Coffee With Greta: Stocks Are Still Sliding
DJIA Futures: +6 (+0.02%) SPX Futures: -7 (-0.2%) NASDAQ Futures: -46 (-0.4%) Good morning friends! Futures are mostly lower as Wall Street continues to struggle and traders digest new data on the housing market. Let’s get right to it! New Home Construction Slows New home construction slowed less than expected in November. The Census Bureau reported housing starts dropped 0.5% last month to a seasonally adjusted annual rate of 1.43 million units. That was better than expectations for 1.40 million but marked the third straight monthly declines. Starts were down 16.4% year over year as high mortgage rates put pressure on builders. Single-family starts dropped 4.1% to an SAAR of 828,000 units while multi-family starts jumped 4.8% to an SAAR of 584,000 units. But building is expected to slow further as permits tumbled last month. Permits dropped 11.2% to an SAAR of 1.34 million units, sharply lower than 1.48 million expected. Bank of Japan Shifts Bond Yield Policy The Bank of Japan shocked global markets overnight by unexpectedly widening its target range for 10-year Japanese government bond yields. The central bank will now allow the 10-year yield on the Japanese Government Bond to move 50 basis points on either side of its 0% target. That’s up from 25 basis points previously. The BOJ says the move intended to “improve market functioning and encourage a smoother formation of the entire yield curve, while maintaining accommodative financial conditions.” The bank is also maintaining loose monetary policy, leaving its benchmark interest rate unchangedat -0.1% and vowing to increase the rate of its 10-year government bond purchases. The move caused a sell-off in bonds and stocks globally overnight. In the U.S., the 10-year yield is up 8 basis points to 3.66%. Yields move inversely to prices, rising as bonds are sold. General Mills Slips Despite Earnings Beat, Strong Outlook General Mills (GIS) shares are falling 3.5% ahead of the open despite beating fiscal Q2 expectations and hiking its outlook. Here’s how the company’s results compared to analysts’ expectations: Adjusted EPS: $1.10 vs $1.07 expected Revenue: $5.22 billion vs $5.19 billion expected General Mills hiked its outlook for 2023 adjusted EPS growth to between 4% to 6% vs up to 5% previously. Organic net sales are also expected to rise 8% to 9% vs 6% to 7% growth expected previously. But the company also warned it continues to expect ““the inflationary cost environment and the frequency and severity of disruptions in the supply chain” to be its largest challenge. Oil Prices Rise, Surging Covid Cases In China Limit Gains Oil prices are higher this morning as the dollar weakens and the U.S. prepares to restock its petroleum reserves. West Texas Intermediate crude futures are up 1% to $76 bbl while Brent crude futures are up 0.9% to $80.50 bbl. But the market is concerned about the demand impacts of the latest Covid surge in China. Although the country has been relaxing restrictions, uncertainty remains about how China’s decision to ditch its “zero-Covid” policies will impact other countries. In Case You Missed It Homebuilder sentiment dropped for the 12th straight month on Monday. The National Association of Homebuilders sentiment index fell 2 points this month to 31. That was the lowest reading since mid-2012 and worse than expectations for a slight improvement to 34. Any reading below 50 is considered negative but it was the smallest drop in the past six months. NAHB’s chief economist said that indicates builder sentiment is nearing a bottom. The 6-month sales expectations index also rose by 4 points to 35.
Continue Reading -->Coffee With Greta: Can Traders Shake the December Slump?
DJIA Futures: +2 (+0.01%) SPX Futures: +2 (+0.1%) NASDAQ Futures: +16 (+0.1%) Good morning friends! Futures are flat as traders gear up for a new week of trade. Let’s get right to it! Fresh Week The major indexes are all poised to open slightly higher following two straight weeks of losses. Recession fears took over last week after the Fed hiked rates again and raised its forecast for future moves. The major indexes are all on track for monthly losses so far. The Dow Jones is down 4.8% this month, the S&P 500 has lost 5.6%, and the Nasdaq has dropped 6.7%. Tesla Rises After Musk’s Latest Twitter Poll Tesla (TSLA) shares are up 2% ahead of the open after CEO Elon Musk ran a poll on Twitter asking whether he should step down as head of the company. Musk said he would abide by the results of that poll. 57.5% voted ‘yes’ that he should step down, while 42.5% voted ‘no’. Some Tesla shareholders have previously expressed concern that Musk’s duties at Twitter distract him from Tesla. Musk has also sold off large chunks of Tesla stock to help fund his takeover of Twitter. Regional Airline Ditches American For United Mesa Air Group (MESA) shares are rallying 7.7% in premarket trade. The regional carrier announced over the weekend it is winding down flights for American Airlines (AAL) and is close to an agreement to fly for United Airlines (UAL). In a note to employees, Mesa’s CEO said, “We are excited to announce we have negotiated a wind down of our operations with American and are finalizing a new agreement with United which would transition all CRJ900s currently flying for American Eagle to United Express.” The final Mesa flight for American will be on April 3. Oil Prices Jump On Chinese Demand Hopes Oil prices are higher this morning as optimism about the Chinese economy overshadows global recession fears. West Texas Intermediate crude futures are up 1.3% to over $75 bbl while Brent crude futures are up 1.4% to over $80 bbl. China is sticking by its relaxed Covid restrictions even as cases rise. The country has also vowed to increase support for the economy and boost economic growth in 2023. Homebuilder Sentiment Expected To Improve Homebuilder sentiment is expected to improve slightly this month. The National Association of Homebuilders releases its monthly sentiment index at 10:00 a.m. ET. That survey is expected to show an improvement to 34 from 33. Confidence dropped for the 11th straight month and hit a decade low in November as builders struggle with lower demand due to higher mortgage rates. More housing market data is due later this week. The Census Bureau reports housing starts and building permits Tuesday, the National Association of Realtors reports November existing home sales Wednesday, and the Census Bureau reports November new home sales Friday.
Continue Reading -->Can Elon Musk Commit to Tesla?
SPY did a double top at $410 on CPI day and then again on the FOMC at $405ish. I sold a lot of calls to collect premium. My SPY puts also helped into Friday, when I sold half and made some into a put spread. We’re seeing a small bounce attempt today. The resistance #1 area is $386-$388. If we see that, I’d probably sell $393-$395 calls because I think move into year-end would be capped. QQQ’s failed to hold $295 on CPI day and has been under pressure since hitting a low of $272.67 Friday. If we see a bounce attempt today, I’d think $278ish is resistance and then we’ll have a big one around $283ish. So let’s talk Tesla (TSLA) and some other names. TSLA has been broken since September with lots of ways to stay out of the way. Last week it showed extreme relative weakness and Elon sold more shares. On Friday it was rejected into the $161 area and made another new low on the year, hitting $150.04. It’s trying to bounce a bit on the possibility of a new Twitter CEO. But it’s hard to get excited here. See if the early strength holds or fades. AAPL sold down hard last week to hit $133.73.We’ll see if today’s bounce sticks for a day or fades. $136.50-$137.50 is now resistance. NFLX filled the gap up to $332. It’s been a great vehicle for us the past two months. I’m glad we were out before Last Thursday’s news and gap down. It made a low of $286 and had a small bounce Friday. I wouldn’t chase prices. Perhaps it goes green to red today. MSFT hit $263 and sold down fast. Some got short around $253 and it hit $243ish. I’d think $249ish would reject a bounce attempt.
Continue Reading -->Coffee With Greta: Stocks Are Free, Free Fallin’
DJIA Futures: -377 (-1.1%) SPX Futures: -41 (-1.1%) NASDAQ Futures: -68 (-0.6%) Good morning friends! Futures are sliding as recession fears grip traders. Let’s get right to it! Wall Street Selloff Continues Recession fears have taken over Wall Street and stocks are continuing to tumble. The major indexes are all sliding further in premarket action after dropping sharply on Thursday. The Dow Jones dropped 764 points or 2.25% on Thursday, its worst daily performance since September. The S&P 500 and the Nasdaq fell 2.49% and 3.23% respectively. All three are on track to notch a second straight week of losses. Trading is also expected to be volatile today with a large amount of options set to expire. $2.6 trillion worth of index options are set to expire today, which Goldman Sachs says is the highest amount “relative to the size of the equity market in nearly two years.” Adobe Jumps On Strong Earnings Adobe (ADBE) shares are up 5.3% ahead of the open after beating fiscal Q4 expectations. Here’s how the software company’s results compared to analysts’ expectations: Adjusted EPS: $3.60 vs $3.50 expected Revenue: $4.53 billion as expected Revenue grew 10% year over year, down from 13% growth the previous quarter. The CEO said, “We delivered record operating cash flows with a focus on profitability.” For fiscal Q1, Adobe forecast $3.65 to $3.70 in adjusted EPS on $4.60 billion to $4.64 billion in revenue. That topped analysts’ expectations of $3.64 in adjusted EPS on $4.64 billion in revenue. Safety Regulators Investigate GM’s Self-Driving System General Motors (GM) shares are slipping 1.5% in premarket trade after U.S. safety regulators opened a formal investigation into the company’s autonomous driving system. The National Highway Traffic Safety Administration (NHTSA) is investigating GM’s self-driving vehicle unit Cruise. A filing shows NHTSA has received complaints about the vehicles engaging in “inappropriately hard braking” or becoming “immobilized while operating.” The regulator said, “This may introduce multiple potential hazards such as a collision with a Cruise vehicle, risk to a stranded passenger exiting an immobilized Cruise vehicle, or obstruction of other traffic including emergency vehicles.” NHTSA is investigating about 240 of the vehicles retrofitted with the Cruise software system. Cruise is currently awaiting regulatory approval to expand its robotaxi service in San Francisco. Coinbase Drops As Crypto Uncertainty Continues Coinbase (COIN) shares are falling 2.3% ahead of the open as uncertainty and volatility continue in the crypto market. Binance announced today that accounting firm Mazars Group has suspended all work with its crypto clients. Those clients included Binance, KuCoin, and Crypto.com. This comes after the collapse of FTX.com has caused uncertainty about other crypto firms and assets across the market. Bitcoin prices are down nearly 3% in the past 24 hours, dropping below $17,000. Ethereum is down 5% in the past 24 hours to just over $1,200. In Case You Missed It Two key manufacturing indexes contracted more than expected in early December. The Philadelphia Fed’s manufacturing index came in at -13.8 vs -12 expected but that was an improvement from -19.4 in November. Meanwhile, the Empire State manufacturing index dropped to -11.2 vs -0.5 expected, down sharply from 4.5 in November. Both of these surveys are seen as barometers for the national manufacturing sector. Any reading below 0 indicates deteriorating business conditions. S&P Global releases its flash U.S. manufacturing PMI at 9:45 a.m. ET today.
Continue Reading -->Coffee With Greta: Stocks Slide As Retail Sales Disappoint
DJIA Futures: -374 (-1.1%) SPX Futures: -54 (-1.4%) NASDAQ Futures: -201 (-1.7%) Good morning friends! Futures are sliding after the release of disappointing retail sales data. Let’s get right to it! Retail Sales Drop More Than Expected Retail sales fell more than expected in November as consumers shift their spending habits due to high inflation. The Census Bureau reported retail sales fell 0.6% to $689.4 billion. That was worse than economists’ expectations for a 0.3% decline. Retail sales were still up 6.5% year over year. Core retail sales, which exclude auto sales and gas stations, also fell 0.2% monthly and were up 6.7% annually. Sales dropped 2.3% at car dealers and parts stores, fell 2.6% at furniture and decor retailers, declined 1.5% at electronics and appliance stores, fell 2.5% at building materials retailers. Grocery store sales rose 0.8%, health and personal care store sales rose 0.7%, and restaurant and bar sales rose 0.9%. Weekly Jobless Claims Drop to 11-Week Low Weekly jobless claims fell to an 11-week low in early December. The Labor Department reported 211,000 Americans filed initial unemployment claims last week. That was down by 20,000 from the previous week and better than 232,000 expected. Continuing claims rose by 1,000 to 1.67 million in the week ending December 3. ECB Hikes Rates, Announces Balance Sheet Reduction The European Central Bank followed the Fed’s lead overnight, implementing a 50 basis point rate hike. That takes the bank’s key rate from 1.5% to 2% and is the fourth rate hike this year. The ECB also announced it will begin reducing its balance sheet in March 2023 by 15 billion euros per month on average. That balance sheet reduction will continue through the end of Q2 2023. Musk Sells Off More Tesla Shares Tesla (TSLA) shares are down 3% ahead of the open after a new filing showed CEO Elon Musk sold off more of the stock this week. The SEC filing shows Musk sold about 22 million more shares worth around $3.6 billion between Monday and Wednesday of this week. Many believe the recent sales are linked to Musk’s $44 billion takeover of Twitter. He told Twitter employees after that deal closed that he sold Tesla shares to “save” their business. In Case You Missed It The Fed hiked the federal funds rate as expected by 50 bps on Wednesday. That puts the rate in a target range of 4.25% to 4.5%, the highest in 15 years. The Fed’s dot plot shows officials expect rates to top out at 5.1% in 2023 with rate cuts not beginning until 2024. The FOMC expects 1% of rate cuts in 2024 and 1% of cuts in 2025, with the longer-run neutral rate at 2.5%.
Continue Reading -->Coffee With Greta: FOMC In Focus
DJIA Futures: +6 (+0.02%) SPX Futures: -3 (-0.1%) NASDAQ Futures: -12 (-0.1%) Good morning friends! Futures are flat as traders await today’s Fed decision. Let’s get right to it! FOMC In Focus The Federal Open Market Committee releases its rate hike decision at 2:00 p.m. ET today. CME Group’s FedWatch Tool still shows 79.4% of traders expecting the Fed to vote for a 50 bps hike. That would be a pivot to smaller moves after four consecutive 75 bps hikes so far this year. The hike comes after new data on Tuesday showed consumer inflation slowing to an annual pace of 7.1%. That was lower than expectations but is still more than 3.5x the Fed’s target rate of 2%. Traders will also be focused on the Fed’s summary of economic projections and where that shows rates peaking in 2023. Fed Chair Jerome Powell speaks at 2:30 p.m. ET. Mortgage Demand Rises Amid Lower Rates Mortgage application volume is rising again as rates have cooled. The Mortgage Bankers Association reported total applications rose 3.2% last week compared to the previous week. Purchase applications rose 4% weekly and were down 38% year over year. Refinance applications rose 3% weekly but were still 85% lower on an annual basis. The average 30-year fixed contract rate increased slightly to 6.42% from 6.41%. But that’s down from the peak of just over 7% in October Delta Rallies On Strong Forecast Delta Airlines (DAL) shares are up 3.9% ahead of the open after the company hiked its 2023 outlook. The airline expects adjusted EPS to nearly double next year to as much as $6 per share. The company also forecast a 15% to 20% increase in revenue next year from this year. And free cash flow is expected to rise to more than $4 billion in 2023 from more than $2 billion this year. CEO Ed Bastian said, “Demand for air travel remains robust as we exit the year and Delta’s momentum is building.” Delta also raised its Q4 earnings forecast to a range of $1.35 to $1.40 per share up from $1 to $1.25 per share previously. Total revenue is also expected to be 7% to 8% higher than Q4 2019. Oil Prices Rise On Optimism for 2023 Demand Oil prices are rising this morning amid forecasts for demand to rise in 2023. West Texas Intermediate crude futures are up 0.7% to $76 bbl while Brent crude futures are up 0.7% to over $81 bbl. New data from the American Petroleum Institute on Wednesday showed U.S. crude inventories rose unexpectedly by 7.8 million barrels last week. The Energy Information Administration reports official supply levels later today. Meanwhile, the International Energy Agency raised its 2023 oil demand estimate by 1.7 million barrels per day, now totaling 101.6 million bpd. OPEC also said it is expecting oil demand to grow by 2.25 million bpd in 2023 to 101.8 million bpd.
Continue Reading -->Coffee With Greta: Stocks Surge On Cool CPI
DJIA Futures: +709 (+2.1%) SPX Futures: +109 (+2.7%) NASDAQ Futures: +446 (+3.8%) Good morning friends! Futures are surging after the release of cooler-than-expected inflation data. Let’s get right to it! CPI Cools More Than Expected Consumer prices cooled more than expected in November in a sign the Fed’s rate hikes are working to slow inflation. The Bureau of Labor Statistics’ consumer price index rose 0.1% monthly and 7.1% year over year last month. That was better than economists’ expectations for +0.3% monthly, +7.3% annually. Shelter and food prices continued to rise while energy prices dropped. Grocery prices rose 0.5% monthly and 12% year over year while shelter prices rose 0.6% monthly and 7.1% annually. Those gains were offset by the 2% monthly drop in gas prices, 3.5% monthly decline in utility gas prices, and 2.9% drop in used car and truck prices. The core CPI, which excludes food and energy, also cooled more than expected. Core prices were up 0.2% monthly and 6% year over year vs +0.3% monthly and +6.1% annually expected. Yields Tumble After CPI Treasury yields are tumbling this morning after the release of that better than expected inflation data. The 2-year yield is down 13 basis points to 4.23% while the 10-year yield is down 9 basis points to 3.48%. CME Group’s FedWatch Tool now shows 79.4% of traders expecting the Fed to pivot to a smaller 50 basis point rate hike this week. The central bank kicks off its policy meeting today with the rate hike decision set to be released at 2:00 p.m. ET on Wednesday. Oil Prices Climb On Supply Disruptions, Optimism About China Oil prices are higher this morning as the market faces supply disruptions and Covid restrictions continue to ease in China. West Texas Intermediate crude futures are up 1.9% to over $74.50 bbl while Brent crude futures are up 2.1% to over $79.50 bbl. The Keystone Pipeline which ships Canadian crude to the U.S. is still shutdown after a rupture last week. The timetable to restart that pipeline is still unclear. That shutdown has raised expectations U.S. crude inventories will decline sharply. The American Petroleum Institute releases the first report of supply levels at 4:30 p.m. ET today. Oracle Rallies On Earnings Beat Oracle (ORCL) shares are up 4.6% ahead of the open after beating fiscal Q2 expectations. Here’s how the software company’s results compared to analysts’ expectations: Adjusted EPS: $1.21 vs $1.17 expected Revenue: $12.28 billion vs $11.96 billion expected The CEO called for revenue to increase 17% to 19% in fiscal Q3. That suggests a total between $12.3 billion and $12.5 billion. Oracle guided for adjusted EPS of $1.17 to $1.21. Analysts were estimating adjusted EPS of $1.23 on $12.21 billion in revenue. In Case You Missed It Consumer inflation expectations improved in November. The New York Fed’s survey of consumer expectations showed respondents see inflation at 5.2% one year from now. That was down 0.7% from the October reading and the lowest since August 2021. The three year projection also improved by 0.1% to 3% while the five year outlook declined by 0.1% to 2.3%.
Continue Reading -->Coffee With Greta: Key Fed Week
DJIA Futures: +85 (+0.3%) SPX Futures: +12 (+0.3%) NASDAQ Futures: +39 (+0.3%) Good morning friends! Futures are rising as traders get ready for a key week of data and the December Fed decision. Let’s get right to it! Traders Look Ahead To CPI and The Fed The market is gearing up for a big week of economic data. Things kick off with the release of the November CPI Tuesday morning at 8:30 a.m. ET. That index is expected to show headline inflation cooled last month to a 0.2% monthly pace and 7.3% annually. The Core CPI is expected to rise 0.4% monthly and 6.1% year over year. But both the headline and core PPI came in hotter than expected on a monthly basis last Friday. Following that key inflation data, traders have their focus on the Fed. The FOMC’s latest rate hike decision will be released at 2:00 p.m. ET on Wednesday. CME Group’s FedWatch Tool shows 74.7% of traders expecting the central bank to pivot to a smaller 50bps rate hike this week as inflation pressures begin to show signs of cooling. Amgen to Acquire Horizon Therapeutics Horizon Therapeutics (HZNP) are surging 14.8% ahead of the open after Amgen (AMGN) announced it will acquire the biopharmaceutical company. Horizon shareholders will received $116.50 per share for every share they own. The deal is valued at approximately $26.4 billion while Amgen said it has an enterprise value of about $28.3 billion. Horizon develops potential treatments for rare autoimmune and inflammatory diseases. Coupa Software To Go Private Coupa Software (COUP) shares are rallying 26.9% in premarket trade after private equity firm Thoma Bravo announced it will buy the business software company in an all-cash deal. Thoma Bravo will pay $81 per share with the deal totaling $6.15 billion. The deal reportedly has an enterprise value of $8 billion. The firm has been buying up lower-valued public companies over the past two years including Ping Identity, Sophos, Proofpoint, and Sailpoint Technologies. Rivian Ditches Europe EV Van Plans with Mercedes-Benz Rivian (RIVN) shares are slipping 0.4% ahead of the open after announcing it is pausing plans to manufacture electric commercial vans in Europe with Mercedes-Benz. The company said it would “no longer pursue” the agreement. Rivian’s CEO said, “We’ve decided to pause discussions with Mercedes-Benz Vans regarding the Memorandum of Understanding we signed earlier this year for joint production of electric vans in Europe.” He said the company believes focusing on its consumer business and its existing commercial business “represent the most attractive near-term opportunities to maximize value for Rivian.” But the company said it does remain open to exploring future opportunities with Mercedes-Benz “at a more appropriate time for Rivian.” In Case You Missed It Consumer sentiment improved unexpectedly in early December. The University of Michigan’s consumer sentiment index rose to 59.1 from 56.8. That topped expectations for the index to fall to 56.5. Consumers’ short-term inflation expectations also improved. The survey showed Americans expect inflation to be at 4.6% 1 year from now and still 3% 5 years from now.
Continue Reading -->2 Levels to Watch in Apple Right Now
We have mixed markets around the world ahead of the CPI Tuesday and FOMC Wednesday. China is dismantling their restrictive controls, but FXI went 30% off the lows already. We have about $43 billion worth of deals with HZNP and COUP getting bought to show there are some bargains out there. SPX is about 10% off the lows, and 17% off the highs with about 3 weeks left in 2022 We’ll see if we get one more move to 4052-4100 or if we move towards 3818 or below into Christmas The CPI and FOMC will set the tone for that and we will try and react accordingly. Know your time frame and risk into big binary events. Now let’s dig into some names: AAPL will be important this week. The $145 area rejected price on Friday. $140ish is key support. It probably doesn’t do much today. But the action for the rest of the week will be key. Above $145.50 it helps the tape and below $140 it’s a headwind. TSLA did a tactical Red Dog Reversal Thursday around the $172.22 pivot. On Friday, it gave us some upside cash flow to $182.50. I sold mine. It’s not very compelling here, but will be important this week. Can it stay out of the danger zone? The weekly chart says it hits $150-$129 next year, but can it see $187 first? NFLX has been a go-to name since October. Some revisited it on Wednesday as it did a Red Dog Reversal long around the $303.13 pivot, and then sold strength into the $329 area. It did reverse to get most out. If you are still long, use $319.55 as key support. MSFT isn’t special but acts better than some other names recently. It’s worth knowing what’s happening here this week for complexion. It’s getting tighter again. $242ish is active support. $249ish is pivot resistance. GOOGL stopped out most active longs when it broke $98.90 and hit a low of $92.75 Friday. It’s an avoid. Scott’s Positions Disclosure as of 2022-12-12 at 8.39.43 AM
Continue Reading -->Coffee With Greta: Sticky Inflation Pushes Down Stocks
DJIA Futures: -147 (-0.4%) SPX Futures: -23 (-0.6%) NASDAQ Futures: -75 (-0.6%) Good morning friends! Futures are sliding following the release of hotter-than-expected wholesale inflation data. Let’s get right to it! Wholesale Inflation Runs Hot Wholesale prices rose more than expected in November, dampening the market’s hope for falling inflation. The Bureau of Labor Statistics’ producer price index rose 0.3% monthly and 7.4% year over year. That was higher than economists’ expectations for a 0.2% monthly gain and the third straight month that headline PPI has risen 0.3%. But the annual gain was a cooldown from 8.1% in October. Energy costs fell 3.3% but that was offset by a 3.3% jump in food costs. The trade index rose 0.7% while transportation and warehousing fell 0.9%. The core PPI, which excludes food and energy, also rose 0.3% monthly vs 0.2% expected. On an annual basis, the core PPI did cool to 4.9% from 5.4% in October. That was the lowest year over year gain since April 2021. Treasury Yields Pop After Hot Inflation Data Treasury yields have turned higher as stocks drop following that hotter-than-expected inflation number. The 2-year yield is up 4 basis points to 4.33% while the 10-year yield is up 2 basis points to 3.51%. CME Group’s FedWatch Tool still shows 74.7% of traders expecting the Fed to pivot to a smaller 50bps rate hike next week. Costco Earnings Disappoint Costco (COST) shares are falling 1.1% ahead of the open after missing fiscal Q1 expectations. Here’s how the big box retailer’s results compared to analysts’ estimates: EPS: $3.07 vs $3.12 expected Revenue: $54.44 billion vs $58.36 billion Same-store sales: +6.6% vs +6.4% expected Online sales declined 3.7% in the quarter. Costco already reported slowing November sales last week, in a bad sign for the key holiday shopping season. Lululemon Inventories Soar Lululemon (LULU) shares are dropping 6.8% in premarket trade following mixed Q3 results. Here’s how the athleisure retailer’s results compared to analysts’ expectations: Adjusted EPS: $1.62 vs $1.97 expected Revenue: $1.9 billion vs $1.81 billion expected Same-store sales: +22% vs +19.1% expected Inventories soared in the quarter, up 85% year over year. That prompted concerns among analysts that Lululemon will have to slash prices to clear the excess inventory. But the CEO said during the earnings call that core styles made up around 45% of that inventory and it carried “limited seasonal markdown risk”. He said, “As we discussed, our inventory levels were too lean last year, and we made the strategic decision to build inventories this year, which enabled the strong top-line growth we have delivered.” Lululemon forecast Q4 adjusted EPS between $4.20 and $4.30 on revenue between $2.605 billion and $2.655 billion. The company sees full-year EPS between $9.87 and $9.97 on $7.944 billion to $7.994 billion in revenue. Analysts were estimating full-year EPS of $9.92 on $7.935 in revenue. Consumer Sentiment Coming Up The University of Michigan releases its early December consumer sentiment index at 10:00 a.m. ET. That index is expected to slip to 56.5 from 56.8 at the end of November. But the market is focused on the consumer inflation expectations included in the index. The Fed has previously raised concerns about rising consumer inflation expectations. In November, Americans hiked their 5-year forecast for inflation to 3%. In Case You Missed It The FTC filed an antitrust case against Microsoft (MSFT) Thursday, attempting to block the company’s acquisition of Activision Blizzard (ATVI). Microsoft announced the $68.7 billion acquisition in January with the goal of closing the deal by June 2023. Microsoft has vowed to defend the deal with the vice chair and president saying, “We continue to believe that this deal will expand competition and create more opportunities for gamers and game developers.”
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