The stock market rally had uneven progress, with the Nasdaq and small caps rising while the S&P 500 and Dow Jones edged lower. Crude oil and gasoline futures fell to a six-month low. Treasury yields rebounded, with a red-hot jobs report signaling a resilient economy that may mean more Fed rate hikes.
Techs Lead Stock Market Rally
Tech titans such as Apple and speculative growth stocks led the market rally this past week, while energy stocks sold off with prices falling until a Friday bounce. Earnings, while less market-moving, were still in full force, with plenty of big winners and losers from results and guidance. Treasury yields rebounded, especially on Friday.
Jobs Report Quiets Recession Talk
Friday's jobs report put a lid on recession talk for now, as hiring accelerated to 528,000, more than double views. Wage growth eclipsed expectations and the unemployment rate fell to 3.5%, returning to the half-century low just before Covid hit. After July's job gain, payroll employment has finally eclipsed its February 2020 peak. The number of people participating in the labor force fell for the third time in four months, a setback for the Fed's hope that increased participation could help ease an overly tight labor market. With unemployment still falling, that suggests a heavier lift for Fed policy and a difficult path ahead for the economy.
On Tuesday, the Labor Department reported that the number of job openings fell by 600,000 to 10.7 million in June. That's progress for the Fed, but openings remain high. New claims for jobless benefits have jumped 50% since mid-March, reaching 260,000 in the week through July 30. But continuing jobless claims have only climbed 8% over the same period, remaining at very low levels. Apparently, most workers losing their jobs have quickly been able to find new ones.
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Biotech Earnings Mixed
Regeneron Pharmaceuticals, Moderna and Repligen all beat second-quarter forecasts. While Repligen raised its outlook for 2022 sales and adjusted profit, Moderna kept its view for $21 billion in sales this year based on current agreements. MRNA stock erupted after sales of its Covid vaccine shot unexpectedly climbed, with revenue up 8% to $4.53 billion. Regeneron's success stemmed from better-than-expected sales of its blockbuster eye-disease drug, Eylea. United Therapeutics and Harmony Biosciences, on the other hand, missed EPS targets, but both beat sales targets. Harmony's soared 45% due to a strong showing for its narcolepsy drug, Wakix. Late Thursday, Neurocrine Biosciences, Vertex Pharmaceuticals and Amgen all beat second-quarter expectations. Neurocrine and Vertex raised their sales outlooks while Amgen narrowed its sales target. Early Thursday Amgen announced a $3.7 billion plan to acquire ChemoCentryx.
BYD Leads China EV Sales Gains
China EV giant BYD more than tripled China EV sales, year over year, to a record 162,530 vehicles in July, delivering on hopes for another huge month. BYD sales grew 21% vs. June. Year over year, July EV sales grew 27% for Nio, 43% for Xpeng and 21% for Li Auto. But their sales slid 20%-25% vs. June. Xpeng missed estimates and is also seen trending weaker for August, with the G9 SUV due in September. Li and Nio have new models slated to debut before then. BYD will begin deliveries of the Seal, a cheaper rival to the Tesla Model 3, this month, just as a massive international expansion gets underway. BYD's combined EV and plug-in hybrid sales have raced past those of Tesla, which still leads among all-electric vehicles.
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Chipmakers Cut Sales Forecasts
Chipmakers exposed to PCs, consumer electronics and Android smartphones have noted weakening demand in second-quarter earnings reports. In the past week alone, Advanced Micro Devices, Power Integrations, Qorvo, SiTime, Skyworks and Synaptics lowered their revenue outlooks for the third and fourth quarters based on softening consumer device sales. Meanwhile chipmakers, with greater exposure to enterprise computing, industrial and automotive chip markets, posted beat-and-raise quarterly reports. Those included Lattice Semiconductor, Microchip Technology, Monolithic Power Systems and Rambus.
Lithium Earnings Hot, Stocks Cool
Albemarle and Livent both topped Q2 earnings estimates and hiked their outlooks — Albemarle by a mile. Thanks to recrafted contracts, Albemarle boosted full-year EPS guidance — the third big upward revision in the past three months — to a range of $19.25-$22.25 from $12.30-$15. Livent said it will get a $198-million advance payment from GM to secure lithium supply starting in 2025. But, unlike after Q1 reports, ALB and LTHM stocks weren't rewarded, amid concerns of "peak pricing fears" for lithium.
Infrastructure Construction
IBD Leaderboard stock Quanta Services affirmed full-year guidance despite flagging uncertainties due to Covid, inflation and other risks. Q2 EPS grew 45% and revenue rose, both edging past views. KBR also affirmed its 2022 outlook, beating on earnings for Q2 but slightly missing on sales. But Jacobs Engineering guided low, citing currency headwinds. Fluor missed on the top and bottom line. Heavy construction stocks are set to benefit from federal spending on transit infrastructure and promoting energy projects. But all four stocks fell for the week.
Lilly, Novo Nordisk Hit
Eli Lilly and Novo Nordisk stocks plunged last week on broad second-quarter misses. Lilly earnings tumbled 32%, meeting views, while revenue fell 4%, missing amid new generic competition. Lilly also cut its full-year EPS target. Novo's sales surged 25% and adjusted profit rose more than 11%, but both measures came in light. The Danish drugmaker did raise full-year constant-currency targets. But both stocks fell sharply for the week.
Drug Distributors Top Views
McKesson and AmerisourceBergen easily beat Wall Street's June-quarter expectations last week. McKesson cited continued contributions from Covid vaccines, drugs and testing supplies, and raised its full-year outlook. Sales edged 7% higher as adjusted profit rose 5%. MCK stock rose Thursday on results, moving back into a buy zone. AmerisourceBergen also boosted its 2022 earnings outlook after fiscal Q3 sales advanced 12.5% and adjusted profit grew more than 21%. But shares fell modestly.
Shale Profits Strong But Oil Prices Tumble
Shale oil companies reported strong earnings for the second quarter, including Warren Buffett-backed Occidental Petroleum, Diamondback Energy, Devon Energy, Marathon Oil and SM Energy. Meanwhile, OPEC+, which includes Russia, OK'd a tiny production quota increase of 100,000 barrels per day in September, with actual output increases likely even less. But U.S. crude oil and gasoline inventories unexpectedly rose, reinforcing demand concerns. Crude oil prices slumped below $90 a barrel, the lowest since Russia invade Ukraine in late February. As a result, shale and most other oil and gas stocks fell.
Cheniere Energy, a liquefied natural gas play, reported a big Q2 profit that came up short, even as revenue growth accelerated for a sixth straight quarter, to 165%. LNG stock edged lower for the week, though still near highs after big gains the prior two weeks.
Shipping Rates 'Have Likely Peaked'
Pacific-focused ocean carrier Matson topped earnings views while revenue just missed upwardly revised targets, helped by continued strong demand for its China service and e-commerce. It also said that shipping rates "have likely peaked for now," echoing remarks from last month, following last year's squeeze on global supply chains. Results from containership lessor Danaos also beat, although it said environmental regulations and other supply-chain snags could keep rates elevated despite an expected economic slowdown. Results from commodities shippers Star Bulk Carriers and Eagle Bulk Shipping beat.
Cybersecurity Buyout Amid Sell-Offs
Private equity firm Thoma Bravo will buy Ping Identity for $2.8 billion, paying a 63% premium to PING's Aug. 2 price. Thoma Bravo has also acquired several other cybersecurity firms in recent years. Fortinet reported Q2 EPS climbed 26% while revenue advanced 29% and billings 36%. But the size of the beats disappointed, while Fortinet guided slightly lower for Q3 revenue. Shares plunged Thursday. Check Point Software reported Q2 revenue rose 9% as EPS edged up 2%, both slightly beating. Check Point forecast Q3 revenue just above views but down slightly vs. Q2. Shares tumbled.
Software
ZoomInfo Technologies reported Q2 EPS rose 50% while revenue grew 54% to $267.1 million, both beating. ZI also guided up on Q3 revenue. Shares jumped. Datadog reported Q2 earnings up 144% with revenue running 74% higher to $406 million, both comfortably beating. For Q3, Datadog forecast in-line EPS and sales that were just a fraction light. Shares of the monitoring and analytics platform fell Thursday but rose solidly for the week. Dynatrace reported fiscal Q1 EPS up 13% with revenue rising 27% to $267.3 million, both slightly topping. Management lowered its fiscal 2023 revenue guidance slightly, citing currency headwinds. Atlassian reported fiscal Q4 earnings that met views with a 13% gain while revenue easily beat with a 36% rise amid its transition to a cloud-based business model. The enterprise software maker guided higher for Q1.
SolarEdge Is Dark Spot On Solar Stocks
SolarEdge Technologies plunged on weak revenue, giving up big recent gains. But China's Daqo New Energy rose on its mixed results while installer Sunrun raced higher on a smaller-than-expected loss. Meanwhile, a tax-spending-and-climate bill that promotes green energy cleared another major hurdle, bolstering solar plays generally.
Fertilizer Earnings Mixed
Fertilizer earnings came in mixed relative to expectations for the recently highflying fertilizer group. Nitrogen pure-play CF Industries was the standout, as EPS surged 440% to $6.21, 29 cents ahead of estimates. CF stock has climbed within 13% of its all-time high, hit in April. Nutrien and Mosaic are 30%-34% off their highs after the former curtailed guidance and the latter came up short of estimates. Still, tight agricultural market conditions, high natural gas prices in Europe and geopolitics may keep the group in favor.
Building Materials Earnings Strong
Building materials providers reported strong quarterly earnings, even as housing starts soften dramatically. Builders FirstSource quarterly earnings leapt 127% year over year, its seventh straight quarter of triple-digit EPS growth. Revenue rose to $6.92 billion. TopBuild blew away analysts with 60.5% earnings growth and raised guidance. Atkore EPS grew 54% and it boosted targets again. It expects earnings to range from $20.89 to $21.24 per share. Revenue is expected to hit $3.86 billion, a 32% increase. Beacon Roofing posted 44% EPS growth but missed views. BLDR stock rose, but pared gains, while Atkore sold off hard.
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News In Brief
Evolent Health reported Q2 EPS spiked 600%, easily beating. Revenue increased 44% to $320 million, the best gain in years and the third straight quarter of accelerating growth. The health care cost management firm raised its full-year revenue forecast.
PayPal said it's open to working with activist investor Elliott Management, which has acquired a $2 billion stake in the e-commerce firm. PayPal added $15 billion to its buyback program. PayPal plans to save $900 million via cost-cutting moves in 2022 and $1.3 billion in 2023 after it named a new CFO. EPS fell 19%, better than expected, while revenue rose 10% to $6.8 billion, just beating. Total payment volume processed from merchant customers fell slightly.
Arista Networks reported Q2 EPS jumped 59% while revenue rose 49% to $1.05 billion, both comfortably beating. The networking gear maker also guided higher for Q3.
Semtech will buy Sierra Wireless for $31 per share in a $1.2 billion deal, a 25% premium to the SWIR stock price on July 29.
Ford grew July U.S. sales to 163,942 vehicles, defying an overall industry decline after it signaled improving chip supplies. Ford's truck sales grew 20% and SUVs jumped 70%. EV sales surged 169% to a still-modest 7,669 units on the back of Mustang Mach-E demand.
Celsius jumped after the fast-growing energy-drink maker said that PepsiCo would make a $550 million investment in the company and become its preferred distribution partner. CELH stock jumped, but then slashed gains on news that it will move from the small-cap S&P 600 to the midcap S&P 400, which has fewer funds tracking it.
Monster Beverage fell short on earnings, with the energy-drink giant citing rising costs.
Alnylam Pharmaceuticals rocketed more than 49% on Wednesday after its cardiomyopathy treatment helped patients with the heart condition walk farther for six minutes after a year of treatment. Patients also reported an improvement in quality of life on a questionnaire.
Amazon.com will buy Roomba maker iRobot for $1.7 billion, or $61 a share, continuing a recent buying spree.
Funko earnings fell 35% while revenue rose 34% to $315.7 million, both beating views. Guidance was in line. But shares of the collectibles company tumbled after the results.
