The stock market rally had some more wobbles, but had a solid week, with the Nasdaq and S&P 500 setting new highs. Chip stocks generally found their footing after Monday, though Micron Technology tumbled on in-line revenue guidance. However, software stocks and megacaps shined, while small caps rebounded. Tame inflation data also helped. Carnival and FedEx were earnings winners while Nike tumbled. Rivian soared on a big investment by VW in Rivian.
Megacaps, Small Caps, Software Strong
The stock market rally saw modest to solid gains in the latest week. While a rotation into industrials and financials fizzled, software ramped up its comeback. Several megacap stocks broke out. The Dow Jones rose modestly, while the S&P 500 and Nasdaq hit record highs. The small-cap Russell 2000 jumped above its 50-day line. Micron Technology and Nike fell after earnings while Carnival and FedEx spiked. Crude oil extended its bounce. Treasury yields rose.
Economic Data Bolster Rate-Cut Hopes
The Fed's favorite inflation gauge, the core PCE price index, rose just 0.1% in May vs. the prior month. The core PCE inflation rate came in at 2.6% vs. a year earlier, the lowest since March 2021. The report bolstered expectations for a September Fed rate cut and two quarter-point cuts in 2024. The inflation data was part of the income and spending report, with consumer spending coming in below expectations. Meanwhile, underlying durable goods data unexpectedly weakened in May. Jobless claims fell in the latest week, but the four-week average continued to climb.
Micron's In-Line Guidance Disappoints
Micron Technology earned 62 cents a share adjusted in its fiscal Q3, a second profitable quarter after a string off losses. Revenue spiked 82% to $6.81 billion, with growth accelerating again. Micron highlighted strong sales of high-bandwidth memory for AI applications and solid-state drives for data centers. The memory-chip giant's fiscal Q4 EPS guidance was above consensus at the midpoint, but its revenue target was only in line. Micron also plans to ramp up capital spending, good news for chip-equipment makers. Micron stock fell solidly.
Carnival Soars On Surprise Earnings
The cruise giant earned 11 cents a share adjusted vs. a 31-cent loss a year earlier and forecasts for a 1-cent loss. Revenue climbed 18% to $5.78 billion, slightly beating, as growth continues to slow. Carnival continues to see strong booking momentum, with record volumes for 2025 sailings. Shares surged, blasting out of a base.
Nike Dives On Weak Sales, Outlook
Nike earnings jumped 50% in fiscal Q4, well above views. But revenue dipped 2% to $12.6 billion, falling short of expectations, amid North American weakness. The Dow Jones athletic shoe and apparel giant now expects 2025 revenue to decline in the high-single digits for the first half of fiscal 2025, vs. prior targets of a low single-digit sales drop. UBS in a Friday note said the Q4 report showed that Nike's fundamental trends are "much worse than expected" and the key take-away is there "will be no quick turnaround" for earnings.
Rivian Soars On VW Deal
Late Tuesday, Rivian announced an alliance with Volkswagen, which will invest $5 billion in the startup over the next two years, easing cash concerns. That includes $3 billion in Rivian stock and $2 billion for a joint venture focusing on software along with electrical architecture design and development. Meanwhile on Thursday, Rivian said it still expects to produce 57,000 vehicles this year. It sees Q2 deliveries of 13,000-13,300, above analyst views for 12,000. It'll release official Q2 delivery figures on July 2. Rivian also affirmed its goal of positive gross profit per vehicle by the fourth quarter. In Q1, Rivian lost $38,784 per vehicle delivered. Rivian stock surged Wednesday.
FedEx Jumps On Earnings, UPS Selling Coyote
FedEx reported Q4 EPS rose 9.5% with revenue up 1% to $22.1 billion, both beating. The shipping and delivery giant gave solid guidance and said it's mulling options for its FedEx Freight unit, which is losing its Postal Service contract in September. Earlier, UPS said it'll sell its Coyote Logistics freight-brokerage business to RXO for just over $1 billion, to "focus on our core business." FDX stock spiked to a 52-week high on the stock market. UPS was little changed in a long downtrend.
In Brief
Novo Nordisk won China approval to sell its weight-loss drug Wegovy in that country. Ozempic, Novo's diabetes drug with the same active ingredient, has sold in china since 2021. Novo Nordisk also announced plans to invest $4.1 billion to build a second fill-and-finishing manufacturing facility in Clayton, N.C. to keep up with demand.
AeroVironment sold off after the drone and missile maker on Wednesday posted a 57% decline in Q4 adjusted earnings, while sales growth slowed to 6%. Still, that beat views, though fiscal 2025 guidance with in line.
