Luke Kawa12/10/24

US stocks slump as tech and momentum selloff continues

The S&P 500 slumped for the second straight day, dropping 0.3%. The Nasdaq 100 also gave back 0.3%, while the Russell 2000 fell 0.4%.

Real estate, tech, and materials were the worst-performing S&P 500 sector ETFs, each off more than 1%. Communications services was at the top of the leaderboard, thanks to Alphabet.

Google was the best-performing Magnificent 7 stock, up over 5% after its quantum-computing breakthrough. While other quantum-computing-linked stocks initially fell on the news, most recovered later. Notably, Rigetti Computing spiked after announcing that a joint project with Quantum Machines that used AI to automate how a quantum computer is calibrated was successful.

Walgreens Boots Alliance soared following reports that the embattled pharmacy chain may soon be acquired, making it the best-performing S&P 500 constituent.

A judge blocked Kroger’s acquisition of Albertsons, sending the former higher and the latter lower.

Homebuilders had a rough day after Toll Brothers’ mediocre earnings report, with the iShares US Home Construction ETF down 2.3%.

TSMC tumbled 3.6% despite announcing massive sales growth in November

Oracle tanked 6.7% after posting lower-than-expected sales with an underwhelming earnings guidance, its worst day since the company released quarterly results one year ago.

Moderna was the worst performer in the S&P 500, with the drugmaker facing eviction from the Nasdaq 100.

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Hardware stocks jump thanks to server demand and record Lenovo revenue

Server stocks are rallying as Dell, Super Micro Computer, and Hewlett Packard Enterprise ride the momentum of Hong Kong-based Lenovo. The PC-maker's stock rose 19% on Friday, hitting an all-time high, on record Q4 earnings.

Powering the positive earnings report was the company's AI-related revenue, which grew 84% in the fourth quarter and now makes up for over a third of total revenue. Investors seem to think the increased demand for servers could have trickle-down effects to other companies.

"The company's results and commentary reinforced the outlook for strong AI-infrastructure demand while indicating resilient broader traditional server and storage spending," wrote Bloomberg Intelligence senior technology analyst Woo Jin Ho. "Lenovo's $21 billion AI-server pipeline and remarks that demand is outpacing supply support Dell's AI-demand momentum and point to robust orders."

AI's insatiable computing demand is reshaping the hardware industry and driving up server demand.

Dell will report first quarter earnings Thursday, May 28.

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Ross Stores surges as Q1 results beat expectations, full-year guidance raised

Ross shares are rising after the company delivered strong Q1 results, with sales topping Wall Street’s projections.

The stock soared 6.3% just after the open.

Key numbers:

Earnings per share of $2.02 vs. $1.47 year over year (estimate: $1.72).
Sales of $6.01 billion, up 21% year over year (estimate: $5.61 billion).
Comparable sales growth of 17% (estimate: 8.58%).

CEO Jim Conroy attributed the results to better traffic in stores. “Customer traffic was the primary driver of the strong sales trend as compelling merchandise assortments, higher customer acquisition and engagement from our ongoing marketing initiatives, and an improved in‑store experience are resonating with shoppers.”

The company also noted that transaction volume grew across all key demographics, including “income levels, ethnicities, and age groups, including younger customers.” Sales were also likely buoyed by standard seasonal tailwinds, including consumer spending from tax refunds.

Backed by the strong quarter, the company lifted its full-year targets. Ross now projects same-store sales growth of 6% to 7%, up from the prior forecast of 3% to 4%, topping Wall Street’s estimate of 4.64%. It boosted its annual EPS guidance to a range of $7.50 to $7.74, versus the prior outlook of $7.02 to $7.36.

Ross Stores has been one of the retail sector’s standout performers this year, rising around 20% year to date as of Thursday’s close.

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