over recent weeks, but they have failed to arrest the yen’s fall.

    Finance Minister Shunichi Suzuki earlier Tuesday had warned that “all measures are on the table with a high sense of urgency,” according to Nikkei.

    But FX analysts were skeptical the yen’s bounceback was due to intervention.

    “Talk of intervention but I am skeptical.  It seems like the market is doing it to itself with orders to sell dollar above JPY150.  BOJ intervened three times last year, none was during US time zone,” said Marc Chandler, managing director at Bannockburn Global Forex, in a note to clients.

    The dollar had initially extended its rally versus the yen and other major currencies after data showed U.S. job openings jumped unexpectedly to 9.6 million in September, up from a revised 8.9 million in August. Analysts surveyed by The Wall Street Journal had expected a reading of 8.8 million.

    Continued strength in the labor market added to a rise in Treasury yields
    BX:TMUBMUSD10Y,
    which in turn boosted the dollar. The ICE U.S. Dollar Index
    DXY,
    a measure of the currency against a basket of six major rivals, remained up 0.1% at 107.06, after trading at its highest since November.

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  • U.S. stocks have had a great year in 2023 — but these numbers tell a different story

    U.S. stocks have had a great year in 2023 — but these numbers tell a different story

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    U.S. stocks have risen sharply in 2023, with a small number of technology companies driving an ever-increasing share of the stock-market gains. 

    While the 11.7% year-to-date gains for the large-cap benchmark S&P 500 index
    SPX
    show 2023 has been a “good year” for stocks, that hardly tells the whole story, said Jonathan Krinsky, the technical strategist at BTIG. 

    The U.S. stock market has seen the median return for shares in the S&P 500 index rise merely 1.1% in 2023, which is “a different planet” compared with their median gain of 16.2% in 2014, when the benchmark index recorded a yearly advance of 11.4%, Krinsky said in a Sunday note (see chart below).

    SOURCE: BTIG ANALYSIS, BLOOMBERG

    The Russell 3000
    RUA
    — a barometer that represents approximately 98% of the American equities — had a median return of negative 2.2% this year, but the index has gained 11.3% year to date, wrote Krinsky, citing BTIG and Bloomberg data. In 2014, the median return for the Russell 3000 was 6.9%, and it recorded a yearly gain of 10.4%.

    Meanwhile, the median year-to-date return for stocks in the S&P 1500, which includes all shares in the S&P 500, S&P 400
    MID
    and S&P 600
    SML
    and covers approximately 90% of U.S. stocks, rose a merely 0.1% versus the index’s 11.2% advance this year, said Krinsky. The S&P 1500 recorded a median return of 8.8% in 2014 and was up 10.9%. 

    See: ‘Anxiety’ high as stock market falls, bond yields rise — what investors need to know after S&P 500’s worst month of 2023

    So far in 2023, investors have struggled to brush off a rise in Treasury yields primarily triggered by the Federal Reserve bumping up interest rates and the risk of recession, with hope that the stock-market rally hasn’t run out of steam yet. 

    However, the S&P 500 and the Nasdaq Composite
    COMP
    Friday locked in their worst month of the year, down 4.9% and 5.8%, respectively, according to FactSet data.

    Treasury yields continued to rise on Monday with the yield on the 2-year
    BX:TMUBMUSD02Y
    up 6.4 basis points to 5.110%, while the yield on the 10-year Treasury
    BX:TMUBMUSD10Y
     jumped 11 basis points to 4.682%. The 10-year rate ended at its highest level since Oct. 12, 2007, according to Dow Jones Market Data.

    See: U.S. stock-market seasonality suggests a potential rally in the fourth quarter. Why this time might be different.

    As a result, investors were hoping October and the last quarter of 2023 could bring some relief to the scorching summer selloff they had to endure in markets. Historically, the fourth quarter has been the best quarter for the U.S. stock market, with the S&P 500 index up nearly 80% dating back to 1950 and gaining more than 4% on average, according to data compiled by Carson Group. 

    “It seems to us that a rally [in the fourth quarter] is the consensus view based on the fact that seasonals tend to work that way,” Krinsky said. “While October is a strong month on ‘average’, it has been down ten of the last 30 years, with eight of those years losing 1.77% or more.”

    In other words, when October is good it tends to be really good, but when it’s bad it tends to be quite bad, Krinsky added. 

    U.S. stocks finished mostly higher on Monday with the Dow Jones Industrial Average
    DJIA
    down 0.2%, while the S&P 500 ended flat and the Nasdaq edged up 0.7%, according to FactSet data.

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  • GameStop’s stock on pace for lowest close in two-and-a-half-years

    GameStop’s stock on pace for lowest close in two-and-a-half-years

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    Shares of GameStop Corp. fell 6.9% Monday and are trading at $15.33, putting the stock on pace for its lowest close since Feb. 23, 2021, when it closed at $11.24, FactSet data show.

    The stock, which is down for four of the last five days, is on pace for its largest percent decrease since June 8, 2023, when it fell 17.89%, according to FactSet.

    Related: GameStop’s stock soars after activist investor Ryan Cohen named CEO

    Activist investor Ryan Cohen was named CEO of GameStop
    GME,
    -6.59%
    last week, marking the latest chapter in his attempt to breathe new life into the video-game retailer and original meme-stock company.

    Cohen, the co-founder and former CEO of Chewy Inc. 
    CHWY,
    +1.92%    ,
      made his first investment in GameStop in August 2020 via his investment firm RC Ventures. News of Cohen’s 9% stake in the gaming retailer sent its stock surging. The activist investor quickly began pushing for an overhaul of GameStop, with a focus on digital sales, and he joined the company’s board in January 2021. He consolidated his power at GameStop when he became the company’s chairman in June 2021.

    Ryan Cohen becomes GameStop CEO and social media reacts: ‘Changing the paradigm on Wall Street’

    In its statement announcing Cohen’s election as CEO, GameStop confirmed that he will not receive compensation for serving as the company’s president, chief executive and chairman.

    The video game retailer reported better-than-expected second-quarter results last month, boosted by international sales and what the company described as “a significant software release.” GameStop is also ramping up its efforts to control costs.

    Ryan Cohen has no ‘new idea’: Analyst blasts ‘doomed’ GameStop after leadership announcement

    GameStop shares are down 17% in 2023, compared with the S&P 500 Index’s
    SPX
    gain of 11.2%.

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  • Tesla, Rivian, Discover, Sphere Entertainment, Nvidia, and More Stock Market Movers

    Tesla, Rivian, Discover, Sphere Entertainment, Nvidia, and More Stock Market Movers

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    This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.

    https://www.barrons.com/articles/stock-market-movers-e5dab615

    • Order Reprints
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  • How 10-year Treasurys could produce 20% returns, according to UBS

    How 10-year Treasurys could produce 20% returns, according to UBS

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    Carnage in the bond market in September could tee up an opportunity for investors to earn big returns on U.S. government debt in a year.

    Owners of 10-year Treasury
    BX:TMUBMUSD10Y
    notes at recent yields of around 4.5% could reap up to 20% in total returns in a year if the U.S. economy stumbles into a recession, according to UBS Global Wealth Management.

    The key would be for U.S. debt to rally significantly as investors scramble for safety in the roughly $25 trillion treasury market.

    “U.S. yields remain well above long-term equilibrium levels, providing scope for them to fall as the macroeconomic outlook becomes more supportive for bonds,” a team led by Solita Marcelli, chief investment officer Americas at UBS Global Wealth Management, wrote in a Friday client note.

    Their base-case call is for the 10-year Treasury yield to fall to 3.5% in 12 months, with it easing back to 4% in an upside scenario for growth, and for the economy’s benchmark rate to tumble as low as 2.75% in a downside scenario of a U.S. recession.

    “That would translate into total returns over the period of 14% in our base case, 10% in our upside economic scenario, and 20% in our downside scenario.”

    See: The market ‘may be overpaying you’ on a 10-year Treasury, says Lloyd Blankfein

    A rally in Treasury debt could help boost funds that track the Treasury market and the broader U.S. bond sector. The popular iShares 20+ Year Treasury Bond ETF
    TLT
    was down 10.9% on the year through Friday, while the iShares Core U.S. Aggregate Bond ETF
    AGG
    was 3% lower, according to FactSet.

    A tug of war has been developing in the Treasury market, with fear gripping investors this week as bond yields spike in the wake of signals last week from the Federal Reserve that interest rates may need to stay higher for longer than many on Wall Street anticipated.

    “Bond vigilantes” unhappy about the U.S. deficit have been demanding higher yields, while households and hedge funds have been piling into Treasury securities since the Fed began raising rates in 2022.

    Much hinges on how painful things get if rates stay high, which would ratchet up borrowing costs for households, companies and the U.S. government as the Fed works to get falling inflation down to its 2% target.

    Hedge-fund billionaire Bill Ackman this week said he thinks Treasury yields are going higher in a hurry, as part of his bet that the 30-year Treasury yield
    BX:TMUBMUSD30Y
    has more room to climb.

    The 10-year Treasury edged lower to 4.572% on Friday, after adding almost 50 basis points in September, which helped the stock market reclaim some lost ground in a dismal month, while the 30-year Treasury yield pulled back to 4.709%, according to FactSet.

    The Dow Jones Industrial Average
    DJIA
    posted a 3.5% decline in September, its biggest monthly loss since February, the S&P 500 index
    SPX
    fell 4.8% and the Nasdaq Composite Index
    COMP
    shed 5.8% for the month.

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  • ‘Anxiety’ high as stock market falls, bond yields rise — what investors need to know after S&P 500’s worst month of 2023

    ‘Anxiety’ high as stock market falls, bond yields rise — what investors need to know after S&P 500’s worst month of 2023

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    U.S. stocks and bonds are both falling again, with the S&P 500 just wrapping up its worst quarterly performance in a year after another surge in Treasury yields. 

    “That creates a lot of anxiety,” as there’s still a fair amount of “investor PTSD” from last year, when markets were rocked by losses in both equities and bonds, said Phil Camporeale, a portfolio manager for J.P. Morgan Asset Management’s global allocation strategy, by phone.

    But it’s not the same environment.

    Last year was about the Federal Reserve rushing to tame runaway inflation with rapid interest-rate hikes after being “behind the curve,” he said. Now investors are grappling with a surge in Treasury yields after the Fed in September doubled its U.S. growth forecast this year to 2.1%, according to Camporeale, pointing to the central bank’s latest summary of economic projections.

    “This is your kiss-your-recession-goodbye trade,” he said, with sharp market moves in September reflecting the notion that “the Fed is not easing anytime soon.”

    The U.S. labor market has been strong despite the central bank’s aggressive tightening of monetary policy, with the unemployment rate at a historically low 3.8% in August. In September, the Fed projected the jobless rate could move up to 4.1% by the end of next year, below its previous forecast from June.

    “Inflation is falling,” Camporeale said. “The most important metric right now is the labor market.”

    As he sees it, investors are worried that the Fed will hold interest rates higher for longer should the unemployment rate remain low and the labor market “tight.” The Fed projected in September that it could raise rates once more this year before reaching the end of its hiking cycle, with fewer potential rate cuts penciled in for 2024 than previously forecast. 

    Investors expect to get a look at the U.S. employment report for September this coming week, with nonfarm payrolls data scheduled to be released on Oct. 6.

    See: Government shutdown averted for now as Congress approves 45-day funding bridge

    Meanwhile, the U.S. stock market ended mostly lower Friday, with the Dow Jones Industrial Average
    DJIA,
    S&P 500
    SPX
    and Nasdaq Composite
    COMP
    all closing out September with monthly losses as investors weighed fresh data on inflation. 

    A reading Friday of the Fed’s preferred inflation gauge showed that core prices, which exclude volatile food and energy categories, edged up 0.1% in August. That was slightly less than expected. Meanwhile, the core inflation rate slowed to 3.9% over the 12 months through August. 

    But headline inflation measured by the personal-consumption-expenditures price index rose more than the core reading on a month-over-month basis, as higher gas prices fueled its increase. 

    S&P 500’s worst month of 2023

    Investors have been anxious that the Fed may keep rates high for longer to bring inflation down to its 2% target. 

    Friday’s close left the S&P 500 logging its worst month since December, dropping 4.9% in September for back-to-back monthly losses. The S&P 500 sank 3.6% in the third quarter, suffering its biggest quarterly loss since the three months through September in 2022, according to Dow Jones Market Data. 

    The U.S. stock market has been startled by surging bond yields following the Fed’s policy meeting in September, after being jolted by the rise in Treasury rates in August.

    “The price to pay for a resilient economy is higher yields,” said Steven Wieting, chief economist and chief investment strategist at Citi Global Wealth, in an interview. “We’re probably near the peak in yields.”

    The yield on the 10-year Treasury note
    BX:TMUBMUSD10Y
    ended September at 4.572%, after rising just days earlier to its highest level since October 2007, according to Dow Jones Market Data. Yields and debt prices move opposite each other.

    But for Camporeale, it’s still too early to venture out to the back end of the U.S. Treasury market’s yield curve to add duration to bondholdings. That’s because the yield curve is not yet “re-steepened” and he views the U.S. economy as currently on course for a soft landing with rates staying higher for longer.

    “If you avoid recession, why should you have a lower yield as you go out in time?” said Camporeale. “You should be compensated for having more yield as you go out in time if you avoid recession, not less.”

    The 2-year Treasury rate
    BX:TMUBMUSD02Y
    finished September at 5.046%, continuing to yield more than 10-year Treasury notes.

    The yield curve has been inverted for a while, with short-term Treasurys offering higher rates than longer-term ones. The situation is being monitored by investors because historically such inversion has preceded a recession. 

    “If we were nervous about growth we would be buying the 10-year part of the curve or the 30-year part of the curve,” said Camporeale. “But we are not doing that right now.”

    As for asset allocation, he said he’s now neutral stocks and overweight U.S. high-yield credit, particularly bonds with shorter durations of one to three years. 

    Camporeale sees junk bonds as a “nice” trade as he is not expecting a recession in the next 12 months and they are providing “enticing” yields versus the U.S. equity market, which probably has most of its returns in “versus what we think you get through the rest of the year.”

    The S&P 500 index was up 11.7% this year through September, FactSet data show. 

    While watching for any signs of deterioration in the labor market, Camporeale said he now anticipates the earliest the Fed may cut rates is in the second half of next year. To his thinking, the recent move higher in 10-year Treasury yields was appropriate “in a world where maybe the yield curve has to re-steepen.” 

    ‘Pain trade’

    Bond prices in the U.S. broadly dropped in September along with the stocks. 

    The iShares Core U.S. Aggregate Bond ETF
    AGG
    was down 2.6% last month on a total return basis, bringing its total loss for the third quarter to 3.2%, according to FactSet data. That was the fund’s worst quarterly performance since the third quarter of 2022.

    The ETF, which tracks an index of investment-grade bonds in the U.S. such as Treasurys and corporate debt, has lost 1% on a total return basis so far this year through September, FactSet data show. Meanwhile, the iShares 20+ Year Treasury Bond ETF
    TLT
    has seen a total loss of 9% over the same period.

    “Few investors want to call the top for peak rates,” said George Catrambone, head of fixed income at DWS, in a phone interview. Some bond investors had started to extend into long-term Treasurys in July. “That’s been the pain trade, I think, ever since then,” said Catrambone.

    As for the equity market, the speed of the move up in 10-year Treasury yields hurt stocks, with the rate climbing “well beyond what many assumed would be the upper end,” according to Liz Ann Sonders, chief investment strategist at Charles Schwab. 

    With higher rates pressuring equity valuations, “clearly what’s going to matter is third-quarter-earnings season, once that kicks in” during October, she said by phone. Company “earnings are going to have to start to do some more heavy lifting.”

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  • A Rough September Is Finally Over. Now Is the Time to Buy Stocks.

    A Rough September Is Finally Over. Now Is the Time to Buy Stocks.

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    The forecast for the market is cloudy at best—and there are no meatballs involved. Questions about the strength of the economy, what the Federal Reserve plans to do next, and even the path of corporate earnings won’t be answered for months, leaving certainty-starved investors feeling like they’re walking on quicksand. It’s a good time to…

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  • Why stocks are likely to be especially volatile this October

    Why stocks are likely to be especially volatile this October

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    The U.S. stock market has been volatile in September. Brace yourself for October.

    September has the reputation of being the worst month for the stock market, but October far and away is the most volatile month of the year — as you can see from the accompanying chart. So if this October follows the historical averages, the stock market won’t lose as much as it has so far in September but investors will still feel whipped around.

    You might think October’s historical volatility can be traced to the U.S. market crashes that occurred in 1929 and 1987, each of which occurred during that month. But you’d be wrong: October remains at the top of the volatility rankings even if those two years are removed from the sample. Nor is there any trend over time in October’s place in those rankings: If we divide the period since the Dow Jones Industrial Average
    DJIA
    was created in 1896 into two periods, October is the most volatile in both the first and second halves.

    Why would October be the most volatile month? I’m not aware of any plausible theory, and that normally would be a reason not to expect the historical pattern to continue. But not in this case.

    That’s because an expectation of volatility can itself lead to greater volatility. So the fact that past Octobers have been so volatile is a reason to expect this coming October to also be a particularly choppy month on Wall Street.

    If so, our job is not to get spooked by October’s volatility into going to cash. Of course, you may have other reasons why you might want to reduce your equity exposure. But if you were otherwise wanting to be heavily invested in equities, fasten your seat belt and hold on.

    Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com

    More: Wall Street analysts expect the S&P 500 to rise 19% over the next 12 months. Here are their 10 favorite stocks.

    Plus: Let’s debunk the bears’ top arguments against further stock market gains

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  • Government shutdown looms: Here’s how to help preserve your investment portfolio.  

    Government shutdown looms: Here’s how to help preserve your investment portfolio.  

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    “ The economic impact of a shutdown and the potential implications on your portfolio depend largely on how long the shutdown lasts. ”

    The potential for a U.S. government shutdown can raise alarm for investors and send the phone of a financial adviser like me ringing off the hook. Headlines in front of them, my clients are increasingly asking about potential portfolio implications and how they should respond.

    There is certainly a measured response, which includes not overreacting to the headlines and sticking to your long-term investment plan, and I’ll show you how to draw it.

    Government shutdown explained

    First, it’s important to understand what is happening. During a shutdown, the federal government will suspend all services that are deemed nonessential until a funding agreement is reached. This is much different than a default — which can happen when the government can’t pay its debts or satisfy its obligations. A default can have significant ramifications on U.S. creditworthiness and in turn, the global financial system. You may recall lawmakers’ discussions earlier this year regarding raising the debt ceiling — a solution to avoid defaulting. 

    A U.S. default has never happened, but shutdowns have occurred more than 20 times since 1976. Unlike a default, a shutdown does not affect the government’s ability to pay its obligations, and many critical government services, like Social Security may continue. When weighing the two, one can presume that markets may react more negatively to a default.   

    Markets may experience heightened volatility in response to the shutdown uncertainty, but markets do not react consistently to the news. In the past we have seen U.S. stocks — as measured by the S&P 500
    SPX
    — finish positively after more than half of these shutdowns. Results are similar for fixed-income securities, as we’ve seen an even split between positive and negative returns in the bond markets in shutdowns since 1976. 

    Of course, all investing is subject to risk, past performance is not a guarantee for future returns, and the performance of an index is not an exact representation of any particular investment. 

    The economic impact of a shutdown — and the potential implications on your portfolio — depend largely on how long the shutdown lasts. The longer the shutdown, the more Americans experience dampened economic activity from things like loss of furloughed federal workers’ contribution to GDP, the delay in federal spending on goods and services, and the reduction in aggregate demand (which lowers private-sector activity). 

    Read: Government shutdown: Analysts warn of ‘perhaps a long one lasting into the winter’

    A measured response 

    A government shutdown is just one of many factors, both positive and negative, that can cause fluctuation in the market, so it’s important to treat it just as you would other fluctuations.

    With so many variables, it’s impossible to precisely predict the effects the shutdown will have or determine how long it will last. This can seem scary for many, so it’s important to remember your long-term financial plan and focus on the factors you can control.  

    First, do not try to time the market. Doing so based on short-term events is never a good idea, and volatility is unpredictable. Even if the markets fall, we don’t know when they might recover. If you make an emotionally charged decision, you run the risk of missing out on potentially substantial market gains. 

    Instead, focus on the following: align your asset allocation with your risk tolerance; control your costs; adopt realistic expectations; hold a broadly diversified portfolio and stay disciplined. Doing so can help you weather any form of market uncertainty, including a shutdown.

    Stick to healthy financial habits

    In addition to not making any sudden moves in your investment portfolio, now is a suitable time to make sure you are keeping up with healthy financial habits, especially if you are a federal employee facing a furlough. This can look like readjusting your budget based on your current needs, keeping high-interest debt to a minimum, paying the minimum on all debt to keep your credit score in good standing and continuing to save.

    Remember, using your emergency fund to navigate tight times is exactly what you have saved for and tapping it in this instance is considered a healthy financial habit. Just be sure to replenish it when you have the funds to do so. As a good practice, Vanguard recommends having three- to six months of expenses saved in readily accessible investments.

    With a level, long-term approach and a personalized financial plan, you can be prepared for this potential storm and the inevitable ones to come. 

    Lauren Wybar is a senior financial adviser with Vanguard Personal Advisor. 

    More: Bill Ackman says Treasury yields are going higher in a hurry, and that investors should shun U.S. government debt

    Plus: Social Security checks will still come if there’s a shutdown. But there are other immediate threats to America’s benefits.

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  • SmileDirectClub’s stock plummets 85% after Chapter 11 bankruptcy filing

    SmileDirectClub’s stock plummets 85% after Chapter 11 bankruptcy filing

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    SmileDirectClub Inc. shares plummeted in the extended session Friday after the company said it had voluntarily filed for Chapter 11 bankruptcy protection as founders seek to recapitalize the teeth-straightening business.

    SmileDirectClub shares SDC, which had been halted while up 0.9% in after-hours trading pending news, promptly dropped as much as 85% when trading in the stock reopened.

    The…

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  • Adidas and Puma shares rally after Nike results

    Adidas and Puma shares rally after Nike results

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    Investors bid up Nike’s rivals Adidas and Puma in early European markets action, after their U.S. peer beat first-quarter earnings forecasts.

    Adidas shares
    ADS,
    +6.09%
    jumped 6%, and Puma stock
    PUM,
    +6.22%
    rose 5%, after Nike
    NKE,
    +0.23%
    reported better margins than forecast even though revenue met expectation.

    JD Sports Fashion
    JD,
    +5.04%
    shares also jumped 6% in London.

    Analysts at JPMorgan led by Olivia Townsend said the read-across to the European sporting goods sector was better-than-expected demand in North America, a solid performance in Europe, expansion in gross margins and ongoing improvements in inventory levels.

    The major European indexes also advanced on Friday, with the U.K. FTSE 100
    UK:UKX,
    German DAX
    DX:DAX
    and French CAC 40
    FR:PX1
    each sporting gains around 0.7%.

    U.S. stock futures
    ES00,
    +0.42%
    also edged higher ahead of the release of the PCE price index report later. The S&P 500
    SPX
    ended Thursday with a 0.6% rise.

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  • Micron sees nine-figure data-center sales in 2024, but another quarter of negative margins

    Micron sees nine-figure data-center sales in 2024, but another quarter of negative margins

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    Micron Technology Inc. is far from out of the woods yet when it comes to profitability as quarterly results came in better than expected Wednesday, but the memory-chip maker’s chief executive was upbeat about data-center sales in 2024 as AI fever rages on.

    While the Boise, Idaho-based chip maker topped expectations for its fiscal fourth quarter, it forecast a loss of $1.14 to $1 a share on revenue of $4.2 billion to $4.6 billion for the fiscal first quarter. Analysts surveyed by FactSet, however, had forecast, on average, a loss of 88 cents a share on revenue of $4.24 billion.

    Micron also expects negative gross margins for a fourth consecutive quarter in the fiscal first quarter, between a 6% and 2% loss, which Micron Chief Financial Officer Mark Murphy said on the call assumed no additional inventory write-down because of memory-chip pricing.

    Following gross margins of 22.9% reported in the first quarter of fiscal 2023, gross margins swung sharply to negative-31.4% as Micron reported its largest quarterly loss on record in March, writing off more than $1.4 billion in inventory. Those margins improved to negative-16.1% in the third quarter. On Wednesday, those continued to improve sequentially, to negative-9.1% in the fourth quarter.

    Additionally, the company said it is still experiencing headwinds from China’s cybersecurity review of the company’s products, which surfaced in March.

    Micron
    MU,
    +0.40%
    shares declined nearly 4% after hours Wednesday following a 0.4% rise to close the regular session at $68.21.

    On a conference call, Micron Chief Executive Sanjay Mehrotra told analysts he expects revenue from high-bandwidth memory chips designed for data centers “to begin in early 2024,” and that the company is “very much still on track for meaningful revenue, several hundred million dollars in our fiscal year 2024.”

    Back in July, Micron and Nvidia Corp.
    NVDA,
    +1.33%
    announced that Nvidia was using Micron’s HBM3 Gen2 high-bandwidth memory 1-beta DRAM chips in its AI data-center products. As the AI frenzy has raged on all year, data centers that must handle the enormous amounts of data and throughput required by AI models like Open AI’s ChatGPT, backed by Microsoft Corp.
    MSFT,
    +0.21%    ,
    have boosted demand for hardware.

    Micron specializes in making DRAM and NAND memory chips. DRAM, or dynamic random access memory, is the type of memory commonly used in PCs and data-center servers, while NAND chips are the flash memory chips used in smaller devices like smartphones and USB drives.

    Read: Micron’s stock might be an excellent play for AI investors who want to diversify beyond Nvidia

    In the company’s last earnings report, Mehrotra called the bottom in the memory-chip market, but warned that smartphone and PC weakness could cut into AI gains. This time around, the CEO said smartphone and PC markets were “now at normal levels.”

    Read: AI will accelerate Micron’s recovery, analyst says

    For the fiscal fourth quarter, Micron reported a loss of $1.43 billion, or $1.31 a share, versus net income of $1.49 billion, or $1.35 a share, in the year-ago period.

    The adjusted loss, which excludes stock-based-compensation expenses and other items, was $1.07 a share, versus adjusted earnings of $1.45 a share in the year-ago period. Revenue fell to $4.01 billion from $6.64 billion in the year-ago quarter.

    Analysts had forecast Micron to report a fourth-quarter loss of $1.15 a share on revenue of $3.95 billion.

    Micron shares are up 36.5% year to date, compared with a 32.8% gain by the PHLX Semiconductor Index
    SOX,
    an 11.3% gain by the S&P 500 index
    SPX
    and a 25.1% rise in the Nasdaq Composite
    COMP.

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  • Costco is selling out of small gold bars ‘within a few hours,’ CFO says

    Costco is selling out of small gold bars ‘within a few hours,’ CFO says

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    Costco Wholesale Corp. sells lots of things you wouldn’t expect from a big-box retailer: caskets, caviar, six-pound tubs of Nutella. Add to that list one-ounce bars of gold, which the company on Tuesday said were selling out within a matter of hours.

    “I’ve gotten a couple of calls that people have seen online that we’ve been selling one-ounce gold bars,” Chief Financial Officer Richard Galanti said on Costco’s
    COST,
    +2.45%
    quarterly earnings call on Tuesday. “Yes, but when we load them on the site, they’re typically gone within a few hours, and we limit two per member.”

    Costco did not immediately respond to a request for more information about the types of gold bars it sells, how much they cost or the factors behind the demand. On Wednesday, the site showed a price of $1979.99 per ounce for the bars. Shares of Costco were up 1.3% on Wednesday.

    Gold is generally seen as a safe-haven investment and a hedge against inflation. Buying by central banks, lingering worries about a deceleration in the economy and jewelry purchases have helped prop up prices, according to data tracker Goldhub. But higher interest rates have acted as a counterweight, and some analysts have wondered whether more volatility is on the horizon for gold prices.

    Costco’s quarterly results, reported Tuesday, topped expectations. Analysts have said the retail chain remains attractive to customers who are looking for a break from higher prices.

    Shares of the company are up 23.8% so far this year. The S&P 500 Index
    SPX
    is up 11.4% over that period.

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  • Why a surging U.S. dollar is about to become a problem for stock-market bulls

    Why a surging U.S. dollar is about to become a problem for stock-market bulls

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    Analysts are ringing alarm bells over a surge by the U.S. dollar, warning it may be set to serve as another “headwind” for U.S. stocks as they struggle through a losing September.

    “Since early August, the USD (U.S. dollar) has climbed above its average [second-quarter] level. That means that for corporates, the USD switched back from tailwind to headwind…and an increasing one” as investors close out the third quarter this week, said Andrew Greenebaum of Jefferies, in a Saturday note.

    A rapidly strengthening dollar is often seen as a problem for big, U.S. multinationals. A stronger dollar makes their goods more expensive to overseas buyers. And income earned overseas will be less valuable on their income statements.

    The U.S. dollar went on a tear in 2022 as Treasury yields surged in response to the Federal Reserve’s aggressive series of interest-rate hikes. The ICE U.S. Dollar Index
    DXY,
    a measure of the currency against a basket of six major rivals, hit a 20-year high last September, but then retreated sharply.

    The pullback, which saw the index drop from a high near 115 last fall to a low below 100 in July, was seen as a tailwind for stocks. The S&P 500
    SPX
    saw its bear-market bottom in October of last year, and built on its rally through the winter and spring. Since late July, stocks have suffered a pullback, with the large-cap benchmark down around 5.5% from its 2023 high set on July 31.

    “After creating a substantial headwind to profits for U.S. multinationals, it’s been a tailwind [year to date]. But that all changed roughly 10 weeks ago,” Greenebaum wrote.

    The DXY has ripped higher by around 4% in that short time frame, a move more than one standard deviation outside the norm, he noted. And that sort of move has tended have implications for both company fundamentals and asset allocation.


    Jefferies

    The chart above breaks out the average performance of key indexes, including the S&P 500, S&P 500 cyclicals, small-caps (RTY), the Nasdaq-100
    NDX
    and the MSCI All-World excluding U.S.

    Small-caps are typically expected to outperform during periods of dollar strength, since most of their revenues come from within the U.S. Cyclical stocks are expected to suffer.

    A rising dollar also tightens financial conditions, adding to other headwinds for stocks heading into the fourth quarter, said analysts at Morgan Stanley, in a Monday note (see chart below).


    Morgan Stanley Wealth Management

    “With the 10-year real rate at a 16-year high above 2.0%, the U.S. dollar is surging, producing meaningful headwinds for U.S. multinationals,” they wrote.

    “Oil is becoming a constraint as well, with West Texas Intermediate crude
    CL00,
    +0.01%
    up more than 30% from its spring trough. Together with indications that bank lending and credit availability are already shrinking, these factors suggest the liquidity backdrop may worsen,” they wrote.

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