US FINANCIAL MARKET

‘Priced for Perfection’ Stocks to Face Nvidia Test: Markets Wrap – Bloomberg, 11/21/2023

• Stocks lost steam after a rally that put the market on pace for its best month since July 2022, with traders awaiting the Federal Reserve minutes and Nvidia’s results.
• Bonds rose and the dollar wavered.
• The S&P 500 halted a surge to “overbought” levels, while the Nasdaq 100 fell about 1%.
• As the earnings season winds down, questions on the sustainability of the advance led by the “Big Seven” group of megacaps have resurfaced, with Nvidia expected to report a surge in sales and profit.
• The caveat is that after more than tripling this year, the shares now have little room for error.
• Some $6 trillion in market capitalization has been added to the US equity benchmark in 2023 in a rally fueled by the artificial intelligence boom, Corporate America’s resilience and bets the Fed will pivot to rate cuts next year.
• The gains left the index about 5% away from reclaiming its all-time high.
• Hedge funds are holding their most concentrated wagers on US equities than anytime in the past 22 years, according to data from Goldman Sachs Group.
• The data paints a picture of a market that’s quickly regaining its enthusiasm for profitable and stable tech stocks as economic growth gradually slows down at the end of the Fed’s campaign to raise interest rates.
• The most popular bets remain in megacap tech, with Microsoft, Amazon.com and Meta Platforms in Goldman’s list of “Hedge Fund VIPs” this quarter.
• Traders also awaited minutes of the last Federal Open Market Committee policy gathering for clues on the central bank’s next steps.
• Since the meeting, financial conditions have eased, and it’s possible a few FOMC members have grown more hawkish again on rates, said Anna Wong at Bloomberg Economics.
• Whether the Fed will cut rates next year by as much as markets expect will depend on when they recognize the economic downturn, she noted.
• In economic news, sales of previously owned US homes fell by the most in nearly a year in October, highlighting the toll elevated mortgage rates and still-high prices continue to take on the resale market.
• Signs of ebbing inflation and softer growth have fueled a 3.6% surge in the Bloomberg US Aggregate Index in November, leaving it with a return of about 0.7% for 2023.
• That’s still well short of what cash has earned this year.
• But it shows what a real turning point could deliver after a year marked by head fakes over price pressures and Fed policy.
• Lowe’s cut its forecast for the second time this year, underscoring the shift away from big home-renovation projects after the pandemic boom.
• Dick’s Sporting Goods raised its profit forecast as strong demand for sports gear overcame concerns of a slowdown in spending ahead of the holiday season.
• Best Buy’s same-store sales fell by more than expected in the third quarter after what the retailer called “uneven consumer demand.”
• Kohl’s reported a seventh-straight drop in comparable sales, pointing to an ongoing decline in foot traffic and a broader shift away from consumer spending on discretionary goods like apparel.
• Abercrombie & Fitch boosted its forecast on the back of stronger-than-expected third-quarter sales as the retro brand’s comeback continues to resonate with teens and young millennials celebrating the fashion of the early 2000s.
• Zoom Video Communications reported better-than-expected revenue on strong enterprise sales, a sign the company is holding its own in a competitive market for business collaboration software.

Zoom Reports Sales That Beat Estimates on Business Customers – Bloomberg, 11/21/2023

• Zoom Video Communications reported better-than-expected revenue on strong enterprise sales, a sign the company is holding its own in a competitive market for business customers.
• Fiscal third-quarter sales increased 3.2% to about $1.14 billion, the company said Monday in a statement.
• Enterprise revenue from 219,700 customers rose 7.5% to $661 million in the quarter ended Oct. 31, topping analysts’ average estimate.
• Zoom said it had 3,731 clients that contribute more than $100,000 in trailing 12-month revenue — an increase of almost 14% from the period a year earlier.
• Analysts, on average, estimated $1.12 billion, according to data compiled by Bloomberg.
• Profit, excluding some items, was $1.29 a share, compared with the average estimate of $1.10 a share.
• Still, a revenue forecast of $1.125 to $1.13 billion in the current quarter fell just shy of analysts’ estimates.
• Profit, excluding some items, will be about $1.14 a share in the period ending in January, compared with the average estimate of $1.09.

Best Buy Stock Falls After Retailer Cuts Sales Outlook – Wall Street Journal, 11/21/2023

• Best Buy shares fell after the retailer cut its full-year sales outlook, saying consumers are hunting for deals and demand has been hard to predict.
• For the fiscal third quarter, which ended on Oct. 28, Best Buy reported sales of $9.76 billion, a nearly 8% drop from a year ago and below analysts’ forecasts of $9.9 billion.
• Comparable sales, a measure which adjusts for store openings and closings, fell by a steeper-than-expected 6.9%.
• Third-quarter earnings were $263 million, or $1.21 a share, compared to $277 million, or $1.22 a share, a year earlier.
• The company forecast fourth-quarter comparable sales would fall by 3% to 7%, a steeper drop than analysts expected.
• The company cut the top end of its forecast range for full-year adjusted earnings by 10 cents to $6.30 a share.
• Heading into the holiday shopping period, Barry said Best Buy is “prepared for a customer who is very deal-focused.”

Lowe’s Stock Drops on Homeowners Pulling Back on Big-Ticket Purchases – Wall Street Journal, 11/21/2023

• Lowe’s cut its outlook for the year after its core shoppers pulled back more than expected on discretionary purchases and big-ticket items.
• Revenue fell 13% to $20.47 billion, below analyst projections for $20.87 billion, according to FactSet.
• Comparable sales, which adjusts for store openings and closings, fell 7.4%, a steeper drop than the 5.4% decline analysts had been expecting, according to FactSet.
• Chief Executive Marvin Ellison said the chain’s do-it-yourself, or DIY, customers reduced their spending more heavily than expected, particularly on higher-priced discretionary items.
• Per-share earnings were $3.06 a share, up from 25 cents a share a year ago and above analyst forecasts for $3.02 a share, according to FactSet.
• Full-year sales are now expected to be about $86 billion, down from previous guidance for $87 billion to $89 billion.
• Adjusted per-share earnings, which strip out one-time items, are projected at $13 a share, down from a prior outlook of $13.20 to $13.60 a share.

Shares of American Eagle plummet 17% on unimpressive holiday forecast – CNBC, 11/21/2023

• Shares of American Eagle plummeted about 17% Tuesday after the company issued a holiday forecast that failed to impress.
• Revenue: $1.3 billion vs. $1.28 billion expected.
• During the quarter, American Eagle’s gross margin came in at 41.8%, below the 42.1% that analysts had expected, according to StreetAccount.
• Earnings per share: 49 cents vs. 48 cents expected.
• For its holiday quarter, American Eagle expects sales to be up high-single digits, ahead of the 3.4% sales growth analysts had expected, according to LSEG.
• However, it’s expecting its operating income to be between $105 million and $115 million, which is mostly below expectations of $114 million, according to StreetAccount.
• The forecast was dampened by an expected 20% uptick in selling and general administrative expenses, the company said.

Dick’s Sporting Goods shares jump after retailer hikes outlook as it bounces back from theft woes – CNBC, 11/21/2023

• Sales and profit at Dick’s Sporting Goods bounced back in the fiscal third quarter, leading the retailer to raise its full-year guidance Tuesday after it shocked investors earlier this year when it slashed its outlook over theft concerns.
• Revenue: $3.04 billion vs. $2.94 billion expected.
• Earnings per share: $2.85, adjusted, vs. $2.44 expected.
• For the full year, the company now projects earnings per share to be between $11.45 and $12.05, compared with the $11.27 to $12.39 range that analysts had expected, according to LSEG.
• Dick’s raised its guidance from a prior range of $11.33 to $12.13.
• But it still falls below the original outlook the company set earlier this year, when it said it expected earnings of $12.90 to $13.80.
• Dick’s also raised its comparable sales outlook slightly and expects them to be up between 0.5% and 2%, compared with a previous range of flat to up 2%.
• Much of that range would top the 0.7% increase that analysts had expected, according to StreetAccount.

Abercrombie & Fitch raises outlook after quarterly sales surge 20% – CNBC, 11/21/2023

• Abercrombie & Fitch on Tuesday blew past estimates as it posted a 20% jump in sales thanks to a strong back-to-school shopping season and growth at both its namesake brand and Hollister.
• Revenue: $1.06 billion vs. $981 million expected.
• Earnings per share: $1.83 vs. $1.18 expected.
• For its fourth quarter, Abercrombie expects net sales growth to be up low double-digits compared to the prior year, which is in line with the 11.6% growth analysts had expected, according to LSEG.
• It expects its operating margin to be in the range of 12% to 14%, compared to 7.7% in the year ago period and ahead of expectations of 11.3%, according to StreetAccount.
• The expected uptick is driven by a higher gross profit rate, lower freight costs and higher sales prices.

Kohl’s stock drops after profit tops expectations but same-store sales miss – Market Watch, 11/21/2023

• Shares of Kohl’s dropped in premarket trading Tuesday, after the department store chain beat profit expectations but missed on same-store sales and trimmed its full-year revenue outlook.
• Total revenue fell 5.2% to $4.05 billion, above the FactSet consensus of $3.99 billion, while same-store sales declined 5.5% to miss expectations of a 3.8% fall.
• Gross margin improved 1.58 percentage points to 38.9% while inventories declined 13%.
• Net income for the quarter to Oc.t 28 fell to $111 million, or 53 cents a share, from $119 million, or 82 cents a share, in the year-ago period.
• The FactSet consensus was for earnings per share of 35 cents.
• For Fiscal 2023, the company lifted its EPS guidance range to $2.30 to $2.70 from $2.10 to $2.70 but cut its sales growth outlook to negative 2.8% to 4.0% from negative 2% to 4%.

Jacobs Solutions 4Q Profit Down While Revenue Rises – Market Watch, 11/21/2023

• Jacobs Solutions recorded a smaller profit but higher revenue in its fiscal fourth quarter.
• Revenue rose to $4.29 billion from $3.88 billion in the year-ago quarter, ahead of analyst projections for $4.21 billion, according to FactSet.
• Stripping out one-time items, adjusted earnings were $1.90 a share. Analysts surveyed by FactSet had been expecting $2.02 a share.
• The Dallas-based company said Monday night that it will spin off and combine its Critical Mission Solutions and Cyber & Intelligence government services businesses with rival firm Amentum.

OpenAI in ‘Intense Discussions’ to Quell Potential Staff Mutiny – Bloomberg, 11/21/2023

• OpenAI said it’s in “intense discussions” to unify the company after another tumultuous day that saw most employees threaten to quit if Sam Altman doesn’t return as chief executive officer.
• Vice President of Global Affairs Anna Makanju delivered the message in an internal memo reviewed by Bloomberg News, aiming to rally staff who’ve grown anxious after days of disarray following Altman’s ouster and the board’s surprise appointment of former Twitch chief Emmett Shear as his interim replacement.
• OpenAI management is in touch with Altman, Shear and the board “but they are not prepared to give us a final response this evening,” Makanju wrote.
• On Monday, more than 700 of the startup’s 770 staff signed a letter saying they would quit if the board doesn’t resign and re-hire Altman, who was recruited by Microsoft — OpenAI’s largest shareholder — to run a new artificial intelligence team.
• The memo from Makanju doesn’t elaborate on the extent of contact with Altman, and the former CEO didn’t respond to a request for comment outside regular business hours.
• Microsoft CEO Satya Nadella told Emily Chang in a Bloomberg Television interview that even he wouldn’t oppose Altman’s reinstatement.
• Microsoft, which has pledged to invest as much as $13 billion in OpenAI, benefits whether Altman is running OpenAI or working under its roof, Nadella said.

Amazon’s Black Friday Deal: Football With a Side of Online Shopping – Wall Street Journal, 11/21/2023

• Amazon and the NFL are betting that a combination of two of America’s biggest pastimes—football and holiday shopping—will provide a ratings and retail windfall.
• Amazon Prime Video plans to carry the first-ever “Black Friday” game later this week, serving Americans touchdowns and online shopping as an alternative to battling deal-seekers at the mall.
• The technology giant plans to load up the game with sales promotions in a bid to turn the Friday after Thanksgiving into a major digital shopping day.
• “We’re going to celebrate the fact that it’s Black Friday across the broadcast,” said Mike Hopkins, senior vice president of Prime Video.
• The Friday afternoon game between the New York Jets and the Miami Dolphins will include exclusive deals that “you will have to be watching to know about,” he said.
• Amazon is planning to feature “shoppable ads” during Friday’s game that use QR codes that viewers can scan to make instant purchases.

US ECONOMY & POLITICS

US Existing-Home Sales Slide Further, Still Lowest Since 2010 – Bloomberg, 11/21/2023

• Sales of previously owned US homes fell by the most in nearly a year in October, highlighting the toll elevated mortgage rates and still-high prices continue to take on the resale market.
• Contract closings decreased 4.1% from a month earlier to a 3.79 million annualized pace, still the lowest since 2010, National Association of Realtors data showed Tuesday.
• The figure was weaker than all but one estimate in a Bloomberg survey of economists.
• The median selling price climbed 3.4% from a year earlier to $391,800, the highest for any October in data back to 1999.
• Yun added that nearly a third of homes sold above their list price, indicating that multiple offers are still occurring — particularly on starter and mid-priced homes.
• Even though the number of homes for sale ticked up from a month earlier to 1.15 million, it’s still the lowest for any October in the series.
• At the current sales pace, it would take 3.6 months to sell all the properties on the market.
• The NAR’s report showed 66% of homes sold were on the market for less than a month.
• Properties remained on the market for 23 days on average in October, up slightly from September.
• Sales were down 10.2% from a year earlier on an unadjusted basis.
• Sales fell in three of four regions, while they were unchanged in the Midwest.
• They hit a record low in the West and matched an all-time low in the Northeast.
• Single-family home sales dropped to an annualized 3.38 million pace, also the lowest since 2010.
• First-time buyers made up a historically low 28% of purchases in October.
• Cash sales represented 29% of total sales.
• Investors, who often purchase with cash and are therefore less sensitive to mortgage rates, made up 15% of the market, down from 18% in September.

EUROPE & WORLD

Baidu’s ChatGPT-Style AI Begins to Earn as Sales Beat Estimates – Bloomberg, 11/21/2023

• Baidu’s ChatGPT-style Ernie bots are beginning to add to the company’s top line, potentially shoring up advertising revenue for China’s internet search leader during a severe economic downturn.
• The company, which this year delivered China’s first major riposte to OpenAI’s ChatGPT, posted slightly stronger-than-expected 6% rise in revenue to 34.4 billion yuan ($4.8 billion) from July to September.
• Ernie, the company’s moniker for its generative AI model, should help generate hundreds of millions of yuan in additional ad revenue during 2023’s final quarter, the company estimates.
• Baidu’s Ernie Bot amassed 70 million users three months after its public roll-out, and the company claims its self-developed model has matched GPT-4 in terms of general capabilities.
• Baidu, for its part, has infused Ernie into its flagship products from search to maps and file-sharing, and the company now charges a monthly subscription fee of about $8 to users of its latest chatbot.
• Net income came to 6.7 billion yuan in the quarter, versus the 4.4 billion yuan expected.
• Some analysts noted a quarter-on-quarter slowdown in revenue growth.

Trip.com’s Revenue Surges – Wall Street Journal, 11/21/2023

• Trip.com Group said revenue surged in the latest quarter, driven by a recovery in the domestic and international travel industry amid increasing travel bookings.
• The Shanghai-based travel service provider said revenue jumped 99% to $1.9 billion in the third quarter.
• Total bookings on the company’s global online travel agents platform have more than doubled both year over year and compared to pre-Covid-19 levels, Trip.com said.
• “Looking ahead, we will continue our efforts in expanding our global presence and cultivating AI-related initiatives, laying the foundation for continued growth of our company,” Executive Chairman James Liang said.

Netanyahu to Convene Cabinet as Gaza Hostage Deal Gets Closer – Bloomberg, 11/21/2023

• Prime Minister Benjamin Netanyahu will convene Israel’s cabinet on Tuesday evening after signaling that a deal with Hamas to free hostages in Gaza in return for a temporary pause in fighting is getting closer.
• “We are making progress,” Netanyahu said, referring to the return of some of the 240 hostages abducted by Hamas on Oct. 7.
• “I don’t think its worth saying too much, not even at this moment, but I hope there will be good news soon.”
• Hamas political leader Ismail Haniyeh earlier indicated Qatar-mediated negotiations were moving forward, following similar comments from US President Joe Biden.
• “The movement delivered its response to the brothers in Qatar and the mediators, and we are close to reaching a truce agreement,” Haniyeh, who’s based in Qatar’s capital, said in a statement on Telegram.
• Qatar is helping broker the talks between Israel and Hamas, designated a terrorist organization by the US and European Union.
• Qatari Foreign Ministry spokesperson Majed Al-Ansari said the negotiations are at a critical stage.
• Hamas has agreed in principle for more than 50 women and children to be released, Axios reported earlier.
• In return, Israel would pause its military attacks for a specified time each day and release some Palestinians in Israeli jails.
• Israel’s Channel 12 cited an unnamed senior Israeli official saying that a hostage deal is “very close.”
• Those to be released would be children, their mothers, and other women, the report added.

Houthi Rebels Seize Israeli-Linked Cargo Ship in Red Sea – Wall Street Journal, 11/21/2023

• Iran-backed Yemeni rebels said they hijacked an Israeli-linked cargo ship with 25 crew members in the Red Sea over the weekend, heightening tensions in the Gaza conflict.
• The Houthis, a rebel group that controls Yemen’s north, said on X, formerly Twitter, that they are taking the vessel to the Yemeni coast and would continue to target vessels linked to Israel because of its attacks on Gaza.
• Middle East brokers identified the ship as the Bahamas-flagged car carrier Galaxy Leader, which is owned by Ray Car Carriers.
• The company is registered in the Isle of Man and one of its owners is Israeli businessman Abraham “Rami” Ungar.
• The Galaxy Leader was seized off Al Hodeida, Yemen, while sailing for India.
• Israeli Prime Minister Benjamin Netanyahu’s office said in a written statement that it strongly condemns the attack, adding that no Israelis were among the 25 crew members.
• The ship’s Japanese operator, NYK Line, said the vessel had no cargo at the time of the hijacking.
• Its crew members are from the Philippines, Bulgaria, Romania, Ukraine and Mexico, NYK said.

China Steps Up Support for Palestinian Cause in Challenge to U.S. Mideast Policy – Wall Street Journal, 11/21/2023

• Chinese leader Xi Jinping is seizing on the conflict in Gaza to portray his country as a force for stability in the Muslim world, in contrast with what Beijing casts as American meddling in the Middle East.
• In recent weeks, China has ramped up its appeals to halt the Israel-Gaza war, a show of diplomatic bustle laden with humanitarian platitudes but light on substantive proposals for achieving a cease-fire.
• China’s foreign minister on Monday hosted top diplomats from Arab and Muslim-majority countries in Beijing to discuss ways to mediate peace, building on efforts by Beijing’s Middle East envoy, who shuttled across the region this month to pledge Chinese support for talks to end the fighting in Gaza.
• Xi has weighed in as well. Fresh from his San Francisco summit with President Biden last week, the Chinese leader discussed the Israel-Hamas conflict with French President Emmanuel Macron in a Monday phone call, before joining fellow leaders from the Brics bloc of emerging economies for a videoconference on the war on Tuesday.
• Xi agreed with Macron that “the ‘two-state solution’ is the fundamental way to resolve the cycle of Palestinian-Israeli conflict,” according to the Chinese Foreign Ministry’s readout of the meeting.

Palantir Wins NHS Data Contract Worth Up to £480 Million – Bloomberg, 11/21/2023

• Palantir Technologies, the data analysis company co-founded by billionaire Peter Thiel and contracted by government intelligence agencies and military forces around the world, has won a contract to overhaul the National Health Service’s patient data system in the UK.
• Palantir bid together with Accenture for the deal, valued at as much as £480 million ($602 million), said Victoria Atkins, the Secretary of State for Health and Social Care in a statement on Tuesday.
• The deal will see Palantir and Accenture develop a federated data platform for NHS England that will help hospitals across the country analyze medical data, detect patterns and allocate resources.
• The five-year contract includes the option to be extended by two years.

Factmonster – TODAY in HISTORY

• With the Marquis d’Arlandes, Pilâtre de Rozier made the first free flight in a balloon, reaching a peak altitude of about 3,000 ft and traveling about 5 1/2 mi in 20 min. – 1783
• North Carolina became the 12th state. – 1789
• Georgia’s Rebecca Felton was sworn into the U.S. Senate, becoming the first woman U.S. Senator. – 1922
• For the first time since 1930, the U.S. Senate rejected a Supreme Court nominee, Clement Haynsworth. – 1969
• The 18 1/2 min gap in the Richard Nixon Watergate tapes was revealed. – 1973
• Egypt’s Boutros Boutros-Ghali was chosen to become secretary-general by the UN Security Council. – 1991

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