Tech Stocks Are Carrying the S&P 500. Alibaba’s Slump Offers a Warning.

An Alibaba office in Beijing.

AFP via Getty Images

The S&P 500 recorded its 66th all-time high of the year Thursday and number 67 could well be just around the corner.

Happy days, here’s to many more, right?

Perhaps, but under the surface it’s slightly more complicated. Despite the index’s 0.34% gain, only a third of its constituents moved higher yesterday. The last time the S&P 500 notched a bigger increase on fewer advancing companies was March 2000, according to Deutsche Bank analysts.

It ultimately has tech stocks to thank, and in particular Nvidia and Apple , for record number 66.

The index’s information technology sector has now broken out to fresh relative highs vs. the S&P 500 for the first time since September 2020, LPL Financial noted Friday. That could signal a run of outperformance ahead.

As long as Big Tech continues to outperform, that record close number should keep rising into the year-end. But just a quick glance at Hong Kong trading early on Friday highlights the pitfalls of such a reliance.

Alibaba stock plummeted 10.7%, its worst-ever day since it listed in Hong Kong in November 2019, following the U.S.-listed shares’ 11% drop Thursday. The Chinese e-commerce giant missed earnings estimates and warned of slower growth. Alibaba’s slump dragged the broader Hang Seng Index 1.1% lower.

Bringing it back to the U.S. and there is also the issue of rising inflation. With earnings season over, inflation could once again hit the highflying sector.

Callum Keown

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House Democrats Delay Vote on $1.85 Trillion Spending Bill

As the House vote on the $1.85 trillion social spending and climate bill was delayed to Friday morning, the nonpartisan Congressional Budget Office said late Thursday that it would increase the federal budget deficit by $367 billion over the next 10 years.

  • The CBO disagreed about how much the Internal Revenue Service could collect from tax cheats, saying the IRS could recover $207 billion over 10 years. The White House said the IRS would collect $400 billion from more enforcement.
  • Senate Finance Committee Chair Sen. Ron Wyden (D., Ore.) dismissed the CBO’s analysis of IRS money, saying he agreed with the Treasury Department’s rosier projection. Rep. Josh Gottheimer (D., N.J.) said he was looking for CBO results “in line with our expectations.”
  • Sen. Elizabeth Warren (D., Mass.) said a proposed 15% tax on corporate income would increase federal taxes paid by at least 70 of the largest U.S. companies reporting more than $1 billion in profit, including Amazon , FedEx and Verizon .
  • House Democrats’ plans for a Thursday evening vote on the bill were delayed after Minority Leader Kevin McCarthy (R., Calif.) delivered a more than eight-hour speech, airing his grievances. The vote is now expected to take place Friday morning.

What’s Next: If the bill passes the House this week, it moves to the Senate where some of the provisions face an uncertain future, such as money for immigration or paid leave. Schumer said the Senate would pass the measure before Christmas.

Janet H. Cho

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Ford Motor, GM Are Getting Into the Chip Business

Ford Motor and General Motors have plans to explore producing semiconductor chips in the U.S. after a year of dealing with widespread chip shortages that have stalled global production lines and cost the auto industry an estimated $110 billion in lost revenue, The Wall Street Journal reported.

  • Ford announced an agreement with U.S.-based GlobalFoundries to develop higher-end chips. Designing its own chips in-house could improve automated-driving capabilities or electric-vehicle battery systems and shore up future chip supplies.
  • Chips installed in cars control everything from the ignition, to braking systems to fuel consumption. When supplies were cut by production logjams or diverted to personal electronics makers, the resulting shortage slashed industry output by millions of vehicles.
  • GM is linking with Qualcomm and NXP Semiconductors , the Journal reported. GM President Mark Reuss said it was part of a larger strategy to reduce the variety of microprocessors in vehicle production. GM expects chip demand to more than double in coming years.
  • Designing sophisticated semiconductors with their minute transistors requires specialized engineers. Ford will have to compete for workers with chip companies such as Intel and Nvidia as well as Amazon and Apple, the Journal said.

What’s Next: Apple is pushing to develop a fully autonomous self-driving electric car by 2025, with no steering wheel or pedals, powered by a chip designed by Apple’s silicon engineering group, Bloomberg reported. An Apple representative didn’t comment to Bloomberg on the report.

Janet H. Cho

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Retailers Move to Make the Best Use of Their Stores

Retailers are coming out of the pandemic with a new set of challenges, including how to make the best use of their physical network of stores and how to boost returns from online sales, as the recent patch of earnings reports show.

  • Drugstore chain CVS Health will close 900 stores over the next three years, starting next spring, as part of a broader push to tailor stores to their locations, including adding primary care offices and sites that provide diagnostic testing, mental health services and hearing checks.
  • Macy’s hired consulting firm AlixPartners to explore splitting off its e-commerce business from its store network. The department store is also considering keeping 60 of the 125 stores it had planned to close by 2023.
  • Activist hedge fund Jana Partners in October urged Macy’s to spin off its e-commerce business. Saks Fifth Avenue earlier this year announced plans to split off its Saks.com business in the first half of 2022, aiming to go public with a target valuation of $6 billion.
  • Kohl’s said the 200 new Sephora shops embedded in its stores were attracting a younger customer and boosting sales. More than 25% of Sephora shoppers are new to the department store.

What’s Next: Retailers are trying to fill one million holiday job openings, too. Macy’s is asking its corporate employees to volunteer for shifts in its stores on Black Friday and other busy holiday shopping days, folding clothes, clearing dressing rooms, and restocking merchandise, the Washington Post reported.

Janet H. Cho

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First-Edition Copy of U.S. Constitution Fetches $43.2 Million

A rare first-edition copy of the U.S. Constitution was auctioned for $43.2 million at a Sotheby’s auction in New York on Thursday evening.

  • The winning bid was more than double the presale estimate of between $15 million and $20 million anticipated by the auction house.
  • The identity of the buyer remains a mystery. A crypto collective calling itself ConstitutionDAO, which had announced that it bid on the rare document, said in a tweet that it had not won the auction.
  • The 1787 document sold Thursday is one of only two copies that remain in private hands. In 1988, the same document was auctioned at Sotheby’s for just $165,000.

What’s Next: The sale gives the owner bragging rights on possessing just one of 13 surviving copies of the Constitution from the official first printing done for delegates to the Constitutional Convention and for the Continental Congress, according to Sotheby’s.

Joe Dziemianowicz

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Tracking What the Twitterverse Thinks About Stocks

You know what they say about the wisdom of crowds. Now investors can track the collective wisdom of the Twitterverse using two new indexes that pick up on positive chatter about stocks on the social-media site.

  • The Twitter Sentiment Index Series, by Twitter and S&P Dow Jones Indices, includes a market-cap weighted version that tracks 200 stocks in the S&P 500 that are getting the most positive comments and an equal-weighted version tracking 50 stocks.
  • S&P will track sentiment by looking on Twitter for the ticker symbols of the stocks with a dollar sign in front of them, known as cashtags, which is how people flag the stocks they want to discuss.
  • Tesla and Apple, arguably the buzziest stocks out there, don’t appear in the 200 index, at least not as of the founding date Oct. 29. Meta Platforms , aka Facebook, doesn’t either. But Alphabet does.
  • The equal-weighted 50-stock index includes Home Depot and Eli Lilly . The indexes will be rebalanced once a month.

What’s Next: S&P tested the indexes and found they beat their benchmarks during times of market stress but can fall short when the broader market is rising, Another tracker, the VanEck Social Sentiment ETF, is up 2% over the past month, less than half the S&P 500’s gain.

—Liz Moyer

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Do you remember this week’s news? Take our quiz below about this week’s news. Tell us how you did in an email to thebarronsdaily@barrons.com.

1. New research from insurer MassMutual finds that 73% of Americans are optimistic about their finances, and plan to spend more this holiday season. How much are consumers expected to spend this holiday season, on average, according to the study?

a. $543
b. $843
c. $1,243
d. $1,583

2. In a move to enhance shareholder value, oil company Royal Dutch Shell plans to end its two-class share structure, and move its headquarters and tax residence where?

a. London
b. The Hague
c. Hong Kong
d. Dublin

3. Which major retailer announced it would stop accepting U.K.-issued Visa credit cards because of their high fees, in a move to secure better terms from the payments company?

a. Walmart
b. Amazon.com
c. Target
d. Macy’s

4. Which globally recognized sports and entertainment arena will soon be called Crypto.com Arena following a 20-year naming rights agreement between its owner and Crypto.com, the Singapore-based crypto exchange and mobile wallet provider?

a. Lucas Oil Stadium, Indianapolis, Indiana
b. PNC Park, Pittsburgh, Pennsylvania
c. KFC Yum! Center, Louisville, Kentucky
d. Staples Center, Los Angeles

5. Which auto maker entered into a strategic agreement with semiconductor maker GlobalFoundries to develop and produce chips in the U.S.?

a. General Motors
b. Ford Motor
c. Tesla
d. All of the above

Answers: 1(c); 2(a); 3(b); 4(d); 5(b)

Barron’s Staff

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—Newsletter edited by Liz Moyer, Camilla Imperiali, Steve Goldstein, Callum Keown