Stock Market Rally Improves As S&P 500 Nears High, Breakouts Expand; Ford, GM, Tesla, Boeing, Nvidia In Focus

The stock market rally continued to advance, with the Dow Jones and S&P 500 nearing record highs while the Nasdaq and S&P 500 index. Numerous breakouts and other buying opportunities took place. Ford (F) surged on EV momentum, while General Motors (GM) said several plants will reopen as chip shortages wane, while Tesla (TSLA) removed radar from many new vehicles. Several other auto stocks moved into buy zones. Boeing (BA) and Airbus (EADSY) jet demand appears to be ramping up, fueling a big week for aerospace. Nvidia (NVDA) earnings crushed views while Exxon Mobil (XOM) and other Big Oil giants faced reversals over climate change.

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Stock Market Rally Improves

The Dow Jones and S&P 500 moved toward record highs while the Nasdaq and small-cap Russell 2000 reclaimed their 50-day lines. Leading stocks signaled further strength in the stock market rally, with numerous breakouts and other buying opportunities from a variety of sectors working, at least for now. Still, the market rally remains under pressure.

Economic Data Heats Up

New data on inflation and the labor market — two key Federal Reserve’s two guideposts — both signaled the Covid recovery is running hotter than expected. The Fed’s favored inflation gauge, the core personal consumption expenditures price index rose 3.1% in April vs. a year ago, the fastest rise since June 1992. Including food and energy, the overall PCE price index rose 0.6% from March and 3.6% from a year ago.

The Labor Department reported that new jobless claims fell significantly to a fresh pandemic low of 406,000 in the May 22 week, below expectations of 450,000.

In one respect, at least, price pressures appear to be having a negative impact on growth. After a sharp downward revision to March data, new home sales fell 5.9% to an 863,000 annual rate. Along with tight inventory, a 20.1% annual jump in the median home price to $372,400 may be cutting into demand. Also, surging raw material and labor costs might be limiting supply as well.

Big Oil Faces New Climate

Climate change is taking center stage among investors and regulators pushing for more change from Big Oil. Activist investor Engine No. 1 won at least two board seats at the Exxon Mobil (XOM) shareholder meeting. Chevron (CVX) shareholders went against management to back a proposal to reduce emissions from the Dow Jones oil giant’s customers. A Dutch court ruled that Royal Dutch Shell (RDSA) is partly responsible for climate change and ordered it to slash carbon emissions 45% by 2030 vs. 2019 levels, far more than the company had planned.

Cabot Oil & Gas (COG) and Cimarex Energy (XEC) announced an all-stock merger combining Cabot’s 173,000 acres in the Marcellus Shale and Cimarex’s 560,000 net acres in the Permian and Anadarko basins. The pricing reflects an enterprise value for the combined companies of approximately $17 billion.

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Ford Ramps Up EV Push

Ford (F) further boosted investments in electric vehicles to $30 billion by 2025, after nearly doubling EV spending to $22 billion in February. The auto giant’s new F-150 Lightning electric truck now has 70,000 reservations, up from 20,000 after launch just a week ago. Ford will initially focus EV sales on commercial and government customers. It aims to eventually run a profitable EV business by bundling vehicles, charging and software-driven services, such as fleet management. Lordstown Motors (RIDE) posted a worse-than-feared loss of 72 cents and said it would need to raise capital to keep production goals for its Endurance electric truck on track.

General Motors (GM) said it plans to open five plants May 31 after idling them due to the global chip shortage, saying it has taken steps with its supply base to mitigate the crunch.

Li Auto (LI) lost three cents per ADR, a penny worse than views, as revenue soared 354%. Li Auto stock jumped as the EV maker forecast record Q2 deliveries.

Tesla (TSLA) has removed radar sensors from Model 3 and Model Y vehicles made after April 27 for the North American market, limiting and suspending some driver-assist features for at least a time. CEO Elon Musk had teased a vision-only sensor system in March. Most automakers and startups working on autonomous driving rely on a combination of cameras, radar and Lidar.

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Boeing, Airbus Demand Rising

Southwest Airlines (LUV), a top Boeing (BA) 737 customer, says it could need up to 500 new aircraft as it expands routes across the U.S. The discount carrier has opened routes to 17 new destinations during the Covid-19 pandemic. Boeing’s European rival Airbus (EADSY) said it would boost A320neo output by more than 10% to a rate of 45 per month by the end of 2021. Airbus is also targeting 64 a month by Q2 2023, above its record of 60 a month and up from a pre-pandemic goal of 63. Boeing stock cleared an early entry while Airbus gapped out of a base. Several other aerospace stocks showed strength.

Williams-Sonoma Crushes Q1 Earnings

The upscale home furnishings retailer beat views with a 296% EPS surge. Revenue rose 42% to $1.75 billion, the fourth straight quarter of accelerating top-line growth. Williams-Sonoma (WSM) comp sales jumped 40.4%, with Pottery Barn up 41.3%, Pottery Barn Kids up 27.6% and West Elm up 50.9%. Management now sees low double-digit to mid-teen revenue growth this year, up from its prior view for mid-to-high single-digit growth. WSM stock fell on earnings but rose for the week.

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Apparel Retailers Rebound

Several apparel retailers reported better-than-expected Q1 results, rebounding from year-earlier losses when stores were closed amid the pandemic. American Eagle (AEO) reported Q1 EPS of 48 cents as sales soared 88% to $1.03 billion. Urban Outfitters (URBN) reported Q1 EPS of 54 cents as revenue swelled 58% to $927.4 million. American Eagle and Urban topped pre-pandemic sales. Abercrombie & Fitch (ANF) swung to a profit with sales up 61% to $781.4 million. Gap (GPS) revenue popped 89% to $3.99 billion. All 4 stocks rose for the week.

Cybersecurity Software

Zscaler (ZS) earnings leapt 114% while revenue jumped 60% to $176.4 million, both easily beating views. Zscaler guided higher for July-quarter revenue. Zscaler stock. Okta reported a smaller-than-expected Q1 loss while revenue grew 37% to $251 million. But Okta sees a big Q2 loss while CFO Michael Kourey is stepping down.

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Business Software

Several business software makers reported quarterly views.

Salesforce.com (CRM) earnings, revenue and bookings topped Q1 views. EPS rose 13% excluding investment gains, while revenue grew 23% to $5.96 billion. Current remaining performance obligations, or CRPO bookings, rose 23% to $17.8 billion. For Q2, Salesforce guided slightly higher. Its Slack Technologies (WORK) takeover is expected to close late in the second quarter.

Snowflake (SNOW) is still losing money, but first-quarter revenue jumped 110% to $228.9 million, topping estimates for $213 million. The cloud-based data analytics software firm guided slightly higher for Q2 product revenue.

Workday (WDAY) Q1 adjusted earnings jumped 97%. Revenue climbed 15% to $1.18 billion, including acquisitions, with growth slowing for a seventh straight quarter. The software maker forecast July-quarter subscription revenue roughly in line. Management plans to increase hiring, principally in sales, marketing, and R&D. Growth has slowed in its core business — software for human capital management, or HCM, such as payroll tools.

Anaplan (PLAN) tumbled after it reported an adjusted 10-cent loss in Q1, the same as a year earlier, and a penny more than analysts estimated. Revenue rose 25% to $129.8 million, narrowly beating. Anaplan guided slightly higher on Q2 sales.

Nvidia Earnings Surge 103%

Nvidia (NVDA) easily beat Q1 views, with revenue soaring 84% to $5.66 billion on strong sales of gaming and data-center processors. The graphics-chip maker also guided higher for the current quarter. Nvidia stock rose sharply toward record highs.

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Dell Crushes Q1 Views

Dell Technologies (DELL) trounced estimates, fueled by growth in PCs, infrastructure solutions and its VMware (VMW) business. EPS jumped 59% as revenue grew 12% to $24.49 billion. HP (HPQ) delivered beat-and-raise results for its fiscal second quarter. EPS surged 82% with sales grew 27% to $15.88 billion.

Homebuilder Earnings Top

Luxury builder Toll Brothers (TOL) reported Q2 EPS jumped 71% as sales popped 25% to $1.93 billion, both beating expectations, as housing demand soared in the waning days of the Covid-19 pandemic. Skyline Champion (SKY), a manufactured and modular housing maker, reported a 335% jump in Q4 EPS to 61 cents, crushing estimates for 36 cents. Revenue rose 49% to $447.6 million, also beating. KB Home (KBH) said preliminary Q2 home orders rose 155% year-over-year to 3,961. Toll and KBHome stock jumped while Skyline skyrocketed.

Discounters Cash In

Costco (COST) increased EPS 46% as revenue jumped 22% to $45.3 billion, an overall beat. Same-store sales rose 15% in its third quarter, also beating. But online sales growth slowed to 41% vs. 65% in the year-earlier quarter. And the membership-only warehouse chain warned of inflationary pressures and supply-chain delays. Ollie’s Bargain Outlet (OLLI), Dollar General (DG), Dollar Tree (DT), Burlington Stores (BURL) and Big Lots (BIG) kept up the parade of retail earnings beats, as pandemic restrictions eased and stimulus checks went out.

Sporting Goods Earnings Are Home Runs

Dick’s Sports Goods (DKS) and Hibbett Sports (HIBB) beat earnings and revenue estimates, as kids return to team sports amid declining Covid cases and increased vaccination rates. DKS posted EPS of $3.79, swinging from a loss of $1.17 in the year-ago quarter and beating views for $1.12. Sales grew 119% to $2.92 billion from $1.33 billion the year before. Same-store sales surged 115%, including online sales growth 14%. E-commerce accounted for 20% of total sales, up from 13% in 2019. Dick’s now expects EPS of around $8 and sales of approximately $10.5 billion, both above analyst views. Meanwhile, Hibbett posted blowout EPS of $5, vs. 31 cents in the year-ago period and nearly double views. Sales surged 88% to $507 million, also easily beating. Comps grew 18.5%. Online sales made up 12% of sales. Hibbett now sees EPS for the year between $8.50 and $9. DKS shares and HIBB shares jumped for the week.

News In Brief

Ulta Beauty (ULTA) reported Q1 EPS of $4.10, reversing a year-earlier loss and smashing estimates for $1.93. Sales rose 65% to $1.94 billion on improving consumer confidence, government stimulus payments and easing Covid restrictions. The beauty supply store raised its full-year EPS and same-store sales outlook.

Medtronic (MDT) adjusted EPS surged 159% as revenue grew 37% to $8.19 billion, both beating forecasts.

DXC Technology (DXC) reported smaller-than-expected EPS and revenue declines, issuing new three-year financial guidance with adjusted EPS more than doubling by 2024 to $5 to $5.25.

Best Buy (BBY) reported EPS jumped 233% as revenue swelled 36% to $11.64 billion, thanks to stimulus checks and strong demand for tech products.

Intuit (INTU) reported a 35% EPS gain, narrowly beating fiscal Q3 views. Revenue for the TurboTax maker rose 39% to $4.17 billion, up 39%, in line with views.

Autodesk (ADSK) topped Q1 views, with EPS up 21% as revenue rose 12% to $989 million. But the software maker’s earnings guidance for Q2 and full year were below views.

360 Digitech (QFIN) earnings skyrocketed 458%, crushing views yet again. Revenue rose 22%, also beating, though growth has slowed considerably. The Chinese firm fell Friday but rose for the week.

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