The stock market rally extended gains this week, largely on Friday as Fed chief Jerome Powell signaled rate cuts would start soon. The S&P 500 is near record highs with many leading stocks breaking out or setting up. Cava Group, Palo Alto Networks, TJX and Target were among the earnings winners.
Stock Market Jumps As Powell Confirms Rate Cuts
The stock market rally marched higher with the S&P 500 and Dow Jones closing in on record highs. Most of the gains came Friday as Fed chief Jerome Powell said rate cuts are coming. A number of stocks broke out or set up. Treasury yields fell, with the 10-year yield hitting a 52-week closing low on Wednesday.
Powell: 'Time Has Come' For Fed Rate Cuts
Federal Reserve Chairman Jerome Powell confirmed that the pivot to rate-cutting is on track for the Sept. 18 meeting, saying, "The time has come for policy to adjust." Not only did Powell express confidence that inflation will continue to fade, but he said that "downside risks to employment have increased." Powell dropped his characterization of the labor market as "still strong," and made clear that the Fed wants to avoid any additional labor market cooling. The upshot: Incremental weakness could push the Fed to consider cuts of 50 basis points at a time. Markets were already fully pricing in 75 basis points in rate cuts this year, equating to a quarter-point move at each of the year's final three meetings. However, odds rose to 73% for a full percentage point in cuts this year, meaning one 50-basis-point move.
Cava Jumps On Strong Earnings
Cava Group reported an earnings decline, but comfortably beat views as revenue jumped 35% to $231.4 million. Same-restaurant sales grew 14.4%, slowing from an 18.2% increase last year, but easily beating views. Traffic grew 9.5% for the quarter. Cava raised its outlook slightly for same-restaurant sales growth and adjusted EBITDA. Shares jumped to a fresh high.
Palo Alto Rallies On Next-Gen Momentum
Palo Alto Networks said fiscal Q4 earnings rose 5% to $1.51 per share on an adjusted basis. Revenue climbed 12% to $2.2 billion, including acquisitions. Both topped views, but also showed another quarter of slowing growth. However, next-generation annual recurring revenue from cloud computing products jump 43% to $4.22 billion, topping estimates of $4.1 billion. Shares gapped higher.
Homebuilders Jump On Results
Toll Brothers reported a 3.5% EPS decline while revenue rose 1.5% to $2.73 billion, both beating fiscal Q3 views. Further, the luxury-home builder raised full-year guidance. Shares soared, and gapped to the top of a buy zone. Hovnanian also hiked guidance after posting a 32% EPS surge on an 11% sales gain. Shares rocketed 10% to their highest level since October 2008. Homebuilder stocks rallied broadly as mortgage rates trend lower.
Workday Jumps, Snowflake Falls
Workday reported Q2 adjusted EPS rose 22% while revenue climbed 17% to $2.085 billion, both beating. Workday lowered its subscription revenue growth outlook to 15% from 18% through 2027. However, the software maker said it expects operating margins to improve to 30%, up from previous guidance of 25%. Shares jumped after struggling until now in 2024. Snowflake earnings fell 18%, but topped views, while revenue grew 29% to $868 billion, also beating. The data analytics software maker guided fractionally higher on Q3 product revenue. But shares plunged on fears that Snowflake lags in artificial intelligence products.
Off-Price Retailers Jump
TJX on Wednesday reported earnings rose 13% while revenue increased 6% to $13.47 billion, both modestly ahead of estimates. Consolidated comparable sales rose 4%, also topping. Shares jumped above a flat base despite less-than-stellar guidance. Ross Stores on Thursday reported a 20.5% EPS gain with revenue up 7% to $5.29 billion, both topping. The off-price apparel retailer guided in-line with views, while CEO Barbara Rentler noted Ross' low-to-moderate income customers are facing pressures. Shares slashed post-earnings gains Friday, but still jumped for the week.
Ocean Shippers On Rising Tide
ZIM Integrated Shipping Services reported earnings per share of $3.08 vs. a year-earlier loss of $1.79. FactSet expected EPS of $1.92. Revenue leapt 40% to $1.93 billion to clear views of $1.78 billion. The Israel-based container shipping firm hiked its full-year adjusted EBITDA guidance range to $2.6 billion-$3 billion from $1.15 billion-$1.55 billion. ZIM stock spiked nearly 14% on the week and is consolidating with a 23.82 buy point. Elsewhere, dry bulk specialist Navios Maritime Partners reported an 8% decline in adjusted EPS while sales dipped 1% to $342 million, but both cleared estimates. NMM stock leapt to test a buy point.
In Brief
Medtronic rose Tuesday after reporting adjusted EPS rose 3%, with sales up nearly 3% to $7.92 billion, both beating. The medtech giant slightly hiked its full-year outlook.
Viking Holdings on Thursday reported EPS of 37 cents including various items, down from 46 cents a year earlier and far below views of 67 cents. Revenue rose 9.1% to $1.59 billion, just short of forecasts. As of Aug. 11, the river cruise operator sold 95% of its core capacity for 2024 and 55% for 2025. Shares slumped but came off lows.
Eli Lilly jumped after saying its weight-loss drug, tirzepatide, reduced the risk of diabetes. The company tested its drug in patients with prediabetes and obesity. After three years, patients were 94% less likely to have progressed to type 2 diabetes than the placebo group. Further, they lost an average 22.9% of their body weight vs. 2.1% for placebo recipients.
Target earnings jumped 43% with revenue up nearly 3% as same-store sales grew for the first time since Q4 2022. The big-box discounter also hiked its full-year earnings estimate. Shares jumped.
Advanced Micro Devices plans to buy computer hardware design firm ZT Systems for $4.9 billion in a move to better compete with artificial intelligence systems powerhouse Nvidia.
Analog Devices beat estimates for its fiscal third quarter and guided slightly higher than views for Q4. But the chipmaker reported a 37% drop in earnings and a 25% slide in sales, its fifth straight quarterly decline for both.
Synopsys delivered a beat-and-raise earnings report, with EPS up 27% as revenue climbed 13% to $1.53 billion.
Intuit beat fiscal fourth-quarter estimates with a 21% earnings per share gain as revenue climbed 17% to $3.18 billion. The maker of TurboTax and QuickBooks guided higher for fiscal 2025.
