US markets clocked-up their worst week since the start of the pandemic, with the S&P 500 falling 4.6% on fears the Fed would need to hike interest rates more aggressively to tackle rampant inflation, which reached 40-year highs in May.
Rising risks of recession were reflected in the performance of the economically sensitive Russell 2000; the US's smaller companies index, which dropped 5.3%, and the relative outperformance of the interest rate-sensitive Nasdaq Composite, which only fell 2.7%.
Despite racking up weekly losses, markets rallied on the day of the Fed's rate decision (15 Jun) after comments from chairman Jerome Powell seemed to go some way to re-establishing the banks' inflation-fighting credentials.
Defensive sectors including Healthcare and Consumer Staples were the relative winners, while Energy fell a whopping 12% as oil prices fell back.
ADOBE
Despite beating second quarter earnings estimates, creative software group Adobe (ADBE:NASDAQ) saw its shares drop 2.3% in early trading on Friday, capping losses of 9% for the week.
Adobe reported adjusted earnings of $3.35 per share, topping the consensus estimate of $3.31, on revenues of $4.39 billion, up 14% year-on-year and ahead of analysts' expectations of $4.35 billion.
Nevertheless, investors focused on forward guidance, which fell short of market expectations implying future downgrades to come from analysts. The shares hit new two-year lows and have lost over 50% from their highs in 2021.
KROGER
By focusing on shopping essentials, supermarkets chain Kroger (KR:NYSE) was able to shrug off the inflationary pressures roiling rival retailers to post forecast-beating first quarter earnings. EPS of $1.45 smashed analysts' estimates of $1.28, while sales rose from $41.3 billion to $44.6 billion, ahead of consensus $43.05. That's 8% year-on-year earnings growth, pretty decent considering the pressure on household budgets as inflation continues to bite.
Yet the stock fell 2%, seemingly par for the course given the market's gloomy mood. CEO Rodney McMullen flagged the ‘outstanding job’ of managing costs given the backcloth, which is ‘allowing us to continue to invest in our associates while providing our customers the freshest food at affordable prices when and where they need it.’
Perhaps a little too self-congratulatory, but investors will forgive him if he's able to drive attractive returns for shareholders.
ORACLE
Shares in enterprise database giant Oracle (ORCL:NYSE) jumped more than 10% to $70.72, their biggest rise in six months, as the market applauded better-than-expected full year and fourth quarter results. The Texas-headquartered tech business predicted exciting growth from its cloud business in the future as it posted Q4 adjusted earnings of $1.54 per share, topping the $1.38 consensus.
Revenue of $11.84 billion also comfortably beat estimates, which had been pitched at $11.66 billion, helping the stock rally off 2022 lows. CEO Safra Catz said Oracle's consistent increases in its quarterly revenue growth rate have typically been driven by ‘our market leading Fusion and NetSuite cloud applications. But this Q4, we also experienced a major increase in demand in our infrastructure cloud business - which grew 39% in constant currency’.
Catz believes that this revenue growth spike ‘indicates that our infrastructure business has now entered a hyper-growth phase. Couple a high growth rate in our cloud infrastructure business with the newly acquired Cerner applications business - and Oracle finds itself in position to deliver stellar revenue growth over the next several quarters.’
