Wall Street’s major indexes finished slightly above the flatline on Friday as investors continue to focus on the possibility that the Federal Reserve may be able to begin cutting interest rates. The Dow Jones Industrial Average rose 0.1% to 36,491.67, while the S&P 500 edged up 0.1% to 4,686.10 and the Nasdaq Composite gained 0.2% to 15,606.77.
Case of inflation
The market was largely unmoved by the latest inflation data. Which showed that the consumer price index rose 6.2% year-over-year in October, the highest since 1990. The core CPI, which excludes food and energy, increased 4.6%, the most since 1991. The data reinforced expectations that the Fed will start tapering its $120 billion monthly bond purchases this month and potentially raise interest rates next year to combat inflation.
Some analysts argued that inflation may have peaked. Will ease in the coming months as supply chain bottlenecks and labor shortages ease. They also pointed out that the Fed has signaled that it will be patient and data-dependent in its policy decisions. And that it will not overreact to transitory inflation pressures.
“The Fed has been very clear that they are not going to raise rates until they see inflation persistently above their 2% target. And they are not going to be spooked by one or two months of high inflation readings,” said David Kelly, chief global strategist at JPMorgan Asset Management.
Case of Technology Companies
One of the sectors that weighed on the market on Friday was technology, as some chipmakers fell after a report that the Justice Department was investigating Applied Materials for allegedly violating export controls. Applied Materials lost 4.1% despite posting upbeat quarterly results and raising its guidance. The report said that the company was under criminal investigation for sending its equipment to a Chinese company without the required licenses.
Other chipmakers also declined, with Lam Research dropping 3.4%, KLA Corp shedding 2.9% and ASML Holding sliding 2.2%. The Philadelphia Semiconductor Index fell 1.4%, underperforming the broader market.
Another big loser on Friday was Charge Point Holding. The proce tumbled 35.6% after the electric-vehicle charging company lowered its revenue forecasts and replaced its CEO and CFO. The company cited supply chain challenges and delayed customer deployments for its weak outlook. It also announced that its founder and CEO Pasquale Romano will step down and be replaced by board member Rex Jackson. While CFO Paul Middlekauff will also leave and be replaced by interim CFO Eric Stang.
Despite the fact that the stock price of Applied Materials fell, strong Bulls dominated the market during the session:
Conversely, one of the biggest winners on Friday was Gap, which enjoyed its biggest post-earnings rally in decades, surging 23.6% on the back of better-than-expected earnings and the retailer confirmed its full-year revenue outlook. The company reported adjusted earnings of $0.61 per share. Beating analysts’ estimates of $0.46 per share, and revenue of $4.36 billion, also topping expectations of $4.22 billion. The company said that its online sales grew 8% year-over-year and accounted for 40% of its total sales. While its Old Navy and Athleta brands continued to perform well.
“We delivered another quarter of strong results, demonstrating the power of our purpose-led, billion-dollar lifestyle brands. Fueled by our scaled e-commerce platform and advantaged digital capabilities,” said Sonia Syngal, president and CEO of Gap.
According to the financial information from Gap Inc., the company has performed well in recent years, despite some challenges posed by the COVID-19 pandemic. Here are some highlights of Gap’s financial performance:
- In fiscal year 2021, Gap’s net sales increased 21% year-over-year and were up 2% compared to fiscal year 2019. The company’s comparable sales were up 6% year-over-year and increased 8% versus 2019.
- In fiscal year 2021, Gap’s adjusted diluted earnings per share was $1.44, compared to $1.97 in fiscal year 2019. The company returned over $400 million to shareholders in fiscal year 2021 through dividend program and share repurchase plan.
- In fiscal year 2021, Gap’s online sales grew 8% year-over-year and accounted for 40% of its total sales. The company’s Old Navy and Athleta brands continued to perform well, with net sales growth of 15% and 31%, respectively, compared to fiscal year 2019.
- In the fourth quarter of 2021, Gap’s net sales increased 2% year-over-year and were down 3% compared to the fourth quarter of 2019. The company’s comparable sales were up 3% year-over-year and increased 3% versus 2019.
- In the fourth quarter of 2021, Gap’s adjusted diluted loss per share was $0.02, compared to adjusted diluted earnings per share of $0.58 in the fourth quarter of 2019. The company’s results were impacted by supply chain disruptions, labor shortages, inflation and the new Covid-19 variant.
Case of Bulls
Considering the week, the three major indexes booked gains for the third straight week as the Dow added 2%, the S&P 500 and the Nasdaq advanced 2.6% and 3%, respectively. The market was supported by strong corporate earnings, upbeat consumer sentiment and optimism about the infrastructure bill. However, some headwinds remained, such as inflation, supply chain disruptions, labor shortages and the new Covid-19 variant.
“The market is still in a bullish mode, but it is also facing some challenges,” said Quincy Krosby, chief market strategist at Prudential Financial. “The market is trying to balance the positive factors, such as earnings and fiscal stimulus, with the negative factors, such as inflation and the virus. The market is also looking ahead to the Fed’s tapering and potential rate hikes, and how that will affect the economy and the sectors that are sensitive to interest rates.”