US stocks declined as a surprise uptick in weekly jobless claims and a rise in Covid-19 infections underpinned concerns for a slower economic recovery ahead of Thanksgiving.
US Labor Department data showed that first-time claims for state unemployment benefits totaled a seasonally adjusted 778,000 for the week ended Nov. 21, compared to 748,000 a week earlier. Economists polled by Reuters had expected 730,000 applications in the reported week.
The Dow Jones Industrial Average dropped 0.6% and the S&P 500 Index slipped 0.2%. The tech-heavy Nasdaq Composite Index appreciated 0.4%.
Takeover chatter pushed Slack shares up 25% after the Wall Street Journal reported that the messaging app held talks to be bought up by cloud-based software company Salesforce. Any deal, if it were to be successful, would likely value Slack at more than its market capitalization prior to the WSJ report of about $17 billion. Salesforce dropped 3.5% following the report.
In earnings-related news, Gap tanked 19% as the company missed analysts’ earnings expectations due to higher marketing costs. The company’s 3Q (ended Oct. 31) EPS declined 32.4% year-over-year to $0.25, missing analysts’ forecast of $0.32. Sales were flat at $3.99 billion, compared to the prior-year quarter, but exceeded the Street’s consensus estimate of $3.82 billion. Online sales soared 61% and accounted for 40% of overall sales. However, weak store sales pulled down the overall top line. “While we believe there are attractive characteristics to be found in GPS’ Athleta and Old Navy brands (higher margin and growth profiles), we continue to believe there is significant uncertainty around the company’s revenue and earnings trajectory given its largely mall-based store fleet. We anticipate significant mall store closures and traffic challenges in coming periods,” Guggenheim analyst Robert Drbul commented.
Meanwhile, Nordstrom spiked 20% as the department store operator surprised investors with earnings of $0.34 per share in the 3Q, while analysts had expected a loss of $0.13 per share. Revenues of $3.09 billion dropped 16% and lagged the Street consensus of $3.13 billion. Commenting on the results, Guggenheim analyst Robert Drbul maintained a Hold rating. He said “While we continue to favor JWN’s off-price (~30% of revenue), digital, and local market strategy, we believe shares are fairly valued at ~16x our 2021E EPS, a premium to department store peers facing similar secular challenges.”
Autodesk jumped 6.6% after the software design and services company’s 3Q earnings of $1.04 per share crushed the Street’s estimates of $0.96 and spiked 33.3% year-over-year. Sales rose 13% year-over-year to $952.4 million and exceeded analysts’ expectations of $942.2 million. The company’s subscription plan sales increased by 24% to $884 million year-on-year.
Despite reporting better-than-expected 3Q sales, Pure Storage dived more than 6%. The flash-based storage provider’s revenue fell 4% year-over-year to $410.6 million but was slightly above the Street’s estimates of $407 million. The company’s earnings of $0.01 slumped over 92% from the year-ago quarter, but surpassed analysts’ projection of a break-even.
Shares of electric vehicle start-up Nikola plunged 10% after its CEO Mark Russell failed to convince investors that the $2 billion deal with GM is being finalized. Commenting on talks with GM about supplying fuel cell and battery technologies as well as an all-electric pickup, Russell told CNBC: “Both of those things are interesting to us. We continue to talk to them about those things. If a deal isn’t finalized by Dec. 3, either side can walkaway.”
In dividend-related news, HP bumped up its cash dividend by 10% to 19.38 cents per share, after the computing giant posted better-than-expected quarterly results, as the pandemic-led work-from-home trend spurred demand for its PCs. Shares rose 1.5%. The PC maker reported a 1% decline in its fiscal fourth-quarter sales to $15.3 billion from the year-ago period, which however outpaced the $14.7 billion forecasted by analysts. In the three months ended Oct. 31, HP earned an adjusted 62 cents a share, exceeding analysts’ expectations of 52 cents. For the current quarter, adjusted profit is projected to be between 64 cents to 70 cents a share, compared to the 54 cents estimated by the Street consensus.
In corona updates, Moderna gained 8.4% as the biotech company inked a deal to supply European Union countries with up to 160 million doses of its COVID-19 vaccine candidate. The deal comes on the heels of the biotech’s announcement that its vaccine candidate has an efficacy of 94.5% in preventing COVID-19, with the Phase 3 trial also meeting the statistical criteria pre-specified in the study protocol. “According to the results of clinical trials, this vaccine could be highly effective against COVID-19… Once the vaccine is indeed proven as safe and effective, every Member State will receive it at the same time, on a pro-rata basis, at the same conditions,” European Commission President Ursula von der Leyen noted.
