US stocks slipped on Wednesday, as a record-setting rally took a breather after a string of gains over the past week.
The Dow Jones Industrial Average (^DJI) fell more than 1.2%, while the tech-heavy Nasdaq Composite (^IXIC) and S&P 500 (^GSPC) sank about 1.5%. The down day marked the S&P's worst single-day performance since October, while it also snapped a nine-day winning streak for the Nasdaq and Dow Jones.
Stocks had been building on a strong year-end rally, with Tuesday's finish giving the Dow its fifth record close in a row and bringing the S&P 500 closer to its all-time high set in January 2022. Investors have shrugged off hawkish comments from Federal Reserve officials, who have tried to temper expectations that the central bank will quickly turn to bringing down benchmark rates.
Read more: What the Fed rate-hike pause means for bank accounts, CDs, loans, and credit cards
On Wednesday, a surprise drop in UK inflation to its lowest level in two years lifted optimism that price pressures are easing in leading economies, with an easing in German wholesale inflation also reinforcing that view. Bond yields added to this month's slide, with the 10-year Treasury yield (^TNX) retreating under 3.9%.
But some are questioning whether the faster, earlier rate cuts envisaged would end up pushing the US economy into a downturn. Eyes will be on upcoming data for clues as to whether the Fed can nail a "soft landing." Thursday brings an update on GDP, and on Friday comes a reading on PCE inflation, the Fed's preferred gauge.
In individual corporates, FedEx (FDX) shares tumbled more than 10% after the delivery company missed quarterly profit expectations. It also cut its full-year revenue forecast amid a drop in US Postal Service demand.
US stocks slipped on Wednesday, as a record-setting rally took a breather after a string of gains over the past week.
The Dow Jones Industrial Average (^DJI) fell more than 1.2%, while the tech-heavy Nasdaq Composite (^IXIC) and S&P 500 (^GSPC) sank about 1.5%. The down day marked the S&P’s worst single-day performance since October, while it also snapped a nine-day winning streak for the Nasdaq and Dow Jones.
The Russell 2000 (^RUT), which had been soaring amid investor bets that rate cuts will begin in March, fell nearly 2%.
Stocks reversed in afternoon trade, with all three of the major averages falling more than 1% just after 3 p.m.
“The markets had to take a breather at some point,” Hennion & Walsh Asset Management CIO Kevin Mahn told Yahoo Finance Live Wednesday afternoon.
The S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) were headed for their worst daily performances since the market rally began in late October.
FedEx (FDX) lead the Yahoo Finance trending tickers page on Wednesday, with shares falling more than 10% after the company’s latest earnings release. The delivery company missed quarterly profit expectations and also cut its full-year revenue forecast amid a drop in US Postal Service demand.
Alphabet stock (GOOG, GOOGL) rose nearly 3% as the Information reported the tech giant plans to reorganize its advertising sales unit. Shares were headed for their highest close since April on the news.
Shares of the Toro Company (TTC) popped more than 10% after the company reported better fourth quarter earnings than Wall Street expected. The lawn mower manufacturer’s earnings per share of $0.71 reflected a 36% decrease from the same period last year but came in higher than the Street’s estimates of $0.56.
General Mills stock (GIS) slipped nearly 3% as the company warned about weaker consumer demand. The cereal producer now sees full-year revenues for its current fiscal year down 1% to flat. Previously it had projected revenue growth in a range of 3% to 4%.
The 2023 stock market rally continues to shows further signs of breadth.
The surge in stocks is no longer about the Magnificent Seven stocks driving the major averages higher. At Tuesday’s close, six of the eleven sectors in the S&P 500 were at 52-week highs, the highest share of sectors simultaneously hitting 52-week highs since May 2021, per Bespoke Investment Group.
A chart from Bespoke shows a run like that for sectors is relatively uncommon over the last 30 years.
More buyers are stepping back into the resale market.
Sales of previously owned homes edged up by 0.8% in November to a seasonally adjusted annual rate of 3.82 million, breaking a five-month streak of declines, the National Association of Realtors (NAR) reported Wednesday. Economists polled by Bloomberg were forecasting a 3.78 million pace.
Still, the pace of home sales is still down 7.3% from a year ago.
November’s sales reflect contracts signed 60 days prior, when the average 30-year fixed mortgage rate was hovering near 8%. Rates have retreated since October’s highs following the Federal Reserve’s signal that 2024 could bring significant rate cuts.
Adding to the optimism, NAR chief economist Lawrence Yun said “a marked turn can be expected as mortgage rates have plunged in recent weeks.”
The median price of a previously owned home in November was $387,600, a 4% gain from the year prior. Total housing inventory in November was 1.13 million units, 1.7% lower from October but 0.9% higher than a year ago.
The housing market continues to show signs of life.
Residential housing starts for single family homes soared 18% month over month thanks to a doubling of starts in the northeast region, according to data from the Census Bureau released Tuesday.
“The extreme lack of existing inventory on the market continued to support newbuild demand and construction activity in November,” Capital Economics property economist Thomas Ryan wrote.
The vibes are high in the US economy once again.
New data from the Conference Board released on Tuesday showed consumers haven’t felt this good about the path forward for stocks since the middle of 2021. The renewed optimism comes amid a blistering rally in the stock market that’s seen the Dow Jones (^DJI) set new record highs while the S&P 500 (^GSPC) is trading just below its all-time closing high of 4,797 as investors look forward to interest rate cuts in 2024.
Broadly, the consumer confidence index reached a reading of 110.7, its highest level since the S&P 500’s most recent peak in July 2023, and the second-highest level in two years.
“December’s increase in consumer confidence reflected more positive ratings of current business conditions and job availability, as well as less pessimistic views of business, labor market, and personal income prospects over the next six months,” said Dana Peterson, chief economist at The Conference Board.
Peterson added: “December’s write-in responses revealed the top issue affecting consumers remains rising prices in general, while politics, interest rates, and global conflicts all saw downticks as top concerns.”
Other key areas consumers often focus on include the labor market, which continued to show a steady pace of job additions in the November jobs report. Meanwhile, gas prices recently hit their lowest levels of 2023, contributing to the rebound in consumer optimism.
“Confidence had been waning for most of the second half of the year, which we attributed to inflation fatigue, concern that the economy would soften further next year, concern about overspending during the summer, and most recently, the outbreak of war between Israel and Hamas,” Jefferies US economist Thomas Simons wrote in a note to clients on Wednesday.
“We saw these as ongoing trends, but apparently the consumer is approaching 2024 with far more optimism than we thought.”
FedEx (FDX) shares fell as much as 10% early Wednesday after the company’s disappointing forecast offered late Tuesday.
The shipping giant now expects revenues to decline by a low-single-digit percentage next year after having previously forecast revenues to stay flat.
The company mentioned in its earnings call a “difficult demand environment.” Given the company’s reach across industries and geographies, there may be some read-through for some investors on the state of the global economic recovery.
But for years now, the struggles at FedEx have been mostly about FedEx itself.
Over the last six years, the stock has gone nowhere while the S&P 500 has gained 75%.
The current challenges at FedEx mostly center on the company’s push to integrate its Express, Ground, and other business units into a single org. Back in 2016, the company spent $5 billion to acquire TNT Express to expand its global reach. Nearly eight years later, the transformations promised by this deal continue to be worked out.
“Throughout this year, there has been a lot of talk of cost actions taken to rightsize the business for the current demand, but despite this, Express margin has remained near trough levels for over a year,” Jefferies analyst Stephanie Moore wrote in a client note on Wednesday.
Moore and her team have a Hold rating and a $280 price target on the stock. With Wednesday’s move lower, FedEx shares were trading at closer to $252.
“Investors have been underwriting a structural change at Express and right now we think there is more doubt than ever if that structural change is really there or if the cost structure at Express is simply too high,” Moore added. “Waiting for volumes to return to see the benefits of the cost actions isn’t enough for investors, especially when considering this volume inflection may come as the company is simultaneously integrating Express and Ground and pulling off one of the largest corporate restructurings in the company’s history. We continue to be less optimistic than the Street on this front.”
For any company, every quarterly update offers two lenses through which investors can primarily judge these results — the operating environment and the business’s strategy.
For FedEx, the latter matters much more than the former right now.
Paramount Global (PARA) stock ticked higher in early trading on Wednesday, up about 2%, after Wells Fargo analyst Steve Cahall upgraded shares to Equal Weight from Underweight.
The analyst, who also upped his price target to $18 a share from the prior $12, cited “higher deal probability” after multiple outlets reported Shari Redstone could sell her family’s controlling stake in the company.
Redstone currently serves as the non-executive chairwoman of Paramount Global and president of her family’s holding company, National Amusements (NAI), which controls the company through its class A shares.
Private investment firm RedBird Capital, along with Skydance Media CEO David Ellison, have been named as two potential buyers for the stake.
Acquiring National Amusements shares could allow RedBird and Skydance to take control of the company while avoiding a full purchase of it. The group could then offload undesirable assets from there or find a strategic partner.
“M&A headlines change our thesis around PARA given underlying asset potential,” Cahall wrote in his note to clients. “We continue to believe that NAI might like to sell a controlling stake to a content operator that would protect the significance of Paramount Studios. i.e. willing buyer(s), willing seller.”
Cahall added a future owner could potentially shut down Paramount+, which would allow the company to license its content — which includes NFL streaming rights, films, and original series like “Yellowstone” — to other streaming players.
Overall, the analyst estimated about $10 billion in post-tax proceeds for all divested assets.
Read more here.
US stocks opened lower on Tuesday — signaling a possible pullback in a record-setting rally.
The Dow Jones Industrial Average (^DJI), S&P 500 (^GSPC), and tech-heavy Nasdaq Composite (^IXIC) each ticked down about 0.2% shortly after the opening bell.
The US housing market will remain in focus for investors on Wednesday with the weekly read on mortgage applications due out at 7:00 a.m. ET and existing home sales set for release at 9:00 a.m. ET.
December’s read on consumer confidence from The Conference Board is also due out at 10:00 a.m. ET.
The market’s rally continued on Tuesday, with the Dow notching another record high and the S&P 500 inching closer to taking out a record of its own.
The Nasdaq Composite also eclipsed 15,000 on Tuesday for the first time since January 2022, when the tech index was on its way down to start its most challenging year in decades.
Click here for in-depth analysis of the latest stock market news and events moving stock prices.
Read the latest financial and business news from Yahoo Finance
Stock market news today: Stock market rally stalls as S&P 500 posts worst day since October – Yahoo Finance
Leave a comment