The stock market rally saw the major indexes hit record highs as the Federal Reserve stuck to its dovish rate-cut projections while Nvidia, Broadcom and Microsoft had well-received AI events. Micron Technology reported strong earnings and guidance with an AI bent. FedEx soared on strong earnings and guidance, while Lululemon and Nike tumbled on weak outlooks.
Market Rally Hits New Highs
The Dow Jones, S&P 500 and Nasdaq composite hit all-time highs while the Russell 2000 hit a 23-month closing peak. Credit a dovish Fed and AI optimism from Nvidia, Broadcom, Micron Technology and Microsoft. The 10-year Treasury yield retreated from near 2024 highs.
Fed Sticks With Rate-Cut Plan
The take-away from this week's Federal Reserve meeting is that Chair Jerome Powell would like to start cutting rates by June. Yet his flimsy majority for doing so could be undone by another report showing persistent price pressures. Although the Fed kept its median forecast for three quarter-point rate cuts this year, just 10 policymakers backed three cuts this time, while nine expect two cuts or fewer. That comes amid raised inflation and GDP growth projections. For now, at least, Powell is more worried about nailing a soft landing of the economy than he is about a no-landing scenario in which growth and inflation don't come down.
Nvidia Previews New AI Chip
The artificial intelligence leader detailed its next-generation AI computing platform, Blackwell, at its GTC 2024 conference. Blackwell graphics processing units are much faster and more energy efficient than the current Hopper GPUs. They also can run real-time generative AI on trillion-parameter large language models. Blackwell GPUs are due out later this year. Nvidia also showed off its latest supercomputer design and new high-speed interconnects. Another innovation announced at GTC was new "microservices" that enterprises can use to create AI copilots or assistants using their proprietary data. Nvidia also highlighted how it is helping to infuse AI technology into industries spanning health care, manufacturing, automotive, robotics and more. Nvidia stock jumped while rival Advanced Micro Devices fell solidly.
Broadcom announced that it has signed a new customer for its AI chip business, which makes application-specific integrated circuits, or ASICs. It didn't name the customer, but analysts speculated that it could be TikTok parent ByteDance. Broadcom already makes custom AI chips for Google and Facebook parent Meta Platforms. AVGO stock surged.
Microsoft introduced its first AI PCs and promoted its Copilot artificial intelligence services at a digital event that proclaimed a "new era of work." Microsoft stock popped to a record high.
Micron Posts Surprise Profit
Memory-chip maker Micron Technology crushed Wall Street's targets for its fiscal second quarter with a surprise profit. It also guided well above views for the current quarter, citing a sales boost from artificial-intelligence infrastructure spending. Sales jumped 58% year over year to $5.82 billion in the quarter ended Feb. 29. Micron's results got a lift from the AI data center spending boom as customers snapped up its high-bandwidth memory DRAM chips. Plus, Micron saw demand improve across most of its end markets, including PCs and smartphones.
FedEx Earnings, Guidance Strong
The shipping giant reported a 13% EPS rise, beating fiscal Q3 views for a fractional gain. Revenue fell 2% to $21.74 billion, slightly missing, with FedEx blaming lower fuel surcharges as well as lower volumes in its Express and Freight segments. FedEx Express margins were better than expected, however. FedEx narrowed its full-year earnings target, above analyst consensus, amid ongoing cost cuts. The company also announced a $5 billion buyback, in addition to $600 million remaining on a current program. Shares soared, blasting out of a base.
Apple Hit With U.S. Antitrust Suit
The Justice Department accused Apple of violating antitrust laws with its restrictive iPhone and App Store policies. The lawsuit alleges that Apple's conduct makes it harder for Americans to switch smartphones, undermines innovation for apps, and imposes extraordinary costs on developers, businesses and consumers. The DOJ alleges that Apple illegally maintains a monopoly over smartphones by selectively imposing contractual restrictions on developers and withholding critical access points to its software and devices. Apple stock fell.
Nike Guides Low, Reverses Strategy
Nike earnings rose 24%, beating views for a slight decline. Revenue ticked up to $12.43 billion, just beating. But Nike gave a weak outlook. Also executives said they plan to lean into wholesale and retail channels and pivot its focus from its Nike direct and e-commerce channels. That's a reversal from prioritizing direct sales and scaling back on retailers. Nike stock plunged Friday.
Lululemon Dives On Outlook
The athleisure retailer reported a 20% EPS rise with revenue up 16% to $3.21 billion, both beating Q4 views but with growth decelerating from Q3. North America sales gains in particular cooled. Lululemon guided low on Q1 revenue. Shares plunged in huge volume.
China EV Makers Guide Low
Li Auto slashed its Q1 delivery outlook by 24% on sluggish demand for its first pure electric vehicle, the pricey Mega minivan. Its implied March guidance was roughly half the 50,000 that the premium EV maker had targeted on March 1. Li Auto cut SUV prices in March to stimulate demand. Earlier in the week, XPeng reported a smaller-than-expected fourth-quarter loss. The EV maker guided Q1 deliveries of 21,000-22,500 electric vehicles, but some analysts were expecting 25,000. The Chinese EV price war intensified in March as EV giant BYD led a big price war with China EV makers rolling out new and refreshed models. XPeng affirmed plans to launch 10 brand new models and to enter more international markets.
Chinese Internet Giants
PDD Holdings, parent of Chinese e-commerce giant Pinduoduo and international site Temu, reported a 107% EPS gain with revenue up 123% to $12.52 billion, both easily beating. PDD stock surged as much as 15% Wednesday, but slashed gains and kept falling, losing ground for the week. Messaging and gaming giant Tencent rose slightly as EPS grew 42%. Sales increased 7% in local currency to 155.19 billion yuan ($21.56 billion).
Reddit IPO Has Red-Hot Debut
Shares of the social media firm popped 48% in Thursday's debut. San Francisco-based Reddit priced its IPO at 34, the high end of its range. Shares surged to as high as 57.80 before closing at 50.31. The IPO price gave Reddit a valuation of $6.4 billion. The message-board operator, which recently turned a profit, generates revenue via digital advertising and also plans to license its user content to train AI algorithms.
News In Brief
Chipotle Mexican Grill said it plans a 50-for-1 stock split, pending shareholder approval in June. Shares hit a record high above 3,000.
DLocal reported a 40% EPS gain and a 59% revenue rise to $188 million, both showing accelerating growth vs. Q3. But earnings missed and the Latin American payments firm guided low. Shares plunged.
StoneCo reported rising EPS and revenue that came up short. The Brazilian fintech tumbled below the 50-day line, but did come off lows.
Commercial Metals reported a 12.1% core EPS gain, topping views, while an 11% sales decline to $1.8 billion was slightly worse than expected. But the company made some cautiously optimistic comments.
Darden Restaurants reported in-line profit while a 7.5% sales gain missed. The parent of the Olive Garden and several other chains guided low on full-year results.
Embraer surged to a five-year high as earnings skyrocketed, easily beating views. The Brazilian jet maker's revenue dipped 1% to $1.975 billion, just missing. But analysts were bullish on order prospects.
