Stock Market Rallies On Fed, Jobs Report, Apple: Weekly Review

The stock market rallied for the week, with Friday’s weaker-than-expected jobs report bolstering a relatively dovish Federal Reserve and Fed chief Jerome Powell on Wednesday. The S&P 500 and Nasdaq tested key levels. Apple (AAPL) soared on a record buyback and earnings that were better than feared. AMD (AMD) and Super Micro Computer (SMCI) dived on earnings, hitting AI stocks initially. Carvana (CVNA), Qualcomm (QCOM) and Sprouts Farmers Market (SFM) were earnings winners.  Tesla (TSLA) surged on some China FSD progress, but pared gains as big layoffs raised questions about the EV giant’s plans. China EV stocks soared.

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Stocks Move Higher

All the major indexes rose for the week, with Treasury yields falling on a somewhat-dovish Fed and a weaker-than-expected jobs report. The Nasdaq reclaimed its 50-day line on Friday, trying to confirm a market rally attempt. But the other key indexes hit resistance there. Earnings season remained heavy, with many winners and losers.

Economic Growth Slowing

The April jobs report was soft across the board. Overall hiring slipped to 175,000 vs. expectations for 243,000. Average hourly wages rose just 0.2%, lowering the 12-month gain to 3.9%, the slowest pace in nearly three years. The unemployment rate ticked up to 3.9%, while the number of people working part-time for lack of full-time work or slack business conditions rose by 161,000 to 4.469 million, a 34-month high. Meanwhile, the ISM services index fell 2 points to 49.4, below the neutral 50 level for the first time since December 2022. The ISM manufacturing activity index, meanwhile, slid 1.1 points to 49.2. However, both ISM readings showed accelerating price pressures.

Fed Takes Relatively Dovish Tone

The Federal Reserve on Wednesday ruled out a rate cut until the second half of the year, as Chair Jerome Powell said that restrictive monetary policy clearly needs “longer to do its job” bringing inflation back toward 2%. Yet policymakers gave a green light to cutting the pace at which the Fed is shrinking its balance sheet roughly in half to $40 billion per month. The Fed is unloading $60 billion per month in Treasuries as they mature, but that will slow to $25 billion starting June 1. It’s a sign that policymakers may not be as nervous about inflation as feared. Powell also largely defused Wall Street’s fear that the next interest-rate move could be higher.

Apple Edges Past Views, Sets Huge Buyback

The consumer electronics giant narrowly beat fiscal second-quarter estimates. EPS rose a penny to $1.53. Revenue fell 4% to $90.8 billion, with hardware sales down 10% and services revenue up 14%. Apple (AAPL) expects June-quarter revenue to rise by a low-single-digit percentage gain. Shares jumped as the iPhone maker increased its dividend 4% to 25 cents a share and announced a $110 billion share repurchase plan.

AMD, Super Micro Post Mixed Results

Chipmaker AMD (AMD) and data center specialist Super Micro Computer (SMCI) reported strong demand for products for artificial intelligence in the March quarter. But both missed sales estimates. AMD earnings were in line with views while Super Micro’s earnings topped. For the current quarter, AMD offered a roughly in-line sales outlook while Super Micro guided well above expectations for the June quarter. Both stocks sold off.

Amazon Earnings Soar

Q1 earnings surged 216% while revenue grew 13% to $143.3 billion, both beating. The Amazon Web Services cloud-computing division grew 17% year over year to $25 billion vs. expectations of about 15%. Amazon (AMZN) CEO Andy Jassy said generative AI was helping fuel new AWS growth. Amazon’s retail segment also continued its profitability improvements. Operating income for the North American retail segment jumped 450% to $5 billion. Meanwhile the international retail business swung to a $900 million operating profit compared to a $1.2 billion quarterly loss a year earlier. Amazon stock rose modestly.

Qualcomm Stands Out In Chip Earnings

Wireless-chip leader Qualcomm (QCOM) beat expectations for the March quarter and guided higher than views for the June quarter. Qualcomm stock popped. Meanwhile, industry peers Qorvo (QRVO) and Skyworks (SWKS) beat views for the first quarter but forecast well below Q2 estimates amid weak smartphone sales. Qorvo and Skyworks shares plunged. Among other chipmakers, Monolithic Power (MPWR) delivered a beat-and-raise report on strength in its enterprise data storage business. NXP Semiconductors (NXPI) broke out after its upbeat Q1 report.

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Lilly, Novo Nordisk

Weight-loss drug behemoths Eli Lilly (LLY) and Novo Nordisk (NVO) reported first-quarter earnings last week. Lilly earnings soared 59%, easily beating. Sales climbed 26% to $8.77 billion, slightly missing. But weight-loss drug Zepbound generated $517.4 million in sales, walloping forecasts. Lilly raised full-year forecasts. Novo beat views with a 28% EPS gain with sales up 22% to $9.46 billion. Obesity drug Wegovy’s sales nearly doubled to $1.34 billion but came up short. Revenue from diabetes shot Ozempic climbed 33% to $3.85 billion, narrowly topping. Amgen (AMGN) finished a phase 1 study on an obesity drug and reported a 1% EPS dip that nudged past views. Amgen tumbled. LLY stock rose on earnings, but erased weekly gains in part on the Amgen obesity drug news. NVO stock fell.

Restaurant Stocks Are Mixed

A slew of chains served up results, but traffic may be starting to stale. McDonald’s (MCD), Shake Shack (SHAK) and Wendy’s (WEN) all reported higher same-store sales but missed traffic forecasts. Restaurant Brands (QSR) beat on earnings and revenue, but saw Burger King comparable sales growth slow. Wingstop (WING) is trading near record highs after it cleared forecasts with a 66% earnings spike while domestic same-store sales jumped 21.6%, well above FactSet views. Starbucks (SBUX) dived to multiyear lows after missing earnings and sales estimates and reporting a larger-than-expected traffic decline. Texas Roadhouse (TXRH) earnings leapt 31% in Q1, with traffic up 9.3% in the first five weeks of Q2. TXRH and Wingstop are in buy zones, with Shake Shack making a bullish move.

Neurocrine Bio, Regeneron Rise On Results

Neurocrine Biosciences (NBIX) topped sales expectations with movement disorder drug Ingrezza bringing in $506 million. Adjusted earnings also reversed from a year-earlier loss to $1.20 per share, beating projections. Regeneron Pharmaceuticals (REGN) missed on both metrics, with EPS down 5% and sales off 1% to $3.15 billion. But the biotech giant rose on better-than-feared sales of its eye disease treatment Eylea.

Tesla Soars On China FSD News

Tesla (TSLA) soared 15.3% on Monday, its best gain in more than three years, after reportedly winning tentative approval for introducing Full Self-Driving in China. FSD would face off against a number of other Level driver-assistance systems. But shares pared weekly gains as reports emerged that Musk axed Tesla’s entire teams for Superchargers and new vehicles. Musk wrote on his social site X that Tesla “still plans to grow the supercharger network” but at a slower pace. This move comes after Musk earlier in April cut more than 10% of Tesla’s global workforce.

BYD Earnings Miss, But Margins Strong

China EV and battery giant BYD reported an 11% net income gain in local currency, with revenue up 4%, both missing Q1 views. But gross margins hit a record 21.88%. BYD’s sales totaled 313,245 vehicle in April, up 3.6% from March’s 302,459 and 49% from 210,295 in April 2023. Meanwhile, Nio (NIO) delivered 15,620 vehicles in April, up 31.6% vs. March and 134.6% vs. a year earlier. XPeng (XPEV) delivered 9,393 EVs in April, up 4.1% vs. March’s 9,026 and up 23% vs. a year earlier. Li Auto (LI) delivered 25,787 vehicles in April, down 11% vs. March but up 0.4% vs. a year earlier. BYD stock broke out of a short base while its beaten-down peers soared.

Digital Payments Giants Beat

PayPal Holdings (PYPL) reported a 27% adjusted EPS gain based on a new accounting methodology that includes stock-based compensation expense and related employer payroll taxes. Revenue rose 9% to $7.7 billion while payment volume grew 14%, both beating. The digital payments giant popped on earnings, but then erased gains. Square-parent Block (SQ) reported adjusted Q1 EPS jumped 85% with revenue up 19% to $5.96 billion, both beating. However, gross payment volume from the transactions of merchant customers rose 9% to $50.5 billion, below estimates of $55.81 billion. Shares jumped on earnings after tumbling earlier in the week on a report that federal prosecutors are probing Square’s financial transactions.

Security Software Plays Fall

CyberArk (CYBR) swung to a profit of 75 cents while revenue rose 37% to $221.6 million, both beating. Subscription-based annual recurring revenue climbed 54% to $621 million. But Q2 revenue guidance was slightly below consensus. CyberArk sells identity and access management tools. Shares fell. Cloudflare (NET) earnings doubled in Q1 while revenue grew 30% to $378.6 million. Analysts predicted adjusted profit of 13 cents a share and revenue of $373.2 million. For Q2, Cloudflare, which speeds up and provides security for web applications, forecast in-line revenue. NET stock tumbled.

In Brief

Pfizer (PFE) jumped after beating views, thanks to a one-time benefit from Paxlovid, its Covid treatment. Total revenue tumbled 20% to $14.88 billion, while adjusted EPS skidded 33%. Paxlovid sales fell 50% to $2.04 billion, but crushed views after the U.S. government handed back 5.1 million courses of the drug. Pfizer raised its full-year sales.

Generac (GNRC) reported a 40% EPS gain, beating views, while flat revenue of $889 million was roughly in line. The generator maker maintained full-year targets. Shares fell below a buy point.

Mastercard (MA) reported an 18% EPS gain while revenue climbed 10% to $6.34 billion, both slightly beating. But the payments giant guided lower for the full years. Shares fell solidly.

Carvana (CVNA) skyrocketed after reporting Q1 net income of $49 million and adjusted EBITDA of $235 million, both vs. year-earlier losses. Revenue climbed 17% to $3.06 billion, easily beating.

Sprouts Farmers Market (SFM) gapped higher as a 14% EPS gain and 9% sales rise to $1.88 billion beat views. The natural foods grocery chain gave upbeat guidance.

DoorDash (DASH) reported a wider-than-expected sales miss of a 6-cent decline, although revenue topped views with a 23% gain to $2.51 billion. The food delivery firm’s gross order guidance implied slower growth. Shares tumbled.

DraftKings (DKNG) reported a smaller-than-expected Q1 loss while revenue jumped 53% to $1.174 billion. Monthly unique players (MUPs) increased 23% to 3.4 million, while average revenue per MUP rose 25% to $114. The online sports betting giant raised its full-year revenue outlook. Shares fell in volatile trade.

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