Market Rally At Highs, Led By Apple, Growth: Weekly Review

The stock market rally marched higher, leading the S&P 500 and Nasdaq composite to record highs. But small caps continued to rebound as well, as growth and leading names outperformed too, with a number of new buying opportunities. The jobs report was much weaker than expected, but that could delay Fed tapering plans. Zoom Video (ZM) and Veeva Systems (VEEV) fell sharply on earnings, but Asana (ASAN) and DocuSign (DOCU) led several software winners.


Stock Market Rally Keeps Rising

The stock market rally extended gains, though much of that came on Monday, as Apple (AAPL) led a big-tech rally, even with some negative App Store headlines. The S&P 500 and Nasdaq hit fresh highs, while the small-cap Russell 2000 made another strong move. Many top stocks flashed buy signals or extended gains. Crude oil prices jumped to a one-month high amid lower U.S. inventories and shut-in production from Hurricane Ida. The 10-year Treasury yield rose slightly, popping Friday as a weak jobs report raised expectations that the Federal Reserve won’t begin tapering bond buys.

Jobs Report Weak

The U.S. added just 235,000 jobs in August vs. expectations for more than 700,000. That could be enough to keep the Fed from starting a bond tapering program at the September meeting. The latest Covid wave has clearly put a damper on the leisure and hospitality sector, which went from adding 415,000 jobs in July to 0 in August. Restaurants and bars shed 41,500 jobs, after adding almost 290,000. Still, average hourly wages rose 0.6% last month, doubling expectations. That lifted the 12-month wage gain to 4.3%. July job gains were revised up by 110,000 to 1.05 million. The jobless rate fell to 5.2%.

On Labor Day, emergency unemployment benefits, including an extra $300 per week, expire in the remaining 24 states. The latest data shows that states covered 9.2 million ongoing claims for pandemic-related benefits in the Aug. 14 week.

The ISM manufacturing index rose to 59.9 from 59.5, but the backlog of orders rose 3.2 points to 68.2, even as production picked up 1.6 points to 60. Readings above 50 indicate growth.

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Zoom Video Dives On Weak Guidance

Zoom Video Communications (ZM) reported 48% EPS growth as revenue climbed 54% to $1.02 billion, both beating Q2 views. But it expects to lose more small business customers as the economy normalizes and more in-person meetings resume. Zoom forecast Q3 revenue in a range of $1.015 billion to $1.02 billion — flat vs. Q2 — vs. estimates of $1.02 billion. Shares plunged.

DocuSign (DOCU) reported adjusted profit leapt 176% as revenue rose 50% to $511.8 million, including acquisitions. Both comfortably beat views. For the current quarter, DocuSign forecast revenue slightly above consensus. DocuSign software automates the filing of contracts over the internet and certifies electronic signatures.

Anaplan (PLAN) reported a Q2 loss of 9 cents a share vs. a 4-cent loss a year earlier while revenue rose 35% to $144.3 million, both peaking. The financial software maker guided slightly higher on Q3 revenue.

Asana (ASAN) lost 23 cent a share vs. views for a 26-cent loss. Revenue rose 72% to $89.5 million, easily beating. The company added 7,000 customers for a total of 107,000 as of July 31.

Cybersecurity Software

CrowdStrike (CRWD) reported a 266% EPS gain while revenue jumped 70% to $337.7 million, including acquisitions. Both comfortably beat. But annual recurring revenue only topped views slightly, while CrowdStrike guided in line for Q3 EPS. OKTA lost 11 cents per share vs. a 7-cent profit a year earlier, but it was much better than views. Revenue climbed 57% to $316 million, including a $38 million contribution from its recent Auth0 buy. Okta forecast Q3 revenue slightly above consensus. CRWD stock fell modestly while Okta rose.

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Broadcom Earnings Top Views

Broadcom (AVGO) delivered a modest beat-and-raise report for its fiscal third quarter ended Aug. 1. Earnings rose 29% to $6.96 a share while sales climbed 16% to $6.78 billion. For its fiscal fourth quarter, the chip and software firm expects sales to rise 14%. Broadcom stock wavered near a buy point. Elsewhere among chipmakers, Ambarella (AMBA) and Semtech (SMTC) saw their shares jump after each posted better-than-expected sales, earnings and guidance.

China Rules Hit Game Stocks

Chinese video game stocks including Bilibili (BILI), NetEase (NTES) and Tencent (TCEHY) fell after the Chinese government issued new rules limiting how long minors can play games to just three hours a week. The measures aim to curb what authorities describe as video game addiction, which they blame for societal ills. Minors now can only play online games Friday through Sunday between 8 p.m. and 9 p.m.

Apple Makes App Store Changes

Facing antitrust scrutiny worldwide related to its App Store business practices, Apple (AAPL) has made a major change to its policies to settle a case in Japan. Apple agreed to let developers of media-consumption apps include an in-app link to their website for users to set up or manage an account. That will give those developers a chance to avoid paying Apple’s commission fees, which range from 15% to 30%. The action was taken to settle an investigation by the Japan Fair Trade Commission. Meanwhile, Apple’s App Store policies are facing new regulations in South Korea and an antitrust probe in India. But Apple stock rose to record highs.

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China EV Earnings, Sales

China’s Li Auto (LI) narrowed Q2 losses to 2 cents a share, down from 13 cents a year ago. Revenue swelled 174% to $780.4 million, beating views, on brisk sales of its sole EV, the hybrid-electric Li One SUV. Li Auto also outsold rival EV startups Nio (NIO) and Xpeng Motors (XPEV) for a second straight month. Nio sold 5,880 electric vehicles in August, up 48% year over year, but down sharply from July. Xpeng sold 7,214 EVs, up 172% vs. August 2020 but off 10% vs. July this year. Li Auto sold 9,433 EVs, up 248% vs. a year earlier and up vs. July. Li offered a strong Q3 delivery outlook. On the other hand, Nio cut Q3 delivery outlook, citing still-constrained automobile-chip supplies. The trio is taking on Tesla (TSLA) in China, and expanding that challenge to Norway, another booming EV market.

China EV and battery giant BYD Co. (BYDDF) reported first-half profit fell 29%, but it saw a big jump in revenue. In August, BYD sold 61,409 new energy vehicles, up 288% vs. a year earlier. EV sales leapt 223% to 30,382.

Stock Trading

The SEC is considering a ban on a practice that drives booming growth at no-fee broker Robinhood (HOOD). Payment for order flow involves brokerages directing trades to certain market makers in return for a portion of the profits. Meanwhile, PayPal (PYPL) reportedly plans to let users trade individual stocks. The payments giant could partner with or buy a broker-dealer in the process. The entry of PayPal, with some 400 million global users, is a potential headwind for Robinhood. The startup disrupted online brokers with zero-fee stock trades but has had a run of negative publicity. Robinhood stock sold off, along with Charles Schwab (SCHW).

News In Brief

Veeva Systems (VEEV) delivered 31% EPS growth and a 29% revenue gain to $455.6 million, both beating. The medical software giant also gave bullish guidance. But shares tumbled.

Signet Jewelers (SIG) reported Q2 EPS of $3.57 per share, swinging from a year-earlier loss of $1.13 per share and crushing estimates of $1.70. Revenue more than doubled to $1.8 billion, also beating. Signet raised its full-year outlook following the report. Shares jumped.

Catalent (CTLT) reported adjusted EPS rose 29% with fiscal Q4 sales up 25% to $1.19 billion, both topping. Catalent also said it would buy Bettera, a maker of gummies, for $1 billion.

PVH (PHV) reported Q2 EPS of $2.72 per share, more than double estimates. Revenue jumped 46% to $2.31 billion, driven by sales in Europe. The owner of Tommy Hilfiger, Calvin Klein and other fashion lines raised full-year sales guidance. Shares soared.

ChargePoint (CHPT) reported a wider-than-expected loss while revenue jumped 61% to $56.1 million amid growing demand for EV chargers. It also raised full-year revenue guidance. CHPT stock surged.

Affirm Holding (AFRM) soared after it announced a consumer financing partnership with Amazon is testing Affirm’s buy now, pay later installment payment plans with some customers. The e-commerce giant plans to make Affirm’s BNPL services more broadly available in the coming months.

Five Below (FIVE) plunged after the teen-focused discounter slightly beat profit views, but missed on revenue and disappointed on EPS guidance.


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