The stock market rally staged a follow-through day Tuesday, with the major indexes running above the 50-day line in higher volume. Tame labor and inflation data sent Treasury yields sharply lower, giving stocks a lift. Salesforce, MongoDB and CrowdStrike were software earnings winners, while Amazon.com and Shopify were rebounding after announcing a deeper partnership. Tesla launched an updated Model 3, while also slashing prices.
Market In Confirmed Uptrend
The Nasdaq led a strong rebound, but all the major indexes reclaimed their 50-day lines as Treasury yields fell sharply. With Tuesday's follow-through day, the market is back in a confirmed uptrend. Growth stocks led, with a number of software names rallying on earnings. Crude oil futures rose solidly, back toward 2023 highs.
Jobs Report Is Just Right
A near-perfect jobs report — not too hot, not too cold — capped off a near-perfect week of big economic reports, taking a Sept. 20 rate hike off the table. Odds also shrank to about 35% for a hike on Nov. 1, signaling the Fed is likely done for the cycle. Headline job growth of 187,000 topped estimates, but gains from the prior two months were revised down by a combined 110,000 jobs. The average gain over the past three months has slowed to 150,000. Average hourly wages rose just 0.2% on the month, an 18-month low, while annual wage growth ticked down to 4.3% from 4.4%. The jobless rate popped to 3.8% from 3.5%, though seasonal adjustments could be a factor. That followed job openings tumbling to the lowest since March 2021.
The Fed's primary measure of core inflation, the core PCE price index, rose just 0.2% in July. The annual rate ticked up to 4.2% from 4.1%, but the three-month annualized pace cooled to 2.9%.
Software
Salesforce topped second-quarter estimates as cost cutting spurred by activist investors improved margins. Salesforce earnings jumped 78% to $2.12 per share, with revenue up 11% to $8.6 billion. Operating margins came in at 31.6% versus estimates of 28.3%. A key financial metric, current remaining performance obligations, known as CRPO bookings, slightly topped views with a 12% rise to $24.1 billion.
Nutanix, reported fiscal Q4 EPS of 24 cents vs. a 17-cent loss a year earlier. Revenue rose 28% to $494 million. Both easily beat. For fiscal 2024, the cloud computing network management software maker forecast revenue of $2.1 billion vs. estimates of $2.07 billion. Nutanix also announced a $350 million buyback.
MongoDB earned an adjusted 93 cents per share in Q2, more than double views for 46 cents and reversing a year-earlier loss of 23 cents. Sales rocketed 40% to $423.8 million, easily beating. The database software maker guided sharply higher.
Shopify jumped and AMZN rose after Amazon.com announced a deeper integration between the two e-commerce giants. Amazon will launch the Buy with Prime app for Shopify, letting merchants offer shoppers the option to buy items using their Prime benefits.
Cybersecurity
CrowdStrike said Q2 EPS jumped 105% while revenue climbed 37% to $731.6 million, both beating. Annual recurring revenue increased 37% to $2.93 billion. Analysts had predicted ARR of $2.92 billion. For the current Q3, CrowdStrike predicted revenue of just under $777 million at the midpoint of its outlook. That edged by estimates of $774 million. Shares soared.
Okta reported Q2 profit of 34 cents, well above views and up from a 10-cent loss a year earlier. Revenue rose 23% to $556 million. Okta raised its full-year revenue outlook slightly to $2.21 billion. Shares soared.
SentinelOne reported a smaller-than-expected Q2 loss while revenue rose 46% to $149.4 million, topping views. For the current third quarter, SentinelOne guided slightly higher on revenue.
Tesla Launches Upgraded Model 3
Tesla shook up the auto industry Friday, unveiling its upgraded Model 3 in China and cutting prices by nearly 20% on its higher-end vehicles, the Model S and Model X, in the U.S. The new Model 3 is on presale in China with prices starting at about $35,850, 12% more vs. the old version. The new Model 3's aerodynamics have been reworked reportedly making it 8% more efficient, extending the range. Deliveries will begin in China in Q4, with the new Model 3 going on sale in Europe in October. U.S. production will likely follow. Meanwhile, Tesla slashed U.S. prices on the Model S and X. The base X, at $79,990, is now eligible for the federal $7,500 tax credit. Tesla stock was little changed on Friday's news, but rose sharply for the week.
China EV Sales Strong
Li Auto, Nio, XPeng and BYD reported August deliveries on Friday.
EV and battery giant BYD sold a record 274,386 vehicles in August, up nearly 5% vs. July's 262,161. and 57% vs. a year earlier. Out of the 173,977 passenger vehicles, some 145,627 were all-electric BEVs and 128,459 PHEVs. Li Auto delivered a record 34,914 vehicles, up 2.3% vs. July's 34,134 and 664% vs. a year earlier. The hybrid SUV maker has said production capacity will be constrained until October. However, Li did announce an insurance subsidy on Wednesday. Nio deliveries came in at 19,329, down 5.5% from July's record 20,462 but up 81% vs. a year earlier. Earlier in the week, the EV startup reported a wider-than-expected Q2 loss and revenue also missed. The China EV startup gave a lackluster delivery outlook for the current quarter, despite recent price cuts and new models. XPeng deliveries hit 13,690, the highest since June 2022. Sales jumped 24.4% vs. July, the seventh straight month of sequential gains, fueled by its new G6 crossover, a Model Y rival. Deliveries leapt 43% vs. a year earlier.
XPeng and Didi Global will jointly launch a new car brand next year, with XPeng buying the ride-hailing giant's EV assets and R&D. Analysts say the deal could boost the EV startup's volumes by giving it access to Didi's 19 million users.
Dell Gets AI Business Boost
Computer hardware giant Dell Technologies crushed Wall Street's estimates for its fiscal second quarter and gave a bullish outlook for the current period. Company executives cited artificial intelligence as a "long-term tailwind." Dell earned an adjusted $1.74 a share on sales of $22.93 billion in the quarter ended Aug. 4. Analysts had expected Dell earnings of $1.14 a share on sales of $20.86 billion. Meanwhile, industry peer HP matched earnings expectations for its fiscal third quarter but missed on sales. Its guidance also lagged views as HP deals with continued soft PC sales.
Broadcom, Ambarella Disappoint
Chipmakers Broadcom and Ambarella both beat analyst estimates with their quarterly results but disappointed with their guidance. Broadcom's outlook only matched Wall Street's targets despite strong sales of networking chips for AI data centers. Meanwhile, Ambarella forecast sales for the current quarter that were well below estimates, citing high inventories in the sales channel for video surveillance cameras.
Ollie's Jumps With Discounters Mixed
Ollie's Bargain Outlet surged to a new 2023 high on Thursday after topping Q2 expectations and lifting its outlook. Earnings tripled to 67 cents per share on 13.7% revenue growth to $514.5 million. Earlier in the week, rival closeout retailer Big Lots beat views despite widening losses and falling sales. BIG surged but is in a long downtrend. Meanwhile, Dollar General missed views and guided lower, while Five Below tumbled on a weak outlook.
Bitcoin
Bitcoin, cryptocurrency prices and related stocks jumped Tuesday after a federal appeals court ruled the SEC must review its 2021 decision on Grayscale Investments' bid to convert its Grayscale Bitcoin Trust into an ETF. The SEC is mulling nine applications for a spot bitcoin ETF. But after bitcoin, GBTC and other related names soared Tuesday, they pared weekly gains significantly.
News In Brief
Jabil announced plans to sell its mobility unit to China-based BYD Electronic, a unit of EV giant BYD, for $2.2 billion. The deal will lower the contract manufacturer's exposure to major customer Apple and operations in China. Shares jumped.
Pure Storage topped analyst estimates for its fiscal second quarter and provided a sales outlook above views for the current period. The enterprise data storage firm said its sales and earnings rose 6% year over year in the quarter ended Aug. 6. Shares whipsawed after earnings, but rose solidly for the week.
Best Buy beat Wall Street's targets for its fiscal second quarter but offered a mixed outlook for the back half of the year. The consumer electronics retailer said its earnings dropped 21% year over year while sales declined 7% in the July quarter.
Hewlett Packard Enterprise reported fiscal third-quarter earnings and revenue that edged by Wall Street targets, rising 2% and 1%, respectively. The maker of computer servers, networking equipment and data storage systems guided up slightly on Q4 EPS but slightly lower on sales.
PDD Holdings skyrocketed after crushing Q2 views, despite concerns about China's economy. EPS rose 28%. Sales ran up 54% to $7.21 billion, with growth accelerating for a second straight quarter. The operator of Chinese e-commerce giant Pinduoduo and international site Temu blasted out of a base.
Samsara reported Q2 profit of 1 cent per share on an adjusted basis vs. a loss of 4 cents a year earlier, topping views for a 2-cent loss. Revenue rose 43% to $219.3 million, modestly beating. Annual recurring revenue from subscriptions rose 40% to $930 million, above views. Also, Samsara notched its first positive quarter in adjusted free cash flow. For the current quarter, Samsara guided slightly higher on revenue.
The FTC will let Amgen buy Horizon Therapeutics for $27.8 billion, striking a deal with the biotech giant. Regulators in May had sought to block the takeover.
