The Darlings of Wall Street: An Update on Wall Street Flavor, Wall Street Bullies, and Silicon Valley Phenomenology
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Editors often advise to kill the darlings of pretentious writers who deliver copy well above their requested word count because they’re fond of them.
Wall Street seems to have also latched on to the concept. This was a horrible year for stocks, with the S&P 500 down 20%, but the surprise was the demise of companies that have dominated markets for years.
Investors are rushing to kill their darlings – er, sell their stocks– and even safe-havens like Apple
(AAPL) and Intel
(INTC) are getting crushed in the stampede.
The energy sector thrived as markets fell under the pressures of economic uncertainty, geopolitics, and inflation. The energy sector grew by around 600%, while the S&P was down by 20%. No other sector gained even 5% last year.
But what’s been most surprising is that market-cap titans, traditionally expected to weather storms on Wall Street well, haven’t held up against the rising macroeconomic tides.
Tech companies are often viewed as money-printing machines by investors. In the past, there has been an increase in Microsoft stock and a decrease inAlphabet stock. The biggest drop in the company’s market value came over a single day in February, as it pursues virtual reality dreams. The company lost $232 billion.
Other recent darlings have been sent sputtering this year – Moderna
(MRNA) was one of the top performing stocks of 2021 thanks in large part to its covid vaccine, and now it’s amongst the worst, down 24% this year.
Premarket stock trading in the 21st century: Where are we heading? Why are U.S. consumer and technology sectors going through a recovery?
Even Walmart
(WMT), the big-box chain known for weathering many economic storms, is in the red this year, down just under 2%.
Surprising to the upside: There have been some companies that have been able to keep chugging along in 2022. Consumer staples posted their best relative performance to the S&P 500 since 2008 this year. Coca-Cola shares increased in value this year and trounced markets. Snack food company Mondelez
(MDLZ) is also up 1.5%.
IBM is up 4% in a year when the entire tech sector is not doing so well. The company is “trading well above its historical range,” wrote Bernstein Research analysts in a recent note. But “given its defensive characteristics and historical performance, we believe that IBM
(IBM) is likely to fare well if we continue to have pressured markets, and likely to lag major indices if we enter a recovery period,” they said.
Brian Moynihan, the CEO of Bank of America told CNN last month that the continued strength of the US consumer is the single-handedly keeping the recession at bay. The last two months of the year make up 20% of total retail sales for some retailers, according to National Retail Federation data.
But while American bank accounts are still fairly robust, they’re beginning to dwindle. In the third quarter of 2022, credit card balances jumped 15% year-over-year. That jump is the largest since the New York Fed began keeping track of the data.
EY Parthenon projects that consumer spending will flatline in 2023 after growing 2.7% this year. Daco said that the United States could be in a mild recession during the first half of this year because of persistent inflation, tighter financial conditions and weaker global growth.
And with interest rates poised to go higher in 2023 and economic uncertainty sure to grow, consumers could be starting to run dry at the worst time, reports my colleague Alicia Wallace.
Source: https://www.cnn.com/2022/12/30/investing/premarket-stocks-trading/index.html
What Have We Learned Before the Bell? The Big Bounce and the Big Fate: Changing the Oil, Gas and Oil Cosmic Pillars
2022 has been a wild ride, and I’m so grateful that you joined me for it. I hope that Before the Bell has helped you gain some semblance of balance in this often nonsensical good-is-bad and bad-is-good economy.
You survived this year, so please take a moment to thank yourself as you prepare for the New Year. No matter what state your portfolio is in, you deserve to take a breather and reflect on what you’ve dealt with.
Wall Street analysts say that Big Oil has passed its peak, but the ride down will be slow — these companies will still bring in remarkably large profits for a while.
What’s happening: The story of the year began with energy. Brutally high oil and gas prices were the talk of the town and one of the largest contributing factors to sky-high inflation. It was bad news for drivers, but it was good news for the energy industry because oil prices and stock values are closely linked.
The analysts at HSBC Global Research said there is less headroom than they had imagined because of the slight correction in oil prices and halving in European gas prices.
Big names have already reported misses. The oil company reported a profit of $7.9 billion in the fourth quarter. Despite its record annual earnings, the company’s profit in the fourth quarter was lower than analysts had expected.
These mega-profits are widely expected to reward their shareholders with dividends and buybacks. The company said last week that it would raise its dividends and buy $75 billion of its own shares.
Those buybacks may keep stock prices elevated for a while. “We think that buyback spending is probably the safety valve on uses of cash if fundamentals begin to deteriorate,” wrote Stewart Glickman, deputy research director at CFRA in a recent note.
What’s next: One key risk to the energy sector is the possibility of a steep recession which could cause “oil demand to careen into a ditch,” wrote Glickman. It is not out of the realm of possibility for it to happen, as we have seen before demand falling through the floor and taking prices with it.
Exxon reports today, Shell reports Thursday and BP and TotalEnergies report the following week. Analysts expect misses and some negative forward guidance.
The communications sector, with its many hard hit tech and media companies, lost 40% of its value last year. Everything is different when it comes to time. The sector is currently the best performing one so far in the year, having surged nearly 10%.
Warner Bros. Discovery has surged more than half a century, and the company is the best performing stock in the S&P 500.
Several media companies have enjoyed a resurgence this month. CBS owner Paramount has soared 35%. Disney
(DIS) is up about 25%. The company has gained more than 20%. (So much for the death of streaming media.) Meta Platforms shares are up more than 20%.
Consumer discretionary stocks, which include many retailers and auto companies, have also enjoyed a stunning rebound after tumbling last year. The sector was the second-worst performer in 2022 with a loss of about 38%.
Investors seem to be buying into hopes the Fed will continue pulling back on the size of its rate hikes and possibly even pause later this year. Increasingly, the sentiment is that the economy could wind up heading for a so-called soft landing: a slowdown but not a full-blown recession.
Those hopes have boosted other consumer stocks. Amazon
(AMZN) is up about 20% this year. Cruise line owners Carnival, Royal Caribbea
(RCL)n and Norwegian
(NCLH) are among the top performers in the S&P 500. Some of the casino companies include MGM, Las Vegas Sands, and Wynn.
What’s Happening in the U.S. Oil and Metal Sector? An Analysis of the First Three Months of TikTok Adversarial Data Protection
Chew will be the sole witness at the hearing, scheduled for March 23. He is expected to testify on TikTok’s privacy and data security practices, its impact on young users, and its “relationship to the Chinese Communist Party,” reports my colleague Brian Fung.
The hearing underscores the rising political risk for TikTok, as negotiations with the US government on a national security deal drag on.
US officials have expressed fears that China could use its laws to force TikTok to hand over user data that could be used for intelligence or disinformation purposes. Those concerns have prompted the US government to ban TikTok from official devices, and more than half of US states have taken similar measures, according to a CNN analysis.
Companies listed in the S&P 500 index beat analysts’ earnings estimates by an average of just 1.3% last quarter. FactSet data shows that that is way down from the 5-year average of 8.6%.
What’s happening: There have been some steep and disappointing profit misses as corporate America feels the sting of sticky inflation and the Federal Reserve’s interest rate hikes.
Apple recorded a rare earnings miss this season, and Intel and Alphabet fell short of expectations.
It wasn’t all doom-and-gloom. Energy companies brought in yet another quarter of record profits, with Big Oil companies — such as Chevron, ConocoPhillips, Exxon and Shell — notching their most profitable years in history. There were record revenue gains and better than expected earnings from the company. Big box retailers Target
(TGT) and Walmart
(WMT) also surpassed estimates as US consumers kept on spending.
About 81 S&P 500 companies have issued negative earnings-per-share guidance for the first quarter of 2023, according to FactSet. Only a few companies report positive guidance.
The Wall Street Effect of Inflation on Wall Street Trading and Implications for the ISM and the Chinese Economy: The Fourth Quarter Earnings Call from Home Depot
According to Ted Decker of Home Depot, he was worried that consumers would become less resilient to the economy. The fourth quarter was the time when the deceleration happened, he said on an analyst call.
Wall Street traders appear to be taking this dour earnings season in their stride. The market is rewarding positive earnings surprises more than average and punishing negative earnings surprises less than average for the fourth quarter.
More than 325 S&P 500 companies have cited the term “inflation” during their earnings calls for the fourth quarter. That’s well above the 10-year average of 157, according to FactSet document searches.
But the worries over price hikes appear to be waning, at least a little bit. The lowest number of S&P 500 companies has used the I-word on their calls in more than a year. The number of inflation mentions has fallen since last quarter.
The ISM Services Purchasing Managers Survey is a report that measures the strength of the US service sector. Growth is expected to be slightly slower between January and February than in January. The services economy is growing if the reading is above 50.
A big deal is the deceleration. The economy is starting to cool and that the Fed is trying to fight inflation by raising interest rates. If services sector growth accelerates, however, it could signal that more aggressive rate hikes are ahead and send markets lower.
▸ Wall Street is anticipating (or dreading, depending on who you ask) next Friday’s unemployment report. The February data is expected to shed some light on a shockingly resilient labor market.
Another unexpected surge in non-farm payrolls, like the 517,000 new jobs added in January, could indicate more Fed rate hikes are ahead. That could impact markets in the good news is bad news environment.
The Chinese economy surprised investors this week, bouncing back from zero- Covid shutdowns. China’s first consumer price index, producer price index and trade figures of 2023 are set to be released next week, which will show the full extent of the country’s rebound.
Global manufacturing rose in February for the first time in seven months, according to the latest PMI surveys compiled by S&P Global. The reopening of china spurred growth in that area.
Source: https://www.cnn.com/2023/03/03/investing/premarket-stocks-trading/index.html
Instability of Silvergate: Scaling the Metric of a Cryptobroker into the mainstream banking system in an age of Big Data
Unlike FTX, BlockFi, Celsius, Voyager and other companies that folded last year, Silvergate was a traditional, federally insured lender that had positioned itself as a gateway to the cyber world.
My colleague Allison Morrow explains that the lender lost $1 billion in the fourth quarter as investors panicked over the collapse of FTX, an exchange founded by Sam Bankman-Fried that is now at the center of a federal fraud investigation.
It’s among the first major instances of crypto’s volatility spilling into the mainstream banking system — a scenario regulators and crypto skeptics have long feared.