The stock market was mixed in the latest week, with the Dow edging higher while the Nasdaq and especially small caps retreated. Treasury yields jumped on hotter-than-expected CPI and PPI inflation reports heading into the Fed meeting this coming week. Crude oil prices are at 2024 highs. Oracle and Dick's Sporting Goods were earnings winners, while Adobe, Lennar and SentinelOne were losers.
Stock Market Mixed
The Dow Jones rose slightly while the S&P 500 was little changed. But the Nasdaq retreated and the small-cap Russell 2000 fell solidly, both undercutting their 21-day lines. Software stocks, which got a boost early on from Oracle earnings tumbled Friday on Adobe guidance. Treasury yields soared heading into the coming week's Fed meeting on hot inflation reports. Crude oil prices rose to four-month highs.
Economic Data Less Favorable
The combination of hot inflation data, weak retail sales and benign jobless claims continued to create uncertainty about the outlook for the economy and Fed rate cuts. The consumer price index and the core CPI, which excludes food and energy, rose 0.4% in February. The 12-month inflation rates of 3.2% and 3.8%, respectively, came in just above estimates.
The producer price index rose 0.6%, doubling expectations. Just as important from a Fed perspective, PPI data for health care inflation was revised sharply higher for January. That likely means the Fed's primary inflation gauge, the core PCE price index, will get bumped up to a 0.5% increase for January vs. the initially reported 0.4%.
Yet as inflation began the year on a hot note, consumers took a step back. January retail sales were revised to a 1.1% monthly decline from -0.8%. On top of that, February's bounce of 0.6% undershot 0.7% forecasts.
Still, jobless claims have yet to reveal any labor-market softening. Initial claims dipped to 209,000 from the prior week's downwardly revised total. The four-week average eased to 208,000. Jobless claims have almost never dropped below 200,000 per week.
Oracle Bullish On AI
Fiscal third-quarter earnings rose 16% while sales increased 7% to $13.28 billion. EPS topped while sales were in-line. The database software giant said it had a backlog of work — remaining performance obligations — of more than $80 billion. Demand for AI cloud infrastructure "substantially exceeds supply," Chief Executive Safra Catz said in a news release. Oracle soared.
Adobe Gives Lackluster Outlook
Adobe beat Wall Street's fiscal first-quarter targets but guided to in-line earnings on weaker-than-expected sales. In its fiscal Q1 ended March 1, Adobe earnings rose 18% on sales of $5.18 billion, up 11%. For the current Q2, the digital media and marketing software firm sees adjusted EPS up 12% with revenue climbing 10% to $5.28 billion. Separately, Adobe announced a new $25 billion share repurchase program. But shares tumbled Friday. Many software makers skidded Friday on Adobe after rallying with Oracle earlier in the week.
Microsoft said Copilot for Security, a generative AI cybersecurity tool, will launch April 1. Shares hit a record high Thursday.
GigaCloud Soars On Strong Guidance
GigaCloud Technology reported EPS jumped 180% in Q4 with revenue up 95% to $244.7 million, both easily beating. It forecast first-quarter revenue of $235 million vs. estimates of $210 million. GigaCloud sources large-parcel items such as furniture, home appliances and fitness equipment from China and elsewhere. It sells them to buyers and retailers in the U.S., Europe, Japan and other places, while providing logistics, warehousing and technological solutions in the process. GCT stock jumped Friday on earnings after spiking 260% since the Q3 report.
Lennar Slides On Sales Miss
The homebuilder's fiscal Q1 EPS grew 24%, topping views. Sales increased 13% to $7.31 billion, slightly missing. Deliveries swelled 23% to 16,798 homes, but the average sales price fell 8% to $413,000, with Lennar citing "increased sales incentives." Miller added that housing market fundamentals "remained strong as demand continued to outweigh supply." For Q2, Lennar expects 20,900-21,300 new orders and that it will deliver between 19,000-19,500 homes with an average price of $420,000-$425,000. Shares fell sharply from record highs.
Dick's Sporting Jumps
Dick's Sporting Goods surged Thursday after the retailer reported better-than-expected fourth-quarter earnings and raised its dividend by 10%. EPS grew 31%, following Q3's 10% advance, the first back-to-back earnings gains in two years. Sales grew 8% to $3.88 billion. The company guided slightly higher on current-year earnings. Meanwhile, Hibbett Sports slightly missed views and gave weak guidance. Shares plunged.
On Holding Reports Surprise Loss, Guides Low
On Holding, parent of Swiss shoemaker On Running, tumbled Tuesday after Q4 earnings came in well below forecasts. On Running reported a quarterly loss of 6 cents per share vs. a 2-cent gain a year earlier and views for 12 cents. Revenue rose 28% to $509 million, also missing below views and with growth slowing for a fourth straight quarter. Shares later slashed losses.
Williams-Sonoma Surges On Earnings, Buyback
Williams-Sonoma reported a 1% EPS decline while revenue 7% to $2.28 billion, but those were better than expected. The home furnishing retailer-Sonoma also increased its dividend by 26% to $1.13 per share and announced a $1 billion buyback.
Dollar Stores Discounted On Earnings
Dollar Tree on Wednesday reported a 25% earnings increase to $2.55 per share adjusted, its first earnings gain in a year, while revenue rose 11.9% to $8.63 billion. But EPS missed while revenue was a hair short. The specialty discounter plans to close about 600 of its Family Dollar Stores in the first half of 2024 as part of a portfolio optimization strategy, as well as 370 Family Dollar locations and 30 Dollar Tree stores over the next several years as the leases expire. Dollar Tree recorded more than a $2 billion hit related to the store closure plan. DLTR stock plummeted more than 15% on the week. Meanwhile, rival and Dollar General reported a 38% tumble with sales off 3% to $9.86 billion, though those beat views. However, executives this see retail headwinds and inventory theft to weigh on results in the first half of the year.
Airlines Struggle Amid Boeing Woes
The Federal Aviation Administration announced Tuesday Boeing failed 33 of 89 audits in its production process and found "non-compliance issues" regarding parts handling and storage. Elsewhere, 50 passengers were injured Monday after a Boeing 787 abruptly dropped during a LATAM Airlines flight from Australia to New Zealand. United Airlines and American Airlines both had Boeing jet issues during flight. A number of airlines are changing flight schedules and lowering outlooks due to the Boeing issues and delivery delays. Southwest Airlines on Tuesday said it will reevaluate "all prior full year 2024 guidance" and now expects to report a new loss in Q1, while returning to profitability in March. American Air now expects earnings at the lower end of its guidance based on rising fuel prices. Delta Air Lines was the lone bright spot by maintaining its outlook.
In Brief
SentinelOne narrowed its adjusted loss to 2 cents a share, while revenue swelled 38% to $174.2 million, both beating views. Annualized recurring revenue from subscription-based services increased 39% to $724.4 million, slightly beating. SentinelOne only guided in line for fiscal Q1 and 2025 revenue.
UiPath reported Q4 adjusted EPS jumped 47%, easily beating. Revenue rose 31% to $405.3 million, modestly topping, with growth accelerating for a fifth straight quarter. Annual recurring revenue climbed 22% to 1.46 billion, just above forecasts. The robotic automation software maker guided low for current-quarter revenue. Shares reversed lower.
Ulta Beauty earnings topped views, but the beauty retail chain guided slightly lower on 2024 EPS. ULTA stock fell solidly from record highs.
Jabil delivered mixed fiscal Q2 results, edging above views on earnings but missing its sales target. The electronics contract manufacturer also guided well below estimates for the current Q3, citing short-term revenue headwinds.
