The stock market rally showed broad gains, with the debt-ceiling deal clearing Congress and Fed rate hike odds plunging. The Nasdaq and S&P 500 advanced to fresh 2023 highs. The Dow Jones and Russell 2000 indexes roared higher late in the week after testing key levels. Salesforce.com, Broadcom, C3.ai, Pure Storage, Lululemon Athletica and Okta were among the notable earnings reports.
Stocks Rally As Headwinds Lift
The major indexes rose strongly, especially late in the week, with Congress approving the debt-ceiling deal and Fed officials signaling a June pause in rate hikes. The Nasdaq rallied to a 13-month high while the S&P 500 decisively cleared its recent range. The Dow Jones, which tested its 200-day line during the week, rebounded to retake the 50-day line by Friday. Market breadth improved, but leadership is still largely in Big Tech — the AI, chip and software spaces. Treasury yields fell significantly, while the dollar backed off 2023 highs.
Fed Rate-Hike Odds Dive
The market suddenly slashed expectations for the June 13-14 Fed meeting, with odds now favoring a rate hike pause. The catalyst was a clear call from Philadelphia Fed President Patrick Harker, who is seen as a centrist, for the Fed to "skip" a rate hike and wait for more clarity on the economic outlook. Fed Gov. Nathan Jefferson signaled he also favors "skipping" a rate hike. Friday's May jobs report showed a surprisingly robust 339,000 payroll rise. Yet total hours worked across the economy fell 0.1% in May amid the shortest workweek since the Covid lockdown. Meanwhile, average hourly wage growth eased, rising 0.3% on the month and 4.3% from a year ago. Further, the jobless rate jumped to 3.7% from 3.4%, hitting a seven-month high. Other data also was mixed. ISM's manufacturing index dipped further into contraction territory, slipping to 46.9 from 47.1. Yet construction spending blew away estimates with a 1.2% monthly gain, with residential activity edging higher and factory construction booming.
Nvidia Teases $1 Trillion Value
Graphics-chip maker Nvidia saw its market capitalization briefly pass $1 trillion on its latest artificial intelligence and supercomputer announcements. Elsewhere in semiconductor stocks, Broadcom delivered a beat-and-raise earnings report. Broadcom got a boost from sales of gear for hyperscale data centers. Meanwhile, computer-vision chipmaker Ambarella edged above estimates for its fiscal first quarter but disappointed with its outlook.
Salesforce
Salesforce reported a 72% EPS gain with revenue up 11% to $8.25 billion, both modestly topping fiscal Q1 views as operating margins improved amid cost-cutting moves. The software giant guided current-quarter revenue slightly above views. CRM stock tumbled Thursday from a 52-week high following earnings, but bounced off lows.
C3.ai Guidance Disappoints
C3.ai predicted fiscal 2024 revenue in a range of $295 million to $320 million with the midpoint below analysts' target of 19% growth to $317 million. The AI play expects an adjusted operating loss of $50 million to $75 million vs. estimates for a loss of $61.8 million. In the Q4 2023 quarter, C3.ai lost 13 cents adjusted vs. a 21-cent loss a year earlier. AI stock plunged on results but still rose solidly for the week, continuing a huge run.
Pure Storage, NetApp Get Earnings Lift
Enterprise data storage gear makers Pure Storage and NetApp each reported better-than-expected quarterly results that sent their stocks surging. Pure Storage rocketed 19.1% following earnings and NetApp jumped 8.5%. Pure Storage guided higher than views for sales and earnings in the current quarter while NetApp gave a mixed outlook.
Cybersecurity
CrowdStrike reported an 84% EPS gain while revenue climbed 42% to $692.6 million, both beating. Annual recurring revenue, or ARR, increased 42% to $2.73 billion, edging past views but slowing from 48% in the previous quarter. CRWD briefly plunged Thursday following results, but slashed losses, rising for the week.
Okta reported Q1 EPS surged 181%, crushing views. Revenue rose 25% to $518 million, topping estimates of $510.4 million. But customer growth disappointed. Current remaining performance obligations, known as CRPO bookings, rose 20% to $1.7 billion, just topping. And Okta forecast Q2 CRPO growth of only 14%-15% in Q2.
SentinelOne reported a smaller-than-expected Q1 loss, but the 70% revenue gain missed Wall Street targets. For the July quarter, SentinelOne guided Q2 revenue below views.
Zscaler, which pre-announced some fiscal Q3 results in early May, reported full results, with EPS up 182% and revenue up 34% to $418.8 million. Management raised fiscal 2023 targets for revenue and operating income.
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Lululemon Earnings Strong
Lululemon didn't have to break a sweat to beat Q1 estimates late Thursday. Earnings vaulted 54% while revenue leapt 24% to $2 billion. The athleisure giant raised its full-year earnings guidance. LULU stock surged 15% after hours, rebounding from the 200-day line.
China EV Sales Bounce
China EV sales recovered in May from a month-over-month decline in April. Auto giant BYD and startup Li Auto both posted record monthly sales. BYD sold 240,220 EVs in May, up 14% from April, benefiting from new models and some price cuts. Li sold 28,277 EVs in May, up 10%. Li's startup peers Nio and XPeng trailed as they prepared to launch important new electric vehicles. Still, XPeng's sales rose 6% from April and continued to show an improving trend. Nio's sales fell 7.6% from April, which itself was off 35.9% from March. By the end of June, XPeng plans to launch the G6 SUV. Nio launched a fully revamped ES6 SUV in late May. Both the G6 and ES6, seen as Model Y rivals, are expected to drive growth the rest of this year. Li's new L7, which made up more than a third of May sales, is also seen as a Model Y challenger. The battle for China's electric SUV market, dominated by BYD and Tesla, continues to heat up, with a slew of new models in the second quarter. BYD stock moved back into a buy zone while Li Auto is at 2023 highs. Nio and XPEV hit recent lows before rebounding.
China reportedly could extend a purchase tax exemption for at least some EVs past the current expected expiration in 2023.
Weak PC Sales Plague Dell, HP
Dell Technologies smashed Wall Street's estimates for its fiscal first quarter, thanks to strong sales of storage solutions and AI-optimized servers. However, continued weak PC sales were a drag, with revenue down 23% year over year. Rival HP beat fiscal Q2 EPS expectations but missed views on sales. HP's PC sales dropped 29%.
Department Stores See Slowing Consumer Spending
Nordstrom and Macy's noted they expect sales to slow and macroeconomic conditions for consumers to worsen as they beat quarterly estimates. JWN stock popped, but still not far from a two-year low. Macy's reversed higher after hitting a fresh two-year nadir. Nordstrom reported a surprise profit as revenue fell 10.9% to $3.18 billion, slightly beating forecasts. The upscale retailer guided in-line. Macy's earnings tumbled 48% while sales fell 7% to $4.98 billion for its first quarter. Macy's slashed its full-year targets.
Specialty Discounters
Dollar General and Five Below saw mixed reactions to their Q1 results early and late Thursday, respectively. Dollar General stock dived 20% Thursday after earnings fell 3% vs. a year earlier while sales grew 7% to $9.34 billion, both slightly missing. The dollar store cut full-year forecasts. Five Below reported a 9% EPS gain with revenue up 13.5% to $726.2 million, beating on the bottom line but missing on sales. The teen- and tween-focused discounter slightly raised full-year guidance, mostly due to the Q1 beat. FIVE stock rose Friday on results but fell for the week.
News In Brief
Hewlett Packard Enterprise reported fiscal Q2 EPS climbed 18%, topping views, but revenue rose 4% to $6.97 billion, missing estimates. HPE stock fell, though it did pare losses.
Veeva Systems beat fiscal fourth-quarter expectations on Wednesday. Adjusted earnings sank 8% to 91 cents per share, but topped forecasts. Sales rose 4% to $526 million. In response, Veeva stock rocketed Thursday.
Samsara reported a loss of 2 cents per share on an adjusted basis vs. a 5-cent loss a year earlier. Meanwhile, revenue rose 43% to $204.3 million. Analysts expected Samsara to record a 5-cent loss on sales of $192 million. For the current quarter, Samsara said it expects revenue of $207 million at the midpoint of its outlook. IOT stock analysts had projected revenue of $201 million. Founded in 2015, Samsara provides sensors and cloud-based software to manage vehicle fleets and industrial operations.
Asana reported a narrower-than-expected Q1 loss while revenue grew 26% to $152.4 million, slightly topping views. . The software maker forecast Q2 revenue, in line with estimates. Asana's work management platform helps users orchestrate work, from daily tasks to cross-functional strategic initiatives.
Cooper Companies narrowly beat fiscal Q2 views, with EPS down 5% and revenue up 5.7%.
PagerDuty reported Q1 EPS of 20 cents vs. a 4-cent loss a year earlier, easily beating. Revenue climbed 21% to $103.2 million, in line. Billings rose 16% to $96 million, missing estimates for 20% growth. PagerDuty's cloud-based platform provides "incident response" support for applications being deployed by information technology departments.
MongoDB reported Q1 EPS of 56 cents, up 180% from a year earlier, topping estimates of 18 cents. Revenue rose 29% to $368.3 million, beating estimates of $347.8 million. Guidance handily beat views, including a one-time license fee. The company forecast Q2 revenue of $390 million, above estimates of $363 million. MongoDB provides an open-source database platform for businesses, with a subscription-based software-as-a-service business model.
