Markets traveled a tough road in 2023

The Business Alabama Quarterly Stock Index ended in negative terrain for the third quarter of 2023

The Business Alabama Quarterly Stock Index, which ran from June 30, 2023, through October 31, 2023, ended in solidly negative terrain, with Alabama stocks taking the biggest hit.

Local stocks tumbled 304.02 points, or 13.64%, and closed at 1,924.11. Declining issues outweighed advancing issues by a 10-to-6 count. The Comprehensive Index fell 14.96 points, or 0.83%, and ended at 1,785.67. Declining issues dominated advancing issues by a 39-to-16 count. Last year’s quarterly at this time was all about rate hikes and inflation; this time, it is still about inflation, but inflation that is showing signs of easing, even though more interest rate hikes have not been ruled out.

The surprising question mark in the economic recovery has been the robust jobs market. Several times in our cycle, actual job numbers surprised experts. In July, for example, experts expected some 250,000 new jobs, but the Labor Department reported a 528,000 increase. In another report, the Labor Department said that job openings rose higher than expected in August, to 9.6 million jobs, up from 8.9 million jobs in July. Economists had expected 8.9 million job openings.

The June consumer price index was not as hot as expected, just 3% higher than the year before, the slowest rate since March 2021; inflation was at a 9% rate last summer. The Labor Department’s June producer price index — wholesale prices before they reach the consumer — was up just 0.1% from the year before, the smallest increase since August 2020. The rise in consumer prices moderated slightly in September; the Labor Department’s report showed that they rose 0.4% from the month before, compared to the 0.6% increase from the month before that, in line with expectations. Year-over-year inflation was unchanged from August’s gain of 3.7%. However, wholesale prices for the same period were higher than anticipated. The department’s Producer Price Index rose 0.5% month-over-month, but was up 2.2% from the year before. That compares to a 2% increase in August.

The Commerce Department reported June retail sales increased 0.2% from the month before, a bit softer than expected. However, the more volatile sector including cars, building materials, food services and gas increased 0.6% in June. July retail sales remained unchanged from June; economists had expected a small increase. Compared to a year ago, July retail sales rose by 10.3%. Excluding cars and car parts, however, overall retail sales increased 0.5% in July. The Commerce Department reported September retail sales increasing 0.7%, more than twice the rate economists expected. Retail sales in September reflected the buoyancy worrying Fed chief Jerome Powell.

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Another report from the Commerce Department showed that the economy grew at a fierce 4.9% annual rate in the third quarter — twice as much as the previous quarter — as consumers continued to spend, despite increased interest rates and higher prices.

The Commerce Department said that new single-family homes tumbled 8.7% in August, to a seasonally adjusted pace of 675,000 units. Economists surveyed by Reuters expected a figure of 700,000 units. July’s rate was revised higher, to 739,000 units, from the 714,000 previously tallied. The National Association of Realtors said that sales of existing homes fell 2% in September, to a seasonally adjusted 3.96 million; economists expected 3.9 million, the most sluggish sales rate since October 2010. Sales were off 15.4% from last year.

The Conference Board’s July consumer confidence index jumped to 117, from June’s revised 110.1 reading. That was much higher than the 110.5 expected by economists, the highest level since July 2021. In August, it fell to 108.7. Despite declining confidence, there is some hope that inflation may be taming. The Federal Reserve also kept rates steady, but warned of the possibility of future hikes. Consumers, though, weren’t so confident. The Conference Board reported that its confidence index fell to 102.6 in October, from September’s 104.3.

“The continued skepticism about the future is notable given U.S. consumers — at least through the third quarter of this year — continued to spend heavily on both goods and services,” said Dana Peterson, chief economist at The Conference Board.

Medical Properties Trust fell 4.48 points, or 48.38%. For its third quarter, MPW reported net income of $116.7 million, or $0.19 per share, with revenue of $306.6 million. Analysts polled by Zacks expected revenue of $346.5 million. However, a figure closely watched in the real estate investment trust (REIT) industry, funds from operations (FFO), was $225.5 million, or $0.38 per share. Analysts surveyed by Zacks expected FFO of $0.35 per share. MPW ended at 4.78 and was the top percentage loser in the Alabama Index.

Hibbett Sporting Goods was the top dollar and percentage gainer in local stocks, matching Warrior Met Coal for the top dollar spot. For its fiscal second quarter, HIBB posted net income of $10.9 million, or $0.85 per share, and revenue of $374.9 million. Earnings beat analysts’ expectations; the average estimate from Zacks was for $0.68 per share. Analysts anticipated that HIBB would post revenue of $376.8 million, but the company exceeded those expectations, posting revenue of $431.9 million for third quarter fiscal 2023. HIBB rose 9.78 points, or 26.95%, and closed at 46.07.

Vulcan Materials tumbled 28.95 points, or 12.84%, despite beating on third quarter earnings and revenue and receiving an upgrade. VMC posted net income of $2.29 per share, versus $1.78 per share in the same quarter last year. Revenue was $2.19 billion, versus year ago revenue of $2.09 billion. Revenue surpassed the Zacks consensus estimate by 0.39%. Investment firm Seaport Research Partners boosted its rating for VMC to “buy” from “neutral.” Their price target is $260. Vulcan Materials ended at 196.49 and was the top dollar loser in the Alabama Index.

Margot Crabtree covers stocks for Business Alabama, under contract with her company, Trade Trends.

This article appears in the January 2024 issue of Business Alabama.

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