Markets News, Aug. 30, 2023: Nasdaq Gains; S&P 500 Rises for Fourth Straight Day

Colin is an Associate Editor focused on tech and financial news. He has more than three years of experience editing, proofreading, and fact-checking content on current financial events and politics. He received his M.A. in journalism from The New School and his B.A. in history and political science from McGill University.

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U.S. stocks rose Wednesday after reports showed a slackening jobs market and slower-than-expected GDP growth—good news in the eyes of Fed watchers.

The Nasdaq gained 0.5% while the S&P 500 rose 0.4% and the Dow Jones Industrial Average inched up 0.1%.

Markets got a boost from more economic data pointing to a slowing, not crashing, U.S. economy. Private employers added half as many jobs in August as they did in July, according to data from ADP. Also, the Bureau of Economic Analysis (BEA) lowered its estimate of second-quarter GDP growth to 2.1% from 2.4%.

Chinese stocks closed up slightly today after the government asked two of the nation's largest banks to review the finances of Zhongrong International Trust, a troubled wealth management firm that recently missed interest payments on several investment products. Oil futures and gold futures both advanced.

Yesterday, stocks soared on data showing higher interest rates are cooling the jobs market, raising hopes the Federal Reserve will hold rates steady at its next policy meeting in September.

Dow Rises for Fourth Straight Session

Ahead of key inflation data tomorrow, the Dow Jones Industrial Average held on in up-and-down trading to finish higher by 0.1%, or about 38 points, notching a fourth straight winning session.

Apple (AAPL) shares gained 1.9%. The stock has risen 6.4% in the last four sessions but is unlikely to gain enough tomorrow to close in the green for August and extend its seven-month winning streak.

Salesforce (CRM) moved higher by 1.5% ahead of its earnings report after markets close. Investors will be looking to see the early results of its rollout of artificial intelligence (AI) tools.

Boeing (BA) gained 0.7% after reports that China Airlines was considering adding the aircraft maker’s latest version of its 777 model to its fleet.

3M (MMM) shares fell 1.1%, giving up some gains from its settlement of lawsuits over defective earplugs.

Amgen (AMGN) shares dipped 0.7%. Its acquisition of Horizon Therapeutics looks more likely after regulators earlier this week paused their challenge to the merger.

JPMorgan Chase (JPM) shares slipped 0.4% after it raised its stake in Brazil’s C6 digital bank to 46%.

Johnson & Johnson (JNJ) shares fell 0.4% despite predicting double-digit earnings growth this year in its first forecast as a standalone pharmaceutical and medical device company.

-Terry Lane

Google Expected to Unveil New Phones at October 4 Event

The new Google Pixel 8 and Pixel 8 Pro phones are expected to be unveiled by the Alphabet (GOOGL) unit on October 4 during its “Made by Google” hardware event. Last year, the tech giant introduced the Pixel 7 and Pixel 7 Pro versions at the same press gathering.

It’s also anticipated that Google will be updating its first-ever smartwatch, the Pixel Watch, with Pixel Watch 2. It's not clear if any other products will be released.

Alphabet shares gained 1% Wednesday, adding to their more than 50% rise so far this year.

-Bill McColl

Regional Banks Slip Under Pressure From Federal Regulators

Shares of regional banks fell Wednesday after reports the Federal Reserve has issued warnings to several banks as it intensifies its scrutiny of smaller lenders.

Banks including Citizens Financial Group Inc. (CFG), Fifth Third Bancorp (FITB), and M&T Bank Corp. (MTB) have been served warnings about such topics as their liquidity, technology, and compliance. The warnings give banks time to make changes and avoid enforcement action, which can carry a fine.

Yesterday, regulators unveiled a new set of rules aimed directly at regional banks and intended to prevent bank failures like those that shook the industry this March. The proposed regulations would require banks with assets greater than $100 billion to hold long-term debt exceeding a certain percent of assets.

Shares of Citizens Financial were down 1% in late afternoon trading while Fifth Third Bancorp lost 0.3% and M&T Bank fell 0.8%.

Shares of Jack Daniel's Whiskey Maker Brown-Forman Fall as Costs Climb

Brown-Forman (BF.A) shares slumped more than 5% in early trading on Wednesday as the maker of Jack Daniel’s and other alcoholic drinks posted worse-than-expected results as costs rose and demand for its more expensive brands slid.

Brown-Forman reported fiscal 2024 first-quarter earnings per share (EPS) of $0.48, with revenue rising 3% to $1.04 billion. Both missed analysts’ estimates. Net income was $231 million, down 7% from the same period a year ago.

Growth was hampered by “the difficult shipment comparison from fiscal 2023, when we rebuilt inventory impacted by prior glass supply challenges," said CEO Lawson Whiting.

Shares of Brown-Forman have stumbled since hitting a 2023 high late last month, although they remain in positive territory for the year.

-Bill McColl

Midday Market Movers

Insulet Inc. (PODD): Shares of the medical technology company gained more than 10% after an SEC filing showed CEO James Hollingshead bought $1 million of stock on Monday. Shares of DexCom (DXCM), which makes continuous glucose monitoring technology that is often paired with Insulet’s products, gained 5%.

MercadoLibre Inc. (MELI): Shares of the Latin American e-commerce platform gained nearly 3% after UBS raised its price target on the stock to $1,700 from $1,600 and reiterated its “Buy” rating.

Apple Inc. (AAPL): Shares rose about 2% after Bloomberg reported the company is testing the use of 3D printers to manufacture parts of its new Apple Watch, potentially speeding up production and streamlining the supply chain.

HP Inc. (HPQ): Shares of the computer hardware company fell about 7% after it reduced its full-year sales guidance, citing soft demand for PCs and printers.

Brown-Forman Corp. (BF.A; BF.B): Shares of the Jack Daniel’s maker lost 4% after it posted worse-than-expected earnings for the most recent quarter as costs rose and demand for higher-end offerings slipped.

Johnson & Johnson Forecasts Double-Digit Earnings Growth After Kenvue Spin-Off

Johnson & Johnson (JNJ) on Wednesday released its first earnings forecast as a standalone pharmaceutical and medical devices company, estimating double-digit growth in earnings this year.

J&J forecasts full-year adjusted earnings per share to come in between $10 and $10.10, 12.5% higher than in 2022.

J&J's first-half sales excluding Kenvue were $42 billion, an increase of 5.9% year-on-year. Its net earnings, stripped of Kenvue, were down 44.7% to $4.9 billion. With Kenvue's results, earnings fell 49% to just over $5 billion in the first half of 2023.

With the completion of its Kenvue exchange offer, in which shares of J&J were swapped with Kenvue stock, the consumer health business will be reported as discontinued operations, including a gain of about $20 billion in this year's third quarter.

J&J's shares were up about 0.4% in mid-afternoon trading.

-Fatima Attarwala

HP Shares Tumble After Lowering Guidance on Soft PC and Printer Demand

HP (HPQ) shares tumbled more than 7% Wednesday morning after the company warned the market for PCs and printers remains soft and reduced its full-year guidance.

"The external environment has not improved as quickly as anticipated and we are moderating our expectations as a result," said CEO Enrique Lores in a statement.

HP now sees 2023 earnings per share (EPS) of $3.23 to $3.35, down from its previous outlook of $3.30 to $3.50.

Cost-cutting measures helped HP post third-quarter EPS of $0.86, in line with analysts’ estimates. However, revenue slumped 9.9% to $13.2 billion, short of forecasts.

Shares of HP fell to their lowest level since March following the news.

-Bill McColl

Wegovy Maker Novo Nordisk Buys Embark Biotech to Boost Edge in Weight Loss Treatments

Wegovy maker Novo Nordisk (NVO) agreed to buy Embark Biotech for €15 million ($16 million) in cash upfront, in a move that could boost Novo Nordisk's portfolio of weight loss treatments.

In addition, Embark shareholders could receive up to €456 million ($500 million), depending on whether certain commercial milestones are reached.

The companies said a three-year collaboration to research and develop new treatments for obesity and related conditions will also give Novo Nordisk the option to acquire assets based on discoveries by Embark Biotech.

The market for obesity drugs is expected to grow to $54 billion by 2030, up from $2.4 billion in 2022, according to Morgan Stanley Research. Globally, around 650 million people are clinically obese, of which only about 7% are diagnosed and recommended for medical treatment.

American depositary receipts (ADRs) of Novo Nordisk dipped about 0.7% in early trading on Wednesday but remained more than 40% higher for the year.

-Fatima Attarwala

Visa, Mastercard Shares Climb on Plans to Raise Credit Card Fees

Shares of Visa (V) and Mastercard (MA) rose in early trading Wednesday after the Wall Street Journal reported the credit card providers are planning to raise the fees they charge merchants.

According to the Journal, the fee increases, slated to go into effect in October and April, could cost merchants an additional $500 million a year. Swipe fees totaled a record $160 billion in 2022, according to the Nilson Report.

Visa and Mastercard account for about 80% of all credit card transaction volume. Their dominance has elicited criticism from some in Congress, where legislation has been introduced to allow merchants to process Visa and Mastercard cards over other networks, possibly incentivizing lower fees.

Visa shares gained 0.7% Wednesday morning while Mastercard rose 1.2%.

Shares of Insulet Surge on Insider Purchase

Shares of the medical device maker Insulet Corp. (PODD) gained more than 7% Wednesday morning, making it the S&P 500’s best-performing stock, after an SEC filing showed CEO James Hollingshead bought more than $1 million worth of company stock.

The purchase of 5,550 shares upped Hollingshead’s stake in the company by nearly 20%.

Insulet stock fell 30% in the weeks after Aug. 8, when it beat second-quarter earnings expectations and raised its full-year sales forecast. Shares reached a three-year low of $181.21 on Aug. 28, the day of Hollingshead’s purchase.

Investors often look to insider buys as a sign a stock is undervalued and that leadership is confident about the company’s prospects.

U.S. GDP Is Holding Up Despite Consumer Spending Slowdown

The Bureau of Economic Analysis (BEA) Wednesday revised its estimate of second-quarter GDP to 2.1% from last month’s estimate of 2.4%. Still, that’s marginally higher than the first quarter’s 2% growth rate.

Researchers attributed the acceleration in GDP to a smaller decline in inventory investment and an uptick in business investment, possibly a sign the supply/demand imbalance that fueled last year’s historic inflation is abating and business conditions are improving. Those improvements were offset slightly by a slowdown in consumer spending.

More good news from today’s GDP release: prices rose at their slowest pace since the end of 2020. Personal Consumption Expenditure (PCE) prices rose at an annualized rate of 2.5% in the second quarter, falling from 4.1% in the first quarter. PCE prices excluding food and energy rose 3.7%, a more modest slowdown from the first quarter's 4.9% increase.

The BEA will publish July’s PCE price index—the Fed’s preferred inflation gauge—tomorrow morning.

Stocks Making the Biggest Moves Premarket

Gainers:

Losers:

5 Things to Know Before Markets Open

Here's what investors need to know to start their day:

-Terry Lane

Futures Little Changed as Markets Take a Breather

Futures contracts connected to the Dow Jones Industrial Average were up just a few hundredths of a percentage point in premarket trading Wednesday.

S&P 500 futures contracts were down about the same amount.

And Nasdaq 100 contracts slipped just less than 0.1%.

CNBC. "Google announces event for Oct. 4, where new Pixel phone and smartwatch expected."

Brown-Forman. "Brown-Forman Reports First Quarter Fiscal 2024 Results; Reaffirms Full Year Outlook."

Bloomberg. “Apple Tests Using 3D Printers to Make Devices in Major Manufacturing Shift.”

Johnson & Johnson. "Johnson & Johnson Announces Updated Financials and 2023 Guidance Following Completion of the Kenvue Separation."

Johnson & Johnson. “Johnson & Johnson Reports Q1 2023 Results.”

Johnson & Johnson. “Johnson & Johnson Reports Q2 2023 Results.”

Johnson & Johnson. "Johnson & Johnson Announces Final Results of Exchange Offer and Finalizes Separation of Kenvue Inc."

HP. "HP Inc. Reports Fiscal 2023 Third Quarter Results."

Embark Laboratories. "Embark Biotech has been acquired by Novo Nordisk."

Morgan Stanley. "Why Obesity Drugs May Be a New Blockbuster Pharma Category."

The Wall Street Journal. "Visa, Mastercard Prepare to Raise Credit-Card Fees."

Bureau of Economic Analysis. “Gross Domestic Product (Second Estimate), Second Quarter 2023.”

Bureau of Economic Analysis. “2023Q2 (Second Estimate) Comparisons -- Percent Change from Preceding Period in Real Gross Domestic Product and Related Measures.”