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Gap's holiday season outlook, Alibaba slips in Hong Kong - what's moving markets

Published 2023-11-17, 05:22 a/m
Updated 2023-11-17, 05:22 a/m
© Reuters

Investing.com -- U.S. stock futures point into the green following a mixed session on Wall Street, as traders pour through a raft of economic figures this week. Gap's (NYSE:GPS) quarterly profit tops estimates, sending shares soaring premarket, but the retailer joins peers Target (NYSE:TGT) and Walmart (NYSE:WMT) in flagging some caution over consumer spending heading into the holiday shopping season. Elsewhere, Chinese tech shares plummet after Alibaba (NYSE:BABA) scraps a planned spin-off of its cloud intelligence unit.

1. Futures tick mostly higher

U.S. stock futures inched higher on Friday, but remained relatively close to the flatline, as investors digested a week of key economic data and an ebbing stream of corporate earnings.

In the prior session, the 30-stock Dow Jones Industrial Average shed 1%, ending a four-day streak of gains, while the benchmark S&P 500 and tech-heavy Nasdaq Composite both climbed by 0.1%. All three of the main indices on Wall Street remain on pace for their third consecutive positive week.

Sentiment in recent days has been aided by soft data for both consumer and wholesale prices in October, which have bolstered hopes that the Federal Reserve may have reached the end of an unprecedented and long-standing campaign of interest rate hikes. Whether this optimism can hold firm in the weeks to come remains a key source of debate among investors.

2. Gap's earnings beat

Shares in Gap surged in premarket U.S. trading on Friday after the retailer posted higher-than-anticipated third-quarter income, although the firm flagged some caution over trading in the key holiday quarter.

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In the three months to Oct. 28, the owner of brands like Athleta and Banana Republic reported adjusted profit of $0.59 per share, trouncing Bloomberg consensus estimates of $0.19, thanks in part to cost cutting measures and strength at its Old Navy division.

Net sales growth in the current quarter is seen coming in flat to slightly negative, disappointing expectations that it would forecast an increase of 0.33%, according to LSEG numbers cited by Reuters. Sales at Banana Republic and Athleta, in particular, are seen falling during the period, which includes the crucial holiday shopping season.

The San Francisco-based company, which has been hit by increased competition from peers like Shein and Amazon.com (NASDAQ:AMZN), conceded that it still needs to create "trend-right product assortments" to bring more customers back into its stores.

Gap's outlook echoes comments this week from peers Target and Walmart, in a sign that retail chains are still wary of the spending habits of inflation-squeezed consumers.

3. Apple announces plan to support messaging standard

Apple (NASDAQ:AAPL) has said it plans to adopt a smartphone-industry messaging standard, boosting hopes for a smoother and more even-handed texting experience between iPhone and Android gadgets.

In a statement on Thursday, California-based Apple said it will begin to add support for so-called rich communication services (RCS) later next year, adding it will offer "better interoperability" between operating systems. RCS, which is widely included in a variety of phones, allows users to see read notifications and receive high-quality videos or photos, among a host of other features.

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Apple has so far resisted pressure from Google (NASDAQ:GOOGL) and other phone makers to make the change to RCS, a reluctance exemplified by an ongoing debate between green and blue bubbles. At the moment, texts shared between iPhones and Androids appear in a green bubble -- instead of the typical blue -- for the iPhone user.

Although it was not certain if the different colored bubbles would soon disappear, Google welcomed the news, saying it was "happy to see" Apple "coming on board to embrace RCS."

4. Chinese tech stocks slide

Chinese technology stocks plummeted on Friday, with Alibaba Group (HK:9988) (NYSE:BABA) leading losses after the e-commerce giant shelved a planned spin-off of its cloud unit.

Alibaba’s Hong Kong shares slid 10.0%, touching a one-year low, and were by far the worst performer on the Hang Seng index, which fell 1.9%.

The firm’s rivals Baidu (HK:9888) (NASDAQ:BIDU) and Tencent (HK:0700), fell 4.9% and 3.0%, respectively.

Alibaba said on Thursday that it was no longer proceeding with a proposed demerger of its cloud business, citing the impact of enhanced U.S. controls on exports of advanced computing chips and semiconductor manufacturing equipment to China.

The move threatens to rupture a major pillar of Alibaba's long-stated goal of splitting into six separate entities in a bid to appease regulators in Beijing and stimulate growth.

5. Oil on track for weekly loss

Oil prices edged higher Friday, but were on course for a fourth straight negative week, as traders grappled with signs of rising supplies and fears of worsening global demand.

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This week’s sharp drop was partly triggered by a steep jump in American crude inventories. Data showing the first fall in U.S. retail sales in seven months and an easing in Chinese oil refinery throughput in October also exacerbated concerns that fuel demand may have been weakening at the start of the final quarter of the year.

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