Here are five things you need to know this morning:
Swimming upstream: Earnings are like a lead foot on the markets right now. We’ve got 62 companies reporting on the S&P 500 today and seven companies reporting on the TSX. We will also be reacting to 10 companies that reported last night, including CPKC Rail and Agnico Eagle. Tech stocks, especially the so-called Magnificent Seven, have been a blight. The NASDAQ has entered official correction territory (a pullback of 10 per cent or more). Against this backdrop, we just got a fresh read of the U.S. economy for the third quarter that showed it expanded at the fastest pace in nearly two years. U.S. GDP rose 4.9 per cent in Q3 annualized as personal spending jumped four per cent. A read of inflation showed a cooling to 2.4 per cent – the slowest pace since 2020. Looking at the immediate market action, good news for the economy could be good news for stocks. Today will be about a tug of war between corporate warnings about the economy and backward-looking data that shows economic resilience.
That's so Meta: Shares of Meta are under pressure after the company sent warnings about the economy. Executives warned that softer advertising spending could materialize and that the revenue outlook for 2024 is “uncertain.” Shares initially rallied as the parent company of Facebook, Instagram and WhatsApp posted better than expected sales and profit. Keep in mind that with the stock up nearly 150 per cent so far this year, it’s an easy candidate for profit-taking.
Toying with investors: Shares of toymakers Hasbro and Mattel are plunging in the pre-market. Hasbro is poised to open at a seven-month low after cutting its sales forecast, citing “softer toy outlook.” It’s an ominous sign going into the crucial holiday period. As for Barbie maker Mattel, it appears they certainly saw a benefit from the “Barbie” film that helped to power an earnings beat. However, Mattel maintained their sales outlook instead of raising it, citing similar concerns as Hasbro.
UPS (Unfavourable Profit Statement): Shares of UPS are also getting hammered after cutting its profit forecast for the second time in three months. UPS has been taking hits on both revenue and expenses. On the revenue side, the CEO said unfavourable macro conditions negatively affected demand this quarter, as sales in the U.S. and international units both fell 11 per cent. On the cost side, a new labour agreement means that wage costs are going up.
Railroaded: We have everyone from tech companies to toy companies to shipping companies sending warnings. Let’s throw the former CP Rail into the mix – or Canadian Pacific Kansas City, if you prefer its government name. The rail company cut its outlook for 2023 profit as Q3 results came in below expectations on things like a weakening economy and labour disruptions. However, the shares are holding in right now. It’s interesting because CN Rail also missed earnings, but at the end of the day, the stock rallied. Most analysts talking about CPKC Rail’s earnings are taking the profit outlook reduction in stride, noting that management actually seemed optimistic about Q4 volumes. The stock is also at a 52-week low, so it’s getting a greater benefit of the doubt than some of the other high-fliers.