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Stock Market Rally Hits Highs, Fed Chief Powell Backs Bond Taper

The stock market rally continued to rebound from key levels, with the Nasdaq and S&P 500 index hitting record highs. Market breadth and leadership improved once again. Fed chief Jerome Powell backed a bond taper before the end of the year, not surprising financial markets.




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Palo Alto Networks (PANW) and CrowdStrike (CRWD) led cybersecurity firms higher. Salesforce.com (CRM) and Snowflake (SNOW) were earnings winners, along with Williams-Sonoma (WSM) and Dick’s Sporting Goods (DKS).

Stock Market Rally Rebounds

The S&P 500 and Nasdaq composite hit all-time highs while the Dow isn’t far away. The Russell 2000 reclaimed its 50-day line. Cybersecurity stocks were among the big winners, along with several other software makers and a few retail earnings winners. Stocks extended weekly gains as Fed chief Jerome Powell signaled the central bank will begin to scale bond purchases before the end of the year.

Treasury yields rebounded for the week, but dipped Friday after Powell’s speech.

Fed Chief Powell Backs Bond Taper

In his much-anticipated Jackson Hole speech, a virtual meeting this year, Federal Reserve Chairman Jerome Powell signaled he favors starting to scale back bond purchases before the end of the year, saying the economy has made enough progress. He stressed that actual rate hikes are a long ways off. Earlier, several Fed officials explicitly or implicitly backed approving a bond taper program at the September Fed meeting, with tapering following soon after.

Pfizer (PFE) yo-yoed last week after the FDA fully approved its BioNTech (BNTX)-partnered Covid vaccine for people ages 16 and older. Two days later, they began the process of asking the FDA to approve their booster shot. In related news, Johnson & Johnson (JNJ) said two small, early-stage tests indicated a booster dose of its Covid vaccine produced a large number of antibodies. But U.S. officials have yet to decide whether recipients of the Johnson & Johnson shot will need a booster dose.

Last Monday, Pfizer (PFE) said it would spend $2.26 billion to buy Trillium Therapeutics (TRIL), a small biotech company testing blood cancer treatments.

Williams-Sonoma, Dick’s Crush Views

Upscale housewares retailer Williams-Sonoma and Dick’s Sporting Goods reported blowout earnings and guidance. They both also hiked dividends and announced buybacks. Dick’s also announced a special $5.50 payout. Both stocks skyrocketed.

Dick’s rival Hibbett Sports (HIBB) also easily beat quarterly views. But shares tumbled Friday, slashing weekly gains.


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Business Software

Salesforce.com (CRM) reported Q2 EPS rose just 3% while revenue climbed 23% to $6.34 billion, including the acquisitions of Slack and Acumen. Salesforce also reported strong bookings and guided slightly higher for Q3. Shares popped Thursday.

Snowflake (SNOW) is still losing money, but July-quarter revenue jumped 104% to $272.2 million from a year earlier, topping estimates of $256.5 million. The cloud-based data analytics software firm said it now has 116 customers with “trailing 12-month product revenue greater than $1 million,” each, up from 104 as of April 30. For the current quarter, Snowflake forecast product revenue above estimates of $270.5 million. Shares rallied.

Splunk (SPLK) also guided higher for Q3 revenue. The data analytics company is shifting to the cloud amid increased competition.

Elastic (ESTC) topped estimates as well but now expects a bigger full-year loss than it had flagged before.

Workday (WDAY) stock rose after the enterprise software maker reported July-quarter adjusted earnings of $1.23 a share, up 46% from the year-earlier period. Revenue climbed 18.7% to $1.26 billion, including acquisitions. Subscription revenue rose 19.5% to $1.11 billion, topping estimates of $1.09 billion. Analysts expected Workday earnings of 78 cents a share on revenue of $1.24 billion for the period ended July 31. The software maker forecast October-quarter subscription revenue of $1.157 billion at the midpoint of guidance vs. analyst estimates of $1.131 billion.

Bill.com (BILL) popped after the financial software maker reported fiscal Q4 revenue of $78.3 million, up 86% from a year earlier, including the acquisition of DivvyPay. That topped consensus estimates of $62.1 million. The company forecast fiscal Q1 revenue of $103.7 million, with organic core growth of 60%, blowing past estimates of $67.1 million. The software maker reported a 7-cent loss in the July quarter vs. estimates of a 4-cent loss.

VMware (VMW) reported Q2 EPS fell 3% while revenue climbed 9% to $3.14 billion, topping estimates. But the virtualization software maker guided slightly lower for Q3. In April, Dell Technologies (DELL) announced plans to spin off its 81% equity stake in VMware. The transaction is expected to close in early November.

Domo (DOMO) reported a narrower-than-expected loss as revenue rose 23% to $62.8 million, topping estimates. Domo guided slightly higher for Q3.

Data management and collaboration company Box (BOX) also beat quarterly expectations, driven by strength in customer expansion and retention.

Cybersecurity Stocks Soar

Palo Alto Networks (PANW) reported stronger-than-expected fiscal Q4 results late Monday while also guiding higher for fiscal 2022. CrowdStrike (CRWD) surged as it was added to the Nasdaq 100 index. Finally, Microsoft (MSFT), Google (GOOGL) and others pledged big spending on cybersecurity after a White House summit on the subject. Palo Alto and CRWD stocks raced to record highs, but several other cybersecurity stocks did too.

JD.com, Pinduoduo Beat

JD.com (JD) beat Q2 expectations as revenue jumped 26% to $39 billion. Active annual customers jumped 27% to 532 million. The 32 million new users was the company’s largest quarterly increase ever. Pinduoduo (PDD) also topped quarterly expectations, while average monthly active users climbed 49% to 724.6 million. Pinduoduo runs the third-largest e-commerce platform in China, behind Alibaba (BABA) and JD.com. JD and PDD jumped as China stocks bounced following a long, sharp sell-off as Beijing cracks down on internet platforms and private enterprise generally.

China Clears Chip Deal

Chinese regulators approved the Analog Devices (ADI) acquisition of Maxim Integrated Products (MXIM), announced in July 2020. The news is positive for other chip deals awaiting government approval in China. Other acquisitions needing China’s antitrust clearance include the Advanced Micro Devices (AMD) purchase of Xilinx (XLNX) and the Nvidia (NVDA) purchase of Arm Holdings. Semiconductor stocks rallied on the news. The European Union reportedly is ready to open a formal probe of the Nvidia-Arm deal.

Dell Storage Sales Lag

Dell Technologies (DELL) beat top- and bottom-line estimates for its fiscal Q2. PC sales jumped 27% to $14.3 billion while enterprise hardware sales rose just 3% to $8.4 billion. Growth in servers and networking equipment helped make up for a 1% decline in storage gear. Dell stock fell on the news. Meanwhile, industry peer HP (HPQ) topped EPS views but missed on sales.

Discounters Tumble On Earnings

Burlington Stores (BURL) beat earnings estimates as sales more than doubled, but BURL gapped down. Dollar General (DG) earnings fell 14% on flat sales while Dollar Tree (DLTR) earnings sank 23%. Both dollar stores fell. Closeout retailers Ollie’s Bargain Outlet (OLLI) and Big Lots (BIG) missed views. Shares tumbled.

News In Brief

NetApp (NTAP) jumped as the cloud storage and data networking giant reported quarterly results that topped estimates.

Autodesk (ADSK), a maker of design and project workflow software, easily beat Q2 EPS targets, but sales were only in line. Shares plunged.

Best Buy (BBY) smashed expectations for its fiscal second quarter and guided higher for the full year. The largest sales drivers were home theater, appliances, computing, mobile phones and services.

Intuit (INTU) trounced consensus estimates, with a 9% EPS gain and 41% revenue gain for its fiscal fourth quarter. The tax and accounting software maker guided higher for the year ahead.

Abercrombie and Fitch (ANF) reported Q2 earnings of $1.70 per share, beating FactSet estimates for 77 cents. Revenue rose 24% year over year to $865 million, falling short of estimates. U.S. sales rose 31% on a one-year basis and 11% on a two-year basis. Shares fell.

Medtronic (MDT) popped Tuesday after the company beat fiscal first-quarter forecasts, reporting adjusted profit of $1.41 per share and $7.99 billion in sales. Earnings grew 127% and sales popped 23% year over year. Organically, sales increased 19%.

Peloton (PTON), the connected exercise-bike maker, reported a much deeper than expected fiscal Q4 loss, gave a weak first-quarter outlook and said it would cut the price of one of its bikes. The company also said it would release a new Tread treadmill this month, following a safety recall earlier this year. Shares tumbled.

Advance Auto Parts (AAP) grew EPS 15% to $3.40 per share as revenue rose 6% to $2.649 billion, an overall beat. The aftermarket auto parts retailer guided higher.

Xpeng Motors (XPEV) lost a wider-than-expected 21 cents per share but sales jumped roughly 600% to $582.5 million, well ahead of views.

Visa (V) jumped into non-fungible tokens with its $150,000 purchase of a Cyberpunk digital artwork.

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