A stock market correction began as the major averages and leading stocks showed more weakness, but S&P 500 and other indexes rebounded for solid weekly gains. Nvidia (NVDA) plunged as it halted autonomous-driving tests, just one of several negative headlines for Tesla (TSLA). Facebook (FB) continued to slide on its data privacy furor, while Amazon (AMZN) tumbled through its 50-day moving average. Lululemon Athletica (LULU) and RH (RH) rallied on strong earnings as retail remained a relative source of strength. Baidu (BIDU) streaming video unit iQiyi (IQ) came public.
Stock Market Correction Triggered
The major averages rebounded Monday as trade war fears eased. But the S&P 500 and other indexes tumbled Tuesday, triggering a stock market correction. But, fueled by a Thursday rally, the Dow Jones rose 2.7% for the week, the S&P 500 2.1% after testing their 200-day moving averages. The Nasdaq composite rose 1%, but many tech giants were big losers. Nvidia (NVDA) and Uber suspended self-driving tests. Tesla (TSLA), a Nvidia supplier, also faces a federal probe of a Model X involving its Autopilot system. Moody's also cut Tesla debt over Model 3 production woes. Amazon.com (AMZN) tumbled through its 50-day line for the first time in six months amid fears that President Trump will "go after" the e-commerce giant. Retail and apparel remained a relative bright spot.
For the quarter, the Dow lost 2.3% and the S&P 500 2.7%, while the Nasdaq added 2.3%.
Autonomous-Driving Tests Halted, Tesla Dives
Uber Technologies suspended self-driving tests amid a federal probe into a recent fatal crash involving one of its autonomous vehicles. Nvidia (NVDA) also said it would halt its tests. Shares of the chipmaker plunged, helping to trigger the stock market correction. Tesla (TSLA), which uses Nvidia chips, fell sharply amid bad news. The U.S. National Transportation Safety Board said it is probing a fatal crash on March 23 involving a 2017 Model X. Moody's downgraded Tesla's credit rating amid concerns over cash burn and Model 3 production delays.
Alphabet (GOOGL)-unit Waymo is sticking with plans to roll out a commercial robotaxi service in Phoenix this year. Waymo also plans to order as many as 20,000 luxury, autonomous electric cars from Jaguar Land Rover, a subsidiary of India's Tata Motors (TTM). Waymo and Jaguar plan to move into production with the crossover sport-utility by 2020.
Daimler and BMW announced they will combine their self-driving service assets and form a 50/50 joint-venture structure.
Facebook's Zuckerberg Will Testify
Facebook Chief Executive Mark Zuckerberg is expected to testify before Congress as pressure mounts from the data privacy scandal that has roiled the company and its stock. The congressional hearings were prompted by revelations that data consultancy Cambridge Analytica had wrongfully obtained personal information on millions of Facebook users without their knowledge. Facebook beefed up its privacy controls and said it would halt selling some data to third-party brokers. Facebook shares initially tumbled but rose modestly for the week.
Amazon Slammed As Trump Takes Aim
Amazon fell 4.4% Wednesday, undercutting its 50-day line, on a report that President Trump wants to "go after" the e-commerce giant. Trump has long been critical of Amazon, perhaps in part because CEO Jeff Bezos owns the Washington Post. The White House denied any plans to target Amazon. But Trump tweeted his "concerns" regarding Amazon on Thursday. Amazon initially fell Thursday but closed up 1.1%. Fellow FANG Netflix (NFLX) found support at its 50-day line.
Lululemon Athletica Soars
Shares of Lululemon (LULU) soared 12% to record highs for the week. The athletic apparel maker and retailer beat estimates across the board and raised full-year guidance. EPS rose 33% to $1.33 as revenue grew nearly 18% to $929 million. In North America, where peers like Nike (NKE) have struggled, Lululemon sales grew in the low single digits. And online sales popped 42% in constant currency on top of 12% prior-year growth. Analysts said new products, an improved website and marketing investments fueled the quarterly win. Apparel makers and retailers are a pocket of market strength.
Red Hat Earnings Boom On Cloud Gains
The Linux open-source software provider's earnings growth accelerated to 49% in its fiscal fourth quarter. Revenue rose 23% to $772 million, gradually accelerating for a fourth straight quarter. Both topped views. Red Hat (RHT) guided low on Q1 earnings but sees full-year earnings and revenue above the consensus. Red Hat's push into "container" software for cloud-computing workloads will drive growth, analysts say. Red Hat shares initially soared Tuesday, but settled for a fractional gain. Shares rose 1.1% for the week.
Concho Resources Will Be No. 1 In Permian Basin
Concho Resources (CXO) will buy RSP Permian (RSPP) in an all-stock deal worth $9.5 billion. The takeover will create the largest drilling and completion operation in the Permian. Concho shares tumbled. U.S. crude inventories rose by 1.6 million barrels, more than expected, the Energy Information Administration said. Production hit a new high of 10.43 million barrels per day. Saudi Crown Prince Mohammed bin Salman told Reuters that OPEC is looking to extend oil production cooperation with Russia for up to 20 years.
China Streaming Video Giant iQiyi's IPO Tumbles In Debut
Baidu (BIDU) video streaming unit iQiyi (IQ) fell nearly 14% to 15.55 in Thursday's trading debut. That's after selling 125 million shares at 18 apiece, in line with the expected range. The $2.25 billion raised in the IPO was just shy of January's $2.27 billion IPO from PagSeguro Digital (PAGS). Called "the Netflix (NFLX) of China," iQiyi has a licensing deal with Netflix. With 50 million subscribers, iQiyi has about 28% market share in China, where rivals Alibaba (BABA) and Tencent (TCEHY) have their own streaming services in a hotly contested battle for viewers.
Inflation Tame
The Fed's favorite inflation gauge, the core personal consumption expenditures price index, showed a slight uptick in February. The annual inflation rate edged up to 1.6% from 1.5%, an 11-month high. Inflation is far below the Fed's 2% target, and there's enough doubt about corporate pricing power. So inflation will have to rise further to pressure Fed policymakers to hike rates more than three times this year. Commerce Department data on Thursday showed that disposable personal income rose 0.4% in February, but spending rose a modest 0.2%. That suggests people may initially be saving their tax cuts. Consumers ended 2017 on a strong note. Fourth-quarter GDP was revised up to 2.9% from 2.5%.
Biotechs Are Big Winners, Losers
Biotech stocks collectively rose to sixth out of 197 groups tracked by IBD last week, but news was more mixed among big movers. On Monday, Celgene (CELG) lifted nearly 3% on an analyst's suggestion that it could be near a settlement with Dr. Reddy's Laboratories (RDY) over a generic version of cancer drug Revlimid. At the same time, Biohaven Pharmaceuticals (BHVN) tanked 7.3% after it unveiled two late-stage trials for its migraine drug that lagged results from a rival drug by Allergan (AGN.) Tesaro (TSRO) slipped 4% on Tuesday amid split views for its combination of Zejula and Merck (MRK) blockbuster Keytruda in ovarian cancer patients. Also Tuesday, AnaptysBio (ANAB) toppled 5.5% on the results of its peanut allergy drug study. Celgene (CELG) and Bluebird Bio (BLUE) agreed to jointly market an advanced cancer treatment known as bb2121 in the U.S., expanding on a 2013 deal.
Buyouts
U.K. sports retail giant JD Sports will pay $558 million for athletic apparel chain Finish Line (FINL), which soared to slightly above the $13.50 a share offer. Finish Line pulled back to 13.54 Thursday following mixed Q4 results. Building materials company USG (USG) has rebuffed a $5.9 billion buyout offer from Germany's Knauf. That's despite the offer getting support from Warren Buffett's Berkshire Hathaway (BRKB), which is one of USG's top shareholders. USG shares shot up on speculation that the provider of wall, ceiling, flooring and roofing products could be had for a higher price. Shire Pharmaceuticals (SHPG) shot up after confirming that Japan's Takeda could make an offer. Finally, audio communications firm Plantronics (PLT) agreed Wednesday to acquire videoconferencing company Polycom for $2 billion. Polycom was bought by private equity firm Siris Capital for the same price just two years ago.
News In Brief
GlaxoSmithKline (GSK) agreed to buy out the 36.5% stake in its consumer health unit for $13 billion from Novartis (NVS).
BlackBerry (BB) reported a fiscal Q4 adjusted profit of 5 cents a share, topping expectations that it would break even, while revenue fell 19% to $233 million, in line with views.
RH (RH), formerly known as Restoration Hardware, reported that Q4 profit leapt 148.5% to $1.69 per share on 13% sales growth to $670 million, topping forecasts. The home furnishings retailed guided high and signaled a more aggressive expansion plan for its design galleries. Shares soared nearly 23% for the week, blasting above their 200-day and 50-day lines.
Constellation Brands' (STZ) earnings per share rose 28% as revenue climbed 8.5% to $1.77 billion, both beating. Beer sales grew 12% to $997.2 million. Constellation Brands increased its quarterly dividend 42% to 74 cents. Shares rose 3.4% to 227.92, closing below a recent buy point after cross that intraday.
Apple (AAPL) introduced a lower-priced iPad at a Chicago high school as the company seeks to regain ground lost to Google-owner Alphabet and Microsoft in the education market. The new 9.7-inch Retina display iPad has a starting price of $329 for the 32-gigabyte Wi-Fi model, discounted to $299 for schools.
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