The stock market rally suffered a blow Monday, as the Nasdaq undercut its December lows, but the S&P 500 did not. The major indexes then rebounded, helped by various omicron Covid headlines, as well as Micron and Nike earnings.
Stock Market Rally Under Pressure
The Nasdaq ended its rally on Monday as it undercut early December lows, but the S&P 500 did not, so the market uptrend only went "under pressure." The S&P 500, followed by the Dow Jones and Nasdaq, reclaimed their 50-day lines later in the week as markets reacted well to various omicron Covid variant headlines in the holiday-shortened week. Micron lifted memory and various chip plays. A number of leading stocks flashed buy signals or moved into position. Treasury yields and crude oil rose.
Inflation Hot, Savings Drop
The Federal Reserve's primary inflation gauge, the personal consumption expenditures price index, showed consumer prices surging 5.7% from a year ago, highest since 1982. Core prices, excluding food and energy, rose a hotter-than-expected 0.5% on the month and 4.7% from a year ago, the most since 1989. The Commerce Department's personal income and spending report also showed outlays on services climbed 0.9% in November, as goods spending inched up just 0.1%, for an overall 0.6% rise that just matched headline inflation. Meanwhile, personal saving as a percentage of disposable income slipped to 6.9%, the lowest since December 2017. After holding at 10% or higher from the start of the pandemic through August, the lower savings rate could mean that more people will need to rejoin the labor force to make ends meet.
Data through the Dec. 18 week had yet to show any ill-effect of the omicron variant on the job market. New jobless claims held at a seasonally adjusted 205,000 for a second week, not far off the five-decade low of 188,000 recorded in early December.
Micron Earnings Guidance Strong
Micron Technology reported fiscal Q1 EPS jumped 161% with sales up 33% to $7.69 billion, with EPS just missing and sales in line. But the memory chip giant guided higher for the current Q2. Micron jumped Tuesday on the report, with some other memory-related plays also rallying.
Covid News
Moderna and Novavax fell Monday despite bullish news for their Covid vaccines. In a study against a lab-created version of omicron, Moderna's authorized booster shot — a half-sized dose of its regular vaccine — generated a 37-fold increase in virus-blocking antibodies. A third dose of its vaccine resulted in an 83-fold increase in neutralizing antibodies. Novavax also gained authorization for its Covid vaccine in Europe. Meanwhile, the FDA approve Covid antiviral pills from Merck and Pfizer. The Pfizer pill in particular has shown strong success in reducing hospitalizations and death.
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Nike Earnings, Revenue Beat Views
Sports apparel retailer Nike reported fiscal Q2 EPS grew 6% to 83 cents vs. views for a drop to 63 cents, as the sports apparel retailer continues to cut ties with retail partners to focus on its own stores and online sales. Sales edged up 1% $11.4 billion, slightly beating. Nike Direct sales were $4.7 billion, up 8% on a currency-neutral basis. Nike Brand Digital sales increased 11% on a currency-neutral basis, led by 40% growth in North America.
Cintas Earnings Top
Cintas reported fiscal Q2 EPS rose 16% while sales climbed 9% to $1.92 billion, both topping. The uniform rental company raised its full-year views slightly, mostly on the Q2 beat.
CarMax Beat Views
CarMax posted a 15% EPS increase to $1.63 on a 65% revenue jump to $8.528 billion. Both easily beat estimates. Same-store sales increased 16%, also well ahead of views. The nation's largest used-car seller said growing online demand for retail and wholesale used vehicles drove results. Used-car prices are still hot, but so are vehicle acquisition costs. Revenue from online sales made up 30% of total revenue, up from 20% a year ago.
Paychex Earnings Robust
Paychex grew earnings 25% to 91 cents per share, handily topping views. Revenue also beat, rising 13% to $1.109 billion. The provider of payroll and HR solutions said pandemic trends "continue abated," while hiking its outlook for 2022 earnings and sales growth. Those trends include the demand for human resource advice and for benefits packages to attracted talent, it added. Paychex stock jumped.
Crocs will buy casual footwear maker Heydude for $2.5 billion. That includes $2 billion in cash and $450 million in Crocs stock.
Tencent Holdings said it'll distribute 457 million JD.com shares to its investors. The Chinese internet giant's stake in JD.com will fall to 2.3% from 17%, though they'll maintain close business ties. JD.com stock fell sharply Thursday. Tencent shares rose.
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