US stocks recovered from a tricky start to the past week to trade higher as the latest economic data increased hopes the Federal Reserve's rate hiking cycle is nearing an end.
US inflation at the wholesale level continued its downward slide in March with annualised price increases sinking substantially to 2.7% from an upwardly revised 4.9%, according to PPI (Producer Price Index) data released on 13 April by the Bureau of Labor Statistics.
It is the lowest reading the key inflation metric since January 2021. PPI figures tend to offer an indication of the direction of travel for consumer prices as when producers charge more for goods and services the higher costs are usually passed on to households. The news helped prompt weakness in the dollar.
Energy stocks were higher, while brewer Molson Coors (TAP:NYSE) was in demand after last month's better-than-expected numbers.
Entertainment company Warner Bros Discovery (WBD:NYSE) struggled as the market gave a lukewarm reaction to the latest plans for its streaming platform.
NETFLIX
Streaming platform Netflix (NFLX:NASDAQ) could be under the cosh when it reports first quarter 2023 results on 18 April. With little in the way of blockbuster shows and movies to drive subscriber numbers, there are concerns that revenue and earnings could fall flat.
Not that investors will find out subscriber numbers, Netflix has decided to no longer reveal how many users it has.
The fourth quarter of 2022 was a good example of why subscriber numbers are arguably not as meaningful as once believed. The streaming platform reported 7.66 million new subscribers in the three months to 31 December, crushing its own estimate of 4.5 million, and bringing the total to 223 million across 190-odd countries.
Hits like Addams Family spin-off Wednesday, (26,633 views) and Glass Onion: A Knives Out Mystery movie (16,051 views) and Luther: The Fallen Sun, were the reason, Netflix said.
Yet it still missed earnings, delivering EPS (earnings per share) of $0.12 versus $0.59 expected, thanks to a $462 million non-cash foreign exchange loss.
DELTA AIR LINES/ AMERICAN AIRLINES
Shares in Atlanta-based airline Delta Air Lines (DAL:NASDAQ) jumped in pre-market trading on Thursday despite posting a wider than anticipated first quarter loss.
The company offered up a bullish outlook and predicted a higher-than-expected profit for the second quarter.
The carrier said it expected sales to increase 15% to 17% year-on-year in the current quarter and deliver earnings per share of between $2 to $2.25, outstripping consensus analysts' forecasts of $1.66 per share.
The company cited record advanced summer bookings as CEO Ed Bastian brushed off fears of a consumer slowdown.
Pent-up travel demand and constrained capacity due to shortages of spare parts and labour has created a tailwind for the sector, helping to offsett rising interest rates and soaring inflation.
Shares in American Airlines (AAL:NASDAQ) fell 10% on Wednesday despite increasing profit first quarter profit guidance from breakeven to between $0.01 to $0.05 per share.
The upgrade fell short of analysts' expectations with consensus forecasts pegged at $0.06 per share.
CARMAX
CarMax (KMX:NYSE) revved up 9% to $68.6 after America's biggest used car retailer posted better-than-feared fourth quarter earnings, helped by cost controls, as the company warned of ‘vehicle affordability challenges’ caused by inflation, rising interest rates and tightening lending standards.
The used car seller delivered quarterly earnings per share of 44 cents from sales of $5.7 billion, ahead of the 20 cents and $6.1 billion of sales Wall Street was looking for. CarMax's 22% decline in Q4 comparable store sales was also better than the 27% drop forecast by analysts.
‘Our deliberate steps to navigate the pressures facing the used car industry are driving sequential improvements in our business, and we will continue to prioritise initiatives to increase efficiencies and create better experiences for our associates and customers across our diversified business model,’ said CEO Bill Nash, confident his charge is ‘well positioned to continue leading the used car industry and to accelerate growth when the market improves.’
