Markets close higher on earnings, job revisions and Fed minutes

Wednesday, 21 August 2024

The market indices had a decent trading day today. Only the blue-chip Dow was in the red for a longer period; the other indices – especially the small-cap Russell 2000 – turned around from midday and possibly began the recent winning streak on the markets. The Dow closed at +0.13%, the S&P 500 at +0.42%, the Nasdaq gained +0.57% and the Russell 2000 gained +1.22% in the session.

The number of job revisions fell by -818,000, lower than expected

The Bureau of Labor Statistics (BLS) expected a decline in the total number of job creations between April 2023 and March 2024 (about -500,000), but not as sharp as -818,000 overall. This represents almost -30% of job creation during this period, compared to the 2.9 million originally reported.

The Services sector bore the brunt of the decline, down -358k, followed by Leisure/Hospitality at -150k and Manufacturing at -115k. One third of the Trade, Transportation and Utilities sector – Transportation/Warehousing – grew +56k, while Trade fell to -129k for the quarter. Education/Healthcare also grew +87k. This brings us back to the “bad news is good news” view, with a weaker than expected labor market during this period likely to accelerate a Fed rate cut on September 18.

Minutes of the Fed meeting of July 30-31

Speaking of the Fed: The latest minutes of the Federal Open Market Committee (FOMC) The minutes of the July 31 meeting were released today. Although, as we saw in real time, no voting member of the FOMC opposed Fed Chairman Jerome Powell's decision, today's minutes show that several members saw arguments for a rate cut at the July meeting.

The minutes featured a Fed that viewed economic conditions as neither a “headwind nor a tailwind for growth,” but acknowledged that personal consumption expenditures (PCE) were lower month-on-month than they were earlier in the year. Nonfarm payrolls were lower than in the first quarter and in 2023 – and that was before today's latest revision of -818,000.

Quarterly results overview

Urban Outfitters URBN reported strong quarterly results, posting earnings of $1.24, above the 98 cents in the Zacks Consensus estimate of $1.35 billion – a record revenue quarter. Driven by +62.6% growth in its fledgling Nuuly clothing subscription rental business ($90.7 million versus Anthropologie's $569.1 million), Urban Outfitters shares rose sharply in late trading. The stock was up +16% year-to-date, nearly on par with the S&P.

Software security company Contents SNPS beat expectations on its quarterly earnings this afternoon, reporting earnings of $3.43 per share, above expectations of $3.28 and $2.88 per share in the year-ago quarter. Revenue was in line with expectations at $1.53 billion, and forward guidance was revised upward. The stock has risen from recent lows in early August, gaining 1.5% in after-hours trading today.

Enlarge video ZM missed its earnings this afternoon as revenue for the quarter beat estimates by +2.1%. However, these results do not reflect the impact of the July 31 share buyback program. However, guidance for earnings and revenue for both the next quarter and the full year increased, helping to push shares up +2.8% in after-hours trading.

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