The coronavirus stock market rally continued to march higher, as coronavirus vaccine hopes fueled expectations of V-shaped economic activity, along with states reopening and some hints of positive data. With U.S.-China tensions rising over Covid-19 and Hong Kong, the Senate passed a bill that could force Chinese companies such as Alibaba (BABA) to delist from U.S. exchanges. Alibaba stock, which broke out early in the week, sold off on rising risks and after earnings. Nvidia (NVDA), Splunk (SPLK) and Lowe’s (LOW) were earnings winners, but Best Buy (BBY), Walmart (WMT) and Target (TGT) were losers.
Stocks Win Big, Lose Small
The coronavirus stock market rally had some up and down days, but the major indexes closed with solid weekly gains. Leading stocks continued to outperform, with the Nasdaq starting to set its sights on all-time highs. Coronavirus vaccine developments fueled hopes for a faster economic recovery, but China tensions are rising, with delisting risks hitting Chinese stocks on U.S. exchanges. Airlines rose on some signs of slowly recovering demand.
Coronavirus Vaccines In Progress
Moderna (MNRA) rocketed 20% Monday after the biotech said two groups of patients developed antibodies after receiving different dosing regimens of its coronavirus vaccine. Shares slashed weekly gains on doubts that the early data were that meaningful. Also Monday, Vir Biotechnology (VIR) said it had selected two potential antibody treatments to send into clinical testing for Covid-19. Vir shares soared more than 32%. On Wednesday, Inovio Pharmaceuticals (INO) jumped on promising test results for its coronavirus vaccine in mice and guinea pigs. Meanwhile, Vaxart (VXRT) added Kindred Biosciences (KIN) as a manufacturing partner for its coronavirus vaccine, and small-cap biotech Aldeyra Therapeutics (ALDX) said its experimental coronavirus treatment outdid Gilead Sciences‘ (GILD) drug remdesivir on one measure of potency in testing humans cells. AstraZeneca (AZN) rose to a record high as the U.S. will give the drug giant $1.2 billion to get vaccine manufacturing capacity ready as Astra works with Oxford on a vaccine.
Nvidia Delivers Beat-And-Raise Report
Graphics-chip maker Nvidia (NVDA) reported EPS surged 105% as revenue leapt 39% to $3.08 billion, beating estimates. Data-center revenue rose 80% year over year to $1.14 billion. For the July quarter, Nvidia expects revenue to rise 42% to $3.65 billion, above views. Meanwhile, chipmaker Analog Devices (ADI) reported earnings fell 21%, beating views, while sales fell 14% to $1.32 billion, missing. ADI earnings have declined six straight quarters while sales have fallen four consecutive quarters. The declines are forecast to continue for at least another two quarters.
Chinese Internet Firms Deliver Strong Revenue
E-commerce giant Alibaba (BABA) beat estimates, as gross merchandise volume for its fiscal year reached a record $1 trillion. Pinduoduo, the No. 3 e-commerce company in China, solidly beat revenue estimates but its loss was worse than views. Video game publisher NetEase easily beat Wall Street targets. Bilibili, a social media company that targets a young audience, missed on earnings but soundly beat on revenue and outlook. The Bilibili platform covers a range of genres and media formats, including videos, live broadcasting and mobile games. Alibaba stock, which broke out early in the week, sold off amid U.S.-China tensions and after earnings. NetEase stock also sold off. But PDD stock and Bilibili stock rose sharply for the week.
ZTO Express (ZTO) earned 12 cents a share, missing views for 16 cents. Revenue fell 14.4% to $553 million in the coronavirus-hit first quarter. Parcel volumes grew 4.9% to 2,374 million, but unit price per parcel fell 19.4%, reflecting adverse coronavirus impact and cutthroat competition in the Chinese express delivery market. ZTO Express is backed by Alibaba.
The U.S. job market is healing only slowly as states roll back social distancing restrictions, the latest data on unemployment claims suggests. Survey data indicated that manufacturing continued to contract, though at a less severe rate than in April. Meanwhile, the Fed offered some signals of what investors can expect at the June meeting and beyond.
New claims for regular state unemployment benefits fell 182,000 to 2.17 million in the week through May 16, the Labor Department reported Thursday. But the number of people continuing to claim unemployment benefits jumped nearly 2.1 million to 22.9 million in the prior week.
Those numbers don’t include people who aren’t eligible for unemployment benefits but have claimed Pandemic Unemployment Assistance benefits. Many states have been slow to process pandemic-related benefits. Claims for pandemic benefits rose 1.2 million last week. Some 8 million people have claimed or are receiving such benefits.
The Philadelphia Fed manufacturing survey index bounced to -43.1 from -56.6. New orders fell at 50% of firms and rose at 25%. Employment fell at 24% and rose at 9%.
On the plus side, mortgage applications for buying a home picked up yet again, and are down just 1.5% vs. a year earlier.
Best Buy Beats Q1 Targets
Best Buy (BBY) beat consensus estimates with Q1 EPS off 34% and sales down just 6% to $8.56 billion. The consumer electronics retailer quickly pivoted to online sales and curbside pickup as the pandemic forced it to shut its retail stores to customers. During the period of curbside-only business, Best Buy was able to retain 81% of last year’s sales in those last six weeks of the quarter. The retailer did not provide guidance for the current quarter given economic uncertainties related to the Covid-19 pandemic. Shares, which broke out a few days before earnings, reversed lower for the week.
Several software makers reported earnings this week.
Splunk (SPLK) reported a loss that was a little smaller than expected, while a 2% revenue gain slightly missed. The database and security software firm is shifting to a subscription model that is hurting results in the short run. But cloud revenue soared 81%. Shares soared to a record high.
Chip design software maker Synopsys (SNPS) beat analyst targets for its fiscal second quarter ended April 30, but its outlook for the current quarter was weak. It earned an adjusted $1.22 a share, up 5% on sales of $861.3 million, up 3%. For the current quarter, Synopsys guided to adjusted earnings of $1.36 a share on sales of $890 million. Analysts were looking for earnings of $1.47 a share on sales of $948.7 million in the fiscal third quarter.
Financial software maker Intuit‘s (INTU) earnings fell 19% while sales sank 8% to $3 billion. The Covid-19 pandemic hurt its small business customers. Also, the extension of the IRS tax filing deadline to July 15 caused customers to delay purchasing TurboTax this year.
Take-Two Interactive Software (TTWO) crushed fiscal fourth-quarter views as the coronavirus pandemic drove a surge in stay-at-home game usage, but the “Grand Theft Auto” game maker said it’ll release few titles in fiscal 2021.
Palo Alto Networks (PANW) reported fiscal Q3 earnings that fell from a year earlier but still topped expectations. For the current quarter, the cybersecurity firm guided higher.
Big-Box Digital Sales Jump
Walmart (WMT) and Target (TGT) reported first-quarter results that beat estimates, helped by a jump in digital sales, as shoppers rushed to stock up due to the coronavirus pandemic. Both retail chains noted rising costs, as they expand pay, benefits and safety protections to workers. E-commerce sales and sales of items like groceries came with lower margins. Walmart suspended its full-year outlook, and warned of starts and stops in its path to recovery. The company also discontinued its Jet.com brand. Walmart and Target shares fell.
Airlines See Flicker Of Hope
Southwest (LUV) reported a “modest improvement” in demand so far this month and projected for June, after the coronavirus pandemic and travel restrictions forced carriers to slash flights and seek government aid amid a collapse in demand. United Airlines (UAL) also reported lower cancellations and “moderate” strengthening on U.S. and some international routes, and said it would schedule more flights in July than this month or next. Delta Air Lines (DAL) said it would restore several major domestic and international routes that were pulled due to the pandemic.
TJX Touts Reopened Stores
Ross Stores (ROST) fell far short of estimates late Thursday. Off-price rival TJX Cos. (TJX) missed first-quarter estimates early Tuesday. But TJX said sales at reopened stores have been strong so far. Both companies closed stores due to the coronavirus pandemic. Both stocks rose on TJX results then pulled back somewhat after Ross reported.
Home Depot Mixed, Lowe’s Beats
Home Depot (HD) beat sales views, but earnings missed as coronavirus-related expenses took their toll. Rival home improvement chain Lowe’s (LOW) beat on profit and revenue. Lowe’s popped on results but is still well off highs. Home Depot hit a record high before earnings, then pulled back. Visa (V) has said spending has actually improved on home improvement.
News In Brief
Kevin Mayer, who led Disney’s direct-to-consumer division which includes the streaming sites Disney+, Hulu and ESPN+, announced late Monday he would join Chinese tech giant Bytedance, as COO and TikTok’s CEO. Mayer was expected to be tapped as the CEO of Disney (DIS) when Bob Iger stepped down earlier this year. But he was passed over in February. Disney named Josh D’Amaro to head the parks segment just as it begins reopening. Rebecca Campbell is taking over Mayer’s former role. Shares rose sharply.
Advance Auto Parts (AAP) earned 91 cents a share, missing by 70 cents. Revenue fell 8.6% to $2.7 billion, as coronavirus stay-at-home orders hurt car counts and retail traffic. The auto parts retailer didn’t update 2020 guidance, after withdrawing it on April 9.
Medtronic (MDT) reported adjusted income of 58 cents per share on $6 billion in sales, down a respective 62% and 26% year over year. Both measures lagged expectations.
Japan-based SoftBank could sell up to $20 billion of its stake in T-Mobile US (TMUS) following T-Mobile’s merger with Sprint, reports said. In a separate deal, SoftBank reportedly is in talks to sell part of its 24% stake to Deutsche Telekom. That deal would enable Deutsche Telekom to increase its stake to over 50%.
Deckers Outdoor (DECK) popped after the footwear maker beat fiscal Q4 views.
Sea Ltd. (SEA) reported mixed first-quarter earnings results, with double-digit gains in users. Shares hit a new high. Sea operates the largest e-commerce platform in Southeast Asia.
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