2021-11-05 09:58:42
The stock market rally racked up another week of gains, with the Dow Jones, S&P 500, Nasdaq composite and even the small-cap Russell 2000 hitting record highs. Stocks rallied on the long-awaited Fed decision to taper bond buys and a strong jobs report, while Treasury yields generally retreated. Tesla (TSLA) and especially Nvidia (NVDA) kept racing higher, while tech earnings generally buoyed growth names. The Nasdaq is getting extended, raising the risk of a pullback.
Coronavirus vaccine makers tumbled on weak Moderna (MRNA) results and a new anti-viral Covid pill from Pfizer (PFE) that’s reportedly more effective than a Merck (MRK) tablet.
Stock Market Rally At Highs
All the major indexes are at record highs, reflecting, a broad, strong stock market rally. The positive stock and bond market reactions to the Fed taper and jobs reports were notable. The Nasdaq is looking a little extended from the 50-day line, but a pullback could be healthy and provide buying opportunities. Nvidia (NVDA), already on a strong run, went vertical on metaverse opportunities. Tesla continued to spike while many EV plays look strong. Earnings generally buoyed growth stocks and beyond, despite losers such as Moderna (MRNA) and Digital Turbine (APPS). Crude oil futures pulled back from near multiyear highs as U.S. crude inventories rose more than expected while OPEC+ continued to slowly unwind pandemic-era supply cuts, despite White House urging faster output increases. But oil prices rebounded Friday.
Fed Decides To Taper Bond Buys
In a well-telegraphed Fed taper decision, the $120 billion in monthly asset purchases will shrink by $15 billion per month and wind up in June, barring a major economic surprise. Wall Street is already focused on what will happen next, and the Fed meeting provided some clues on that front. Markets are currently pricing in two quarter-point rate hikes in 2022, the first coming by the July meeting. Fed chief Jerome Powell expects that inflation will likely stay elevated well into next year, receding in Q2 or Q3. But he said that rate hikes aren’t well-suited to addressing inflation that comes from supply-chain constraints, which should ease over time.
Jobs Report Strong
The stronger-than-expected October jobs report should lay to rest concerns about sluggish growth. Not only did October’s employment gain of 531,000 soundly beat estimates, but hiring in August and September was revised up by a combined 235,000 jobs and no longer looks so soft. The jobless rate saw a bigger-than-expected drop to 4.6% from 4.8%. The labor force participation rate remains stubbornly low, though the work force did pick up slightly last month.
Tesla Stock Keeps Soar Despite Hertz Revision
Tesla (TSLA) CEO Elon Musk said that the EV giant has not actually signed a contract with car rental giant Hertz for 100,000 Model 3 sedans by the end of 2022. But Tesla stock, which had skyrocketed to a trillion-dollar valuation in the prior week on the “Hertz deal,” continued to surge. Tesla issued a recall notice for the nearly 12,000 vehicles running FSD Beta after an upgrade caused the emergency braking system to malfunction. Tesla had already pulled back that software.
Trucking Firms Mixed
ArcBest (ARCB) delivered a 112% EPS gain with revenue up 28% to $1.02 billion, both beating views. Shares soared. GXO Logistics (GXO) reported 138% per-share profit growth with sales up 25% to $1.97 billion. Shares soared. GXO is a recent spinoff from XPO Logistics (XPO) posted 124% EPS growth with revenue up 22% to $3.27 billion, narrowly beating. XPO tumbled on soft guidance.
China EV Sales: BYD Boom Continues
BYD Co. (BYDDF) reported new energy vehicles, which include EVs and plug-in hybrids shot up 212% in October vs. a year earlier to 81,400. It’s the fifth straight month that BYD’s NEV sales have increased by roughly 10,000. October EV sales rose to 41,232. Plug-in hybrids increased to 38,771. Xpeng (XPEV) delivered 10,138 EVs in October, up 233% vs. a year earlier and topping 10,000 for a second straight month. Li Auto (LI) delivered 7,649 vehicles in October, up 107% vs. a year earlier. That’s also up slightly from September, as chip shortages hit the automaker, which makes the Li One, a hybrid SUV. Deliveries are still below their July and August levels. Nio (NIO) deliveries in October fell 27.5% vs. a year earlier to 3,667, plunging from September’s 10,628. A production line overhaul limited output to about 10 days last month.
Shale Firms Cautious, Except One
U.S. oil stocks Devon (DVN), Diamondback (FANG), Occidental Petroleum (OXY) and EOG Resources (EOG) reported third-quarter results that beat analyst expectations, with the shale operators pledging to remain disciplined with spending. However, Continental Resources (CLR) announced it was expanding into the Permian Basin, buying up key assets from Pioneer Natural Resources (PXD). OPEC+ stuck to its script of slowly increasing production, despite White House urgings for fast output increases. Crude oil futures fell sharply on rising U.S. crude inventories, but rebounded Friday.
Lithium Stocks Strong
Albemarle (ALB), Livent (LVNT) and SQM (SQM) blew through buy range. Albemarle topped estimates, though profit slipped 4% from a year ago, and boosted full-year guidance. Livent missed on earnings due to cost pressures, but it hiked full-year guidance, saying it should benefit more from higher lithium pricing. Investors are betting that the quickening EV race will outstrip supplies of battery-grade lithium.
Cybersecurity Earnings
Cybersecurity firms beat EPS views as many companies have upped spending on cybersecurity amid a spike in ransomware attacks.
Fortinet (FTNT) EPS rose 12% while Q3 revenue grew 33% to $867 million. Fortinet also guided up on Q4 revenue.
Rapid7 (RPD) reported EPS of 6 cents, up 500%. Revenue rose 33% to $139.9 million. The company guided just above Q4 revenue targets. Its threat detection and vulnerability management tools analyze huge volumes of network data.
CyberArk (CYBR) swung to a loss while revenue rose 14% to $121.6 million amid a shift to subscription services. Annual recurring revenue climbed 38% to $344 million. CyberArk’s software monitors and manages administrative access to company computer systems.
Qualys (QLYS) reported EPS climbed 12%, while revenue rose 13% to $104.9 million.
Business Software
A number of business software makers also reported strong earnings.
Cloudflare (NET) swung to a 1-cent profit in Q3, topping estimates for a 4-cent loss. Revenue rose 51% to $172.4 million while billings grew 55% to $184.8 million, both beating. Management raised 2021 revenue guidance.
Bill.com (BILL) reported a narrower-than-expected fiscal Q1 loss of 15 cents while revenue growth accelerated again, to $116.4 million. It guided higher on fiscal Q2 revenue.
ZoomInfo Technologies (ZI) reported Q3 EPS grew 18%,just beating from a year earlier. Revenue rose 61% to $199.2 million, also topping. Excluding acquisitions, revenue rose 54%. Sales and marketing teams use ZoomInfo’s database of contact and account information to identify, engage and track their best potential customers.
HubSpot (HUBS) said Q3 earnings rose 78% while revenue climbed 49% to $339.2 million, both beating. The maker of web marketing software guided higher for Q4 revenue.
Travel Stocks Thrive
As travel restrictions are loosening globally and vaccinations increase, leisure and travel stocks are showing renewed momentum, with Airbnb (ABNB), Booking Holdings (BKNG) and Expedia (EXPE) reporting strong third-quarter results. Airbnb reported strong profit growth and a beat on revenue, up 67% to $2.24 billion. Booking Holdings revenue jumped 77% to $4.68 billion, topping estimates. Substantial improvement in its booking trends was a tailwind. Expedia stock soared after posting stronger-than-expected earnings that offered further evidence that the travel market is on the mend.
Hyatt (H) and Choice Hotels (CHH) rallied on stronger-than-expected results.
EA, Take-Two Beat Views
Video game publishers Electronic Arts (EA) and Take-Two Interactive Software (TTWO) got a lift from upbeat earnings reports while peer Activision Blizzard (ATVI) disappointed. EA’s September-quarter results were helped by live services for games FIFA and Apex Legends. The Nov. 19 launch of Battlefield 2042 should drive December-quarter sales. Take-Two crushed estimates thanks to strong sales of games in its NBA 2K, Grand Theft Auto and other franchises. Activision tumbled after meeting Q3 views, gave weak guidance and announced the delay of two major games.
Fertilizer Earnings Don’t Bear Fruit
A big week for fertilizer company earnings was mostly a dud, despite high prices fueled by strong demand, Chinese export restrictions, high natural gas prices and weather disruptions to production. Nutrien (NTR) topped estimates and substantially hiked guidance, but Mosaic (MOS), CF Industries (CF) and Intrepid Potash (IPI) all fell short amid production issues. Still, the stocks reacted constructively to earnings disappointments, supported by fertilizer pricing and hopes for a lift to production in Q4. CF, NTR remain in buy range, while IPI is still extended after a big run in October. Mosaic fell back into buy range on earnings, then skidded further Friday on a share price announcement.
Casino Earnings Mixed
Caesars Entertainment (CZR) missed Q3 earnings expectations Tuesday with a wider-than-expected loss. Caesars stock retreated significantly. MGM Resorts (MGM) beat earnings and revenue estimates, with EPS of 3 cents and sales of $2.7 billion. MGM initially popped to record highs, but reversed lower. Penn National Gaming (PENN) dived on mixed results while online sports betting specialist DraftKings (DKNG) sold off for the week as it missed on the top and bottom line.
Retail Earnings
Capri Holdings (CPRI), made up of the Michael Kors, Versace and Jimmy Choo brands, reported a 70% jump in Q2 earnings. Revenue rose 17% to $1.3 billion. Both beat Wall Street estimates. Retail sales were up 20% on improved e-commerce sales. Revolve (RVLV) reported a 19% drop in Q3 EPS. But that still beat analyst expectations. Sales swelled 62%. Capri gapped out of a base, Revolve held at highs.
Etsy Jumps On Earnings
Etsy (ETSY) spiked after the arts-and-crafts e-commerce platform beat Q3 EPS estimates on better-than-expected gross merchandise sales. Etsy guided low on Q4 sales. Mercado Libre (MELI), an e-commerce giant in Latin America, reported mixed third-quarter results.
Solar Earnings Partly Cloudy
SolarEdge (SEDG) beat on earnings but missed on revenue as the solar energy supplier contended with a Covid-related shutdown of nearly three months at one of its plants. SolarEdge stock dropped. SunPower (SPWR) fell short of expectations and also said it was considering “strategic options” that it will update in Q4. The company announced restructuring plans in early October to focus exclusively on residential solar. First Solar (FSLR) also missed estimates as the company dealt with Covid-related issues.
Covid Vaccine, Pill News
Moderna (MRNA) reported weaker-than-expected Q3 results and guided low on Q4. Shares of the Covid vaccine maker plunged Thursday, with other vaccine makers also falling. Merck (MRK) won U.K. approval for its Covid antiviral pill that reduces hospitalization or death risks by about 50%. On Friday, Pfizer (PFE) said its Covid pill with HIV drug cuts the risk of hospitalization or death by 89%. That lifted Pfizer Friday while Merck retreated. Moderna and other vaccine makers tumbled again on Friday.
News In Brief
Roku (ROKU) sank after the streaming video platform reported fewer new users than expected in the third quarter. It also disappointed with its outlook for the holiday quarter
Nvidia (NVDA) skyrocketed Thursday after Wells Fargo said the chipmaker on Tuesday will announce a big push in metaverse applications.
Allbirds (BIRD), the environmentally conscious shoemaker, nearly doubled in its trading debut, after pricing an expanded IPO above the expected range.
Avis (CAR) skyrocketed as much as 300% on huge volume on Tuesday after posting blockbuster earnings and amid an apparent short-squeeze before giving up much of those gains. EPS for the third quarter surged 850% year over year to $10.74 and sales swelled 96% to $3 billion. CAR stock closed nearly 72% higher for the week.
Bed Bath & Beyond (BBBY) will sell many of its goods via the e-commerce site of Kroger (KR). BBBY stock skyrocketed, but greatly pared gains. KR stock rose solidly.
Zillow (Z) said it was exiting the home-flipping business and laying off 25% of its workforce. Zillow stock plunged after the announcement and missing Q3 earnings and revenue estimates.
Nike (NKE) and Dick’s Sporting Goods (DKS) announced a partnership to combine their membership programs, strengthening ties and boosting efforts to reach each other’s most loyal customers.
Horizon Therapeutics (HZNP) reported adjusted EPS rose 1% with revenue up 63% to $1.04 billion, both beating. CFO Paul Hoelscher will retire on May 16. Shares initially tumbled but slashed losses.
Under Armour (UAA) Q3 earnings per share unexpectedly rose 19% as revenue climbed 8% to $1.55 billion. North American revenue increased 8%. Apparel revenue rose 14% percent while footwear sales were up 10%. UAA stock surged into buy range.
CVS Health (CVS) reported 19% EPS growth an a 10% revenue gain to $73.8 billion, topping forecasts thanks to a bump in prescriptions and Covid-19 vaccines. The drug store, insurer and pharmacy benefit manager raised its full-year EPS guidance. Shares soared.
Skyline Champion (SKY) reported a 187% EPS gain while revenue rose 63% to $524.2 million. The modular homes maker spiked to a new high.
Peloton (PTON) reported a wider-than-expected loss as connected bike sales tumble and existing owners use their bikes less. PTON stock plunged to a 52-week low on Friday.
Square (SQ) reported weaker-than-expected earnings and sales amid declining Cash App growth.
Sprout Social (SPT) narrowed its Q3 loss while revenue grew 46% to $49.1 million. Sprout reported revenue of $49.1 million, up 46%. Analysts had estimated an 8-cent loss on revenue of $47.4 million. The company forecast Q4 revenue of $51.2 million vs. estimates of $49.7 million.
Epam Systems (EPAM) reported EPS of $2.42, up 47%. Revenue climbed 52% to $988.5 million. Results topped estimates.
Floor & Decor (FND) reported Q3 earnings and sales that topped analyst estimates. The specialty flooring company reported a 10.9% jump in same-store sales. But shares fell solidly Friday from near highs.
Generac (GNRC) posted a 13% rise in EPS and 34% rise in sales, both missing Q3 estimates. The supplier of backup power and clean energy solutions kept full-year sales guidance but narrowed its expected net income margin, citing supply chain constraints and rising input costs. Shares fell sharply.
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