In a week shortened by the Presidents' Day holiday on Monday Wall Street struggled.
Warnings of 50 basis point interest rate increases from Federal Reserve officials at the end of the previous week resonated through the market and undermined optimism about a soft landing for the US economy and an early pivot away from rate hikes by the Fed.
Helping to lift sentiment a bit was an upbeat earnings statement from chip company NVIDIA (NVDA:NASDAQ) which also lifted the wider industry.
The company predicted a wave of interest in new AI products sparked by OpenAI's release of ChatGPT. The Santa Clara-based firm reported Q4 EPS (earnings per share) of $0.88 on $6.05 billion revenues for the three months to 31 January. Consensus was for $0.81 on $6.01 billion sales.
Takeaways franchise Domino's Pizza (DPZ:NYSE) was out in the cold as inflation-hit consumers were put off by increased delivery fees and menu prices.
This suggests the company may either have to sacrifice profitability to bolster sales or put up with a drop in revenue.
WALMART/HOME DEPOT
Earnings from two of America's retail heavyweights, Walmart (WMT:NYSE) and Home Depot (HD:NYSE) indicated hitherto resilient consumer demand may be running out of steam and left shares in the former down 0.5% on the week at $144.24 with the latter suffering a 6.5% drop to $296.3.
Both issued gloomy outlooks with fourth quarter results (21 February). Arkansas-based Walmart was cautious on the year ahead with consumers likely to continue shopping for cheaper items that hurt margins at a time when suppliers are planning further price hikes.
For the year to January 2024, Walmart expects same-store sales for Walmart US to rise by a modest 2% to 2.5% excluding fuel and adjusted earnings per share (EPS) to come in between $5.90 to $6.05 range, below the $6.50 analysts were looking for and overshadowing forecast-beating fourth quarter earnings from the value-focused retail titan.
Led by CEO Ted Decker, Home Depot missed revenue expectations for the first time since 2019. And the Atlanta-based home improvement giant issued a downbeat outlook for the coming year, with management now guiding for flat comparable sales in 2023 and a mid-single digit decline in EPS.
MODERNA
Biotechnology company Moderna (MRNA:NASDAQ) missed Wall Street earnings estimates for the fourth quarter by a whopping 22% while its 2023 Covid-19 vaccine sales forecast fell short of expectations.
Fourth quarter vaccine sales were a touch higher than estimates at $5.08 billion, implying a drop of 30% year on year but earnings per share was $3.61 compared with $4.68 penciled in by analysts.
Rising costs and surplus manufacturing capacity reflecting flagging demand for the company's only commercial drug impacted margins and profit.
Despite vaccine sales performing better than expected in the final quarter the company now anticipates full-year 2023 vaccine sales of around $5 billion, well below market forecasts of $6.98 billion according to Refinitiv data.
For the full year Moderna's Covid-19 vaccine drug generated sales of $18.4 billion. The US government plans to stop buying Covid-19 doses this year as it moves procurement to the private market.
The shares fell around 7% on the results and are 70% below the peak levels reached in August 2021.
PALO ALTO NETWORKS
Shares in California-based cybersecurity leader Palo Alto Networks (PANW:NASDAQ) jumped 12.5% to a three-month high of $187.75 on 23 February, bucking the gloomy trend on Wall Street, after the company posted second-quarter earnings which blew away expectations.
For the three months to the end of January, the firm reported sales of $1.7 billion, just ahead of the $1.65 billion consensus, but earnings per share were $1.05 against an average forecast of $0.78 per share.
The firm also raised its third- and fourth-quarter guidance, with billings in the three months to the end of April now seen between $2.2 billion and $2.5 billion against market estimates of $2.22 billion, and earnings seen between $0.90 to $0.94 against a forecast of $0.78 per share.
For the full year, earnings are now seen at $3.97 to $4.03 billion compared with a consensus of $3.42 billion, while revenue is seen matching market forecasts at around $7 billion.
