Stocks Slip, Earnings Outlook Brightens, and IPO Buzz Grows
Stocks Slip, Earnings Outlook Brightens, and IPO Buzz Grows
By:JJ Kinahan
Instacart's IPO Plans and Hostess Merger Talk Stir Market Speculation
- Stocks dip, but optimism grows with higher earnings forecasts and Tesla's robust performance.
- Instacart eyes an IPO, merger rumors circulate and the market awaits key economic reports and auto industry labor dispute.
- Low volatility suggests calm; a moment of reflection for 9/11 anniversary
In this weekly market update, we'll delve into the recent stock market performance, upcoming economic indicators, corporate news, and a moment of remembrance.
Last week saw a dip in the stock market, with the S&P 500 dropping 1.3% and the Nasdaq Composite slipping 1.9%. However, the week ended on a slightly positive note as both indices posted modest gains on Friday, breaking a three-day losing streak for the S&P and a four-day slide for the Nasdaq. Notably, this came despite significant losses from Apple and Nvidia, both of which tumbled by 6%.
Forecasts: 0.5% increase in earnings
Analysts are revising their expectations for the third-quarter earnings season, with forecasts now anticipating a 0.5% increase in earnings. This positive outlook is welcome news for market fundamentalists who have been closely monitoring the market's price-to-earnings multiple, currently at 18.7, slightly above its 10-year average of 17.7. Adding to the optimism, Morgan Stanley upgraded Tesla (TSLA) to an overweight rating, setting a price target of $400. In premarket trading, Tesla shares surged by 6%.
Instacart, the grocery delivery giant, is eyeing a possible initial public offering (IPO), potentially as early as next week. Despite its previous valuation of $39 billion, the company is now targeting a valuation range of $8.6 to $9.3 billion. While this reflects a significant drop in valuation, it marks a noteworthy development in the IPO market. In related merger news, J.M. Smucker (SJM) is said to be in talks to acquire Hostess Brands (TWNK), the maker of Twinkies, in a deal valued around $4 billion, sparking curiosity about the potential for grape jelly-filled Twinkies.
This week promises important economic reports. On Wednesday, the latest consumer price index (CPI) will be released, with forecasts anticipating a 0.5% month-over-month increase and a 0.2% year-over-year rise. Additionally, Thursday will see the release of both the producer price index (PPI) and retail sales reports. PPI is expected to show a 0.4% month-over-month increase, while retail sales are forecasted to have risen by 0.2%.
Auto strike is possible
The strong economy juxtaposed with a slowdown in inflation faces a potential challenge this week as the United Auto Workers threaten to strike as early as Friday when their current contract expires. A strike involving 146 thousand workers from Ford (F). General Motors (GM), and Stellantis (STLA) could halt the auto industry, which accounts for about 3% of the U.S. GDP. Such a strike could have significant repercussions for Michigan's economy, as reported by Bloomberg.
For today, there isn't a significant economic agenda. However, Oracle (ORCL) is set to report earnings after the close, and investors will be keen to see their forward-looking guidance. In premarket trading, the S&P 500 showed a 0.5% gain, while volatility dipped by nearly 1.5%. It's intriguing that despite last week's market downturn, volatility remains low at around 14, signaling that markets may not be overly concerned at this moment.
We remember 9/11
In closing, it's essential to take a moment to remember the tragic events of Sept. 11, 2001, when nearly 3,000 lives were lost in a devastating attack on American soil. We will never forget the impact of that fateful day.
JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahanFor live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.
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