The Stock Market This Week: November 30 – December 4

By: Stacey Nickens

• Earnings Reports
  • Salesforce reported earnings per share of $1.74 and revenue of $5.42 billion in Q3. Both their EPS and revenue clocked in above expectations. Despite that, some analysts were concerned about a drop in Q3 billings as well as margin pressure from their upcoming acquisition of Slack.
  • Kroger reported earnings per share of $0.71 and revenue of $29.72 billion in Q3. Earnings per share were slightly higher than expected, while revenue was slightly lower than expected.
  • Dollar General reported earnings per share of $2.31 and revenue of $8.20 billion in Q3. Both earnings per share and revenue were higher than expected. Dollar General executives reported elevated demand in stores due to COIVD-19.
  • Docusign reported earnings per share of $0.22 and revenue of $382.9 million in Q3. Both their EPS and revenue clocked in above expectations. Analysts attributed Docusign’s strong performance to continued elevated demand for their eSignature offerings due to the pandemic. Additionally, Docusign increased their net dollar retention as well as new customer count.
• Economic News
  • Pending homes sales declined 1.1% in October. Home sales still remain above their rate in October 2019; however, the month-over-month decline may be due to rising prices impacting home affordability.
  • The Fed Beige Book showed some economic slowing in certain districts due to rising COVID-19 cases; however, most districts still showed modest or moderate growth.
  • November’s ADP employment report missed expectations, showing nonfarm payrolls growing by 307,000 compared to the expected 405,000. The services sector showed a slowdown in growth, while leisure & hospitality posted the strongest improvements.
  • The ISM manufacturing index fell in November for the first time since April but still remained elevated.
  • Initial jobless claims dropped to their lowest level in three weeks, clocking in at 712,000.
  • November payrolls missed estimates, clocking in at 245,000 compared to the expected 610,000. Government payrolls declined by 99,000, while retail jobs also fell. However, the transportation and warehouse industries both saw growth in their payroll numbers.
  • Average hourly earnings came in slightly higher than expected, the average workweek came in at 34.8 as expected, and the unemployment rate fell slightly more than expected to 6.7%. The dropping unemployment rate correlated with a decline in employment participation rates.
• Major Corporate News
  • Salesforce announced that they would be acquiring Slack while also reporting that their CFO would be retiring.
  • The UK approved the distribution of Pfizer and BioNTech’s vaccine. Distribution will begin with high-priority groups next week.
  • Kohl’s will install 850 Sephora shops inside of their own by 2023.
  • Reports suggest that the US will file an antitrust lawsuit against Facebook next week.
  • According to FactSet, S&P 500 companies also have an improved earnings outlook for Q4. Analysts raised their earnings estimates for S&P 500 companies by 2.8%. This is the largest increase in EPS estimates since the first quarter of 2018.

On Monday, major indexes declined due to month-end profit taking. The S&P 500 fell 0.5%. The Nasdaq lost only 0.1% after an intraday recovery in technology stocks, and the Dow Jones declined 0.9%. Nine of the 11 S&P 500 sectors finished lower. However, positive vaccine news and a boost from technology stocks allowed the information technology and health care sectors to post gains. Health care rose after Moderna announced that their vaccine was 94.1% effective in preventing COVID-19 and 100% effective in preventing serious health problems. They are now applying for emergency-use authorization for their treatment. In economic news, pending homes sales declined 1.1% in October. Home sales still remain above their rate in October 2019; however, the month-over-month decline may be due to rising prices impacting home affordability.

On Tuesday, major indexes erased Monday’s pullback as funds continued to flow into cyclical securities. The S&P 500 climbed 1.26%. The Dow Jones added 0.83%, and the Nasdaq was up 1.32%. The market was bolstered by the potential for a COVID vaccine approval in the near future as well as renewed hope of fiscal stimulus. Along those lines, Fed Chair Jerome Powell testified before Congress on Tuesday, emphasizing the need for emergency lending programs and more fiscal stimulus. Treasury Secretary Steve Mnuchin underscored that point by encouraging Congress to use the $455 billion set aside by the CARES Act funds for fiscal relief. In economic news, the ISM manufacturing index fell in November for the first time since April but still remained elevated. Khol’s shares were up after announcing a partnership with Sephora. Kohl’s will install 850 Sephora shops inside of their own by 2023. In other corporate news, Zoom shares were down in daily trading. The company posted strong Q3 earnings and revenue but still missed lofty expectations.

On Wednesday, major indexes started lower but posted modest gains by close. Overall, positive vaccine news continued to dilute pessimism from rising infection rates and stalled fiscal stimulus talks. By close, the Dow Jones added 0.2%, and the S&P 500 gained 0.18%. The Nasdaq posted a small 0.05% gain. Fiscal stimulus popped into the headlines again; however, reports suggested that Republicans and Democrats remained deeply divided on the issue. The Fed Beige Book also showed some economic slowing in certain districts due to rising COVID-19 cases; however, most districts still showed modest or moderate growth. In other news, the UK approved Pfizer and BioNTech’s COVID vaccine and will begin distribution next week. The market toggled between all of these headlines but seemed to land on a moderately bullish note. In other economic news, November’s ADP employment report missed expectations, showing nonfarm payrolls growing by 307,000 compared to the expected 405,000. The services sector showed a slowdown in growth, while leisure & hospitality posted the strongest improvements. In corporate news, Salesforce reported earnings per share of $1.74 and revenue of $5.42 billion in Q3. Both their EPS and revenue clocked in above expectations. Salesforce also announced that they would be acquiring Slack while simultaneously reporting that their CFO would be retiring. The market was mixed on the news. Some analysts were concerned about the acquisition’s price tag.

On Thursday, indexes posted modest gains on COVID-19 headlines. Vaccine optimism, potential for fiscal stimulus, and rising infection rates continued to dominate the news cycle. Pfizer reported that they would only be able to deliver around half of the vaccines they expected to be able to deliver in 2020. However, the company currently remains on target to deliver all expected doses in 2021. With these headlines, the S&P 500 gained 0.06%. The Dow Jones added 0.29%, and the Nasdaq rose 0.23%. Initial jobless claims dropped to their lowest level in three weeks, clocking in at 712,000. In earnings news, Kroger reported earnings per share of $0.71 and revenue of $29.72 billion in Q3. Earnings per share were slightly higher than expected, while revenue was slightly lower than expected. Dollar General reported earnings per share of $2.31 and revenue of $8.20 billion in Q3. Both earnings per share and revenue were higher than expected. Dollar General executives reported elevated demand in stores due to COIVD-19.

On Friday, major indexes rode higher as vaccine optimism won out over concern for rising infection rates. The S&P 500 rose 0.88%. The Dow Jones added 0.83%, and the Nasdaq gained 0.7%. Value equities performed slightly better than growth equities, with energy, materials, and industrials posting the strongest gains. Consumer discretionary and communication services were dragged down a bit by underperforming FAANG stocks. Economic news was mixed during the day. November payrolls missed estimates, clocking in at 245,000 compared to the expected 610,000. Government payrolls declined by 99,000, while retail jobs also fell. However, the transportation and warehouse industries both saw growth in their payroll numbers. Average hourly earnings came in slightly higher than expected, the average workweek came in at 34.8 as expected, and the unemployment rate fell slightly more than expected to 6.7%. The dropping unemployment rate correlated with a decline in employment participation rates. According to FactSet, S&P 500 companies also have an improved earnings outlook for Q4. Analysts raised their earnings estimates for S&P 500 companies by 2.8%. This is the largest increase in EPS estimates since the first quarter of 2018.