The labor market is continuing to ease with recurring unemployment claims for the week ended November 4 reaching the highest level since November 2021. Initial unemployment claims for the week ended November 11 also jumped, hitting the highest levels since this past August. Initial claims rose to 231,000, significantly above the 220,000 expected and the 218,000 recorded in the prior week. Additionally, continuing claims jumped to 1.865 million, higher than forecasts calling for 1.847 million and the 1.833 million in the previous period. While the labor market is slowly cooling, which is positive for dampening inflation, an accelerated slide would signal economic risk. Continuing claims need to stay below 2.2 million while initial claims must remain below 300,000 for soft landing prospects to flourish. So far, so good.<\/p>\n\n\n
![\"Continuing](\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/11\/unemployment-claims-extend-eight-weeks-2023_contrib-Jose-Torres.png\")
<\/figure>\n<\/div>\n\n\nProposed GM Union Agreements Faces Opposition<\/strong><\/h2>\n\n\n\nIn other labor matters, voting by Union Auto Workers members to ratify proposed contracts with the nation\u2019s three largest automobile manufacturers is continuing today, with observers noting that the outcome for General Motors employees may go down to the wire. Contracts for Ford and Stellantis workers are expected to be approved. The contracts provide various improvements to benefits and would increase wages 33% over time, resulting in top assembly lines workers receiving approximately $42 per hour by April of 2028. While the GM voting is too close to call, 66.1% of Ford union employees have voted in favor of the agreement and 66.5% of Stallantis workers have also voted to ratify the contracts. For GM, votes in favor of the contract exceed no votes by only 2,500. However, some 2,400 votes from the company\u2019s Lansing, Michigan, factory haven\u2019t been tallied. As of the last count, 61% of union workers at the facility voted to reject the agreement. Some union members don\u2019t believe the contract\u2019s immediate 11% wage increase is sufficient to make up for union concessions provided in 2008.<\/p>\n\n\n\n
Other Companies Face Union Opposition<\/strong><\/h2>\n\n\n\nAutomobile company employees aren\u2019t the only ones upset, with workers at approximately 200 Starbucks stores expected to walk off the job today, which is Red Cup Day, an annual event in which the company gives away free reusable cups. It is one of Starbucks busiest days. Employees are seeking to unionize and are complaining that stores are understaffed. Meanwhile, members of the Coalition of Kaiser Permanente Unions have overwhelmingly voted to approve a new contract that would set the minimum hourly wages for California workers, where most of the health care provider facilities are located, at $25. Unions held a three-day strike prior to reaching the agreement. Also on the West Coast, scientists employed by California kicked off a three-day strike today in protest of not having a renewed contract. The contract expired three years ago. Additionally, the employees\u2019 union, the California Association of Professional Scientists, is seeking what they believe is fair pay. Nearly 60% of the organization\u2019s members voted to reject a proposed contract in February, sending members and state representatives back the negotiation table. <\/p>\n\n\n\n
Corporate Earnings Reflect Consumer Caution<\/strong><\/h2>\n\n\n\nQuarterly earnings reports continue to reflect the impact upon consumers of steep interest rates, large credit card balances, tighter lending conditions and higher costs of living. In the corporate world, an earnings report from Palo Alto Networks, which provides cybersecurity, illustrates the impact of high interest rates on businesses.<\/p>\n\n\n\n
In discussing quarterly results, Walmart Chief Financial Officer John David Rainey told CNBC that the company has seen a decline in sales prior to and after promotional events. Consumers are closely watching their spending and relying heavily on promotions. Additionally, sales weakened toward the end of its fiscal quarter ended October 31. During the quarter, the company generated $160.80 billion in revenue, exceeding the consensus expectation of $159.72 billion and climbing from $152.81 billion in the year-ago quarter. Walmart\u2019s grocery shelves helped sustain foot traffic and its digital sales increased 24% in the U.S. Additionally, revenue from selling advertising space on the company\u2019s ecommerce site grew 26% year-over-year (y\/y). Walmart\u2019s adjusted EPS of $1.53 exceeded the analyst consensus expectation of $1.52. In the year-ago quarter, it generated a $0.66 loss per share, a result of a settlement for pharmacy related issues. For the full year, Walmart increased its net sales guidance to a range of 5% to 5.5% and its EPS to a range of $6.40 to $6.48 while analysts expected EPS guidance of $6.48.<\/p>\n\n\n\n
Macy\u2019s, however, experienced a 7% y\/y decline in sales with revenue dropping from $5.23 billion to $4.86 billion. Despite the decline, revenue exceeded the analyst expectation of $4.82 billion. Among Macy\u2019s various brands, the Bluemercury beauty chain performed the best, with comparable sales increasing strongly. While many consumers with stretched finances are turning to off-price retailers, upper income shoppers appear less impacted by inflation with Macy\u2019s higher end Bloomingdale\u2019s chain store experiencing only a 3.2% comparable sales decline. Macy\u2019s grew its earnings despite the decline in sales by lowering its inventory 6% and reducing its permanent markdowns on merchandise, which increased its gross margin from 38.7% to 40.3% y\/y. As a result, the company\u2019s quarterly adjusted EPS of $0.21 exceeded the consensus expectation of $0.0 but nevertheless declined from $0.52 in the year-ago quarter. In another positive development, Macy\u2019s previously estimated that same-store sales would decline as much as 7.5% for the full year. It now expects a decline of no more than 7%. It also increased the lower end of its full-year revenue guidance from $22.8 billion to $22.9 billion and updated its adjusted EPS guidance range of between $2.70 and $3.20 to a range of $2.88 to $3.13. <\/p>\n\n\n\n
Palo Alto generated third-quarter results that beat expectations, but the company\u2019s guidance fell short of the analyst consensus expectation because the \u201chigh cost of money\u201d has become a focus among businesses. For its fiscal first quarter ended October 31, Palo Alto generated an adjusted EPS of $1.38, exceeding the $1.16 expected by analysts and climbing 66% from the $0.83 in the year-ago quarter. Additionally, the company\u2019s $1.9 billion in revenue grew 20% from the $1.56 billion produced in the year-ago quarter and beat the analyst expectation of $1.84 billion. After soaring approximately 85% year to date, Palo Alto stock dropped nearly 20% after the company provided disappointing billing guidance. The billing metric indicates the volume of sales and is used because of the lag between the signing of sales contracts and payments from clients. For the current quarter, Palo Alto expects billings to total $2.36 billion compared to the expectation for $2.41 billion. Its current quarter revenue of $1.97 billion, furthermore, only met analysts\u2019 expectations.<\/p>\n\n\n\n
Risk-off Trading <\/strong><\/h2>\n\n\n\nRisk-off sentiments are driving markets this morning with investors scooping up bonds while they sell-off economically cyclical stocks whose revenues and earnings underperform amidst softer consumer spending. All major U.S. equity indices are lower, with the small-cap, cyclically tilted Russell 2000 leading the way lower, it\u2019s down 1.6%. The Dow Jones Industrial, Nasdaq Composite and S&P 500 indices are only down 0.3%, 0.3% and 0.1%, meanwhile. Sector breadth is poor, with all sectors lower except for the defensive health and utilities sectors. The energy sector is leading the way lower, it\u2019s down 2.1% as crude oil prices, an important revenue driver for the sector, plunge. WTI crude oil is down 3.5% or $2.70 to $73.83 per barrel as concerns over rising U.S. inventories, slowing U.S. economic activity and weakening manufacturing production in China, the world\u2019s largest importer of barrels, mount. Meanwhile, Treasuries are catching a bid, as investors brace for potential economic and financial market volatility. Yields on the 2- and 10-year maturities are down 8 and 9 basis points (bps) to 4.83% and 4.45%. The dollar is lower, as rising Fed rate cut wagers weigh on the currency, with the greenback\u2019s index down 20 bps to 104.17. The U.S. currency is lower against the yen, euro, pound sterling, franc and yuan while it\u2019s higher versus the Aussie and Canadian dollars. <\/p>\n\n\n\n
Looking Ahead to The Real Estate Sector<\/strong><\/h2>\n\n\n\nTomorrow\u2019s data on housing starts and building permits are likely to reflect elevated caution by homebuilders. This month and next, however, real estate activity will begin to lift off, as lower interest rates unlock the sector\u2019s potential. How much of this increased activity is inflationary will be top of mind, with renewed surges in price pressures compelling the Fed to stay on the market\u2019s back. Stronger activity alongside decelerating inflation on the other hand, is what equity bulls need for further upside in stocks.<\/p>\n\n\n\n
Automobile company employees aren\u2019t the only ones upset, with workers at approximately 200 Starbucks stores expected to walk off the job today, which is Red Cup Day, an annual event in which the company gives away free reusable cups. It is one of Starbucks busiest days. Employees are seeking to unionize and are complaining that stores are understaffed. Meanwhile, members of the Coalition of Kaiser Permanente Unions have overwhelmingly voted to approve a new contract that would set the minimum hourly wages for California workers, where most of the health care provider facilities are located, at $25. Unions held a three-day strike prior to reaching the agreement. Also on the West Coast, scientists employed by California kicked off a three-day strike today in protest of not having a renewed contract. The contract expired three years ago. Additionally, the employees\u2019 union, the California Association of Professional Scientists, is seeking what they believe is fair pay. Nearly 60% of the organization\u2019s members voted to reject a proposed contract in February, sending members and state representatives back the negotiation table. <\/p>\n\n\n\n
Corporate Earnings Reflect Consumer Caution<\/strong><\/h2>\n\n\n\nQuarterly earnings reports continue to reflect the impact upon consumers of steep interest rates, large credit card balances, tighter lending conditions and higher costs of living. In the corporate world, an earnings report from Palo Alto Networks, which provides cybersecurity, illustrates the impact of high interest rates on businesses.<\/p>\n\n\n\n
In discussing quarterly results, Walmart Chief Financial Officer John David Rainey told CNBC that the company has seen a decline in sales prior to and after promotional events. Consumers are closely watching their spending and relying heavily on promotions. Additionally, sales weakened toward the end of its fiscal quarter ended October 31. During the quarter, the company generated $160.80 billion in revenue, exceeding the consensus expectation of $159.72 billion and climbing from $152.81 billion in the year-ago quarter. Walmart\u2019s grocery shelves helped sustain foot traffic and its digital sales increased 24% in the U.S. Additionally, revenue from selling advertising space on the company\u2019s ecommerce site grew 26% year-over-year (y\/y). Walmart\u2019s adjusted EPS of $1.53 exceeded the analyst consensus expectation of $1.52. In the year-ago quarter, it generated a $0.66 loss per share, a result of a settlement for pharmacy related issues. For the full year, Walmart increased its net sales guidance to a range of 5% to 5.5% and its EPS to a range of $6.40 to $6.48 while analysts expected EPS guidance of $6.48.<\/p>\n\n\n\n
Macy\u2019s, however, experienced a 7% y\/y decline in sales with revenue dropping from $5.23 billion to $4.86 billion. Despite the decline, revenue exceeded the analyst expectation of $4.82 billion. Among Macy\u2019s various brands, the Bluemercury beauty chain performed the best, with comparable sales increasing strongly. While many consumers with stretched finances are turning to off-price retailers, upper income shoppers appear less impacted by inflation with Macy\u2019s higher end Bloomingdale\u2019s chain store experiencing only a 3.2% comparable sales decline. Macy\u2019s grew its earnings despite the decline in sales by lowering its inventory 6% and reducing its permanent markdowns on merchandise, which increased its gross margin from 38.7% to 40.3% y\/y. As a result, the company\u2019s quarterly adjusted EPS of $0.21 exceeded the consensus expectation of $0.0 but nevertheless declined from $0.52 in the year-ago quarter. In another positive development, Macy\u2019s previously estimated that same-store sales would decline as much as 7.5% for the full year. It now expects a decline of no more than 7%. It also increased the lower end of its full-year revenue guidance from $22.8 billion to $22.9 billion and updated its adjusted EPS guidance range of between $2.70 and $3.20 to a range of $2.88 to $3.13. <\/p>\n\n\n\n
Palo Alto generated third-quarter results that beat expectations, but the company\u2019s guidance fell short of the analyst consensus expectation because the \u201chigh cost of money\u201d has become a focus among businesses. For its fiscal first quarter ended October 31, Palo Alto generated an adjusted EPS of $1.38, exceeding the $1.16 expected by analysts and climbing 66% from the $0.83 in the year-ago quarter. Additionally, the company\u2019s $1.9 billion in revenue grew 20% from the $1.56 billion produced in the year-ago quarter and beat the analyst expectation of $1.84 billion. After soaring approximately 85% year to date, Palo Alto stock dropped nearly 20% after the company provided disappointing billing guidance. The billing metric indicates the volume of sales and is used because of the lag between the signing of sales contracts and payments from clients. For the current quarter, Palo Alto expects billings to total $2.36 billion compared to the expectation for $2.41 billion. Its current quarter revenue of $1.97 billion, furthermore, only met analysts\u2019 expectations.<\/p>\n\n\n\n
Risk-off Trading <\/strong><\/h2>\n\n\n\nRisk-off sentiments are driving markets this morning with investors scooping up bonds while they sell-off economically cyclical stocks whose revenues and earnings underperform amidst softer consumer spending. All major U.S. equity indices are lower, with the small-cap, cyclically tilted Russell 2000 leading the way lower, it\u2019s down 1.6%. The Dow Jones Industrial, Nasdaq Composite and S&P 500 indices are only down 0.3%, 0.3% and 0.1%, meanwhile. Sector breadth is poor, with all sectors lower except for the defensive health and utilities sectors. The energy sector is leading the way lower, it\u2019s down 2.1% as crude oil prices, an important revenue driver for the sector, plunge. WTI crude oil is down 3.5% or $2.70 to $73.83 per barrel as concerns over rising U.S. inventories, slowing U.S. economic activity and weakening manufacturing production in China, the world\u2019s largest importer of barrels, mount. Meanwhile, Treasuries are catching a bid, as investors brace for potential economic and financial market volatility. Yields on the 2- and 10-year maturities are down 8 and 9 basis points (bps) to 4.83% and 4.45%. The dollar is lower, as rising Fed rate cut wagers weigh on the currency, with the greenback\u2019s index down 20 bps to 104.17. The U.S. currency is lower against the yen, euro, pound sterling, franc and yuan while it\u2019s higher versus the Aussie and Canadian dollars. <\/p>\n\n\n\n
Looking Ahead to The Real Estate Sector<\/strong><\/h2>\n\n\n\nTomorrow\u2019s data on housing starts and building permits are likely to reflect elevated caution by homebuilders. This month and next, however, real estate activity will begin to lift off, as lower interest rates unlock the sector\u2019s potential. How much of this increased activity is inflationary will be top of mind, with renewed surges in price pressures compelling the Fed to stay on the market\u2019s back. Stronger activity alongside decelerating inflation on the other hand, is what equity bulls need for further upside in stocks.<\/p>\n\n\n\n
Risk-off sentiments are driving markets this morning with investors scooping up bonds while they sell-off economically cyclical stocks whose revenues and earnings underperform amidst softer consumer spending. All major U.S. equity indices are lower, with the small-cap, cyclically tilted Russell 2000 leading the way lower, it\u2019s down 1.6%. The Dow Jones Industrial, Nasdaq Composite and S&P 500 indices are only down 0.3%, 0.3% and 0.1%, meanwhile. Sector breadth is poor, with all sectors lower except for the defensive health and utilities sectors. The energy sector is leading the way lower, it\u2019s down 2.1% as crude oil prices, an important revenue driver for the sector, plunge. WTI crude oil is down 3.5% or $2.70 to $73.83 per barrel as concerns over rising U.S. inventories, slowing U.S. economic activity and weakening manufacturing production in China, the world\u2019s largest importer of barrels, mount. Meanwhile, Treasuries are catching a bid, as investors brace for potential economic and financial market volatility. Yields on the 2- and 10-year maturities are down 8 and 9 basis points (bps) to 4.83% and 4.45%. The dollar is lower, as rising Fed rate cut wagers weigh on the currency, with the greenback\u2019s index down 20 bps to 104.17. The U.S. currency is lower against the yen, euro, pound sterling, franc and yuan while it\u2019s higher versus the Aussie and Canadian dollars. <\/p>\n\n\n\n