Business

Homebuilder sentiment in the single-family home market fell 8 points to 38 in October from the previous month.
Builders cite rapidly rising interest rates for the drop in confidence.
The average rate on the 30-year fixed was more than 7% this week, up from 3% at the start of this year.

Homebuilder sentiment in the single-family home market has fallen to half what it was just six months ago as mortgage rates climb, according to a new report.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which is designed to gauge market conditions, fell 8 points to 38 in October from the previous month.

That’s the lowest level since 2012, with the exception of a brief drop at the start of the coronavirus pandemic. A rating below 50 is considered negative.
Builders cite rapidly rising interest rates for the decline in confidence. The average rate on the 30-year fixed was 7.12% on Monday, according to Mortgage News Daily. That’s up from 3% at the start of this year.
“High mortgage rates … have significantly weakened demand, particularly for first-time and first-generation prospective home buyers,” said NAHB Chairman Jerry Konter, a homebuilder and developer from Savannah, Georgia. “This situation is unhealthy and unsustainable.”

A worker stands on the roof of a home under construction at a new housing development in San Rafael, California.
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Of the index’s three components, current sales conditions slid 9 points to 45, and sales expectations in the next six months dropped 11 points to 35. Buyer traffic fell 6 points to 25.
“This will be the first year since 2011 to see a decline for single-family starts,” said Robert Dietz, chief economist for the NAHB.

Given expectations that interest rates will continue to be elevated, Dietz said 2023 is forecast to see additional single-family building declines.
On a three-month moving average, the sentiment score in the Northeast fell 3 points to 48. In the Midwest it dropped 3 points to 41. In the South it fell 7 points to 49 and in the West declined 7 points to 34.

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We believe that Wall Street’s muted reaction to Johnson & Johnson ‘s (JNJ) better-than-expected quarter has more to do with the stock’s outperformance this year compared to the broader market than anything that investors heard when the results were reported before the opening bell Tuesday. The Club stock and Dow component opened slightly higher and then drifted slightly lower in the afternoon. Reported sales for the third quarter increased 1.9% year over year to $23.79 billion, exceeding the $23.34 billion consensus estimate provided by Refinitv. On an adjusted operational basis, which excludes the impact of acquisitions and divestitures and currency, sales rose 8.2%. Adjusted diluted earnings-per-share decreased 1.9% to $2.55 but still came in ahead of the $2.478 the Street was expecting. With about half of J & J’s sales coming from outside the United States, it was not a surprise to see the company’s Q3 sales take a big hit from the strong dollar. The American currency had a 12.6% negative impact to sales reported outside the U.S., greater than the 10.1% headwind we saw in the second quarter. Bottom line It was a solid quarter for Johnson & Johnson. While the strong dollar is and will remain a headwind for the foreseeable future, the underlying results reflect management’s ability to effectively navigate the difficult macroeconomic environment. Meanwhile, the planned separation of the Consumer Health business remains on track — and as we’ve noted previously, in our view, it represents a positive catalyst in the year ahead, especially as the business continues to see positive operational momentum. From a financial perspective, as noted in the post-earnings conference call, J & J remains in a strong position thanks to year-to-date free cash flow of more than $13 billion and a net cash position of roughly $2 billion — that’s $34 billion in cash and $32 billion debt. This strong position has allowed the company to increase research and development (R & D) spending by about 8% on a year-to-date basis versus the prior year. It also provides management the opportunity to evaluate strategic acquisitions and external collaborations while returning cash to shareholders. We also remind Club members that the board of directors previously authorized a new $5 billion share buyback program, which along with dividend payments, has resulted in the return of almost $11 billion to shareholders in 2022. Despite the positive results, the flat stock in Tuesday’s trading can also be partly attributed to a slightly weaker outlook. Updated full-year earnings guidance at the midpoint, on a reported basis, of $10.05 per share implies Q4 earnings of roughly $2.24, which is below the expectations of $2.30 coming into the print. However, the reiterated full-year earnings midpoint comes despite an incremental currency headwind of 3 cents per share. Management’s reluctance to pass through the full impact of the quarterly beat likely signals some conservatism given the strong dollar, continued high rates of inflation, and broader macroeconomic uncertainty. Pharmaceutical Sales in Q3 for this segment worldwide were $13.2 billion, representing an increase of 9% on an adjusted operational basis, which excludes the impact of currency translation, outpacing expectations for sales of $13.01 billion. Management said on the call they continue to see this business on track for its 11th consecutive year of above-market adjusted operational sales growth in 2022. Here’s a breakdown by product line. Immunology sales increased 5.6% on an operational basis to $4.29 billion. Driving the results were increased sales of Stelara on the back of market growth and market share gains in Crohn’s Disease and Ulcerative Colitis. Same story for Tremfya sales in Psoriasis and Psoriatic Arthritis. Remicade sales, on the other hand, declined as a result of competition from biosimilars, also known as generics. On an operational basis: Stelara sales grew by 8% to $2.45 billion, below expectations of $2.6 billion; and Tremfya sales increased 41.9% to $729 million, missing estimates of $749 million. Oncology sales increased 20% on an operational basis to $4.06 billion. Notably, cancer drug Darzalex sales increased with market share gains seen in all regions. The global launch of Erleada continued to be strong. Additionally, though Imbruvica remains a market leader, sales declined as a result of increased competition. On an operational basis: Darzalex sales increased 38.7% to $2.05 billion, beating estimates of $2.01 billion; sales of Imbruvica, which is jointly commercialized by J & J and fellow Club holding AbbVie (ABBV), fell 7.2% to $911 million, missing estimates of about $1.03 billion; and Erleada sales were up 51.2% to $490 million, in line with expectations. Neuroscience sales increased 5.9% on an operational basis to $1.68 billion. Infectious Diseases increased 3.8% on an operational basis to $1.3 billion. Covid vaccine sales continued to aid the segment, coming in at $489 million in the quarter. Cardiovascular, Metabolism, Other sales increased 1.4% on an operational basis to $1.03 billion. Pulmonary Hypertension sales increased 3% on an operational basis to $852 million. Looking ahead, management said that despite Stelara losing exclusivity — meaning generics will be able to come to market — they continue to anticipate sales growth in the coming years as they work toward their goal of $60 billion in Pharmaceutical sales by 2025. MedTech Worldwide sales in this segment for Q3 were $6.8 billion, representing an increase of 8.1% on an adjusted operational basis. The quarterly result was a slight miss compared to expectations for sales of $6.9 billion. On the call, management said, “Drivers for growth across MedTech include procedure recovery as well as focused commercial strategies in differentiated new products.” Here’s a breakdown by product line. Surgery sales increased 7.1% on an operational basis to $2.42 billion, beating estimates of $2.36 billion. Orthopedics sales increased 4.7% on an operational basis to $2.1 billion, outpacing estimates of $2.08 billion. Vision sales increased 8.6% on an operational basis to $1.21 billion, in line with expectations. Interventional solutions sales surged 17.7% on an operational basis to $1.06 billion, outpacing estimates of $1.01 billion with double-digit growth in all regions. Consumer Health Sales worldwide in this segment for Q3 were $3.8 billion, representing an increase of 4.7% on an adjusted operational basis. Expectations were for sales of $3.73 billion. Here’s a breakdown by product line. OTC sales increased 7.2% on an operational basis to $1.52 billion, exceeding estimates of $1.41 billion, driven by price actions, and elevated levels of cough/cold/flu and pediatric fever rates this season, though the results were partially offset by ongoing supply constraints in the U.S. Skin health, Beauty sales advanced 5% on an operational basis to $1.13 billion, slightly missing estimates of $1.14 billion. The increase was driven by price increases, market growth, and increased international demand for Neutrogena and Aveeno on the back of new product launches. Oral Care sales fell 0.7% on an operational basis to $375 million, missing expectations of $394 million due in part to weakness in China, EMEA (Europe, the Middle East and Africa), Latin America, and the suspension of the sale of personal care products in Russia. Working to offset the weakness were price actions in the U.S. Baby Care sales increased 1.6% on an operational basis to $375 million versus the $386 million expected. Women’s Health sales increased 7.9% on an operational basis to $225 million versus the $222 million expected. Wound Care, Other sales fell 2.5% on an operational basis to $176 million vs. $182 million expected. Regarding the planned spinout of the Consumer Health segment — which upon separation will be called Kenvue — management said on the call that they “made further progress” during the quarter, adding they intend to provide additional updates regarding the “the type of separation as well as standup cost estimates and how [they] are addressing stranded costs later this year or early in 2023.” The separation remains on track for finalization in mid-to-late 2023. Guidance Management reaffirmed full-year expectations for 7% operational sales growth. However, they tightened the range to $97.5 billion to $98 billion versus $97.3 billion to $98.3 billion previously. On a reported basis, management reduced their sales forecast to $93 billion to $93.5 billion, down from $93.3 billion to $94.3 billion — attributing the guide to incremental foreign exchange headwinds. As a result of inflation, the company also slightly reduced its adjusted pre-tax operating margin outlook to a roughly 50 basis point decline year over year, down from approximately flat. On earnings, the company now sees adjusted operational EPS in the range of $10.70 to $10.75, representing a raise to the low end versus the prior forecasted range of $10.65 to $10.75 per share. On a reported basis, management tightened their EPS guidance range to $10.02 to $10.07 from $10 to $10.10 previously. That’s unchanged at the $10.05 midpoint despite the incremental 3-cent per share foreign exchange-related headwind that we referred to earlier. (Jim Cramer’s Charitable Trust is long JNJ and ABBV. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Johnson & Johnson’s products
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More than 603 people have died more than 1.3 million have been displaced in the worst floods Nigeria has experienced in over a decade, according to the country’s humanitarian affairs department.
Thousands of homes and large swaths of farmland, roads and other critical infrastructure have been damaged or destroyed.
The widespread flooding was prompted by extreme rainfall and the release of water from a dam in Cameroon, which neighbors Nigeria.

Flood water breaks a river bank and overflows into a settlement in Lokoja, Nigeria October 13, 2022. 
Afolabi Sotunde | Reuters

More than 600 people have died and more than 1.3 million have been displaced in the worst floods Nigeria has experienced in over a decade, according to the country’s humanitarian affairs department.
Thousands of homes and large swaths of farmland, roads and other critical infrastructure have been damaged or destroyed. The widespread flooding was prompted by extreme rainfall and the release of water from the Lagdo Dam in Cameroon, which neighbors Nigeria.

Nigeria has put forward a national response plan for state and local governments and has provided food and supplies to states. Flooding has impacted 27 of Nigeria’s 36 states, officials said, and several more weeks of flooding is anticipated.
Matthias Schmale, the United Nations’ humanitarian coordinator for Nigeria, said that climate change played a role in worsening the flooding. Rising temperatures have prompted more evaporation in the atmosphere, leading to more frequent and intense precipitation events and drought conditions.
“Climate change is real, as we are yet again discovering in Nigeria,” Schmale said during a press briefing last week.

Flood water, breaking a bank, floods a road close to a river bank in Lokoja, Nigeria October 13, 2022.
Ayodeji Oluwagbemiga | Reuters

Sadiya Umar Farouq, the minister of humanitarian affairs, said this week that states and local governments failed to take adequate action to prepare for the extreme floods despite the forecasts, and urged local communities to take heed of climate predictions.
Farouq also called on officials to prepare for more flooding by evacuating people residing on flood plains to high grounds, as well as providing tents, relief materials and medical supplies to communities.

“There was enough warning and information about the 2022 flood, but states, local governments and communities appear not to take heed,” the minister wrote in a tweet on Monday.
Floodwaters have inundated numerous communities along the banks of the Niger and Benue rivers, as well as Lokoja, the capital city of the state of Kogi, according to satellite imagery shared by NASA.

Vehicles are seen submerged in flood water at a petrol station in Lokoja, Nigeria October 13, 2022. 
Afolabi Sotunde | Reuters

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Peloton Chief People Officer Shari Eaton is leaving the company.
The move comes after multiple executive departures in September, including former CEO John Foley.
In a LinkedIn post, Eaton praised and thanked Peloton’s founders as well as its current CEO, Barry McCarthy.

A Peloton Interactive Inc. logo on a stationary bike at the company’s showroom in Dedham, Massachusetts, U.S., on Wednesday, Feb. 3, 2021.
Adam Glanzman | Bloomberg | Getty Images

Peloton’s Chief People Officer Shari Eaton is leaving the company for another opportunity, she announced in a LinkedIn post Tuesday.
Eaton’s departure is the latest in a series of executive changes at Peloton. Former CEO John Foley left his board chair position alongside fellow co-founder and Chief Legal Officer Hisao Kushi in mid-September. Head of marketing Dara Treseder left later in the month.

The move also comes after several rounds of layoffs and other shakeups this year as the company seeks a return to growth. Eaton praised Peloton and its leaders in her LinkedIn post.
Eaton thanked Foley and Kushi, as well as the company’s new leadership as it transforms the business to counter a drop in customer demand.
“Thank you Barry McCarthy for believing in me and trusting me to work alongside you during this important transformational time,” Eaton wrote on LinkedIn.
Previously at Amazon, Eaton was at Peloton for more than three years, joining as a vice president in the human resources division just months before the company’s pandemic boom. She rose to become senior vice president of people, safety and security officer, and then global head of people.
McCarthy elevated Eaton to chief people officer when he became CEO, which was a time of mass layoffs and personnel changes for the company. Despite her longer tenure, the CEO refers to Eaton fondly as his “first hire.”

Eaton told CNBC that she is departing Peloton to pursue a new endeavor.
“It felt like the right time. The phone rang, the right thing came along. It’s time to turn over a new chapter,” Eaton said in a phone interview Tuesday. “In no way does that mean I’m not bullish on the brand.”
Shares of Peloton were effectively flat Tuesday. The company announced earlier in the morning that it was extending the refund period for its recalled Tread+ product following dozens of injuries and a death last year.

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McDonald’s will sell Krispy Kreme doughnuts at nine locations in Kentucky, starting Oct. 26, as part of a test.
Restaurant chains have been experimenting with new menu items and promotions to lure cash-strapped customers back to their locations.
Krispy Kreme CEO Mike Tattersfield has said customers are willing to splurge on affordable treats like fresh doughnuts.

Scott Olson | Getty Images

McDonald’s will sell Krispy Kreme doughnuts in select restaurants later this month for the first time.
Starting Oct. 26, the fast-food giant will sell Krispy Kreme doughnuts at nine locations in the Louisville, Kentucky, area as part of a test. McDonald’s said the test will help it learn more about how teaming up with Krispy Kreme would affect its operations.

McDonald’s customers will be able to order the original glazed, chocolate iced with sprinkles and raspberry filled doughnuts, either individually or in packs of six. Participating McDonald’s locations will sell the doughnuts all day, but the treats won’t be available for delivery.
Krispy Kreme will deliver fresh doughnuts daily to the McDonald’s restaurants, according to McDonald’s. The doughnut chain uses a “hub and spoke” model that lets it make and distribute its treats efficiently. Production hubs, which are either stores or doughnut factories, send off freshly made doughnuts every day to retail locations such as grocery stores and gas stations.
The test comes as consumers have been cutting back on restaurant visits as soaring inflation pressures budgets. To get customers back into restaurants, chains have been experimenting with new menu items and promotions.
In the first half of the year, McDonald’s said that lower-income consumers in the U.S. were spending less at its restaurants. Krispy Kreme CEO Mike Tattersfield, on the other hand, has said his chain has strong pricing power because customers are willing to splurge on affordable treats like fresh doughnuts.
In the second quarter, Krispy Kreme reported 7.5% revenue growth for its U.S. and Canada division. But it trimmed its full-year forecast for earnings and revenue, citing a stronger dollar and weaker performance from U.S. production hubs that don’t deliver to other locations.
It’s not the first time that fast-food chains have leaned on doughnuts to draw customers. In 2020, KFC launched a “Fried Chicken and Donut” sandwich nationwide after tests of the item grabbed attention on social media.

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3D-printing specialist Relativity Space signed an expansion deal with NASA’s Stennis space center in Mississippi.
Relativity will build new infrastructure and facilities on more than 150 acres at the NASA complex.
The additional facilities are key to Relativity’s development of a reusable rocket called Terran R.

A map of the company’s expansion plans at NASA’s Stennis space center in Mississippi.
Relativity Space

Relativity Space, which 3D-prints rockets, said Tuesday that it signed a deal to expand its presence at NASA’s Stennis Space Center in Mississippi and create one of the country’s largest rocket engine test facilities.
Based in Long Beach, California, Relativity’s rockets are designed to be almost entirely 3D-printed, an approach the company says is less complex and faster to build or modify, compared with traditional rockets.

The additional facilities at Stennis in Mississippi will be key to Relativity’s development of a reusable rocket called Terran R, which is expected to debut in 2025 and compete against some of the most powerful rockets on the market, such as SpaceX’s Falcon 9, with the goal of being fully reusable.
“We’re looking forward to writing some new history at Stennis through an incredibly large new expansion of development and test capabilities,” Relativity cofounder and CEO Tim Ellis said in a statement.

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Relativity earlier this year said it has signed a backlog worth over $1.2 billion in contracts for launches on the Terran R.
Relativity said it will build multiple testing stands, office buildings and a hangar for its vehicles on the more than 150 acres at the NASA complex. The area hasn’t been used by the agency and is adjacent to existing rocket engine testing areas. The company is already operational at Stennis, with agreements for seven engine test stands that have seen Relativity conduct more than 2,000 tests to date.

The company testing an early version of an Aeon R rocket engine.
Relativity Space

The company has already begun testing versions of the Aeon R engines that will power the Terran R rockets, and plans to begin full testing of the engines in late 2023 at the expansion.

An aerial view of construction underway of the company’s expansion in Mississippi.
Relativity Space

Relativity has raised just over $1.3 billion in capital to date and has nearly 1,000 employees at facilities in California, Florida, Mississippi, Washington state and Washington D.C.
NASA’s director of Stennis Rick Gilbrech said in a statement that the agency welcomed “the growth of this valued partnership” and called Relativity “a respected member” among those at the center since the company arrived in early 2018.

An artist’s rendition of a Terran R rocket launching to orbit.
Relativity Space

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Peloton agreed to extend a refund period for its recalled Tread+ for another year, the company and the U.S. Consumer Product Safety Commission announced.
The refund period was extended to Nov. 6, 2023, as Pelton continues to work on a fix.
In April 2021, the CPSC had warned consumers to stop using the Tread+ after a child died in an accident involving the device.

Liza Lecher works out on her Peloton Tread+ treadmill on May 24, 2021 in Williamstown, New Jersey.
Michael Loccisano | Getty Images

Peloton agreed to extend a refund period for its recalled Tread+ for another year, the company and the U.S. Consumer Product Safety Commission jointly announced Tuesday.
The refund period was extended to Nov. 6, 2023, as Pelton continues to work on a fix. Consumers have until them to request a refund or take the company’s offer to move the Tread to another room in the house. Customers returning units after Nov. 6, 2023, will receive a prorated refund.

Shares of Peloton were up more than 3% Tuesday morning.
In April 2021, the CPSC had warned consumers to stop using the Tread+ after a child died in an accident involving the device. The CPSC also disclosed 18 reports about the treadmill’s touchscreen loosening, six reports of the touchscreen detaching, as well as warnings about the gap between the floor and the belt of the Tread +. 
Peloton recalled around 125,000 of its Tread+ machines and of its 1,050 Tread products. In total, there were 335 incidents reported with 87 reports of consumer injury.
“Peloton is working on a rear guard that would address the hazard at the back of the treadmill but no repair has been approved to date,” the CPSC and Peloton said in their joint release Tuesday.
Following the recall, then-CEO John Foley apologized for Peloton’s inaction, and said it should have engaged with the Consumer Product Safety Commission’s initial request for a recall more productively.

The Tread+ was originally called the Tread, but was rebranded to prepare for the release of a less expensive version, which was then delayed by the recall. 
Peloton is in the midst of a broad turnaround effort under Barry McCarthy, who took took over as CEO in February. Peloton slashed 500 jobs in early October, following multiple rounds of layoffs earlier in the year. McCarthy said that “the restructuring is done” with that round of cuts. 
Read the full announcement here.

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Kodiak Robotics and IKEA announced a pilot program in Texas.
Trucks equipped with Kodiak’s self-driving system will make daily deliveries from a warehouse near Houston to an IKEA store near Dallas.
Kodiak has been operating self-driving trucks in Texas since 2019.

Kodiak Robotics truck in front of an IKEA store.
Source: Kodiak Robotics

Self-driving truck startup Kodiak Robotics said that it has begun a pilot program with IKEA in Texas.
A semitruck equipped with Kodiak’s autonomous driving system is making daily delivery runs from an IKEA warehouse near Houston to a store close to Dallas, roughly 300 miles away.

The trucks have human safety drivers on board, but they’re being driven by Kodiak’s autonomous-driving system.
Kodiak’s CEO, Don Burnette, said that he isn’t looking to put truck drivers out of business – in fact, he’s aiming to make their lives easier.
“Adopting autonomous trucking technology can improve drivers’ quality of life by focusing on the local driving jobs most prefer to do,” Burnette said. “Together [with IKEA] we can enhance safety, improve working conditions for drivers, and create a more sustainable freight transportation system.”
This isn’t Kodiak’s first self-driving rodeo. The company has been running freight in Texas with its autonomous test trucks since 2019, and recently opened a new route between Dallas and Oklahoma City. Kodiak has also conducted pilot tests with logistics giants Werner Enterprises and U.S. Xpress, running self-driving trucks on routes from Dallas to Lake City, Florida, and Atlanta, respectively.
Texas has become a hotbed for self-driving truck testing, in part because of favorable regulations — and also because the long highway stretches between its cities are ideal for automation. Waymo, the Alphabet subsidiary that grew out of the Google Self-Driving Car Project, has been testing a fleet of self-driving Freightliner semitrucks (with human safety drivers) on a route between Dallas and Houston for several months.
Self-driving truck startup Aurora Innovation has also been testing trucks in Texas. Aurora began a Texas pilot with Werner Enterprises in April, running on a 600-mile stretch between Fort Worth and El Paso. Another startup, TuSimple, has been testing its self-driving semitrucks in Arizona and is planning to expand to Texas next year.

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