Stock Market Falls Into Correction As Treasury Yields Jump On Fed Chief Powell; Oil Soars, Target, Tesla, Zoom Tumble

The stock market fell into a correction Thursday as the S&P 500 knifed through its 50-day line and the Nasdaq plunged below recent lows. The 10-year Treasury yield spiked on Fed chief Jerome Powell’s comments and a strong February jobs report. Tesla (TSLA) and other highly valued growth stocks continued to lead the declines. OPEC+ unexpectedly kept current production levels through April, sending crude oil prices soaring. Target (TGT) plunged on heavy investment plans, despite strong holiday quarter results. Zoom Video (ZM) crushed views and guided up, but also tumbled.

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Stock Market Falls Into Correction

With growth stocks plunging and the major indexes breaking through key levels, IBD declared a market correction as of Thursday’s close. A new rally attempt began on Friday. The rapid rise in 10-year Treasury yields has been pressuring growth stocks for a few weeks, and yields soared Thursday as Fed chief Jerome Powell signaled he wasn’t too concerned about bond moves.

Job Market Gains Steam, Powell Calm

The job market is gaining steam as Covid’s grip eases, but it hasn’t yet shifted into high gear. The 379,000 rise in payroll jobs surprised Wall Street, and the jobless rate dipped to 6.2{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588}. But aggregate hours worked and aggregate pay both fell. Weather appeared to play a role, as construction jobs fell 61,000. The household survey also indicated a more lukewarm increase in hiring, as the ranks of the employed rose by 208,000.

Wall Street is bracing for a job-market breakout as vaccinations proceed and nearly $1.9 trillion in new stimulus propels growth. The 10-year Treasury yield surged as high as 1.61{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} on Friday, up from under 1{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} at the start of the year. However, Fed chief Jerome Powell gave no sign in a Thursday appearance that the Fed will act to rein in long-term Treasury yields at the upcoming March 16-17 meeting. Powell seemed to suggest that the backup in yields hasn’t been disorderly or persistent enough to merit action.

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New Market Rally Attempt Begins; Don’t Assume These Stocks Will Lead

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Oil Spikes As OPEC+ Keeps Cuts

In an unexpected move, OPEC+ members will continue current production quotas in April, including Saudi Arabia’s earlier decision to curb 1 million barrels per day of its own output. Russia and Kazakhstan have exceptions and can increase production by 130,000 bpd and 20,000 bpd, respectively, “due to continued seasonal consumption patterns.” Analysts were expecting around a 1.5 million barrel increase in production. Saudi energy minister Prince Abdulaziz bin Salman suggested that the U.S. shale oil revolution was running out of steam and that the attitude of “drill, baby, drill, is gone forever.” Oil prices soared.

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Explosion Of New EV Stocks Could Bring The Next Tesla

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Chinese EV Makers Tumble

Nio (NIO) lost 14 cents a share, missing views. Revenue more than doubled to $1.02 billion. It gave a strong Q1 revenue outlook, but warned that the chip shortage will hit EV production. Nio delivered 5,578 luxury electric SUVs in February, up 689{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} year over year. Smaller peer Li Auto (LI) sold 2,300 EVs last month, up 755{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588}, and Xpeng Motors (XPEV) sold 2,223 EVs. Amid the Chinese New Year, all three EV startups saw sales slow in February vs. January. All three stocks plunged for the week, along with Tesla stock.

Ford Sales Fall But Mach-E Picks Up

Ford (F) sold 163,520 new vehicles in the U.S. last month, down 14{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} year over year, with broad declines across trucks, SUVs and passenger cars. But retail sales only edged lower, with gains in trucks and SUVs. It said 3,739 Mustang Mach-E electric crossovers sold in its first full month of sales. The Mach-E took share from Tesla in February, Morgan Stanley said, as overall U.S. EV sales climbed 34{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588}. Analysts estimated the annual pace of U.S. auto sales reached 16 million vehicles, down more than half a million both year over year and month over month. Ford stock rose on the week, outperforming the market.

Digital Sales Fuel Retailers

Target (TGT) earnings jumped 58{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} to $2.67 a share, as revenue surged 21{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} to $28.34 billion. Same-store sales gained 20.5{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588}. In-store comps grew 6.9{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} with digital comps up 118{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588}. But Target plunged as management plans heavy spending to beef up online operations. BJ’s Wholesale Club (BJ) beat Q4 estimates with EPS up 75{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} on a 14{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} rise in revenue to $3.95 billion. Same-store sales excluding gasoline climbed 16{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588}. Costco (COST) posted second-quarter EPS of $2.14, including a 41-cents-a-share cost due mostly to Covid-related premium wages. Sales were up 15{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} to $44.8 billion. Comps climbed 11{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} in U.S. stores and 13{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} in total, while digital sales surged 76{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588}.

Department store operator Kohl’s (KSS) reported Q4 EPS rose 12{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} as sales slid 10{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} to $6.1 billion. Digital sales grew 22{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} year over year and accounted for 42{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} of all sales.

Discounters’ Results Mixed

Burlington Stores (BURL) reported better-than-expected results, and increased its target for new stores. Burlington Stores gapped higher. Ross Stores‘ (ROST) fourth-quarter results missed estimates. Shares tumbled. Dollar Tree (DLTR) reported fourth-quarter earnings that beat expectations, while same-store sales missed estimates and overall revenue came in roughly in line with forecasts. However, the chain a day earlier hiked its share buyback plans. DLTR rose slightly.

Las Vegas Sands Leaves Vegas; DraftKings Inks Two Deals

Las Vegas Sands (LVS) sold its U.S. properties for $6.25 billion to focus on its Asia casinos, where most of its income is derived. Apollo Global Management (APO) will acquire Las Vegas real property and operations, including The Venetian Resort Las Vegas and the Sands Expo and Convention Center for approximately $1.05 billion in cash and $1.2 billion in financing. VICI Properties will acquire subsidiaries that hold the real estate and real estate-related assets for about $4 billion in cash. Meanwhile, sports betting specialist DraftKings (DKNG) inked two deals: one with Dish Networks (DISH) and another with top mixed martial arts promoter UFC. ESPN said the UFC tie-up spans five years and is worth $350 million. And casino operator Bally’s (BALY) posted Q4 EPS of 39 cents, down 7{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} from a year ago but beating views. It had revenue of $118 million, 9{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} lower than last year and below analyst expectations.

Software

Zoom Video Communications (ZM) said Q4 earnings jumped 713{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} as revenue soared 369{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} to $882.5 million, easily beating. The company said it had 467,100 business customers, each with more than 10 employees, as of Jan. 31. That’s up from 433,700 in the October quarter. Zoom guided sharply higher for the current quarter while seeing a modest beat for full-year revenue. But shares sold off.

Okta (OKTA) fell sharply after agreeing to pay $6.5 billion for rival ID authentication software maker Auth0. January-quarter earnings, revenue and billings topped analyst estimates. Okta forecast revenue roughly in line.

Snowflake (SNOW) reported a narrower GAAP loss. Revenue jumped 117{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} to $190.5 million, slowing from the prior quarter’s 119{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} growth. For the current quarter ending in April, the software maker forecast product revenue of $195 million to $200 million, with the midpoint slightly above estimates.

Veeva Systems (VEEV) said Q4 EPS rose 44{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} to 78 cents while revenue rose 27{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} to $396.8 million, both beating. The medical software maker guided up on Q1.

Splunk (SPLK) reported quarterly results that came in well above analyst estimates as the data analytics company continues its transition to a software-as-a-service business model.

Box (BOX) beat quarterly earnings expectations as the business collaboration company also gave a first-quarter outlook above views.

Sea Ltd. Beats Views

Asian e-commerce and gaming company Sea Limited (SE) reported Q4 revenue doubled, well above views, although its loss was wider than expected. E-commerce revenue in the fourth quarter jumped 178{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} to $842 million. Tencent (TCEHY) is a principle shareholder. Sea stock fell modestly after big swings up and down.

Broadcom Growth Best In 2 Years

Broadcom (AVGO) reported a 26{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} EPS gain as revenue rose 14{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} to $6.66 billion, the best gains for both in more than two years. For its fiscal second quarter, the chipmaker expects sales to rise 13{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} $6.5 billion. Video-processing-chip maker Ambarella (AMBA) also topped analyst estimates and guided higher with its quarterly report. However, Marvell Technology (MRVL) posted in-line earnings on better-than-expected sales and gave mixed guidance. All three stocks fell.

News In Brief

Hibbett Sports (HIBB) reported a 172{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} EPS gain, narrowly beating. Sales climbed 20{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} to $376.8 million, just shy of views. Same-store sales rose almost 22{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} with e-commerce sales up nearly 45{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588}. Looking ahead, the sporting goods retailer sees roughly flat comps in the current fiscal year.

FuboTV (FUBO) added more subscribers than forecast in the fourth quarter, ending 2020 with 548,000 subscribers. But the sports-first live TV streaming service posted a larger-than-expected loss of $195 million.

SciPlay (SCPL), a maker of casino video games for mobile and web platforms, beat Q4 sales targets with a 30{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} gain to $147.1 million. But a 5{c9ada2945935efae6c394ba146a2811ce1f3bfd992f6399f3fbbb16c76505588} EPS decline missed views.

Lemonade (LMND), a digital insurance provider that uses AI to improve performance, reported a narrower Q4 per-share loss than expected. Revenue also beat estimates. But shares fell sharply.

C3.ai (AI) reported revenue edged by expectations amid a wider-than-expected loss in its first quarter as a public company. Billings missed views. C3.ai revenue guidance for its fiscal 2022 came in slightly above estimates. Shares plunged.

MercadoLibre (MELI), the largest e-commerce company in Latin America, reported quarterly results that topped revenue estimates but missed widely on earnings.

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