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U.S. stocks drift higher as tech earnings, Fed rate decision loom
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U.S. stocks were modestly higher on Tuesday as the Dow’s winning streak continued for now, while investors waited for big tech company earnings after the bell and the Federal Reserve’s interest rate decision on Wednesday.
How stocks are trading
- The S&P 500 climbed 5 points, or 0.1%, to 4,560
- The Dow Jones Industrial Average gained 12 points, or 0%, to 35,423
- The Nasdaq Composite increased 51 points, or 0.3%, to 14,110
On Monday, the Dow Jones Industrial Average
DJIA,
+0.21%
rose 184 points, or 0.52%, to 35411, the S&P 500
SPX,
+0.30%
increased 18 points, or 0.4%, to 4555, and the Nasdaq Composite
COMP,
+0.66%
gained 26 points, or 0.19%, to 14059.What’s driving markets
The Dow Jones Industrial Average is on an 11-session winning streak, its best run in more than six years, as hopes build that the Federal Reserve’s remaining interest rate hikes this year will not cause a recession as inflation cools.
Whether the Dow can make it an even dozen days of gains and extend its rally even further to fresh 15-month highs will likely depend on the next few days containing corporate earnings reports and Fed comments.
Dow components 3M
MMM,
+5.58%
and Verizon Communications Inc.
VZ,
+0.60%
both reported results before the bell. So did big name companies like General Electric
GE,
+5.97%
and General Motors
GM,
-4.44% .After the bell, come Microsoft
MSFT,
+1.18%
and Visa
V,
-0.28% ,
with non-Dow member Alphabet
GOOG,
+0.11%
also a highlight. Coca-Cola
KO,
-0.23%
and Boeing
BA,
-1.67%
are among those Dow members presenting their numbers on Wednesday.Investors will be want to hear from Alphabet and Microsoft about their cloud businesses, the ongoing impact and use of artificial intelligence and their general outlooks for American and global markets, David Sekera, chief U.S. market strategist at Morningstar, said in a phone interview.
Meanwhile, equity markets are in “a little bit of a holding period” ahead of the events to come, he noted.
Read also: IMF sees signs global economy is headed in the right direction
Wednesday also sees the Fed’s latest monetary policy decision. The market is certain the central bank will increase its policy interest rate by another 25 basis points to a range of 5.25% to 5.50%.
But investors are less sure of whether that will be the last hike of the current cycle, so the Fed’s accompanying statement and what Chair Jerome Powell says at his press conference will be the main drivers of bonds, equities and forex around the event.
“Our view is the Fed is one and done,” Sekera said. Even with expectations that central banks will continue to “talk tough” on inflation, Sekera said Morningstar’s base case is that July’s 25-basis point hike is the last, while inflation continues to cool over the second half of the year. Rate cuts could occur as early as February, he said.
At Vanguard, Andrew Patterson, senior international economist, said in a note that the Fed could reach its terminal rate “with 1 or 2 more hikes.” The central bank is “likely to remain on hold through at least the end of the year. If inflation proves persistent, this may be a sign of a higher neutral rate and the Fed may need to go to 6% or beyond in order to bring inflation back to target,” he said.
Others think there’s more rate hikes to go. “There is a great chance that the Fed will spoil your mood if you are among those thinking that this week’s rate hike will be the last for this tightening cycle in the U.S.,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Meanwhile, helping underpin sentiment on Tuesday was a rebound in Chinese stocks, notably property developers after Beijing signaled support for the heavily-indebted sector.
In other economic data Tuesday, home prices increased for the fourth consecutive month in May, according to the S&P Case-Shiller Index. May’s strongest price gains were in Midwest cities, but the overall gains underscore the ongoing lack of supply of homes.
While home prices are rising, so is consumer confidence. One gauge on consumer sentiment reached a two-year high, according to data out Tuesday. The Conference Board’s index for July increased to 117.0, which was above economists’ expectations and up from a revised 110.1 last month.
While mood is brightening, the index is still below pre-pandemic levels as consumers contend with the toll of high prices and rising interest rates.
Companies in focus
-
General Electric Co.
GE,
+5.97%
shares up more than 6% and approaching a nearly five-year high after second quarter results from the aerospace and renewable energy company that topped expectation. The company reported net income of $946 million, or 86 cents per share, from a loss of $1.25 billion, or $1.13 a share one year ago, while free cash flow and revenue also beat estimates. -
Verizon Communications Inc.
VZ,
+0.60%
shares are up more than 0.7% after the telecommunications company topped profit expectations in its latest earnings but came just below revenue expectations. The company reported $1.21 earnings per share, above FactSet consensus for $1.17 earnings per share. -
General Motors Co.
GM,
-4.44%
shares are more than 3% lower after the car maker delivered better than expected second quarter earnings and raised its guidance. The company had adjusted earnings per share of $1.91, topping the $1.86 consensus according to FactSet. -
3M Co.
MMM,
+5.58%
shares are more than 6% higher Tuesday after results showing the company booked a loss in connection with a litigation settlement over “forever chemicals.” But taking away the one-time charge, the company still topped adjusted profit expectations and raised its full-year outlook. -
Spotify Technology
SPOT,
-13.68%
shares tumbled about 12% Tuesday after the streaming giant easily surpassed subscriber-growth expectations for its latest quarter but failed to sport upside on its key financials.
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F5, Logitech, Cadence Design, GE, GM, Microsoft, Alphabet, 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-9cc9fac3
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With Microsoft, Meta and Alphabet earnings hanging on AI, more investors are asking: ‘How are you going to pay for that?’
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Shares of big tech companies have coasted through this year on AI euphoria, but as Microsoft Corp., Alphabet Inc. and Meta Platforms Inc. prepare to report results this week, some investors are starting to ask how much those AI advancements might actually cost.
Those questions have surfaced after several months during simply saying “AI” on earnings calls appeared to be enough for investors. If the economy sours though — as some expect in the second half of this year or next year — big tech’s AI ambitions could go with it.
“Given the exorbitant costs associated with the development, hosting and serving of AI products, many investors are concerned about the potential for [fiscal 2024] commentary regarding a material increase,” Jefferies analyst Brent Thill wrote, according to a MarketWatch earnings preview for Microsoft’s
MSFT,
-0.89%
results.Microsoft and Alphabet Inc.
GOOGL,
+0.69% GOOG,
+0.65% ,
which both report on Tuesday, have been in heated competition in the world of online search and digital advertisements, as Microsoft leans more on its massive investments in research lab OpenAI to muscle up its own search capabilities. But a Deutsche Bank analyst said that so far, Google appears to have the upper hand in that battle.Still, for Microsoft, after a broader pullback in IT spending earlier this year, analysts have found more to like about its cloud-computing business — namely market-share gains, generally-sturdy demand, and whatever ways AI can fit into the equation. Wolfe Research analyst Alex Zukin, in a recent note, said he believed “the focus will turn from what is good enough, to how good can it be,” as Microsoft moves deeper into AI.
“How good can it be?” might also be a question for Meta
META,
-2.73% ,
which reports second-quarter results on Wednesday.Shares of the social-media company have more than doubled in value so far this year. JMP analyst Andrew Boone, in a recent note, cited likely improvements in Meta’s digital ad segment, better engagement, and a broader advertising backdrop that “appears to be stable” after a slowdown in spending, Still, there are signs that the initial user attraction to Threads, Meta’s answer to Twitter, has fizzled.
This week in earnings
For the week ahead, 166 companies in the S&P 500 index report results, including 12 from the Dow, according to FactSet. Among them are Domino’s Pizza Inc.
DPZ,
-0.62% ,
which now plans to deliver pizza via Uber Eats after years of chafing at third-party delivery apps. Industrials General Electric Co.
GE,
-0.82%
and 3M Co.
MMM,
+0.04%
also report, after 3M agreed to pay $10.3 billion to settle accusations it was responsible for so-called “forever chemicals” in drinking water.Quick-service restaurant chains Chipotle Mexican Grill Inc.
CMG,
+0.20%
and McDonald’s Corp.
MCD,
-0.51%
also report, with BofA analysts expecting an “almost normal” quarter for the industry, after spending at chain restaurants grew last month and costs for some ingredients started to ease following two years of supply disruptions. Auto makers General Motors Co.
GM,
-1.81%
and Ford Motor Co.
F,
-0.71%
also report, and while parts shortages that have constrained vehicle production have shown signs of fading, so has electric-vehicle “euphoria.”The calls to put on your calendar
Visa, Mastercard: Earlier this month executives from the big banks said U.S. consumers are generally doing OK despite still-rampant inflation, although perhaps less OK than in prior months. This week credit-card giants Visa Inc. and Mastercard Inc. report results on Tuesday and Thursday, respectively. The profit, sales and credit-card volume figures from Visa
V,
-0.15%
and Mastercard
MA,
-0.14%
will offer more specifics on consumer spending, as vacations and concerts compete with more expensive and more pressing needs, like groceries and other bills.Shares of Visa and Mastercard are up so far this year, but some analysts said there could be more room investors to step in. SVB MoffettNathanson analyst Lisa Ellis recently said shares of both companies were hovering at “unusually attractive” levels.
The number to watch
Mattel outlook, and anything ‘Barbie’-related: The “Barbie” movie hit theaters nationwide on Friday. And after an epic marketing campaign, Mattel Inc.’s investors, banking on the film to drive a rebound for the toy maker during the second half of this year, will be zeroed in on the box-office results following the film’s debut on Friday.
Expectations for the film are huge. And when Mattel
MAT,
-0.42%
reports second-quarter results on Wednesday, executives could offer the first answers to some big questions: Has the film helped revive toy sales? Sales for anything else? Will the “Barbenheimer” effect help or hurt financials?The film — directed by Greta Gerwig, written Gerwig and Noah Baumbach, and starring Margot Robbie and Ryan Gosling — brings together two writers with indie bona fides and two actors with mainstream starpower. Reviews so far have been favorable, and Barbie is already Mattel’s most profitable franchise. But the movie isn’t directly geared toward children, movie theaters have struggled to get back on track after pandemic lockdowns, and toy demand through this year has been weak after ballooning during the pandemic. And some analysts don’t expect “Barbie” to do much for Mattel’s stock.
Emily Bary and Jon Swartz contributed reporting to this story.
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U.S. stocks fall to cap off worst week since collapse of Silicon Valley Bank
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U.S. stocks fell Friday with the S&P 500 index on track for its worst week since the collapse of Silicon Valley Bank in March suggesting the three month rally may be coming to an end.
Investors sought safety in bonds and the U.S. dollar as a wave of interest-rate hikes and hawkish commentary from international central bankers revived worries about global economic growth.
How are stocks trading?
-
The S&P 500
SPX,
-0.51%
fell 32 points, or 0.8%, to 4,349. -
The Dow Jones Industrial Average
DJIA,
-0.43%
fell 204 points, or 0.6%, to 33,741. -
The Nasdaq Composite
COMP,
-0.75%
slid 145 points, or 1.1%, to 13,484.
On Thursday, the Dow industrials fell 4.81 points, or less than 0.1%, to close at 33,946.71. The four-day slide is the blue-chip gauge’s longest losing streak since a five-day drop that ended on May 25, according to Dow Jones Market Data. Both the S&P 500 and Nasdaq finished higher, snapping a three-day losing streak.
What’s driving markets
U.S. stocks on Friday looked set to snap the longest streak of weekly gains since 2019 for the Nasdaq.
Concerns that interest rate rises by central banks might harm global economic growth were weighing on global equities on Friday, analysts said, following interest rate rises in the U.K., Switzerland, Norway and Turkey on Thursday. The latest batch of rate hikes followed moves by the central banks of Canada and Australia earlier this month.
Data released on Friday also showed business activity in the eurozone losing momentum in June, according to a purchasing managers survey. U.S. economic growth may also be slowing. The S&P Global U.S. services index fell to a 54.1 in June from 54.9 in the prior month, a two-month low, while the manufacturing index, meanwhile, slid to a five-month low of 46.9 from 51 in May.
“US stocks are sliding as the global growth outlook continues to deteriorate following soft global PMI readings,” Edward Moya, Senior Market Analyst at Oanda wrote in a note Friday. “The risk of a sharper economic downturn is greater for Europe than it is for the US, so that could keep the dollar supported over the short-term.”
With central banks around the world promising to raise borrowing costs even higher to tame inflation, analysts focused on the potential ramifications of higher interest rates for both the health of the economy and equity valuations. In the U.S., analysts across Wall Street have warned that the S&P 500 and Nasdaq Composite valuations are again looking unreasonably rich.
The price-to-earnings ratio for the S&P 500 based on Wall Street’s forecasts for corporate earnings over the next 12 months is just shy of 19, according to FactSet. That’s higher than the five-year average.
While the Federal Reserve opted to leave interest rates on hold in June, Chair Jerome Powell reiterated in Congressional testimony this week that senior Fed officials strongly support hiking rates “a couple of times” later this year.
Ryan Belanger, founder and managing principal at Claro Advisors, is among the analysts who believe the market’s rally is getting ahead of itself.
“The market is too confident that the Federal Reserve can engineer a soft landing and it would be wise for investors to reduce exposure to stocks,” Belanger said in emailed commentary.
With the S&P 500 down nearly 1.5% for the week, stocks are on track for their biggest such pullback since March 10, FactSet data showed.
Of course, the market is coming off a rally which is leading some to conclude that this might be a healthy pullback. The S&P 500 had climbed for five straight weeks through June 16, its longest such winning streak since November 2021, Dow Jones Market Data show. Meanwhile, the technology-heavy Nasdaq had logged eighth straight weekly advance to mark its longest stretch of gains since March 2019.
“Some of this is a bit of a giveback and when you look at the market action from the last month and a half, we’ve kind of gone parabolic,” said Paul Nolte, senior wealth manager and market strategist at Murphy & Sylvest Wealth Management, during a phone interview with MarketWatch.
Defensive assets like the dollar and high-quality sovereign bonds were outperforming on Friday, with the yield on the 10-year Treasury note
TMUBMUSD10Y,
3.742%
falling five basis points to 3.744%. Yields on 10-year U.K. gilt
TMBMKGB-10Y,
4.317%
and 10-year German bunds were down by 10 basis points or more. Crude prices
CL.1,
-1.12% ,
which are sensitive to expectations for the global economy, fell 1.6% to $68.49 a barrel.However, U.S. Treasury Secretary Janet Yellen struck an upbeat tone Friday when she said during an interview with Bloomberg that recession risks in the U.S. have faded “because look at the resilience of the labor market, and inflation is coming down.”
Investors will hear from Cleveland Fed President Loretta Mester later. She’s expected to speak at 1:40 p.m. Eastern Time.
Companies in focus
-
3M Co. shares
MMM,
-0.38%
rose after the materials and chemicals company, and Dow Jones Industrial Average
DJIA,
-0.43%
component, offered $10.3 billion to settle claims it was responsible for so-called “forever chemicals” in drinking water. -
Virgin Galactic Holdings Inc.
SPCE,
-19.27%
dropped after the space-tourism company said late Thursday in a filing it’s seeking to raise $400 million to scale up its business and improve its fleet. -
Smith & Wesson Brands Inc.
SWBI,
+17.88%
jumped after the gun maker reported fiscal fourth-quarter results that topped expectations -
Starbucks
SBUX,
-2.11%
fell as workers at more than 150 stores plan to go on strike, their union said Friday, as tensions escalated in response to accusations that the company banned Pride-themed decorations at some U.S. stores.
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The S&P 500
-
U.S. stocks sputter as investors watch debt-ceiling talks and economic data
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U.S. stocks struggled for direction Monday as investors monitored efforts to resolve a U.S. debt-ceiling standoff ahead of a potential default, and weighed economic data that showed a sharp fall in New York state factory activity.
How stocks are trading
-
The Dow Jones Industrial Average
DJIA,
-0.04%
was marginally lower by 4 points at 33,297, after briefly turning higher. -
The S&P 500
SPX,
+0.09%
edged up 4 points, or 0.1%, at 4,128. -
The Nasdaq Composite
COMP,
+0.41%
rose 50 points, or 0.4%, to 12,335.
The S&P 500 fell 0.3% last week, while the Dow dropped 1.1%. The S&P 500’s decline was cushioned by megacap tech-related stocks, which also helped lift the Nasdaq Composite out of a bear market. The Nasdaq gained 0.4% last week.
In One Chart: The S&P 500 is top-heavy with tech. Here’s what that says about future stock-market returns.
What’s driving markets
Despite a generally well-received earnings season and signs that easing inflation may allow the Federal Reserve to halt its monetary-tightening cycle, stocks have been unable to break out of their recent range, as first banking-sector anxiety and lately worries about a technical government-debt default have restrained bulls.
“Over the short-term, the stock market is stuck until we reach a debt-ceiling resolution and until we see more clarity from the regional banking sector, which are the two factors weighing on stocks right now,” said Brad Bernstein, managing director at UBS Wealth Management in Philadelphia, in a note. “Markets are anxious for a debt-ceiling solution and the markets are also hoping that the Fed pauses its rate hikes at the June meeting.”
See: Why the stock market will struggle to rally until debt ceiling, bank woes are in rearview mirror
A second round of debt-ceiling talks between the White House and congressional leaders appears set for Tuesday, according to President Joe Biden.
“I remain optimistic because I’m a congenital optimist,” Biden told reporters Sunday in Rehoboth Beach, Del. “But I really think there’s a desire on their part as well as ours to reach an agreement. I think we’ll be able to do it.”
House Speaker Kevin McCarthy, R-Calif., on Monday, however, said the White House and congressional Republicans remained far apart.
Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, warned against complacency, noting that previous debt-ceiling deadlines have required significant market volatility to encourage politicians to reach agreement.
“[W]e’ve continued to remind investors that since 2011, getting Congress to strike a deal has seemed to occur only after the stock market has thrown a temper tantrum,” said Calvasina in a note to clients.
“In years where the drama in equity markets has otherwise been modest, the hits generally end up in the 5-6% area. In years in which debt ceiling drama has occurred in the context of other major problems in the market (i.e., 2011, 2015-2016, 2018), the hits have ranged from 10% to 19%,” she added.
The New York Fed’s Empire State business-conditions index, a gauge of manufacturing activity in the state, plunged 42.6 points in May to negative 31.8, the regional Fed bank said Monday. Economists had expected a reading of negative 5, according to a survey by The Wall Street Journal. Any reading below zero indicates deteriorating conditions.
The data underlined stagflation worries, said Edward Moya, a senior market analyst at Oanda, in a note.
“It seems that after every economic reading, Wall Street has more reminders on how hard it will probably be to get inflation anywhere close to the Fed’s target. A recession seems like the only way pricing pressures will get closer to 3%,” Moya said.
Atlanta Federal Reserve Bank President Raphael Bostic on Monday said that he would like to see the central bank pause its cycle of rate hikes to gauge the health of the economy.
“I think the appropriate policy is really to just wait and see how much the economy slows from the policy actions that we’ve done,” Bostic said in an interview on CNBC.
Check out: Paul Tudor Jones says stocks likely to finish 2023 higher because Fed is done hiking rates
Companies in focus
-
Shares of Newmont Corp.
NEM,
+2.42%
rose 1.2% after the company agreed to buy Australian gold and copper producer Newcrest Mining Ltd.
NCM,
+1.52%
for $17.5 billion. -
Oneok Inc.
OKE,
-8.30%
shares fell 7.7% after the company agreed to buy Magellan Midstream Partners LP
MMP,
+14.00%
for $18.8 billion in cash and stock, which is a 22% premium to Friday’s close. -
3M Co.
MMM,
+0.02%
said Monday it has fired Michael Vale, group president and chief business and country officer, for cause. The dismissal is due to “inappropriate personal conduct and violation of company policy, unrelated to the company’s operations and financial performance,” the company said in a brief statement. Shares of the diversified industrial company and Dow component were down 0.4%.
Earnings Watch: Executives are less worried about inflation. Walmart and Target earnings could disagree
— Jamie Chisholm contributed to this article.
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The Dow Jones Industrial Average
-
These 20 stocks led the January rally
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The initial version of this story had incorrect price changes for 2023. It is now updated with information as of the market close on Jan. 31.
Investors staged a January rally, with solid gains for the S&P 500 and an even better showing for technology stocks that led the dismal downward action in 2022.
This…
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This dividend-stock ETF has a 12% yield and is beating the S&P 500 by a substantial amount
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Most investors want to keep things simple, but digging a bit into details can be lucrative — it can help you match your choices to your objectives.
The JPMorgan Equity Premium Income ETF
JEPI,
+0.20%
has been able to take advantage of rising volatility in the stock market to beat the total return of its benchmark, the S&P 500
SPX,
+1.19% ,
while providing a rising stream of monthly income.The objective of the fund is “to deliver a significant portion of the returns associated with the S&P 500 Index with less volatility,” while paying monthly dividends, according to JPMorgan Asset Management. It does this by maintaining a portfolio of about 100 stocks selected for high quality, value and low price volatility, while also employing a covered-call strategy (described below) to increase income.
This strategy might underperform the index during a bull market, but it is designed to be less volatile while providing high monthly dividends. This might make it easier for you to remain invested through the type of downturn we saw last year.
JEPI was launched on May 20, 2020, and has grown quickly to $18.7 billion in assets under management. Hamilton Reiner, who co-manages the fund with Raffaele Zingone, described the fund’s strategy, and its success during the 2022 bear market and shared thoughts on what may lie ahead.
Outperformance with a smoother ride
First, here’s a chart showing how the fund has performed from when it was established through Jan. 20, against the SPDR S&P 500 ETF Trust
SPY,
+1.20% ,
both with dividends reinvested:JEPI has been less volatile than SPY, which tracks the S&P 500.
FactSet
Total returns for the two funds since May 2020 pretty much match, however, JEPI has been far less volatile than SPY and the S&P 500. Now take a look at a performance comparison for the period of rising interest rates since the end of 2021:
Rising stock-price volatility during 2022 helped JEPI earn more income through its covered call option strategy.
FactSet
Those total returns are after annualized expenses of 0.35% of assets under management for JEPI and 0.09% for SPY. Both funds have had negative returns since the end of 2021, but JEPI has been a much better performer.
““Income is the outcome.””
The income component
Which investors JEPI is designed for? “Income is the outcome,” Reiner responded. “We are seeing a lot of people using this as an anchor tenant for income-oriented portfolios.”
The fund quotes a 30-day SEC yield of 11.77%. There are various ways to look at dividend yields for mutual funds or exchange-traded funds and the 30-day yield is meant to be used for comparison. It is based on a fund’s current income distribution profile relative to its price, but the income distributions that investors actually receive will vary.
It turns out that over the past 12 months, JEPI’s monthly distributions have ranged between 38 cents a share and 62 cents a share, with a rising trend over the past six months. The sum of the past 12 distributions has been $5.79 a share, for a distribution yield of 10.53%, based on the ETF’s closing price of $55.01 on Jan. 20.
JEPI invests at least 80% of assets in stocks, mainly selected from those in the S&P 500, while also investing in equity-linked notes to employ a covered call option strategy which enhances income and lowers volatility. Covered calls are described below.
Reiner said that during a typical year, investors in JEPI should expect monthly distributions to come to an annualized yield in the “high single digits.”
He expects that level of income even if we return to the low-interest rate environment that preceded the Federal Reserve’s cycle of rate increases that it started early last year to push down inflation.
JEPI’s approach may be attractive to investors who don’t need the income now. “We also see people using it as a conservative equity approach,” Reiner expects the fund to have 35% less price volatility than the S&P 500.
Getting back to income, Reiner said JEPI was a good alternative even for investors who were willing to take credit risk with high-yield bond funds. Those have higher price volatility than investment-grade bond funds and face a higher risk of losses when bonds default. “But with JEPI you don’t have credit risk or duration risk,” he said.
An example of a high-yield bond fund is the iShares 0-5 Year High Yield Corporate Bond ETF
SHYG,
-0.10% .
It has a 30-day yield of 7.95%.When discussing JEPI’s stock selection, Reiner said “there is a significant active component to the 90 to 120 names we invest in.” Stock selections are based on recommendations of JPM’s analyst team for those that are “most attractively priced today for the medium to long term,” he said.
Individual stock selections don’t factor in dividend yields.
Covered call strategies and an example of a covered-call trade
JEPI’s high income is an important part of its low-volatility total-return strategy.
A call option is a contract that allows an investor to buy a security at a particular price (called the strike price) until the option expires. A put option is the opposite, allowing the purchaser to sell a security at a specified price until the option expires.
A covered call option is one an investor can write when they already own a security. The strike price is “out of the money,” which means it is higher than the stock’s current price.
Here’s an example of a covered call option provided by Ken Roberts, an investment adviser with Four Star Wealth Management in Reno, Nev.
-
You bought shares of 3M Co.
MMM,
+1.63%
on Jan. 20 for $118.75. - You sold a $130 call option with an expiration date of Jan. 19, 2024.
- The premium for the Jan. 24, $130 call was $7.60 at the time that MMM was selling for $118.75.
- The current dividend yield for MMM is 5.03%.
- “So the maximum gain for this trade before the dividend is $18.85 or 15.87%. Add the divided income and you’ll get 20.90% maximum return,” Roberts wrote in an email exchange on Jan. 20.
If you had made this trade and 3M’s shares didn’t rise above $130 by Jan. 19, 2024, the option would expire and you would be free to write another option. The option alone would provide income equivalent to 6.40% of the Jan. 20 purchase price in the period of a year.
If the stock rose above $130 and the option were exercised, you would have ended up with the maximum gain as described by Roberts. Then you would need to find another stock to invest in. What did you risk? Further upside beyond $130. So you would have written the option only if you had decided you would be willing to part with your shares of MMM for $130.
The bottom line is that the call option strategy lowers volatility with no additional downside risk. The risk is to the upside. If 3M’s shares had doubled in price before the option expired, you would still wind up selling them for $130.
JEPI pursues the covered call options strategy by purchasing equity-linked notes (ELNs) which “combine equity exposure with call options,” Reiner said. The fund invests in ELNs rather than writing its own options, because “unfortunately option premium income is not considered bona fide income. It is considered a gain or a return of capital,” he said.
In other words, the fund’s distributions can be better reflected in its 30-day yield, because option income probably wouldn’t be included.
One obvious question for a fund manager whose portfolio has increased quickly to almost $19 billion is whether or not the fund’s size might make it difficult to manage. Some smaller funds pursuing narrow strategies have been forced to close themselves to new investors. Reiner said JEPI’s 2% weighting limitation for its portfolio of about 100 stocks mitigates size concerns. He also said that “S&P 500 index options are the most liquid equity products in the world,” with over $1 trillion in daily trades.
Summing up the 2022 action, Reiner said “investing is about balance.” The rising level of price volatility increased options premiums. But to further protect investors, he and JEPI co-manager Raffaele Zingone also “gave them more potential upside by selling calls that were a bit further out of the money.”
Don’t miss: These 15 Dividend Aristocrat stocks have been the best income builders
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You bought shares of 3M Co.
-
Earnings Watch: Microsoft, Tesla and Intel are about to face the doubters
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After one of the worst years in Wall Street’s history, investors have some serious questions for companies. As holiday returns roll in — and with them, forecasts for the months or year ahead — many have the chance to answer those questions, or avoid them.
In the busiest week of the holiday-earnings season so far, three big names will take the stage on back-to-back-to-back afternoons. Here is what to expect:
Microsoft Corp.
Microsoft
MSFT,
+3.57%
shed $737 billion in market value last year, the third-most of any S&P 500 company, then announced plans to lay off some 10,000 workers this month. Previously a Wall Street darling thanks to the phenomenal growth of its Azure cloud-computing offering, Microsoft now faces a cutback in enterprise spending on cloud and other products, as companies seek to cut their bills after spending wantonly during the early years of the COVID-19 pandemic.First Take: Big Tech layoffs are not as big as they appear at first glance
When the company announced layoffs, Chief Executive Satya Nadella admitted customers were cutting, saying “as we saw customers accelerate their digital spend during the pandemic, we’re now seeing them optimize their digital spend to do more with less.” Analysts believe Azure may be holding up better than rivals, however, and will expect to hear about it when Microsoft results hit Tuesday afternoon.
“Our Azure checks were mixed, but generally better than public cloud sentiment that has turned highly negative over the past few months,” Mizuho analysts wrote. “More specifically, we have heard of increasing levels of optimization, but it is being partially offset by many organizations prioritizing digital transformation.”
From October: The cloud boom has hit its stormiest moment yet, and it is costing investors billions
As cloud growth slows down, expect Microsoft to point to the next big buzzword in tech: Artificial intelligence, specifically ChatGPT, the chatbot product developed by OpenAI, which Microsoft has invested heavily in and expects to incorporate into its products. D.A. Davidson analyst Gil Luria this month wrote that Microsoft’s investments in OpenAI would help it build out more AI technology, including in its search engine Bing.
Tesla Inc.
Tesla
TSLA,
+4.91%
stock suffered a much larger percentage decline than Microsoft in 2022,as the electric-vehicle maker’s shares closed out their worst year on record with their worst quarter and month ever. After the year ended, Tesla began slashing prices in China and the U.S. in hopes of qualifying for more consumer tax incentives and reinvigorating demand, which could lead to questions about previously fat margins.In-depth: Tesla investors await clues on demand, board actions and weigh downside risks in 2023
For Tesla, which reports fourth-quarter results Wednesday, the results will offer more context on production of the Cybertruck — currently set to start in the middle of the year — demand in China, competition and the impact of price cuts. Auto-information website Edmunds on Thursday said that Tesla’s decision to slash prices by as much as 20% in the U.S. and Europe led to a jump in interest in the vehicles.
While those cuts seem likely to hurt profit, Deutsche Bank analyst Emmanuel Rosner called it “a bold offensive move, which secures Tesla’s volume growth, puts its traditional and EV competitors in great difficulty, and showcases Tesla’s considerable pricing power and cost superiority.” And a survey from Wedbush analysts found that “76% of EV Chinese consumers are considering buying a Tesla in 2023.” But Toni Sacconaghi, an analyst at Bernstein, said Tesla needed more low-cost electric-vehicle offerings, which might not ship until 2025.
Tesla earnings preview: Price cuts in focus as stock hovers around 2-year low
With Tesla’s stock in the gutter, some analysts have raised the possibility of a share buyback to spur investor interest, and Chief Executive Elon Musk said such a plan was being discussed in the previous earnings call. Musk is not in great favor with many investors right now, however, following some heavy selling of Tesla shares in the wake of his purchase last year of Twitter, which some on Wall Street have said has distracted him from the needs of the auto maker. Musk’s tweets have landed him in trouble elsewhere: Opening arguments began last week for a trial centered on allegations that Musk put investors at risk when he tweeted in 2018 that he was “considering” taking Tesla private and had secured the money to do so.
‘He broke the stock’: Why a prominent Tesla investor wants Elon Musk to put him on the board
Intel Corp.
Intel’s
INTC,
+2.81%
questions were not fresh in 2022, as the chip maker for years has seen rivals like Advanced Micro Devices Inc.
AMD,
+3.49%
and Nvidia Corp.
NVDA,
+6.41%
challenge it in ways that would have been unthinkable in previous generations. Shares still dove more than 43% last year, as declining sales led to plans for $3 billion in cost cuts.There’s little hope for a big rebound when Intel reports Thursday afternoon. Personal-computer sales have experienced their biggest year-over-year declines ever recorded, and Intel’s long-delayed new data-center offering that is meant to answer AMD’s challenge only began selling this year.
Opinion: The PC boom and bust is already ‘one for the record books,’ and it isn’t over
Intel CEO Pat Gelsinger, though, has a chance to lay out his vision for a long-term Intel rebound, as he attempts to make Intel a chip-manufacturing powerhouse again after years of struggles. He was forced to trim his annual outlook multiple times last year, so it will be important for him to provide attainable numbers this time, but without reducing hopes in the path forward.
This week in earnings
Expectations remain low for fourth-quarter earnings season overall, with consumers squeezed by higher prices and interest rates, and hopes fading for any relief from the holiday shopping season. But even with a low bar, the fourth-quarter results from companies so far have been worse than the historical norm, with FactSet senior earnings analyst John Butters writing Friday that “the fourth-quarter earnings season for the S&P 500 is not off to a strong start.”
So far, 11% of S&P 500 companies have reported fourth-quarter results, with roughly one-third reporting earnings better than estimates, Butters reported. That’s lower than the 10-year average of 73%.
Still, Wall Street generally expects strong profit margins for companies in the S&P 500, as earlier price increases — which help businesses offset their own costs and test the limits of consumer demand — mix with more recent cost cuts.
For the week ahead, 93 companies in the S&P 500 index
SPX,
+1.89% ,
and 12 of the 30 Dow Jones Industrial Average
DJIA,
+1.00%
components, are set to report quarterly results.Mark your calendars! Here is MarketWatch’s full earnings calendar for the week
Among the highlights: General Electric Co.
GE,
+1.07%
reports Tuesday for the first time since splitting off its GE HealthCare Technologies
GEHC,
+4.43%
business. 3M Co.
MMM,
+1.87%
— which makes Post-it Notes, duct tape, air filters, adhesives and coatings — also reports Tuesday, after the company in October said the costs of raw materials, a big driver of inflation, were showing signs of easing.And as demand for goods eases amid worries about a downturn, a number of railroad operators that ship those goods report during the week. Union Pacific Corp.
UNP,
+1.54% ,
whose lines ship across the Western half of the U.S., reports on Tuesday, while CSX Corp.
CSX,
+1.46% ,
which covers much of the East, reports Wednesday. Norfolk Southern Corp.
NSC,
+1.51%
also reports Wednesday.Telecom giants Verizon Communications Inc.
VZ,
-0.15% ,
AT&T Inc.
T,
+1.53%
and Comcast Corp.
CMCSA,
+3.22%
report Tuesday, Wednesday and Thursday, respectively. Results there will offer a clearer sense of the state of demand for Apple Inc.’s
AAPL,
+1.92%
iPhones, as premium models suffer from production snags, and for broadband, which saw heightened demand when more people were staying home due to the pandemic.The call to put on your calendar
Southwest, post-meltdown: Southwest Airlines Co.
LUV,
+1.67% ,
which reports on Thursday, will offer executives with plenty to answer for, after bad weather and an overloaded, aging scheduling system caused thousands of flight cancellations over the holidays.For more: Southwest Airlines turns to repairing its reputation after holiday meltdown
The implosion has raised questions about the air carrier’s investments in its own technology — after restarting dividend payments shortly before the disruptions — and airlines’ ability to handle the post-lockdown travel rebound. The breakdown has underscored the airline industry’s bigger issues with understaffing, after 2020’s wave of departures, as carriers try to reload flight schedules to meet pent-up travel demand.
Scott Kirby, chief executive at United Airlines Holdings Inc.
UAL,
+2.25% ,
said during his company’s earnings call last week that he felt the industry’s goals to expand their flight coverage this year and beyond were “simply unachievable.” And he said that airlines that tried to follow prepandemic patterns were destined to face trouble. He said manufacturers were suffering from delays in building jets, engines and other parts, and that airlines had outgrown their technology infrastructure.For more: United Airlines swings to profit despite ‘worst’ winter storm’
“All of us, airlines and the FAA, lost experienced employees and most didn’t invest in the future,” he said. “That means the system simply can’t handle the volume today, much less the anticipated growth.”
American Airlines Group Inc.
AAL,
+0.37% ,
Alaska Air Group Inc.
ALK,
+0.85%
and JetBlue Airways Corp.
JBLU,
+0.94%
are also expected to report results Thursday morning, along with Southwest.The numbers to watch
Visa, Mastercard and consumer spending: The return of travel and entertainment, along with rising prices, have helped prop up consumer spending. But as Visa Inc.
V,
+1.77% ,
Mastercard Inc.
MA,
+2.27% ,
American Express Co.
AXP,
+3.23%
and Capital One Financial Corp.
COF,
+6.40%
prepare to report, their finance-industry counterparts are getting nervous — and taking more steps to pad themselves against the fallout from consumers struggling to pay their bills.Credit-card issuer Capital One reports results on Tuesday, while card payments-network providers Visa and Mastercard report on Thursday, with Amex on Friday morning. They’ll report after shares of Discover Financial Services
DFS,
+4.16%
got hit last week after the company, which also offers credit cards and loans, set aside more money to cover souring credit, and reported a bump in its net charge-off rate — a measure of debt a company thinks is unlikely to be recovered.Larger banks, like JPMorgan Chase & Co.
JPM,
+0.24% ,
have also set aside more money to guard against credit losses.[ad_2]
-
Earnings Watch: Microsoft, Tesla and Intel are about to face the doubters
[ad_1]
After one of the worst years in Wall Street’s history, investors have some serious questions for companies. As holiday returns roll in — and with them, forecasts for the months or year ahead — many have the chance to answer those questions, or avoid them.
In the busiest week of the holiday-earnings season so far, three big names will take the stage on back-to-back-to-back afternoons. Here is what to expect:
Microsoft Corp.
Microsoft
MSFT,
+3.57%
shed $737 billion in market value last year, the third-most of any S&P 500 company, then announced plans to lay off some 10,000 workers this month. Previously a Wall Street darling thanks to the phenomenal growth of its Azure cloud-computing offering, Microsoft now faces a cutback in enterprise spending on cloud and other products, as companies seek to cut their bills after spending wantonly during the early years of the COVID-19 pandemic.First Take: Big Tech layoffs are not as big as they appear at first glance
When the company announced layoffs, Chief Executive Satya Nadella admitted customers were cutting, saying “as we saw customers accelerate their digital spend during the pandemic, we’re now seeing them optimize their digital spend to do more with less.” Analysts believe Azure may be holding up better than rivals, however, and will expect to hear about it when Microsoft results hit Tuesday afternoon.
“Our Azure checks were mixed, but generally better than public cloud sentiment that has turned highly negative over the past few months,” Mizuho analysts wrote. “More specifically, we have heard of increasing levels of optimization, but it is being partially offset by many organizations prioritizing digital transformation.”
From October: The cloud boom has hit its stormiest moment yet, and it is costing investors billions
As cloud growth slows down, expect Microsoft to point to the next big buzzword in tech: Artificial intelligence, specifically ChatGPT, the chatbot product developed by OpenAI, which Microsoft has invested heavily in and expects to incorporate into its products. D.A. Davidson analyst Gil Luria this month wrote that Microsoft’s investments in OpenAI would help it build out more AI technology, including in its search engine Bing.
Tesla Inc.
Tesla
TSLA,
+4.91%
stock suffered a much larger percentage decline than Microsoft in 2022,as the electric-vehicle maker’s shares closed out their worst year on record with their worst quarter and month ever. After the year ended, Tesla began slashing prices in China and the U.S. in hopes of qualifying for more consumer tax incentives and reinvigorating demand, which could lead to questions about previously fat margins.In-depth: Tesla investors await clues on demand, board actions and weigh downside risks in 2023
For Tesla, which reports fourth-quarter results Wednesday, the results will offer more context on production of the Cybertruck — currently set to start in the middle of the year — demand in China, competition and the impact of price cuts. Auto-information website Edmunds on Thursday said that Tesla’s decision to slash prices by as much as 20% in the U.S. and Europe led to a jump in interest in the vehicles.
While those cuts seem likely to hurt profit, Deutsche Bank analyst Emmanuel Rosner called it “a bold offensive move, which secures Tesla’s volume growth, puts its traditional and EV competitors in great difficulty, and showcases Tesla’s considerable pricing power and cost superiority.” And a survey from Wedbush analysts found that “76% of EV Chinese consumers are considering buying a Tesla in 2023.” But Toni Sacconaghi, an analyst at Bernstein, said Tesla needed more low-cost electric-vehicle offerings, which might not ship until 2025.
Tesla earnings preview: Price cuts in focus as stock hovers around 2-year low
With Tesla’s stock in the gutter, some analysts have raised the possibility of a share buyback to spur investor interest, and Chief Executive Elon Musk said such a plan was being discussed in the previous earnings call. Musk is not in great favor with many investors right now, however, following some heavy selling of Tesla shares in the wake of his purchase last year of Twitter, which some on Wall Street have said has distracted him from the needs of the auto maker. Musk’s tweets have landed him in trouble elsewhere: Opening arguments began last week for a trial centered on allegations that Musk put investors at risk when he tweeted in 2018 that he was “considering” taking Tesla private and had secured the money to do so.
‘He broke the stock’: Why a prominent Tesla investor wants Elon Musk to put him on the board
Intel Corp.
Intel’s
INTC,
+2.81%
questions were not fresh in 2022, as the chip maker for years has seen rivals like Advanced Micro Devices Inc.
AMD,
+3.49%
and Nvidia Corp.
NVDA,
+6.41%
challenge it in ways that would have been unthinkable in previous generations. Shares still dove more than 43% last year, as declining sales led to plans for $3 billion in cost cuts.There’s little hope for a big rebound when Intel reports Thursday afternoon. Personal-computer sales have experienced their biggest year-over-year declines ever recorded, and Intel’s long-delayed new data-center offering that is meant to answer AMD’s challenge only began selling this year.
Opinion: The PC boom and bust is already ‘one for the record books,’ and it isn’t over
Intel CEO Pat Gelsinger, though, has a chance to lay out his vision for a long-term Intel rebound, as he attempts to make Intel a chip-manufacturing powerhouse again after years of struggles. He was forced to trim his annual outlook multiple times last year, so it will be important for him to provide attainable numbers this time, but without reducing hopes in the path forward.
This week in earnings
Expectations remain low for fourth-quarter earnings season overall, with consumers squeezed by higher prices and interest rates, and hopes fading for any relief from the holiday shopping season. But even with a low bar, the fourth-quarter results from companies so far have been worse than the historical norm, with FactSet senior earnings analyst John Butters writing Friday that “the fourth-quarter earnings season for the S&P 500 is not off to a strong start.”
So far, 11% of S&P 500 companies have reported fourth-quarter results, with roughly one-third reporting earnings better than estimates, Butters reported. That’s lower than the 10-year average of 73%.
Still, Wall Street generally expects strong profit margins for companies in the S&P 500, as earlier price increases — which help businesses offset their own costs and test the limits of consumer demand — mix with more recent cost cuts.
For the week ahead, 93 companies in the S&P 500 index
SPX,
+1.89% ,
and 12 of the 30 Dow Jones Industrial Average
DJIA,
+1.00%
components, are set to report quarterly results.Mark your calendars! Here is MarketWatch’s full earnings calendar for the week
Among the highlights: General Electric Co.
GE,
+1.07%
reports Tuesday for the first time since splitting off its GE HealthCare Technologies
GEHC,
+4.43%
business. 3M Co.
MMM,
+1.87%
— which makes Post-it Notes, duct tape, air filters, adhesives and coatings — also reports Tuesday, after the company in October said the costs of raw materials, a big driver of inflation, were showing signs of easing.And as demand for goods eases amid worries about a downturn, a number of railroad operators that ship those goods report during the week. Union Pacific Corp.
UNP,
+1.54% ,
whose lines ship across the Western half of the U.S., reports on Tuesday, while CSX Corp.
CSX,
+1.46% ,
which covers much of the East, reports Wednesday. Norfolk Southern Corp.
NSC,
+1.51%
also reports Wednesday.Telecom giants Verizon Communications Inc.
VZ,
-0.15% ,
AT&T Inc.
T,
+1.53%
and Comcast Corp.
CMCSA,
+3.22%
report Tuesday, Wednesday and Thursday, respectively. Results there will offer a clearer sense of the state of demand for Apple Inc.’s
AAPL,
+1.92%
iPhones, as premium models suffer from production snags, and for broadband, which saw heightened demand when more people were staying home due to the pandemic.The call to put on your calendar
Southwest, post-meltdown: Southwest Airlines Co.
LUV,
+1.67% ,
which reports on Thursday, will offer executives with plenty to answer for, after bad weather and an overloaded, aging scheduling system caused thousands of flight cancellations over the holidays.For more: Southwest Airlines turns to repairing its reputation after holiday meltdown
The implosion has raised questions about the air carrier’s investments in its own technology — after restarting dividend payments shortly before the disruptions — and airlines’ ability to handle the post-lockdown travel rebound. The breakdown has underscored the airline industry’s bigger issues with understaffing, after 2020’s wave of departures, as carriers try to reload flight schedules to meet pent-up travel demand.
Scott Kirby, chief executive at United Airlines Holdings Inc.
UAL,
+2.25% ,
said during his company’s earnings call last week that he felt the industry’s goals to expand their flight coverage this year and beyond were “simply unachievable.” And he said that airlines that tried to follow prepandemic patterns were destined to face trouble. He said manufacturers were suffering from delays in building jets, engines and other parts, and that airlines had outgrown their technology infrastructure.For more: United Airlines swings to profit despite ‘worst’ winter storm’
“All of us, airlines and the FAA, lost experienced employees and most didn’t invest in the future,” he said. “That means the system simply can’t handle the volume today, much less the anticipated growth.”
American Airlines Group Inc.
AAL,
+0.37% ,
Alaska Air Group Inc.
ALK,
+0.85%
and JetBlue Airways Corp.
JBLU,
+0.94%
are also expected to report results Thursday morning, along with Southwest.The numbers to watch
Visa, Mastercard and consumer spending: The return of travel and entertainment, along with rising prices, have helped prop up consumer spending. But as Visa Inc.
V,
+1.77% ,
Mastercard Inc.
MA,
+2.27% ,
American Express Co.
AXP,
+3.23%
and Capital One Financial Corp.
COF,
+6.40%
prepare to report, their finance-industry counterparts are getting nervous — and taking more steps to pad themselves against the fallout from consumers struggling to pay their bills.Credit-card issuer Capital One reports results on Tuesday, while card payments-network providers Visa and Mastercard report on Thursday, with Amex on Friday morning. They’ll report after shares of Discover Financial Services
DFS,
+4.16%
got hit last week after the company, which also offers credit cards and loans, set aside more money to cover souring credit, and reported a bump in its net charge-off rate — a measure of debt a company thinks is unlikely to be recovered.Larger banks, like JPMorgan Chase & Co.
JPM,
+0.24% ,
have also set aside more money to guard against credit losses.[ad_2]
-
Tesla is a ‘soft landing’ stock, says Goldman Sachs. Here are its picks for a gentle economic landing and stocks for a recession.
[ad_1]
Pour one out for the beleaguered economists, who for once got an important indicator, the consumer price index, right on the nose, after CPI fell 0.1% in December, while core prices rose 0.3%.
“The 2021 surge in durable goods demand normalized, and the resulting collapse in durable goods price inflation was stunningly fast,” says Paul Donovan, chief economist of UBS Global Wealth Management.
“The commodity wave of inflation is fading, and that leaves the profit margin expansion in focus,” he adds. What a good time for earnings season to be upon us, and what do you know, it is, kicking off with the banking sector on Friday before broadening out next week.
Strategists at Goldman Sachs have a new note out, saying that the market is pricing in a soft landing even though the trend of earnings revisions points to a hard landing.
They’re not that optimistic — even in the soft-landing scenario, the team led by David Kostin say the S&P 500
SPX,
+0.40%
will end the year right around current levels, at 4,000. But they identify 46 stocks that could benefit — profitable, cyclical companies that are trading at price-to-earnings valuations below their 10-year median, among other factors.One name jumps out: Tesla
TSLA,
-0.94% ,
which trades at 22 times forward earnings versus the 10-year median of 117 times. But the other 45 names are less flashy, ranging from Capital One
COF,
+1.81%
and Carlyle Group
CG,
+0.54% ,
to a host of industrials including 3M
MMM,
+0.12% ,
Parker-Hannifan
PH,
+0.73%
and Otis Worldwide
OTIS,
+0.42% .
As a whole, these typically $10 billion companies are trading at 12 times earnings, versus 17 times usually.In the hard landing scenario, S&P 500 profit margins would shrink by 125 basis points, to 10.9% — about in line with the median peak-to-trough decline during the eight recessions since 1970, which has been 132 basis points. Consensus expectations are for a 26 basis-point margin decline.
The Goldman team also have a 36 stock screen for a hard landing — profitable companies in defensive industries with a positive dividend yield. They’re typically food, beverage and tobacco companies as well as software and services companies — including Costco Wholesale
COST,
+0.58% ,
Kroger
KR,
-0.99% ,
Altria
MO,
+0.48% ,
Tyson Foods
TSN,
+0.23% ,
Microsoft
MSFT,
+0.30% ,
MasterCard
MA,
-1.13%
and Visa
V,
-0.25% .
As a whole, these $37 billion companies are trading at 22 times earnings vs. a historical 24 times.The market
After a 2.3% advance for the S&P 500
SPX,
+0.40%
over the last three sessions, U.S. stock futures
ES00,
+0.39% NQ00,
+0.58%
declined on Friday.The yield on the Japanese 10-year bond
TMBMKJP-10Y,
0.511%
exceeded 0.5%, the Bank of Japan’s yield cap, ahead of next week’s rate decision , prompting a second day of aggressive bond purchases from the central bank.For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.
The buzz
Fourth-quarter earnings were rolling out from Bank of America
BAC,
+2.20% ,
JPMorgan Chase
JPM,
+2.52% ,
Citigroup
C,
+1.69%
and Wells Fargo
WFC,
+3.25% ,
and outside of banks, Delta Air Lines
DAL,
-3.54% ,
BlackRock
BLK,
+0.00%
and UnitedHealth
UNH,
-1.23% .JPMorgan shares slumped after forecast-beating earnings, though investment bank revenue came in light of estimates. Delta shares also declined after topping earnings estimates.
Tesla
TSLA,
-0.94%
cut prices of Model 3 and Model Y vehicles in the U.S. and elsewhere by up to 20%. The electric vehicle maker stock dropped 6%.Virgin Galactic
SPCE,
+12.34%
surged after saying it’s on track to launch space-tourism flights in the second quarter.Apple
AAPL,
+1.01%
says CEO Tim Cook requested, and received, a pay cut after investor criticism.The University of Michigan’s consumer-sentiment index is due at 10 a.m. Eastern, and Minneapolis Fed President Neel Kashkari and Philadelphia Fed President Patrick Harker are due to speak.
Tyler Winklevoss said charges by the Securities and Exchange Commission brought about Gemini Trust for allegedly offering unregistered securities were “super lame” as it seeks to unfreeze $900 million in investor assets.
Best of the web
There’s a bull market in swearing on corporate earnings calls.
The West is now preparing to send tanks to Ukraine in what could be another escalation of its conflict with Russia, which on Friday claimed victory in the eastern town of Soledar.
A look back at photos of Lisa Marie Presley, who died at age 54.
Top tickers
Here were the most active stock-market tickers as of 6 a.m. Eastern.
Ticker Security name BBBY,
-30.15% Bed Bath & Beyond TSLA,
-0.94% Tesla GME,
-0.68% GameStop AMC,
+0.80% AMC Entertainment MULN,
-8.59% Mullen Automotive NIO,
-0.08% Nio APE,
-2.56% AMC Entertainment preferreds AAPL,
+1.01% Apple SPCE,
+12.34% Virgin Galactic AMZN,
+2.99% Amazon.com Random reads
Like a scene out of “Stranger Things” — there’s uproar after new restrictions on the Hasbro
HAS,
+0.21%
game Dungeons & Dragons.Starting next month, Starbucks
SBUX,
+1.30%
rewards will be less generous for most items, though iced coffee will be easier to get.Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.
Listen to the Best New Ideas in Money podcast with MarketWatch reporter Charles Passy and economist Stephanie Kelton.
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-
U.S. stocks edge higher, aiming to end four-day skid as Bank of Japan policy surprise adds to jitters
[ad_1]
U.S. stocks turned higher at midday Tuesday, as investors gauged whether the recent losing streak in equities has been overdone. Traders also weighed the potential rippled effects of the Bank of Japan’s surprise announcement to put a higher ceiling on government bond yields.
How are stocks are trading
-
The S&P 500
SPX,
+0.45%
rose 9 points, or 0.2%, to 3,814. -
The Dow Jones Industrial Average
DJIA,
+0.63%
was up 114 points, or 0.3%, at 32,866. -
The Nasdaq Composite
COMP,
-1.76%
was up 26 points, or 0.2%, to 10,578.
Stocks fell for a fourth straight session on Monday. The Nasdaq Composite was down 6.3% over that stretch, and has retreated 32.6% so far this year.
What’s driving markets
Wall Street is looking to avoid a fifth straight losing session, while investors weighed the implications of a surprise monetary policy shift by the Bank of Japan.
The S&P 500 closed the previous day near a six-week low as concerns intensify that central banks’ hiking of borrowing costs to combat inflation will push economies into recession and cause corporate earnings to fall.
The Bank of Japan had been an outlier among major central banks by having maintained rates at the zero lower bound, while others embarked on their biggest tightening cycle in a generation, noted Henry Allen, strategist at Deutsche Bank.
But on Tuesday the BoJ doubled the cap on the country’s 10-year bond, from 0.25% to 0.5%, causing the yen to jump more than 3%, while whacking equities in the region and giving U.S. stock investors more to consider.
See: Why the Bank of Japan’s surprise policy twist is rattling global markets
The BoJ kept its short-term interest rate at minus 0.1%, but the raising of the yield at which it will allow bonds to trade was seen as a step towards the ending of its era of ultra-loose monetary policy. The Nikkei 225
NIK,
-2.46%
fell 2.5%.“It’s important not to underestimate the impact this could have, because tighter BoJ policy would remove one of the last global anchors that’s helped to keep borrowing costs at low levels more broadly,” Allen added.
The 10-year U.S. Treasury yield
TMUBMUSD10Y,
3.692%
stood at 3.685% as the equivalent maturity Japanese government bond
TMBMKJP-10Y,
0.417%
climbed to 0.418%.However, some analysts argued that recent drops in U.S. stocks were starting to go too far.
“I think we’ve been oversold the last couple weeks,” Joe Saluzzi, partner at Themis Trading, said in a phone interview. There’s the macroeconomic pressures weighing on stocks, but Saluzzi said the recent run of heavy selling may also be partly attributable to year-end tax loss harvesting in order to reap tax benefits from the year’s losses.
The Bank of Japan announcement may have unsettled some early trading, he said. But ultimately, there’s just one central bank in the mind of U.S. equity investors, Saluzzi noted.
Until the Federal Reserve is clear that its own interest rate hikes are complete, markets will be choppy, Saluzzi said. “The economy is weakening. No matter what the Fed said, they are not going to be doing much more,” he said.
“U.S. equity markets remain trending lower in the short run, but are close to near-term support which should materialize between 12/21-12/23 at marginally lower levels,” wrote Mark Newton, head of technical strategy at Fundstrat, in a note to clients.
“The percentage of stocks above their 20-day moving average is nearing single-digit territory, which normally provides relief for longs. Overall, I don’t expect markets to go down much further in December, and risk/reward for trading shorts looks sub-par with SPX not far above targets at 3,725.
“This might materialize at 3775-3800 before allowing for a minor bounce, and then retest into Wednesday-Friday. However, I’m fully expecting a bounce next week into year-end, regardless if it proves temporary,” Newton concluded.
Tuesday morning data gave another window to a slowing economy. Building permits and housing starts were both down in November.
Companies in focus
-
3M Co.
MMM,
-0.34%
is phasing out the manufacturing of so-called “forever chemicals” like fluoropolymers, fluorinated fluids, and PFAS-based additive products by the end of 2025. The phase-out process will include taking mostly non-cash charges of $1.3 billion to $2.3 billion to exit the line of business. Shares are down 0.5% in mid-morning trading. -
Wells Fargo & Co.
WFC,
-1.06%
is being ordered to pay a civil penalty of $1.7 billion and return more than $2 billion to consumers, according to the Consumer Financial Protection Bureau. The regulator said the fines and consumer redress are connected to “widespread mismanagement” of auto loans, mortgages and deposit accounts, the CFPB said. Shares were off 1.1% in mid-morning trading.
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The S&P 500
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Best stock picks for 2023: Here are Wall Street analysts’ most heavily favored choices
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Following a sharp and sustained rise in interest rates, U.S. stocks have taken a broad beating this year.
But 2023 may bring very different circumstances.
Below are lists of analysts’ favorite stocks among the benchmark S&P 500
SPX,
the S&P 400 Mid Cap Index
MID
and the S&P Small Cap 600 Index
SML
that are expected to rise the most over the next year. Those lists are followed by a summary of opinions of all 30 stocks in the Dow Jones Industrial Average
DJIA.Stocks rallied on Dec. 13 when the November CPI report showed a much slower inflation pace than economists had expected. Investors were also anticipating the Federal Open Market Committee’s next monetary policy announcement on Dec. 14. The consensus among economists polled by FactSet is for the Federal Reserve to raise the federal funds rate by 0.50% to a target range of 4.50% to 4.75%.
Read: 5 things to watch when the Fed makes its interest-rate decision
A 0.50% increase would be a slowdown from the four previous increases of 0.75%. The rate began 2022 in a range of zero to 0.25%, where it had sat since March 2020.
A pivot for the Fed Reserve and the possibility that the federal funds rate will reach its “terminal” rate (the highest for this cycle) in the near term could set the stage for a broad rally for stocks in 2023.
Wall Street’s large-cap favorites
Among the S&P 500, 92 stocks are rated “buy” or the equivalent by at least 75% of analysts working for brokerage firms. That number itself is interesting — at the end of 2021, 93 of the S&P 500 had this distinction. Meanwhile, the S&P 500 has declined 16% in 2022, with all sectors down except for energy, which has risen 53%, and the utilities sector, which his risen 1% (both excluding dividends).
Here are the 20 stocks in the S&P 500 with at least 75% “buy” or equivalent ratings that analysts expect to rise the most over the next year, based on consensus price targets:
Company Ticker Industry Closing price – Dec. 12 Consensus price target Implied 12-month upside potential Share “buy” ratings Price change – 2022 through Dec. 12 EQT Corp. EQT Oil and Gas Production $36.91 $59.70 62% 78% 69% Catalent Inc. CTLT Pharmaceuticals $45.50 $72.42 59% 75% -64% Amazon.com Inc. AMZN Internet Retail $90.55 $136.02 50% 91% -46% Global Payments Inc. GPN Misc. Commercial Services $99.64 $147.43 48% 75% -26% Signature Bank SBNY Regional Banks $122.73 $180.44 47% 78% -62% Salesforce Inc. CRM Software $133.11 $195.59 47% 80% -48% Bio-Rad Laboratories Inc. Class A BIO Medical Specialties $418.28 $591.00 41% 100% -45% Zoetis Inc. Class A ZTS Pharmaceuticals $152.86 $212.80 39% 87% -37% Delta Air Lines Inc. DAL Airlines $34.77 $48.31 39% 90% -11% Diamondback Energy Inc. FANG Oil and Gas Production $134.21 $182.33 36% 84% 24% Caesars Entertainment Inc CZR Casinos/ Gaming $50.27 $67.79 35% 81% -46% Alphabet Inc. Class A GOOGL Internet Software/ Services $93.31 $125.70 35% 92% -36% Halliburton Co. HAL Oilfield Services/ Equipment $34.30 $45.95 34% 86% 50% Alaska Air Group Inc. ALK Airlines $45.75 $61.08 34% 93% -12% Targa Resources Corp. TRGP Gas Distributors $70.42 $93.95 33% 95% 35% Charles River Laboratories International Inc. CRL Misc. Commercial Services $201.94 $269.25 33% 88% -46% ServiceNow Inc. NOW Information Technology Services $401.64 $529.83 32% 92% -38% Take-Two Interactive Software Inc. TTWO Software $102.61 $135.04 32% 79% -42% EOG Resources Inc. EOG Oil and Gas Production $124.06 $158.24 28% 82% 40% Southwest Airlines Co. LUV Airlines $38.94 $49.56 27% 76% -9% Source: FactSet Most of the companies on the S&P 500 list expected to soar in 2023 have seen large declines in 2022. But the company at the top of the list, EQT Corp.
EQT,
is an exception. The stock has risen 69% in 2022 and is expected to add another 62% over the next 12 months. Analysts expect the company’s earnings per share to double during 2023 (in part from its expected acquisition of THQ), after nearly a four-fold EPS increase in 2022.Shares of Amazon.com Inc.
AMZN
are expected to soar 50% over the next year, following a decline of 46% so far in 2022. If the shares were to rise 50% from here to the price target of $136.02, they would still be 18% below their closing price of 166.72 at the end of 2021.Read: Here’s why Amazon is Citi’s top internet stock idea
You can see the earnings estimates and more for any stock in this article by clicking on its ticker.
Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
Mid-cap stocks expected to rise the most
The lists of favored stocks are limited to those covered by at least five analysts polled by FactSet.
Among components of the S&P 400 Mid Cap Index, there are 84 stocks with at least 75% “buy” ratings. Here at the 20 expected to rise the most over the next year:
Company Ticker Industry Closing price – Dec. 12 Consensus price target Implied 12-month upside potential Share “buy” ratings Price change – 2022 through Dec. 12 Arrowhead Pharmaceuticals Inc. ARWR Biotechnology $31.85 $69.69 119% 83% -52% Lantheus Holdings Inc. LNTH Medical Specialties $54.92 $102.00 86% 100% 90% Progyny Inc. PGNY Misc. Commercial Services $31.21 $55.57 78% 100% -38% Coherent Corp. COHR Electronic Equipment/ Instruments $35.41 $60.56 71% 84% -48% Exelixis Inc. EXEL Biotechnology $16.08 $26.07 62% 81% -12% Darling Ingredients Inc. DAR Food: Specialty/ Candy $61.17 $97.36 59% 93% -12% Perrigo Co. PLC PRGO Pharmaceuticals $31.83 $49.25 55% 100% -18% Mattel Inc. MAT Recreational Products $17.39 $26.58 53% 87% -19% ACI Worldwide Inc. ACIW Software $20.75 $31.40 51% 83% -40% Topgolf Callaway Brands Corp. MODG Recreational Products $21.99 $32.91 50% 83% -20% Dycom Industries Inc. DY Engineering and Construction $86.03 $128.13 49% 100% -8% Travel + Leisure Co. TNL Hotels/ Resorts/ Cruiselines $37.98 $56.00 47% 75% -31% Frontier Communications Parent Inc. FYBR Telecommunications $25.21 $36.18 44% 82% -15% Manhattan Associates Inc. MANH Software $120.06 $171.80 43% 88% -23% MP Materials Corp Class A MP Other Metals/ Minerals $31.39 $44.79 43% 92% -31% Lumentum Holdings Inc. LITE Electrical Products $54.45 $76.44 40% 76% -49% Tenet Healthcare Corp. THC Hospital/ Nursing Management $44.22 $62.00 40% 80% -46% Repligen Corp. RGEN Pharmaceuticals $166.88 $233.10 40% 82% -37% STAAR Surgical Co. STAA Medical Specialties $59.57 $82.67 39% 82% -35% Carlisle Cos. Inc. CSL Building Products $251.99 $348.33 38% 75% 2% Source: FactSet Wall Street’s favorite small-cap names
Among companies in the S&P Small Cap 600 Index, 91 are rated “buy” or the equivalent by at least 75% of analysts. Here are the 20 with the highest 12-month upside potential indicated by consensus price targets:
Company Ticker Industry Closing price – Dec. 12 Consensus price target Implied 12-month upside potential Share “buy” ratings Price change – 2022 through Dec. 12 UniQure NV QURE Biotechnology $22.99 $51.29 123% 95% 11% Cara Therapeutics Inc. CARA Biotechnology $11.34 $23.63 108% 88% -7% Vir Biotechnology Inc. VIR Biotechnology $25.50 $53.00 108% 75% -39% Dynavax Technologies Corp. DVAX Biotechnology $11.22 $23.20 107% 100% -20% Thryv Holdings Inc. THRY Advertising/ Marketing Services $18.40 $36.75 100% 100% -55% Artivion Inc. AORT Medical Specialties $12.93 $23.13 79% 83% -36% Cytokinetics Inc. CYTK Pharmaceuticals $38.33 $67.43 76% 100% -16% Harsco Corp. HSC Environmental Services $7.17 $12.30 72% 80% -57% Ligand Pharmaceuticals Inc. LGND Pharmaceuticals $64.80 $110.83 71% 100% -35% Corcept Therapeutics Inc. CORT Pharmaceuticals $20.84 $34.20 64% 80% 5% Payoneer Global Inc. PAYO Misc. Commercial Services $5.70 $9.33 64% 100% -22% Xencor Inc. XNCR Biotechnology $28.69 $46.71 63% 93% -28% Pacira Biosciences Inc. PCRX Pharmaceuticals $45.50 $72.90 60% 80% -24% BioLife Solutions Inc. BLFS Chemicals $19.72 $31.38 59% 89% -47% Customers Bancorp Inc. CUBI Regional Banks $30.00 $47.63 59% 75% -54% ModivCare Inc. MODV Other Transportation $92.22 $145.83 58% 100% -38% Stride Inc. LRN Consumer Services $32.56 $51.25 57% 100% -2% Ranger Oil Corp. Class A ROCC Oil and Gas Production $36.98 $58.00 57% 100% 37% Outfront Media Inc. OUT Real Estate Investment Trusts $17.59 $27.00 53% 83% -34% Walker & Dunlop Inc. WD Finance/ Rental/ Leasing $82.22 $125.20 52% 100% -46% Source: FactSet The Dow
Here are all 30 components of the Dow Jones Industrial Average ranked by how much analysts expect their prices to rise over the next year:
Company Ticker Industry Closing price – Dec. 12 Consensus price target Implied 12-month upside potential Share “buy” ratings Price change – 2022 through Dec. 12 Salesforce Inc. CRM Software $133.11 $195.59 47% 80% -48% Walt Disney Co. DIS Movies/ Entertainment $94.66 $119.60 26% 82% -39% Apple Inc. AAPL Telecommunications Equipment $144.49 $173.70 20% 74% -19% Verizon Communications Inc. VZ Telecommunications $37.95 $44.60 18% 21% -27% Visa Inc. Class A V Misc.s Commercial Services $214.59 $249.33 16% 86% -1% Microsoft Corp. MSFT Software $252.51 $293.06 16% 91% -25% Chevron Corp. CVX Integrated Oil $169.75 $191.20 13% 54% 45% Cisco Systems Inc. CSCO Information Technology Services $49.30 $53.76 9% 44% -22% UnitedHealth Group Inc. UNH Managed Health Care $545.86 $593.30 9% 85% 9% Goldman Sachs Group Inc. GS Investment Banks/ Brokers $363.18 $392.63 8% 59% -5% Walmart Inc. WMT Specialty Stores $148.02 $159.86 8% 72% 2% JPMorgan Chase & Co. JPM Banks $134.21 $143.84 7% 59% -15% Home Depot Inc. HD Home Improvement Chains $327.98 $346.61 6% 61% -21% American Express Co. AXP Finance/ Rental/ Leasing $157.31 $164.57 5% 43% -4% McDonald’s Corp. MCD Restaurants $276.62 $288.67 4% 72% 3% Johnson & Johnson JNJ Pharmaceuticals $177.84 $185.35 4% 36% 4% Coca-Cola Co. KO Beverages: Non-Alcoholic $63.97 $66.62 4% 73% 8% Boeing Co. BA Aerospace and Defense $186.27 $192.69 3% 77% -7% Intel Corp. INTC Semiconductors $28.69 $29.54 3% 13% -44% Walgreens Boots Alliance Inc. WBA Drugstore Chains $41.06 $42.24 3% 17% -21% Merck & Co. Inc. MRK Pharmaceuticals $108.97 $110.62 2% 65% 42% Caterpillar Inc. CAT Trucks/ Construction/ Farm Machinery $233.06 $236.23 1% 41% 13% Honeywell International Inc. HON Aerospace and Defense $214.50 $217.35 1% 54% 3% Nike Inc. Class B NKE Apparel/ Footwear $112.07 $112.58 0% 64% -33% 3M Co. MMM Industrial Conglomerates $126.85 $127.30 0% 5% -29% Procter & Gamble Co. PG Household/ Personal Care $152.47 $150.22 -1% 59% -7% Travelers Companies Inc. TRV Multi-Line Insurance $187.11 $184.24 -2% 18% 20% Amgen Inc. AMGN Biotechnology $276.78 $264.79 -4% 24% 23% Dow Inc. DOW Chemicals $51.11 $48.73 -5% 15% -10% International Business Machines Corp. IBM Information Technology Services $149.21 $140.29 -6% 33% 12% Source: FactSet Don’t miss: 10 Dividend Aristocrat stocks expected by analysts to rise up to 54% in 2023
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‘There are plenty of storm clouds on the horizon’: 5 things not to buy on Black Friday
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It’s a year for shopping prudently.
Americans will spend between $942.6 billion and $960.4 billion this holiday season, according to projections from the National Retail Federation. That’s up from last year when holiday sales hit a record $889.3 billion, the trade association said.
However, people are not willing to go as crazy this Black Friday compared to previous years: that 6% to 8% year-over-year growth expectation is slower than the 13.5% annual increase in holiday season spending in 2021 when consumers had pandemic-era government benefits to spend.
Once again, millions of people will also be shopping from the comfort of their home and avoiding the Black Friday crowds. Online and other non-store sales are predicted to rise 10% to 12% (to between $262.8 billion and $267.6 billion).
“People have reason to be concerned about their spending. ”
“The economy is probably doing better than it feels right now, but that’s not true for everyone of course,” said Ted Rossman, senior industry analyst at Bankrate.com. “There are plenty of storm clouds on the horizon.” He cited rising interest rates, 40-year high inflation and tech layoffs.
People have reason to be concerned about their spending. The personal saving rate — meaning personal saving as a percentage of disposable income, or the share of income left after paying taxes and spending money — fell to 3.3% in the third quarter from 3.4% in the prior quarter, the government said last month.
Despite a strong labor market and unemployment hovering at 3.7% in October, Rossman said, “it still seems like a recession is likely in 2023, although the best guess is that it will be a mild one.”
So what should you not buy this Black Friday? Quite a lot, if you don’t believe in living large. Here are 5 things to think about avoiding:
— Quentin Fottrell
Tech accessories
For tech accessories — like earbuds and headphones — waiting until December may be a better way to score better deals, added Ryan McGonagill, director, industry research at Savings.com, another site that aggregates discounts.
The most popular electronic products like Apple AAPL iPads, MacBooks and iPhones have scant Black Friday deals. “For a limited time, get an Apple Gift Card to use on a later purchase when you buy an eligible iPhone, Apple Watch, Mac, AirPods, and more,” according to Apple’s Black Friday offer.
Computer makers and retailers, however, are coming off the work-from-home boom and may have inventory they need to thin before year’s end. Holiday discounts on computers, at least through October, were at 10% off the base price, according to analysis from Adobe
ADBE,
+2.92% .
The software and analytics provider said computer discounts could go much steeper, up to 32% off the base price before the end of the year. Cyber Monday could be the best day for bargains on computers, Adobe said, but computer deals may stick around for the rest of 2022.
Pay attention to early deals, if you desperately need a new laptop. “Many retailers offer the same pricing on Black Friday and Cyber Monday,” said Kristin McGrath, editor at RetailMeNot.com, a site that promotes deals. “So start looking on Black Friday and use Cyber Monday as a second chance to snag what you missed.”
— Andrew Keshner
Seasonal items
Winter wear is usually not going to be on sale before Christmas, so it’s best to shop for your puffy jackets and snow boots in the New Year, if you can. The same goes for white linen, tools and holiday decorations, said Charles Lindsey, associate professor in the Marketing School of Management at the University at Buffalo.
Most stores put their coats, hats, scarves and flannel pajamas on sale — with discounts on big-name brands of 50% or more in January — to make room for their spring collections. Similarly, buy summer clothes in the fall and winter.
“The best time to buy holiday decor is immediately after said holidays,” according to DealNews, a site offering shopping advice. “After Christmas sales are generally your best bet for snagging deeply discounted ornaments, lights, and inflatables in order to be well prepared for next year.”
Fashion-conscious shoppers inclined to snap up discounted items may want to practice patience on Black Friday. Apparel may have even deeper discounts after the holidays. If you feel compelled to buy something new to wear to the office party, invest in quality pieces. Fast fashion has a cost: It has contributed to a waste crisis, in part because such items are not meant to last very long in your closet.
But that does not mean you should not keep your eyes peeled for some seasonal goods on Black Friday. Walmart
WMT,
+0.34% ,
for instance, is pushing out the boat early with some discounts on toys, including hoverboards, bicycles, remote-control cars, and karaoke machines. Similarly, Kohl’s
KSS,
+4.17%
has discounts on a range of doll’s houses.— Quentin Fottrell and Emma Ockerman
Appliances and white goods
There might be tempting Black Friday deals on appliances, mattresses and furniture. Discounts on appliances may reach up to an 18% from the base price, Adobe said. Still, “you’re going to get another shot at them during New Year’s Eve sales and again during Presidents Day sales in February,” McGrath said.
If Black Friday is “too chaotic …you’ll have plenty of opportunities to save,” she added. Department stores usually run very attractive discounts on houseware in the days following Christmas. “Stores know they’ll be getting a lot of traffic with so many people returning gifts — and hope to convince shoppers to make an impulse self-gifting purchase or two,” McGrath said.
If you can’t wait, Costco
COST,
+1.64%
is already rolling out deals on white goods and appliances, including $70 off a Sonos
SONO,
+1.87%
WiFi speaker. However, Consumer Reports cautions consumers against falling for big deals without checking out the reliability of the brand first, as you could end up paying more in repairs down the road.You might be tempted by offers and rebates on matching kitchen suites — typically a refrigerator, range, dishwasher, and microwave — from the same maker,” Consumer Reports said. “But price is only part of the equation when you’re purchasing appliances. Reliability is key, and it can vary within a brand’s offerings.”
— Andrew Keshner
Fitness equipment
One of the best times to buy exercise equipment is around the New Year, when people are making resolutions to improve their health, said Regina Conway, who researches sales and promotions for Slickdeals, a site that tracks retail discounts.
When you make your purchase, think twice before buying equipment that runs on proprietary technology, like Peloton
PTON,
-1.13%
or Lululemon’s
LULU,
+1.79%
Mirror exercise products, mainly because the at-home fitness boom faces an uncertain future post-pandemic, Conway noted.However, this Black Friday is a little different than previous years, and there are some deals in categories that traditionally don’t have good Black Friday discounts, including exercise equipment. “This year we’re seeing strong Black Friday deals from industry stalwarts like NordicTrack,” Conway said.
Peloton Interactive, which is facing a challenging time since people are no longer stuck at home due to the pandemic, is currently offering $600 off this fitness bike package. However, consumers will still have to fork over $2,195 for the machine and exercise regime.
“We think consumers are likely to continue to prefer out-of-home experiences in the near-term and believe Peloton is still working through pandemic pull-forward,” Cowen & Co. analyst John Blackledge wrote in an analyst note on Tuesday, citing “limited visibility” on Peloton’s fiscal 2023 performance.
— Leslie Albrecht and Quentin Fottrell
Big-ticket items like TVs
Does Amazon
AMZN,
+0.80%
founder Jeff Bezos have a point about the dangers of splurging this year? In something of a Black Friday surprise, Bezos offered some shocking spending tips as Americans gear up for the holiday shopping season — amid four-decade-high inflation. Or, to be more accurate, he offered tips on what not to spend your money on.‘If you’re an individual and you’re thinking about buying a large-screen TV, maybe slow that down, keep that cash, see what happens. Same thing with a refrigerator, a new car, whatever. Just take some risk off the table,” Bezos said in a recent interview on CNN
WBD,
+2.27% .
The remarks drew a significant amount of scorn on social media, with some critics advising people to avoid shopping on Amazon too.About those TVs: “They’re normally not going to be a high-end TV brand,” Lindsey said. “It will be a lower to mid-tier brand. Companies utilize these TVS as doorbusters to get people in the store and people clicking on their website. You’re probably better off shopping around the Superbowl in late January.”
Rossman said consumers are becoming more judicious about their Black Friday splurging. “People seem to be pulling back on some big-ticket purchases,” he told MarketWatch. “For example, sellers of appliances, electronics and furniture all posted disappointing results in the most recent retail sales report.”
“Yet discretionary sectors such as travel and dining are seeing sharp increases in spending,” he added. “I think the main explanation is pent-up demand. People are prioritizing experiences over things right now, largely due to the pandemic. There was also a pull-forward in demand for many physical goods the past couple of years as many out-of-home activities were curtailed.”
— Quentin Fottrell
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