Weekly Market Movement Wrap

Weekly Market Movement Wrap

U.S. Indices
Dow +2.6% to 28,654. S&P 500 +3.3% to 3,508. Nasdaq +3.4% to 11,696. Russell 2000 +1.5% to 1,576. CBOE Volatility Index +1.9% to 22.96.

S&P 500 Sectors
Consumer Staples +2.4%. Utilities -0.7%. Financials +4.4%. Telecom +4.8%. Healthcare +1.%. Industrials +3.%. Information Technology +4.5%. Materials +3.3%. Energy +1.1%. Consumer Discretionary +3.1%.

World Indices
London -0.6% to 5,964. France +2.2% to 5,003. Germany +2.1% to 13,033. Japan -0.2% to 22,883. China +0.7% to 3,404. Hong Kong +1.2% to 25,422. India +2.7% to 39,467.

Commodities and Bonds
Crude Oil WTI +1.5% to $42.96/bbl. Gold +1.3% to $1,973./oz. Natural Gas +8.5% to 2.655. Ten-Year Treasury Yield -0.2% to 139.27.

Forex and Cryptos
EUR/USD +0.9%. USD/JPY -0.4%. GBP/USD +2.02%. Bitcoin -1.5%. Litecoin -5.2%. Ethereum -0.4%. Ripple -5.7%.

Top Stock Gainers


VivoPower International (NASDAQ:WPR) +215%. Cancer Genetics (NASDAQ:CGIX) +109%. Voxeljet AG (NYSE:VJET) +60%. Autoweb (NASDAQ:AUTO) +60%. MICT (NASDAQ:MICT +50%.

Top Stock Losers


Garrett Motion (NYSE:GTX) -51%. Akers Biosciences (NASDAQ:AKER) -48%. Odonate Therapeutics (NASDAQ:ODT) -47%. Kirkland's (NASDAQ:KIRK) -38%. Fulgent Genetics (NASDAQ:KIRK) -37%.

STOCKS

Major shakeup for the Dow

Big changes are coming to the Dow Jones Industrial Average due to Apple's (NASDAQ:AAPL) 4-for-1 stock split, which will significantly reduce the benchmark's exposure to the information technology sector. Exxon Mobil (NYSE:XOM), Pfizer (NYSE:PFE ) and Raytheon (NYSE:RTX) will be swapped out for Salesforce.com (NYSE:CRM, Amgen (NASDAQ:AMGM and Honeywell (NYSE:HON), marking the biggest reshuffle in seven years. The moves are effective before the open on Monday, while the divisor used to calculate the blue-chip index from the constituents will be changed before then, preventing any distortions.


force soars

Cloud and software stocks got a boost following a stellar earnings report from Salesforce (NYSE:CRM on Tuesday. The company raised its full-year outlook to $20.7B-$20.8B in revenue and adjusted EPS of $3.72-3.74 (after lowering guidance last quarter). Shares climbed 13% AH on the Q2 results, which saw subscription and support sales up 29% and Professional Services increase 23%. "It's humbling to have had one of the best quarters in Salesforce's history against the backdrop of multiple crises seriously affecting our communities around the world," said CEO Marc Benioff.

A surprising party joined the race for TikTok, as Walmart (NYSE:WMT) joined forces with Microsoft (NASDAQ:MSFT) to buy the U.S. assets of the popular short video app. The bid could total $30B or even more, and as odd as that coupling seems, CNBC reports that Walmart originally sought majority ownership of TikTok in a consortium with Alphabet (GOOG, GOOGLE) and SoftBank (OTCPK:SFBTY). "We believe a potential relationship could provide Walmart with an important way for us to reach and serve omnichannel customers as well as grow our third-party marketplace and advertising businesses," the company said in a statement. Oracle (NYSE:ORCL) is another U.S. company vying to acquire the assets of TikTok, whose CEO Kevin Mayer called it quits this week only three months into the job.


Consumer

Amazon expands beyond Whole Foods

Moving further into the grocery sector to challenge Walmart (NYSE:WMT), Kroger (NYSE:KR) and Albertsons (NYSE:ACI), Amazon (NASDAQ:AMZN) opened the first location of its new chain of Fresh grocery stores in Woodland Hills, California. The 35,000-square foot store features Echo Show devices to ask Alexa where certain items are located, and debuted the Dash Cart, a smart grocery cart that tracks shoppers' items and allows them to skip the checkout line. There will also be a service counter for people to pick up orders from Amazon.com, and they can also complete returns there without having to package their items in boxes.

 

VMware's ascension to the cloud mitigating softness in traditional virtualization software 

Traditionally known for developing virtualization software that enables on-premise servers to run more efficiently, VMWare's (VMW) migration towards cloud computing is reshaping the company. The effects of this evolution was on display when VMW reported STERNG Q2 results after the close yesterday.

The metric that best highlights VMW's progress in its transition is subscription and SaaS revenue. In Q2, total subscription and SaaS revenue jumped by 44% to $631 mln, accounting for 22% of revenue, up from 18% in 4Q19.

VMW's suite of cloud offerings, which allow enterprises to run, manage, connect, and protect apps on any cloud, are in the sweet spot of the accelerating digitization trend. According to CEO Patrick Gelsinger, the pandemic prompted many of VMW's customers to ramp up their cloud plans, providing a boost for VMW's subscription and SaaS business.

Strong demand for VMW's cloud offerings helped offset weakness in the on-premise business. Due to the pandemic, some customers delayed on-premise projects, causing bookings for its core SDDC and vSAN products to fall by low single-digits. Mr. Gelsinger stated that the slowdown was most pronounced in the Americas region.

The ongoing integration of cloud software companies Carbon Black and Pivotal, both of which were acquired last year, presented another potential risk to VMW's bottom line. In particular, G&A expenses have soared as the companies combine. However, after surging by 130% in Q4 to $592 mln, G&A expense moderated to $246 last quarter (+18%) and $277 mln (+24%) this quarter. 

In addition to the easing expense burden, Carbon Black and Pivotal's combined customer base reached 20,000, nearly doubling from the end of Q4.

With momentum building across VMW's cloud offerings, the company issued upside Q3 EPS guidance ($1.42 vs. $1.36) and upside FY21 EPS and revenue guidance. VMW's FY21 outlook, which calls for EPS of $6.62 and revenue of $11.60 bln, is an especially bullish sign because the company had previously suspended its fiscal year guidance.

On a final note, Dell's (DELL) spin-off plans of its 81% stake in VMW is a hot topic. VMW did acknowledge the matter during the earnings conference call, but, predictably, offered few specifics. The company simply reiterated its belief that a spin-off may be value enhancing to VWM shareholders and that a potential spin-off would not occur prior to September 2021.



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