The stock market rally retreated during the week amid some big earnings losers. The Dow tumbled below its 50-day line while the Nasdaq, S&P 500 and Russell 2000 also fell back.
Salesforce.com plunged on weak revenue and guidance. Along with Nutanix, UiPath and a few others, CRM slammed software stocks generally. Dell Technologies also dived on guidance, hitting some computer makers.
On the upside, Dick's Sporting Goods, Burlington Stores, Abercrombie & Fitch, Cava and Birkenstock showed pockets of strength, though Kohl's and American Eagle Outfitters tumbled.
A relatively tame PCE inflation rate raised rate-cut hopes.
Stock Markets Slump
The stock market retreated amid some major earnings losers, including Salesforce and Dell Technologies. The Nasdaq fell to its 21-day moving average, while the S&P 500 undercut that short-term level and the Dow Jones retreated well below the 50-day line. The 10-year Treasury yield surged to start the week but slashed gains. Copper futures retreated for a second straight week.
Core Inflation Inches Lower
Core inflation appears to be back on the wane as economic growth downshifts, but the trends will need confirmation before the Fed follows through with rate cuts. Friday's personal income and spending report showed that both were softer in April, with income rising 0.3% and personal consumption expenditures just 0.2% after the latter saw back-to-back 0.7% gains. Core PCE prices rose just under 0.25% in April, which rounded down to 0.2%. Including modest revisions to Q1 inflation, 12-month core PCE inflation dipped to 2.75%, the lowest since March 2021. The soft start to consumption in Q2 followed downward revisions to prior data that lowered Q1 GDP growth to a 1.3% annual from the initially reported 1.6% rate.
Salesforce Dives On Weak Revenue, Guidance
Salesforce.com reported adjusted Q1 earnings that rose 44% vs. a year earlier, slightly beating views. But revenue climbed 11% to $9.13 billion, fractionally missing for the first time since 2006. A key financial metric, current remaining performance obligations, known as CRPO bookings, also fell short with a 10% gain. The Dow giant guided lower for current-quarter revenue. Salesforce stock gapped sharply lower, dragging down many other software names.
Dell Earnings Outlook Misses
Dell Technologies just matched Q1 EPS estimates with a 3% dip. Revenue rose 6% to $22.24 billion, topping views on AI-optimized server sales. But Dell guided below estimates for earnings in the current quarter and full year ahead. Shares plunged.
Cava Soars On Strong Earnings
Cava Group earned 12 cents a share vs. a year-earlier loss of $1.30. Revenue leapt $30% to $256.3 million, beating views. Same restaurant sales growth slowed for the fourth consecutive quarter but topped estimates with a 2.3% increase. But guest traffic fell 1.2%. Still, the Mediterranean fast-casual chain lifted its same-restaurant sales growth outlook. Cava stock initially tumbled but quickly roared for big gains to fresh all-time highs.
Cybersecurity Guidance Mixed
Okta reported Q1 EPS shot up 195% as revenue rose 19% to $617 million, both beating. It also raised its fiscal 2025 revenue guidance slightly. But shares reversed sharply lower. SentinelOne reported an adjusted loss of 1 cent a share vs. a 15-cent loss a year earlier. Revenue rose 40% to $186.4 million. Both topped views. But annualized recurring revenue from subscriptions slightly missed, while SentinelOne guided slightly lower for Q2 and full-year revenue. Shares plunged. Zscaler said adjusted fiscal Q3 EPS rose 83%, revenue climbed 32% to $553.2 million, while billings rose 30% to $628 million, all beating. It guided in line for Q4 revenue.
Sporting Goods Stores Are Game
Dick's Sporting Goods reported better than expected fiscal Q1 results, with EPS down 3% to $3.30 and revenue 6% higher to $3.02 billion. The sporting goods retailer also guided higher for the full year. Shares ran to a new high. Meanwhile, Foot Locker reported better-than-expected earnings. Revenue slid 2% to $1.88 billion, but same-store sales fell less than expected and the CEO said consumers are willing to pay full price. Shares jumped.
Abercrombie & Fitch Soars Again
Abercrombie & Fitch and American Eagle Outfitters both beat earnings estimates for their latest quarters, but only Abercrombie hiked full-year outlook. Abercrombie earned $2.14 a share, soaring 449% vs. a year earlier. Revenue swelled 22% to $1.02 billion, with growth accelerating for a fourth straight quarter. The youth apparel retailer now sees revenue up 10% for the entire year vs. a prior target of 4%-6%. American Eagle earnings doubled to 34 cents a share but sales rose 6%, less than expected. Abercrombie stock soared into the profit-taking sell zone from a 140.28 buy point, cleared earlier in May. AEO stock tumbled.
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Storage Firms Deliver Strong Earnings
Enterprise data storage rivals Pure Storage and NetApp both beat expectations with April-quarter earnings. Pure Storage earnings jumped 300% year over year as shift to a subscription model pays off, while revenue increased 18% to $693.5 million. Pure Storage stock rose modestly, to record highs. Meanwhile, NetApp earnings increased 18% while sales climbed 6% to $1.7 billion. NTAP stock also rose to record highs. A big question for data storage players is when will they see the same revenue boosts from AI that other hardware companies have. "As yet, we have seen very little, if any, pull-through on storage, whereas servers and networking have grown meaningfully," Barclays analysts wrote following Pure Storage's report.
Discounters Top Earnings Views
Warehouse retail chains and dollar stores reported generally robust earnings as consumers turned more value conscious. Costco earnings jumped 29%, the best gain in years, with revenue slightly beating with a 9% gain to $58.515 billion. Burlington Stores crushed earnings estimates, with EPS surging 61% as sales rose 11%. Dollar General posted a 30% EPS decline, better than feared, on a 6% sales gain. Costco stock fell slightly, backing off record highs. Burlington stock soared and pushed off-price peer TJX back into a buy zone as well. Dollar General slid to its 200-day line.
In Brief
American Airlines cuts its Q2 EPS target to $1-$1.15 from $1.15-$1.45. It sees unit revenues down 5%-6% vs. a year earlier. Previously, it expected a 1%-3% decline. AAL stock tumbled. United Airlines, which guided in line for Q2 EPS, rose slightly.
Heico reported Q2 EPS rose 16% while revenue jumped 39% to $955.4 million, both slightly beating. The aerospace components play fell but from near record highs.
ConocoPhillips will buy Marathon Oil in a $22.5 billion all-stock deal including assumed debt. The acquisition will add more shale exposure. Conoco fell while MRO jumped.
Nutanix reported fiscal Q3 adjusted EPS of 28 cents a share vs. 4 cents a year earlier, topping estimates for 17 cents. Revenue rose 17% to $524.6 million, also beating. But the cloud-computing network management software maker guided lower on current-quarter revenue. Shares plunged.
C3.ai lost 14 cents a share adjusted in fiscal Q4 vs. a year-earlier 13-cent loss but much better than views for a 30-cent drop. Revenue rose 20% to $86.6 million, modestly beating. For fiscal 2025, C3.ai forecast revenue of $382.5 million at the midpoint of guidance, above consensus. But it also sees a higher-than-expected loss.
UiPath said CEO Rob Enslin was resigning and that founder Daniel Dines would take that position. The automation software maker earned 13 cents a share vs. 1 cent a year earlier, just beating. Revenue rose 16% to $335 million, edging by estimates. UiPath cut its full-year revenue and operating income guidance considerably. Shares plummeted.
Best Buy beat expectations for earnings but missed on sales. Fiscal Q1 EPS rose 4% while sales fell 7% to $8.85 billion, the 10th straight quarter of declining revenue vs. a year earlier.
HP topped fiscal Q2 estimates with a 4% EPS gain as sales dipped 1% to $12.8 billion. The PC and printer maker has now posted eight consecutive quarters of declining sales.
Sea Limited fell on news that Indonesia regulators are investigating the Singapore-based company's Shopee online sales platform for allegedly unfairly steering shoppers toward its own shipping services.
Viking Holdings reported a 14% revenue gain to $718 million, easily beating views in the cruise line operator's first earnings report since coming public a month earlier. Its adjusted EBITDA loss narrowed to $4.4 million, much less than expected. Shares fell on results but rose for the week, hitting record highs.
Veeva Systems topped fiscal first-quarter sales and adjusted earnings expectations late Thursday, with a 65% EPS jump and 24% revenue gain to $650.3 million. But the medical software developer trimmed its fiscal 2025 revenue outlook. Shares fell.
Marvell Technology matched fiscal Q1 earnings estimates with a 23% decline. Sales fell 12% to $1.16 billion, but beat views on AI infrastructure chips. It also guided higher than views for Q2.
Ulta Beauty reported a 5% EPS decline, better than expected. Revenue climbed nearly 4% to $2.726 billion, slightly missing. But shares rebounded despite the beauty products retailer warning of ongoing challenges.
China EV giant BYD unveiled its fifth-generation hybrid system that provides at least 2,100 kilometers (1,300 miles) of range on a single charge and tank of gas. The automaker began deliveries of two new affordable sedans with the new system.
MongoDB plunged Friday after the database software company lowered its full-year sales guidance. Q1 results beat expectations, with a 9% drop in adjusted EPS while revenue rose 22% to $451 million.
