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A series of curious events occurred last Friday morning, which continued — Rube Goldberg-like — throughout the day and, it may be argued, even into this morning’s pre-market trading action. Friday’s Dow closed down 673 points, or -2.57%, while the Nasdaq and S&P 500 hived off roughly 2% each. The Dow looks to open down another triple digits, although we’ve seen some early buying back from how low we started this morning.
The first thing to have happened was the non-farm payroll report Friday morning, which posted another very strong month for employment gains (+200K). Average Hourly Earnings also gained another third of a percent, meaning wage growth is showing signs of adding to overall inflation in the U.S. And talk of a fourth interest rate hike in the next 12 months from the Fed when incoming Chairman Jay Powell takes over added to the already +50% likelihood of three rate hikes, beginning next month.
From there we saw the 10-year bond yield spike up past 2.8%. As Zacks Strategist Tracey Ryniec remarked in real time on Friday, “A strong economy and inflation means no more free money.” Zacks’ Dave Bartosiak reacted, “Perhaps this is the bond market telling the US, ‘We’re a little concerned with that debt situation you’ve got now that you’ve cut those tax rates.’” And Senior Strategist Kevin Cook looked at the VIX and said, “Volume still looks tame, no huge fear. Spot VIX is acting like 1% moves could be normal again. Futures are hardly panicked.”
Cook also points out that last week was the worst week… of one of the best two-year rallies we’ve ever seen. Markets are up 65%, so this correction is a mere pittance by comparison. Especially considering — if you can remember back to January 2016, not all that long ago — we saw a sell-off of 6.2%. Right now, even with Monday futures again in sell-off mode, we’re only looking at around -5%. Not really in the same ballpark, at least not yet.
Earnings Estimates Going Up
If you’re still concerned about markets swooning to start this new week, a good tonic for you might be Zacks Director of Research Sheraz Mian’s latest Earnings Preview, where he points out not only is Q4 earnings season the best we’ve seen in years, but future earnings guidance is shooting up for future quarters. So while we do see some near-term pressure on valuations — which outgoing Fed Chair Janet Yellen did mention was somewhat of a concern going forward — the name of the game is still earnings, and those are only pointing north.
Q4 Earnings Roundup
Last week saw a host of marquee names posting quarterly earnings reports, with mostly good results. In fact, the only bottom-line misses we saw stemmed from tax-related write-downs, which are essentially near-term in nature, and not a result of missed expectations (Apple’s [(AAPL - Free Report) ] lower-than-anticipated iPhone X sales notwithstanding). This week, we see just as many reports hitting the tape, even if they are not quite the same household names as last week.
Foodservice giant Sysco (SYY - Free Report) beat estimates on both its top- and bottom-lines this morning, with 78 cents per share on $14.41 billion surpassing the 65 cents per share and $14.19 billion in revenues expected. Earnings results for the Zacks Rank #2 (Buy) company rose 34.5% year over year. For more on SYY’s earnings, click here.
British pharma major Bristol Myers (BMY - Free Report) also topped expectations, beating on the bottom line by a penny to 68 cents per share, and quarterly sales of $5.45 billion outpaced the $5.31 billion in the Zacks consensus estimate. Guidance was ratcheted up a bit, but still within the Zacks consensus. For more on BMY’s earnings, click here.
And Arconic , the engineered products segment that formerly belonged to aluminum giant Alcoa (AA - Free Report) , easily outperformed both sales and earnings estimates. The company saw 31 cents per share on $3.27 billion in revenues, ahead of the 24 cents per share and $3.07 billion we had been expecting. Guidance on the top-line rose past the Zacks consensus, while full-year earnings remain in-range. For more on ARNC’s earnings, click here.
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UBS Group AG’s strong capital position, expansion strategies and business restructuring initiatives will continue to aid its financials. The growth in NII has been aiding the top line growth.
Cabot remains focused on boosting its specialty compounds business. It will also gain from the carbon plant buyout in China. Strong cash level is an added advantage.
Strength in the Engine Products, Engineered Structures and Fastening Systems segments, and solid liquidity position augur well for Howmet. Its consistent measures to reward shareholders spark optimism.
WestRock is poised well on strong packaging demand for food, beverage, household cleaning and e-commerce. A solid balance sheet, investment in growth projects and recent acquisitions will drive growth.
As Tyson Foods progresses into the back half of fiscal 2024, it is focused on executing fundamental strategies and maximizing the multi-protein portfolio.
Restructuring efforts and favorable market conditions have led to improved operating margins, driven by strong demand in the solar and infrastructure industries.
The TJX Companies’ off-price business model, along with its strategic store locations and impressive demand for products, is likely to aid its performance.
The ongoing volatility in metal prices will continue to weigh on Teck Resources’ sales and earnings performance. The increase in the cost of certain key supplies will also hurt margins.
Rockwell Automation’s order levels will bear the brunt of excess inventory buildup at customers and contraction in manufacturing activity. Increasing material costs add to the pressure on margins.
Weakness in the Infrastructure segment and escalating operating costs are major challenges for Kennametal. Softness in the general engineering market and foreign currency headwinds are added concerns.
Alibaba's business structure involves certain risks due to the strict laws in China, which along with lower mobile monetization, increasing competition and integration risks are concerns.
AGCO’s performance will be affected by low commodity prices in the upcoming quarters. Higher expenses, as well as supply-chain constraints, might hurt the company’s results.
Rising costs, if not checked, can hurt Five Below’s margins. The Competitive retail landscape, changes in consumer behavior and high interest rate scenarios could impede the stock's momentum.
As Tyson Foods progresses into the back half of fiscal 2024, it is focused on executing fundamental strategies and maximizing the multi-protein portfolio.
Amazon is benefiting from its Prime program, delivery and logistic system in the e-commerce space. Further, its dominant position in cloud market is a positive.
Broadcom is a leading player in the semiconductor market based on its expanding product portfolio, multiple target markets, accretive acquisitions and strong cash flow.
Kroger is making investments to enhance product freshness and quality, and expand digital capabilities. Impressively, it has been introducing new items under its ‘Our Brands’ portfolio.
Central Garden & Pet has been advancing digital capabilities, optimizing its supply chain, expanding data analytics capability and focusing on marketing activities to better engage with customers.
Strength across all product groups is a positive catalyst for Edwards Lifesciences. The company’s bullish long-term growth strategy buoys optimism on the stock.
