The stock market rally showed mixed action in the past week. The Dow Jones hit a record high, rising modestly, while the S&P 500 and Russell 2000 edged lower. The Nasdaq fell solidly, fighting for support at its 50-day line. Nvidia sold off after its beat-and-raise report failed to wow. Birkenstock, Pure Storage and PDD Holdings were among the earnings losers, while Dell Technologies and Autodesk were winners.
Stock Market Rally Mixed
The S&P 500 paused in the latest week, edging lower along with the small-cap Russell 2000. The Dow Jones Industrial Average rose modestly, hitting a record high. The Nasdaq was the laggard, trying to hold onto its 50-day line. Nvidia tumbled after its beat-and-raise report. There were a number of big earnings winners and losers in the tech and retail spaces. A number of stocks did break out or set up. Treasury yields rose modestly.
Inflation Slowing, Economy Solid
Inflation is cooling more than expected, but the broad economy is holding up pretty well amid solid consumer spending. The latest evidence of these trends came in Friday's personal income and spending report for July, which showed that the Federal Reserve's primary inflation gauge, the core PCE price index, rose just 0.16% in July. Over the past three months, core inflation is running at just a 1.7% rate. Yet the same report showed that consumer outlays rose 0.5% in July. Meanwhile, personal income rose a stronger-than-expected 0.3%, as wages and salaries grew 0.35% from June. The latter was notably stronger than suggested by the soft July jobs report, hinting at a more solid August report in the coming week. On Thursday, Commerce revised up its estimate of Q2 GDP growth to 3% from 2.8%.
Nvidia Earnings Beat Disappoints
The artificial intelligence chip leader delivered a beat-and-raise quarterly report but came up short of lofty "whisper numbers." Nvidia fell sharply. The tech titan reported a 152% EPS gain in Q2 while sales jumped 122%. For the current quarter, Nvidia forecast revenue of $32.5 billion, up 79%. Its gross profit margin forecast was below views, but analysts expect margins to bounce back when Nvidia is in volume production of its Blackwell graphics processing units starting in fiscal Q4.
Salesforce Beats, Guides Low
Q2 earnings per share climbed 21% while revenue rose 8% to $9.33 billion, both above consensus. Operating margin rose to 33.7%, topping estimates of 32%. Current remaining performance obligations (CPRO) climbed 10% to $26.5 billion, slightly beating. The software giant guided low on Q3 revenue. CFO Amy Weaver will step down. Salesforce fell slightly for the week, hitting 200-day line resistance.
Cybersecurity Plays Top Views
CrowdStrike cut fiscal 2025 guidance across the board in the wake of a widespread IT outage on July 19 caused by a defective CrowdStrike software update for corporate customers. But fiscal Q2 earnings leapt 41% per share while revenue rose 32% to $963.9 million, above consensus. New annual recurring revenue comfortably topped lowered expectations. SentinelOne reported a 1-cent profit while revenue climbed 33% to $198.9 million. The CrowdStrike rival fell solidly after big gains over the prior three weeks. Okta reported Q2 EPS up 132% with revenue up 16% to $646 million, both beating. But it forecast Q3 CPRO bookings to rise 9% to $1.99 billion, just below consensus.
Storage Firms Mixed
Rival enterprise data storage firms NetApp and Pure Storage fell sharply despite both topping quarterly views. NetApp earnings rose 38% while revenue growth accelerated for a third straight quarter, to 8%. Pure Storage earnings grew 29% while revenue growth slowed to 11%. NetApp raised full-year targets while Pure Storage guided lower. Nutanix dropped fiscal Q4 views but guided low on Q1 revenue. But shares soared, as the storage software buy touted grabbing market share from VMware, recently acquired by Broadcom.
Apparel Retailers Frayed
Abercrombie & Fitch cleared estimates with its sixth consecutive quarter of triple-digit earnings growth, 127%, with sales up 21% to $1.134 billion. But the young adult retailer guided Q3 lower as the CEO warned of an "increasingly uncertain environment." ANF tumbled more than 16% on the week. American Eagle Outfitters edged past EPS views with a 56% gain, though the 8% revenue gain just missed. American Eagle shares tumbled. Gap reported a 59% EPS gain, while revenue also topped with a 5% rise. It reported earnings of 54 cents, well above views for 41 cents per share. Revenue rose about 5% to $3.72 billion, also ahead of estimates for $3.63 billion. Gap also lifted its gross margin forecast. But shares still fell solidly for the week.
Discount Retailers A Mixed Bag
Burlington Stores, Ollie's Bargain Outlet, Five Below and Dollar General all reported. Burlington handily beat earnings estimates with a 98% increase, while sales rose 13% and topped views. Comparable sales growth also outpaced forecasts. The off-price apparel retailer guided up on Q3 and lifted its full-year earnings guidance. Ollie's earnings grew 16%, in line with views, while the 12% revenue gain beat. Five Below slashed its earnings outlook with its Q2 results, with EPS down 36% but meeting views. Meanwhile, Dollar General earnings, revenue and comparable sales all missed expectations and the dollar store cut its full-year outlook. DG stock crashed 32% Thursday. Ollie's and Five Below sold off while Burlington reversed lower from a record high.
BYD Reports Strong Earnings Growth
China EV and battery giant BYD and smaller rival Li Auto both beat earnings views and missed on sales. But while BYD reported a 32% EPS gain and 26% revenue rise, Li Auto reported a 45% profit tumble, with revenue growth slowing to 10%. Li Auto gave lackluster Q3 guidance. Analysts expect BYD to report surging EV sales in August, with further gains in September as more models are released. BYD stock broke out past a buy point. Li Auto dived, hitting a 52-week low.
XPeng reported strong orders for its Mona M03 sedan, which starts at $16,800, significantly lower than expected and about half the price of a Tesla Model 3. Deliveries began Friday for XPeng's first EV from the affordable Mona sub-brand.
In Brief
Eli Lilly released a new form of its weight-loss drug Zepbound for roughly half its typical price, expanding affordability and increasing supply. Lilly stock was little changed for the week. Him & Hers, which has made copycat versions of obesity treatments, sold off hard.
Neurocrine Biosciences plunged after its experimental schizophrenia treatment lagged drugs from Bristol Myers Squibb and AbbVie in a midstage study. Neurocrine's drug outperformed its placebo by 7.5 points on a scale ranging from 30 to 210 points. The drugs from Bristol and AbbVie topped their placebos by 11.1 to 12.7 points.
PDD Holdings reported a 122% EPS gain in local currency, beating views, but the 86% revenue gain fell short. The parent of Chinese e-commerce giant Pinduoduo and the international Temu site said it's willing to accept lower profitability amid fierce competition. PDD stock crashed to a 52-week low.
AeroVironment surged after winning a $990 million U.S. Army contract for its Switchblade "suicide" drones. Two analysts also upgraded the drone maker.
Foot Locker reported a smaller-than-expected Q2 loss, with revenue up 1.9% to $1.89 billion, just beating. The company also announced plans to close or transfer 30 stores and e-commerce operations in Europe and South Korea, with the changes expected to be completed in mid-2025. Foot Locker maintained its full-year earnings guidance. Shares plunged but pared weekly losses.
Birkenstock reported a 20% EPS gain while revenue rose 22% to $629 million, but both were well short of views. Shares of the footwear maker plunged.
Dell Technologies reported fiscal Q2 EPS and sales up 9%, thanks to robust data-center hardware sales, including AI systems.
HP reported mixed fiscal third-quarter results and offered roughly in-line earnings guidance for the current period. The PC and printer maker reported a 3% EPS drop, missing views. Sales climbed 2% to $13.52 billion, up 2%, slightly beating.
Super Micro Computer crashed after the data-center specialist announced it was delaying the filing of its annual report with the SEC. It cited the need for more time to assess the "effectiveness of its internal controls over financial reporting." The news came a day after short seller Hindenburg Research accused Super Micro of accounting irregularities.
Autodesk, a maker of software for computer-aided design and workflows, beat analyst estimates for its fiscal second quarter and raised its full-year outlook. Earnings increased 13% while sales rose 12% to $1.51 billion.
Best Buy reported a 10% EPS gain while sales fell 3% to $9.29 billion, both beating thanks to strong sales of tablets and PCs. The consumer electronics retailer also raised its full-year earnings forecast.
Affirm Holdings reported a smaller-than-expected fiscal Q4 loss with revenue up 48% to $659 million, also topping. The buy now, pay later giant guided up on Q1 revenue and predicted a GAAP profit in Q4 2025.
