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<\/figure>\n\n\n\nThis morning\u2019s Unemployment Claims data came in higher than the marketplace would like but lower than May highs and not an immediate cause for concern. The 232,000 workers filing for unemployment benefits during the week ended May 27was lower than the consensus expectation of 235,000 but marginally higher than the previous week\u2019s 230,000. Meanwhile, continuing claims of 1.795 million for the week ended May 20, less than the 1.8 million expected but higher than the 1.780 million from the previous week.<\/p>\n\n\n\n
Markets are happy today as we start June and recovering from yesterday\u2019s bearish sentiment. Stocks were negative near the open on the hot ADP number but turned positive on lower prices paid as depicted by the ISM\u2019s report at 10:00 am Eastern Time. The S&P 500 Index is recovering from yesterday\u2019s losses and is up 0.8% to 4217 with broad participation from all other major indices. Yields are down across the curve with the 2- and 10-year Treasury maturities down 3 basis points (bps) each to 4.36% and 3.61%, respectively. The dollar is lower as well, on lighter Fed tightening expectations amidst modestly lower long-term inflation expectations. The Dollar Index is down 56 bps to 103.74. WTI Crude oil is recovering some of its losses from its recent downtrend, gaining 1.5% to $69.12 per barrel. <\/p>\n\n\n\n
Recent earnings reports show that technology companies are continuing to grow their earnings, but at slower rates, while higher costs of living are continuing to crimp consumers’ discretionary spending. These trends are illustrated by the following examples:<\/p>\n\n\n\n
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- Salesforce, which provides cloud-based software for marketing, sales, e-commerce and client services, reported net income of $199 million, or $0.20 a share, for the quarter ended April 30 compared to $28 million, or $0.03 a share, for the year-ago quarter. The company\u2019s adjusted earnings of $1.69 a share exceeded the consensus analyst estimate of $1.61 and increased year-over-year (y\/y) from $0.98. Revenues climbed y\/y from $7.41 billion to $8.25 billion and exceeded the consensus expectation of $8.18 billion. The company raised its full fiscal-year 2024 adjusted earnings per share (EPS) forecast to a range of $7.41 to $7.43 from prior guidance of $7.12 to $7.14. Salesforce shares fell more than 5.5% in premarket trading this morning in part because capital expenditures during the quarter climbed 36% y\/y to $243 million, exceeding the analyst consensus forecast of $205 million. Additionally, revenue increased at the slowest rate in approximately 10 years. The company initiated layoffs earlier this year and also reduced its office space to cut costs and preserve profits. Chief Operating Officer Brian Millham noted that customers are taking longer to finalize deals than in the past and they are seeking technology that can provide value quickly. The change in customer behavior is creating headwinds for the company. During the recent quarter, Salesforce expanded its AI services by adding Einstein GPT, which among other functions will allow clients to respond to message with chatbots.<\/li>\n\n\n\n
- CrowdStrike, which provides cloud-based cybersecurity, reported adjusted EPS of $0.57 for the first quarter compared to $0.31 in the year-ago quarter and above the analyst consensus estimate of $0.51. Its profit of $500,000 was up from a loss of $31.5 million for the first quarter of 2022. CrowdStrike\u2019s revenue also increased, climbing from $487.8 million to $692.6 million and exceeding the consensus expectation of $676.4 million. The y\/y 42% revenue growth rate, however, moderated from the y\/y 61% rate CrowdStrike reported for the first quarter of 2022, which caused the company\u2019s share price to initially drop 11% after the recent earnings announcement. On a positive note, a slowdown in hiring employees supported profits, according to Chief Financial Officer Burt Podbere. Like many other companies, CrowdStrike also announced using AI to improve its technology. CrowdStrike estimates it will generate revenue ranging from $717.2 million to $727.4 million during the current quarter while the analyst consensus estimate is for a range of $698 million to $742 million.<\/li>\n\n\n\n
- Macy\u2019s, which operates department stores with brands such as Macy\u2019s and Bloomingdale\u2019s, reported net income of $155 million for the first quarter of this year, down substantially y\/y from $286 million. Its diluted EPS of $0.56 declined from $0.98 y\/y while adjusted diluted EPS dropped from $1.08 to $0.56. Analysts anticipated an adjusted EPS of $0.46. For the first quarter, revenue of $5 billion declined 7% y\/y as inflation weary consumers who are struggling with higher costs of living continued to cut back on discretionary spending. In a sober development, Macy\u2019s Chief Executive Officer Jeff Gennette said the company anticipated challenging conditions but in March it became clear that the downward trend in discretionary spending was accelerating. Same-store sales for Macy\u2019s branded locations tanked 8.7% y\/y while sales at Bloomingdales, which is a higher-end brand, dropped 3.9%. Gennette said the bigger decline in sales at Macy\u2019s reflects that more than half of the stores\u2019 customers have household incomes of $75,000 or less so they are more suspectable to inflation. The company also reported an 8% y\/y decline in digital sales. In early March, Macy\u2019s estimated its full-year net sales would range from $23.7 billion to $24.2 billion. It has lowered that estimate to a range of $22.8 billion to $23.2 billion. Macy\u2019s guidance reflects anticipated markdowns in merchandise and continued macroeconomic pressure on consumer spending. It also reflects $200 million in cost savings. Its shares were down as much as 5% but are now near the flatline.<\/li>\n<\/ul>\n\n\n\n
As ISM and ADP data conflict regarding manufacturing employment, with one showing a gain and the other showing a loss, tomorrow\u2019s Jobs Report from the Bureau of Labor Statistics shall provide the tiebreaking vote. Nonetheless, the report is likely to come in hot as I\u2019m expecting a 220,000 monthly job gain driven by services, as consumers just can\u2019t get enough of airplanes, cruise ships, restaurants, drinking parlors, amusement parks and more. Tomorrow\u2019s number and June 13\u2019s Consumer Price Index (CPI) are pivotal, and will likely be the driving forces influencing another 25-bp hike or pause from Federal Reserve Chairman Jerome Powell and committee members. I\u2019m expecting hot numbers for both Jobs and CPI, driving the central bank to reach its terminal rate of 5.38% in thirteen days.<\/p>\n\n\n\n