The big turning point for US stocks over the past week came with the comments of US Federal Reserve chair Jerome Powell on 30 November.
Although he warned the fight against inflation was not over and rates would remain higher for longer, he also signalled the pace of rate hikes would slow at its upcoming meeting on 14 December. This stoked gains for US stocks.
Wall Street largely consolidated those gains on 1 December as the PCE measure of inflation - a key metric for Fed decision making - came in lower than expected. The reading of 0.2% compared with the 0.3% forecast and was down on the previous level of 0.5%. PMI data also showed that the US manufacturing sector contracted in November - reminding the Fed that it if it pushes to hard on rates it could inflict material economic damage.
Powell's relatively dovish stance helped Netflix (NFLX:NASDAQ) and other growth stocks, with the streaming platform also supported by a strong debut for its new series Wednesday - the Addams Family spin-off breaking records for most hours viewed in a week.
Evidence of cost savings at pharmaceutical firm Catalent (CTLT:NYSE), as it cut hundreds of jobs at facilities in Indiana and Texas, saw investors get behind the stock. In November the company cut its 2023 forecast on lower Covid-19 related product demand as well as inflationary and currency headwinds.
BUILD-A-BEAR WORKSHOP
There was no sign of a slowdown in consumer spending for Build-A-Bear Workshop (BBW:NYSE) as its third quarter results smashed expectations. The toy assembler says life is going so well that it's on track to achieve its most profitable 12 months in its 25-year history.
Third quarter revenue increased by 9.9% to $104.5 million and pre-tax profit jumped 25.3% to $9.9 million. The company subsequently raised its 2022 guidance for both revenue and profit. Investors couldn't wait to snap up the shares, bidding them up 30% over the past week.
Build-A-Bear has become more than a shop selling a range of characters that can be stuffed and dressed up. It also sees itself as a content business, having created a live-action film based on some of its characters, an animated film and a documentary in the works, and a partnership with Reese Witherspoon's production company to develop a reimagination of Goldilocks and the Three Bears.
COSTCO
Shares in Costco Wholesale (COST:NASDAQ) plunged 6.6% to $503.90 after the retailer reported (1 December) weaker than expected sales for November which suggested consumers are feeling the pinch heading into the all-important festive selling season. Sentiment towards the stock worsened further as Oppenheimer reacted by removing Costco from its top pick list, pointing out the figures showed trends weakened ‘meaningfully’ last month.
Costco's sales increased by 5.7% to $19.17 billion year-on-year in November, robust enough but below the growth rates delivered in October and September. US same-store sales excluding gas rose 4.6% over the four weeks ended 27 November, representing a slowdown from the 6.1% generated in October, with the Washington-based Costco bemoaning weakness in the consumer electronics, jewellery and hardware categories.
KROGER
US grocery chain Kroger (KR:NYSE) smashed analysts' third quarter earnings estimates on 1 December with adjusted earnings per share coming in at $0.88 compared $0.82 according to Refinitiv complied data.
The company said same stores sales excluding fuel grew 6.9% in the third quarter beating estimates of 4.5% as it benefited from strong sales of its own branded cheese and meats as cash strapped consumers shopped for cheaper alternatives.
Strong trading prompted the firm to raise full year guidance with like-for-like sales growth in the range of 5.1% to 5.3% from 4.1% to 4.5% and adjusted earnings per share between $4.01 and $4.15 from $3.95 to $4.05.
Kroger said it expects to increase its dividend over time and has paused its share buyback programme to prioritise paying down debt following the proposed $25 billion merger with supermarket chain Albertsons (ACI: NYSE).
After rallying as much as 5% in pre-market trading the shares opened 1.4% lower at $48.5 but remain up 4% for the year compared with a 11% loss in the S&P 500.
