Market Overview:
During the past week, the S&P 500 experienced a notable 2.50% increase. This marked its most significant weekly gain since mid-June, buoyed by economic data indicating a slowing economy and fostering speculation that the Federal Reserve might pause further rate hikes. Technology stocks also contributed to this ascent, building on their prior week's performance. The week featured key economic data on labor market and inflation trends, which are expected to influence the upcoming Federal Reserve monetary policy committee meeting. Many indicators signaled economic cooling, raising hopes that the central bank might maintain interest rates. Although the unemployment rate ticked up in Friday's nonfarm payrolls report, investors are optimistic that this might prompt the Fed to reconsider its tightening policy.
News:
- Salesforce Surges on Earnings Beat and Upbeat Forecast: Salesforce's stock surged by 6% in after-hours trading as the cloud software company reported quarterly results that outperformed Wall Street's expectations. The company posted earnings of $2.12 per share (adjusted), exceeding analysts' projections of $1.90 per share, and reported revenue of $8.60 billion, slightly above the expected $8.53 billion. Salesforce's Q2 revenue grew by 11% year-over-year, with net income reaching $1.27 billion, compared to $68 million in the previous year. Despite economic uncertainties impacting growth, Salesforce achieved growth across all five product categories and anticipates further expansion driven by artificial intelligence. During the quarter Salesforce said AI enhancements to its Sales Cloud and Service Cloud applications were available for $50 per person per month on top of existing costs. And it announced an AI Cloud that will encompass tools for marketing and data analysis. Salesforce's shares have surged by 64% year-to-date, outperforming the S&P 500's 18% gain over the same period.
- CrowdStrike's AI-Powered Platform Boosts Revenue: Cybersecurity firm CrowdStrike reported robust earnings for the fiscal quarter ending July 31, with profits totaling $8.5 million, equivalent to 74 cents per adjusted share, surpassing consensus expectations. The company's AI-driven Falcon platform played a pivotal role in driving revenue gains, contributing over half a billion dollars to the nearly $3 billion in annual recurring revenue for the quarter. Subscription revenue increased by 36%, reaching $690 million, with improved gross margins at 80%. CrowdStrike's clientele includes Fortune 500 giants like Verizon, ADP, and Amgen, who rely on the company's cloud-based cybersecurity services for risk assessment, endpoint detection, and threat response. The CEO attributed revenue growth to the unique capabilities of the Falcon platform, which tracks and analyzes trillions of data points to protect over 23,000 clients from security breaches. CrowdStrike's shares have surged by approximately 7% for the week and 53% year-to-date.
- UBS Reports Record-Breaking $29 Billion Profit: UBS has reported an unprecedented $29 billion profit in the second quarter, largely attributed to its acquisition of Credit Suisse for approximately $3.2 billion, a purchase widely considered a significant discount. However, this extraordinary gain stems from "badwill," an accounting phenomenon that recognizes the true value of an asset when it is purchased for less than its worth, rather than reflecting actual operational profit. UBS's underlying profit for the quarter was $1.1 billion, highlighting the challenges it faces as it works toward completing its takeover of Credit Suisse, the largest bank acquisition since the 2008 financial crisis. The merger involves consolidating the domestic operations of both banks and shuttering a substantial portion of the investment banking activities. This consolidation is expected to result in around 3,000 job losses, raising concerns about competition in Swiss retail banking. Despite these challenges, UBS maintains that full integration is the best course for its stakeholders and the Swiss economy, with shareholders reacting positively to the badwill gain, leading to a more than 6% increase in UBS's stock price and its highest level since 2008. Despite the challenges ahead, UBS shareholders seem satisfied with the acquisition, driven by the advantageous badwill gain and the significant increase in assets under management, with UBS managing approximately $5 trillion in client assets after the merger.
Weekly ETF:
The First Trust NASDAQ Cybersecurity ETF (CIBR) is an exchange-traded fund that offers investors exposure to the cybersecurity sector by tracking the NASDAQ CTA Cybersecurity Index. This ETF is designed to provide a diversified investment approach within the cybersecurity industry, encompassing companies involved in various aspects of cybersecurity, such as network security, data protection, and threat detection. CIBR aims to capitalize on the growing importance of cybersecurity in the digital age, making it an attractive option for investors seeking to benefit from the increasing demand for cybersecurity solutions. CIBR's holdings included notable cybersecurity firms like Cisco Systems Inc., Palo Alto Networks Inc., Fortinet Inc. …etc.
Earnings This week:
Tuesday, September 5 - Zscaler (ZS), HealthEquity (HQY), and Asana (ASAN).
Wednesday, September 6 - UiPath (PATH), GameStop (GME), American Eagle Outfitters (AEO), and C3.ai (AI).
Thursday, September 7 - DocuSign (DOCU), Guidewire Software (GWRE), Smartsheet (SMAR), and Planet Labs (PL).
Friday, September 8 - Kroger (KR) and Rent the Runway (RENT).
