The S&P 500 ended lower and the Nasdaq higher on Thursday after U.S. inflation data matched estimates, underscoring expectations the Federal Reserve could pause its monetary tightening, while Salesforce climbed following an up upbeat forecast.
The Nasdaq reached its highest in over four weeks after a Commerce Department report showed the Personal Consumption Expenditures (PCE) price index, considered the central bank's preferred inflation gauge, climbed 3.3% in July on an annual basis, in line with expectations.
Investors are awaiting more comprehensive non-farm payrolls data due on Friday for greater clarity on the Fed's likely monetary path.
Market Snapshot
The S&P 500 declined 0.16% to end at 4,507.66 points. The Nasdaq gained 0.11% to 14,034.97 points, while Dow Jones Industrial Average declined 0.48% to 34,721.91 points.
Market Movers
VinFast Auto (VFS) stock dropped again. Shares of the Vietnamese EV maker fell 15.9% to $34.71 Thursday. Declines leave VinFast’s market capitalization at about $81 billion, making it the fifth most valuable automaker on the planet behind Tesla, Toyota Motor, Porsche and BYD.
Salesforce (CRM), the cloud-based enterprise software provider, reported second-quarter earnings that beat analysts’ estimates and issued an outlook for the third quarter and fiscal year that also topped forecasts. Salesforce said it expects fiscal-year adjusted earnings of $8.04 to $8.06 a share on revenue of $34.7 billion to $34.8 billion. Analysts had been predicting profit of $7.42 a share on revenue of $34.7 billion. The stock rose 3%.
Ciena (CIEN) rallied 15.8% after the optical networking company posted better-than-expected fiscal third-quarter adjusted earnings and revenue, driven by growing demand for the company’s hardware from cloud computing providers.
Okta (OKTA) shares rose 13.5% after the identity-management software company reported better-than-expected adjusted earnings and revenue in the second quarter and said it saw signs of stabilization in spending on information technology. Okta raised its fiscal-year forecast, saying it expects adjusted profit of $1.17 to $1.20 a share on revenue of $2.21 billion to $2.22 billion. Analysts had expected earnings of 91 cents a share on revenue of $2.18 billion.
Dollar General (DG) sank 12.2% after second-quarter earnings missed analysts’ expectations and the discount retailer reduced fiscal-year guidance. The stock was the worst performer in the S&P 500 on Thursday.
Chewy (CHWY), the online seller of pet foods and accessories, reported a surprise second-quarter profit and higher-than-expected sales. The company finished the quarter with 20.4 million active customers, matching expectations but falling from a year earlier. Chewy said it expects third-quarter net sales of between $2.74 billion and $2.76 billion, below expectations of $2.79 billion. Chewy shares fell 12.3%.
Palantir Technologies (PLTR) declined 8.3% to $14.98 after Morgan Stanley downgraded shares of the data-analytics software company to Underweight from Equal Weight. Analysts raised the price target to $9 from $8.
Shopify (SHOP) jumped 10.8% after Amazon.com (AMZN) released the Buy with Prime app for Shopify that will allow U.S.-based merchants to more easily offer shoppers the option to buy items using their Prime benefits.
Tilray (TLRY) rose 11.3% and Canopy Growth (CGC) jumped 26% after the Drug Enforcement Administration said it would review the classification for cannabis. The U.S. Department of Health and Human Services has asked the DEA for cannabis to be classified as a Schedule III drug, as opposed to its current Schedule I.
UBS Group (UBS) gained 5.6% after the Swiss bank reported a second-quarter net profit of $29 billion following the integration of Credit Suisse, the former rival that was acquired in June.
CrowdStrike (CRWD) earned 74 cents a share on an adjusted basis in the second quarter, higher than analysts’ expectations of 56 cents. Revenue rose to $731.6 million from $535.2 million and was higher than estimates. Annual recurring revenue was $2.93 billion, up 37%. The cybersecurity company raised its outlook for the fiscal year and the stock rose 9.3%.
Arista Networks (ANET) gained 4.4% to $195.23 after analysts at Citi upgraded the provider of data center networking hardware to Buy from Neutral and raised the price target to $220 from $177.
Signet Jewelers (SIG) rose 5% after the company beat estimates and raised its fiscal-year earnings guidance.
Victoria’s Secret (VSCO) reported a surprise loss in the second quarter and forecast that fiscal-year sales would decrease in the low-single digit range from the year earlier. The stock, however, increased 6.9% after trading lower in the premarket session.
Market News
Fed’s Preferred Inflation Gauges Rise Modestly, Spending Jumps
The Federal Reserve’s preferred measure of underlying inflation posted the smallest back-to-back increases since late 2020, encouraging a burst of consumer spending and feeding growing expectations that the economy can avert a recession.
The core personal consumption expenditures price index, which strips out the volatile food and energy components, rose 0.2% in July for a second month. The overall PCE price index also increased 0.2%, Bureau of Economic Analysis data showed Thursday.
Inflation-adjusted consumer spending increased 0.6% last month on the heels of a solid gain in June. That was the strongest advance since the start of the year.
Palantir Downgraded by Morgan Stanley on Overdone AI Optimism
Palantir Technologies Inc. was downgraded at Morgan Stanley, the latest indication of how Wall Street is skeptical of the software company, which has touted itself as a major player within artificial intelligence.
Shares fell 8.3% on Thursday. While Palantir remains up more than 130% this year, a beneficiary of investor enthusiasm for AI, it is 25% below a peak hit earlier this month, and down more than 60% off a 2021 high.
Analyst Keith Weiss wrote the stock’s valuation reflects “AI euphoria,” but that any tailwind from this trend will take time to materialize.
Morgan Stanley cut its rating from equal weight to underweight, leaving fully half of analysts with the equivalent of a sell on Palantir, a high ratio. Compared with the nine bearish analysts, there are four with buy ratings and five with a neutral view.
Arm to Hold Roadshow After Labor Day, With IPO Pricing Sept. 13
Arm Holdings Ltd., one of the most anticipated stock listings of the year, is preparing to set a price range for its initial public offering before embarking on an investor roadshow next week, according to people familiar with the matter.
The chip designer is considering pricing its shares on Sept. 13 and the stock will start trading the next day, said the people, who asked not to be identified because the deliberations are private. The roadshow to promote the offering is expected to come after the Labor Day holiday on Monday. Still, the company’s plans are fluid and the timeline could move, the people cautioned.
Arm is aiming to raise $5 billion to $7 billion in a listing valuing the business at $60 billion to $70 billion, the people said, noting that the details could still change depending on demand. The valuation could also end up in the range of $50 billion to $60 billion, one of the people said.