Week In Review: Stock Win Streak Looks To End, But GM, Netflix Stay Hot
The S&P 500 index, Nasdaq composite and Dow industrials all set record highs through the week, until the weak payroll report ended their hot streaks. But Netflix (NFLX) broke out and set new highs, and General Motors (GM) soared on strong September sales and big plans for electric vehicles. Tesla (TSLA) stock brushed off weak Model 3 production figures, and Amazon.com (AMZN) rose on reports that it's testing a home-delivery service.
S&P 500 Marks 20-Year Record
XAutoplay: On | OffThe S&P 500 marked eight straight gains, its longest streak in four years, and six straight record highs, its longest such streak since 1997. The Nasdaq also marked eight consecutive gains, and the Dow had its seventh. But that all looks to end on Friday amid a surprise drop in September payroll figures. Still, the S&P 500 is up 1% so far this week, which would be its fourth consecutive weekly advance. The Nasdaq is tracking toward a 1.3% weekly gain, and the Dow is headed for a 1.5% rise.
Payrolls Slammed, But Wages Jump
The economy lost 33,000 jobs in September, but financial markets overlooked that temporary, hurricane-related hit and focused on the employment report's underlying strength. The jobless rate fell to 4.2%, the lowest since early 2001, while average hourly wage gains jumped to 2.9%, matching the best gain since 2009. Other data earlier in the week also pointed to an economy that seems to finally be breaking out of its eight-year run of slow growth, though some of the strength may reflect a boost from hurricane recovery efforts. The Institute for Supply Management manufacturing survey index jumped to a 13-year high of 60.8, far above the 50 neutral mark. The ISM's nonmanufacturing survey gauge also surprised on the upside, registering its fastest growth since August 2005.
U.S. Auto Sales Rebound
General Motors, Ford Motor (F), Toyota (TM) and most automakers reported stronger-than-expected September U.S. sales, as demand rebounded following hurricanes. Fiat Chrysler Automobiles (FCAU) was an exception, but that was due to a decision to slash low-margin fleet sales. Industrywide sales hit an annual rate of 18.57 million, the best of the year.
GM, Ford Plan Big Electric Push
GM vowed to add 20 electric and fuel-cell vehicles by 2023, though it'll largely finance the effort via profits on its gas-guzzling SUVs and trucks. Ford, which has not been as profitable as GM and has lagged in EVs, said it will slash $14 billion in costs to expand its production of electric vehicles as well as trucks and SUVs. Volvo and several other automakers have also announced plans for a rapid expansion of EV and hybrid models, despite tepid demand, as China and major European countries and cities announce plans to ban sales of gas-only vehicles in the coming decades. GM shares are up 10.5% for the week, and Ford is up 2.5%.
Tesla Reports Model 3 'Production Bottlenecks'
Tesla had planned to make 1,500 Model 3 sedans in Q3, but only turned out 260, citing "production bottlenecks." Tesla delivered just 220 Model 3 cars in Q3. Overall deliveries reached 26,100, amid strong demand for the more-expensive Model S and Model X. But the Model 3 woes are a bad sign for Tesla's push to make 20,000 in December and an even-faster pace in 2018. Tesla shares fell to a two-month low, extending a recent pullback. But shares rebounded, helped by Nomura initiating Tesla at a buy with a 500 price target. The stock is still up 3.6% for the week.
Netflix Prices Itself To Breakout, New High
The streaming video leader raised monthly prices on its midrange and high-end tiers by $1 and $2, respectively, as it gets ready to sink $7 billion into content acquisition next year. The price hikes will only be in the U.S. and will start in November. Netflix hadn't had a major change in its pricing since 2014. Shares broke out of a 10-week cup-with-handle base at a buy point of 190.05 on Thursday and continued rising to another record high on Friday, already threatening to climb above their buy range. For the week, the stock is up 9%.
Amazon Hits UPS, FedEx
The e-commerce giant is testing another home delivery service, this time with third-party merchants that use its online platform, which could intensify competition with longtime partners FedEx (FDX) and United Parcel Service (UPS), Bloomberg reported. The new delivery program is called "Seller Flex." Amazon would pick up packages from third-party merchants selling on its platform and deliver the products to consumers. Amazon.com would provide free two-day delivery to eligible customers. A broad rollout is possible in 2018.
Google Unveils New Gadgets
Alphabet's (GOOGL) Google took more shots at Apple (AAPL) than it did at Amazon, while launching new hardware products — including two Pixel-branded smartphones that will ship ahead of the iPhone X. Google added a new member to its voice-activated home automation family but didn't one-up Amazon, which has sold some 15 million of its Echo speaker systems. Google rolled out a new $399 home speaker system that competes with Apple's HomePod. The 5-inch-screen Pixel 2 starts at $649 while the 6-inch-screen Pixel 2 XL starts at $849, which is about $150 less than the iPhone X but $80 more than the large-screen version of the first Pixel rolled out in 2016. Google also unveiled a new $999 Pixel-branded laptop that will compete with Apple's MacBooks.
Homebuilders Continue To Break Out
Lennar (LEN) reported better-than-expected earnings and revenue Tuesday. Despite slightly raising its forecast for hurricane-related delays, the builder's stock rose 6% for the week, clearing a buy point of 55.85. Meanwhile, KB Home (KBH) and Meritage (MTH) broke out on Monday and kept rising. KB Home reported strong earnings on Sept. 29, while Meritage gave solid Q3 orders and sales figures on Tuesday. D.R. Horton (DHI), LGI Homes (LGIH) and Toll Bros. (TOL) are among the other recent breakouts, even as Treasury yields have rebounded in recent weeks.
Oil Prices Lose Momentum
The price of U.S. crude struggled to stay above $50 a barrel, despite crude inventories falling by 6 million barrels. Gasoline supplies rose by 1.6 million, according to the Energy Information Administration. Analysts expected a 1.5 million-barrel decline in crude inventories and a 1.5 million-barrel gain in gasoline. Crude production rose to 9.561 million barrels per day last week, from 9.547 million bpd a week prior. Russia seemed open to extending the current output deal with OPEC that expires in March to the end of 2018.
MGM Resorts' Stock Reels After Shooting
Las Vegas-exposed casino stock MGM Resorts (MGM) fell after a gunman killed at least 58 people and injured 489 others at a country music concert outside MGM's Mandalay Bay Resort and Casino, in the worst shooting in modern U.S. history. MGM's China unit also said it would delay the opening of its new casino on the Cotai strip section of Macau to early next year, from the last half of 2017, due to damage from Typhoon Hato in August. September gambling revenue from Macau jumped 16% to $2.7 billion, but early estimates on the number of visitors to Macau during the key "Golden Week" holiday period were weak.
Delta Eases Airline Worries
Delta Air Lines (DAL) led the airline sector higher after the carrier offered a third-quarter unit-revenue forecast that, when factoring out Hurricane Irma, looked OK in the eyes of some analysts. Delta, American Airlines (AAL), JetBlue (JBLU) and Spirit Airlines (SAVE) were seen as more vulnerable to the areas where the storm struck. Cowen also said that the guidance suggested "stabilizing pricing trends for Delta" amid a fare war between network carriers and low-cost rivals that had earlier ravaged airline stocks.
Buffett Likes Truck Stops, BofA
Warren Buffett's Berkshire Hathaway (BRKB) said it would take a 38.6% stake in Pilot Flying J, a large truck-stop chain, with plans to gobble up an extra 41.4% in 2023. Buffett, in a statement, called Pilot Flying J "a key enabler of the nation's economy." The move boosts Buffett's transportation-related holdings and gives him a way to use some of the roughly $100 billion that his company has accumulated. Buffett also praised Bank of America (BAC) CEO Brian Moynihan for his efforts to turn the bank around, and the billionaire investor said he'd be a shareholder for a "long, long, long time." Berkshire became BofA's biggest shareholder this summer.
Studies, FDA Lift Biotechs
AveXis (AVXS) touched a record high and Amicus Therapeutics (FOLD) hit its highest point since September 2015 on strong data in spinal muscular atrophy and Pompe disease, respectively. Acadia Pharmaceuticals (ACAD) rallied late Wednesday, but fell Thursday, after the FDA granted breakthrough designation to its dementia drug. CytomX Therapeutics (CTMX) launched on a mash-up with Amgen (AMGN) in immuno-oncology on Wednesday. On Thursday, a judge tossed out a ban on Regeneron Pharmaceuticals (REGN) and Sanofi's (SNY) Praluent in a court battle with Amgen, prompting Regeneron and Amgen stocks to diverge.
Did Costco Beat Or Not?
Costco (COST) scored a broad Q4 beat, but the stock fell after one key metric — net sales — missed some views. The membership-based retailer reported that EPS grew 18% to $2.08 as revenue climbed 16% to $42.3 billion. Both topped estimates, as did results for same-store sales. Some investors worry about the Amazon effect on Costco's business, but the retailer's e-commerce sales grew 30% in September and 21% in the fourth quarter.
Yum China Rewards Shareholders
The Yum Brands (YUM) spinoff increased its share buyback and initiated a dividend, while also naming a new CEO. But Yum China's (YUMC) quarterly results were mixed: EPS of 53 cents missed by 2 cents, and revenue of $2.04 billion topped views for $1.995 billion. Same-store sales jumped 6%, with both KFC and Pizza Hut restaurants doing better than expected.
Cheers For Constellation Brands
The wine and beer maker's EPS jumped 39.5% to $2.47, easily topping forecasts for $2.16, as revenue grew 3.2% to $2.085 billion, beating views for $2.06 billion. Constellation Brands (STZ) also hiked full-year EPS guidance to $8.25-$8.40, above the $8.18 consensus, and management said market share and operating margins widened.