Dow Hits Highs, But Growth Slumps; Metals, Miners, Fertilizer Stocks Thrive

The stock market rally diverged once again, with the Dow Jones and S&P 500 hitting record highs. The Nasdaq tested its 50-day line before slashing weekly losses Thursday afternoon and Friday, helped by a surprisingly weak jobs report. Growth stocks still struggled for the week though. Coronavirus vaccine stocks such as Moderna (MRNA) came under pressure as President Biden supported waiving patent rights. Fertilizer stocks such as Mosaic (MOS) and CF Industries (CF) reported strong earnings, while metals and mining stocks thrived.


Stock Market Rally Diverges

The Dow Jones and S&P 500 rose solidly for the week, hitting record highs as metals, mining, machinery and financials did well. The Nasdaq dived below its 50-day line Thursday intraday before closing above that key level. Friday’s weak jobs report cooled Fed taper talk, sending techs higher. But the Nasdaq still closed lower for the week, with many growth suffering significant losses.

Jobs Report Stunningly Weak

Friday’s jobs report may have changed everything that Wall Street thought it knew about the Covid recovery. The gain of 266,000 jobs fell 732,000 short of estimates, while the jobless rate unexpectedly ticked up to 6.1%. The immediate effect of the big miss is that Fed taper talk will be on hold until late summer, at the earliest. The big question is whether this report is somehow an anomaly, or whether the jobs recovery will proceed much slower than expected.

A key unknown is how much of a factor emergency jobless benefits played in keeping workers on the sidelines. The extra $300 per week in benefits lasts through September. Yet other factors appeared to weigh on hiring, including the chip shortage. Auto manufacturers shed 27,000 jobs.

The Covid recovery boosted the leisure and hospitality sector, which added 331,000 jobs, including 187,000 at restaurants and bars. Yet food and beverage stores cut 49,400 jobs. Courier jobs, key during the pandemic, fell by 77,400. Temp jobs fell by 111,400. That may partly reflect a waning need for extra health care workers as Covid fades.

Specialty Chemicals Maker Rallies On Electronics, EV Boom

Fertilizer, Agricultural Stocks Flourish

CF Industries (CF) reported a 133% EPS gain while Nutrien (NTR) also easily beat profit views, with both fertilizer stocks breaking out. CF predicted years of strong margins as farmers enjoy high crop prices and work to build tight supplies. Rival fertilizer maker Mosaic (MOS) also delivered strong earnings as revenue rose 28% to $2.3 billion. Insecticide and herbicide producer FMC (FMC) nudged past estimates, though EPS and sales fell vs. a year ago. Both Mosaic and FMC briefly tumbled out of buy range before rebounding. Ag giant Bunge delivered 244% EPS growth with revenue up 41% to $13 billion, buoyed by biodiesel demand. BG stock rose to the highest in nearly six years.

Coronavirus Vaccine Patents In Focus

President Joe Biden and his administration voiced support Wednesday for waiving the patent rights for Covid vaccines in an effort to help other countries develop vaccines. On Thursday, German Chancellor Angela Merkel, on the other hand, opposed the plan. The Biden news hit shares of Pfizer (PFE) and partner BioNTech (BNTX) as well Moderna (MRNA) and Novavax (NVAX). On Tuesday, Pfizer reported $3.46 billion in sales of its BioNTech-partnered Covid vaccine. Total sales climbed 42% to $14.58 billion and adjusted profit rose 47%, both beating. Moderna reported a first-ever profit, far above views. Covid vaccine sales hit $1.73 billion, but overall revenue of $1.94 billion missed estimates.

Pfizer on Friday said it would seek full FDA approval for its coronavirus vaccine, up from the current emergency use authorization.

Animal Health Leaders Beat Views

Idexx Laboratories (IDXX) reported adjusted income grew 82% with sales up 24% to $778 million. Zoetis (ZTS) said adjusted profit climbed 33% as sales surged 22% to $1.87 billion. But both stocks fell.

GM, VW Report Strong Earnings

General Motors (GM) earnings shot up 263%, well above views, though revenue dipped 1% to $32.5 billion. Vehicle sales grew 4% in the U.S. and 69% in China vs. a year earlier. Hummer electric pickup production remains on track for fall 2021, despite a global chip shortage. A redesigned Bolt EV and new Bolt electric SUV are still due to launch this summer. GM’s full-year EPS target is slightly below consensus at the midpoint. Meanwhile, Volkswagen (VWAGY) reported aftertax profit of 3.41 billion euros ($4.11 billion) vs. 517 million euros a year earlier. Revenue climbed to 62.38 billion euros ($75.15 billion) from 55.05 billion euros, slightly above estimates. VW raised its full-year earnings outlook slightly, now expecting an operating return on sales at 5.5%-7% in 2021 vs. a prior range of 5%-6.5%.

Floor & Decor Results Beat

Floor & Decor (FND) reported Q1 EPS doubled as revenue grew 41% to $782.5 million, beating expectations. Same-store sales leapt 31.1% The results for the company — which sells tile, laminate and other styles of flooring and decorations — come after the coronavirus inspired more people, stuck indoors, to redo their homes or build new ones. Floor & Decor still expects to open 27 new warehouse stores for the full year.

PayPal, Square Earnings Strong

PayPal (PYPL) reported Q1 EPS rallied 85%, revenue climbed 29% to $6.03 billion and total payment volume processed from merchant customers jumped 50% to $285 billion. All beat views. PayPal added 14.5 million net new active accounts worldwide in the March quarter, for a total of 392 million. Square earnings came in far above views. Revenue swelled 266% to $5.06 billion, or up 44% to $1.55 billion excluding Bitcoin transactions. but Square cautioned that government stimulus payments to consumers will wind down, slowing Square Cash App growth. PayPal and Square rose on earnings, but fell for the week.

Software Makers Delivers Strong Growth

Cloudflare (NET) reported a narrow Q1 loss in line with views. Revenue jumped 51% to $138.1 million, beating views. The provider of cloud-based networking and cybersecurity services guided higher for Q2 revenue. NET stock popped Friday but fell sharply for the week. (BILL) reported a smaller-than-expected loss while revenue growth accelerated again, to 45%. It also announced a $2.5 billion deal to buy spending management software maker Divvy. BILL stock soared Friday but fell for the week.

HubSpot (HUBS) said it earned 31 cents a share in the March quarter, up a penny from a year earlier. Revenue climbed 41% to $281.4 million. Analysts expected EPS 29 cents on sales of $263.8 million. The marketing software maker guided slightly higher for current-quarter revenue. HUBS stock fell modestly for the week.

Shale Producers Beat, Pay Shareholders

EOG Resources (EOG) topped views as EPS nearly tripled to $1.62 with revenue down 22% to $3.69 billion. It also declared a special dividend of $1 after earlier hiking its regular payout. Pioneer Natural Resources (PXD) also beat and will start paying a long-term variable quarterly dividend in 2022, after raising its regular quarterly dividend early this year. ConocoPhillips (COP) reported strong earnings too and resumed its share repurchase program at $1.5 billion.

Gambling Stocks Report

DraftKings (DKNG) crushed views, reporting a smaller-than-expected loss as revenue skyrocketed 252%. During Q1, tens of millions more people were allowed to wager on the Super Bowl and March Madness online as more states legalized sports betting. Penn National Gaming (PENN) reported mixed results as EPS soared 817% to 55 cents a share, ahead of views for 30 cents, while sales rose 14% to $1.27 billion, missing. Caesars Entertainment (CZR) also had mixed earnings but reported strong demand in Las Vegas.

Uber, Lyft Show Recovery

Uber (UBER) and Lyft (LYFT) both reported the ride-hailing business is steadily recovering from the pandemic. Uber reported a shrining loss, but revenue fell short. The ride-hailing and food-delivery giant expects to hike driver pay to increase capacity, but still expects to turn a profit before the end of the year. Lyft beat estimates on the top and bottom lines. Uber and Lyft shares tumbled.

Chip Investors Hard To Please

Lattice Semiconductor (LSCC), Microchip Technology (MCHP) and Qorvo (QRVO) saw their shares rise, at least on the initial post-earnings day, after delivering better-than-expected March-quarter results and guidance. But Allegro MicroSystems (ALGM) and ON Semiconductor (ON) fell despite giving upbeat reports. Monolithic Power (MPWR) and SiTime (SITM) saw their shares waver after their beat-and-raise reports. The same was true with semiconductor equipment stocks. Kulicke & Soffa Industries (KLIC) fell hard after its beat-and-raise report while Ichor Holdings (ICHR) climbed after its report.

News In Brief

Dropbox (DBX) reported EPS leapt 106% as revenue rose 12% to $511.6 million. Paying users climbed 8% to 15.8 million.

T-Mobile US (TMUS) said Q1 adjusted earnings fell 33% from a year earlier as a rise in outstanding shares tied to the Sprint merger reduced earnings. Pro forma revenue rose 13.5% to 19.76 billion. T-Mobile added 773,000 postpaid phone subscribers, topping estimates of 497,000.

Match Group (MTCH) said Q1 earnings rose 14% to while revenue climbed 23% to $668 million, both beating. But shares of the dating site and app operator tumbled.

Funko (FNKO) reported booming earnings growth that beat estimates. The the pop-culture centered toy and accessories maker also raised its EPS outlook. Funko soared.

Beyond Meat (BYND) missed Q1 EPS views. But the maker of plant-based burgers and sausages said it began to see a “slow thaw” in its restaurant business, which has been hit by coronavirus restrictions. It guided slightly higher for Q2 sales.

Repligen (RGEN) reported adjusted EPS rose 1113, while revenue leapt 88% to $142.8 million, both beating views for the bioprocessing tools firm.

LGI Homes (LGIH) crushed Q1 earnings views with a 137% jump while sales jumped 55% to $706 million.

Horizon Therapeutics (HZNP) said its first-quarter sales dipped 4% to $342.4 million and adjusted profit tumbled 93%. Both were hurt due to a supply distribution pact for thyroid eye disease treatment Tepezza. Sales beat, but earnings lagged.

Zebra Technologies (ZBRA), a maker of enterprise systems for tracking inventory and other assets, reported a 79% EPS gain with sales up 28% to $1.35 billion. Zebra also guided higher.

Etsy (ETSY) cratered following its first-quarter earnings report that toppled estimates but provided an outlook below expectations and did not provide explicit guidance for the remainder of the year.

Peloton (PTON) easily topped fiscal Q3 estimates but trimmed its fiscal year revenue guidance to $4 billion from $4.075 billion, estimating that its recall of treadmills will impact Q4 revenue by about $165 million. The connected fitness company issued the recall after initially resisting despite the death of a child and a warning from the Consumer Product Safety Commission.

Cameco (CCJ) reported a smaller-than-expected loss but missed on revenue. The uranium play had no uranium production in Q1 due to a mine closure. But shares rose to its highest level in nearly six years.


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