A trader works on the trading floor at the New York Stock Exchange (NYSE) in New York City, January 26, 2023.
Andrew Kelly | Reuters
Stocks rose Friday, and all the major averages headed for a winning week fueled by better-than-expected economic growth and a pop in market-darling Tesla.
The S&P 500 gained 0.4%, while the Nasdaq Composite added 0.56%. The Dow Jones Industrial Average was last up 135 points, or 0.4%.
Earnings season continued, with Intel slumping more than 8% following a dismal earnings report that missed on the top and bottom lines. Strong guidance boosted American Express 9% despite a top-and bottom-line miss.
All the major averages are positive for the week and month. The Dow and the S&P 500 have gained 1.7% and 2% this week, respectively. The Nasdaq is up 3.2% on the week and is set to notch its best monthly performance since July. The Nasdaq has gained the last four weeks. Tesla rose 3% Friday, building on a 24% weekly gain on the back of an earnings beat.
So far this year, markets have bucked 2022’s selloff trend. The Dow is up 2.8%, while the S&P has gained 6.1%. The Nasdaq has surged more 10.6%
“This year’s stock market rally is impressive and shouldn’t be ignored,” Chris Zaccarelli, chief investment officer for the Independent Advisor Alliancesaid in a Thursday note. “Unfortunately, the Fed is likely to start talking down the market again, as early as next week, so prepare for volatility again this year; we may be in the eye of the hurricane and not completely out of the woods yet.”
Investors digested more economic data ahead on next week’s Federal Reserve policy meeting. The personal consumption expenditures price index, a preferred inflation measurement for the Fed, showed prices rise 4.4% from a year ago, the Commerce Department said. That was in line with the Dow Jones estimate.
It’s some of the last data ahead of the central bank’s next interest-rate decision. Investors are currently expecting a 25 basis point hike.
Stocks are coming off a positive session. Investors cheered a better-than-expected fourth quarter gross domestic product report that stoked hopes that the U.S. economy can experience a soft landing as the central bank hikes rates to tame inflation.
Check out the companies making headlines before the bell:
Intel — The chipmaker suffered a 9% loss in its shares in early morning trading after its latest financial results missed analysts’ estimates and showed significant declines in the company’s sales, profit and gross margin. The company also forecasted a loss for the current quarter.
Advanced Micro Devices — Chip stocks such as Advanced Micro Devices fell as a group following Intel’s results. Shares of Advanced Micro Devices fell nearly 2.4%, while shares of Nvidia and Micro dipped about 1.5% each.
Chevron — Shares dipped more than 1% after Chevron reported its latest earnings results. The oil producer missed earnings expectations, but topped revenue forecasts, according to consensus estimates from Refinitiv. The shares had gained on Thursday after Chevron raised its dividend and announced a buyback plan.
American Express — Shares of the credit card company rose 5% despite weaker-than-expected results for the fourth quarter. American Express reported $2.07 in earnings per share on $14.18 billion of revenue. Analysts surveyed by Refinitiv were looking for $2.22 per share on $14.22 billion of revenue. However, American Express’ guidance for 2023 was better than anticipated for earnings and revenue. Also, AMEX said it would be increasing its dividend by 15%.
Ralph Lauren — Shares fell more than 3% after BMO Capital Markets downgraded the stock to underperform. The investment firm said Ralph Lauren’s recent rally has gone too far.
Chewy — Chewy shares rose more than 4% after Wedbush upgraded the stock to outperform from neutral.
Silvergate Capital — The bank to crypto businesses slid about 8% after the company suspended payments on its Series A preferred stock dividend, in an effort to preserve capital as it navigates recent crypto market volatility. The stock has been falling since November, after crypto exchange FTX, for whom Silvergate held deposits, collapsed in scandal.
Visa — The payment network operator reported strong financial results for its most recent quarter, including adjusted earnings per share of $2.18 and revenue of $7.94 billion. Analysts expected $2.01 per share in adjusted earnings and $7.70 billion in revenue, according to Refinitiv. Visa shares rose about 1% in premarket trading.
Hasbro — Shares of the toy maker slid more than 5% after the company said it would eliminate around 1,000 employee positions and warned of weak holiday-quarter results. The layoff of around 15% of its global workforce comes as the company seeks to save between $250 million and $300 million annually by the end of 2025.
KLA — Chip maker KLA Corporation declined about 4.6% after issuing weaker-than-expected forward guidance for its fiscal third quarter. Otherwise, KLA reported a beat on earnings and revenue expectations.
— CNBC’s Tanaya Macheel, Yun Li and Jesse Pound contributed reporting
There are two things keeping the toy industry afloat right now: inflation and a consumer group known as “kidults.”
These kids at heart are responsible for one-fourth of all toy sales annually, around $9 billion worth, and are the biggest driver of growth throughout the industry, according to data from the NPD Group.
This cohort, which NPD defines as ages 12 and older, has been steadily contributing to the industry for years, but spending has accelerated in the wake of the pandemic, leading to year-over-year gains despite tough comparisons.
It’s an important moment for the toy industry, too, with the holiday season upon us. While sales surged across the board for board games, puzzles and playsets during the pandemic, the first nine months of 2022 saw a 3% decline in sales volume. Higher toy prices helped outweigh these losses, as sales revenue for the time period jumped 3%, NPD reported.
Kidults, who tend to spend more on toys, have a great fondness for cartoons, superheroes and collectibles that remind them of their childhood. They buy merchandise such as action figures, Lego sets and dolls that might typically be considered “for kids.” However, in recent years, toy makers have created product lines just for these consumers, realizing that demand is high for this generation of adults who still want to have fun.
“The definition of adulthood has definitely evolved,” said Jeremy Padawer, chief brand officer at toy company Jazwares. “What it used to mean, to be an adult, was to be a very upstanding, serious member of society. And to do that you had to demonstrate it intellectually, emotionally, in every other single way.”
“Now we feel a lot more free to express our fandom as a part of our adulthood,” he said.
In the ’70s and ’80s, the toy business began to shift away from being an industry that was just about the next innovative item and embraced creating more product based on entertainment franchises. To be sure, there were toys based on movies and TV shows prior to this time, but this is when the trend kicked into high gear.
“In 1977, ‘Star Wars’ launches, and you started seeing a lot more licensed product at retail, where we were celebrating our fandom with with toys and collectibles,” Padawer said.
This included nontoy merchandise such as bedsheets, crockery and clothing.
“At the time, the intended recipient was almost all kids,” he explained. “But those children that were born in the ’70s and ’80s were really the first generation that had this much licensing and this much product that was available for them to demonstrably attached to. And it’s not a big surprise, then that those kids is their 30s and 40s, that they continue to demonstrate that.”
This kidulting trend started to rise in prominence around a decade ago, as superhero movies and comic book culture exploded into the mainstream. It became more consequential to the bottom lines of toy companies in the last five years, said James Zahn, editor in chief of “The Toy Book” and senior editor of “The Toy Insider.”
Toy manufacturers such as Lego embraced these consumers and created lines, often tied to nostalgic entertainment properties, just for this cohort. Hasbro‘s Black Series for action figures, is a prime example of this, tapping into the desire for high-quality Star Wars and Marvel collectibles. Even Mattel has lines from Barbie and Hot Wheels that are designed specifically for this group of buyers.
Toy companies have even begun creating their own television and movie content in order to support toy lines. Mattel launched its own internal movie company and is set to release “Barbie” in July 2023 and Hasbro bought eOne and will set “Dungeons & Dragons: Honor Among Thieves” in theaters in March.
These films are not designed for young kids, instead catering to this older group of toy-loving consumers.
Other brands, such as Funko, have always catered toward adult collectors who are in-tune with their inner kid.
But nostalgia doesn’t have to be tied to intellectual property.
“We know that this generation does take their jobs very seriously, but at the end of the day, they also want to have fun,” said Josh Shave, senior director of marketing for Razor.
Razor began selling its classic kick scooter in 2000. Within six months, the company had sold more than 5 million units.
“Twenty years later, all those kids have grown up,” Shave said, noting that Razor has created electric versions of its scooters and ride-ons just for these folks.
“The Razor Icon is literally the adult version of the kick scooter, but it’s electric,” he said. “I just got done with an event and everyone says the same thing, ‘Oh, my goodness, I’m so glad they came up with all these adults. I’m so glad they came up this reminds me of…’ and they would tell me a story.”
The Razor Icon, which can reach 18 miles per hour, retails for $600 and is part of the company’s wider collection of items for kidults. There’s also the Rambler, a take on the retro mini motor-bike, which looks like a swoop bike from the ’60s and can reach 15.5 miles per hour. It retails for $660.
Lego Star Wars toys sit on display inside a Toys “R” Us Inc. store in Paramus, New Jersey, U.S., on Tuesday, Nov. 26, 2019.
Bloomberg | Getty Images
Zahn also pointed to Basic Fun as another example of a company transforming its traditionally kid-centric toys into unique items for adults. The toy manufacturer partnered with Netflix to create a larger version of its Lite-Brite set based on “Stranger Things” that can be hung as artwork. It costs $100.
“And a lot of that we saw expanded during the pandemic because people went home and they rediscovered play,” Zahn said.
That connection with imagination didn’t end with the lockdowns.
In the last 12 months ending September, the kidult group represented 60% of the dollar growth in the industry, despite accounting for only a quarter of sales, according to NPD’s Checkout data.
“So, it’s been a huge windfall,” said Juli Lennett, vice president and industry advisor for NPD’s U.S. toys practice.
Still, the stakes remain high for the toy industry as it heads into the final weeks of the year.
Inventory has been a major challenge for retailers across the board. Supply chain snafus threatened to make shelves bare for holiday shoppers last year, leading many big-box stores to hedge their bets on how much merchandise to order and receive deliveries earlier than usual. As the supply chain loosened, many had excess inventory, leading to sharper discounts as demand waned.
Some companies, such as MGA Entertainment, which is the manufacturer of LOL Surprise dolls, decided to offer more items that sell for under $15 in order to cater to more cost conscious parents.
CEO Isaac Larian told CNBC that the company had about 20 products that sold between $5 and $15 last year. This year, there are more than 200.
Kidults, on the other hand, are a coveted consumer because they are often willing to spend more money than others on items for themselves.
“Right now, adult toy buyers are the reason for growth in the toy business,” Larian said.
It’s been a difficult year for stocks as the Federal Reserve’s rate-hiking campaign and fears of a recession ahead largely pummel growth-oriented areas of the market. But despite a rough 2022, Jefferies says it’s time for investors to consider putting their money back in some “fallen angels” with solid fundamentals and a decent growth trajectory ahead. “While some of the derating in growth stocks is likely structural, there are also cyclical components such as risks related to slowing economy,” the firm wrote in a note to clients Sunday. “In particular, stocks that have witnessed a significant correction and are now trading at trough valuations compared to their own history while still exhibiting relatively better earnings momentum and quality characteristics compared to their peers, are likely to see the most investor interest.” To find these so-called “fallen angels,” the firm searched for quality names that have undergone a significant correction, trading down more than 25% from their 52-week highs. Despite slumping shares and valuations trading near 10-year lows, these names offer a 10% return on invested capital, and more than 15% return on equity over the next two years. Shares are also trading relatively cheap, at less than 20 times forward price-to-earnings and offer decent earnings momentum ahead. Here are some of the names that made the cut: Several beaten-up technology names came up, including Qualcomm . The semiconductor stock, down more than 40% this year, shared a weak outlook for the current quarter in its earnings results last week and said it’s implemented a hiring freeze. Despite the dropdown in the stock price, shares are expected to bring a 58.2% return on equity and 52.4% return on invested capital and trade cheap at 8.8 times forward earnings, Jefferies found. On the tech front, Jefferies’ screen also included shares of PayPal . Despite slumping 59% this year, the stock offers a 21.9% return on equity. While the payments company recently shared a weaker-than-expected revenue outlook for the fourth quarter , it said last week it plans to add its PayPal and Venmo cards to Apple Wallet. Shares trade at nearly 17 times forward earnings, Jefferies found. A slew of consumer discretionary stocks also made the cut, including Hasbro and Tapestry . Toymaker Hasbro, down about 38% in 2022, recently shared quarterly results that missed earnings expectation s as it grapples with high inventories and rising inflation. Shares trade at about 12 times forward earnings. Home Depot , 3M and Southwestern Energy were also among the names included in Jefferies’ screen. — CNBC’s Michael Bloom contributed reporting
Hasbro Inc. toys from based on “Marvel’s The Avengers” movie sit on the shelf at a Target Corp. store in Union, New Jersey, U.S., on Wednesday, Aug. 22, 2012.
Bloomberg | Bloomberg | Getty Images
Check out the companies making headlines in midday trading Tuesday.
Hasbro — Shares of the toy company dipped 2.3% after the company reported third-quarter earnings that missed expectations. CEO Chris Cocks blamed “increasing price sensitivity” among consumers and inventory gluts.
Salesforce — Salesforce shares gained 5.2% after Starboard Value revealed to CNBC that it has taken a “significant” stake in the software giant. Starboard founder Jeff Smith did not reveal the exact amount but said he sees a big opportunity after the shares fell more than 40% this year.
Carnival Corporation — Shares of the cruise company jumped more than 12% after one of Carnival’s subsidiaries began an offering of $1.25 billion of senior priority notes due 2028. The company plans to use the net proceeds of the offering to make principal payments on debt and for other general corporate expenses, according to a regulatory filing. Norwegian Cruise Line Holdings and Royal Caribbean also rose 8.8% and 7.6%, respectively, on the news.
Goldman Sachs — Goldman Sachs rallied 3% after beating third-quarter analyst expectations for profit and revenue on better-than-expected trading results. The company also announced a corporate reorganization that combines the firm’s four main divisions into three.
Target — Shares of the retailer jumped 5% after Jefferies upgraded Target to a buy from hold, saying they can rally about 20% from current levels and benefit from both an easing of supply chain issues and improved inventory positioning.
Lockheed Martin — Shares of the aerospace company jumped 8.5% after Lockheed reported third-quarter earnings of $6.87 per share excluding items, which was higher than a Refinitiv estimate of $6.66 per share.
Amazon — Amazon added 2.7% after Citi named it a top pick for both a hard and soft economic landing, saying it would perform well under either scenario.
XPO Logistics — XPO Logistics fell 1.7% after the freight transportation company released disappointing preliminary quarterly results ahead of its earnings release. The company said Monday that it expects revenue to come in lower than analysts expect, but that earnings before interest, taxes, depreciation and amortization will be higher. The company reports Oct. 31.
Nordstrom — The retailer’s shares added more than 3% after the company announced its chief financial officer, Anne Bramman, will step down in December. Nordstrom has begun its search for her successor and said accounting chief Michael Maher will serve that role in the interim.
Enviva — The wood pellet maker rose 4.7% after Raymond James said its value as a more environmentally and socially responsible energy provider is misunderstood.
— CNBC’s Carmen Reinicke, Alex Harring and Michelle Fox contributed reporting
The board game Monopoly by toymaker Hasbro at a toy store in New York City.
Getty Images
Check out the companies making headlines in midday trading Thursday.
DoorDash — Shares of DoorDash jumped more than 11% after the food delivery company’s quarterly revenue turned out better than expected. DoorDash reported $1.3 billion in revenue last quarter, beating a Refinitiv estimate of $1.28 billion. The company also posted strong order numbers and added new users, suggesting that demand for food delivery services remains high.
Palantir Technologies — Shares of Palantir dropped 10% after the company’s earnings fell short of forecasts for the fourth quarter, though its revenue beat estimates. Its reported net loss was $156.19 million, wider than the $148.34 million loss seen in the year-earlier period.
Hasbro — The toymaker saw shares rise more than 3% after activist investor Alta Fox Capital Management nominated five directors to the company’s board. Alta is pushing for Hasbro to spin off its Wizards of the Coast unit and its digital games unit, which include franchise brands like Dungeons and Dragons and Magic: The Gathering. Alta owns a 2.5% stake in Hasbro worth around $325 million.
Fastly — The cloud computing company’s shares plunged 30% on disappointing full year guidance. Fastly reported a fourth quarter loss, though it was narrower than analysts had expected, and revenue beat consensus estimates.
Nvidia — Shares of the chipmaker fell 6% despite the company reporting strong quarterly results. Nvidia noted that its automotive business, which represents a growth market for its chips, had revenue drop 14% to $125 million. It also came under pressure on concerns about its exposure to the cryptocurrency market.
Cheesecake Factory — The restaurant chain saw its shares rise 4% despite it reporting earnings that missed analysts’ expectations along with increased input costs that negated a beat in revenue. The company is planning a price increase in new menus that could lift prices later this year.
Walmart — The retail giant’s shares rose more than 2% after Walmart topped earnings expectations and said it’s on track to hit long-term financial targets, calling for adjusted earnings per share growth in the mid single-digits.
Tripadvisor — The travel site operator fell 2.7% following an unexpected quarterly loss and a revenue miss. Tripadvisor said it expects the travel market to improve significantly in 2022 following what it called “unexpected periods of virus resurgence” in 2021.
Cisco Systems — The software company added about 4% after it reported a beat on quarterly revenue and earnings and issued an upbeat full-year forecast, citing strong demand from cloud computing companies. Cisco earnings of 84 cents per share beat estimates by 3 cents. Revenue came in at $12.72 billion, versus estimates of $12.65 billion.
Equinix — Digital infrastructure company Equinix gained more than 4% after TD Securities upgraded the stock to buy from hold, citing its recent pullback. The upgrade came a day after the company reported fourth quarter adjusted EBITDA that beat estimates, as well as a slight revenue beat.
A Spirit Airlines aircraft takes off at Orlando International Airport.
Paul Hennessy | SOPA Images | LightRocket | Getty Images
Check out the companies making headlines in midday trading.
Frontier Group, Spirit Airlines — Shares of Frontier Group and Spirit Airlines rose in midday trading after the companies announced they are merging in a deal valued at $6.6 billion. The two largest low-cost airlines will create what would become the fifth-largest airline in the country. Spirit Airlines surged 14% and Frontier Group was marginally higher.
Peloton — Shares of the exercise bike maker soared 15% after reports that Amazon and Nike expressed interest in buying the company. The reports come a few days after activist investor Blackwells Capital urged Peloton’s board to consider a sale of the company. Still, CNBC reported that all talks are preliminary, and Peloton has yet to kick off a formal sales process.
Hasbro — Hasbro shares fell 0.7% even after the toymaker beat Wall Street estimates for its latest quarterly report. Hasbro posted per-share earnings of $1.21, well above the 88 cents a share Refinitiv consensus estimate.
Stock picks and investing trends from CNBC Pro:
Tyson Foods — Shares of Tyson jumped 10% after a better-than-expected earnings report. The beef and poultry producer reported earnings of $2.87 per share, beating earnings estimates. Higher meat prices helped boost profit.
Ford — Ford shares dipped 1% after announcing Friday it will suspend or cut production at eight of its North American factories due to the global semiconductor shortage.
Spotify — Spotify was on watch again after a compilation video of the company’s biggest podcasting star Joe Rogan using a racial slur circulated on social media. CEO Daniel Ek apologized to Spotify employees for the controversy with Rogan. Shares fell 1.9%.
Snowflake — Shares of Snowflake jumped 6.5% after Morgan Stanley upgraded the data storage stock to overweight from equal weight. The firm said Snowflake is undervalued after the stock’s roughly 30% fall from its high and has quality growth.
Netflix — The streaming stock fell 3.7% after Needham analyst Laura Martin reiterated an underperform rating on the stock. She said Netflix must consider drastic measures to “win the ‘streaming wars,'” such as adding a cheaper ad-supported tier and even selling itself.
Stanley Black & Decker – Shares of the tool manufacturer fell 3.2% after Citi double-downgraded the stock to sell. “We downgrade SWK to Sell (from Buy) due to recent margin dilutive acquisitions, potential m/s loss, and lack of new innovative products,” Citi said.