Stocks Fall for Third Straight Week

Stocks ended in the green on Friday.

The Dow Jones Industrial Average closed 176 points higher, or 0.5%, to 33,203.93. The S&P 500 rose 0.6% to 3,844.82, while the and Nasdaq Composite added 0.2% to close at 10,497.86.

— Tanaya Macheel

Needham lowered earnings estimates for Meta while keeping its underperform rating for the stock.

The firm is keeping its fourth-quarter revenue and earnings per share estimates, which show year-over-year declines of 10% and 45%, respectively.

For the 2023 fiscal year, Needham lowered its per-share earnings estimate by 17% and its revenue estimate by 5%. Revenue should eek out a 4% year-over-year gain, while earnings per share should drop even further to 15% below the prior year.

Needham also introduced 2024 fiscal year estimates. It expects revenue to come in at 12% over the rolled-back 2023 expectation, while per-share earnings should recover, coming in at 35% higher than the prior year.

Analyst Laura Martin said the company will struggle going forward due to its focus on the Metaverse, which the company does not expect to see returns on investments in until 2030. She said that “enormous” spending on its Metaverse platform also suggests the company feels “existential risks” to the platforms it already owns, which includes Facebook and Instagram.

“Near-term, we worry that consensus estimates are too high, based on META’s promises of higher investments in the Metaverse at the same time it is purposely slowing its revenue growth to better compete with TikTok,” Martin said in a note to clients. “We believe that near-term financial discipline is secondary to META’s long-term vision.”

The stock has dropped 65% this year.

— Alex Harring

PCE may be coming down, but it’s doing as consumers are reducing their spending – which could mean lower earnings and potentially more pressure for stock, according to Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

“At this point the market has been backed into a corner, since more robust spending and higher growth is indirectly bad for the stock market (because it is likely to trigger an even stronger hawkish reaction from the Fed), while slower spending and growth is directly bad for the stock market, because it implies lower corporate earnings,” he said.

“It’s not too late for the Santa Claus rally… but unfortunately the positive inflation data (e.g. continuing to drop) has been overshadowed by the Fed’s tough language and the upcoming recession that they’ve orchestrated with their aggressive rate hikes,” he added.

— Tanaya Macheel

With Charter Communications‘ network evolution and capital expenditure now “well understood,” Wells Fargo has upgraded the stock to equal weight from underweight.

Based on the telecommunication company’s latest capex guidance, Wells Fargo has boosted its capex estimates for 2023 to $10.7 billion from $9.5 billion. For 2024, it expects $11.5 billion in capex, up from $9.6 billion and in 2026, it has estimated capex at $10.9 billion versus its prior call of $9.5 billion, analyst Steven Cahall wrote in a note Thursday. Meanwhile, the firm’s free-cash-flow estimates are down by 14% for 2023.

Wells Fargo has lowered its price target to $340 from $370, as earnings growth gets pushed out, he said.

“However, we think investors now understand CHTR’s long-term strategy, which should deliver strong FCF growth on the other side of the hump,” Cahall said. “The outyears certainly look attractive for FCF if capital spend is stepping way down and subscriber/EBITDA growth is healthy.”

— Michelle Fox

Check out the stocks making the biggest moves midday:

• Alphabet — The tech stock gained more than 1% after The National Football League said Thursday that its “Sunday Ticket” subscription package will go to subsidiary YouTube, which is owned by Alphabet, starting next season.
• Tesla — Shares of the electric vehicle maker declined 2% after CEO Elon Musk said that he would hold off on selling any more Tesla stock for the next 18 to 24 months.
• 3M — The stock shed 1.6% after a U.S. judge barred the company from shifting liability to a subsidiary for injuries suffered by military members from allegedly defective earplugs.

See the full list here.

— Alex Harring, Sarah Min

This window for this year’s “Santa Claus rally” – a period defined as the last five trading days of the year plus the first two trading days of the new year that historically has generated strong market returns – is officially open as of Friday.

“Given the challenging year for U.S. equity markets, including what could be one of the worst Decembers for the S&P 500 since 1950, investors are hoping Santa can deliver some positive returns and holiday cheer as we approach year-end,” said Adam Turnquist, chief technical strategist at LPL Financial.

If the S&P 500 finishes higher during this year’s Santa Claus rally, it would mark the seventh consecutive period of positive returns, he added.

— Tanaya Macheel

Daiwa launched coverage of Enphase Energy, SolarEdge Technologies with outperform ratings, saying they’re best positioned to benefit from growth in the renewable energy technology sector.

Enphase Energy is a buying opportunity in the sector as it has been gaining market share in a duopoly, according to the note.

“Enphase is a technology leader in solar technology, and we note that it is the only company to make a microinverter solution work at scale and cost successfully,” analyst Jonathan Kees said in a Thursday note. “ENPH has been gaining share against its traditional string inverter and hybrid peers while maintaining sector-leading margins.”

Shares of Enphase Energy are up 63% this year. Still, the analyst’s $335 price target implies roughly 12% upside from Thursday’s closing price. The stock is up 1% in Friday premarket trading.

Meanwhile, First Solar has an advantage over other solar manufacturers as it does not use crystalline silicon semiconductors, meaning its supply chain will not be hurt by disruptions in silicon.

“We look for pullbacks to build a position as FSLR can benefit the most from high demand and regulatory lifts,” Kees wrote.

Shares surged 80% in 2022. Kees’ $175 price target represents roughly 12% upside for shares of First Solar. The stock is up 1% in Friday premarket trading.

— Sarah Min

The University of Michigan’s consumer sentiment index rose more than expected in December, coming in at 59.7. That’s above a Dow Jones estimate of 59.1 and up from 56.8 in November.

Surveys of Consumers director Joanne Hsu noted that inflation expectations improved, with consumers now expecting prices to rise 4.4% — down from 4.9% in November.

Still, Hsu said inflation expectations remain elevated.

“Declines in short-run inflation expectations were visible across the distribution of age, income, education, as well as political party identification,” Hsu said. “At 2.9%, long run inflation expectations have stayed within the narrow, albeit elevated, 2.9-3.1% range for 16 of the last 17 months.”

“While the sizable decline in short-run inflation expectations may be welcome news, consumers continued to exhibit substantial uncertainty over the future path of prices,” she said.

— Fred Imbert

Stocks opened lower on Friday morning.

The Dow Jones Industrial Average was down 36 points to start the day, or 0.1%. The S&P 500 dipped 0.2% and the Nasdaq Composite fell 0.4%.

— Tanaya Macheel

The core personal consumption expenditures price index, the Federal Reserve’s preferred gauge of inflation, rose slightly more than economists expected on a year-over-year basis.

Core PCE climbed 4.7% in November from the year-earlier period, while economists polled by Dow Jones expected a gain of 4.6%. Month over month, the index advanced 0.2%, matching expectations.

— Fred Imbert

The degree of bearishness about the short-term direction of the stock market in the latest weekly poll conducted by the American Association of Individual Investors climbed to 52.3%, a nine-week high, from 44.6% last week.

Bullish sentiment fell to 20.3% from 24.3% last week, while those who said they were neutral on the outlook for stocks dropped to 27.4% from 31.1%.

The AAII said the (-) 32-point spread between bullish and bearish opinion is “unusually negative.”

The survey is a contrarian indicator, meaning less risk when bearishness is high and more risk when bullishness is rampant. “Above-average market returns have often followed unusually low levels of optimism, while below-average market returns have often followed unusually high levels of optimism,” AAII says.

— Scott Schnipper

Don’t expect this brutal bear market to reach its end until the CBOE Volatility Index, or VIX, spikes, according to Fairlead Strategies’ Katie Stockton.

“I know it’s a bit cliche, but in reality, no bear market cycle has ended without a VIX spike,” the chart analyst told CNBC’s “Closing Bell: Overtime” on Thursday.

Before the cycle reaches its end, she estimates the volatility index will need to hit 48 or more. As of Thursday’s close, it stood at just under 22. The VIX is an index measuring volatility using S&P 500 options.

Stockton also expects a downtrend to continue going forward, saying that the major indices need to make lower highs and lower lows.

— Samantha Subin

The Bureau of Economic Analysis will issue November’s personal consumption expenditure report – the Federal Reserve’s preferred inflation measure – on Friday morning.

The core personal consumption expenditures price index, which excludes food and energy prices, is expected to have gained 0.2% in November – the same increase seen in October, according to economists polled by Dow Jones. On an annual basis, the measure is expected to have climbed by 4.6%, compared to 5.0% in October.

The BEA will also release personal income data. Economists are calling for a 0.3% increase in November, which would be a step down from October’s gain of 0.7%.

The November data is coming out at a crucial time, reflecting the impact of the Fed’s six previous interest rate hikes in 2022 as the central bank attempts to cool the economy. Policymakers issued their seventh rate increase on Dec. 14, a hike of 50 basis points.

— Darla Mercado

Stock futures opened flat on Thursday evening.

Futures tied to the Dow Jones Industrial Average dipped 12 points, or 0.04%, while S&P 500 and Nasdaq 100 futures traded flat.

— Samantha Subin