Get the tinsel out, put on the Christmas tunes, the Santa Rally has come early. Right?<\/p>\n
Steady on. The U.S. stock market just had its best week of the year as the Federal Reserve paused interest rates again, bond yields fell, and the jobs report showed a further cooling in the labor market.<\/p>\n
It was a stunning week, but it\u2019s probably best not to get too carried away just yet. As the rally gathered pace into the end of the week, it was beaten-down parts of the market, such as travel stocks and regional banks, that drove the gains. That points toward hedge funds covering bets against companies and doesn\u2019t typically sustain a prolonged rally.<\/p>\n
Earnings season, which continues with Disney and Uber among those reporting in the coming days, is also harboring a warning about the months ahead. The fourth quarter isn\u2019t looking good.<\/p>\n
In October, Wall Street cut aggregate fourth-quarter S&P 500 earnings estimates by 3.9%, according to FactSet data. The decline is lower than the five-year average of a 1.9% decline in the first month of a quarter. It comes as companies have signaled slowdowns with largely disappointing guidance.<\/p>\n
The economy is at a key junction. The much-debated, highly anticipated landing is finally coming into view. But we still don\u2019t know if it\u2019ll be hard or soft.<\/p>\n
Data are beginning to consistently come in below expectations\u2014150,000 jobs were added in October, below estimates of 180,000. U.S. manufacturing activity fell to its lowest level since July, also missing expectations.<\/p>\n
The economy\u2019s descent is starting and for now, at least, it appears to be a gradual one. If it stays that way, the sherry can be cracked open, but if the data suddenly veer sharply lower, last week\u2019s epic rally will become a distant memory.<\/p>\n
\u2014Callum Keown<\/em><\/p>\n *** Join Barron\u2019s senior managing editor Lauren R. Rublin and deputy editor Ben Levisohn today at noon when they speak with Matt Gertken, chief strategist of BCA Research, on the outlook for financial markets, industry sectors, and individual stocks. Sign up here.<\/em><\/p>\n \n Walt Disney Lions Gate Entertainment,<\/span> What\u2019s Next:<\/strong> Unions representing actors, who are still on strike after 114 days, said they needed time to evaluate an offer from the studio and streaming companies they got on Saturday. They are considering a response in the context of critical issues addressed in their proposals, they said.<\/p>\n <\/em>\u2014Liz Moyer and Carleton English<\/em><\/em><\/p>\n Tesla is increasing pay for workers in Germany. It\u2019s a reminder that the electric-vehicle manufacturer can\u2019t totally ignore the union pressures that have rocked Detroit car companies.<\/p>\n What\u2019s Next:<\/strong> Tesla has resisted union drives at its sites in the U.S. and Europe but that\u2019s not a guarantee it can avoid wage pressures, which could cut into its margins. UAW President Shawn Fain has signaled the union\u2019s next targets are U.S. sites without union representation.<\/p>\n \u2014Adam Clark<\/em><\/em><\/p>\n Billionaire Elon Musk rolled out his answer to ChatGPT, the chatbot issued by What\u2019s Next:<\/strong> It\u2019s no surprise why the PC makers want in on the action. Research firm IDC recently forecast that enterprise AI spending would reach $143 billion by 2027, with a compound annual growth rate of more than 73%. <\/p>\n <\/em>\u2014Liz Moyer and Eric J. Savitz<\/em><\/em><\/em><\/p>\n Warren Buffett\u2019s What\u2019s Next:<\/strong> The cash means Berkshire could buy a business Buffett finds attractive. Berkshire\u2019s vice chairman and Buffett\u2019s business lieutenant Charlie Munger recently told The Wall Street Journal that the odds of their making another big acquisition were \u201cat least 50\/50.\u201d<\/p>\n \u2014Janet H. Cho<\/em><\/em><\/p>\n Fewer companies are buying back their shares, as more firms are holding on to their cash amid an uncertain economy. Higher borrowing costs from rising interest rates is increasing the focus on company balance sheets, and pressuring companies to preserve cash instead of buying their stock.<\/p>\n What\u2019s Next:<\/strong> Profit outlooks have not brightened. The aggregate 2023 earnings for the \u2014Jacob Sonenshine and <\/em>Janet <\/em>H. Cho<\/em><\/em><\/em><\/p>\n***<\/h4>\n
Disney Set to Report Earnings Amid Possible Peltz Battle<\/h2>\n
\n is set to report earnings on Wednesday amid questions about losses in its streaming operation, efforts to cut billions of dollars in costs, its intention to buy the rest of Hulu it doesn\u2019t already own, and how its thinking has evolved on potentially selling some of its large media properties.<\/p>\n\n
\n Warner Bros. Discovery,<\/span><\/p>\n
\n and
\n AMC Entertainment,<\/span>
\n giving investors a deeper sense of whether Hollywood is getting back into its groove<\/strong> after a summer of strikes.<\/p>\n<\/li>\n<\/ul>\n\n Tesla
\n Raises Pay for German Workers\u2014It\u2019s Not 25%<\/h2>\n\n
***<\/h4>\n
Elon Musk Unveils His Answer to ChatGPT: Grok<\/h2>\n
\n Microsoft
\n -backed OpenAI with great fanfare a year ago. Musk\u2019s new artificial intelligence company xAI announced on his X social-media platform (formerly known as Twitter), that Grok is \u201cmodeled after the Hitchhiker\u2019s Guide to the Galaxy<\/em>.\u201d<\/p>\n\n
***<\/h4>\n
Buffett\u2019s Berkshire Hathaway Amasses Record $157.2 Billion in Cash<\/h2>\n
\n Berkshire Hathaway
\n ended the third quarter with a record $157.2 billion in cash\u2014its biggest war chest since the third quarter of 2021 amid a difficult environment for deal making. The conglomerate reported a deeper net loss because of stock-market weakness, but said its operating earnings rose.<\/p>\n\n
\n Apple,<\/span>
\n Berkshire\u2019s largest stockholding, fell 12% in the quarter, while
\n American Express
\n shares dropped 14%,
\n Coca-Cola
\n shares dropped 7%, and
\n Bank of America
\n shares lost 4.6%. All four stocks have risen in the current quarter.<\/p>\n<\/li>\n***<\/h4>\n
Companies Steer Away from Stock Buybacks Amid Uncertainty<\/h2>\n
\n
\n Expedia
\n unveiled a $5 billion buyback, while oil major
\n Shell
\n revealed a $3.5 billion buyback. Rival oil company
\n BP
\n announced a $1.5 billion buyback<\/strong>, and brewer
\n Anheuser-Busch InBev
\n has a $1 billion buyback.<\/p>\n<\/li>\n
\n MSCI World Index
\n are expected to grow less than 1% from a year earlier, according to FactSet. Narrowing profit margins because of the rising cost of other items are pressuring companies\u2019 bottom lines.<\/p>\n***<\/h4>\n