The stock market rally consolidated, with the major indexes rising slightly, just below 52-week highs. Advanced Micro Devices and Google-parent Alphabet jumped on big artificial intelligence news, even as some high-beta AI-tied plays like MongoDB and C3.ai tumbled. The November jobs report showed stronger-than-expected hiring, but the underlying trend in jobs and wage growth continues to cool. Treasury yields erased big weekly losses on the employment data. Crude oil futures rebounded, but after hitting a multimonth low.
Market Rally Near 2023 Highs
The major indexes rose modestly for the week, trying to clear recent ranges and set 2023 highs. The Russell 2000 rose solidly, continuing a rebound as market breadth improves. Advanced Micro Devices and Google-parent Alphabet jumped on AI announcements, with AMD leading a new crop of breakouts. Treasury yields rebounded from three-month lows on Friday's jobs report. Crude oil hit multimonth lows, but did bounce Friday.
Jobs, Other Data Modest
The November employment report showed 199,000 new jobs and just 3.7% unemployment, but the underlying private hiring was soft. Average hourly earnings growth is at a two-year low. Earlier, October job openings tumbled. However, other data showed some strength, helped by lower market interest rates, declining gas prices and higher stock prices. The ISM services index rose to 52.7 in November from 51.8, further above the 50 neutral level. The University of Michigan consumer sentiment index jumped to a five-month high of 69.4 from 61.3, while one-year inflation expectations dived to 3.1% from 4.5%.
AMD Surges On AI Chip
Advanced Micro Devices on Wednesday launched an AI-focused chip to challenge the dominance of Nvidia in the red-hot market of artificial intelligence computing. AMD shares surged 10% Thursday, following positive analyst commentary. AMD said its Instinct MI300X line of accelerators have industry-leading capacity and bandwidth to train and run AI data models. Microsoft, Oracle and Meta are customers. Further, AMD projected that the AI chip market will grow beyond $400 billion by 2027, well above most other estimates. The company left unchanged its previous projection of $2 billion in sales for its own chips next year. Still, Barclays analyst Tom O'Malley said he "would expect the company to revise higher as the year progresses, largely as a function of an ecosystem desperate for a second source."
Google Launches Gemini AI
Google parent Alphabet launched its "Gemini" artificial intelligence foundation model. Gemini will be available in three different sizes — Ultra, Pro and Nano. Google showed benchmark results that suggest better performance vs. OpenAI's GPT4-V. Google said Gemini Ultra's performance exceeds current state-of-the-art results on 30 of the 32 widely-used academic benchmarks used in AI model research and development. Ultra will not be available until early 2024. Developers and enterprises will have access to Pro on Dec. 13. Nano will be able to run on smartphones. Google's Bard chatbot will be first to use Gemini. Gemini will be used in other products — search, ads, Chrome and Duet AI cloud services "in the coming months." Google stock jumped.
FDA OKs Crispr's Gene-Editing Treatment
The FDA approved the first-ever gene-editing treatment, for sickle-cell anemia, which affects some 100,000 Americans. Crispr Therapeutics and Vertex Pharmaceuticals codeveloped the one-time treatment, which could cost $2 million per patient. The FDA approval was widely expected, following positive comments last month by an FDA advisory panel and the U.K.'s approval.
CRSP stock reversed lower on the FDA's Friday decision, but had surged over the past several weeks in anticipation. VRTX stock fell slightly.
Ollie's Beats, Stock Beaten Down
Ollie's Bargain Outlet surprised Wall Street with better-than-expected third-quarter results, with EPS growing 38% while revenue jumped 15% to $480 million. Comparable store sales increased 7%. The closeout retailer raised full-year guidance by slightly more than Q3's beat. Ollie's opened 23 stores, ending Q3 with 505 locations. OLLI stock initially jumped Wednesday on earnings, but erased gains and fell solidly on Thursday.
Tesla News
Tesla vehicle registrations in China continue to come in strong, on track for a best-ever quarter in the world's largest and most competitive EV market. European sales are somewhat mixed, even with hefty Model Y discounts. Model Y and 3 discounts continue to swell in the U.S., as Tesla tries to hit its 2023 delivery target of 1.8 million. The EV giant confirmed that two Model 3 variants will see their IRA tax credits halved to $3,750 in 2024, reflecting battery sourcing rules. Elon Musk said a next-generation vehicle will be made first at Tesla's Austin plant, with the Mexico plant on the back burner. Chinese media said Tesla is gearing up for another Shanghai expansion, also for the mystery next-gen EV. Tesla stock rose, moving off the 50-day line toward early entries.
Bitcoin Continues Big Run
Bitcoin rallied back to its $44,000 price level this week to its highest level since April 2022 after reclaiming its $40,000 level last Friday. Cryptocurrency prices continue to gain steam in anticipation that the SEC will eventually approve a slew of spot bitcoin ETFs, which allow investors to gain exposure to the crypto without directly purchasing it. Thirteen firms including BlackRock, ARK Investments and Grayscale Investments have pending ETF applications. Bloomberg Intelligence ETF analyst James Seyffart reported Dec. 1 via X that a brief window for the SEC to approve the applications will open between Jan. 5 and Jan. 10. The next halving event of bitcoin mining rewards is set to occur around April and expectations of possible Fed rate cuts are also fueling crypto prices and related stocks. Ethereum, the No. 2 crypto is trading at its highest level since May 2022. Coinbase leapt nearly 7% this week as Needham hiked its price target on COIN stock by $40 to $160 on Tuesday. Robinhood Markets leapt on strong crypto volume.
MongoDB Smashes Views, But Stock Crushed
MongoDB fell more than 10% despite adjusted EPS skyrocketing 317%, far above views. Revenue grew 30% to $433 million, comfortably beating. Analysts pinned the stock sell-off on "highly elevated expectations." The database software stock had gained 120% on the year heading into the report.
Toll Brothers Earnings Strong
Toll Brothers earnings fell 26%, the luxury homebuilder's first EPS drop in over two years, as high mortgage rates took a toll. Revenue fell 18% to $2.95 billion. Toll Bros. gave a bullish outlook, as mortgage rates have come down sharply in the past several weeks. TOL stock jumped to a record high on earnings and still-sliding rates.
SentinelOne Soars On Results, Guidance
The cybersecurity firm reported a smaller-than-expected loss with revenue rising 42% to $164.2 million. Also, SentinelOne said annualized recurring revenue from subscription-based services increased 43% to $663.9 million. For the current quarter ending in January, SentinelOne guided revenue slightly above consensus.
Broadcom Narrowly Beats
Broadcom said adjusted fiscal Q4 earnings rose 6% with sales up 4% to $9.29 billion, eking past views. The chipmaker and infrastructure software provider said it expects to hit $50 billion in fiscal 2024 revenue, including recently acquired VMware. Shares traded around a buy point.
Asana And Smartsheet Diverge
Asana reported a Q3 loss of 4 cents, narrowing from a 26-cent loss a year earlier. Revenue rose 18% to $166.5 million, edging by estimates. But forward-looking indicators such as billings and contract-related Remaining Performance Obligation (RPO) growth continued to decelerate and miss expectations. ASAN stock plunged. Fellow work management software maker Smartsheet reported a fiscal Q3 profit that was well above views. Revenue rose 23% to $245.9 million while billings climbed 22% to $268.5 million, both topping estimates. SMAR stock rose solidly for the week.
Lululemon Sees Ho-Hum Holiday
Lululemon Athletica beat Q3 estimates with a 26.5% EPS gain. Revenue rose 19% to $2.2 billion, just edging past forecasts. But the yoga apparel retailer guided holiday-quarter revenue slightly below views. The board approved a new $1 billion stock repurchase plan. LULU stock rallied to a two-year high.
Drone Stock Tumbles On Outlook
AeroVironment crushed earnings estimates while revenue surged 62% to $180.8 million, also above views. AeroVironment said it's seeing more use of unmanned systems on battlefields, amid the Ukraine and Israel wars. It also expects to benefit from the recent Tomahawk Robotics purchase. The drone maker raised full-year guidance, but still disappointed investors. AVAV stock tumbled from a 10-year high.
Nio Tops Views But Has Work To Do
Nio posted a smaller-than-feared Q3 loss while revenue jumped 49%, slightly beating. Its Q4 delivery outlook was better than feared, but would be below Q3's levels. Nio is gaining key partners for its expanding battery-swap operations. Nio still has a long way to go in proving to investors that it can be a first-tier EV player as volumes stagnate and costs mount, Deutsche Bank analysts said. Meanwhile, the China EV price war continued with XPeng announcing sizable December discounts, joining a host of rivals. Nio stock bounced, but from a three-year low. XPEV stock retreated.
News In Brief
Braze reported a Q3 loss of 5 cents, narrowing from a 15-cent loss a year earlier. Revenue rose 33% to $124 million, topping estimates for 26% sales growth. But the software maker said growth is slowing among small and medium-size businesses. Braze added 53 net customers vs. 92 in Q2 and 116 a year earlier. BRZE stock fell solidly from a 52-week high.
C3.ai reported an adjusted Q3 loss of 13 cents per share vs. 11 cents a year earlier, but it was better than expected. Revenue rose 17% to $73.2 million, slightly missing $74.3 million. For fiscal Q4 ending in January, the company predicted revenue below estimates. C3.ai expects revenue growth to reaccelerate as more artificial intelligence pilot projects ramp up into commercial production. But AI stock tumbled.
GitLab reported Q3 earnings of 9 cents a share, swinging from a 10-cent loss a year earlier and beating views for a 1-cent loss. Revenue rose 32% to $149.7 million. GitLab raised its fiscal 2024 revenue guidance by $17.5 million, more than 3's $8 million beat in Q3. Also, management expects positive EPS for the year. GitLab helps customers develop software and deploy new applications in a secure process. GTLB stock soared.
Alaska Air will buy Hawaiian Airlines for $18 a share cash, a 270% premium to the Dec. 1 close. HA stock skyrocketed. ALK stock tumbled, in part due to news that it will exit the S&P 500 index.
Guidewire Software reported a break-even fiscal Q1, defying views for a loss. Revenue climbed 6%, also beating. But the insurance software maker guided lower on current-quarter revenue.
