The French government moved to temporarily suspend Shein’s website after authorities discovered sex dolls resembling children were being sold on its platform.
The French finance ministry said Wednesday that it had begun the process to suspend Shein for “the time necessary for the platform to demonstrate” it has scrubbed its site of illegal products.
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Chelsey Dulaney
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Amazon.com Inc. shares continued their charge higher Friday, securing their highest close in more than two years.
The e-commerce giant’s stock advanced 2.7% in Friday’s session to finish the day at $174.45. That was the best ending level since Dec. 9, 2021, when Amazon’s stock
AMZN,
closed at $147.17, according to Dow Jones Market Data.
Don’t miss: Is Meta now a value stock?
Amazon briefly surpassed Alphabet Inc.
GOOG,
GOOGL,
as the third most valuable U.S. company by market capitalization last week, though it’s since fallen back to the No. 4 spot. Still, the recent momentum for Amazon shares has been enough to help the company hold down a place in the top four even as Nvidia Corp.
NVDA,
nips at its heels.
Alphabet finished Friday’s session with a $1.86 trillion market cap, while Amazon’s was $1.81 trillion and Nvidia’s was $1.78 trillion.
Wall Street had a mixed reaction to earnings from big technology companies this quarter, but Amazon’s results were among those that were well received.
See also: Amazon says the ‘magic words.’ They spurred a $130 billion market-cap boost.
“Overall the overhangs which kept a lid on AMZN shares — e-commerce deceleration in 2021, e-commerce deceleration and margin compression in 2022 and AWS deceleration in 2023 — will have dissipated throughout 2024,” UBS analyst Stephen Ju wrote in a note to clients following those results.
The company has been a huge driver of earnings growth for the S&P 500 consumer discretionary sector, as its quarterly earnings per share grew to $1 in the latest quarter from 3 cents a year before. The consumer discretionary sector is now expected to post 33% growth in EPS for the fourth quarter, according to FactSet, but without Amazon, that would swing to a decline of about 1%.
Earnings season is causing a reshuffling among the ranks of the largest U.S. companies.
Amazon.com Inc.
AMZN,
overtook Alphabet Inc.
GOOG,
GOOGL,
and become the third-largest U.S. public company upon Friday’s close, after its results were well received by Wall Street and Alphabet’s earlier in the week got panned.
Amazon edged out Alphabet only barely, with a closing market cap of $1.785 trillion compared with $1.777 trillion for Alphabet, according to Dow Jones Market Data.
Read: Amazon says the ‘magic words.’ They could spur a $110 billion market-cap boost.
The e-commerce giant hadn’t been valued above the Google parent company since Sept. 30, 2022, according to Dow Jones Market Data. That was also the last time Amazon was the third-largest by market cap.
Wall Street found plenty to like in Amazon’s latest report, including drastic improvement in operating income, upbeat commentary on the cloud and momentum within the retail business. Meanwhile, Alphabet’s earnings were met with a chillier reception as the company talked up heavy spending plans linked to its artificial-intelligence ambitions.
The very top of the market-cap ranks has changed up as well lately, though admittedly with less of a tie to earnings. Microsoft Corp.’s
MSFT,
closing valuation surpassed Apple Inc.’s
AAPL,
on Jan. 12 for the first time since November 2021. While the two traded around the top spot in January, Microsoft has been sitting there since Jan. 25.
Don’t miss: Microsoft earnings may have offered a big bullish clue about cloud growth
Microsoft also rests alone in the $3 trillion club, with Apple, the only other U.S. company to ever claim membership, having fallen out of it.
See also: Apple just did something unusual. Can it help the stock amid growth woes?
Investors bought up shares of Etsy Inc. on Thursday after the online crafts marketplace added to its board of directors a partner of hedge fund Elliott Investment Management L.P., which recently acquired a “sizable” stake in the company.
Etsy
ETSY,
said Marc Steinberg, who is responsible for public- and private-equity investments at Elliott, has been appointed to the board, effective Feb. 5, and will also join the board’s audit committee.
“Etsy has a highly differentiated position in the e-commerce landscape and a uniquely attractive business model, supported by a distinctive and engaged community,” Steinberg said. “We became a sizable investor in Etsy and I am joining its board because I believe there is an opportunity for significant value creation.”
Etsy’s stock shot up 8% in afternoon trading, to pare earlier gains of as much as 14.2%. The stock was headed for its best one-day gain since it climbed 9.2% on July 11.
Elliott’s stake was acquired in recent months, as the fund’s disclosure of equity holdings through the third quarter did not list Etsy shares.
“Marc’s appointment reflects our ongoing commitment to enhance the perspectives and expertise on the Etsy Board,” said Etsy Chairman Fred Wilson. “We look forward to benefiting from his voice in the boardroom as a seasoned and experienced investor as we continue our journey of creating a leading global e-commerce platform.”
Etsy now has 10 board members.
Etsy’s stock has run up 18.6% over the past three months, but has tumbled 48.5% over the past 12 months. That’s compared with the S&P 500 index’s
SPX
18.7% rally over the past year.
Read (December 2023): Etsy to cut 11% of staff as CEO says company is on ‘unsustainable trajectory’
At an investor conference in December, Chief Executive Josh Silverman said business has slowed since the post-pandemic boom, as people have “had enough of buying things” and are now spending primarily on eating out and travel. Inflation and the loss of government subsidies was also weighing on spending.
Still, Silverman said, Etsy is now about two and a half times bigger than it was before the pandemic, and the company has more active buyers than it did at the peak of the pandemic.
Walmart Inc. will shut down Store No. 8, the big-box retailer’s startup incubator and innovation hub, the Wall Street Journal reported on Friday. It’s the latest move by a retailer to trim expenses and protect profits as shoppers continue to grapple with higher prices.
Chief Financial Officer John Rainey told employees in a memo that much of what Store No. 8 did had already been incorporated into the company’s operations as a whole, the Journal said.
“We’ve graduated capabilities from this operating approach that are now fully embedded in our organization,” Rainey said in the memo, according to the Journal.
“The responsibility to shape the future of retail is now shared by all segments,” he continued.
Walmart launched Store No. 8 in 2017 in an effort to experiment with new ideas, including augmented reality, artificial intelligence and new ways of delivering products, and to stay nimble in a retail landscape increasingly defined by online shopping. The Journal said that Scott Eckert, who led Store No. 8, was leaving the company.
Walmart did not immediately respond to a request for comment. Shares were up fractionally after hours, after finishing 0.5% lower during the day.
Some analysts think that Walmart could hold onto the higher-income shoppers it attracted over the past two years of high inflation. But in a possible sign of its priorities, the retailer on Thursday announced pay raises for store managers and a bonus program that hinges more on store profits.
Walmart and other retailers have signaled that they are rethinking what technology to invest in and what stores to keep open. Those decisions would follow years of online-sales adoption, pandemic-related disruptions to shopping and a jump in prices for basics that began in 2022 and led people to shy away from buying things like laptops and clothing.
Elsewhere on Thursday, Macy’s Inc.
M,
said it would lay off corporate staff and close a handful of stores amid efforts to adapt to “an everchanging consumer and marketplace” and “evaluate the right mix of on- and off-mall locations.”
The Wall Street Journal, which first reported that news, said Macy’s intended to bring more automation to its supply chain and invest “in areas that impact consumers,” like visual displays in stores and efforts to smooth out the online-shopping experience.
CVS Corp.
CVS,
meanwhile, said it would close some pharmacies at Target Corp.
TGT,
stores as it pivots toward health services.
By Anthony O. Goriainoff
Discount retailer Pepco Group said conflict in the Red Sea has had a limited effect on current product availability, but could hurt supply in the coming months if it continues.
The discount retailer–which houses Poundland in the U.K. and Dealz and Pepco in continental Europe–said Thursday that attacks on vessels in the Red Sea by Houthi fighters was leading to higher spot freight rates and delays to container lead times.
Although Pepco’s freight costs are contracted until the end of its third quarter, it faces additional surcharges from carriers stemming from the longer routes being taken by shipping companies avoiding the Red Sea.
Meanwhile, the company said that for its fiscal first quarter ended Dec. 31, group like-for-like revenue fell 2.3% although there was an improving trend during the period.
Revenue grew on a constant currency basis grew 11% from a year earlier to 1.9 billion euros ($2.07 billion), with the Pepcobusiness’s like-for-like revenue falling 3.7% against a tough comparative period when sales were up by 20% from the year-prior period.
Revenue at Dealz fell 4.6%, driven by planned lower stock availability in general merchandise categories. Poundland’s performance continued to be robust with a strong Christmas performance driven by demand for fast-moving consumer goods, the company said.
Write to Anthony O. Goriainoff at anthony.orunagoriainoff@dowjones.com
Jan 12, 2024, 1:00 am EST
The Magnificent Seven had an extraordinary year in 2023—one that will be very difficult to repeat. And there will be a new Magnificent Seven in 2024.
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(Updated with Friday’s closing prices.)
The 2023 rally for stocks in the U.S. accelerated as more investors bought the idea that the Federal Reserve succeeded in its effort to bring inflation to heel.
The S&P 500
SPX
ended Friday with a 24.2% gain for 2023, following a 19.4% decline in 2022. (All price changes in this article exclude dividends). Among the 500 stocks, 65% were up for 2023. Below is a list of the year’s 20 best performers in the benchmark index.
This article focuses on large-cap stocks. MarketWatch Editor in Chief Mark DeCambre took a broader look at all U.S. stocks of companies with market capitalizations of at least $1 billion, to list 10 with gains ranging from 412% to 1,924%.
The Fed began raising short-term interest rates and pushing long-term rates higher in March 2022 by allowing its bond portfolio to run off. That explains the poor performance for stocks in 2022, as bonds and even bank accounts because more attractive to investors.
The central bank hasn’t raised the federal-funds rate since moving it to the current target range of 5.25% to 5.50% in July, and its economic projections point to three rate cuts in 2024.
Investors are anticipating the return to a low-rate environment by scooping up 10-year U.S. Treasury notes
BX:TMUBMUSD10Y,
whose yield ended the year at 3.88%, down from 4.84% on Oct. 27 — the day of the S&P 500’s low for the second half of 2023.
Read: Treasury yields end mostly higher but little changed on year after wild 2023
Before looking at the list of best-performing stocks of 2023, here’s a summary of how the 11 sectors of the S&P 500 performed, with the full index and three more broad indexes at the bottom:
| Sector or index | 2023 price change | 2022 price change | Price change since end of 2021 | Forward P/E | Forward P/E at end of 2022 | Forward P/E at end of 2023 |
| Information Technology | 56.4% | -28.9% | 11.5% | 26.7 | 20.0 | 28.2 |
| Communication Services | 54.4% | -40.4% | -7.6% | 17.4 | 14.3 | 21.0 |
| Consumer Discretionary | 41.0% | -37.6% | -11.4% | 26.2 | 21.7 | 34.7 |
| Industrials | 16.0% | -7.1% | 8.0% | 20.0 | 18.7 | 22.0 |
| Materials | 10.2% | -14.1% | -4.9% | 19.5 | 15.8 | 16.6 |
| Financials | 9.9% | -12.4% | -3.4% | 14.6 | 13.0 | 16.3 |
| Real Estate | 8.3% | -28.4% | -21.6% | 18.3 | 16.9 | 24.7 |
| Healthcare | 0.3% | -3.6% | -3.3% | 18.2 | 17.7 | 17.3 |
| Consumer Staples | -2.2% | -3.2% | -5.4% | 19.3 | 20.6 | 21.4 |
| Energy | -4.8% | 59.0% | 51.8% | 10.9 | 9.8 | 11.1 |
| Utilities | -10.2% | -1.4% | -11.4% | 15.9 | 18.7 | 20.4 |
|
S&P 500 SPX |
24.2% | -19.4% | 0.4% | 19.7 | 16.8 | 21.6 |
|
Dow Jones Industrial Average DJIA |
13.7% | -8.8% | 3.8% | 17.6 | 16.6 | 18.9 |
|
Nasdaq Composite COMP |
43.4% | -33.1% | -3.5% | 26.9 | 22.6 | 32.0 |
|
Nasdaq-100 NDX |
53.8% | -33.0% | 3.5% | 26.3 | 20.9 | 30.3 |
| Source: FactSet | ||||||
A look at 2023 price action really needs to encompass what took place in 2022 for context. The broad indexes haven’t moved much from their levels at the end of 2022 (again, excluding dividends). We have included current forward price-to-earnings ratios along with those at the end of 2021 and 2022. These valuations have declined a bit, which may provide some comfort for investors wondering how likely it is for stocks to continue to rally in 2024.
Here are the 20 stocks in the S&P 500 whose prices rose the most in 2023:
| Company | Ticker | 2023 price change | 2022 price change | Price change since end of 2021 | Forward P/E | Forward P/E at end of 2022 | Forward P/E at end of 2021 |
| Nvidia Corp. |
NVDA, |
239% | -50% | 68% | 24.9 | 34.4 | 58.0 |
| Meta Platforms Inc. Class A |
META, |
194% | -64% | 5% | 20.2 | 14.7 | 23.5 |
| Royal Caribbean Group |
RCL, |
162% | -36% | 68% | 14.3 | 14.9 | 232.4 |
| Builders FirstSource Inc. |
BLDR, |
157% | -24% | 95% | 14.2 | 10.7 | 13.3 |
| Uber Technologies Inc. |
UBER, |
149% | -41% | 47% | 56.9 | N/A | N/A |
| Carnival Corp. |
CCL, |
130% | -60% | -8% | 18.7 | 41.3 | N/A |
| Advanced Micro Devices Inc. |
AMD, |
128% | -55% | 2% | 39.7 | 17.7 | 43.1 |
| PulteGroup Inc. |
PHM, |
127% | -20% | 81% | 9.1 | 6.3 | 6.2 |
| Palo Alto Networks Inc. |
PANW, |
111% | -25% | 59% | 50.2 | 38.0 | 70.1 |
| Tesla Inc. |
TSLA, |
102% | -65% | -29% | 66.2 | 22.3 | 120.3 |
| Broadcom Inc. |
AVGO, |
100% | -16% | 68% | 23.2 | 13.6 | 19.8 |
| Salesforce Inc. |
CRM, |
98% | -48% | 4% | 28.0 | 23.8 | 53.5 |
| Fair Isaac Corp. |
FICO, |
94% | 38% | 168% | 47.1 | 29.3 | 28.7 |
| Arista Networks Inc. |
ANET, |
94% | -16% | 64% | 32.7 | 22.3 | 41.4 |
| Intel Corp. |
INTC, |
90% | -49% | -2% | 26.6 | 14.6 | 13.9 |
| Jabil Inc. |
JBL, |
87% | -3% | 81% | 13.5 | 7.9 | 10.3 |
| Lam Research Corp. |
LRCX, |
86% | -42% | 9% | 25.2 | 13.5 | 20.2 |
| ServiceNow Inc. |
NOW, |
82% | -40% | 9% | 56.0 | 42.6 | 90.1 |
| Amazon.com Inc. |
AMZN, |
81% | -50% | -9% | 42.0 | 46.7 | 64.9 |
| Monolithic Power Systems Inc. |
MPWR, |
78% | -28% | 28% | 49.1 | 27.3 | 57.9 |
| Source: FactSet | |||||||
Click on the tickers for more about each company.
Don’t miss: Nvidia tops list of Wall Street’s 20 favorite stocks for 2024
Updated Dec 27, 2023, 7:34 am EST / Original Dec 27, 2023, 4:26 am EST
Stock futures traded slightly lower Wednesday after the S&P 500 finished higher Tuesday and just 0.45% below its record close of 4,796.56 hit Jan. 3, 2022. The broad market index has risen 24% this year and has gained 4.5% this month as traders bet the Federal Reserve will begin cutting interest rates as soon as March.
Continue reading this article with a Barron’s subscription.
Alphabet could be the best bet among the Magnificent Seven stocks that led the market higher in 2023.
Continue reading this article with a Barron’s subscription.
View Options
2023 will go down in history for the start of a new bull market, albeit a strange one.
Despite some year-end catch-up by the rest of the S&P 500 index, megacap technology stocks, characterized by the so-called Magnificent Seven, have dominated gains for the large-cap benchmark SPX, which is up 23.8% for the year through Friday’s close.
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As sneaker makers try to stay relevant amid waning demand, Nike Inc. executives on Thursday said they were banking on “newness and innovation” to win over reluctant shoppers. And as sales deals on shoes proliferate, they said interest in its sneakers that cost over $100 is still solid, and that an expansion of its Jordan brand — beyond basketball gear and shoes — represents an opportunity to boost profits.
But one analyst on Friday cast doubt over whether those plans will work for all of Nike’s
NKE,
customers in the long term.
“Nike needs improved marketing outside of basketball, streetwear and lifestyle trends,” TD Cowen analyst John Kernan said in a research note on Friday. “Innovation at the higher end of its assortment is not resonating at scale while . . . Nike faces disruption from smaller competitors in footwear and apparel. Jordan brand moving into lower price points and away from a scarcity model creates risk to the fastest-growing piece of the business.”
That assessment came after Nike’s quarterly results and dimmer outlook after the market close on Thursday sent shares reeling. Management said that consumers were still cautious, as higher prices for essential goods siphon away what they can spend on new sneakers and clothes.
Following the results, TD Cowen analysts on Friday downgraded the stock to their version of a hold rating. CFRA, meanwhile, also lowered its opinion on the stock to sell from hold.
Shares of Nike were down 11.6% on Friday.
During Nike’s fiscal second quarter, sales trends were shaky in both the athletic-gear maker’s digital channels and its markets abroad, executives said Thursday. In North America, sales slipped 4% year over year. For the holidays, sales were softer outside of the big discount days like Black Friday and Cyber Monday. And competition from the likes of Adidas
ADDYY,
Deckers Brands
DECK,
subsidiary Hoka One One and running-shoe maker On Holding
ONON,
hasn’t gone anywhere.
Nike’s results, Kernan said, were a sign that Wall Street’s profit estimates were too high for Adidas and other competitors like Vans owner VF Corp.
VFC,
and Under Armour
UA,
On the company’s earnings call Thursday, Nike said it didn’t plan on getting sucked into a “race to the bottom on digital,” where weaker online traffic forced more markdowns. But like Kernan, Raymond James analyst Rick Patel also had questions about Nike’s efforts to push full-priced product.
“Nike noted that it intends to focus on full-price selling and doesn’t want to participate in aggressive discounting,” he said. “Also, it aims to manage inventories for key franchises more carefully going forward in order to avoid the promotional fray, which also limits sales growth. We view these as the right moves to protect the health of the brand, but also acknowledge that it leaves Nike at a near-term competitive disadvantage to drive revenue.”
CFRA analyst Zachary Warring, in emailed commentary, said some of Nike’s other rivals could cut into demand.
“Although Nike maintains a fortress balance sheet with significant capital returns, we believe the multiple will trend back down to pre-pandemic levels as the company faces competition from brands like Hoka and On [Holding] while it looks for new growth drivers and focuses on cutting costs,” Warring said.
Nike executives on Thursday said Jordan-branded clothing and products for golf, soccer and football, along with products for women and children, would bring stronger results. They said the same for bras, leggings, retro-themed running shoes and other offerings in its business geared toward women.
The company also announced plans to save up to $2 billion over the next three years. That savings effort, it said, could include simplifying its product selection, bringing more automation into its operations, and “streamlining” the company by shedding management layers.
Nike has reportedly already begun laying off workers. The company on Thursday said it expected to book pre-tax restructuring charges of around $400 million to $450 million “primarily associated with employee-severance costs.”
Nike plans to reinvest those savings back into the company. But as the company tries to fatten margins, Jefferies analyst Randal Konik said those reinvestments could do the opposite.
“We would expect [management] to reinvest a majority of these cost savings, likely leaving less margin and earnings ‘cushion’ should top-line performance continue to soften over the next 6-12 months,” he said.
In recent years, Nike has been trying to sell fewer items through outside retail chains and more through its own stores and online channels. But executives on Thursday said that multiyear effort had created “complexity and inefficiencies”
Edward Jones analyst Brian Yarbrough told MarketWatch that Nike is likely cutting costs after weighing the broader economic backdrop and weakness in its digital business against its sales and margin goals.
“Combined with a slower revenue-growth environment — and the fact that digital, which is their more profitable channel, is slowing and in some markets declining — I think they probably said, ‘If we’re going to get there, it’s probably going to have to come with some cost cuts,’” Yarbrough said.
Shares of Nike Inc. tumbled after hours Thursday after the athletic-gear giant warned of a “softer second-half revenue outlook” on its quarterly earnings call, and said it is targeting up to $2 billion in cost cuts over the next three years as it looks to shed management and focus on women customers and its Jordan brand.
Nike
NKE,
said that the savings could come from simplifying its product selection and using more automation and technology. But the athletic-gear giant has also reportedly begun to lay workers off, and said it expected to book pre-tax restructuring charges of around $400 million to $450 million, much of it in the company’s fiscal third quarter, “primarily associated with employee-severance costs.”
Nike did not immediately respond to questions about job cuts at the company, or how many staff have been or could be laid off. But on the company’s earnings call, management said its plans included “reducing management layers.”
In Nike’s earnings release, Chief Financial Officer Matthew Friend said the company’s fiscal second quarter — in which per-share profit beat expectations while sales were roughly in line — marked “a turning point in driving more-profitable growth.”
But investors appeared skeptical after hours on Thursday, as shares slid more than 11%.
Nike announced the cost-cutting drive as clothing and shoe brands try to steer through weaker demand overall and a broader price-cutting battle in retail stores for inflation-battered customers. Those customers have had to set aside more money to cover the costs of ever-pricier essential goods, at the expense of things like sportswear and sneakers.
“We are seeing indications of more cautious consumer behavior around the world in an uneven macro environment,” Friend said during the call.
Nike executives said consumer demand was strong through the back-to-school season, Black Friday and Cyber Monday, but lagged in between. Demand wobbled online, and in China and Europe.
They also said that the money they planned to save would be reinvested into helping Nike become more nimble and more responsive to consumer preferences, after years of shifting away from selling shoes and gear through traditional retail chains in favor of doing business through its own stores and e-commerce channels. They added that those efforts “added complexity and inefficiencies” as competition grew steeper.
Chief Executive John Donahoe said on the call that the Nike-brand women’s segment was already a $9 billion business. But he said new products — like bras, leggings, retro-themed running shoes and other offerings that span both sports and lifestyle — would help draw more women customers.
Within the Jordan category, Donahoe cited opportunities beyond basketball sneakers. Clothing and golf-, soccer- and football-related products, along with offerings targeted toward women and children, would also help drive growth, he said.
But for the rest of its fiscal year, Nike’s expectations were dimmer. The company said it forecasted “slightly negative” sales growth for its fiscal third quarter. For its fourth quarter, executives expect low-single-digits sales gains. And they said they now anticipate Nike’s full-year sales to increase around 1%, compared to an outlook in September for mid-single-digits gains.
In its fiscal second quarter, which ended on Nov. 30, Nike reported net income in the period of $1.58 billion, or $1.03 a share, compared with $1.33 billion, or 85 cents a share, in the same quarter last year. Revenue rose 1% year over year, to $13.4 billion.
Analysts polled by FactSet expected adjusted earnings per share of 84 cents, on sales of $13.39 billion.
Gross margin rose to 44.6%, helped by price increases and lower costs for ocean-freight shipping.
Outlooks this year from athletic-gear retailers like Foot Locker Inc.
FL,
and Dick’s Sporting Goods Inc.
DKS,
have also been cautious, and Nike has faced competition from the likes of Adidas
ADDYY,
and On Running
ONON,
Nike management also said in their previous earnings call in September that they aimed to do more to attract women and running-shoe customers. However, they noted that demand for the company’s products remained solid and they were “cautiously planning for modest markdown improvements for the balance of the year,” as the company tightens up its supplies of sneakers and clothing in stock.
On Thursday’s call, executives said that demand for higher-priced products had been “resilient,” and that they didn’t have to cut prices as much as their rivals. And they said new releases — like the Sabrina 1 and Luka 2 sneakers — were the best way to stand out in a sea of discounts.
“We know in an environment like this, when the consumer is under pressure and the promotional activity is higher, that it’s newness and innovation which causes the consumer to act,” Friend said.
Dec 19, 2023, 4:31 am EST
Stock futures traded flat Tuesday, a day after the S&P 500 finished up 0.5% and moved closer to its all-time. The broad market index stands just 1.2% below its record of 4,796.56 reached in early January 2022.
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One-time pandemic darling DocuSign Inc. may be looking to sign a deal of its own.
The e-signature company is working with advisers as it considers a sale, the Wall Street Journal reported Friday afternoon. A deal for DocuSign
DOCU,
valued at upwards of $11 billion, could result in one of the largest recent leveraged buyouts, the report said, noting that private-equity firms and technology companies were among the potential suitors.
DocuSign shares were up more than 11% in afternoon trading Friday following the report.
A DocuSign spokesperson said the company doesn’t comment on rumors or speculation.
The company was a pandemic-era poster child as businesses looked for ways to get signatures on contracts, mortgages and other documents in a virtual world. But DocuSign has struggled to match its earlier growth rates as offices have resumed in-person activity, and management acknowledged a tough macroeconomic environment when DocuSign last posted earnings.
DocuSign shares traded above $310 at their highest point in September 2021, but they closed Thursday near $56. The stock was changing hands just south of $64 Friday amid the intraday rally.
Options contracts tied to more than $5 trillion worth of stocks, exchange-traded funds and indexes are set to expire on Friday as the latest “triple witching” expiration event collides with the rebalancing of the S&P 500 and Nasdaq-100.
The result could be a high-octane, and potentially extremely volatile, session where tens of billions of contracts and shares could change hands, market strategists said.
According to figures from Rocky Fishman, founder of Asym500, options with a notional value of $5.3 trillion are set to expire, with the biggest slug expiring ahead of the open.
On one side, many traders will be cashing in bullish bets that are deep in the money, while some roll their positions, forcing market-makers to continue to hedge their exposure.
At the same time, managers of index-tracking funds will need to finish adjusting their holdings before the announced index changes take effect.
Already, trading volume has been trending higher all week. In the U.S. market, 17 billion shares changed hands on Thursday, according to Steve Sosnick, chief market strategist at Interactive Brokers, during a phone interview with MarketWatch. That is up from 10.6 billion on Tuesday.
“I expect to see enormous volumes tomorrow in a lot of popular names,” Sosnick said.
“Not only will this one be the largest option expiration of the year (as is typical for December), but it is currently set up to become the largest SPX option expiration in more than a decade,” Fishman said in a report shared with MarketWatch.
Brent Kochuba, founder of Spotgamma, an options-market analytics provider, went even further during a phone interview with MarketWatch: “This might be the biggest options expiration ever.”
As markets have rallied, traders have been scooping up bullish options contracts at a record pace, according to data from Cboe Global Markets, the biggest operator of options exchanges in the U.S.
For S&P 500-linked options, typically the most popular product, 4.8 million contracts changed hands on Thursday, according to Cboe, a new record, surpassing the previous record from Nov. 14.
Also, total call-trading volume for all U.S. equity options exceeded 30 million contracts on Wednesday, according to Goldman Sachs Group, making it one of the busiest days for trading in bullish contracts this year.
Aggressive call-buying over the past month has helped push the S&P 500 to just shy of its record closing high, options-market experts said. The S&P 500
SPX
gained 8.9% in November, its best month of 2023, and the 18th best-performing month of the past 73 years. And it has continued to climb in December, having risen 3.3% through Thursday’s close, according to FactSet data.
Earlier this week, options strategists warned that markets might run into trouble at 4,600 on the S&P 500. They warned that a “call wall” of open-interest in bullish contracts around that level could force market makers to put the breaks on the rally.
Instead, bullish traders blew through the call wall, pushing it higher to 4,700, said Kochuba.
The S&P 500 closed at 4,719.55 on Thursday, its highest close since Jan. 12, 2022, according to FactSet data. The index is now sitting within 1.75 percentage points of its record closing high of 4,796.56 on Jan. 3, 2022.
Traders’ bullishness recently helped push the Cboe Volatility Index
VIX,
otherwise known as Wall Street’s “fear gauge,” to multiyear lows, according to FactSet data.
To be sure, it isn’t just S&P 500 options and contracts tied to popular stocks like Tesla Inc.
TSLA,
seeing explosive volume: Calls tied to the iShares Russell 2000 ETF
IWM,
which tracks the small-cap Russell 2000, hit 1.35 million contracts, the third-highest ever, according to Goldman. Activity in options contracts linked to small-cap stock indexes has surged since late October.
Heavy call buying has pushed the put-call skew for S&P 500 options to its lowest level in a year, according to data from Goldman Sachs Group.
This shows that investors have been scrambling to buy bullish contracts, while largely shunning bearish ones, as stocks marched higher. Goldman analysts described Friday as “the last major liquidity event of the year” in a note to clients obtained by MarketWatch.
“Triple Witching” days happen once a quarter. They are thusly named because options tied to single stocks, ETFs and indexes will expire, alongside index-tracking futures contracts. Options-market experts say they are typically associated with more intraday swings and higher trading volume.
Making things even more interesting is the fact that the quarterly rebalancing of the S&P 500 and Nasdaq-100 is due to take effect after markets close on Friday.
Normally routine, this quarter’s rebalancing is drawing outsize attention following an extremely rare ad hoc rebalancing over the summer to rein in the influence of megacap stocks in the Nasdaq-100.
Earlier this month, Standard & Poor’s announced its rebalancing plans, which included reducing the weighting of two Magnificent Seven stocks, Apple Inc.
AAPL,
and Alphabet Inc.
GOOG,
GOOGL,
At the same time, Amazon.com Inc.
AMZN,
which is also part of the Mag 7, will see its weighting increased. Meanwhile, three companies will join the index, including Uber Inc.
UBER,
while shares of three other companies depart.
Kochuba believes Friday’s expiration could remove the last barrier holding stocks back from rocketing to record highs before the end of the year.
“After OpEx, markets will be able to move more freely,” Kochuba said.
Garrett DeSimone of OptionMetrics cautioned that investors shouldn’t place too much weight on options-market activity and other technical factors.
“At the end of the day, macro trumps everything,” he said during an interview with MarketWatch.
Oracle shares were heading sharply lower in late trading Monday after the enterprise software giant posted November quarter financial results that fell short of both the company’s own guidance and consensus Street estimates.
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Financial conditions are now looser than in September, says economist
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The feel-good tone gripping markets in the home stretch of 2023 may not be what the Federal Reserve had penciled in for the holidays.
The stock market in December, once again, has been knocking on the door of record levels, driven by optimism about easing inflation and potential Fed rate cuts next year.
But while the prospect of double-digit equity gains this year would be a reprieve for investors after a brutal 2022, the latest rally also points to looser financial conditions.
Ultimately, the risk of looser financial conditions is that they could backfire, particularly if they rub against the Fed’s own goal of keeping credit restrictive until inflation has been decisively tamed.
Read: Inflation is falling but interest rates will be higher for longer. Way longer.
Specifically, the November rally for the S&P 500 index
SPX
can be traced to the 10-year Treasury yield
BX:TMUBMUSD10Y
dropping to 4.1% on Thursday from a 16-year peak of 5% in October.
Oxford Economics
The Fed only exerts direct control over short-term rates, but 10-year and 30-year Treasury yields
BX:TMUBMUSD30Y
are important because they are a peg for pricing auto loans, corporate debt and mortgages.
That makes long-term rates matter a lot to investors in stocks, bonds and other assets, since higher rates can lead to rising defaults, but also can crimp corporate earnings, growth and the U.S. economy.
Michael Pearce, lead U.S. economist at Oxford Economics, thinks the November rally may put Fed officials in a difficult spot ahead of next week’s Dec. 12 to 13 Federal Open Market Committee meeting — the eighth and final policy gathering of 2023.
“The decline in yields and surge in equity prices more than fully unwinds the tightening in conditions seen since the September FOMC meeting,” Pearce said in a Thursday client note.
The Fed next week isn’t expected to raise rates, but instead opt to keep its benchmark rate steady at a 22-year high in a 5.25% to 5.5% range, which was set in July. The hope is that higher rates will keep bringing inflation down to the central bank’s 2% annual target.
Ahead of the Fed’s July meeting, stocks were extending a spring rally into summer, largely driven by shares of six meg-cap technology companies and AI optimism.
Rates in September were kept unchanged, but central bankers also drove home a “higher for longer” message at that meeting, by penciling in only two rate cuts in 2024, instead of four earlier. That spooked markets and triggered a string of monthly losses in stocks.
Pearce said he expects the Fed next week to “push back against the idea that rate cuts could come onto the agenda anytime soon,” but also to “err on the side of leaving rates high for too long.”
That might mean the first rate cut comes in September, he said, later than market odds of a 52.8% chance of the first cut in March, as reflected by Thursday by the CME FedWatch Tool.
Stocks were higher Thursday, poised to snap a three-session drop. A day earlier, the S&P 500 closed 5.2% off its record high set nearly two years ago, the Dow Jones Industrial Average
DJIA
was 2% away from its record close and the Nasdaq Composite Index
COMP
was almost 12% below its November 2021 record, according to Dow Jones Market Data.
Related: What investors can expect in 2024 after a 2-year battle with the bond market
In case you missed the news, the pop-chart star of the moment is Brenda Lee, a 78-year-old Rock & Roll and Country Music Hall of Famer whose 1958 holiday hit, “Rockin’ Around the Christmas Tree,” is remarkably now the nation’s No. 1 song, according to Billboard.
It all follows a major push by Lee’s label, Universal Music Group’s UMG Nashville/UMe
UMG,
to bring the decades-old rockabilly-flavored song to the fore. That included releasing the first-ever video for the song, with cameos by country greats Tanya Tucker and Trisha Yearwood, plus a new EP.
But here’s a related story that could come as a surprise: Lee may stand to gain relatively little financially from her chart-topping success, according to a number of entertainment-industry attorneys and experts who spoke with MarketWatch.
David Schulhof, a veteran music-industry executive who is behind the MUSQ ETF MUSQ, an exchange-traded fund focused on the music business, said that Lee might take home $250,000 at best directly from recording royalties through her label.
Not quite the millions of dollars you might expect, in other words. And certainly not the estimated $2.5 million to $3 million that Mariah Carey rakes in annually from her holiday hit, “All I Want for Christmas Is You,” the song that has given Carey the unofficial title of “Queen of Christmas.”
But Lee’s case is not unique, Schulhof said. “A lot of these artists appear to be richer than they are,” he said.
MarketWatch reached out to Lee for comment through Universal Music, but didn’t receive an immediate response.
Lee did issue a statement through the company, however, saying, “This is amazing! I cannot believe that ‘Rockin’ has hit No. 1 65 years after it was released, this is just so special!…The song came out when I was a young teenager and now to know that it has resonated with multiple generations and continues to resonate — it is one of the best gifts I have ever received.”
A label spokesperson didn’t have immediate comment on the recent royalties generated by the recording.
Not that Lee’s royalty earnings this year may be anything to sneeze at — certainly, $250,000 is not a bad payday. But in general, the big money in the music business often goes to songwriters, Schulhof and others explain.
“The richer pot of the two is definitely the composer’s side,” Barry Chase, a Miami-based entertainment attorney, told MarketWatch.
That is, songwriters are guaranteed a solid chunk of royalties in most contractual arrangements. Indeed, the reason Carey does so well with “All I Want for Christmas Is You” is because she helped pen the hit, which is said to have earned her $60 million since its 1994 release. (That said, Carey is now facing a $20 million copyright lawsuit connected to the song.)
In the case of “Rockin’ Around the Christmas Tree,” the songwriter is the late Johnny Marks, who also penned such holiday hits as “Rudolph the Red-Nosed Reindeer,” “A Holly Jolly Christmas,” “Silver and Gold” and “I Heard the Bells on Christmas Day.” Marks’ catalog is now managed by his estate, with the songwriter’s son, Michael Marks, helping guide the business.
“Who would have thought?” Michael Marks told MarketWatch about the recent chart-topping success of “Rockin’ Around the Christmas Tree.” But he didn’t want to respond to other questions, saying, “This is a busy time for us.”
A key reason songwriters stand to benefit so much is that they receive money from radio play, whereas recording artists — and record labels — do not, explained Chase. And while radio is not as significant in the era of Spotify and other digital outlets, it still counts for something.
Chase says the radio arrangement was set in motion decades ago and that record companies didn’t push for money tied to airplay because they were eager for the exposure, which they saw as a way to drive sales of the singles or albums.
Other issues are also at play for recording artists that affect their earnings, experts explain. That’s especially true for older artists who signed contracts decades ago, when the industry was especially known for taking advantage of singers.
Further complicating matters: The artist contracts back in the day didn’t anticipate the advent of everything from digital platforms like Spotify to ringtones, all sources of royalty revenue, experts note. And while there might have been clauses that allowed for the potential of such future sources, there’s no saying those arrangements were fair.
“‘It takes a lot of streams to make money.’”
Contracts can be renegotiated, of course — and often are, particularly if a label is trying to stay on good terms with an artist in anticipation of keeping them signed and making more hit records, industry professionals observe.
But when it comes to something like Spotify, the royalties still may not amount to much — reports say they can be between $0.003 to $0.005 per stream. And even then, the artist is splitting that streaming revenue with the record label.
“It takes a lot of streams to make money,” Lisa Alter, a partner and entertainment attorney with the New York-based firm Alter, Kendrick & Baron, told MarketWatch.
Schulhof throws another wrinkle into the equation: Often, a contract renegotiation involves the recording artist getting an upfront payment from the label in advance of future royalties. So, in theory, an artist like Brenda Lee could be receiving nothing in 2023 from her label, with the money having been paid out years ago, Schulhof said.
Lee can still mine her chart-topping success in other ways, however. Namely, through concert engagements, personal appearances and film, TV and advertising opportunities. Schulhof said that could easily add $100,000 to $150,000 in earnings this year, but probably not more.
But Holly Gleason, a veteran music journalist who knows Lee personally, said Lee is both “cute-as-a-button crazy” and sharp and smart — in other words, just the formula that would make her someone in demand for a variety of opportunities and someone who would know how to mine them properly.
And Gleason told MarketWatch that those opportunities could be endless. “Maybe she’ll be on QVC selling Christmas trees,” Gleason said.
Spotify Technology SA on Monday said it plans to reduce head count by 17%, which would mark the third time the audio streaming group has announced layoffs cuts this year.
The Wall Street Journal said the cuts would equate to about 1,500 jobs.
The move was announced by Chief Executive Officer Daniel Elk in a letter to employees that was posted on the company’s website.
“Economic growth has slowed dramatically and capital has become more expensive. Spotify is not an exception to these realities,” he said, adding that the “painful” cuts were needed to align the company with “future goals and ensure we are right-sized for the challenges ahead.”
Spotify
SPOT,
previously announced 200 workers would be laid off in June and 600 workers in January.
Elk said that he realized the new reductions seem “surprisingly large, given the recent positive earnings report and the company’s performance” — shares have soared 128% in 2023.
Analysts have credited Spotify’s share performance this year to strong growth and improved profitability, but Citi downgraded the stock last week, saying risk-reward is no longer attractive.
“We debated making smaller reductions throughout 2024 and 2025. Yet, considering the gap between our financial goal state and our current operational costs, I decided that a substantial action to rightsize our costs was the best option to accomplish our objectives,” he said.
Elk explained that in 2020 and 2021, Spotify took advantage of lower costs of capital and “invested significantly,” for example in expanding the company’s team and enhancing conent.
“These investments generally worked, contributing to Spotify’s increased output and the platform’s robust growth this past year. However, we now find ourselves in a very different environment. And despite our efforts to reduce costs this past year, our cost structure for where we need to be is still too big,” he said.