The stock market rally suffered sharp losses across the board for the week, selling off hard on recession fears after strong gains Wednesday on a brief burst of AI optimism and Fed rate-cut hopes. The S&P 500 and Nasdaq composite fell below their 50-day lines while the Dow Jones and Russell gave up much of their gains over the past few weeks.
Amazon.com and Google parent Alphabet were big earnings losers, along with Intel. Meta Platforms and Apple advanced amid strong results. Microsoft and Advanced Micro Devices also were notable earnings reports.
Stocks Sell Off Sharply
Despite tech giants signaling continued heavy AI spending and the Fed making it clear rate cuts are on the way, the stock market sold off as recession fears suddenly flared up. The S&P 500 and Nasdaq tumbled below their 50-day moving averages. The Dow Jones and Russell 2000 knifed below their 21-day lines, wiping out a large portion of their gains over the prior several weeks. The 10-year Treasury yield plunged below 4%.
Economic Fears Trump Fed Hopes
The Fed played second fiddle to economic data this week as Chairman Jerome Powell's view of solid growth and a strong but normalizing labor market was overtaken by a series of weak reports, capped off by Friday's market-rattling July jobs report.
Powell stopped just shy of embracing a pivot to rate cuts at the Sept. 18 policy update. He acknowledged that some of the Fed's 19 policymakers preferred to cut now, rather than wait for September. Yet he said the idea of cutting more than a quarter-point in September was not even raised. But on Thursday, jobless claims hit their highest level in nearly a year while the ISM manufacturing index signaled the sharpest contraction in eight months. On Friday, jobs growth came in far below views while unemployment jumped and wage growth lagged. Markets now expect a half-point cut in September and at least 100 basis points in 2024.
Meta Earnings, Guidance Strong; Rivals Dive
Meta Platforms reported a 73% EPS jump while revenue grew 22% to $39.07 billion, both beating views thanks to strong digital advertising. The Facebook and Instagram parent also guided higher on Q3 revenue. Meta also slightly upped its forecast for capital expenditures in 2024. CEO Mark Zuckerberg told analysts the company is investing in boosting its AI capabilities and is already seeing results from stronger user content recommendations. Meta rose, but pared gains amid the market sell-off. Meanwhile, Pinterest and Snapchat parent Snap plunged on weak guidance.
Amazon Misses On Sales, Guides Low
The tech titan reported a 94% EPS gain, better than expected, with Amazon Web Services growth picking up to 19%. But overall sales growth slowed to 10%, below views, amid weakness in retail operations, including advertising. Amazon guided lower on Q3, while boosting capital spending plans for the second half to beef up AI data centers. Shares dived Friday.
Apple Gets Lift From Services, iPad
Apple beat fiscal third-quarter expectations due to record services revenue and strong iPad sales. It also guided current-quarter sales modestly above views. The consumer electronics giant's earnings rose 11% with revenue up 5% to $85.8 billion. Services revenue increased 14% to $24.2 billion. Apple iPhone revenue dipped 1% to $39.3 billion, while iPad sales jumped 24% to $7.2 billion thanks to the release of new models. Apple forecast fiscal Q4 revenue growth of about 5%, vs. the consensus of 4.4%. Shares rose.
Microsoft Azure Growth Slows
Microsoft reported fiscal 2024 fourth-quarter earnings rose 10% with revenue up 15% to $64.7 billion, edging above views. But Azure cloud-computing growth slowed to 30% in constant currency, slightly missing. Microsoft also guided slightly lower on overall revenue and Azure in the current fiscal 2025 Q1. However, the Dow tech giant expects Azure growth to pick up in second half of fiscal 2025. Microsoft also reported strong capital spending in Q4 and sees robust capex in fiscal 2025.
Intel Leads Bad News For Chip Stocks
Intel badly missed Q2 estimates and guided lower for Q3. The ailing chipmaker also announced a $10 billion cost-reduction plan, including big job cuts, and suspended its quarterly dividend. The Intel report capped a bad week for semiconductor stocks. Wireless-chip leader Qualcomm posted a beat-and-raise report, but shares fell on its weak sales forecast for the December quarter. Chip designer Arm Holdings disappointed with its earnings outlook for the current quarter and full year. AMD delivered better-than-expected Q2 results and guidance, thanks to sales of chips for data centers. AMD stock initially rose on the news but fell amid a broad sell-off of chip stocks. Other chip stocks falling after lackluster quarterly reports included Lattice Semiconductor, Microchip Technology and Skyworks.
Arista Is Solid Gold
Arista Networks said Q2 earnings popped 33% to $2.10 per share on an adjusted basis while revenue rose 16% to $1.69 billion, both beating. Sales growth decelerated for the sixth straight quarter. For the current quarter, Arista predicted revenue in a range of $1.72 billion to $1.75 billion, edging by estimates. Along with strong capex guidance from huge customers Microsoft and Meta Platforms, Arista stock jumped, but then erased those gains amid the market sell-off.
Big Pharma Split On Outlook
Merck reported strong earnings vs. a year-earlier loss while total sales grew 7% to $16.11 billion, led by blockbuster cancer drug Keytruda. But the Dow giant guided lower for the full year. Pfizer EPS fell 11% while operational sales grew 3% to $13.3 billion, both beating. Pfizer raised its outlook for the year. Merck shares tumbled while Pfizer jumped.
Biotech Earnings Are Mixed Brew
Neurocrine Biosciences gapped up to a record high, fueled by strong growth in its movement disorders treatment Ingrezza. Moderna, on the other hand, slashed its full-year outlook due to "very low" Covid vaccine sales in Europe. Shares plunged. Biogen and Regeneron Pharmaceuticals beat sales and earnings forecasts, but Biogen fell after the lion's share of its Alzheimer's drug beat stemmed from outside the U.S. Biogen's total revenue was flat at $2.47 billion, while earnings rocketed 31%, largely due to a one-time benefit. Regeneron earnings rose 13% with sales up 12% to $3.55 billion. Shares reversed higher.
McDonald's, Starbucks See Green Shoots
McDonald's and Starbucks reported dismal Q2 results. The former reported declining EPS, revenue and same-store sales that all missed views, but shares jumped as the burger giant said its new "$5 Meal Deals" are starting to lure low-income diners back. Starbucks reported in-line earnings but revenue fell short, both declining on global weakness, especially in China. As traffic slides, even Starbucks has been turning to a fast-food and "value" model, with bundled coffee-and-snacks deals. Starbucks is seeing some green shoots in the U.S. Shares rose on results, though it later slashed gains.
Wingstop reported a 63% EPS gain, with revenue soaring 45% amid hot same-store sales. Both beat views, while the wings chain also hiked its dividend. But shares hit resistance at the 50-day line.
Coinbase See Revenue, Trading Spike
Coinbase reported a Q2 profit of 14 cents a share vs. a year earlier loss of 42 cents, but analysts expected 95 cents profit. Revenue spiked 104% to $1.449 billion to beat estimates. The cryptocurrency exchange's trading volume spiked 146%, with institutional customers accounting for much of that growth. Transaction revenue soared 138%, but fell just short of views. Elsewhere, bitcoin miner Marathon Digital on Thursday posted a wider-than-expected loss, while the 78% revenue gain fell short. Coinbase and MARA tumbled for the week as bitcoin slumped.
Exxon Earnings Rise
Exxon Mobil reported its first profit gain in five quarters, with the 10% gain beating views. Dow giant Chevron missed, with EPS down 17%. Shell reported EPS growth topping 30%, while BP had mixed results. The Q2 reports came amid a sag in oil prices, despite increased tension in the Middle East. Exxon edged higher and Shell was flat, while Chevron and BP slumped.
China EV Sales Strong
Chinese EV makers maintained sales momentum in July on the back of increased subsidies, discounts and new models. Among startups, Li Auto led with record sales of 51,000 units. Nio topped the 20,000 delivery mark for a third consecutive month. Xpeng delivered 11,145 electric vehicles, but trailed Geely-backed Zeekr. China's EV leader BYD delivered a record 342,383 vehicles, with its three-month total topping 1 million. Powered by hybrids, BYD's EV sales have jumped 29% year to date, while its overseas sales continue to rise. EVs are almost at 50% of total China auto sales.
In Brief
Sprouts Farmers Market reported a 32% EPS gain, beating views. Sales grew 12% to $1.89 billion, with growth accelerating for a second straight quarter. Same-store sales popped 6.7%. The natural foods grocery chain guided higher for Q3 and the full year. Shares gapped up to a record high.
Boeing named Robert "Kelly" Ortberg to the CEO post, replacing Dave Calhoun as of Aug. 8. Ortberg has over 35 years of leadership experience in the aerospace industry. However, Boeing reported a wider-than-expected adjusted loss in Q1, with revenue falling 15%. Shares jumped on results and CEO news, but fell for the week.
Carvana guided for record 2024 earnings after a blowout second quarter. The online used-car seller said retail used car sales increased 33%, accelerating from Q1's 16% gain. That drove a surprise $48 million profit, while key metrics improved. The white-hot stock gapped up to a two-year high.
MercadoLibre jumped Friday after easily beating Q2 views. The Latin America e-commerce and payments giant reported a 103% EPS gain with revenue up 41% to $5.07 billion.
