The stock market rally continued for the Dow Jones, S&P 500 index and Nasdaq composite, with most of the gains Friday on a strong jobs report, positive China news and a vow from Fed Chairman Jerome Powell to be flexible. Stocks did tumble Thursday on warnings from Apple (AAPL) and Delta Air Lines (DAL) and a sharp drop in the ISM manufacturing index. Apple's warning on iPhone and China demand spurred heavy losses among suppliers. Tesla (TSLA) Model 3 deliveries fell short in Q4, while the luxury electric automaker cut prices on all three models. Bristol-Myers Squibb (BMY) agreed to buy Celgene (CELG) for $74 billion.
XStock Market Rally Powers Higher On Jobs, Powell
In another holiday-shortened week, the stock market rally continued with gains. The Dow Jones and S&P 500 rose more than 1.5% while the Nasdaq composite climbed over 2%. All of those gains came Friday, with Fed Chairman Powell promising to be flexible and patient, following a strong jobs report and some upbeat news on China's economy and stimulus. On Thursday, the major stock market averages tumbled due to Apple's warning on iPhone demand, especially in China, along with another Delta Air Lines warning and the ISM manufacturing index coming in short.
Crude oil prices surged on a big OPEC production drop in December, before OPEC and Russia output cuts officially began in January.
Jobs Report Strong, Fed Chairman Powell Tamed
The labor market ended a good year on a great note, but Fed Chairman Jerome Powell said that policymakers will heed the message of concern in financial markets and consider using all its tools.
That double-dose of good news, along with some positive Chinese economic data and stimulus measures, fueled a stock-market rebound on Friday. Just a day earlier, markets had tumbled on the sharpest plunge in the ISM manufacturing index since 2008 and a huge Apple earnings warning.
Jobs report: The U.S. economy added 312,000 jobs in December, the best gain in 10 months and far beyond estimates. Average hourly wage growth rose to 3.2%, matching October's fastest pace since 2009. The unemployment rate scooted up to 3.9% from 3.7%, but only because more people joined the workforce.
Fed Chairman Powell: Fed Chairman Powell said that the Fed will be sensitive to the "conflicting signals" financial markets are sending about the economic outlook that seem at odds with the data. Powell indicated an openness to adjusting the Fed's unwinding of asset purchases it made to boost the economy after the financial crisis hit. That was a big change from Powell's statement on December 19 that the Fed's quantitative tightening was on "autopilot." However, Powell said that he personally doesn't think the Fed's quantitative tightening is really weighing on markets, despite the opposite conclusion by numerous Wall Street strategists. Amid the acceleration in wage growth, Powell offered the soothing analysis that the wage-inflation link is very loose.
Fed chief Powell also took a stand for the Fed's independence. Asked whether he would resign if President Donald Trump asked him to, Powell gave a firm, "No."
Apple Slashes December-Quarter Outlook
Apple (AAPL) late Wednesday warned investors that its holiday-quarter sales would come in well below the not-so-hot guidance it gave just two months earlier. It blamed weak demand for its iPhones, especially in China. The tech giant now expects revenue of about $84 billion in its fiscal first quarter, down 5% vs. a year earlier. It previously predicted sales of $89 billion to $93 billion. Apple also cut gross margin targets. Apple's guidance suggested earnings per share of $4.36 for the December quarter vs. Wall Street's view of $4.53. Apple shares, which had tumbled since its initial Nov. 1 holiday outlook, crashed 10% Thursday to its lowest point since April 2017. Shares of iPhone chipmakers and other suppliers also tumbled, while the China warning spooked markets generally.
Bristol-Myers To Buy Celgene
Bristol-Myers Squibb (BMY) agreed to buy biotech giant Celgene (CELG) for $74 billion to forge a cancer-fighting giant. Celgene shareholders will receive one Bristol stock and $50 cash for each share of Celgene, plus a tradable Contingent Value Right for each share of Celgene. The CVR entitles the shareholder to a future payment for the achievement of a regulatory milestone. Bristol stock plunged more than 13% Thursday, reducing the deal's value. Celgene stock rocketed 21%.
Tesla Cuts Prices After Deliveries Fall Short
Tesla (TSLA) tumbled after reporting it delivered 63,150 Model 3 vehicles in the fourth quarter, short of analyst estimates of about 65,000. Tesla also cut the price of all three of its vehicles by $2,000 to partly offset the reduction of the electric vehicle tax credit for Tesla cars. But the data hint at weaker demand. Tesla said there are "significant opportunities" to grow Model 3 sales by expanding to international markets and introducing lower-priced versions of its vehicles. International deliveries in Europe and China will start next month.
Auto Sales Top 17 Million Again In 2018
General Motors (GM) saw U.S. auto sales slide 2.7% in the fourth quarter, with declines for the Chevrolet, Cadillac and Buick brands. Ford (F) U.S. sales tumbled 8.8% in December, with declines in passenger cars, SUVs and pickup trucks. Toyota Motor (TM) saw December sales drop fractionally year over year. But Fiat Chrysler (FCAU) bucked the trend for December, posting a 14% increase. Fiat Chrysler grew sales for 2018 as a whole, with the Jeep its standout brand. Overall, December auto sales across the industry reached a robust 17.5 million seasonally adjusted rate, according to Edmunds. Automakers sold 17.3 million new light vehicles in 2018, a 0.4% increase from the prior year, the car info site added. Ford said it'll start reporting quarterly instead of monthly sales, following GM's move last year. Meanwhile, GM is expected to give a 2019 sales outlook at an investor day Friday.
Delta Air Sinks Airlines Again
Delta Air Lines (DAL) cut its fourth-quarter revenue forecast for the second time in a month, saying it wasn't able to charge as much as expected for flights booked closer to departure times last month. Delta sank to a 15-month low on the news and dragged other airline stocks lower. The carrier said demand for business and leisure travel remained solid. Jet-fuel costs fell as crude prices plunged. But some investors and analysts have grown more concerned that cheaper fuel — which helps airlines' profits and often emboldens them to expand — could lead to fare cuts that hurt sales figures.
Drug Price Hikes Muted In 2019
Biopharmas were largely restrained in hiking drug prices to start 2019, an analyst said Wednesday. Biogen (BIIB) raised the prices on multiple sclerosis drugs Tecfidera and Tysabri by 6% and 3.5%, respectively. Bristol-Myers is raising prices on five drugs expected to account for 54% of U.S. sales in 2019, while Allergan (AGN) boosts the prices of seven out of 10 drugs forecast to bring in 40% of total U.S. sales for the year. Eli Lilly (LLY) is raising the prices of diabetes drugs Jardiance and Tradjenta by 6% each.
Macau Gaming strong
Gaming revenue in the world's biggest gambling center jumped 16.6% in December to 26.47 billion patacas ($3.3 billion), better than expected. Full-year revenue grew 14% to 302.85 billion patacas ($37.6 billion). Macau-focused casino stocks Wynn Resorts (WYNN), Las Vegas Sands (LVS), MGM Resorts (MGM) and Melco Resorts & Entertainment (MLCO) jumped Wednesday. However, JPMorgan said the days of double-digit gross gambling revenue growth are over, at least for now.
News In Brief
Amazon (AMZN) plans to build Whole Foods stores across the U.S., to put more customers within range of the e-commerce giant's two-hour delivery service, the Wall Street Journal reported. The stores will be larger than the average Whole Foods location, providing space to store additional products and pickup services for online ordering.
Canada Goose (GOOS) stock popped Monday after crowds flocked to the opening its first-ever store in mainland China, and amid renewed hopes for a China trade deal with the U.S. The maker of $1,000 parkas has tumbled since Canada arrested the CFO of China's Huawei at America's request.
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The post Stock Market Rally Extends On Fed Chairman Powell, Jobs; Apple, Tesla, Delta Disappoint; Bristol-Myers Buys Celgene: Weekly Review appeared first on Investor's Business Daily.
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