Stock Market Rally Shifts To Tech After Fed Meeting; Adobe, Ford In Focus

The stock market rally reacted to Wednesday’s Fed meeting, then reacted again the following day. Treasury yields first jumped and then reversed. The Nasdaq took the lead, with the Nasdaq 100 hitting record highs. But the Dow Jones and S&P 500 undercut their 50-day lines. Adobe (ADBE) rallied on earnings as software stocks power higher. Mining, metals and fertilizer stocks continued to sell off hard. Financials, after a brief Fed bounce, also retreated. Ford (F) gave some bullish guidance while GM (GM) stepped up EV spending, but shares pulled back amid the real economy retreat.

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Techs Lead Divided Stock Market Rally

The stock market rally is split once again, but now with techs leading and real economy sectors slumping, especially metals, mining and financials. The Nasdaq is close to a record high with the Nasdaq 100 already there. The S&P 500 hit fresh highs early in the week but edged lower. The Dow Jones fell below its 50-day line with the S&P 500 and Russell 2000 undercutting that key level intraday Friday. The 10-year Treasury yield spiked Wednesday after the Fed meeting, but then tumbled late in the week. Copper futures plunged after a long run, as China said it would sell some stockpiles of copper, aluminum and other metals to rein in prices. Crude oil futures pulled back from multiyear highs.

Fed Rate Hikes Move Up

The Federal Reserve signaled it expects two rate hikes in 2023, moving up its forecast somewhat. That came as the central bank sees higher inflation than previously forecast, while economic growth improves. However, the Fed has not officially begun talking about tapering asset purchases. Fed chief Jerome Powell said this was the “talking about talking” Fed meeting.

Economic Data Miss Views, Show Spending Shift

May retail sales fell 1.3%, much more than expected, though April sales were revised up substantially. The report showed a shift away from pandemic-era spending on the home and back to apparel and restaurants. May housing starts were below estimates. The New York Fed’s Empire manufacturing index showed slowing regional factory growth in June, though the Philly Fed manufacturing index still showed robust activity in the mid-Atlantic area. Jobless claims unexpectedly rose after several weeks of declines.

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Adobe Earnings Shine

Adobe (ADBE) easily beat Wall Street’s targets for its fiscal second quarter, with EPS up 24% and sales up 23% to $3.84 billion. It also guided above views for the current period. The digital media and marketing software maker guided up for fiscal Q3. Adobe broke out last week in the stock market ahead of the earnings news and continued to climb after the report.

GM, Ford Step Up EV Investments

General Motors (GM) hiked spending on electric cars and autonomous vehicles for the second time since the pandemic began, to $35 billion by 2025, up 30% from its November forecast of $27 billion. GM will build two more battery plants in the U.S. with two already under construction, as it looks to supply batteries and fuel cells to Wabtech (WAB) for the first electric freight-locomotive. Ford acquired Electriphi, a California-based startup providing software for EV charging management and fleet monitoring, part of its upgraded $30 billion spending on electric cars and autonomous vehicles by 2025. Meanwhile, Ford’s F-150 Lightning, its first all-electric pickup, reached 100,000 reservations within a month of launch. The auto giant is seeing strong reservations for the compact Maverick brands hybrid-electric pickup and Transit electric van as well. Ford also raised its Q2 guidance. But Ford and GM shares fell in the stock market.

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Oracle Sinks On Guidance

Oracle earnings rose 28%, the fourth straight quarter of accelerating growth. Revenue rose 8%, the best gain in six years, helped by easy year-over-year comparisons. But its earnings outlook for the current quarter missed estimates, due to increased investments in cloud computing. Shares tumbled.

News In Brief

Roblox (RBLX) said its daily active users dipped 1% to 43 million from April to May. Bookings for the kid-focused video game platform also came in below estimates. Roblox fell in the stock market after the report.

Kroger (KR) beat first-quarter views. The grocery-store operator also raised its full-year outlook.

Honest Company (HNST), the personal-care products company and recent IPO founded by actress Jessica Alba, reported first-quarter results that topped estimates.

Jabil (JBL), a contract manufacturer of electronics and other products, beat estimates for its fiscal third quarter ended May 31 and guided higher for the current period. Jabil’s earnings soared 251% to an adjusted $1.30 a share. Sales increased 14% to $7.21 billion.

DraftKings (DKNG) fell sharply in the stock market for the week after short-seller Hindenburg Research said its subsidiary SBTech had ties to organized crime and black-market betting. The online sports betting operator denied the charges.

Lordstown Motors (RIDE) CEO Steve Burns and CFO Julio Rodriguez resigned after a probe substantiated a key claim from a short seller that the electric-truck startup made “inaccurate” claims regarding “preorders.” President Rich Schmidt said Tuesday that Lordstown is reconfirming orders and raising more capital, adding that it has enough money to cover production through May 2022. On Thursday, Lordstown said it does not have “binding” orders.

Elanco Animal Health (ELAN) will buy Kindred Biosciences (KIN) for $440 million. Kindred has three potential blockbuster treatments for dermatologic conditions, Elanco says.

Novavax (NVAX) said its Covid vaccine showed 90.4% overall effectiveness in a Phase 3 study. It was 100% protective against moderate or severe disease and 93% effective against concerning variants. But CureVax (CVAC) said its vaccine was only 47% effective. Novavax fell sharply and CVAC stock plunged.

Smith & Wesson (SWBI) earnings shot up 242% to $1.71 a share, smashing analyst estimates of $1.02. Revenue climbed 67% to $322.9 million, also beating. The firearms maker also hiked its dividend and announced a $50 million buyback. Shares surged Friday.

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