Key US indices S&P 500 and Nasdaq Composite set themselves on the right course to break a seven-week losing streak on Friday (27 May).
Discount retailer Dollar Tree (DLTR:NASDAQ) followed up a robust showing from some of its peers to suggest some of the concerns about US consumer spending may be overdone and investors moved to take advantage of what they perceived as oversold opportunities.
Gap (GPS:NYSE) bucked the retail recovery as its Old Navy brand saw sales dive. The company slashed earnings guidance to between $0.30 and $0.60 per share compared with previous consensus forecasts of $1.34.
Along with a lot of consumer-focused names, IT outfit DXC Technology (DXC:NYSE) also cut a dash, as it won a new $465 million contract with insurance market Lloyd's of London.
As we enter June key manufacturing data (1 Jun) and jobs numbers (3 Jun) may have some bearing on whether US markets can build on their recent gains.
MACY'S
After the retail rout sparked by weak numbers and outlooks from US giants Walmart (WMT:NYSE) and Target (TGT:NYSE), department store Macy's (M:NYSE) helped to boost sentiment by lifting its 2022 outlook.
The latter's focus on high-end retailing potentially means its customer base is less exposed to inflationary pressures and is therefore less likely to cut back on discretionary spending than the typical Walmart and Target shopper.
Macy's, which also owns the Bloomingdale's chain, still expects revenue for the 12 months to the end of January 2023 to be flat or up 1% on the previous year's levels at between $24.46 billion and
$24.7 billion but has lifted earnings guidance from a range of $4.13 to $4.52 per share to $4.53 to $4.95.
In the three month period to 30 April 2022 earnings per share came in at $1.08 versus the $0.82 expected with revenue at $5.35 billion against a forecast of $5.33 billion.
SNAP
Concerns over a big drop in online advertising spread widely over the past week after Snapchat's parent threw a cluster bomb on Wall Street.
Snap (SNAP:NYSE) plunged more than 43% after the social media company cut its guidance on revenue and profitability, citing a faster-than-expected deterioration of the macroeconomic environment.
The warning ‘will sound the alarms on the deteriorating macro's evolving effects on digital advertising,’ RBC said in a note after slashing its price target on the stock from $25 to $17, having closed the week below $15.
Snap ran up a near half billion net loss in 2021 despite revenues jumping 64%, but the company had been forecast to make its first profit this year. Perhaps not.
Concerns about a weaker backdrop of advertising spending sent shockwaves throughout the social media stock space.
Shares in Facebook-owner Meta Platforms (FB:NASDAQ) and Pinterest (PINS:NYSE) both fell over the past week.
BROADCOM
Chip designer and manufacturer Broadcom (AVGO:HASDAQ) stunned tech investors this week with the surprise announcement it would buy enterprise software provider VMware (VMW:NYSE) for $69 billion including debt.
The deal is the biggest ever takeover by a chipmaker and represents a 44% premium to VMware's market value last Friday.
VMware's shareholders can either receive $142.50 in cash or Broadcom stock in exchange for each of their shares. The deal has the support of key investors including Michael Dell and Silver Lake.
Bringing the two companies together ‘will enable customers, including leaders in all industry verticals, greater choice and flexibility to build, run, manage, connect and protect applications at scale across diversified, distributed environments, regardless of where they run’ according to Broadcom chief executive Hock Tan.
VMware is Tan's third major software buy in five years after the acquisition of CA Technologies in 2018 and Symantec's enterprise security division in 2019.
In a sign of investor confidence, Broadcom shares finished the week higher.
DISCLAIMER: AJ Bell is the owner and publisher of Shares. Tom Sieber owns shares in AJ Bell.
