Stocks rise, but end the week lower
Stocks rallied on Friday, but ultimately ended the week in losses.
The Dow Jones Industrial Average gained 401.97 points, or 1.26%, to close at 32,403.22. The S&P 500 advanced 1.36% to 3,770.55, and the Nasdaq Composite rose 1.28% to end at 10,475.25.
All major averages closed lower for the week. The Dow was down 1.4% after four straight weeks of gains. The S&P and Nasdaq fell 3.35% and 5.65%, respectively, to snap a two-week winning streak.
— Samantha Subin
Morgan Stanley’s Slimmon on playing the ‘massive bifurcation’ between mega-cap tech stocks and the rest of the market
A “massive bifurcation” is occurring between mega-cap tech stocks and the rest of the market, says Andrew Slimmon, senior portfolio manager at Morgan Stanley Investment Management.
Many popular tech stocks have sold off sharply in recent days with disappointing results and forecasts. Despite the drop in their ratings, Slimmon says many of these names should be avoided as earnings are set to decline. Most also trade at a higher price than the rest of the market.
Instead, Slimmon points investors to stocks he’s confident will continue to do their numbers even in a slowing economy. These sectors have also cut estimates and are trading at low-teens or high-single-digit multiples.
One area he sees as positive are homebuilder stocks and home retailers that have been hit hard by mortgage rates but are expected to recover from current levels.
“Those groups really started to break down in the fourth quarter of last year in anticipation that rates would go up,” he said. “I think ultimately the economy will slow down and it won’t be great for the housing market, but mortgage rates could start to come down.”
— Samantha Subin
Morgan Stanley says further deterioration lies ahead
Morgan Stanley remains “fundamentally bearish”, saying leading indicators show further deterioration.
The firm recommended overweighting utilities, healthcare and real estate. Meanwhile, he listed discretionary material and hardware as sectors in which investors should be underweight.
But the firm noted that a Fed pivot could come “sooner than later” and that there is the possibility of a further rally to between 4,000 and 4,150 before what it called “the next stage of this market bassist”, which would reach between 3,000 and 3,200 points.
Corporate earnings were being watched closely as the firm said the “weak macro” environment has been a major talking point among companies. He also noted that the average valuation is trending lower as earnings per share cuts begin for companies.
However, the firm said several major indexes, including the S&P 500, saw rebounds in October.
—Alex Harring
FactSet says fourth-quarter earnings will shrink after an eight-quarter expansion
It finally happened.
After falling for several months, analysts’ expected growth rate for fourth-quarter S&P 500 earnings has turned negative. Q4 profit is now expected to fall 1%, compared with growth estimated at 9.1% as of June 30 and 3.9% as recently as September 30, according to the senior earnings analyst FactSet’s John Butters said in a report released Friday afternoon.
A week ago, on October 28, fourth-quarter profits were still expected to rise, albeit by a scant 0.2%.
Third quarter earnings are currently at a 2.2% growth rate. If they stay higher than last year, that would mark the eighth consecutive quarter of year-over-year earnings growth for the S&P 500.
—Scott Snapper
Stocks rise, but weekly losses are forecast as the final hour of trading begins
Shares rose as the final hour of trading began on Friday.
The Dow Jones Industrial Average was last up 221 points, or 0.7%. The S&P 500 advanced 0.8% and the Nasdaq Composite advanced 0.6%.
— Samantha Subin
Black male unemployment fell in October, but for the wrong reasons
The unemployment rate for black men fell to 5.3% in October from 5.8% a month earlier on a seasonally adjusted basis. But it wasn’t because the group was necessarily making headway in the labor market.
The downward movement in black male unemployment is likely due to the employment rate, which fell slightly to 67.2% in October, just below the previous month’s reading of 68%.
Also, the employment-to-population ratio for black men fell to 63.6% from 64.1% in September, which could indicate that workers have stopped looking for work, making unemployment higher down
Overall, unemployment among black and Hispanic workers remains higher than among white workers.
—Carmen Reinicke
Truist downgrades technology, sees better opportunities in energy and industry
Truist is rallying tech stocks amid the latest market shake-up, downgrading the sector to underweight from neutral.
“The sector recently broke below an important technical price level and is still trading at a significant premium to the market, despite earnings momentum at multi-year lows,” Truist said in a note to clients. “Importantly, we are finding better opportunities in other areas of the market, including energy, industrials, healthcare and commodities.”
Tech stocks continue to trade expensively at a 25% premium to the S&P 500, Truist said. This compares to a 10-year average premium of 6%. Meanwhile, the sector does not offer the strong earnings momentum for which investors have willingly paid a premium in the past.
The firm recommends the energy sector and defensive areas such as consumer staples and healthcare, which tend to perform well in a weak economic environment.
— Samantha Subin
October jobs report shows gains starting to ‘wind down’ in economy, Allianz Investment Management’s Ripley says
Friday’s October jobs report may signal earlier Fed hikes starting to work their way through the system, said Charlie Ripley, senior investment strategist at Allianz Investment Management.
“Today’s payrolls figure was the lowest to date and while the pace of the slowdown has not been materially evident, we could be witnessing the initial effects of policy tightening on the economy “, he said. “The bottom line is that while the employment data doesn’t show a rapid slowdown, the data appears to be moving in the right direction, but at a very slow pace.”
— Samantha Subin
Here are some of the biggest stock moves from midday on Friday
- Block: The mobile payments company rose a better-than-expected 10% in its third-quarter results. Block earned 42 cents a share on revenue of $4.52 billion. Analysts polled by Refinitiv had expected earnings of 23 cents per share on revenue of $4.49 billion.
- Atlassian: Shares of Atlassian fell 33.4% after the collaboration software maker reported lower-than-expected earnings and issued a disappointing outlook.
- DraftKings: DraftKings fell nearly 28% after warning that a prolonged economic downturn could hurt its customers’ spending.
For more moves, check out the full story.
—Michelle Fox
Metals, mining stocks soar, briefly sending ETF to biggest gain in 2.5 years
The SPDR S&P Metals & Mining ETF soared as much as 8.8% on Friday, briefly putting it on pace for its best day since March 2020 in the depths of the short-lived Covid-19 bear market (XME rise 12.7% one day that month). .) Among the individual stocks leading the XME today are TimkenSteel, Peabody Energy, Alcoa, MP Materials, Ryerson, Century Aluminum and Freeport-McMoRan, all of which were up more than 10% at one point before retreating- yes
The much larger iShares MSCI Global Metals & Mining Producers ETF (market cap of $19.4 billion vs. $820 million for the XME) was at one point higher as much as 9.7% on Friday.
December copper contracts hit $3.6665, the highest level since September 13, bringing the week’s gain to 6.75% (the best week since March 2022) and left copper higher for the year.
Aluminum contracts on the London Metal Exchange rose to $2,337.5 a metric ton and rose more than 5% year to date.
– Scott Schnipper, Gina Francolla
S&P 500 New Lows Beat New Highs, But 78% of Highs Are Also All-Time Records
New 52-week lows in the S&P 500 (20) topped new highs (18) early Friday, but nearly four out of five new highs set all-time records.
One of the new lows (Microsoft) is in the Dow Jones Industrial Average, as is one of the new highs (Chevron).
New 52-week lows:
- Lumen Technologies (LUMN), lowest since 1988
- Meta Platforms (META) lowest since 2015
- Paramount (PARA), lowest since 2020
- Warner Bros. Discovery (WBD), lowest since 2009
- Amazon.com (AMZN), 2020 low
- Assurant (AIZ), the lowest since 2020
- Lincoln National (LNC), 2020 low
- SVB Financial (SIVB), lowest since 2020
- Baxter (BAX), lowest since 2017
- Catalent (CTLT), the lowest since 2020
- DaVita Inc. (DVA), the lowest since 2020
- Generac (GNRC), lowest since 2020
- F5 Networks (FFIV), lowest since 2020
- Microsoft (MSFT), lowest since 2021
- Tyler Technologies (TYL), lowest since 2020
- Zebra Technologies (ZBRA), lowest since 2020
- AvalonBay Communities (AVB), lowest since 2021
- Equity Residential (EQR), lowest since 2021
- Essex Property Trust (ESS), lowest since 2020
- Public Storage (PSA), lowest since 2021
New 52-week highs:
- Monster Beverage (MNST), highest ever, dating back to 1992 Nasdaq IPO
- ConocoPhillips (COP), all-time high from the 2002 merger of Conoco and Phillips Petroleum
- Chevron (CVX), the all-time high since the merger with Texaco in 2000
- EOG Resources (EOG), trading at an all-time high until trading began in 1989
- Diamondback Energy (FANG), all-time high until 2012 IPO
- Marathon Petroleum (MPC), 2011 Marathon Oil spin-off all-time high
- SLB (SLB), highest since 2018
- Exxon (XOM), traded at an all-time high until it traded on the New York Stock Exchange in 1920
- Everest RE Group (RE), all-time highs until 1995 IPO
- Principal Financial (PFG), all-time highs until 2001 IPO
- AmerisourceBergen Corporation (ABC), all-time high until 1995 IPO
- Cardinal Health (CAH), highest since 2017
- Gilead Sciences (GILD), highest since 2020
- Eli Lilly (LLY), record going back to initial trading in 1952
- McKesson (MCK),…