The stock market rebounded this week, led by the Nasdaq. Big-cap earnings winners included Microsoft, Google parent Alphabet, Tesla, General Electric and Chipotle Mexican Grill. Meta Platforms, ServiceNow, Dexcom and Caterpillar were notable earnings losers. Nvidia and several other AI chip and hardware stocks surged, buoyed by strong AI-led capital spending by Meta and Microsoft. Treasury yields surged to fresh 2024 highs on hot inflation data.
Stock Market Rebounds
A stock market rally attempt began this week, with the Nasdaq leading the way thanks to Nvidia, Google parent Alphabet and Tesla. There were many earnings winners, but also some losers. Treasury yields jumped to a 2024 high as core inflation accelerated, but they came off highs.
Economic Growth, Inflation Stubborn
A raft of economic data this week confirmed that elevated inflation is being stubborn – but then again, so is the strength of the labor market, consumer spending and new home sales. The stock market got a shock early Thursday when, along with a lower-than-forecast 1.6% rise in first-quarter GDP growth, the report's core PCE price index accelerated to a 3.7% pace. Friday's March core PCE inflation was a little less worrisome. Meanwhile, a report said consumer spending rose 0.8% in March for a second straight month. Jobless claims fell to a two-month low while new-home sales unexpectedly jumped.
Google Surges On Earnings, Payouts
Google-parent Alphabet announced its first quarterly dividend, starting at 20 cents a share, and a $70 billion stock buyback. Q1 earnings came in at $1.89 per share, up 61% from a year earlier. Gross revenue rose 15% to $80.54 billion. Analysts had predicted EPS of $1.51 on revenue of $78.7 billion. Advertising revenue rose 13% to $61.66 billion and YouTube ad revenue rose 21% to $8.1 billion, both beating. Cloud-computing revenue rose 28% to $9.574 billion, above estimates.
Meta Dives On Revenue, Spending Outlook
Meta Platforms tumbled in the stock market following its Q1 earnings report late Wednesday, as investors fretted over the rising costs of the Facebook parent company's AI push. Additionally, Meta earnings surged 114%. Sales jumped 27% to $36.46 billion, the fifth straight quarter of accelerating growth. Both beat views. But the Facebook and Instagram parent guided low for Q2 revenue at the midpoint. Meanwhile, Meta raised its guidance for 2024 capital expenditures by 12% to $37.5 billion at the midpoint of its range. It upped the midpoint of its total expenses about 1%, to $97.5 billion. Chief Executive Mark Zuckerberg told analysts that Meta will "invest significantly more over the coming years" to create AI products.
Cloud Strength Drives Microsoft Beat
Microsoft beat fiscal third-quarter views with a 20% EPS gain while revenue climbed 17%. Microsoft Cloud revenue jumped 23% to $35.1 billion, led by Azure infrastructure revenue, which rose 31% vs. Q2's 30%. For the current quarter, Microsoft forecast sales of $63.5 billion to $64.5 billion, and was bullish on AI demand and cloud growth. The Dow giant expects capital spending to increase "materially" in Q4.
AI Chip Stocks Rebound
Nvidia and other AI chip stocks regained ground from the prior week's sell-off on reports of increased investments in AI data centers by Meta Platforms and other tech giants. But chip stocks exposed to markets in cyclical downturns, such as industrial and automotive, diverged. Texas Instruments and STMicroelectronics rose on expectations that they've hit a sales bottom. But MaxLinear and Silicon Labs fell after their quarterly reports. Meanwhile, Intel stock fell on a mixed first-quarter report and weak Q2 outlook. Elsewhere, tracking-chip maker Impinj exploded out of a flat base after its beat-and-raise earnings report.
Tesla Surges In Stock Market Despite Earnings Miss
The EV giant's EPS plunged 47% while revenue fell 9% to $21.3 billion, both missing lowered expectations, while Tesla burned $2.5 billion in cash. But Tesla said "affordable" new models will come in late 2025, with Elon Musk saying production could happen before the end of 2024. However, they won't be "next-generation" EVs with big cost savings. The timeline suggests a stripped-down Model 3 or Model Y. Musk also touted self-driving and robotaxis, and also predicted Tesla deliveries will rise in 2024. Shares surged from a 52-week low, even as analysts kept cutting earnings estimates.
GM, Ford Beat Views
General Motors reported a 19% EPS gain with sales climbing 8% and raised its full-year profit estimates. Ford reported Q1 revenue up 3% to $42.8 billion with EPS off 22%. Ford affirmed EBITA guidance but raised its cash flow guidance. GM stock soared, flashing multiple buy signals. Ford also rallied for the week, moving above key levels.
Chipotle Earnings Jump
Chipotle earnings jumped 27%, easily topping views and with growth accelerating for a second straight quarter. Sales grew nearly 14% to $2.684 billion, slightly beating views. Same-restaurant sales rose 7%. Operating margin picked up to 16.3% from 15.5%, with restaurant operating margins at 27.5%, up 190 basis points.
GE Aerospace Soars On Boeing's Woes
GE Aerospace reported its first quarterly results Tuesday following the April 2 spinout of General Electric's power and energy business, now known as GE Vernova. Earnings for GE Aerospace soared 273%, easily beating, with revenue meeting views for a 15% gain to $8.1 billion. GE Aerospace is benefiting from strong aftermarket parts revenue, in part due to Boeingwoes. Boeing reported a smaller-than-expected Q1 loss as revenue fell 8% to $16.57 billion, modestly beating. Outgoing CEO David Calhoun said 737 production will be "slow and lumpy" in Q2 as it works through challenges. "We are not going to rush it," he said. CFO Brian West said Boeing is slowing near-term production of the 787 Dreamliner and plans to "return to five per month later this year." BA stock reversed lower, hitting its lowest levels since late 2022.
GE Vernova reported a narrower loss in its first stand-alone report, with revenue climbing 6% to $7.26 billion. GEV stock jumped toward the top of its IPO base.
ServiceNow Guides Low
ServiceNow said adjusted Q1 EPS swelled 44%, solidly beating, while the 24% revenue gain to $2.6 billion just edged past views. Current remaining performance obligations, or CRPO, climbed 21% to $8.45 billion, slightly above expectations. But the software giant forecast Q2 subscription revenue just below estimates. Atlassian reported a 65% EPS gain, easily beating fiscal Q3 views, while revenue climbed 30% to $1.189 billion. The collaboration software maker guided fractionally higher for Q4 revenue. Co-CEO Scott Farquhar will step down in August, leaving co-founder Mike Cannon-Brookes as the sole CEO. Both stocks tumbled on earnings, though NOW edged higher for the week.
ATT/Verizon/TMUS
AT&T, Verizon Communications and T-Mobile US topped earnings estimates and wireless subscriber estimates, though overall revenue slightly missed. AT&T earnings fell 8% while core revenue dipped 0.5% to $30 billion. Free-cash flow and postpaid wireless subscriber growth were strong. Verizon profit fell 4% with revenue up 0.2% to $33 billion. Wireless service revenue climbed 3.3% to $19.5 billion, beating, helped by price hikes. Verizon lost 68,000 postpaid phone customers, but not as bad as feared. Also, Verizon added 354,000 5G fixed wireless broadband customers, below estimates of 364,000. T-Mobile EPS popped 26% while revenue edged down 0.2% to $19.59 billion, with 532,000 postpaid phone subscribers added. Controlled by Deutsche Telekom, T-Mobile said it added 405,000 5G broadband customers
AT&T was little changed while Verizon fell modestly. TMUS stock edged higher.
Medical Product Firms Top Views
Boston Scientific, Edwards Lifesciences and Dexcom all beat quarterly estimates. Boston Sci stock gapped up. Edwards Life pared modest weekly gains following earnings. Dexcom wiped out solid weekly gains as its raised sales forecast was still light.
Construction Stocks Diverge
Dow Jones heavy equipment maker Caterpillar gapped below its 50-day line after first-quarter sales came in light, while United Rentals powered above its 50-day line after exceeding forecasts and bumping up its full-year sales outlook. Caterpillar demonstrated its operating prowess that has led to higher profit margins, as EPS rose 14% to $5.60, 46 cents ahead of views, while sales dipped 0.4% to $15.8 billion. The Dow Jones giant said sales should dip in Q2 and be roughly flat for the year. United Rentals EPS rose 15% to $9.15, easily beating, as revenue climbed 6% to $3.485 billion. The top rental-equipment firm raised its full-year revenue outlook by $300 million, now targeting $14.95 billion to $15.45 billion.
Defense Giants
Lockheed Martin, RTX and Northrop Grumman solidly beat views. Lockheed earnings eased 1.5% while revenue jumped 14% to $17.2 billion, RTX's per-share profit grew 10% and sales grew 12% to $19.3 billion. Northrop's EPS advanced 15% as revenue gained 9% to $10.13 billion. Meanwhile, General Dynamics delivered a 9% EPS rise that slightly missed, though a near-9% sales gain to $10.7 billion beat. Northrop shares jumped, clearing early entries and nearing a traditional breakout. RTX stock continued to trade tightly near the top of a two-year consolidation. Lockheed edged higher while General Dynamics fell slightly.
Steel Stocks Pressured
Three industry titans slid below their 50-day lines. Steel Dynamics, which delivered the only earnings beat among the trio, held up much better than Nucor and Cleveland-Cliffs after they came up short. The companies painted an extended outlook for firm demand amid onshoring and infrastructure spending. Yet Nucor EPS fell 22% to $3.46 a share as sales slid 7% to $8.14 billion. Q2 EPS will be lower than Q1, Nucor said, though analysts were expecting $3.63. Cleveland-Cliffs, while missing on EPS and sales, stuck by its full-year revenue and cost-savings outlook. Steel Dynamics beat by 16 cents as EPS fell 8% to $3.67 and sales dipped 4% to $4.69 billion.
Oil Earnings Mixed
Supermajors Exxon Mobil and Chevron capped a big week for oil stocks, reporting mixed Q1 results with EPS and sales down due to lower refining margins and a drop in natural gas prices. Exxon Q1 EPS came in at $2.06, down 27% compared to Q1 2023, while revenue decreased 4% to $83.08 billion. Meanwhile, Chevron announced first-quarter earnings fell 17% to $2.93 per share with revenue down 4% to $48.72 billion. Refining giant Valero Energy topped earnings expectations but missed on revenue. Meanwhile, oil service firms Halliburton, Weatherford International, TechnipFMC and Oceaneering all reported better-than-expected first-quarter earnings and revenue. Halliburton and Weatherford financials continue to be fueled by overseas growth as North America revenue declined. This came as Helix Energy Solutions announced a surprise loss. Exxon, Chevron and Valero shares rose modestly, around buy areas, while Weatherford, TechnipFMC, Oceaneering and Helix jumped.
Merck, AstraZeneca Lead Big Pharma
Merck and AstraZeneca also posted sales beats on the back of their biggest cancer treatments, Keytruda and Tagrisso, respectively. Bristol Myers Squibb also topped first-quarter expectations, but plunged on lowered profit guidance and layoffs. Biogen topped on EPS but missed on sales. Alzheimer's treatment Leqembi and Friedreich's ataxia drug Skyclarys helped drive profit upside.
In Brief
Visa reported fiscal Q2 EPS grew 20%, with revenue up 10%, both topping views and with gains picking up from the prior quarter. Payments volume grew 8% in constant dollars, with cross-border volume climbed 16%. Operating expenses swelled 29%.
Vertiv earnings jumped 79% to 43 cents a share, easily beating analyst views though growth slowed for a third straight quarter. Revenue rose 8% to $1.64 billion, slightly topping. Organic orders jumped 60% in constant currency.
Cadence Design Systems, a maker of electronic design automation software, topped estimates for the first quarter but guided well below views for the second quarter. Q1 EPS fell 9% vs. a year earlier as sales declined 1% to $1.01 billion. Shares tumbled.
Neurocrine Biosciences popped Tuesday saying patients who took its depression drug for 28 days showed a statistically significant improvement in symptoms. The results continued to improve over 56 days. Analysts say this puts the biotech on track to rival Johnson & Johnson, which sells a nasal spray called Spravato for treatment-resistant depression.
Medpace results were mixed with an 18% sales gain to $511 million slightly missing, but a 41% EPS gain easily beat forecasts at $3.20 per share. The contract resource organization, which helps run clinical trials, reiterated its full-year sales outlook despite the Q1 miss and light bookings. Shares jumped 8.2% Tuesday in a big upside reversal, later testing a buy point.
Roku beat first-quarter expectations and guided higher for Q2. The streaming video platform added 1.6 million new accounts, ending Q1 with 81.6 million households. It lost 35 cents a share on sales of $881 million.
