Wall Street has made a killing of its darlings

Premarket Stocks Trading: If You’re Not A Subscriber, The Bell is Coming – An Audio Version of the Melting of Cursed Writers

A version of this story first appeared in CNN Business’ The Bell newsletter was published before that. Not a subscriber? You can do that right here. You can listen to the newsletter in its audio version by clicking the link.

Editors often advise cursed writers to throw out large swaths of their stories because they are particularly fond of them.

Source: https://www.cnn.com/2022/12/30/investing/premarket-stocks-trading/index.html

The Decline of Apple, Microsoft, Meta and Moderna: Why Tech Companies are Failing as Money Printers in a Year Filled with Technological Chaos

The large, established companies that offer long-term growth potential were crushed. Just look at Apple. Even the Oracle himself, Warren Buffett, thought it was a good idea to purchase more Apple shares in early 2022, but the stock is now down 29% for the year (Buffet’s Berkshire Hathaway

            (BRKA) is doing fine, though, up over 3% this year). Intel, another blue chip, has fallen 51%.

Apple and Intel are safe-havens, and they’re getting crushed in the stampede as investors kill their darlings.

A year filled with economic uncertainty, political chaos and inflation is winding down. The only thing that has helped the stock market this year is the energy sector, which is up about 60 percent so far.

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 have long been seen as invincible, essentially money-printing machines by investors. That has not been the case this year as Alphabet stock fell nearly 40% and Microsoft

            (MSFT) by 28%. Meta, down 64% this year as it pursues virtual reality dreams, experienced the biggest drops in market value on February 2nd. The company lost money.

Moderna, a darling of the market this year due to its covid vaccine, is one of the worst performers this year, it is down 24% this year.

Premarket Stocks Trading: The U.S. Consumer Market is Not in the Red, Yet it’s Coming Into a Recovery Phase

Walmart is in the red this year, down 2%, making it the only big-box chain to be in the red.

Surprising to the upside: There have been some companies that have been able to keep chugging along in 2022. Consumer staple’s relative performance has been their best since 2008. Coca-Cola shares are up almost 8% this year. Snack food company Mondelez

            (MDLZ) is also up 1.5%.

In a year when the entire tech sector is in decline, IBM is up 4%. 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.

The strength of the consumer in the US is almost solely responsible for staving off the recession, as Brian Moynihan explained to CNN last month. Consumer spending is a major driver of the economy, and the last two months of the year can account for about 20% of total retail sales — even more for some retailers, according to National Retail Federation data.

But while American bank accounts are still fairly robust, they’re beginning to dwindle. Credit card balances jumped in the third quarter. That’s the largest annual jump since the New York Fed began keeping track of the data in 2004.

Gregory Daco and Lydia Boussour, economists at EY, expect consumers to rein in their spending further in the coming months. “Real consumer spending should see modest growth in the final quarter of the year, but we expect it will barely grow in 2023.”

Consumer confidence could be in trouble if interest rates go up and economic uncertainty increases, reports my colleague, Alicia Wallace.

Source: https://www.cnn.com/2022/12/30/investing/premarket-stocks-trading/index.html

The Good, The Bad, and the Bad: A Thankful Before the Bell! What have you been waiting for in the last five years?

This has been a wonderful time, and I am so grateful that you joined me. 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.

Please take a moment to say thank you for surviving this year, so that we can start anew in 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.

Big profits for investors: Oil shareholders are still sleeping well at night. It is estimated that Exxon Mobil, Chevron, Shell, and TotalEnergies will make a Mega-profit of $190 billion for the next five years.

What is happening? The story of energy in two years was not as big as initially thought. The talk of the town was of high oil and gas prices contributing to high inflation. It was bad for drivers, but great for the energy industry since oil prices and energy stocks are closely linked.

The analysts wrote that there is less room for growth than they had thought just a few months ago, thanks to the correction in oil prices and the halving of European gas prices.

Big names have already reported misses. Chevron

            (CVX) reported $7.9 billion in fourth-quarter profit on Friday. Even though the company booked a record $36.5 billion in annual earnings, it was lower than it would have liked.

They’re also widely expected to use these mega-profits to reward their shareholders with dividends and buybacks. Chevron announced last week that it plans to buy $75 billion worth of its own shares, and hike its quarterly dividend.

The stock prices may stay elevated for a while. Stewart Glickman, deputy research director at CFRA, wrote in a recent note that he thought that the use of cash could be put at risk if fundamentals deteriorated.

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. “We have seen prior instances of demand falling through the floor and taking prices with it (see 2009, and again in 2020), so it is not out of the realm of possibility,” he said.

Exxon, Shell, and TotalEnergies report in the next week. Analysts expect some misses.

The communications sector, with its many hard-hit tech and media companies, was the worst-performing market group last year, plummeting a whopping 40% in 2022. Everything is changed by time. According to data from S&S Global Market Intelligence, it is the best performing sector so far this year and has surged nearly 10%.

Warner Bros. Discovery has surged more than 50% in the last year, making it one of the best performers in the S&P 500.

Several other media companies, old and new, have also enjoyed a resurgence this month. CBS owner Paramount has increased in value. Disney

            (DIS) is up about 25%. The company has gained more than 20%. (So much for the death of streaming media.) Shares of Facebook and Instagram owner Meta Platforms are up more than 20%, as well.

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%.

The investors seem to believe that the Fed may pause or even pull back on its rate hikes later in the 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. Carnival, Royal Caribbea, Norwegian, and others are top performers in the S&P 500. So are shares of casino companies Caesars

            (CZR), Wynn, Las Vegas Sands

            (LVS) and MGM

            (MGM).

The Rise and Fall of TikTok in the U.S.: Where Are We Going? The S&P 500 Index Revisited

TikTok CEO Shou Zi Chew will testify at an upcoming hearing before the House Energy and Commerce Committee, a committee spokesperson confirmed to CNN Monday.

The high-profile hearing underscores the rising political risk for TikTok as its negotiations with the US government on a national security deal continue to drag on.

US officials worried that China would use its laws to force the handover of user data that could be used for intelligence or disinformation purposes. In the US, TikTok has been banned from official devices, and an analysis by CNN indicates more than half of US states have followed suit.

Compared to the same time last year, companies listed in the S&P 500 index beat analysts earnings estimates. For context, that’s way down on the index’s 5-year average of 8.6%, according to FactSet data.

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 but other tech companies, including Intel and Alphabet, fell short of expectations.

But it wasn’t all doom-and-gloom. Big Oil companies, such as Exxon and Shell, have notching their most profitable years in history, as energy companies brought in yet another quarter of record profits. In other news,Tesla reported record revenue gains and beat earnings expectations. 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. That’s a lot higher than the 23 companies reporting positive guidance.

Premarket Stocks, Wall Street, and the S&P 500: Implications for the US Services Sector and the Reopening of China

Home Depot

            (HD) CEO Ted Decker said he was concerned that consumers were becoming less resilient to the economy. He said on the analyst call that certain products and categories appeared to have slowed down in the fourth quarter.

Wall Street traders appear to be taking this dour earnings season in their stride. The fourth quarter is when the market rewards positive earnings surprises more than average and punishing negative earnings surprises less than average.

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. This marks the lowest number of companies in the S&P 500 using the I word on their calls in more than a year. The number of mentions of inflation has fallen.

▸ ISM Services PMI — a report that measures the strength of the US service sector — is due out at 10 a.m. ET. The data is expected to show a slight slowdown in growth between January and February (54.5 in February vs. 56.5 in January. For context, a reading above 50 means the services economy is expanding).

That would make a big deal of it. It would be positive to know that the economy is beginning to cool and that the Fed’s efforts to fight inflation are working. 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 data from February is expected to shed some light on the 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. Markets could be hurt by that.

Analysts from S&P Global wrote that the numbers would give the first official indications of the reopening of mainland China.

In February, global manufacturing rose for the first time in seven months according to the latest S&P Global surveys. That growth was largely spurred on by China’s reopening.

Source: https://www.cnn.com/2023/03/03/investing/premarket-stocks-trading/index.html

The collapse of FTX and the volatility of crypto assets: A warning for regulators and skeptics from the SEC results on Silvergate

On Thursday, shares of Silvergate Capital plummeted to a record low after the company told the SEC that it wouldn’t be able to file its annual report on time.

My colleague Allison Morrow explains: The California-based lender reported a $1 billion loss for the fourth quarter as investors panicked over the collapse of FTX, the exchange founded by Sam Bankman-Fried that is now at the center of a massive 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.