Everything to Know about Macro and Markets
The Dow Jones Industrial Average (DJIA) scored another week of outperformance over other major indexes, making gains for the eighth straight trading session on Friday. The 30-member blue-chip index was supported by a strong performance in most of its components, with only three stocks subtracting from growth. However, the S&P 500 (SPX) is also doing quite well, with over 80% of its members registering gains so far this month. The benchmark large-cap index rose within 1% from its March high.
Economic Reports in Focus
Last week was a rather uneventful one, with not much to report in terms of market-moving news. Investors were in waiting mode ahead of this week’s crucial consumer and producer price indexes. Consumer health will also be in focus, with retail sales data scheduled to be published this week and earnings from two major retailers in the spotlight.
Still, markets were encouraged by last week’s unexpected jump in initial weekly jobless claims, which rose to their highest level since August. This was widely viewed as an indication that the U.S. labor market continues to cool, supporting the Federal Reserve’s hand in their battle with the sticky inflation.
A stronger-than-expected decline in consumer sentiment didn’t derail investors’ optimism, despite reflecting heightened short-term inflation expectations. The markets now see a significant chance for a rate cut in September, despite the continued hawkishness reflected in some rate-committee members’ comments.
Strong Earnings Season
The successful first-quarter earnings season has added to renewed investor enthusiasm. With about 90% of the S&P 500 companies having reported, the blended year-over-year earnings growth rate is 5.4%, the highest since Q2 2022.
Moreover, excluding Bristol Myers Squibb’s (BMY) outsized earnings drop, the index would have seen its earnings growth come in at 8.3%, according to FactSet. The upbeat Q1 results have led analysts to hike their Q2 earnings-growth projections to 7.1% year-on-year, sending an optimistic signal for SPX’s performance for the rest of the year.
Stocks That Made the News
¤ Taiwan Semiconductor Manufacturing (TSM) led chip stocks higher last week, as the world’s largest foundry reported a 60% year-on-year surge in revenues in April.
¤ Arista Networks (ANET) was a notable outperformer last week, surging almost 15%. The cloud network gear provider topped analysts’ estimates for revenue and earnings, raised its 2024 revenue guidance, and authorized a new $1.2 billion share repurchase program.
¤ Gen Digital (GEN) saw its stock surge by almost 19% over the week, after the cybersecurity firm beat revenue and EPS estimates on surging demand for its software solutions – including AVG, Norton, Avast, and Avira – following a global rise in cyber threats.
¤ Intel (INTC) was the only semiconductor stock to be deep in the red last week, as it said that Q2 revenues would be lower than previously estimated due to new restrictions on sales to China’s Huawei.
¤ Epam Systems (EPAM) led the losses among S&P 500 stocks, plummeting 25% despite topping EPS estimates, as the software company produced weak sales and profit guidance for the current quarter and full year.
¤ Airbnb (ABNB) shares fell strongly on the week. The rental platform has surpassed analysts’ expectations for sales and profits in the past quarter, but the Q2 outlook came in below consensus.
¤ Robinhood (HOOD) was another notable decliner last week, falling after an initial boost from its better-than-expected quarterly results that showed the retail brokerage’s first-ever positive profit.
¤ Tesla (TSLA) stock continued downward, taking its year-to-date loss to over 32%, as the EV producer abruptly slashed thousands of jobs, some of its executives announced resignations, and regulators said they are investigating a possible failure to address safety issues.
Upcoming Earnings and Dividend Announcements
The Q1 2024 earnings season is drawing to an end, but a slew of notable earnings releases are still scheduled for this week.
This week’s spotlight will be on earnings releases from Home Depot (HD), Cisco Systems (CSCO), Walmart (WMT), and Applied Materials (AMAT).
In addition, investors will follow the reports scheduled to be published by Alibaba Group Holding (BABA), Monday.com (MNDY), Deere (DE), and Take-Two Interactive Software (TTWO).
Ex-dividend dates are coming this week for Exxon Mobil (XOM), KLA (KLAC), Target (TGT), Microsoft (MSFT), Eli Lilly (LLY), Visa (V), Chevron (CVX), Amgen (AMGN), Raytheon (RTX), Delta Air Lines (DAL), and other dividend-paying firms.
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