The shortened trading week saw US markets move higher, with gains of over 1% across the board. Wednesday saw strong gains with the Nasdaq Composite gaining over 2%, snapping a seven-day losing streak, its longest since 2016.
Weekly jobs data on 8 Sep showed a continuing buoyant labour market with layoffs remaining near record lows and unemployment claims coming in lower than the market expected. Federal Reserve Chairman Jerome Powel reaffirmed the committee's strong commitment to bringing inflation down, virtually nailing on another three-quarter percentage point rate increase at the next Fed meeting.
Other Fed members were all singing from the same hymn sheet this week. Fed vice-chair Lael Brainard said on Wednesday that higher interest rates would be needed for some time while Chicago Fed president Charles Evens said on Thursday, he is comfortable with interest rates reaching 4% by year-end.
Meanwhile the European Central Bank raised its benchmark interest rate by three-quarters of a percentage point and hinted that further hikes were on the cards.
ZSCALER
Growth investors desperate for good news found some during the past week as Zscaler (ZS:NASDAQ) proved that not all pandemic winners are now on their uppers. The cloud security company reported fourth quarter earnings (8 Sep) that beat analyst forecasts with revenue that also topped expectations.
Zscaler announced earnings per share of $0.25 on revenue of $318.06 million, easily trumping consensus projections of $0.205 EPS on $305.4 million as demand for digital protections continues to defy wider economic worries.
Zscaler shares have nearly halved this year despite consistently beating analyst growth targets in a run that goes back to 2018, so it's surprising that investors seem stunned at the outperformance this time round.
But stunned they were, with the Q4 results sparking a 12% after-market jump in response. There maybe plenty of tech stocks still reeling as societies get back to normal after massive Covid disruption, but Zscaler shows that there are also many that continue to prosper.
GAMESTOP
US video game retailer and original ‘meme’ stock GameStop's (GME:NYSE) second quarter results were accompanied by news of a partnership with cryptocurrency exchange FTX. The venture will apparently involve teaming up on online marketing and e-commerce plans while GameStop will carry FTX gift cards in some of its stores.
The company has already made moves into the crypto and NFT (non-fungible token) market, launching a digital asset wallet allowing gamers to store, send and receive NFTs and cryptocurrencies and rolling out a platform to trade those assets.
When it comes to GameStop's core operations, net sales were down 4% to $1.14 billion for the quarter which was short of what had been pencilled in by analysts and its net loss almost doubled to $108.7 million. Still in the short term at least the market was prepared to look past these challenges and the shares moved higher on the FTX news.
LULULEMON
It was a good week for shareholders in technical sportswear brand Lululemon Athletica (LULU:NASDAQ) with the stock gaining almost 15% in three days after the firm posted forecast-busting sales and earnings for the second quarter.
In the three months to the end of July, sales increased 29% to $1.9 billion against a Wall Street consensus of $1.77 billion and earnings per share jumped 33% to $2.20 against a forecast of $1.87. In-store sales rose 18% on a constant-currency basis while D2C (direct-to-consumer) sales rose 32%, leading to a 140 basis-point improvement in margins to 21.5%, also ahead of estimates.
Analysts at Wedbush said demand appeared ‘exceptionally strong and well-balanced’ with ‘impressive growth in almost all aspects of the business’.
They singled out sales in China as the most surprising result, given other western athletic brands, including Adidas (ADS:ETR) and Nike (NKE:NYSE) have reported sharp declines in sales to the country. The company raised its full year sales guidance to around $7.9 billion from $7.7 billion previously and lifted its earnings outlook from $9.35 to $9.50 to between $9.75 and $9.90 per share.
