Tag: Sales Figures

SVB Financial’s stock suffers biggest drop in 25 years after large losses on securities sales, equity offering

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Shares of Silicon Valley Bank parent company SVB Financial Group plummeted Thursday toward the biggest one-day selloff since the dotcom boom, after the Santa Clara, Calif.-based financial-services company disclosed large losses from securities sales and a stock offering meant to provide a boost to its balance sheet.

The bank
SIVB,
-43.86%,
which helps fund technology startups backed by venture-capital firms, said it took the “strategic actions” to strengthen its financial position as rising interest rates increase pressure on public and private markets and as clients face elevated cash burn levels.

SVB also cut its first-quarter guidance ranges for net interest income (NII) to $880 million-$900 million from $925 million-$955 million and for net interest margin (NIM) to 1.75%-1.79% from 1.85%-1.95%. The outlook for declines in average deposits was increased to the low-double-digit percentage range from mid single digits.

“While VC deployment has tracked our expectations, client cash burn has remained elevated and increased further in February, resulting in lower deposits than forecasted,” Chief Executive Greg Becker wrote in a letter to shareholders. “The related shift in our funding mix to more, higher-cost deposits and short-term borrowings, coupled with higher interest rates, continues to pressure NII and NIM.”

The stock dove 41% in morning trading, outpacing the S&P 500’s
SPX,
+0.02%
losers by a wide margin. It was suffering the biggest one-day selloff since its record 42.3% decline on Sept. 10, 1998.

SVB said late Wednesday it sold about $21 billion worth of its available-for-sale securities. As of Dec. 31, the company had $26.1 billion in AFS securities.

The sale will result in a loss of about $1.8 billion in the first quarter of 2023, while the FactSet consensus for first-quarter net income was $274.8 million.

“The sale of substantially all of our AFS securities will enable us to increase our asset sensitivity, partially lock in funding costs, better insulate net interest income (NII) and net interest margin (NIM) from the impact of higher interest rates, and enhance profitability,” Becker wrote.

Separately, the company said it plans to offer for sale $2.25 billion worth of equity securities to bolster its financial position.

The offering includes $1.25 billion worth of common stock, which represents 13.4% of the company’s current market capitalization of $9.33 billion, and $500 million worth of mandatory convertible preferred stock. SVB has also entered into an agreement with private-equity investor General Atlantic to buy $500 million worth of common stock in a separate private transaction.

“Our financial position enables us to take these strategic actions, which are intended to further bolster that position now and over the long term,” the bank said in a statement.

JPMorgan analyst Steven Alexopoulos cut his stock-price target to $270 from $300 but reiterated the overweight rating he’s had on SVB for at least the past three years. The stock target is above Tuesday’s closing price of $267.83.

“While this is yet another setback that will result in another negative [earnings-per-share] revision, we continue to believe that it remains a question of when rather than if the war chest of dry powder on the sidelines starts to get deployed at a much more rapid pace,” Alexopoulos wrote in a note to clients.

The stock, which was headed for its lowest close since April 2020, has tumbled 28.3% over the past three months and plunged 70.7% over the past 12 months. In comparison, the Financial Select Sector SPDR exchange-traded fund
XLF,
-2.06%
has lost 7.1% over the past year and the S&P 500 has shed 6.6%.

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March 9, 2023
Pending home sales blew past expectations last month as buyers pounced on lower rates | CNN Business

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Washington, DC
CNN
—

Pending home sales crushed expectations in January, when mortgage rates dropped from recent highs of more than 7% and home buyers jumped at the opportunity.

According to data released Monday from the National Association of Realtors, it was the largest monthly sales increase since June 2020.

The pending sales index, based on signed contracts to buy a home rather than the final sales that are accounted for in existing home sales, rose by 8.1% from December to January, beating economists’ predictions for a rise of 1%. January’s jump followed a downwardly revised 1.1% rise in December.

“Buyers responded to better affordability from falling mortgage rates in December and January,” said Lawrence Yun, chief economist at NAR.

But since then, mortgage rates have risen again, climbing almost half a percentage point since the beginning of February, according to Freddie Mac.

“Mortgage rates took a breath in December and January before resuming their climb in February, reaching 6.5%, the highest level of the new year,” said Hannah Jones, an economic data analyst at Realtor.com.

At the current mortgage rate, the monthly payment on a median-priced home is about 45% higher — or $630 more — than it was at the same time last year, she said. “Many buyers are still holding off, waiting to see if prices or rates give a bit before getting into the market.”

Last year’s persistent increase in both mortgage rates and home prices pushed many would-be home purchasers out of the market, said Jones. This resulted in a slowing of new homes in the building pipeline and fewer sellers listing their homes, which limited options for buyers still in the market.

“New listings were at the lowest level in the last six years in January as sellers stayed on the sidelines, waiting to see buyers return, before placing their homes for sale,” said Jones. “However, the first month of the year brought glimmers of hope as year-over-year declines in both existing and new home sales slowed, and buyer sentiment improved slightly.”

While home sales were down by 24.1% from the still-hot market of a year ago, activity appears to be bottoming out in the first quarter of this year, before incremental improvements will occur, Yun said.

“An annual gain in home sales will not occur until 2024,” said Yun. “Meanwhile, home prices will be steady in most parts of the country with a minor change in the national median home price.”

All regions saw a month-to-month increase in pending home sales, with the Northeast up 6%, the Midwest up 7.9%, the South up 8.3% and the West up 10.1%.

“An extra bump occurred in the West region because of lower home prices, while gains in the South were due to stronger job growth in that region,” Yun said.

Home prices are dropping fastest in areas where prices ran up the most in the frenzied market of the past few years.

But overall, the number of home sales are expected to drop this year, according to NAR’s forecast.

NAR anticipates the economy will continue to add jobs throughout this year and next, with the 30-year fixed mortgage rate steadily dropping to an average of 6.1% in 2023 and 5.4% in 2024.

Even with an improving interest rate environment and job gains, Yun still expects annual existing-home sales to drop about 11% this year from last year, before jumping up about 18% in 2024. NAR projects new-home sales will fall about 4% this year compared with last year before surging nearly 20% in 2024.

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February 27, 2023
Dow drops more than 500 points as retail earnings disappoint | CNN Business

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New York
CNN
—

US stocks dropped on Tuesday afternoon after fourth-quarter earnings and forecasts from mega-retailers like Walmart and Home Depot raised concerns about the strength of demand from the US consumer.

The Dow was down about 500 points, or 1.5%, on Tuesday afternoon. The S&P 500 fell by 1.6% and the Nasdaq Composite was 1.8% lower.

Walmart

(WMT) topped revenue expectations, but shares of the stock fell nearly 2% in morning trading after the retailer lowered its outlook for the year ahead. Walmart

(WMT)’s CFO said that he was worried about inflation and its impact on the US consumer.

“The consumer is still very pressured, and if you look at economic indicators, balance sheets are running thinner and savings rates are declining relative to previous periods,” Walmart CFO John Rainey said during the earnings call. “And so that’s why we take a pretty cautious outlook on the rest of the year.”

Shares of the stock had recovered by the early afternoon and were up by about 0.6%.

Home Depot

(HD) reported record earnings for the fiscal year that ended in January, and boosted both hourly wage and the stock dividend. But the fourth quarter painted a different picture, as the company missed revenue expectations for the first time since 2019, before the pandemic.

The company also lowered its outlook for the year ahead as executives struck a more cautious tone about recession and inflation forecasts on the call that followed earnings.

Shares of the stock fell by nearly 6% on Tuesday as the housing market weakens – US existing home sales dropped to their lowest level in more than 12 years in January.

“After a year of defying gravity, the slowing economy and pressures on consumers have finally caught up with Home Depot,” said Neil Saunders, managing director of GlobalData. “For most of 2022, the number of existing homes sold has been in decline. However, the pace of decline accelerated in December with the volume of completed sales down by a sharp 36.3%.”

Target, Best Buy, Macy’s and Gap will report later this month.

Investors, meanwhile, are gearing up for a week full of important economic data. Minutes from the Federal Reserve’s last meeting are coming on Wednesday, a second revision of GDP will be released on Thursday and Friday brings January’s Personal Consumption Expenditures – the Fed’s preferred inflation gauge.

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February 21, 2023
In a market that’s gone mad, investors can embrace these dependable stocks | CNN Business

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A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.

New York
CNN
—

Many people don’t have the time or inclination to do deep research on stocks.

It’s often easier to buy an exchange-traded fund that owns a basket of the top blue chips, like Apple

(AAPL), Microsoft

(MSFT) and Amazon

(AMZN). Other investors like to bet on themes and memes instead of poring over a company’s financial statements and regulatory filings. Hence the recent craze for momentum stocks like GameStop

(GME) and AMC

(AMC).

But for old-fashioned investors with a little gray in their hair (and veteran business journalists like yours truly) there are other ways to find winning stocks for the long haul.

I’ve been running stock screens using market data software, first from FactSet and now from Refinitiv, on and off during the more than 20 years I’ve worked at CNN Business. (It was CNNMoney when I first started.)

I’ve typically done this stock picking feature in early to mid February as a Stocks We Love type of story, pegging it to Valentine’s Day. (Here’s the first one I did in 2002!) So they’ve often been littered with cheesy references to how romantic it is to find a reliable company you can count on for a long-term relationship.

Well, investing trends have changed a bit in the past two decades. Some would argue that active investing (actually choosing individual companies) is no longer in vogue thanks to the rise of passively run index funds.

And to be fair, the experts are right, mostly. Investors usually are better off owning an index ETF. If the goal is saving for retirement in particular, a diversified mix of companies is safer than trying the riskier strategy of identifying individual winners and losers.

But you know what they say about not being able to teach an old dog new tricks? I still believe there’s value in looking for quality stocks at bargain prices. Legendary investors like Warren Buffett and Peter Lynch of Fidelity fame would likely agree.

With that in mind, I ran one final stock screen for this Valentine’s Day. Like my past screens, I tried to find companies with strong fundamentals (solid sales and earnings growth), low levels of debt and high returns on equity. And perhaps most importantly, I screened for companies trading at a reasonable price based on their estimated earnings.

This screen wound up identifying 33 companies that could make sense as a buy-and-hold investment. All of them generated double-digit sales growth annually over the past five years and they are all expected to report profit growth of at least 10% a year for the next few years.

Some of the more prominent companies on the list? IT services/consulting giant Accenture

(ACN) made the cut. So did software leader Adobe

(ADBE), semiconductor manufacturer Analog Devices

(ADI), chip equipment juggernaut Applied Materials

(AMAT) and Venmo owner PayPal

(PYPL).

That’s a fair amount of exposure to the tech sector. But several other non-techs made my list too.

Auto insurer Progressive

(PGR) (hi Flo!), health insurer Humana

(HUM), cosmetics retailer Ulta Beauty

(ULTA), UGG boots and Hoka sneakers maker Deckers Outdoor

(DECK) and trucker JB Hunt

(JBHT) met my criteria.

As did financial services firm Raymond James

(RJF), perhaps most famous for having its name on the Tampa Bay Buccaneers stadium Tom Brady briefly called home.

None of these stocks are likely to be moonshots that will surge because of comments that someone makes on Reddit. But they might offer a little more in the way of security and dependability. And after all, isn’t that what we all want from a long-term partner on Valentine’s Day?

The broader market has continued to rally, in large part due to hopes that inflation pressures (and more Federal Reserve rate hikes) will soon be things of the past. But consumers are still skittish when it comes to buying more costly items.

Meat processing giant Tyson Foods

(TSN) reported disappointing results last week, largely due to a pullback in consumer demand for pricier beef. Luxury apparel retailer Capri Holdings

(CPRI), which owns the Versace, Jimmy Choo and Michael Kors brands, also posted lousy numbers.

But shoppers still seem to be spending on more affordable goods. Pepsi

(PEP) reported sales and earnings last week that topped Wall Street’s targets. Fast food giant Yum! Brands

(YUM), the owner of Taco Bell, KFC and Pizza Hut, issued solid results too.

That could bode well for several leading consumer companies that are on tap to report earnings this week, including Pepsi competitor Coca-Cola

(KO) as well as Restaurant Brands

(QSR), the parent company of Burger King, Popeyes, Tim Horton and Firehouse Subs.

Kraft Heinz

(KHC), restaurant owner Bloomin’ Brands

(BLMN), Sam Adams brewer Boston Beer

(SAM) and food delivery service DoorDash are also scheduled to release their latest results this week.

The restaurant stocks in particular could do well.

“Consumers continue to trade goods for services,” said Jharonne Martis, director of consumer research for Refinitiv, in a report. Martis noted that the restaurant and broader leisure sector has continued to outperform other consumer-related industries this year.

Inflation is obviously still a concern for big consumer brands. Companies have to deal with the challenge of trying to pass on higher costs to customers without driving them away.

That could become less of a problem though.

The US government will report both its Consumer Price Index and Producer Price Index for January this week and economists are hoping for a further slowdown in year-over-year prices. Consumer prices rose 6.5% over the past 12 months through December, down from a 7.1% pace in November.

“There are positive signs. Inflation has passed the peak so there is a little bit of a respite,” said Kathryn Kaminski. chief research strategist with AlphaSimplex.

Higher prices were a problem for retailers during the holidays. Retail sales fell 1.1% in December from November, according to figures from the US government, following a 0.6% drop in November.

But retail sales are expected to bounce back as inflation becomes less of an issue. Economists are forecasting a 0.9% increase in retail sales for January when those numbers come out later this week.

Monday: Earnings from TreeHouse Foods

(THS), Avis Budget

(CAR), FirstEnergy

(FE), IAC

(IAC) and Palantir

Tuesday: US CPI; Japan GDP; UK employment report; earnings from Coca-Cola, Asahi Group, Marriott

(MAR). Cleveland-Cliffs

(CLF), Restaurant Brands, Suncor Energy

(SU), Airbnb, Herbalife

(HLF), GoDaddy

(GDDY) and TripAdvisor

(TRIP)

Wednesday: US retail sales; UK inflation; weekly crude oil inventories; annual meeting of Charlie Munger’s Daily Journal Co

(DJCO); earnings from Kraft Heinz, Lithia Motors

(LAD), Sunoco

(SUN), Sonic Automotive

(SAH), Ryder

(R), Barrick Gold

(GOLD), Biogen

(BIIB), Owens Corning

(OC), Krispy Kreme, Cisco

(CSCO), AIG

(AIG), Shopify

(SHOP) and Boston Beer

Thursday: US PPI; US weekly jobless claims: US housing starts and building permits; China housing prices; earnings from US Foods

(USFD), Lenovo

(LNVGF), Nestle

(NSRGF), Paramount Global, Southern

(SO), Hasbro

(HAS), Hyatt

(H), Bloomin’ Brands, WeWork, Applied Materials

(AMAT), DoorDash, DraftKings and Redfin

(RDFN)

Friday: Earnings from Deere

(DE), AutoNation

(AN), Sands China

(SCHYF) and AMC Networks

(AMCX)

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February 12, 2023
Under Armour stock jumps toward 9-month high after big profit beat, strong shoe sales

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Shares of Under Armour Inc. sprinted higher Wednesday toward a nine-month high, after the athletic apparel and gear seller reported a big beat in fiscal third quarter profit and raised its full-year outlook.

Net income for the quarter to Dec. 31 rose to $121.6 million, or 27 cents a share, from $109.7 million, or 23 cents a share, in the year-ago period. Excluding nonrecurring items, adjusted earnings per share of 16 cents was well above the FactSet consensus of 9 cents.

Revenue grew 3.4% to $1.58 billion, above the FactSet consensus of $1.55 billion, as a 25% jump in footwear revenue offset 2% declines in apparel and accessories revenue. Meanwhile, a 2% decline in North America revenue was offset by a 14% increase in international revenue.

The Class C shares
UA,
+0.09%
shot up 6.8% in premarket trading, which puts them on track to open at the highest price seen during regular-sessions hours since May 5, 2022. The Class A shares
UAA,
-0.08%
jumped 6.9%.

Gross margin contracted by 6.5 percentage points, due primarily to higher promotions, sales mix impacts and the negative impact of currency fluctuations.

For fiscal 2023, the company raised its adjusted EPS guidance range to 52 cents to 56 cents from 44 cents to 48 cents, but kept its revenue growth guidance at a low single-digit percentage range. The FactSet consensus for EPS was 46 cents, and the FactSet revenue consensus of $5.86 billion implied 2.7% growth.

The Class C shares have soared 53.5% over the past three months through Tuesday, while the S&P 500
SPX,
+1.29%
has gained 8.8%.

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February 8, 2023
Apple earnings show steepest sales decline in more than 6 years

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Apple Inc. posted its largest revenue decline in more than six years amid underwhelming sales of iPhones, Macs and wearables, but its shares pared back most of their initial losses in after-hours trading Thursday after the company blamed its smartphone declines on supply issues.

Apple’s
AAPL,
+3.71%
iPhone revenue fell to $65.8 billion in the fiscal first quarter from $71.6 billion a year before, whereas analysts tracked by FactSet were looking for $67.8 billion. The performance comes after Apple warned in November that its iPhone 14 Pro and Pro Max shipments would be impacted by pandemic-fueled production constraints at a major Foxconn
2354,
-0.35%
facility in China.

Chief Executive Tim Cook said on Apple’s earnings call that he believes the company would have shown iPhone sales growth in the quarter had it not been for the supply constraints.

At the same time, he noted that it’s “very hard” to estimate the company’s ability to recapture lost sales, “because you have to know exactly what would’ve happened.”

Apple shares ended the extended session Thursday down 3.2%, after having been down as much as 5.6% in after-hours trading.

After reporting a quarterly revenue record for Macs in the September quarter, Apple fell way short of those heights in the December quarter with its Thursday afternoon report, and the company missed expectations by a wide margin. Mac sales declined to $7.7 billion from $10.9 billion a year earlier, while analysts had been looking for $9.4 billion.

Those big misses helped drive total revenue lower on the year and fueled a miss on the top line, despite a sizable beat in the iPad category. Overall revenue declined to $117.2 billion from $123.9 billion a year ago, while analysts were looking for $121.4 billion.

Dating back to its report for the December 2017 quarter, Apple has only missed revenue expectations twice, according to FactSet, including one time when the company issued a formal warning ahead of its official results.

The smartphone giant’s sales decline of 5.48% was its steepest year-over-year fall since the September quarter of 2016, when sales slipped 8.12%, according to Dow Jones Market Data.

Apple executives once again declined to provide a traditional financial forecast, though Chief Financial Officer Luca Maestri shared on the call that he expects Apple’s year-over-year revenue performance in the March quarter to be similar to what was seen in the December quarter. That would actually mark an acceleration of sorts, he said, since the December quarter benefited from an extra week.

Within iPhones specifically, Maestri also anticipates that year-over-year revenue growth will accelerate.

Apple’s profits fell as well in the latest period, as the company generated net income of $30.0 billion, or $1.88 a share, compared with $34.6 billion, or $2.10 a share, a year earlier. Analysts were modeling $1.94 in earnings per share.

Maestri called out “significant foreign-exchange headwinds, supply constraints on iPhone 14 Pro and iPhone 14 Pro Max and a challenging macroeconomic environment” in discussing the company’s smartphone performance. Mac growth was negatively impacted by economic conditions, currency pressures and tough comparisons to a year before.

Within its iPad segment, Apple showed sharp growth. Revenue increased to $9.4 billion from $7.3 billion a year earlier. The FactSet consensus was for $7.8 billion.

Maestri noted that the iPad business benefited from the launch of new iPads during the quarter as well as comparisons to a year-earlier period in which Apple faced supply constraints.

Revenue for wearables, home and accessories came in at $13.5 billion, down from $14.7 billion a year before and far below the $15.3 billion that analysts were modeling. Services revenue rose to $20.8 billion from $19.5 billion and beat the FactSet consensus, which was for $20.4 billion.

Shares of Apple have fallen 14.2% over the past 12 months, though they’re up 16.1% to start 2023. The Dow Jones Industrial Average
DJIA,
-0.11%
is off 4.4% over a 12-month span but ahead 2.7% so far this year.

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February 2, 2023
Amazon stock falls as least profitable holiday quarter since 2014 leads to its worst annual loss on record

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Amazon.com Inc. reported its least profitable holiday quarter since 2014 on Thursday, leading to the biggest annual loss on record for the e-commerce giant, which also disappointed Wall Street with its forecast amid concerns about cloud growth.

Amazon
AMZN,
+7.38%
reported a holiday profit of $278 million, or 3 cents a share, down from $1.39 a share a year ago. Revenue increased to $149.2 billion from $137.41 billion a year ago. Analysts on average were expecting earnings of 17 cents a share on sales of $145.71 billion, according to FactSet.

Shares fell 5% in after-hours trading following the release of the results, after closing with a 7.4% increase at $112.91.

“In the short term, we face an uncertain economy, but we remain quite optimistic about the long-term opportunities for Amazon,” Chief Executive Andy Jassy said in a statement.

Amazon was expected to post a loss for the whole year for the first time since 2014, but worse-than-expected holiday earnings actually led Amazon to the company’s worst annual loss on record. For the year, Amazon produced a net loss of $2.7 billion and revenue of $513.98 billion, up from $469.82 billion a year ago and the company’s first annual sales total to surpass a half-billion dollars. Amazon had never lost more than $1.4 billion in a single year since going public in 1997, according to FactSet records.

Amazon’s fourth-quarter profit was hindered again by the decline of Rivian Automotive Inc.
RIVN,
+5.94%
stock, which cost Amazon $2.3 billion in net income in the quarter. In addition, Amazon recognized many of the costs of its recently announced layoffs and other cost cuts in fourth-quarter results as well — a $2.7 billion impairment charge included $640 million in severance charges related to layoffs and $720 million related to closures and impairment of physical stores, Chief Financial Officer Brian Olsavsky said in a call with reporters.

Without those charges, Amazon would have exceeded expectations, and recognizing them in 2022 leaves a cleaner sheet for this year, when Amazon’s ability to return to strong profitability will be the focus of Wall Street. The end result will likely rest on Amazon Web Services, or AWS, the cloud-computing offering that has supplied the bulk of Amazon’s profit in recent years, including 2022. Last year, AWS had operating profit of $22.84 billion, while the rest of the business produced an operating loss of $10.59 billion.

But cloud-computing growth has slowed, as Microsoft Corp.
MSFT,
+4.69%
displayed in its results and forecast last week, and Olsavsky confirmed the slowdown Thursday after AWS results missed expectations and suggested revenue growth had slowed to mid-teens and could stay there.

“Starting back in the middle of the third quarter of 2022, we saw our year-over-year growth rates slow as enterprises of all sizes evaluated ways to optimize their cloud spending in response to the tough macroeconomic conditions,” he said in a conference call with analysts. “As expected, these optimization efforts continued into the fourth quarter.”

Olsavsky told reporters he expected “slower growth rates for the next few quarters” for AWS, and later disclosed to analysts that revenue growth was in the mid-teens in the first month of this year. He noted that AWS revenue growth rates had been hit by customers looking to cut their cloud spending, and “we expect these optimization efforts will continue to be a headwind to AWS growth in at least the next couple of quarters.”

Opinion: The cloud boom has hit its stormiest moment yet, and it is costing investors billions

Making his first appearance on an earnings call since being named CEO two years ago, Jassy — who led AWS before being promoted to replace Jeff Bezos as CEO — said “if it’s good for our customers to find a way to be more cost effective in an uncertain economy, our team is going to spend a lot of cycles doing that.”

“We’re the only ones that really break out our cloud numbers in a more specific way, so it’s always a little bit hard to answer your question about what we see,” Jassy said to an analyst asking about the larger cloud industry, while referencing rival Microsoft’s refusal to provide full financial information about Azure. “But to our best estimations, when we look at the absolute dollar growth year over year, we still have significantly more absolute dollar growth than anybody else we see in this space.”

In the fourth quarter, AWS produced operating income of $5.21 billion on revenue of $21.38 billion, with sales growing more than 20% and operating income declining slightly. Analysts on average were expecting profit of $5.73 billion on sales of $21.85 billion, according to FactSet.

Any slowdown in AWS would hit Amazon’s bottom line as well as its overall top line, and executives’ forecast for the first quarter shows less optimism than Wall Street expected. Amazon’s guidance calls for operating profit of break-even to $4 billion and revenue of $121 billion to $126 billion, while FactSet recorded an average analyst forecast of $4.04 billion in operating profit on sales of $125.09 billion.

Amazon’s e-commerce business has struggled for growth amid the worst inflation in decades, with Olsavsky saying in a call with reporters that Amazon “saw customers spend less on discretionary items… [while] continuing to spend on everyday essentials.” Amazon recently announced it would start charging for grocery delivery for Prime members, which could increase revenue from sales of fresh food.

For more: Amazon Fresh to start charging Prime customers up to $10 for grocery deliveries

Amazon’s domestic e-commerce business posted an operating loss of $240 million on sales of $93.36 billion, after a $206 million loss on sales of $82.36 billion in the holiday quarter of 2021. Olsavsky said cuts in the company’s physical stores and device businesses would improve operating margins in North America.

Amazon’s international efforts struggled more, with a sales decline and increasing losses, as Olsavsky said the U.K. and other parts of Europe showed slowdowns. Amazon reported an operating loss of $2.23 billion on revenue of $34.46 billion overseas, after a loss of $1.63 billion on sales of $37.27 billion a year ago.

One bright spot in Amazon’s report was a record quarter for its advertising business, which has grown fast in recent years in a challenge to Alphabet Inc.’s
GOOGL,
+7.28%
GOOG,
+7.27%
Google and other online ad giants. Ads brought in $11.56 billion in the holiday quarter, growing nearly 19% from $9.71 billion a year ago and beating the analysts’ consensus.

Amazon stock has fallen more than 25% over the past 12 months, but has experienced a rebound so far in 2023, gaining more than 33% year to date. The S&P 500 index
SPX,
+1.47%
has declined 10.2% in the past year while gaining 7.3% since the calendar flipped to 2023.

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February 2, 2023
Infineon profit nearly doubles as revenue climbs on strong demand for chips

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Infineon Technologies AG on Thursday posted higher revenue and profit for its fiscal first quarter as strong chips sales in the automotive and industrial segments offset weaker demand for smartphones, computers and data centers.

The German chip maker
IFX,
+7.46%
said revenue for the three months ended Dec. 31 climbed to 3.95 billion euros ($4.34 billion) from EUR3.16 billion the prior-year quarter. Infineon’s automotive segment contributed EUR1.87 billion to the total.

“The energy transition and expansion of electromobility are causing a continuously high need for our solutions in industrial and automotive applications. In contrast, we are seeing significantly weaker demand in areas such as smartphones, PCs and data centers,” Chief Executive Jochen Hanebeck said.

Last week, Intel Corp. reported a fourth-quarter loss and a decrease in sales, reflecting, in part, the sharp downturn the personal-computer market has been experiencing over recent months. Infineon also saw lower demand for chips in laptops, TVs and games consoles.

Net profit jumped to EUR728 million from EUR457 million. Infineon’s segment result, a key profitability metric, surged to EUR1.11 billion from EUR717 million, generating a margin of 28%.

Analysts polled by FactSet had forecast revenue of EUR4 billion, a net profit of EUR675 million and a segment result of EUR1 billion.

Infineon had guided for revenue of around EUR4 billion and a segment result margin of about 25%.

For the fiscal second quarter, Infineon is targeting revenue of around EUR3.9 billion and a segment result margin of around 25%.

“We are continuing to navigate carefully in these challenging times and remain flexible in our approach to market dynamics. All in all, we are increasing our guidance slightly for the fiscal year, adjusting for currency effects,” Mr. Hanebeck said.

For the fiscal year, Infineon continues to expect revenue of around EUR15.5 billion, plus or minus EUR500 million, but raised its segment result margin forecast to around 25% from about 24% previously. The company based its guidance on an exchange rate of $1.05 to the euro, up from $1 previously.

Write to Mauro Orru at mauro.orru@wsj.com; @MauroOrru94

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February 1, 2023
Meta stock spikes nearly 20% as cost cuts and $40 billion for investors overshadow earnings miss

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Meta Platforms Inc. shares soared in after-hours trading Wednesday despite an earnings miss, as the Facebook parent company guided for potentially more revenue than Wall Street expected in the new year and promised more share repurchases amid cost cuts.

Meta
META,
+2.79%
said it hauled in $32.17 billion in fourth-quarter revenue, down from $33.67 billion a year ago but stronger than expectations. Earnings were $4.65 billion, or $1.76 a share, compared with $10.3 billion, or $3.67 a share, last year.

Analysts polled by FactSet expected Meta to post fourth-quarter revenue of $31.55 billion on earnings of $2.26 a share, and the beat on sales coincided with a revenue forecast that also met or exceeded expectations. Facebook Chief Financial Officer Susan Li projected first-quarter sales of $26 billion to $28.5 billion, while analysts on average were projecting first-quarter sales of $27.2 billion.

Shares jumped more than 19% in after-hours trading immediately following the release of the results, after closing with a 2.8% gain at $153.12.

Alphabet Inc.’s
GOOGL,
+1.61%

GOOG,
+1.56%
Google and Pinterest Inc.
PINS,
+1.56%
benefited from Meta’s results, with shares for each company rising more than 4% in extended trading Wednesday.

“Our community continues to grow and I’m pleased with the strong engagement across our apps. Facebook just reached the milestone of 2 billion daily actives,” Meta Chief Executive Mark Zuckerberg said in a statement announcing the results. “The progress we’re making on our AI discovery engine and Reels are major drivers of this. Beyond this, our management theme for 2023 is the ‘Year of Efficiency’ and we’re focused on becoming a stronger and more nimble organization.”

Read more: Snap suffers worst sales growth yet in holiday quarter, stock plunges after earnings miss

Facebook’s 2 billion-user milestone was slightly better than analysts expected for user growth on Meta’s core social network. Daily active users across all of Facebook’s apps neared, but did not crest, another round number, reaching 2.96 billion, up 5% from a year ago.

Meta has been navigating choppy ad waters as it copes with increasing competition from TikTok and fallout from changes in Apple Inc.’s
AAPL,
+0.79%
ad-tracking system in 2021 that punitively harmed Meta, costing it potentially billions of dollars in advertising sales. Meta has invested heavily in artificial-intelligence tools to rev up its ad-targeting systems and making better recommendations for users of its short-video product Reels, but it laid off thousands of workers after profit and revenue shrunk in recent quarters.

The cost cuts seemed to pay off Wednesday. While Facebook missed on its earnings, it noted that the costs of its layoffs and other restructuring totaled $4.2 billion and reduced the number by roughly $1.24 a share.

Meta executives said they now expect operating expenses to be $89 billion to $95 billion this year based on slower salary growth, cost of revenue, and $1 billion in savings from facilities consolidation — down from previous guidance for $94 billion to $100 billion. Capital expenditures are expected to be $30 billion to $33 billion, down from previous guidance of $34 billion to $37 billion, as Meta cancels multiple data-center projects.

In a conference call with analysts late Wednesday, Zuckerberg called 2023 the “year of efficiency” after 18 years of unbridled growth. He recommitted to Meta’s emphasis on AI and the metaverse, a platform for “better social experiences” than the phone, he said.

“The reduced outlook reflects our updated plans for lower data-center construction spend in 2023 as we shift to a new data-center architecture that is more cost efficient and can support both AI and non-AI workloads,” Li said in her outlook commentary included in the release.

Meta expects to increase its spending on its own stock. The company’s board approved a $40 billion increase in its share-repurchase authorization; Meta spent nearly $28 billion on its own shares in 2022, and still had nearly $11 billion available for buybacks before that increase.

“Investors are cheering Meta’s plans to return more capital to shareholders despite worries over rising costs related to its metaverse spending,” said Jesse Cohen, senior analyst at Investing.com.

“At first glance…Meta getting its mojo back,” Baird Equity Research analyst Colin Sebastian said in a note late Wednesday. “Results and guidance look particularly solid after Snap’s dismal report; however, further cuts to operating and capital expenditures announced this afternoon were perhaps the biggest surprise.”

UBS analyst Lloyd Walmsley said he anticipates double-digit revenue growth exiting 2023 and strong growth in earnings and free cash flow.

The results came a day after Snap Inc.
SNAP,
-10.29%
posted fourth-quarter revenue of $1.3 billion, flat from a year ago and the worst year-over-year sales growth Snap has ever reported. But they also arrived on the same day Facebook scored a major win in a California court. The company successfully fended off the Federal Trade Commission bid to win a preliminary injunction to block Meta’s planned acquisition of VR startup Within Unlimited.

Read more: Meta wins bid to buy VR startup Within Unlimited, beating U.S. FTC in court: report

Meta shares have plunged 53% over the past 12 months, while the broader S&P 500 index
SPX,
+1.05%
has tumbled 10% the past year.

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February 1, 2023
AMD CEO promises to keep taking data-center from Intel even as cloud demand pauses following ‘strong’ 2022

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Advanced Micro Devices Inc. shares rose in the extended session Tuesday after the chip maker’s data-center sales gained and executives forecast sales of more than $5 billion to start 2023, even as cloud-customer demand begins the year light.

AMD shares AMD rose 3% after hours, following a 3.7% gain in the regular session to close at $75.15.

AMD…

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January 31, 2023
U.S. pending home sales rise 2.5% in December. Realtors say the housing market is in recovery mode.

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The numbers: U.S. pending-home sales rose 2.5% in December, reversing a six-month losing streak, according to the monthly index released Friday by the National Association of Realtors (NAR).

Pending home sales were down for six months in a row, as the U.S. Federal Reserve increased interest rates and mortgage rates took off.

Pending-home sales beat analyst expectations. Analysts polled by the Wall Street Journal had forecast the pending home sales index to drop by 1%.

Contract signings rose in the South and the West.

Pending home sales reflect transactions where the contract has been signed for an existing-home sale, but the sale has not yet closed.

Economists view it as an indicator for the direction of existing-home sales in subsequent months.

Mortgage application activity hints at the housing market’s further recovery. Mortgage demand rose in the latest week.

Key details: Compared with a year earlier, transactions were down by 33.8%.

On a monthly basis, pending sales rose in the South and the West. Sales dropped in the Northeast and Midwest.

Pending home sales fell the most since last December in the West, by 37.5%.

Big picture: A dip in rates has boosted demand for mortgages. Buyers are coming back to the market, and the housing market is slowly recovering. But inventory remains low, as sellers hold out. Many are looking to the spring to see if sellers are motivated to list their homes.

What the realtors said: “This recent low point in home sales activity is likely over,” NAR Chief Economist Lawrence Yun said. “Mortgage rates are the dominant factor driving home sales, and recent declines in rates are clearly helping to stabilize the market.”

Yun expects mortgage rates to hover between the 5.5% and 6.5% range.

He also expects the South to outperform in terms of sales, since the job market is stronger in the region.

What they’re saying: “Home sales have now largely adjusted to the collapse in demand since late 2021. … [but] a sustained recovery likely remains a long way off,” Kieran Clancy, senior U.S. economist at Pantheon Macroeconomics, wrote in a note.

“The downturn in sales is coming to an end, but the decline in home prices is only just getting underway,” he added. He expects home prices to fall 15% over the next year.

Market reaction: The Dow Jones Industrial Average
DJIA,
+0.08%
and the S&P 500
SPX,
+0.25%
were mixed in early trading on Friday. The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.511%
rose above 3.5%.

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January 27, 2023
STMicroelectronics revenue, profit jump on automotive, microcontrollers strength

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STMicroelectronics NV on Thursday posted a surge in revenue and profit for the fourth quarter led by growth at its automotive and microcontrollers divisions.

The European chip maker STM IT:STM said net revenue climbed to $4.42 billion compared with $3.56 billion in the 2021 fourth quarter, with the company’s automotive business contributing $1.70 billion.

Net…

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January 25, 2023
ASML reports forecast beating profit of $1.96 billion on higher sales

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ASML Holding NV said Wednesday that for the fourth quarter it beat net profit consensus and net sales rose, and that it expects continued strong sales growth in 2023 despite a challenging environment.

The Dutch semiconductor-equipment maker NL:ASML ASMLsaid net profit for the period was 1.8 billion euros ($1.96 billion) compared with EUR1.77 billion for the fourth quarter of 2021, and consensus of EUR1.71 billion, taken from FactSet and based on 17 analysts’ estimates.

For…

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January 24, 2023
Microsoft stock dives into the red after forecast misses, CFO warns about deceleration

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Microsoft Corp.’s profit declined more than 12% in the holiday season, and executives said Tuesday that a revenue deceleration at the end of 2022 is expected to continue into the new year as the company lays off workers.

Microsoft MSFT Chief Financial Officer Amy Hood said in a conference call Tuesday that “we are seeing customers exercise caution,” which resulted in “moderating consumption growth in Azure and lower-than-expected growth in new business” in December. Hood then said that “we expect business trends that we saw…

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January 24, 2023
Nordstrom Report Hints at Weaker Spending by Wealthy Shoppers

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Nordstrom’s holiday season sales were softer than prepandemic levels, the company said.

Craig Barritt/Getty Images for Nordstrom

If
Nordstrom’s
latest sales update is anything to go by, high-income shoppers are finally starting to feel the pinch of a slowing economy.

The luxury department store, whose product lineup is aimed mainly at wealthier people, said late on Thursday that holiday sales were softer than hoped. It is the latest retailer to warn that consumers took a more cautious approach to holiday shopping in 2022.

“The holiday season was highly promotional, and sales were softer than prepandemic levels,” said CEO Erik Nordstrom in a news release late Thursday. “While we continue to see greater resilience in our higher income cohorts, it is clear that consumers are being more selective with their spending given the broader macro environment.”

Shares of Nordstrom (ticker:
JWN
) were largely unchanged in early Friday trading, with a gain of 0.1% to $17.47.

The company also updated its financial forecasts for fiscal 2022, the 12 months ending January 2023. It now expects revenue growth to be at the low end of the range of 5% to 7% it had forecast. Holiday sales fell by 3.5% in 2022, driven by a 7.6% decline in the company’ Nordstrom Rack banner and a 1.7% decrease in core Nordstrom sales.

Nordstrom also said that the need to sell off outdated inventory weighed heavily on profit and margins. Adjusted earnings per share will range between $1.50 and $1.70, compared with the company’s prior call for $2.30 to $2.60. The consensus call among analysts surveyed by FactSet was for earnings to land at $1.81 for fiscal 2022.

Adjusted earnings before interest and taxes margin will be 3.1% to 3.3%, compared with the 4.3% to 4.7% management had predicted.

While costly to the bottom line, discounting heavily during the holiday season may actually be better for Nordstrom in the long run. The company expects year-end inventory levels to be down by a double-digit percentage compared with last year, putting them roughly at 2019 levels.

“We believe this reduction, coupled with cleaner inventory (~flat to 2019), may actually have been better than feared,” wrote BMO Capital Markets analyst Simon Siegel in a research note. Siegel maintained a Market Perform rating and trimmed his target for the stock price to $20 from $23.

Still, it isn’t an easy time to be a department store. Nordstrom’s announcement comes weeks after
Macy’s
provided investors with a similar update, saying sales would come in at the low to middle end of the range it had forecast as a result of unexpected lulls in demand outside of the peak shopping weekends.

On Wednesday, the Census Bureau reported that department stores’ retail sales fell by 6.6% in December from November, and were down 0.6% from December 2021.

Analysts have also expressed concern about what Nordstrom’s guidance means for demand from high-end consumers, whose buying has remained fairly resilient despite macroeconomic challenges.

For
Piper Sandler
‘s Edward Yruma, who the revision indicates that high-income shoppers may be “undergoing a cyclical slowdown,” driven by layoffs in white-collar industries, a volatile stock market, and a weak housing market. He maintained a Neutral rating on the stock.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

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January 20, 2023
U.S. existing-home sales fall for the eleventh straight month in December

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The numbers: U.S. existing-home sales fell 1.5% to a seasonally adjusted annual rate of 4.02 million in December, the National Association of Realtors said Friday.

This is the 11th straight monthly decline in existing-home sales. The losing streak is the longest since NAR began tracking sales in 1999.

Economists polled by the Wall Street Journal were expecting existing-home sales to drop to 3.95 million.

The level of sales activity was lowest since November 2010, in the midst of the foreclosure crisis in America.

Compared with December 2021, home sales were down 34%.

Total sales of existing homes in 2022 were down 17.8% from the previous year. Last year, 5.03 million existing homes were sold, which is the lowest level since 2014.

The last time existing home sales dropped by this magnitude was in 2008.

Key details: The median price for an existing home fell to $366,900 in December, from $370,700 in November.

The number of homes on the market fell 13.4% to 970,000 units in December.

Expressed in terms of the months-supply metric, there was a 2.9-month supply of homes for sale in December, down from the previous month. Before the pandemic, a four- or five-month supply was more the norm.

Homes remained on the market for 26 days on average, up from 24 days in November. Pre-pandemic, the average time for homes to remain on the market was a month.

Sales of existing homes mostly fell across the country, led by the South, which saw a 2.2% drop. Sales were unchanged in the West.

All-cash transactions made up 28% of all transactions. About 31% of homes were sold to first-time home buyers, up from the previous month.

Big picture: Mortgage rates have moved lower, and many buyers are coming back to the real-estate market.

A small dip in rates prompted a 28% surge in mortgage demand earlier this week.

So with rates continuing to move downwards, sales may likely rebound in the next few months, breaking an 11-month losing streak.

But the market still has to figure out inventory, since there are so few homes for sale on the market.

What the realtors said: “We really need to begin to address this supply issue,” Lawrence Yun, chief economist at the National Association of Realtors said.

Yun said that overall, homeowners have enjoyed more in home price appreciation versus their 401k performance in the stock market.

What are they saying? Even though sales dropped considerably, “this result was somewhat better than expected,” Stephen Stanley, chief economist at Amherst Pierpont, wrote in a note.

And as rates move lower, that will “help to boost demand for homes generally,” Stanley added, “but it will also lessen the impact of homeowners being ‘trapped’ in their current locations.”

Market reaction: Stocks were up in early trading on Friday. The yield on the 10-year note
TMUBMUSD10Y,
3.479%
rose above 3.45%.

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January 20, 2023
Ericsson warns on near-term outlook as profit disappoints

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STOCKHOLM–Ericsson AB on Friday posted lower-than-expected fourth-quarter net profit and cautioned that the near-term outlook is uncertain, with operators holding off placing new orders as they rebalance inventories and assess economic headwinds.

The Swedish telecommunications-equipment company
ERIC.A,
-5.29%

ERIC.B,
-6.46%

ERIC,
-1.66%
said these trends started to hurt its key networks unit in the fourth quarter and that it expects them to continue at least during the first half of 2023.

Ericsson reported net profit attributable to shareholders of 6.07 billion Swedish kronor ($588.2 million) compared with SEK10.08 billion a year earlier, as sales rose 21% to SEK86.0 billion.

Analysts polled by FactSet had expected net profit of SEK7.05 billion on sales of SEK84.78 billion.

The company expects to start seeing the effect of its SEK9 billion cost-saving activities during the second quarter of 2023.

“We anticipate declining margins in networks during the first half of 2023 due to changing business mix,” Chief Executive Borje Ekholm said.

“In 1Q we expect the earnings before interest, tax and amortization for the group to be somewhat lower than Ebita last year.”

Overall sales of network equipment grew by 15% on the year, but margins were weighed by a switch to new growth markets in south east Asia, Oceania and India, from higher margin front-runner markets such as North America.

Write to Dominic Chopping at dominic.chopping@wsj.com

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January 19, 2023
P&G Earnings Hit By Higher Costs. ‘Strength in Innovation’ May Help Demand.

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Procter & Gamble

stock recovered from an early loss, edging higher after the consumer goods company posted second-quarter earnings that matched analysts’ expectations. Gross margins declined largely due to higher costs.

Net sales came in at $20.8 billion, while diluted earnings were $1.59 per share, Procter & Gamble said Thursday. Analysts had anticipated $20.7 billion of sales and a per-share profit of $1.59, according to FactSet.

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January 19, 2023
Retail sales continued to fall in December as shoppers battled inflation | CNN Business

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Minneapolis
CNN
—

It was a ho-hum end to 2022 for spending in America.

US retail sales continued their fall in December, dropping by 1.1% as inflation remained high, the Commerce Department reported Wednesday.

That’s the largest monthly decline since December 2021, and practically every category (except for building materials, groceries and sporting goods) saw sales drop from the prior month.

Economists had expected sales to fall by just 0.8% for the month, according to Refinitiv. The November number was revised down to -1%.

All in all, the final retail sales report for 2022 shows a muted finish to a holiday season that crept even further into October versus the traditional late-November and December.

October was the last strong retail sales month of 2022, as discounting and slowing inflation prompted consumers to shop more then, said Kayla Bruun, economic analyst at Morning Consult.

“I think the hope was that this was going to lead to a little bit more momentum heading into the holiday season,” she said. “But really, it turned out to be more of just an early bump that actually took away from some of the spending that otherwise might have happened in November and December.”

The Commerce Department’s retail sales data is not adjusted for inflation, which reached a 40-year high in June before falling during the second half of 2022, hitting 6.5% for the 12-month period ending in December, according to the latest Consumer Price Index reading released last week.

Wholesale price growth is also cooling significantly: The Producer Price Index for December measured 6.2%, according to Bureau of Labor Statistics data released Wednesday.

During the November and December holiday season, retail sales grew 5.3% over 2021 to $936.3 billion, the National Retail Federation reported Wednesday.

The holiday total, which is not adjusted for inflation and excludes sales at auto dealerships, gas stations and restaurants, falls short of the trade association’s projections of 6% to 8% holiday sales growth.

“We knew it could be touch-and-go for final holiday sales given early shopping in October that likely pulled some sales forward plus price pressures and cold, stormy weather,” said Jack Kleinhenz, NRF’s chief economist, in a statement. “The pace of spending was choppy, and consumers may have pulled back more than we had hoped, but these numbers show that they navigated a challenging, inflation-driven environment reasonably well. The bottom line is that consumers are still engaged and shopping despite everything happening around them.”

Consumer spending has remained robust despite inflation, rising interest rates and recession fears. However, some economic data suggests that activity may be losing some steam and that Americans are running out of dry powder.

“I think the consumers has gotten very active in managing their household budget and what they’re willing to spend on,” said Matt Kramer, KPMG’s national sector leader for consumer and retail. “They’re spending more time looking for the deals and being thoughtful about when they make purchases.”

That’s seen in the monthly sales declines in categories like motor vehicles, which were down 1.2% from November; furniture, down 2.5%; and electronics, down 1.1%, according to Wednesday’s report.

“Certainly on those large purchases, financed purchases where interest rates play in, the consumers are pushing those decisions out and extending their buying cycles around the larger categories,” he said.

The next few months are traditionally the slowest for retailers, but headwinds like credit card debt and stubborn inflation may exacerbate that, said Ted Rossman, senior industry analyst for Bankrate.

“A further slowdown in purchasing appears likely, at least in the near-term,” Rossman said in a statement.

Discretionary spending is usually the first to go, with people typically cutting back on travel, eating out and other expenditures, said Amanda Belarmino, assistant professor of hospitality at the University of Nevada Las Vegas.

However, the post-pandemic pent-up demand that fueled strong services spending in 2022 is still going strong. Spending on food services and drinking places was up 12.1% in December from the year before.

“What we’ve seen in restaurants, tourism, hospitality is completely contrary to what we normally see in an economic slowdown,” Belarmino said. “We have seen consumers continue to make that spending. But where you’re seeing those slowdowns are things like people canceling their streaming services, canceling their Peloton, canceling their home services. So it seems that consumers are making those trade-offs.”

However, shifts in tipping activity could be harbinger of shifts to come.

“The average tip rate in the US had gone up to about 18% to 20%, and there are some indicators that’s going to be falling back down toward the 15% range,” Belarmino said. “It’s not a huge thing, but it’s a way for consumers to save money.”

How spending activity holds up in the service industries will be a critical indicator in the coming months, Morning Consult’s Bruun said, adding that a strong labor market should help to prevent a dramatic collapse in spending.

“That has been the component of consumer spending that’s been driving growth,” she said. “And it’s going to need to, going forward, because we’ve really seen that goods demand has been tapped out to a large extent.”

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January 18, 2023
Bonds are back, but for how long? | CNN Business

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A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.

New York
CNN
—

Stocks soared on Friday to their best day in more than a month. The Dow gained 700 points and the S&P 500 and Nasdaq rose by 2.3% and 2.6% respectively, as traders bet that a slowdown in wage growth could mean that inflation may finally be cooling off.

But the big turnaround story during the short first week of the year isn’t just about equities, it’s also about bonds.

What’s happening: US Treasuries recorded their worst year in history in 2022, but investors are suddenly reversing course. They now appear quite optimistic about the bond market.

Last year’s bond massacre came as the Fed raised short-term interest rates at the fastest speed in about four decades, lifting the Fed funds rate to its highest level in over a decade. Bonds are particularly sensitive to those increases — as rates are hiked, the price of existing bonds falls as investors prefer the new debt that will soon be issued with those higher interest payouts.

But now investors are betting that those rate increases are mostly over and that inflationary pressures are on a downswing.

Treasuries just notched their strongest start to a year since 2001, back when investors eagerly purchased government debt under the (correct) assumption that then-Fed chair Alan Greenspan was about to slash interest rates. This time around, investors are scooping up bonds as they anticipate the pace of Fed interest rate hikes will soon ease.

That’s great news for Treasuries. Core bonds, or US investment grade debt, tend to perform well during Fed rate hike pauses. Since 1984, core bonds have been able to generate average 6-month and 1-year returns of 8% and 13%, respectively, after the Fed stopped raising rates, according to data from LPL Financial.

That anticipation could be seen at the end of last week. Treasuries tumbled following strong private jobs data earlier in the week but quickly rebounded when US payroll data showed that wage growth was weakening.

The gains are in sync with economists’ positive outlooks for falling yields and rising bond prices in 2023.

The other side: The problem is that there’s no guarantee that interest rates will actually come down, and investors could find themselves blindsided if they don’t.

“The potential for rates to go high and stay higher for longer would hit bond markets hard, especially considering weaker economies would likely force governments to borrow more,” said Chris Varrone, managing director at Strategas, a Baird Company.

Former Treasury Secretary Larry Summers issued a warning on Friday to bond investors who assume that inflation is easing and a new era of low interest rates is upon us.

“I suspect tumult” for bonds in 2023, Summers said on Bloomberg Television. “This is going to be remembered as a ‘V’ year when we recognized that we were headed into a different kind of financial era, with different kinds of interest-rate patterns.”

Persistently high inflation may have put a damper on holiday shopping.

Macy’s chair and CEO Jeff Gennette said Friday that lulls during the non-peak weeks of the fourth quarter “were deeper than anticipated” and that consumers will continue to feel pressured into 2023, reports my colleague Ramishah Maruf.

Macy’s said Friday its net sales from the holiday quarter will likely be at the low-end to mid-point of its previously issued forecast range of $8.16 billion to $8.4 billion. It reported Q4 sales of $8.67 billion in 2021.

Americans spent more this season to keep up with high prices. US retail sales increased 7.6% during the period between November 1 to December 24 compared to the same time last year, according to the Mastercard Spending Pulse. US retail sales were lower than expected in November, falling 0.6% during the month, which was the weakest performance in nearly a year.

Gennette warned that consumer sentiment is unlikely to change with the new year.

“Based on current macro-economic indicators and our proprietary credit card data, we believe the consumer will continue to be pressured in 2023, particularly in the first half, and have planned inventory mix and depth of initial buys accordingly,” the Macy’s CEO said.

The company expects to report full results for the fourth quarter and fiscal year 2022 in early March 2023.

China’s heavy-handed crackdown on tech giants is coming to an end and the country’s economic growth is expected to be back on track soon, according to a top central bank official, my colleague Laura He reports.

The crackdown on fintech operations of more than a dozen internet companies is “basically” over, said Guo Shuqing, the Communist Party boss at the People’s Bank of China, in an interview with state-run Xinhua news agency on Saturday.

“Next, we’ll promote healthy development of internet platforms,” said Guo, who is also chairman of China’s Banking and Insurance Regulatory Commission. “We’ll encourage them to come out strong in leading economic growth, creating more jobs, and competing globally.”

His remarks came on the same day Chinese billionaire Jack Ma gave up control of Ant Group after the fintech giant’s shareholders agreed to restructure the company.

Chinese tech stocks listed on US exchanges have already enjoyed a dream start to 2023.

The Nasdaq Golden Dragon China Index — a popular index tracking Chinese firms listed in the United States — soared 13% in the first two trading days of 2023. That was the index’s best yearly start on record, according to data compiled by Refinitiv dating back to 2003.

US-listed shares of Chinese e-commerce firms Alibaba

(BABA), JD.com

(JD), and Pinduoduo

(PDD) added $53 billion to their combined market value last Wednesday alone.

The sweeping regulatory crackdown since late 2020 had driven investors away. In 2021 and 2022, the Nasdaq Golden Dragon China Index plummeted 46% and 25% respectively.

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January 9, 2023