The coronavirus stock market rally heated up amid growing signs of economic recovery, with the U.S. actually adding jobs in May. The Dow Jones led the way, but the Nasdaq hit a record high. American Airlines (AAL) and other carriers skyrocketed as they bring back more flights. Zoom Video (ZM) delivered blowout earnings and guidance, though it later pared gains amid a market rotation away from coronavirus plays such as Slack Technologies (WORK). Taser and body camera maker Axon Enterprise (AAXN) surged as security stocks rallied amid unrest across the U.S.
Dow Leads Stock Market Rally, Nasdaq Climbs To Fresh High
With the May jobs report and other economic data and corporate comments fueling recovery hopes, the stock market rally continued its stunning advance. The Dow Jones, lagging for most of the rally, led the way as “real economy” sectors took charge. Airlines, banks, energy and housing plays were among the big winners. The Nasdaq composite didn’t charge ahead as fast, but still had solid gains and hit record highs intraday Friday. Treasury yields rose sharply.
Jobs Report Shocker: 2.5 Million Added
Friday’s jobs report, which delivered what economists said was the biggest upside surprise of their lives, seemed to confirm that the U.S. economy is bouncing back faster than expected. Private-sector payrolls were expected to shrink by 6.5 million, but grew by 3.1 million. The overall 2.5 million job gain, held back by state and local government jobs cuts, beat expectations by more than 10 million. The jobless rate, expected to jump from 14.7% to 19.8%, instead slipped to 13.3%.
Other data supported the picture of a recovery that’s ahead of schedule. May auto sales jumped to a better-than-expected 12.2 million annual rate from 8.6 million in April, but still came in about 30% below year-ago levels. The Institute for Supply Management manufacturing survey index rose to 43.1 from 41.5 in April, indicating a more moderate pace of contraction.
Mortgage applications for buying a home are soaring vs. year earlier.
More reopenings will likely bring further employment gains. But eventually, profits will have to follow, or else the progress will wane. The uncertain course of the coronavirus pandemic and the extent to which Americans return to their old activities remains a huge wild card.
Zoom Video Earnings Crush Views
Zoom Video Communications (ZM) reported Q1 earnings skyrocketed 566% year over year while revenue soared 169% to $328.2 million, both obliterating analyst views. For the current Q2, the videoconferencing leader guided to EPS of 45 cents on revenue of $497.5 million, vs. official consensus for an 11-cent profit and sales of $222.4 million. Zoom shares surged but pared weekly gains as coronavirus plays retreated. Slack Technologies (WORK) reported a smaller-than-expected Q1 loss and revenue above forecasts. But the workplace collaboration software maker also guided slightly higher on full-year sales. Shares plunged Friday.
Smartsheet (SMAR) said Q1 revenue jumped 52% to $85.5 million while it reported an 11-cent per share loss, beating consensus estimates. But the software maker gave weak guidance. Shares plunged Thursday. Cloudera (CLDR) earnings came in at 5 cents vs. views for 1 cent while revenue rose 12% to $210.5 million, mostly beating. But the data analytics software maker guided low on Q2 revenue. Shares fell sharply Thursday. MongoDB (MDB) reported a smaller-than-expected loss with revenue topping views. But guidance was mixed. Shares fell Friday.
CrowdStrike Swings To Profit
Cybersecurity firm CrowdStrike (CRWD) swung to a Q1 profit of 2 cents a share, beating views for a 6-cent loss. Revenue leapt 85% to $178.1 million, easily topping forecasts. For the current quarter, CrowdStrike guided higher. Shares jumped, then pared gains somewhat.
American Airlines Bringing Back Flights
American Airlines (AAL) said July flights will be 55% of year-earlier levels, up from 25% in June and 20% in May as summer travel demand rises. The routes with the biggest increase in flights are popular tourist spots, including cities in Florida and mountain destinations. International capacity next month will be nearly 20% of year-ago levels. Previously, international capacity had been as low as 10%. Shares skyrocketed.
RH Reports Strong Earnings, Sees Huge Expansion
Luxury furniture chain RH (RH) reported strong Q1 earnings growth and gave upbeat comments about the current Q2. Earlier in the week, CEO Gary Friedman said he sees higher operating margins in 2020 and beyond. He also outlined a move beyond the luxury home furnishings market and into the $1.7 trillion North American housing market by offering furnished turnkey homes, but did not give a timeline for the project. Shares spiked to record highs, but pared gains slightly.
Ciena Gets Work-From-Home Boost
Ciena (CIEN) reported fiscal Q2 earnings rose 58% while revenue grew 3.4% to $894.1 million, both topping views, as the work-from-home shift amid Covid-19 increased bandwidth demand on telecom networks. The maker of optical communications network gear fell modestly after hitting an 18-year high during the week.
Security Stocks Soar
Axon Enterprise (AAXN), Digital Ally (DGLY) and security-related companies rose as protests over the death of a black man in police custody roiled the nation. Taser and body camera maker Axon popped 22% to a record high. Digital Ally, which also makes body cameras for cops, surged. So did Vislink Technologies (VISL) and Cemtrex (CETX), which make video surveillance products. Gun maker Sturm Ruger (RGR) and security systems provider ADT (ADT) rallied, along with ShotSpotter (SSTI), which makes advanced sensors and AI software to alert police to gunfire. Wrap Technologies (WRTC), maker of remote controlled restraint devices, also climbed.
OPEC+ Meeting Date Split
OPEC reportedly reached a preliminary deal to extend its current output cuts through July ahead of the OPEC and OPEC+ meetings expected on Saturday, June 6. But the deal didn’t include Iraq, sources told Bloomberg. De facto OPEC leader Saudi Arabia and Russia want to crack down on Iraq, Nigeria and other cheaters who aren’t sticking to quotas. The Energy Information Administration reported U.S. crude stockpiles fell by 2.1 million barrels vs. the prior week, surprising analysts that were expecting a 3.5 million barrel build. Gasoline supplies grew by 2.8 million barrels. Renewed U.S.-China trade tensions are weighing again on oil prices after the State Department declared in late May that Hong Kong is no longer autonomous from mainland China.
Chip Guidance Mixed
Broadcom (AVGO) earnings per share fell 1%, meeting views, with revenue up 4% to $5.74 billion, beating. Sales of software and networking equipment chips helped offset lower wireless chip sales. For its fiscal Q3, the chip giant expects revenue of $5.75 billion, slightly below consensus. Videoprocessing-chip maker Ambarella (AMBA) beat Q1 views with EPS of 4 cents vs. 1 cent a year earlier, with revenue up 16% to $54.6 million. But it guided low on sales. Shares dived on the results. Microchip Technology (MCHP) raised its June-quarter guidance thanks to an improving outlook for automotive and industrial chips. Shares soared.
IPOs Rise In Debuts
Warner Music (WMG) rose as high as 34.76 before giving up much of its gains in its first week of trading. The music giant raised $1.925 billion in its initial public offering, the biggest of the year so far. Shares sold at 25 a share, within the price range. Warner Music sold an upsized 77 million shares. ZoomInfo Technologies (ZI), 2020’s first software IPO, also ceded some of its gains after nearly doubling on its first day of trading. But it remained well clear of its offering price of 21. ZoomInfo provides a cloud-based market intelligence platform for sales and marketing teams.
News In Brief
Pfizer (PFE) tumbled Monday after the drug giant said a combination of its blockbuster drug Ibrance and standard adjuvant endocrine therapy appeared likely to fail in a Phase 3 test of early breast cancer patients.
Nio (NIO) delivered a record 3,436 electric SUVs in May. Goldman Sachs upgraded Tesla rival Nio to a buy on improved financial outlook and positive word-of-mouth for the “robust quality” of its vehicles.
Video game publisher Zynga (ZNGA) surged to an eight-year high after the video game publisher announced the acquisition of Peak Games and raised its financial guidance for the current quarter and full year.
Baozun (BZUN) reported mixed first-quarter results but the China e-commerce software maker expects an acceleration in business in the second quarter. Shares jumped.
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