Stocks rebounded from a drop in early trading on Wednesday and rallied into the close amid a negative turnaround for crude oil. Energy stocks were among the best performers during the session.
First, the scoreboard:
- Dow: 16,911.95, +121.76, (0.73%)
- S&P 500: 1,995.79, +15.87, (0.80%)
- Nasdaq: 4,791.15, +42.79, (0.90%)
And now, the top stories on Wednesday:
- Shares of Yum Brands collapsed 18% following the company’s worse-than-expected earnings release on Tuesday. Yum reported adjusted earnings per share of $US1 on revenues of $US3.43 billion. Analysts were most interested in what the company had to say about China; it cut its outlook and now expects full-year same-store sales to be low-single-digit negative. Analysts at Nomura wrote to clients that spinning off Taco Bell may be one remedy for the company; it would give investors the opportunity to invest in the unit, which is least exposed to China compared to KFC and Pizza Hut.
- As Yum Brands tanked after-hours yesterday, shares of Nu Skin Enterprises also plunged, falling 25% during today’s session. The personal care product-marketing company worth $US2.6 billion also pointed to China, as it lowered its outlook for quarterly revenues. “Third-quarter results were impacted by lower-than-expected sales of our new cosmetic oils in China during August and September, which may be a reflection of economic conditions in China,” CEO Truman Hunt said in the earnings statement.
- GoPro shares fell more than 8% to an all-time low after Morgan Stanley analysts cut their price target nearly 50% and said disappointing sales of its new, compact camera were a “harbinger of future disappointments.” The analysts lowered their price target to $US35 from $US62 with an “equal-weight” stock rating. “Commentary by management at recent investor events confirm that Session [the compact camera] has been a difficult sell at the same price point of its historically favourite HERO4 Silver model,” they wrote in a client note.
- In economic data, consumer credit rose by $US16 billion in August ($US19.5 billion expected). Revolving consumer credit, including credit card debt, rose by $US4 billion, a cycle high.
- Crude oil seesawed. West Texas Intermediate crude futures in New York rose 2% to $US49.70 per barrel before retracting to about $US48.04; oil last hit $US50 on July 22. The Energy Information Administration said US oil inventories rose last week by 3.07 million barrels.