Markets slide while Big Tech remains under pressure

Dow dropped 251 (session lows), advancers modestly ahead of decliners & NAZ slumped 225.  The MLP index was off 1+ to the 247s & the REIT index rose 6+ to the 325s.  Junk bond funds edged higher & Treasuries were heavily purchased, reducing yields.  Oil retreated 2+ to the 83s after recent strength & gold inched up 1 to 1996 (more on both below).

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Southwest Airlines (LUV) plans to slow its capacity growth next year, citing moderating travel demand as booking patterns shift back to pre-Covid pandemic norms.  LUV will expand its flying 10-12% in the first qtr of 2024 from a year earlier, down from a previous forecast of as much as 16% growth.  It expects to grow 6-8% for the full year 2024.  Airlines have expanded their flying this year, while travelers have returned to more traditional booking, traveling during peak vacation periods or holidays.  That capacity expansion has driven airfare lower.  Last year, execs cited high amounts of traditionally off-peak travel coupled with a shortage of aircraft & other challenges that kept fares high. it plans to slow its capacity growth next year, citing moderating travel demand as booking patterns shift back to pre-Covid pandemic norms.  LUV forecast unit revenue, the amount an airline brings in for each seat it flies a mile, would drop 9-11% from a year earlier in the 4th qtr, with capacity up about 21%.  “As we move into 2024, we are slowing our [available seat mile growth] rate to absorb current capacity, mature development markets, and optimize schedules to current travel patterns,” CEO Bob Jordan said.  Net income in the 3rd qtr dropped 30% from a year earlier to $193M (31¢ per share) while revenue advanced 4.9% to $6.53B.  Adjusting for the impact of labor contract adjustments & other one-time items, EPS was 38¢.  The stock fell 20¢.
If you would like to learn more about LUV, click on this link:
club.ino.com/trend/analysis/stock/LUV_aid=CD3289&a_bid=6aeoso5b6f7

Southwest slows 2024 growth as travel demand moderates

Merck (MRK), a Dow stock, reported 3rd-qtr revenue & adjusted earnings that topped expectations on strong sales of its blockbuster cancer drug Keytruda, HPV vaccine Gardasil & surprisingly, its Covid drug Lagevrio.  The pharmaceutical giant also increased its full-year sales forecast to $59.7-60.2B, slightly higher than the $58.6-59.6B guidance provided in Aug.  MRK lowered its adjusted EPS guidance to $1.33-1.38, from a previous forecast of $2.95-3.05.  But that updated outlook reflects an upfront charge of $5.5B ($1.70 per share) related to its recent drug collaboration agreement with Daiichi Sankyo. That guidance also includes previously announced one-time charges related to the company's acquisitions of Prometheus Biosciences & Imago BioSciences, along with another upfront payment related to a collaboration deal with Kelun-Biotech.  Revenue was $15.96B for the qtr, up 7% from the same period a year ago.  EPS was$1.86 which compares with $1.28 last year.  Excluding certain items, adjusted EPS was $2.13.  Its pharmaceutical business, which develops a wide range of drugs for different disease areas, posted $14.26B in revenue during the qtr, up 10% from the same period a year ago.  Excluding Lagevrio, pharmaceutical sales grew 9%.  The Covid antiviral treatment brought in $640M in sales for the qtr, up 47% from the 3rd qtr of 2022.  Growth was due to higher demand in Japan, partially offset by lower demand in Australia & the nonrecurrence of sales in the UK.  The stock rose 1.92.
If you would like to learn more about MRK, click on this link:
club.ino.com/trend/analysis/stock/MRK_aid=CD3289&a_bid=6aeoso5b6f7

Merck results beat expectations on strong Keytruda, Covid drug growth

The number of Americans applying for jobless benefits rose last week but remains historically low as the labor market continues to show strength amid high interest rates & inflation.  Jobless claim applications rose by 10k to 210K last week, the Labor Dept reported.  The previous week's applications were the fewest in 8 months.  Jobless claim applications are considered a proxy for layoffs.  The 4-week moving average of claims, which smooths out some of the week-to-week volatility, rose by 1K to 207K.  Overall, 1.79M people were collecting unemployment benefits in the latest week, 63K more than the previous week.  In an effort to stem persistent inflation, the Federal Reserve has raised its benchmark interest rate 11 times since Mar of 2022.  The central bank's goal is to cool the economy & labor market & bring down rising wages, which it says feeds inflation.  However, the labor market & the broader economy have held up better than expected.  In Sep, employers added 336K jobs, raising the average gain for each of the past 3 months to a robust 266K.  Though the unemployment rate rose from 3.5% to 3.8% last month, that's mostly due to the fact that about 736K people resumed their search for employment.  Only people who are actively looking for a job are counted as unemployed.

Weekly applications for US jobless benefits tick up slightly

Gold closed higher, pushing closer to the $2,000 mark on safe-haven buying as treasury yields dropped after the US reported its 3rd-qtr GDP rose more than expected, while the $ rose.  Gold for Dec closed up $2 to $1997 per ounce.  The price is at a 3-month highs on safe-haven buying as Israel steps up its war on the Hamas militant group, launching an overnight raid on the territories using armor, while a full-scale invasion of the territory expected in coming days.  Gold continues its impressive performance this month amid demand from investors seeking a haven against weakness in stocks & bonds as well as geopolitical turmoil in the Middle East.  The US reported GDP rose by 4.9% in the 3rd qtr, the largest increase since the 4th-qtr of 2021 & ahead of expectations for a 4.7% rise.  The higher than expected results had little effect on markets, with the $ moving off overnight highs & treasury yields weakened.  The ICE dollar index was last seen up 0.15 points to 106.67, down from 106.88 overnight.  The yield on the US 2-year note was down 9.5 basis points to 5.05%, while the 10-year note was paying 4.862%, down 10 basis points.

Gold Closes Higher on Safe-Haven Buying as the Dollar Rises and Yields Drop

Oil futures finished lower, with US benchmark prices settling at their lowest in 2 weeks.  The ongoing conflict between Israel & Hamas is causing volatility in crude prices despite having minimal direct impact on actual oil supply & demand conditions.  The primary risk associated with the ongoing conflict is the potential for stricter sanctions against Iranian oil exports due to Iran's support of Hamas.  Dec West Texas Intermediate crude fell $2.18 (2.6%) to settle at $83.21 a barrel, the lowest finish for a front-month contract since Oct 12.

U.S. Oil Futures Settle at Their Lowest in 2 Weeks

The Dow is back under 33K again with a dreary outlook.  High interest rates along with expectations they may linger for a long time are keeping investors away from buying risky investments like stocks.  Safe haven investments are looking good to many.

Dow Jones Industrials