The stock market rally moved to uptrend under pressure, but the major indexes ultimately were little changed for the week. Meta Platforms and Microsoft were big earnings winners but so was Google parent Alphabet ultimately. Amazon.com was little changed after warning on cloud growth. But there were also some big losers, including Mobileye, AbbVie, Snap, Cloudflare and Crocs. Market breadth remains a concern, though it improved somewhat late in the week. Meanwhile. First Republic Bank deposit flight revived banking fears.
Stock Market Rally Under Pressure
The major indexes retreated midweek on banking concerns and underlying weakness, pushing the market rally to uptrend under pressure. But they rebounded Thursday as megacap techs such as Meta Platforms led the way. The Dow Jones, S&P 500 and Nasdaq composite rose for the week. A number of top stocks suffered massive earnings losses. Crude oil prices and Treasury yields fell.
Economic Data Mixed
The Fed's favorite inflation gauge, the personal consumption expenditures, or PCE, price index rose just 0.1% in March as the annual inflation rate slid to 4.2% from 5% in February. The core PCE price index rose 0.3% as the core inflation rate dipped to 4.6% from an upwardly revised 4.7%. The spending category emphasized by Fed chair Jerome Powell, core services excluding housing, saw prices rise just 0.2% in March, lowering 12-month inflation to 4.5%. But the Fed's favorite read on worker pay, the Employment Cost Index, showed a stronger-than-expected 1.2% rise in Q1. Pay hasn't slowed enough to satisfy the Fed, but recent trends in jobless claims point to softer gains ahead. The U.S. economy grew just 1.1% at an annual rate in the first quarter, down from 2.6% in Q4 as companies reduced inventories and business equipment investment fell. Consumer spending picked up.
Microsoft Gets Cloud Lift
Microsoft beat Wall Street's targets for the March quarter thanks to a strong showing by its cloud computing businesses. The software giant reported a 10% EPS gain with revenue up 7% to $52.9 billion. Microsoft Cloud sales surged 22% to $28.5 billion in the March quarter. It forecast sales rising 7% in the June quarter.
Google Exceeds Views, Sets Huge Buyback
Google-parent Alphabet reported EPS fell 5% vs. a year earlier while gross revenue rose 3% to $69.79 billion, topping estimates of $68.9 billion. The tech giant forecast higher capital spending in 2023 due to investments in artificial intelligence. Previous guidance was for flat capex. In Q1, Alphabet recorded $2.6 billion in one-time charges related to cost cutting. Google's board authorized an additional $70 billion in stock repurchases. In Q1, the company repurchased $14.6 billion of its own stock. Shares rose for the week, regaining a buy point.
Meta Easily Beats Views
Facebook and Instagram parent Meta Platforms reported a 19% EPS decline but that was much better than expected. Sales grew 3% to $28.65 billion, ending three quarters of year-over-year declines. Meta also reported increases in the number of people using Facebook and its family of apps on a daily and monthly basis. Shares surged to a 52-week high.
First Republic Revives Bank Fears
First Republic Bank sent shock waves through the financial sector announcing deposits plummeted 40.8%, or $72 billion, to $104.5 billion as of March 31 vs. Dec. 31. That's even with the $30 billion injection from JPMorgan Chase and other of the nation's largest banks in March. First Republic reportedly is trying sell assets at above market value to stay afloat, telling big banks that the alternative is an FDIC takeover that ultimately forces them to pay more in fees to cover the losses. Already battered FRC stock crashed once again. Other banks also tumbled, especially regionals, but pared losses.
Amazon Beats, Cautious On Cloud
Amazon.com reported Q1 earnings that topped estimates amid cost-cutting by the e-commerce giant. But management's earnings call commentary raised questions over how long a slowdown in cloud computing growth will persist. Amazon Q1 earnings were 31 cents a share on an adjusted basis vs. a 38-cent loss a year earlier. Revenue climbed 9% to $127.4 billion. Amazon Web Services revenue rose 16% to $21.4 billion, slowing from 37% growth in the year-earlier period. On the earnings call, management said AWS is seeing slower growth in April vs. Q1. AMZN stock fell on earnings.
Intel Delivers Mixed Report
Intel reported a smaller-than-expected Q1 loss while revenue tumbled 36% to $11.72 billion amid weak PC sales and softening data center sales, but still beat views. For the current Q2, Intel forecast an adjusted loss of 4 cents a share on sales of $12 billion. Analysts had expected Intel to break even on sales of $11.74 billion. But shares popped Friday. Semiconductor stocks took a hit in the past week as many chipmakers cut forecasts amid weakening demand. Chipmakers guiding lower included Impinj, Mobileye, Silicon Labs and Texas Instruments. MaxLinear and Wolfspeed also disappointed investors with their guidance. However, STMicroelectronics bucked the trend with a beat-and-raise earnings report. But skittish investors still sold off STM after the report. Major semiconductor equipment firms fared better, with KLA and Teradyne posting beat-and-raise earnings reports.
Software Firms Fall On Guidance
Software maker ServiceNow reported Q1 earnings per share up 37%, comfortably beating. Revenue climbed 22% to $2.096 billion, just above views. ServiceNow raised its full-year 2023 subscription revenue outlook, but by less than the Q1 beat, disappointing some investors. NOW stock fell for the week, but was still well off lows. Cloudflare easily beat Q1 EPS views while a 37% revenue rise just missed. NET stock crashed on weak Q2 and full-year revenue targets. Cybersecurity play Tenable and data analytics firm Alteryx plunged on weak guidance.
Energy Giants Top Earnings Views
Chevron and Exxon Mobil saw revenue slip vs. a year earlier as lower prices took a toll. Chevron reported earnings up 6%, benefiting from higher margins on refined products, as sales dropped 6% to $50.79 billion. Worldwide net oil-equivalent production came in at 2.98 million oil-equivalent barrels per day in Q1, down 3%. Capital expenditures totaled $3 billion in Q1, up 55% vs. a year ago on the back of "higher investment" in the U.S. Meanwhile, Exxon earnings jumped 36%. Revenue declined 4% to $86.56 billion, missing views. Net production rose 4% to 3.8 million oil-equivalent barrels per day.
GE Easily Beats, Reports Positive Cash Flow
General Electric earned 27 cents a share, reversing a year-earlier loss and nearly doubling Q1 views. Revenue grew 14% to $14.5 billion, crushing views and with gains accelerating for a fourth straight quarter. Revenue in its aerospace business surged 25% and orders rose 14% from a year earlier. GE reported positive free cash flow, the first time its done that in a first quarter in a decade. GE stock hit a five-year high but then reversed lower.
Hot Shoe Stocks Offer Weak Outlooks
Crocs reported a 27% EPS jump with revenue up 34% to $884.2 million, beating views. Crocs' Hey Dude brand revenue was $235.4 million, up 104.8% from the partial period last year following the February acquisition. But the specialty footwear maker dived on weak Q2 guidance. Skechers topped forecasts with a 32.5% per-share profit jump with revenue up 10% to $2 billion. For Q2, Skechers guided low, especially on EPS. But shares jumped Friday and for the week.
Drug Earnings Are Up And Down
Eli Lilly missed profit views, but showed promising results for its diabetes treatment Mounjaro in a weight-loss study. Mounjaro sales rocketed in Q1, but overall sales fell. LLY popped to a new high briefly Thursday, but was little changed for the week. Merck, Novartis and GSK topped Q1 views. Shares fell on earnings but were mixed for the week. Bristol Myers Squibb missed sales forecasts on continued declines for its blockbuster cancer drug Revlimid. Shares fell solidly for the week.
AbbVie reported a 22% EPS decline that missed forecasts. Revenue fell nearly 10% to $12.23 billion, beating views. Sales of blockbuster Humira, used to treat various diseases, tumbled due to a new, biosimilar rival. Shares tumbled.
Medical Device Players Beat
Edwards Lifesciences, Boston Scientific, Medpace, Illumina and Dexcom beat first-quarter expectations. Medpace initially spiked on results, but slashed gains. BSX stock rose modestly. Edwards Lifesciences was little changed while DXCM stock fell modestly. Illumina tumbled on plunging earnings and sliding revenue.
Biotechs Mixed
Biotechs offered mixed earnings reports last week. Biogen won speedy approval for a medicine that treats a rare form of amyotrophic lateral sclerosis, or ALS. But the approval didn't help shares which were hampered by what one analyst called a "low-quality" beat. Adjusted earnings fell 3% to $3.40 per share and sales skidded 6% to $2.46 billion. Amgen beat earnings expectations with a 6% drop, but the 2% sales dip missed. Gilead revenue inched 4% higher to $6.35 billion. But earnings plummeted 35%, missing forecasts.
Card Giants Beat On Cross-Border Payments
Visa and Mastercard beat quarterly forecasts. Cross-border transactions were up 24% and 35%, respectively. Dow giant Visa reported a 19% EPS gain and Mastercard posted a 1% increase, with both riding 11% revenue rises. MA stock is trading in a buy zone while V is just below a buy point.
GM Ups Guidance, To End Bolt EV
General Motors reported Q1 EPS rose 6%, defying views for a drop, while revenue climbed 11% to $39.98 billion. The auto giant also raised full-year profit guidance. GM will stop making the Chevrolet Bolt by year end. It's an older model but GM's bestselling U.S. EV by far. GM will shift the production line to EV pickups, which may be more profitable. GM stock fell to a six-month low.
Restaurant Giants Hit Highs
McDonald's and Chipotle Mexican Grill hit record highs after serving up deluxe-size earnings jumps this week. McDonald's earnings grew 15% as revenue grew 4.3%, ending three quarters of year-over-year declines. Same-store sales jumped 12.6%. Chipotle earnings rocketed 84%, well above views. Revenue swelled 17% to $2.4 billion, edging out forecasts. CMG stock bolted out of the buy zone.
News In Brief
Super Micro Computer fell after the server maker warned that its fiscal third-quarter revenue will fall well short of expectations. It expects sales of $1.28 billion in the quarter ended March 31, vs. its previous forecast of $1.47 billion. Super Micro blamed component shortages.
Roku added 1.6 million new active accounts in the March quarter, bringing its total to 71.6 million. Wall Street had expected 1.14 million new users. Analysts remain concerned about the streaming video platform's path to profitability.
Cadence Design Systems shares tumbled after the maker of electronic design automation software gave weak guidance for the current quarter. However, CDNS stock pared losses to find support at its 50-day line.
Spotify Technology added 5 million premium subscribers in the first quarter, crushing estimates for 2.23 million, for a total of 210 million. The streaming music leader also topped estimates for listeners to its ad-supported service.
Churchill Downs surged to a record high as the casino-and-racetrack operator reported a 66% EPS gain on a 54% revenue rise, both accelerating for a second straight quarter.
Caterpillar reported a 70% EPS gain, well above views, while revenue grew 17%. The Dow Jones heavy equipment giant still reported solid trends for Q2. Shares initially tumbled on results but closed back above the 200-day by the end of the week.
