The stock market rally continued to climb, with the S&P 500 index and Nasdaq composite hitting record highs on stimulus deal hopes, coronavirus vaccine progress and strong tech earnings. The U.K. approved the Pfizer (PFE) and BioNTech (BNTX) coronavirus vaccine. Salesforce (CRM) will buy Slack Technologies (WORK), sending CRM stock sharply lower. Zoom Video (ZM) tumbled despite another quarter of stellar results. But several software stocks soared on earnings, including Zscaler (ZS), CrowdStrike (CRWD) and Snowflake (SNOW).
XStocks Continue To Rise
The stock market rally continued to power higher, with the Dow Jones, S&P 500, Nasdaq composite and Russell 2000 all hitting new highs amid stimulus deal talks, ongoing coronavirus vaccine progress and strong earnings. Apple (AAPL) quietly had a strong week. But software dominated the headlines. Salesforce is buying Slack. Zscaler, CrowdStrike and Snowflake were among the many software winners, though Zoom Video was a notable loser.
Pfizer Coronavirus Vaccine Gets U.K. Approval
Pfizer (PFE) and BioNTech (BNTX) jumped Wednesday after the U.K. authorized their coronavirus vaccine for emergency use, with vaccinations starting in days. Moderna (MRNA) announced some new vaccine supply deals as it said its treatment appears to have a lasting immune response. An FDA panel will review the Pfizer-BioNTech coronavirus vaccine on Dec. 10, followed by the Moderna vaccine a week later.
U.S. Economic Recovery Slowing
Friday's jobs report revealed a big slowdown in November, as private employers added 344,000 workers to payrolls, down from 877,000 the prior month, according to the Labor Department's monthly employer survey. Nonfarm payrolls rose just 245,000, less than half of expectations. The coronavirus spike was the obvious culprit, as retailers, restaurants and bars shed a combined 52,000 jobs after adding 287,000 the prior month. Meanwhile, employers added 82,000 couriers as e-commerce keeps the stay-at-home economy running. The household survey confirmed the labor-market slowing, though the jobless rate dipped to 6.7%. The ranks of the employed fell by 74,000, while 400,000 people stopped looking for work.
The jobs report reflects mid-month surveys. That means still-surging coronavirus cases and the recent tightening of restrictions on gathering size and restaurant capacity in numerous states may show a further toll in December's report.
Still, it appears that the U.S. economy is slowing, not relapsing. The Institute for Supply Management manufacturing index slipped to 57.5 in November from 59.3, but that's still consistent with solid growth.
Salesforce Falls On Slack Deal
Salesforce.com (CRM) fell sharply on its $27.7 billion cash and stock acquisition of Slack Technologies (WORK). Analysts said another suitor may have led to Salesforce paying a high premium of 55% over Slack's Nov. 24 closing price. Slack marks Salesforce's largest acquisition yet. Salesforce CFO Mark Hawkins will retire effective Jan. 31, with President and Chief Legal Officer Amy Weaver taking over as CFO. Salesforce reported October quarter earnings and revenue that topped analyst estimates as the software maker recorded a big investment gain on recent IPO Snowflake (SNOW). Salesforce projected January quarter current remaining performance obligations, or CRPO bookings CRPO growth of 16%, below estimates of 17%.
Cybersecurity Earnings
Cybersecurity stocks CrowdStrike (CRWD), Zscaler (ZS) and Okta (OKTA) jumped on October quarter earnings reports. Sunnyvale, Calif.-based CrowdStrike said it earned an adjusted 8 cents a share vs. a year earlier 7-cent loss. Revenue jumped 86% to $232.5 million. Analysts had projected a break-even quarter on revenue of $213.5 million. Annual recurring revenue increased 81% to $907 million. CrowdStrike added a record 1,186 net new subscription customers. San Jose, Calif-based Zscaler said adjusted EPS leapt 250% as revenue rose 52% to $142.6 million, both easily beating. Zscaler guided higher for current-quarter revenue and in line for EPS. Okta earned 4 cents a share, the second straight quarter of adjusted profit and defying views for a 1-cent loss. Revenue grew 42% to $217.4 million, topping estimates of $202.7 million. Okta's software monitors and manages privileged accounts. CrowdStrike and Zscaler blasted out of bases Thursday. Okta briefly broke out, but pulled back.
Snowflake Soars On Booming Revenue
Snowflake (SNOW) reported a loss of 62 cents a share in its first report as a public company. Revenue soared 119% to $159.6 million, beating views. For the current quarter, Snowflake guided product revenue that was slightly below consensus at the midpoint. But shares skyrocketed 16% Thursday and kept surging Friday.
DocuSign Q3 earnings doubled while revenue rose 53% to $382.9 million, both easily beating views. The e-signature software specialist reported better-than-expected Q3 billings and Q4 revenue guidance. Shares jumped Friday.
Splunk (SPLK) reported Q3 revenue that was well below estimates, while guiding sharply lower for the current Q4. The data analytics and security software firm is undergoing a cloud transition to a software-as-a-service business model as it faces increased competition. Shares plunged Thursday.
Elastic (ESTC) lost just 3 cents a share with revenue up 43% to $144.89 million. Analysts expected a 20-cent loss on $130.5 million in revenue. The search software firm also guided higher. Shares gapped up to a new high Thursday.
Veeva Systems (VEEV) reported adjusted EPS rose 30% with sales up 34% to $377.5 million, both beat. Shares fell.
Synopsys (SNPS) reported a 37% EPS gain with sales up 20% to $1.025 billion, narrowly topping fiscal Q4 estimates. The Chip design software maker offered mixed guidance. Shares rose.
Zoom Video Earnings Aren't Enough
Zoom Video earnings leapt 1000% vs. a year earlier with revenue surging 367% to $777.2 million. The videoconferencing specialist, perhaps the ultimate work-from-home stock, also raised guidance. But it wasn't enough to satisfy investors. Zoom Video stock tumbled 15% on Tuesday.
China Delistings Bill Passes
The House unanimously passed legislation that would delist China stocks from U.S. exchanges within three years, unless their auditors come under supervision of the Public Company Accounting Oversight Board. Kandi Technologies (KNDI) became the latest U.S.-listed Chinese firm to face fraud claims, raising the issue's importance. But Beijing has made it illegal for Chinese auditors to submit to such scrutiny from an overseas regulator. The Senate already passed the bill and President Trump is expected to sign it. But the Treasury Department would have a lot of leeway to interpret compliance. U.S.-listed Chinese stocks didn't seem too affected.
China EV Sales Jump
China-based electric-vehicle makers Nio (NIO), Xpeng (XPEV), and Li Auto (LI) and BYD (BYDDF) all reported a jump in November sales. Nio reported a 109% year-over-year jump in deliveries, and said it was "in the process" of speeding up production capacity expansion to handle the increase in orders. Xpeng's deliveries surged 342% vs. a year earlier. Deliveries for Li Auto's Li One EVs rose 25.8% from October. BYD's EV sales hit 18,220 in November, up 128% vs. a year earlier and 22% vs. October. Plug-in hybrid sales hit 7,333, up 174% vs. a year earlier.
Tesla To Join S&P All At Once
Tesla (TSLA) got another bump up early in the week when it was announced that it would be added to the S&P 500 all at once on Dec. 21. The automaker has a market capitalization of more than $500 billion, making it the largest company ever to be added to the index. Tesla got the official green light to sell its Model Y SUVs in China. Meanwhile, Tesla pushed back on its Cybertruck timeline, saying that deliveries won't start until early 2022.
Nikola (NKLA) scrapped plans to build the Badger electric pickup truck in a scaled-down partnership deal with General Motors. GM will no longer take a stake in Nikola and they won't collaborate on electric vehicles, but will work together on fuel-cell technology. Nikola stock plunged.
Holiday Bargain Hunters Fuel Sales
Discount retailers reported strong earnings with the holiday shopping season in full swing. Teen-focused Five Below (FIVE) crushed views, with EPS surging 88% to 32 cents and revenue soaring 26% to $476.61 million. Same-store sales jumped 12.8%. Dollar General (DG) Q3 EPS leapt 63% to $2.31, with revenue up 17.3% to $8.2 billion. Same-store sales popped 12.2%. Closeout retailers Ollie's Bargain Outlet (OLLI) and Big Lots (BIG) beat Q3 views, but Ollie's said same-store sales growth is slowing in the holiday quarter while Big Lots didn't offer guidance. FIVE stock rose modestly to a new high, Dollar General edged lower while Ollie's and Big Lots sold off.
News In Brief
Advanced Micro Devices (AMD) surged after CEO Lisa Su forecast continued growth in PC sales next year and a better-than-seasonal first quarter for the chipmaker.
S&P Global (SPGI), the financial data and debt-rating firm, said it would buy rival IHS Markit (INFO) for $44 billion. The merger deal was the biggest so far this year.
OPEC+ agreed to raise output by 500,000 barrels per day starting in January. Each month, OPEC+ officials will meet to see if the market can handle further monthly output adjustments, which will not exceed 500,000 bpd. That marks a compromise between the plan agreed to earlier this year to loosen the quota and increase output by 2 million bpd vs. efforts to maintain current production cuts.
Ryanair (RYAAY) ordered 75 more Boeing 737 Max planes, the largest order since the plane was grounded last year. Boeing (BA) hasn't received an order for the narrow-body jet since Poland's Enter Air ordered two in August. An unidentified customer ordered three the same month bringing total 737 Max orders to five for the year. The FAA and European regulators have cleared the 737 Max for flights.
Kohl's (KSS) department stores will house Sephora mini-shops starting in 2021 as the makeup outlet's deal with JCPenney is due to expire in a few years. By 2023, Kohl's sees up to 850 Sephora shops in its stores. The deal follows a similar one Ulta Beauty (ULTA) struck with Target (TGT) last month.
UnitedHealth (UNH) guided slightly lower on 2021 earnings, citing high coronavirus-related costs. But investors seemed pleased with the underlying long-term forecasts. Shares rose.
Ulta Beauty (ULTA) reported a 26% EPS drop, beating views. Sales fell 8% to $1.55 billion, above some forecasts but missing others. Same-store sales sank 8.9%.
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