Markets hesitate as PCE inflation data warms the hearts of investors

Dow went up 228 with buying into the close, advancers ahead of decliners 4-3 & NAZ gained 197.  The MLP index was steady in the 285s & the REIT index added 3+ to the 427s.  Junk bond funds edged higher & Treasuries were sold which raised yields.  Oil fell 2+ to the 73s & gold sank 28 to 2531 (more on both below).

Dow Jones Industrials 

Dell (DELL) reported quarterly results that beat expectations, powered by an 80% increase in server sales.  EPS was $1.17, up from 63¢ in the year-ago period.  Revenue increased about 9% from $22.9B a year ago.  The stock took a leg lower after DELL revised its full-year revenue guidance to $95.5 - $98.5B, a slight upward revision from the company's previous forecast.  Earlier this year, the company said to expect revenue of $93.5 - $97.5B for the full year, up from $88.4B in the prior year.  For the current qtr, DELL said it expects $24 - $25B in revenue, in line with the estimate of $24.6B.  DELL has emerged as a top vendor for servers that can handle artificial intelligence workloads, especially those based around Nvidia (NVDA) chips, as demand skyrockets from cloud providers.  Earlier this year, NVDA  CEO Jensen Huang called out DELL founder Michael Dell as the person to contact to place orders for systems that include the company's new chips.  AI sales are in the company's Infrastructure Solutions Group (ISG), which makes servers & systems for data centers.  It's the company's fastest-growing unit.  Overall ISG sales rose 38% to $11.6B, ahead of expectations for $10.4B.  DELL said it spent $1B in the qtr on share repurchases & divs.  DELL stock rose 4.84.

Dell beats estimates as server sales soar 80%, riding AI wave

Lululemon (LULU) lowered its guidance and posted its first revenue miss in more than 2 years after it botched a highly anticipated product launch & growth slowed in the Americas.  The company now expects full-year net revenue to be $10.4 - $10.5B, down from a previous estimate of $10.7 - $10.8B.  LULU anticipates earnings per share will be $13.95 - $14.15, down from previous guidance of $14.27 -  $14.47.  EPS for the 3-month period that ended Jul 28 rose to $3.15, compared with $2.68 per share a year earlier.  Sales rose to $2.37B, up about 7% from $2.21B a year earlier.  Beyond total sales, LULU also missed expectations on comparable sales, which grew 2%, well behind estimates of 5.9%.  Comparable sales in the Americas fell 3%.  The trend doesn't appear poised to improve in the current qtr.  LULU expects sales to grow 6-7%, lower than the 9.2% growth that had expected.  However, its profit guidance is roughly in line with what was anticipated.  The expects 3rd-qtr EPS to be $2.68 - $2.73, compared with estimates of $2.70.  The stock fell 78¢.

Lululemon cuts guidance, misses sales estimates after botched product launch

MongoDB (MDB) reported healthy fiscal 2nd-qtr earnings & pushed up full-year guidance.  EPS was 70¢ adjusted vs 49¢ expected & sales were $478M vs $464M.  MDB's revenue grew 13% year over year in the qtr that ended Jul 31.  The qtr's net loss came to 74¢ per share, compared with 53¢ per share, in the same qtr a year ago.  "We believe we are incredibly well positioned to help customers incorporate generative AI into their business and modernize their legacy application estate," CEO Dev Ittycheria said.  The company's Atlas cloud database service enjoyed modestly better consumption than expected.  In the fiscal first qtr, Atlas consumption growth slowed as clients observed more challenging economic conditions & usage in the fiscal 2nd qtr implied that the climate did not change, Ittycheria said.  "We generally have not seen the macro environment impact our ability to win new business, and that was true in Q2 as well," Ittycheria added.  "We realized that this is different from what you hear from some other software vendors."  With respect to guidance, MDB called for fiscal 3rd-qtr adjusted EPS of 65-68¢ on $493 - $497M in revenue.  Analysts had expected 60¢ in adjusted EPS on $478.8M in revenue.  Management nudged up its fiscal 2025 forecast.  MDB now sees $2.33 - $2.47 in adjusted EPS, with $1.92 - $1.93B in revenue.  That's up from the May guidance of $2.15 - $2.30 in adjusted EPS & $1.88 - $1.90B in revenue.  Analysts had predicted $2.26 per share in adjusted earnings, along with $1.90B in revenue.  The stock soared 42+ (18%).

MongoDB shares surge as high as 16% on guidance boost

Gold slipped 1% as the $ & yields firmed after US inflation data matched expectations, but the bullion is set for a monthly gain as a Sep interest rate cut by the Federal Reserve remains in play.  Spot gold fell 0.9% to $2497 per ounce & US gold futures settled 1.3% lower at $2527.  Bullion gained 2% this month after prices rallied to an all-time high of $2531 on Aug 20.  Data earlier in the day from the Commerce Dept showed the personal consumption expenditures (PCE) price index rose 0.2% last month, matching forecasts.  The PCE data confirms inflation is no longer the Fed's main concern, as they have shifted their focus to unemployment, which further validates the potential rate cuts in Sep.  Investors now look ahead to the US non-farm payroll report due next week.  Next week will solidify whether or not there will be a 50- or 25-basis-point interest rate cut at the Sep meeting.  Traders slightly raised bets of a 25-basis-point rate reduction by the Fed next month to 69%, with a 50-bps cut possibility coming down to 31% following the inflation report, according to the CME FedWatch tool.

Gold Drops as Dollar, Yields Firm After US Inflation Report

Oil prices rose as investors weighed supply concerns in Libya & Iraq, although signs of weakened demand, particularly in China, limited gains.  Brent crude futures for Oct, which expire today, were up 39¢ (0.5%) at $80.33 a barrel.  The more actively traded contract for Nov rose 34¢ (0.4%) to $79.16.  US West Texas Intermediate crude futures gained 30¢ (0.4%) to $76.21.  Both benchmarks settled more than $1 higher yesterday on oil supply concerns, up 1.6% & 1.8% respectively for the week so far.  Meanwhile, Iraqi supplies are also expected to shrink after the country's output surpassed its OPEC+ quota.  The Organization of the Petroleum Exporting Countries (OPEC) & allies, (OPEC+), is set to gradually phase out voluntary production cuts of 2.2M bpd over the course of a year from Oct 2024 - Sep 2025.

Oil prices gain on Middle East supply concerns

Stocks finished a wobbly day, week & month on a high note as the latest reading of the Federal Reserve's preferred inflation gauge bolstered rate-cut hopes.  But today the popular stock averages did not stray far from breakeven.  For the fickle month, Dow rose 720 & for the week eased up a modest 387.  Next week, traders on holiday will return & should bring even more excitement to the stock market.  Have a good holiday!