Stocks turned lower across the board Friday after opening in the green. Following a better-than-expected weekly unemployment claims report on Thursday, investors turned their attention to the Producer Price Index to gain insight on how persistent shortages and Covid numbers are affecting economic recovery and inflation.
While there weren’t a ton of headline events during this shortened week, a few earnings reports caused some pops or drops in individual stocks. Meanwhile, Bitcoin and other crypto currencies took a plunge this week despite the flagship crypto being adopted as legal tender in El Salvador.
Apple (AAPL) stock fell 3.3% on Friday after a federal judge ordered the company to make changes to the way it generates revenue from its App Store. Apple, which has been in an ongoing legal battle with Epic Games for over a year, was ordered to allow app developers to route users away from the app for payments and purchases. This effectively lets the developers avoid needing to pay the 30% "commisison" that Apple charges in the app store.
Economic Review
Initial jobless claims for the week ended Sept. 3 came in lower than expected at 310,000. Economists had expected 345,000 new claims, which would have matched the upwardly revised number from the week before.
The surprise drop in jobless claims gave investors confidence that the labor market’s recovery has plenty of stamina, albeit at a slower-than-ideal pace. However, stocks turned mixed following the report as attention went back to speculating about when the Federal Reserve may slow asset purchases after the European Central Bank announced it's own taper of asset purchases.
The Core Producer Price Index, which tracks changes in costs for businesses, less certain volatile goods such as energy, was in-line with expectations with a a 0.6% rise in August. While this represented a cooling from July’s 1.0% increase s, both Core PPI and the headline number PPI readings again set 12-month highs as persistent shortages continue to push prices higher.
Earnings
While this week wasn’t filled with mega-cap earnings reports, there was a lot of movement - both up and down - in reaction to earnings.
After market close on Wednesday, lululemon athletica (LULU) and Reddit-fav GameStop (GME) both reported earnings with very different reactions. Lululemon reported EPS of $1.65 to out-do consensus estimates for $1.19 per share, while growing revenues 60.7% and guiding both earnings and revenue estimates above consensus for both the third quarter and full-year.
Meanwhile, GameStop finally showed a bit of normalcy in its price movements as investors fled the meme-stock following an earnings miss and revenue beat.
Affirm Holding (AFRM) was another big mover, adding a massive 34.37% Friday after beating revenue estimates after the close on Thursday. Affirm actually missed pretty heavily on the earnings side, although the headline number may not have been comparable to estimates. The company’s revenues grew a massive 70.8% year over year to $261.8 million. Affirm saw its gross merchandise volume surge 106%, while active merchants soared by 412%.
All told, stocks fell across the board this week. The S&P lost 1.71%, while the Nasdaq lost 1.63%. Meanwhile, the Dow dropped 2.17% and the Russell 2000 lost 2.55%.
