The stock market rally saw the Nasdaq and S&P 500 hit record highs on Thursday, but then reverse lower. Nvidia gapped higher on booming earnings and guidance, but that provide a lift to AI-related plays or the broader market. Several consumer stocks came under pressure. Some reflected weak results or guidance, such as Target, but also some with seemingly strong results, such as Urban Outfitters and Toll Brothers. But ELF Beauty rocketed despite weak guidance. Commodity plays struggled with oil and especially copper prices retreating.
Market Rally Hits A Wall
The Nasdaq and S&P 500 hit record highs, but fell back despite megacap Nvidia surging on results. The Nasdaq clung to a weekly gain while the S&P 500 fell. The Dow Jones and Russell 2000 fell solidly for the week, testing their 50-day lines. AI stocks didn't get much of a Nvidia boost, while many consumer and commodity plays struggled. The 10-year Treasury yield continued a recent bounce, retaking a key level.
Economic Growth Firming?
Just as the conventional wisdom had turned more negative on the near-term U.S. growth outlook, markets got a bit of a surprise on Thursday. While the proof will have to come from hard data, not surveys, the S&P Global purchasing managers index pointed to the strongest growth in just over two years in a preliminary read on economic output in May. The composite index, which covers services and manufacturing, jumped to 54.4 from 51.3 in April, with 50 being neutral. Meanwhile, initial jobless claims slipped 8,000 to 215,000 in the week through May 18, while ongoing claims were little changed at 1.79 million, both suggesting the job market remains solid. However, new- and existing-home sales disappointed in April, providing a headwind to consumer spending. Minutes from the April 30-May 1 Fed meeting released Wednesday had a slight hawkish tilt. Wall Street wasn't too worried, because the meeting preceded the release of more moderate inflation data for April. However, firmer U.S. growth would likely delay the path to rate cuts.
Nvidia Crushes Views Again
Nvidia continued its streak of big beat-and-raise reports fueled by red-hot sales of AI processors for data centers. The chipmaker's adjusted Q1 EPS rocketed 461% while sales blasted 262% higher. It also guided higher than estimates for the current quarter. Plus, Nvidia announced a 10-for-1 stock split and a 150% dividend hike. Nvidia said it is seeing no letup in demand for its current graphics processing units, despite next-generation models being right around the corner. Nvidia jumped to a record high.
Target Tumbles On Earnings, Guidance
The big-box discounter on Wednesday reported a 1% EPS decline vs. views for slight gain. Revenue fell 3.1% to $24.53 billion, fractionally above views. But Target's Q2 and full-year EPS guidance is below Wall Street consensus at the midpoint, with executives noting that consumers are "feeling pressured." That was in contrast to Walmart, which reported strong results a week earlier, citing more higher-income customers. Target on Monday announced plans to slash prices on more than 5,000 everyday products this summer. TGT stock fell sharply.
TJX, Ross Stores Top Profit Targets
TJX, parent of T.J. Maxx, Marshalls and HomeGoods reported a 22% earnings increase, easily beating. Net sales grew 6% to $12.48 billion, in line with views. The off-price leader sees Q2 and full-year comparable sales growth of 2%-3%. TJX's Q2 and 2025 earnings guidance was slightly below analyst views. TJX stock gapped out to a new high, but slashed gains. Ross Stores modestly beat Q1 views with a 34% EPS gain, while also raising full-year guidance. Shares moved above their sliding 50-day line Friday, building the right side of a base.
Deckers Runs To New High
Deckers Outdoor broke out of a base to a new all-time high Friday after the maker of Hoka and Ugg brand shoes posted a major Q4 earnings beat. Earnings jumped 43% on a 21.2% revenue growth to $959.8 million. Wall Street expected earnings to fall while revenue came in to $888 million. Hoka shoe sales growth accelerated with a 34% jump to $533 million. Ugg brand sales increased 14.9% vs. forecasts of a 5.4% decline. Deckers guided 2025 EPS slightly below estimates while a projected 10% sales gain was in line. 2025 net sales are projected to increase about 10% to $4.7 billion, in line.
ELF Soars On Big Earnings Beat
ELF Beauty delivered a huge earnings beat for the March-end quarter, after fears of a mass beauty slowdown hit shares in April. The youth cosmetics maker posted a 26% EPS jump, vs. views for a 21% decline. Sales surged 71% to $321.1 million vs. 56% expected. The beauty stock initially sold off late Wednesday on cautious guidance for the new fiscal year, but roared above the 50-day line on Thursday.
PDD Earnings Triple
Temu parent PDD Holdings easily beat Q1 views, with earnings tripling in local currency and sales soaring 131%. PDD operates the e-commerce platform Pinduoduo in China and Temu globally. The company's leadership described its global efforts as in an "exploration stage." PDD stock surged to a three-year high.
Microsoft Touts AI Advances
The software giant flexed its leadership position in generative artificial intelligence with a host of updates for software developers at its Build conference. Microsoft added new capabilities to its Azure cloud infrastructure and AI assistants called Copilots. Microsoft also unveiled a new category of Windows personal computers designed for artificial intelligence called Copilot+ PCs. The first models use Arm-based processors from Qualcomm, but future models will run x86 processors from AMD and Intel. Microsoft stock flirted with a breakout on the news.
Upscale Housing Plays Slide
Luxury homebuilder Toll Brothers and upscale housewares and home furnishing retailer Williams-Sonoma both beat quarterly views, but the stocks diverged. Toll Bros. reported a 60% EPS gain in fiscal Q2 and guided up on deliveries and full-year EPS. But shares plunged below a buy point. Williams-Sonoma reported a 54% EPS gain, easily beating, while revenue fell 5% to $1.66 billion, just topping. Shares gapped past above a base Wednesday, but reversed lower.
Palo Alto Billings Weak
Palo Alto Networks reported fiscal Q3 earnings and revenue that modestly beat Wall Street targets while billings again missed amid slowing growth in its core network firewall market. Adjusted EPS rose 20% while revenue climbed 15% to $2 billion, including acquisitions. But billings rose just 3.4%. The cybersecurity firm also guided in line for the current Q4. Shares fell slightly for the week.
In Brief
Eagle Materials missed fiscal Q4 estimates, with Q4 EPS down 20% and sales up just 1%. Shares of the building materials firm tumbled.
Snowflake, under new CEO Sridhar Ramaswamy, reported fiscal Q1 EPS unexpectedly falling 7% as rising AI investments hit operating margins. Revenue grew 33% to $828.7 million, comfortably beating. The data analytics software maker guided up on product revenue for the current quarter. Shares fell solidly.
Workday beat Q1 views with a 33% EPS rise and 18% revenue gain to $1.99 billion. But the software maker trimmed forecasts for Q2 and full-year revenue. Shares plunged.
Macy's easily beat fiscal Q1 EPS views despite the 52% decline. Sales fell 3% to $5 billion but also topped. Shares rose.
Modine Manufacturing reported a 15% EPS gain, edging past fiscal Q4 views, but revenue slightly missed with a 2% drop to $603.5 million. The HVAC company, which has seen strong demand as it serves the AI-led data center boom, guided low at the midpoint on fiscal 2025 EPS. Shares plunged initially but slashed losses.
Lowe's reported better-than-expected first quarter earnings, revenue and same-store sales, though they all fell. The home improvement retailer saw Q1 EPS drop 17% with revenue off more than 4% to $21.36 billion. Same-store sales decreased 4.1%, their sixth straight quarterly decline. Lowe's also reaffirmed its full-year outlook. Shares fell.
Synopsys hit the high end of its guidance for sales and topped its outlook for earnings in its fiscal second quarter ended April 30. But the chip design software firm's results were a tad short of Wall Street's estimates. In Q2, Synopsys said its adjusted earnings increased 26% while sales rose 15% to $1.455 billion.
Analog Devices beat Wall Street targets for its fiscal second quarter ended May 4 and guided higher than views for the current period. But the chipmaker's sales and earnings have fallen for four straight quarters. However, CEO Vincent Roche said he sees "the beginning of a cyclical recovery." Shares jumped.
Star Bulk Carriers saw first quarter earnings soar 140%, above expectations. Revenue grew 26% to $195.7 million, below views. The Athens-based dry-bulk shipping firm announced a quarterly dividend of 75 cents. SBLK rose within a buy zone.
Dorian LPG reported worse-than-expected fiscal 2024 fourth-quarter earnings Wednesday while revenue narrowly topped views. The Connecticut-based company saw Q4 EPS drop 2% to $1.91 while sales grew 6% to $141.4 million. The global liquefied petroleum gas shipper said cold U.S. weather in January-February boosted domestic demand for propane, driving up prices. LPG rose out of a buy zone.
Eli Lilly broke out of a base to a new high after the drug giant released promising late-stage trial data for Crohn's disease treatment. After a year of treatment with Lilly's mirikizumab, nearly half of patients showed endoscopic responses. Most of those patients also entered remission.
Medtronic topped fiscal Q4 views, but EPS declined 7% while sales just edged up to $8.59 billion. The medtech giant also kept full-year forecasts unchanged. Shares slumped.
Urban Outfitters delivered a surprise 23% gain vs. views for a 5% decline. The youth apparel retailer's sales grew 7.8% to $1.20 billion as strong demand at higher-end Anthropologie and Free People brands offset continued weakness at namesake Urban Outfitters stores.
Intuit beat estimates for its fiscal third quarter ended April 30, with EPS up 11% and sales rising 12% to $6.74 billion. But the TurboTax maker offered mixed guidance for the current quarter. Shares tumbled.
Booz Allen Hamilton, spearheading military modernization and other government AI efforts, topped fiscal Q4 estimates early Friday. EPS jumped 32% for a second straight quarter while sales climbed 14%. Shares rose within a buy zone.
