The stock market rally, under pressure since Sept. 17, sold off hard Monday as fears that China’s Evergrande Group would default rippled through financial markets worldwide. But on Wednesday, the Nasdaq regained its 50-day as Evergrande said it would make a debt interest payment, while the Fed pushed back a bond taper decision until November. The S&P 500 also reclaimed its 50-day on Thursday as another flurry of leading stocks flashed buy signals, sending the stock market back into a confirmed uptrend. But Evergrande debt fears remain. Salesforce.com (CRM) jumped on strong guidance. Adobe (ADBE), Nike (NKE) and FedEx (FDX) were earnings losers, while Facebook (FB) sees headwinds.
Stock Market Rally Shrugs Off Pressure
The stock market rally started the week with heavy losses, but then rebounded powerfully on Wednesday and Thursday, with the S&P 500, Nasdaq and Russell 2000 all reclaiming their 50-day lines. The major indexes were slightly to modestly higher for the week as of Thursday. Fears of a huge default by China Evergrande eased, somewhat, while the Fed walked the line between dovish and hawkish moves. After starting “under pressure” and nearly moving into a correction, the market rally was back to a confirmed uptrend by Thursday’s close. Leading stocks, which held up relatively well in the pullback, roared higher as the broader market improved. Treasury yields jumped on the Fed, fueling financials. Crude oil prices lifted energy stocks. But a China ban on crypto transactions slammed Bitcoin and other alt-coins.
But stocks retreated Friday morning.
Fed Signals Bond Taper In November
The Federal Reserve decided not to approved a bond taper at its latest policy meeting, but Fed chief Jerome Powell signaled that it would likely come in November, with asset purchases falling to zero by mid-2022. That could set the stage for a rate hike late next year. Half of the 18 policymakers see a 2022 rate hike, vs. 7 at the prior meeting. Treasury yields rose on the Fed decision, but stocks also rallied.
Adobe Delivers Beat-And-Raise Report
The digital media and marketing software giant reported a 21% EPS gain in its fiscal Q3 as revenue rose 22% to $3.94 billion. Adobe (ADBE) also guided higher. But Adobe stock fell as investors focused on disappointing annual recurring revenue in its core Digital Media business.
Covid vaccine stocks rose last week on a barrage of regulatory decisions and test results. The Food and Drug Administration, following an advisory panel’s recommendation authorized a booster dose of the Pfizer and BioNTech shot for people age 65 and older, and those at risk of progressing to severe Covid due to preexisting conditions or occupational/institutional exposure. The FDA could also soon authorize shots for children ages 5-11. Pfizer and BioNTech said a smaller dose for children still produced a comparable level of antibodies to what has been seen in people age 16-25. The U.S. will buy 500 million more Pfizer/BioNTech shots to donate to the world. Meanwhile, Johnson & Johnson (JNJ) said people getting a second shot of its one-shot vaccine had 75% protection vs. vs. moderate to severe/critical Covid globally, and 94% in the U.S.
Homebuilder Sales Under Pressure
Lennar (LEN) reported Q3 EPS rose 54%, just above views. But sales grew 18% to $6.9 billion, below views. Meanwhile KBHome (KBH) met Q3 EPS views but a 47% revenue jump fell short. Both blamed supply chain constraints that curbed their ability to sell as many homes as they had projected. Both homebuilders fell modestly.
Meanwhile, existing home sales fell a little more than expected in August, while August housing starts and a September homebuilder sentiment gauge rose slightly, above views.
Salesforce, Workday Raise Guidance
Salesforce.com (CRM) sees revenue in fiscal 2022, ending in January, of 26.25 billion to $26.35 vs. its prior target of $26 billion at the high end. At its analyst day, the software giant also forecast fiscal 2023 revenue slightly above expectations amid the acquisition of Slack Technologies. Shares surged to a record high. Workday (WDAY) at its analyst day forecast subscription revenue growth of more than 20% post-fiscal 2022, a little above consensus. The software maker would near $10 billion in revenue by fiscal 2026 under that trajectory. Workday forecast 30%-plus growth in financial software and high-teens growth in human capital management, analysts said. But margin guidance came in below views. Shares rose modestly.
Nike Sales Miss Amid Supply Disruption
Nike earnings rose 22% vs. a year earlier, beating views. Sales grew 16% to $12.2 billion, but that below expectations. Nike blamed supply-chain issues, chiefly in Vietnam, where Covid-19 cases have forced production slowdowns. The sports apparel giant also said supply headwinds will hurt current-quarter sales. NKE stock fell sharply.
IPO Activity Remains Strong
Freshworks (FRSH) raised $1 billion in its IPO and was valued at $10 billion, as the business software firm popped 32% on its first day of trading. Toast (TOST) jumped 56% after raising $870 million in its IPO initially valuing the fintech at $20 billion, with an IPO that jumped 56%. Toast provides an integrated payment processing system for restaurants.
Facebook Sees Business Headwinds
Facebook (FB) said Apple iOS ad-tracking changes are continuing to take a toll on its business, sending shares lower. Meanwhile, Chief Technology Officer Mike Schroepfer will transition to a senior fellow role sometime in 2022. Andrew Bosworth, currently leader of Facebook’s augmented and virtual reality division, will become CTO.
Accenture Rises On Guidance, Buyback
Accenture (ACN) reported fiscal Q4 EPS rose 11% while revenue rose 24% to $13.4 billion, both edging past estimates. The global IT consulting firm guided up on Q1 and fiscal 2022 revenue growth. Accenture also announced a $3 billion buyback and hiked its dividend by 10%. Shares rebounded.
Costco Earnings Beat
Membership warehouse retail chain Costco (COST) reported fiscal fourth-quarter results that beat expectations. The company reported amid signs that it has held onto customers it drew last year during the height of coronavirus lockdown fears. But more recently, rising transportation and food costs have threatened margins.
FedEx Dives On Earnings Miss, Guidance
FedEx (FDX) cut fiscal 2022 guidance after missing Q1 views amid rising labor costs and supply issues. EPS fell 10% despite sales growing 14% to $22 billion. Operating margins also fell as labor costs rose $450 million year over year. Overall market conditions “were more challenging than anticipated and are now expected to extend longer,” the shipping giant said. A day ahead of earnings, FedEx raised shipping rates by an average 5.9% starting in January to offset rising costs.
News In Brief
QuantumScape (QS) is teaming up with a new, unnamed automaker on solid-state, lithium-metal batteries for electric cars, its second partner after Volkswagen VWAGY.
Li Auto (LI) cut its delivery forecast for the third quarter to 24,500 EVs, down from 25,000-26,000 prior, citing the pandemic-fueled chip shortage.
DraftKings (DKNG) on Sept. 21 offered $20 billion to buy British-based Entain, which is a BetMGM partner. DraftKings upped the ante with a second offer the next day of $22.4 billion. MGM says they’d need to be consulted on any deal. Entain stock soared and MGM rallied. DKNG stock plunged.
Disney (DIS) CEO Bob Chapek said at a Goldman Sachs conference that he sees streaming subscriber growth slowing more than expected in Q4, and production woes due to the delta variant will result in fewer new shows than planned. Disney stock fell sharply Tuesday, but then pared losses..
Darden Restaurants (DRI) gapped to a record high after reporting a 214% EPS gain, crushing views. The Olive Garden parent’s sales popped 51% to $2.31 billion, also above estimates for $2.24 billion.
Uber (UBER) surged after it said it may post its first quarter of adjusted profit in Q3, thanks to a rebound in users post pandemic and cost cuts, including selling off its self-driving segment. It still expects an adjusted profit in Q4.
Self-driving startup Aurora, which recently bought Uber’s driver-assist tech, showed off a sensor-laden Toyota Sienna as part of a planned robotaxi service with Uber and Toyota (TM) in 2024. It also plans to test driverless deliveries with FedEx (FDX) on trucks between Dallas and Houston.
Brooks Automation (BRKS) agreed to sell its semiconductor equipment business for $3 billion to private equity firm Thomas H. Lee Partners. Brooks will focus on its life sciences business.
Dell (DELL) announced a $5 billion buyback, said it’ll initiate a dividend next year and gave guidance for its post-VMware (VMW) spinoff.
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