Dow Drops More Than 350 Points on U.S. Banking Concerns, Weakening Chinese Economy

The Dow Dives on Banking Woes

August 15, 2023 04:25 PM EDT

A sell-off in banking stocks, along with a strong retail sales report that helped stoke fears of continued high interest rates, dragged the Dow Jones Industrial Average down by 1%, or 361 points, ending the index’s three-session winning streak amid a broader stock selloff. 

Only two stocks in the Dow 30 moved higher. Amgen (AMGN) was the Dow’s best performer, rising 1.9% to a six-month high of $266 after Jefferies reiterated its “Buy” rating on the pharmaceutical stock and set a price target of $310.

Home Depot (HD) shares gained 0.6% after it reported better-than-expected earnings and revenue as customers continued to spend on small-scale projects, despite the retailer reporting a 5.5% drop in sales of big-ticket items over $1,000. The home improvement chain also announced a $15 billion share buyback program. 

The financial sector lagged, dropping 1.8%, as Fitch Ratings agency warned it could downgrade the banking sector, potentially impacting the credit ratings of more than 70 banks. Shares of JPMorgan Chase (JPM) lost 2.6%, American Express (AXP) dropped 2.5% and Goldman Sachs (GS) gave up 1.6%. 

Materials stocks underperformed, with Dow Inc. (DOW) leading the index lower with a 3.3% drop, while Caterpillar (CAT) moved 2.5% lower and 3M (MMM) gave up 2.2%. 

Data showing weakness in the Chinese economy weighed on the energy sector, taking Chevron (CVX) down by 2.9%. 

Share of Walt Disney Co. (DIS) fell 2% after film financier TSG Entertainment filed a lawsuit accusing the company of withholding millions of dollars in profits from its business partners.

-Terry Lane

VinFast Shares Soar in Nasdaq Debut

August 15, 2023 03:32 PM EDT

Shares of Vietnamese electric vehicle maker VinFast (VFS) jumped more than 100% on its first day of trading.

The EV maker listed on the Nasdaq this morning via a merger with Black Spade Acquisition Co., a special purpose acquisition company. VinFast and Black Spade had agreed on an acquisition price of $10 per share, valuing the company at about $23 billion.

When markets opened this morning, VinFast’s shares immediately jumped to about $20, putting the EV maker on par with General Motors Co. (GM) in terms of market value. Shares traded for as much as $34 today, putting its peak value around $79 billion.

The company, which has yet to make a profit, sold 7,400 cars in Vietnam last year, but none internationally. Late last year, VinFast made its first shipments to the U.S., where it is estimated to have sold about 140 vehicles.

Trading activity was limited, with only about 5 million, or about 0.2%, of the company’s 2.3 billion shares trading hands.

Bill Ackman’s Pershing Square Cuts Consumer Plays in Favor of AI

August 15, 2023 03:00 PM EDT

Bill Ackman’s Pershing Square hedge fund jumped on the AI bandwagon, raising its stake in Google-parent Alphabet (GOOG; GOOGL) and trimming its stake in consumer plays.

Ackman’s firm bought about 1.3 million Alphabet shares, raising its stake by 16% to $1.1 billion. Meanwhile, it cut its Lowe’s Companies (LOW) holdings by 25% and trimmed its stake in Chipotle Mexican Grill (CMG) and Restaurant Brands International (QSR).

Ackman said earlier this month he sees a future of “persistent inflation” spurred by de-globalization, clean energy investments, and workers’ increased bargaining power. That’s encouraged his firm to be “short in size” U.S. 30-year Treasurys, yields on which he sees climbing on government deficits and quantitative tightening.

Home Builders’ Confidence Tumbles on Rising Rates

August 15, 2023 02:31 PM EDT

With mortgage rates nearly at 7% per Freddie Mac, home builders’ confidence is starting to stumble. 

The National Association of Home Builders/Wells Fargo HMI, which was released Tuesday, showed that builder confidence for the newly built single-family housing market dropped six points to 50, after seven months of consecutive gains. NAHB chairman Alicia Huey, a custom home builder and developer from Birmingham, Ala., pointed to rising rates and high construction costs as reasons for the plunge.

“While this latest confidence reading is a reminder that housing affordability is an ongoing challenge, demand for new construction continues to be supported by a lack of resale inventory, as many homeowners elect to stay put because they are locked in at a low mortgage rate,” Huey said in a statement.

-Allison Landa

Dan Loeb’s Third Point Ramps Up AI Bets With Amazon, Nvidia, and TSMC Stakes

August 15, 2023 02:07 PM EDT

Loeb chased the AI craze, according to his hedge fund Third Point’s second-quarter 13F filing.

Third Point opened a $534 million position in Amazon.com Inc. (AMZN), a $247 million position in Taiwan Semiconductor Manufacturing Co. (TSM), and a $211 million stake in Nvidia Corp. (NVDA) as their share prices soared last quarter.

The new positions represent a major ramp-up in the firm’s exposure to artificial intelligence (AI). Though Loeb dumped another AI bet, slashing his firm’s stake in Alphabet Inc. (GOOG; GOOGL) by 70%, bringing its total value to $170 million.

With its pivot to AI, the fund dropped several defensive plays, selling the entirety of its $830 million stake in Colgate-Palmolive (CL) and its $158 million position in UnitedHealth Group (UNH).

Midday Market Movers

August 15, 2023 01:42 PM EDT

Tencent Music Entertainment Holdings (TME): Shares gained about 6% after the Chinese music streaming platform reported its subscriber base grew 20% year-over-year to 99.4 million in the second quarter. That helped nudge revenue up 6% and net income up 52%. 

Lyft Inc. (LYFT): Shares of the ride-hailing company rose 4% after an SEC filing revealed Director and CEO John Risher bought more than $1 million worth of the company’s stock on Aug. 11. 

Paramount Global (PARA): Shares of the entertainment company rose 3% after reports of the Alliance of Motion Pictures & Television Producers offered striking writers a new deal that would ensure humans are credited as screenwriters and give writers access to streaming data.

Hawaiian Electric Industries Inc. (HE): The Hawaiian utility’s stock added to yesterday’s losses, sinking 16% after a class action lawsuit was filed over the weekend alleging the company was negligent in its response to high wind warnings that preceded the wildfires that devastated Maui last week.

Sea Ltd. (SE): The Singapore-based digital entertainment and e-commerce company’s American depositary receipts plummeted 28% after missing sales estimates and warning of future losses as the company ramps up spending on e-commerce.

Getty Images Feels the Effect of Hollywood Strikes

August 15, 2023 01:13 PM EDT

The strikes by TV and movie actors and writers are having a negative impact on the results at Getty Images Holdings (GETY).

The provider of stock images posted a surprise loss and cut its outlook as revenue declined. Getty reported a preliminary second-quarter loss of $0.01 per share, while analysts were anticipating a profit of $0.04. Sales dropped 3.3% to $225.7 million, also below estimates.

CEO Craig Peters said the quarter was “a more challenging environment.” CFO Jennifer Leyden explained the company is reducing its full-year earnings and revenue guidance because of “ongoing macro-economic and Agency sector pressures, expected impacts from the U.S. Hollywood strikes, as well as litigation costs.”

Getty now predicts 2023 sales of $920 million to $935 million, down from the previous $936 million to $963 million. It sees earnings before interest, taxes, depreciation, and amortization (EBITDA) of $292 million to $303 million, compared to the earlier $305 million to $315 million.

Shares of Getty Images Holdings fell more than 7% in early trading on Monday to their lowest level since March.

-Bill McColl

Warren Buffett Dumps $3 Billion in Activision, Buys Into Home Construction Firms

August 15, 2023 12:39 PM EDT

Warren Buffett’s Berkshire Hathaway (BRK.A; BRK.B) sold off about two-thirds of its stake in video game maker Activision Blizzard (ATVI) last quarter, according to its most recent 13F filing.

The industrial conglomerate and investment powerhouse also opened three new positions last quarter, all of them homebuilders. Buffett bought $726 million in D.R. Horton (DHI) and smaller stakes in Lennar Corp. (LEN) and NVR Inc. (NVR).

Berkshire pared back its stake in Chevron Corp. (CVX), upped its investment in Occidental Petroleum Corp. (OXY), and halved its General Motors Co. (GM) holdings.

Buffett exited a nearly $1 billion position in Vitesse Energy Inc. (VTE), an $800 million stake in McKesson Corp. (MCK), and a $67 million position in Marsh & McLennan (MMC).

Esmark Offers $7.8 Billion for US Steel After $7.25 Billion Bid by Cleveland-Cliffs

August 15, 2023 12:06 PM EDT

Privately held Esmark offered $7.8 billion to purchase U.S. Steel (X) after Cleveland-Cliff (CLF) made a bid for $7.25 billion, raising the stakes in the competition to buy U.S. Steel.

Esmark offered $35 per share compared with Cleveland-Cliffs’ $17.50 per share and 1.023 shares of Cliffs for each U.S. Steel share.

If accepted, the offer would be expected to be completed in the fourth quarter, subject to regulatory and antitrust clearances.

On Sunday, the century-old U.S. Steel said it was reviewing strategic options ranging from selling some to all of its assets, and is considering several offers to buy the company.

U.S. Steel shares, which had jumped 37% yesterday in the single biggest spike in the company’s history, were down about 2% midday Tuesday.

-Fatima Attarwala

Home Depot Sales Slide as Consumers Pull Back on Buying Big-Ticket Items 

August 15, 2023 11:30 AM EDT

Home Depot (HD) beat profit and sales estimates for the second quarter despite lower revenue as consumers spent less on discretionary purchases and the boost from the pandemic-era home improvement boom faded.

Net income came in at $4.7 billion, or $4.65 per diluted share, which was down from $5.2 billion or $5.05 a share in the year-ago quarter, but exceeded projections of $4.45. Revenue totaled $42.9 billion, down 2% from the same quarter last year but above estimates of $42.2 billion. Comparable store sales and comparable U.S. sales also fell 2% from the same period a year ago.

The results, while better than expected, indicated a pullback in spending on discretionary purchases and big-ticket items among cost-conscious consumers reeling from higher prices, rising interest rates, and uncertainty about the economy and their finances.

Home Depot shares were 1% higher in early trading on Tuesday. They’re up 6% so far this year, compared to a 34% gain in the broader S&P 500 consumer discretionary sector over the same period.

-Mack Wilowski

UK Wage Growth Sets Record, All But Assuring More Rate Hikes

August 15, 2023 10:59 AM EDT

Wages rose in the U.K. at their fastest rate on record in the three months through June in another sign that the Bank of England (BOE) may have more work to do to tame inflation. 

Workers’ wages excluding bonuses were 7.8% higher in the second quarter than in the same period last year, rising from 7.5% in the preceding quarter. Economists were widely expecting the figure to dip slightly to 7.4%. 

The U.K. has been struggling with some of the stickiest inflation among advanced economies. Inflation was 7.3% in the 12 months ending in June, down from its peak of 11.1% in October but still a far cry from the BOE’s 2% target.

The BOE makes its next rate decision on Sept. 21.

U.S. Retail Sales Beat Expectations, Offering More Evidence of Consumers’ Resilience

August 15, 2023 10:11 AM EDT

U.S. retail sales rose 0.7% in July, according to data from the U.S. Census Bureau, surpassing the average economist’s forecast of a 0.4% increase. 

The data, which is not adjusted for inflation, showed consumer spending increased last month at nine of 13 categories, including grocery stores, bars and restaurants, sporting goods stores, clothing stores, and gas stations.

Online spending, which rose 1.5% from June, was boosted by Amazon.com’s (AMZN) Prime Day, the first day of which set a company record for one-day sales.

The Census Bureau also adjusted an earlier estimate of June sales, revising sales growth figures up from 0.2% to 0.3%.

July was the fourth month in a row in which consumer spending increased, reassuring investors and economists that a strong labor market and robust savings are allowing consumers to keep spending even as rising rates squeeze the economy.

Stocks Making the Biggest Moves Premarket

August 15, 2023 09:16 AM EDT

Gainers:

• Navitas Semiconductor Corp. (NVTS): Shares of the clean energy semiconductor maker jumped 9% after it reported second-quarter sales rose 110% from a year ago. 
• Nvidia Corp. (NVDA): Shares climbed more than 2% after rising more than 7% yesterday. Several analysts have reiterated their positive outlook for the stock in recent days after it lost more than 8% last week.
• D.R. Horton Inc. (DHI): Shares gained more than 2% after a regulatory filing revealed Warren Buffett’s Berkshire Hathaway added about $700 million of the homebuilder’s stock to its portfolio last quarter as part of a bet on U.S. homebuilders.

Losers:

• Sea Ltd. (SE): Shares fell 16% after the Singapore-based tech conglomerate reported lower-than-expected second-quarter revenue, with its e-commerce division posting its slowest-ever sales growth.
• Discover Financial Services (DFS): The financial services provider’s stock fell more than 8% after the company announced CEO Roger Hochschild would step down effective immediately.
• On Holding AG (ONON): Shares of the Swiss running shoe and apparel company sank 11% after reporting earnings per share fell last quarter to 0.04 Swiss francs from 0.14 francs a year ago. Disadvantageous foreign exchange rates ate away at profit despite record revenue growth in the quarter.

5 Things to Know Before Markets Open

August 15, 2023 08:50 AM EDT

Here’s what investors need to know to start their day:

1. U.S. retail sales jumped 0.7% in July, blowing past economists’ forecasts for spending to rise 0.4% after gaining just 0.2% in June.
2. Home Depot (HD) reported second-quarter revenue of $42.9 billion, lower than the $43.8 billion over the same quarter a year ago as consumers pulled back on big-ticket items, though the figure was better than analyst estimates of $42.2 billion.
3. The chief of Amazon’s (AMZN) devices department will retire in the coming months, after David Limp’s division had been a target of cost-cutting by CEO Andy Jassy that eliminated 27,000 jobs.
4. Shares of homebuilder D.R. Horton (DHI) were up 1.8% in pre-market trading after Berkshire Hathaway (BRK.B) bought up approximately $700 million of its stock, regulatory filings revealed.
5. Streaming service Netflix (NFLX) will begin testing offering video games to users through TVs, computers, and mobile devices, starting initial testing on the technology in Canada and the U.K.

-Terry Lane

Futures Tumble on Fears of Global Slowdown

August 15, 2023 08:30 AM EDT

Dow Jones Industrial Average futures contracts fell 0.8% in premarket trading Tuesday.

S&P 500 futures contracts tumbled 0.7%.

And Nasdaq 100 E-mini futures lost 0.6%.