The stock market rally fell modestly in a holiday-shortened week, but held key levels. The May jobs report showed strong hiring, but wage gains cooled. Several Fed officials signaled that big rate hikes will continue for at least the next three meetings. Salesforce.com headlined a strong week of earnings for beaten-down software names. Microsoft warned, slightly, on currency shifts. China EV sales rebounded in May, with BYD hitting yet another high. Tesla fell on reports that Elon Musk wants to cut 10% of staff due to a "super bad feeling" about the economy. Energy stocks rallied as crude oil held well above $110 a barrel.
Market Rally Pauses But Holds Key Levels
The stock market retreated to start a holiday-shortened week, but the Nasdaq held its 21-day moving average. Salesforce.com led positive reactions from many beaten-down software names. But energy stocks, including oil, gas and solar names, were among the biggest winners with crude oil prices well above $110 a barrel. Amid generally strong labor market data, Fed officials signaled that big rate hikes will continue at least through the September meeting. The 10-year Treasury yield rebounded toward 3% after trending lower for several weeks.
Jobs Report Backs Up Hawkish Fed
Friday's jobs report showed that Federal Reserve tightening has had little impact to date, as employers added a stronger-than-expected 390,000 jobs in May. The good news is that the labor force increased solidly, helping to keep the jobless rate at 3.6% and holding down wage growth somewhat. But with prime-age labor force participation near pre-pandemic levels, the Fed won't count on big increases in job seekers. Earlier, the April JOLTS report showed job openings near record highs. The ISM manufacturing index unexpectedly pointed to faster factory growth, though service-sector growth cooled more than expected. Several Fed officials signaled that big rate hikes will continue for at least the next three meetings.
Salesforce Earnings Fall But Top Views
Salesforce reported adjusted EPS fell 19% in the April quarter while revenue climbed 24% to $7.41 billion, including Slack Technologies. Current remaining performance obligations, known as CRPO bookings, rose 24% to $21.5 billion, in line with estimates. For the July-ending quarter, the enterprise software giant guided slightly lower. But CRM stock soared, though still well off highs.
Microsoft Lowers June-Quarter Outlook
The software giant on Thursday lowered its revenue and earnings forecasts for the current quarter, citing foreign exchange headwinds. Microsoft sees currency exchange rates cutting its revenue by $460 million and earnings by 3 cents a share. Based on the midpoint of its guidance, Microsoft now expects EPS to rise 5% with sales up 13% to $52.34 billion. Shares closed up slightly on Thursday, edging lower for the week.
China EV Sales Power Up
Chinese EV and battery giant BYD reported record May sales of 114,943 EVs and plug-in hybrids, topping 100,000 for a third straight month. With its in-house battery and chip operations, BYD avoided the production woes from China's Covid lockdowns. Nio, Xpeng and Li Auto all reported improved sales in May after China's Covid lockdowns slammed the EV startups in April. Nio delivered 7,024 vehicles in May, up 38% vs. April and nearly 5% vs. a year earlier. Xpeng delivered 10,125 vehicles in May, up 12.5% vs. April and 78% vs. May 2021. Li Auto delivered 11,496 Li One SUVs in May, up 176% vs. April and 166% vs. a year earlier. Meanwhile, the Shanghai lockdown ended on June 1 while several local governments, including Shanghai, have announced new EV subsidies. Nio, Xpeng and Li Auto shares rallied, while BYD moved toward record highs.
Tesla is freezing hiring and needs to cut staff by about 10%, CEO Elon Musk said in an internal email, according to Reuters. That would be almost 10,000 jobs. Musk said he has a "super bad feeling" about the economy. That comes after Musk publicly stated that employees could no longer work remotely. Tesla stock fell for the week.
Tesla Vs. BYD: China Giant Seizing Tesla's EV Crown
Chip Woes Limit U.S. Auto Sales
Overall U.S. sales likely fell 30% in May vs. a year earlier, Ford Motor said, as chip supplies continue to curb production. Other data suggested that May sales fell 11% vs. April. Ford's U.S. sales fell just 4.5% in May vs. a year earlier, gaining share. Ford is prioritizing new models, including EVs, as well as its money-spinning F-series pickup trucks. Ford is investing $3.7 billion in Midwest manufacturing plants as part of an EV production push. Toyota U.S. sales skidded 27% while Honda sales plunged 57%. Chip supplies are expected to improve later this year, as the end of China's Covid lockdowns lifts the latest major roadblock to recovery.
Data Storage Firms Beat Views
NetApp reported better-than-expected fiscal Q4 results. Revenue climbed 8% to $1.68 billion as earnings rose 21%, despite pandemic-induced supply chain headwinds and substantial increases in freight and component costs. Shares rose solidly for the week. Pure Storage jumped on much-stronger-than-expected earnings, as demand for cloud-based storage continues to expand. The enterprise storage hardware and services company's revenue soared 50% to $620.4 million.
Cybersecurity Results Top
CrowdStrike reported first-quarter EPS leapt 210% while revenue grew 61% to $487.8 million, including acquisitions. Annual recurring revenue, a metric tied to subscription customer growth, increased 61% to $1.92 billion, just topping. CrowdStrike guided slightly higher for Q2 revenue. SentinelOne reported a smaller-than-expected loss as revenue rose 109% to $78.3 million. The CrowdStrike rival also guided higher for the current quarter. Okta reported a smaller-than-expected loss as revenue rose 65% to $414.9 million, topping estimates by nearly $26 million. OKTA stock jumped. CrowdStrike fell on Friday following earnings and fell for the week. SentinelOne fell.
Apparel Retailers Rally On Earnings
Lululemon reported first-quarter earnings rose 31% as revenue climbed 21%, both beating. The athleisure apparel maker's full-year outlook also came in above forecasts. Lululemon touted its e-commerce growth and said its price increases hadn't hurt sales. And it said it was "comfortable with the quality and composition" of its rising inventories, which it said would help cushion against supply-chain pressures. Capri Holdings, the company that oversees Versace, Jimmy Choo and Michael Kors, also beat expectations, with a mixed full-year outlook. Both stocks rose for the week.
Hewlett Packard Enterprise reported fiscal second-quarter earnings fell 4% while revenue rose a fraction to $6.7 billion, both slightly missing. HPE guided slightly lower on fiscal Q3 earnings.
MongoDB jumped on a surprise profit, and after the database software firm raised guidance.
Regeneron Pharmaceuticals toppled Thursday after the biotech inked a deal worth up to $1.1 billion to acquire the international rights to its Sanofi-partnered cancer drug, Libtayo. Regeneron and other big biotechs and drugmakers also retreated during the week on renewed price control buzz in Washington.
Meta Platforms COO Sheryl Sandberg will leave the internet giant after 14 years.
Delta Air Lines, American Airlines and Alaska Airlines gave bullish Q2 forecasts, following similar comments from other carriers. American also guided up on fuel costs. Airline stocks fell sharply for the week.
