Stocks ended their worst week in a month with more losses Friday, marking the third straight daily loss for the Dow Jones average and the fourth for the S&P 500, weighed by spiking Treasury yields and concerns that Israel’s conflict with Hamas could escalate into a wider Middle East war. Also adding to the gloomy atmosphere on Wall Street was hotter-than-expected retail sales data along with mixed commentary from a host of Federal Reserve speakers, chief among them being chair Jerome Powell’s remarks at an event at the Economic Club of New York. Most of the officials hinted that interest rates could be kept steady, leading the market to bolster their bets for no more rate hikes this year. The yield on the benchmark 10-year Treasury crossed 5% for the first time in 16 years on Thursday, a level that could ripple through the economy in higher rates on mortgages, credit cards, auto loans and more – plus, it offers an attractive alternative to investing in stocks. For the week, the Dow dropped 1.6%, the S&P slipped 2.4%, and the Nasdaq Composite closed down 3.2%
Drugstore chain Rite Aid (OTC:RADCQ) filed for Chapter 11 bankruptcy protection, buckling under its more than $3B debt load and opioid-related liabilities. Rite Aid, which has been shuttering stores across the U.S., also received a commitment for $3.45B in new funds. Rite Aid joins other drugmakers that have declared bankruptcy due to opioid litigation – Mallinckrodt (OTC:MNKTQ), Endo (OTC:ENDPQ), and Purdue Pharma. Note that Rite Aid’s bankruptcy filing also comes at a time when consumer confidence has been weakening. SA analyst WYCO Researcher previously warned that management was not doing enough to keep Rite Aid out of bankruptcy court, adding that the biggest hurdle was negotiating an opioid settlement. (84 comments)
U.S. Treasuries sold off sharply on Tuesday after Sept. retail sales figures came in much stronger than expected. Retail sales rose 0.7% M/M to $704.9B, compared with the 0.3% increase expected, while core retail sales increased 0.6%. Allianz Advisor Mohamed El-Erian said the yield moves were likely a result of growing economic uncertainty and substantial fiscal deficits, views echoed by Federal Reserve Chair Jerome Powell. Longer-end yields powered higher through the week, with the 10-year yield (US10Y) reaching 5% for the first time since mid-2007, while popular bond ETFs dropped to multi-year lows. “Tough times are ahead for stocks and bonds,” warned SA analyst Damir Tokic, pointing to other attractive assets. (93 comments)
Tesla (TSLA) initially moved slightly higher in after-hours trading on Wednesday after posting Q3 results that were just under estimates, while margins continued to shrink. However, the stock dropped 4.2% after CEO Elon Musk tried to rein in expectations on the Cybertruck. “We dug our own grave with Cybertruck,” he conceded, warning that “there will be enormous challenges in reaching volume production with the Cybertruck, and then in making a Cybertruck cash flow positive.” The downbeat comments dragged Chinese EV stocks and other related firms. Investing Group Leader Livy Investment Research said the Tesla selloff was a result of waning confidence in its fundamental prospects. (532 comments)
Netflix (NFLX) soared 12.5% in postmarket action on Wednesday after it posted Q3 profit that topped estimates, saw its best subscriber growth in years and confirmed price hikes. The company added 8.76M global paid subscribers, easily topping the consensus estimate of 6.2M adds, and landed at 247.15M memberships – higher than the 244.41M expected. The subscriber surge was a result of “paid sharing, steady programming and the ongoing expansion of streaming globally,” Netflix said. Investing Group Leader Cestrian Capital Research said management’s outlook of further revenue growth and higher margins suggests scale and better revenue yield from content assets. (99 comments)
SolarEdge Technologies (SEDG) plunged 21.2% after the bell on Thursday after slashing its outlook, citing “substantial unexpected cancellations and pushouts of existing backlog from European distributors” due to higher inventory and much slower installation rates. As a result, SolarEdge’s Q3 earnings will come in below the low end of its prior guidance, with much lower revenue expected in Q4 amid inventory destocking. The outlook dragged other solar stocks in aftermarket trade, including Enphase Energy (ENPH) -13.6% and Sunrun (RUN) -6.9%. SA Quant previously flagged the risk of SolarEdge performing badly, while Investing Group Leader JR Research detailed why investors are better off staying on the sidelines. (140 comments)