The Dow Jones, S&P 500 and Nasdaq composite plunged through their 200-day moving averages. Most leading stocks that had been holding up also broke through at least their 50-day moving averages, including Apple (AAPL), AMD (AMD) and Nvidia (NVDA). Stocks did bounce Friday, but a stock market correction began as of Wednesday. JPMorgan Chase (JPM) and Delta Air Lines (DAL) rallied after earnings reports.
XStocks Plunge In Roller-Coaster Ride
The Nasdaq composite tumbled through its 200-day moving average. The Dow Jones and S&P 500, which knifed through their 50-day lines early in the week, fell through their 200-day averages on Thursday. Growth stocks, which have been under pressure all month, continued to tumble. Stocks did rebound Friday intraday, but were down sharply for the week. A stock market correction is underway.
Delta Earnings Beat, Guidance Solid
Delta Air Lines (DAL) reported Q3 earnings per share that beat expectations, while offering a solid Q4 revenue outlook and more restrained expansion plans for next year. Tickets for premium cabin seats helped, as did its airport hubs in Atlanta, Minneapolis and Detroit. Delta said it had recouped some 85% of the higher fuel costs that have dogged airline stocks all year. Delta stock bounced Thursday after falling for nine straight sessions. Earlier, American Airlines (AAL) sank after warning of higher-than-expected Q3 fuel costs.
Big Bank Earnings Kick Off
JPMorgan Chase (JPM) reported better-than-expected third-quarter earnings. The Dow Jones banking giant remained optimistic about the economy despite market concerns over geopolitical and trade tensions and the potential fallout of higher borrowing costs. Management indicated that the Fed would have to raise interest rates a lot further for it to cause problems for the bank. Citigroup (C) topped EPS, missed on revenue, while Wells Fargo (WFC) fell short on profit. JPMorgan dipped Friday intraday while Citi and Wells rose modestly. All three bank stocks tumbled for the week.
Inflation Tame, Consumers Upbeat
Consumer prices came in surprisingly soft in September for the second straight month. Core prices, excluding food and energy, rose just 0.1% on the month, as the annual rate held at 2.2%, down from July's 2.4%. Headline CPI inflation slipped to an annualized 2.3%, continuing to ease from July's six-year high 2.9%. A 3% dive in used car prices explained the softness, the continuing story is that there's no sign of an acceleration in inflation. Still, contained inflation doesn't change the outlook for more Fed rate hikes, with wage hikes accelerating and the economy on a roll.
The overall IBD/TIPP Economic Optimism Index registered 57.8 at the start of October, up 1.9 points on the month and just two-tenths of a point off August's 14-year high. Americans are more upbeat about their own financial outlook than at any time since the IBD/TIPP Poll began in 2001. Confidence in federal economic policies is high.
Crude Supply Gains, Weaker Demand Outlook
Brent and U.S. crude futures fell back on swelling U.S. supplies, demand weakening due to high prices and the overall global financial market retreat. "Expensive energy is back … And it poses a threat to economic growth," the International Energy Agency said in its monthly report. The group cut its demand growth outlook for 2018 and 2019. OPEC also cut its global demand growth estimates for this year and next. U.S. weekly crude inventories rose by 5.987 million barrels, the Energy Information Administration said, well above forecasts. Domestic production hit a record high of 11.2 million bpd.
Marijuana Firms Active Ahead of Canada Legalization
Canadian marijuana producer Aurora Cannabis said it hopes to trade under the ticker ACB on the New York Stock Exchange. Canopy Growth (CGC) said it exported medical marijuana into the U.S., and later said it expanded its production capacity by around 1.1 million square feet. U.S. marijuana retailer and cultivator MedMen agreed to buy PharmaCann, a medical marijuana company, in a $682 million deal that would create a company spanning 12 U.S. states. Canada legalizes recreational cannabis use on Oct. 17.
Google Unveils New Pixels, Shutters Google+
Core Alphabet (GOOGL) unit Google is becoming the low-priced vendor as it battles Apple (AAPL), Amazon.com (AMZN) and others in consumer electronics. Google took the wraps off a pair of new Pixel smartphones, a tablet computer and a smart home hub equipped with a video screen. Google, meanwhile, faced a new data privacy outcry. It said it will shut down its Google+ social network for consumers following a belated disclosure of a software glitch that exposed user's personal data to developers. The FTC may look into the matter.
Walgreens Earnings, Outlook Solid
Walgreens Boots Alliance registered 13% profit growth to $1.48 a share on 11% revenue gains to $33.44 billion, beating EPS views for $1.44 but below sales goals of $3.68 billion in sales. The drugstore giant's full-year profit guidance midpoint of $6.55 is ahead of estimates. Walgreens recently inked deals with Alibaba (BABA), Kroger (KR) and beauty company Birchbox as it tests out various retail strategies. Meanwhile, CVS Health (CVS) got the DOJ OK on its merger with insurance giant Aetna (AET).
Walmart, Costco Push Into Video
Walmart (WMT) announced a joint venture with interactive video technology developer Eko to make original content for the retailer that could include cooking shows and interactive toy catalogs. That follows reports of Walmart teaming up with MGM studios to create original series for the company's Vudu videoservice. Separately, Costco (COST)is considering offering free streaming video to its executive-level members, according to The Information. No deal is guaranteed, but Costco has reportedly spoken with at least two streaming video providers. Separately, Apple reportedly will offer its video content for free.
News In Brief
Private equity firm Thoma Bravo agreed to buy cybersecurity firm Imperva (IMPV) for $2.1 billion. Thoma Bravo earlier last year bought Barracuda Networks. In July, it took a majority stake in Centrify, a rival of CyberArk Software (CYBR).
Boeing (BA) delivered 61 737s in September, up from 48 737s in August and just 29 in July, as the aerospace giant works though supply chain issues. Overall Q3 deliveries hit 190 commercial jets, including 138 737s and 34 787s. That's down from 202 total aircraft in Q3 2017, when 145 737s and 35 787s were delivered. But Boeing stock fell sharply for the week.
Robinhood unveiled a self-clearing system, dubbed Clearing, which should lower costs for users and fuel revenue for the startup as it eyes an IPO. The zero-fee stock-trading app now has 6 million customers, up from 5 million in July.
A GE Capital unit will sell a portfolio of energy equity investments worth $1 billion to Apollo Global Management (APO). A shrinking General Electric (GE) plans to unload $25 billion in assets at GE Capital by 2020 as it de-risks the lending and leasing arm, which is under scrutiny. GE stock hit resistance at its 200-day line and reversed lower.
TransDigm (TDG) will buy F-35 and 787 parts maker Esterline (ESL) for $122.50 per share or about $4 billion. It'll finance the deal via cash on hand and a $2 billion loan. Earlier this year, Boeing was reportedly interested in the buying Esterline's avionics business.
Late Wednesday, the FDA lifted a clinical hold barring Crispr Therapeutics (CRSP) from beginning an in-human study of its CRISPR gene-editing therapy in sickle cell disease. The biotech is now on track to begin its U.S. test by year end. On Thursday, shares of Crispr and fellow gene-editing biotechs Editas Medicine (EDIT) and Intellia Therapeutics (NTLA) popped on the news.
Facebook (FB) jumped into the booming market for smart speakers with two devices that put an emphasis on video-based calling, pitting it against Amazon (AMZN) and Google (GOOGL).
Netflix (NFLX) is buying its first production studio complex, a facility with eight sound stages in Albuquerque, New Mexico.
Apple (AAPL) has signed a $600 million technology licensing and supply agreement with U.K.-based Dialog Semiconductor. Apple will pay Dialog $300 million for R&D facilities and resources and prepay $300 million for Dialog components to be delivered over the next three years.
Sears Holdings (SHLD) reportedly is near a bankruptcy filing, but that's complicated by CEO and Chairman Eddie Lampert, who's also the top shareholder and creditor. The parent of Sears and Kmart has seen declining sales for several years.
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The post Dow Jones, Top Stocks Tumble, Triggering Market Correction: Weekly Review appeared first on Investor's Business Daily.
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