The major indexes retreated after a strong opening to the week. The Dow lost 185 points, the Nasdaq fell by 14, and the S&P 500 Index declined 12. The price of BlackBerry shares (BBRY) dropped 17% after the company reported disappointing earnings and huge workforce layoffs. Twenty-seven of the Dow’s 30 components lost ground, led by Caterpillar (CAT), which lost 3%. Volume was moderate, as billions of shares changed hands on a last-minute rebalancing in the S&P 500 Index. Declining issues outnumbered advancers by about five to two on the NYSE and by about seven to six on the Nasdaq. The prices of Treasuries strengthened, while the price of gold futures lost 2.69% to $1,332.50 an ounce. The price of crude oil on the New York Mercantile Exchange lost 1.05% to $104.75 a barrel.
For the week, the Dow gained fractionally, and the S&P 500 Index and the Nasdaq each rose by 1%.
In Earnings News:
- Darden Restaurants announced earnings fell from 85 cents a share a year ago to 53 cents a share in the latest quarter. The operator of Olive Garden and Red Lobster eateries blamed rising costs and a large falloff in same-store sales at both Olive Garden and Red Lobster chains. Revenues at its Longhorn Steakhouse chain increased, and the company outlined a cost-cutting plan to improve profitability. The price of the stock (DRI) lost 7% in today’s session.
In Other Business News:
- Goodyear Tire announced it will resume paying dividends after an 11-year hiatus. The nation’s largest producer of tires has undergone a long and difficult turnaround and will start paying 5 cents a quarter as of December 1. The price of the stock (GT) slipped lower by 0.07%.
- Two initial public offerings lit up Wall Street. The first was an advertising technology company called Rocket Fuel, which issued shares at $29 (the top end of its price range) and raised $116 million. The stock closed at $56.10 for a gain of 93% in the session. Shares of the second company, a cyber-security firm called FireEye (FEYE), gained 80% and closed at $36.00 a share.
- Caterpillar announced that global retail sales of its heavy construction and mining equipment declined by 10% in the past quarter compared with the same quarter a year ago. The price of the company’s shares (CAT) fell 3%.
What’s going on with cars? On the one hand, auto sales are back to prerecession levels. In August, all the major carmakers’ factories were humming again. General Motors led the way with a 17% gain (compared with a year ago), and sales at both Ford and Chrysler rose by 12%.
And yet, some observers of the auto business are suggesting that America’s love affair with cars is coming to an end. Can that be? The Federal Highway Administration recently reported that total automobile use, that is, the collective miles that people drive, peaked in 2007, dropped off in the great recession, and has plateaued in the recovery. The average mileage of the individual driver peaked in 2004 at 900 miles per month and has since fallen to 802. Perhaps more significant, the percentage of people under 40 who have driver’s licenses has plummeted. One travel analyst recently told Associated Press: “The idea that the car means freedom, I think, is over.”
Can it be? We reported earlier this week on the demise of VW’s “hippie mobile” minibus, and that is, to be sure, a tragic loss. But if cars and the open road don’t signal freedom, what does? The internet? I guess, but the internet beckons with adventures of the mind, not the body. Where’s the thrill of acceleration, the wind in the hair? And how can carmakers revive the sense of liberation that “wheels” once inspired. I suspect they think the answer is “technology, technology, and technology.” Here are some omens:
- At the Frankfurt Auto Show last week, Nissan unveiled the first automobile-coordinated smartwatch. It tells time, of course, but it also records and stores relevant information about your car—and also relevant information about you, including temperature and heart rate. OK … but don’t get them mixed up: The engine temperature is not 98.6 F and my heart is not going at 4,000 rpms. Personally, I doubt the key to driving excitement is a smartwatch, but some people might say: “You just watch, Smarty.”
- The Korea Advanced Institute of Science and Technology has developed a tiny, two-seater, electric car called the “Armadillo-T” that folds itself in half for parking. The Armadillo can go about 100 miles on an eight-minute charge, and when it’s time to squeeze into a tiny space, the driver clicks on a smartphone (or a smartwatch!) and the back of the car folds up over the front half so the car is only about five feet long. Yeah, but can it burrow into the ground in five seconds flat like a REAL armadillo? NO! (Judging by its size, however, this thing could end up as roadkill, like a real armadillo.)
- Self-driving cars may not be far off. Elon Musk, the founder and CEO of Tesla, announced this week that his company aims to have a car that can take more than 90% of the driving within three years. And three weeks ago, GM said it will have a self-driving car by 2020. Will that restore the mojo of wheels over the internet? Not for me. I drive a stick shift. I see the robot car as an invitation to nap—or to go on Facebook. In other words, the more tech heavy cars become, the more fun and freedom are in the rearview mirror.
Have a great weekend. Make like Marty McFly and take your DeLorean out for a spin. And if you’re wondering what to make of the Fed’s latest move, listen to Dr. Brian Jacobsen discussing “What’s ahead for the Fed?” as my guest for On the Trading DeskSM.