Stocks waver after US economy grew faster than expected

Hackers are everywhere. Consumers and businesses need to be vigilant. So you'd think that companies in the burgeoning world of cybersecurity software would be thriving...despite worries about a broader economic slowdown. But that's not the case.

CrowdStrike, a leading provider of cloud-based cybersecurity services, said in its latest earnings report after the closing bell Tuesday that while overall sales growth was still robust, customers are growing more cautious about what they are looking to spend.

"Increased macroeconomic headwinds elongated sales cycles with smaller customers and caused some larger customers to pursue multi-phase subscription start dates," said CrowdStrike’s co-founder and chief executive officer George Kurtz in the earnings release.

Translation? Small businesses are taking longer to sign deals, and big companies want financial flexibility as well. Kurtz added during a conference call with analysts that "while sales cycles lengthen, we believe the vast majority of these deals are not lost, just delayed."

Wall Street didn't like the sound of that. Shares of CrowdStrike (CRWD) plunged 18% on the news.

The number of job openings in the United States dropped in October, but the labor market still remains historically tight despite the Federal Reserve's efforts to cool demand and bring down inflation.

There were 10.3 million available jobs last month, down from nearly 10.7 million in September, according to the latest monthly Job Openings and Labor Turnover Survey (JOLTS) released Wednesday by the Bureau of Labor Statistics.

Economists had expected 10.3 million openings in October, according to consensus estimates on Refinitiv.

The US trade deficit jumped 7.7% to $99 billion in October and exports fell 2.6% to $173.7 billion, according to advance estimates released Wednesday by the Commerce Department.

It was the second consecutive month that the nominal-goods trade deficit widened, and exports are falling at a time of slower global economic growth and a stronger US dollar.

Within exports, consumer goods sank 9.4% and industrial supplies fell 4.7% from September.

"Trade will likely be modestly negative for growth through the rest of the year and in 2023 as slowing global growth and a deteriorating global economic outlook weigh on exports," PNC senior economist Abbey Omodunbi said in a statement.

Wednesday's report also showed that retail inventories decreased by 0.2% in October, indicating a pullback in consumer demand.

The goods trade deficit peaked at $125.6 billion in March and fell for five consecutive months before growing again in September and October, Omodunbi said.

US stocks opened higher Wednesday morning as investors eagerly anticipate a speech by Federal Reserve Chair Jerome Powell on the state of the economy this afternoon. 

Wall Street was hit with two economic reports Wednesday that caused some volatility as investors interpreted how they might influence the Fed’s December policy decision. 

Payroll processing firm ADP said that private companies added 127,000 jobs in November, below the 190,000 consensus expectation. That signals the job market may be cooling and that the Fed could slow its historic rate-hiking campaign to fight inflation.  

Third-quarter GDP, however, was also revised higher signaling that the economy is still strong. The Bureau of Economic Analysis said Wednesday that third-quarter GDP increased at a 2.9% annual rate, up from the 2.6% initial estimate.

There are just 22 trading days left in the year and traders are still expecting a barrage of data this week including the government jobs report for November, job openings numbers, new housing data, and PCE inflation. 

The Dow gained 28 points, or 0.1%, on Wednesday morning.

The S&P 500 was up 0.2%.

The Nasdaq Composite was 0.4% higher. 

The US economy grew much faster than expected in the third quarter, according to the latest gross domestic product report, which showed GDP rose by an annualized rate of 2.9%.

That's an improvement from the initial government reading in October that showed 2.6% growth in economic activity, and better than the Refinitiv forecast of 2.7%. And it's a marked turnaround from economic contractions of 1.6% in the first quarter of the year and 0.6% in the second.

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A stronger-than-expected GDP report weighed on Wall Street investors worry the Federal Reserve may have room to raise rates for quite some time.

US GDP for the third quarter came in at a 2.9% seasonally adjusted annual rate.

Dow futures fell 14 points. S&P 500 futures were mostly unchanged and Nasdaq futures were slightly higher. Stock futures were all lower than before the report.

Inflation may be causing consumers to make some difficult choices about how they spend their money. But make no mistake. People are continuing to splurge on their pooches, kitties, birds, fish, hamsters and other furry family members.

Petco, a leading pet supplies retailer and health and wellness company for pets, reported a 4% jump in sales from a year ago, slightly topping Wall Street's forecasts. Petco also issued bullish guidance for the rest of the fiscal year.

The strong results "demonstrate the resilience of the pet category through economic cycles," said Petco CEO Ron Coughlin in the earnings release. Coughlin added that "pet parents continue to prioritize the health and wellness of their pets."

Shares of Petco (WOOF) surged nearly 17% on the news Wednesday. Online pet supplies giant Chewy (CHWY), which will report earnings on December, gained about 2%.

But both stocks have actually plunged this year due to worries that pet owners might be pulling back on spending. Petco's solid sales could reassure Wall Street that this may not be the case after all.

The US private sector added 127,000 jobs in November, the slowest monthly job gains since January 2021 as high interest rates cooled off portions of the red-hot labor market, according to a report issued Wednesday by payroll processing giant ADP.

The monthly gains, which are well below economists' expectations of 200,000, indicate that the long-tight labor market is starting to loosen, said Nela Richardson, ADP's chief economist.

"Turning points can be hard to capture in the labor market, but our data suggest that Federal Reserve tightening is having an impact on job creation and pay gains," she said in a statement. "In addition, companies are no longer in hyper-replacement mode. Fewer people are quitting and the post-pandemic recovery is stabilizing."

Bacon, SPAM, chili and Skippy peanut butter may be good comfort food. But there's nothing comforting about the latest results and outlook from Hormel. Sales fell 5% from a year ago, missing forecasts. Hormel also issued downbeat guidance for its next fiscal year.

"We expect to operate in a volatile, complex and high-cost environment again in fiscal 2023," said Hormel chairman, president and CEO Jim Snee in the earnings release.

Shares of Hormel (HRL) fell about 4% in premarket trading on the news. The stock is only down slightly this year though. Investors have flocked to safe haven food companies, believing that they could be good hedges against inflation. Rivals ConAgra (CAG), Mondelez (MDLZ), Campbell Soup (CPB) and Kellogg (K) have also fared well in 2022.