S&P Ends Session Narrowly Amid Government Shutdown, Airline Stress | Closing Bell

Key Concepts

• Government Shutdown: The ongoing shutdown of the US government and its potential impact on the economy and markets.
• Market Performance: Analysis of the S&P 500, Dow Jones Industrial Average, and NASDAQ's performance during the trading day and week.
• Sector Performance: Identification of leading and lagging sectors, with a focus on energy and technology.
• Individual Stock Movers: Detailed discussion of significant gainers and decliners, including Expedia, Monster Beverage, Topgolf Callaway, JBS, Block (formerly Square), and Sweetgreen.
• Economic Indicators: Examination of potential economic signals, such as cardboard box sales, and their implications for the holiday shopping season.
• Corporate Earnings: Preview of upcoming earnings reports from major companies like Walt Disney, Warner Brothers Discovery, and others.
• Treasury Issuance: Mention of significant upcoming Treasury bond auctions.
• Geopolitical News: Brief mention of S&P's outlook revision for Israel and its impact on the Israeli shekel.
• Retail Strategies: Discussion of Target's new customer service initiative.

Market Wrap-up and Government Shutdown Impact

As the trading day and week concluded, the market showed signs of recovery, with the S&P 500 and Dow Jones Industrial Average turning positive. This shift was attributed to perceived signs of communication between the two sides in Washington regarding the ongoing government shutdown. While the exact nature of these discussions remains unclear, with speculation ranging from public statements by aides to actual meetings, the market reacted positively to the prospect of a resolution.

Specific Market Performance:

• S&P 500: Ended the day up 1/10 of 1%.
• Dow Jones Industrial Average: Finished with gains of 2/10 of 1%.
• NASDAQ: Remained lower by 2/10 of 1%, indicating continued pressure from the technology sector.
• S&P 500 Breadth: 389 names in the S&P 500 gained ground, while 112 declined and 3 remained unchanged.

The airline stocks serve as a notable example of this market volatility. They experienced significant swings, down as much as 2.6% earlier in the day and up as much as 3.8% at one point, closing around 2.3% off their highs. This rally was driven by hopes that an end to the government shutdown would lead to a return to normal flight schedules, despite existing issues like reduced flights and airport problems.

Sector Performance

• Lagging Sector: The technology sector was identified as the primary drag on the index, contributing to the S&P 500 being set for its worst week in a while.
• Leading Sector: The energy sector emerged as the biggest winner, led by Exxon. This performance was bolstered by rising oil prices.

Individual Stock Movers

Top Gainers

• Expedia: The number one gainer in the S&P 500, finishing with a rise of approximately 17.5%. The stock is now up about 40% year-to-date.

  • Key Drivers: Expedia raised its full-year gross bookings and revenue outlook, signaling continued strong travel trends into the holiday quarter.
  • Financial Outlook: Revenue expected to increase 6.5% at the midpoint, and gross bookings expected to grow 7%. Both figures are ahead of estimates and Expedia's previous guidance.
  • Shutdown Impact: The outlook does not account for the US government shutdown, and the company has not yet seen an impact, according to its CEO.

• Monster Beverage: The number two gainer in the NASDAQ 100, with a gain of 5.2%.

  • Key Drivers: Third-quarter results surpassed expectations, with analysts expressing positivity regarding gross margins and sales following recent price hikes.
  • Year-to-Date Performance: Up approximately 32% in 2025.

• Topgolf Callaway: Rose about 14.3%.

  • Key Drivers: The company boosted its net revenue guidance for the full year, attributing the increase to increased golf participation.
  • Financial Outlook: Expects annual revenue of $3.92 billion at the midpoint, up from the previous expectation of $3.86 billion and above Wall Street's estimate of $3.89 billion.
  • Year-to-Date Performance: Stock is up more than 30% year-to-date.
  • Short Interest: 10% of the float is short.

Top Decliners

• JBS: Shares of the meat processing company fell 3.64%, with a significant dive late in the trading session.

  • Key Driver: President's social media post announcing an investigation by the Justice Department into meatpacking companies for alleged illicit collusion, price fixing, and price manipulation driving up beef prices.
  • President's Statement (partial): "I've asked the DOJ to immediately begin an investigation into the meatpacking companies who are driving up the price of beef through illicit collusion, price fixing and price manipulation. We will always protect our American ranchers, and they're being blamed for what is being done by majority foreign owned meatpackers."
  • Contributing Factors to Beef Prices: Tariffs on Brazil and political difficulties in importing from Argentina were mentioned as reasons for rising beef prices in the US.

• Block (formerly Square): Shares were down 7.7%.

  • Key Drivers: While the company raised its full-year profit forecast and showed strong growth in consumer banking, its third-quarter revenues fell short of Wall Street's estimates.
  • User Growth: Added 300,000 new primary banking users in the quarter.
  • Cash App: Monthly active users ticked up slightly to 58 million.

• Sweetgreen: Shares hit a record low, down 7.5%.

  • Key Drivers: The restaurant chain cut its revenue guidance for the full year and missed average analyst estimates.
  • Menu Missteps: A Bloomberg News report highlighted that pricey menu add-ons, such as ripple fries made with hand-cut potatoes and air-fried in avocado oil, were removed after five months due to being too complicated to make and not being well-received.

Economic Indicators and Outlook

Cardboard Box Sales Slump

A significant economic indicator discussed is the slump in cardboard box sales. U.S. corrugated box shipments fell to their lowest third-quarter reading since 2015, according to data from the Fiber Box Association. This decline is stoking fears of a weak holiday retail shopping season.

• Explanation: Shipments of corrugated cardboard serve as a demand indicator for food and consumer goods. October is typically a peak month for the box industry as retailers prepare for the holidays.
• Company Warnings: Faction companies have warned that economic uncertainty is weighing on retailers and consumers, with black box plants reporting flat or below-normal orders in October.

Upcoming Earnings

Next week will be busy with earnings reports from several key companies:

• Walt Disney
• Corey
• Paramount
• Skydance
• Warner Brothers Discovery
• Maple Beer
• Instacart
• Cisco (for a tech check)

Treasury Issuance and Geopolitical News

Treasury Issuance

Next week will see a significant amount of Treasury issuance, with approximately $50 billion in threes, tens, and thirties. This issuance will be shortened due to Veterans Day. Investors are advised to keep this substantial supply in mind.

Geopolitical News

S&P revised Israel's outlook to stable from negative. This news led to the Israeli shekel strengthening against the dollar, with the dollar sinking to its session lows versus the shekel, and the shekel reaching its session highs.

Retail Strategy Discussion

A brief discussion touched upon Target's new customer service initiative, where employees are instructed to smile, make eye contact, greet, and wave at shoppers within ten feet. This strategy, dubbed "Minnesota Nice," was compared to the customer service expectations at Starbucks and referenced the movie "Office Space" and its concept of "pieces of flair."

Conclusion

The trading day concluded with a late rally, driven by optimism surrounding potential progress in resolving the government shutdown. While the tech sector continued to face pressure, other sectors like energy showed strength. Individual stocks experienced significant volatility, with Expedia and Monster Beverage leading the gains, while JBS and Block saw notable declines. Economic indicators, such as the slump in cardboard box sales, suggest potential headwinds for the holiday shopping season. The upcoming week will be crucial for market sentiment, with a heavy schedule of corporate earnings and significant Treasury issuance.