Stock Market Mudslide Continues; Crowdstrike (CRWD) Posts Strong Q2

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The market mudslide continued a third-straight trading day today, with the Dow slipping another -0.96%, the S&P 500 -1.10% and the Nasdaq -1.12% — now down -4% for the past week. Weakest of all on the day was the small-cap Russell 2000, which fell -1.54%.

The tone of market trading since Fed Chair Jay Powell’s Jackson Hole speech last Friday morning has gotten decidedly “risk off.” The battle against inflation is once again seen — rightly, it would seem — as formidable, lengthy and with untold aspects of risk abounding.

Aside from Powell telling the American public they should prepare for economic “pain,” we see anecdotally a proclamation from an economics professor at Johns Hopkins University that we’re going to see “one whopper of a recession in 2023.” And Snap SNAP, in a report from The Verve this afternoon, looks to lay off 20% of its 6400-employee workforce, starting Wednesday. That said, while Snap Inc. is only one company, employment coming down in pockets of the economy might be a “bad news is good news” thing regarding inflation.

However, here’s something you can file in the “good news is bad news” column: the Consumer Confidence Index for August jumped up notably from expectations: 103.2, up from the 97.4 anticipated and the 95.7 reported for July. It breaks, as expected, three straight months of lower consumer confidence, but by 580 basis points to the upside. Which means consumers feel better about the economy and their buying power within it — likely due to lower gasoline prices in the month — which means inflation may be harder to tame than many had anticipated of late.

Also, JOLTS data for July surprised higher today: 11.24 million job openings was nearly a million more than expected, with the June headline upwardly revised to 11.04 million from 10.7 million previously. This is another inflationary read, with the idea that in order to fill all these extra jobs, employers need to continue to raise wages. Job Quits last month came down slightly, but off numbers revised higher: 4.18 million from 4.3 million in June.

We’re likely a bit more complex than this, however: available workers currently tally just 5.67 million — only half the number needed to fully satisfy current employment with this many job openings. Thus, simply raising wages is not the (only) answer here; we may also need to look at bigger structural issues like U.S. immigration policy. Until then, we’re still operating in a labor market Fed Chair Powell called “extremely tight” a month ago.

Cybersecurity software firm Crowdstrike CRWD put up strong Q2 numbers after today’s closing bell: earnings of 36 cents per share outperformed the 28 cents expected (though the whisper number had been for a beat; Crowdstrike has not missed on earnings in its 3-year trading history), while $535 million in quarterly sales surpassed the $517.1 million in the Zacks consensus. After a few moments of volatility on the release, shares are up modestly in the late session.

The Silicon Valley-based Crowdstrike also raised guidance for next quarter and the full year on both earnings and revenues. Annual Recurring Revenue grew +59% to $2.14 billion — a robust figure for a growth company of Crowdstrike’s size. Net new subscriptions gained more than 1700 in the quarter,  +51%, and are just a few hundred shy of 20K overall. Considering the difficulties we’ve seen from other tech companies in fiscal Q2, this was an excellent report.

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