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Salesforce shares surge after strong Q1 results

 

Wednesday, June 01, 2022

The news shaping the markets today

An airstrike by Moscow hit a chemical plant in Ukraine’s eastern city of Severodonetsk. Investors adding safe-haven options to their portfolio lent support to the US dollar index.


China’s general manufacturing PMI rose to 49.1 in May, from April’s 26-month low of 46.0. However, the latest reading signalled the fourth contraction in the company’s factory activity this year, which exerted pressure on the CNY/USD forex pair.


Australia’s economy grew 0.8% in the first three months of the year, surpassing market estimates of 0.5%. This was the second consecutive quarter of GDP growth and sent the AUD/USD pair higher in forex trading this morning.


Japan’s manufacturing PMI fell to a 3-month low of 53.3 in May, from a final reading of 53.5 in the previous month earlier, exerting pressure on the JPY/USD forex pair.


Ireland’s manufacturing PMI declined to a 15-month low of 56.4 in May, from 59.1 in the previous month, which sent the EUR/USD pair lower in forex trading this morning.

 

What’s happening: Shares of Salesforce jumped in after-hours trading on Tuesday, after the company reported upbeat earnings for its first quarter.

What happened: Along with its strong first-quarter print, Salesforce raised its annual profit guidance, indicating it had not experienced any material impact of the ongoing macroeconomic instability.

However, the San Francisco, California-based company issued some projections that came in below the consensus estimates.

How were the results: The CRM and SaaS giant reported higher sales for its first quarter, topping market views.

  • Revenues climbed 24% year-over-year to $7.41 billion, surpassing the consensus estimate of $7.38 billion.
  • Adjusted earnings came in at 98 cents per share, beating the Street expectations of 94 cents per share.

Why it matters: Salesforce continued to expand its team and grew revenue despite inflation hitting a four-decade high. The company also bought messaging platform Slack for $27.7 billion.

Full-time equivalent positions climbed 30% year-over-year to 77,810 in the quarter ending April 30.

Salesforce’s subscription revenues generated by the platform division, which includes Slack, surged 55% to $1.42 billion. Sales in the company’s Mulesoft unit rose 9%.

However, Salesforce is facing rising expenses. Management projected second-quarter revenues between $7.69 billion and $7.7 billion and earnings between $1.01 per share and $1.02 per share. Both figures came in below market estimates of $7.77 billion and $1.14 per share, respectively.

For the full fiscal year, the company raised its adjusted profit projection from $4.63 per share to $4.75 per share. However, foreign exchange headwinds resulted in the company lowering its revenue guidance to $31.7-$31.8 billion, from its earlier forecast of $32-$32.1 billion.

How shares responded: Salesforce’s shares climbed 9.2% to $175.00 in extended trading on Monday, following the release of quarterly results. The stock has tumbled 37% year to date.

What to watch: Markets will keep an eye on rising inflation and the company’s initiatives to control expenses.

The markets today

The Canadian dollar will be in focus today ahead of Bank of Canada’s rate decision

Context: The CAD/USD pair climbed to its strongest level in around six weeks on Tuesday, following the recent rise in crude oil prices.

Details: Crude oil prices continued to move higher amid the ongoing Russia-Ukraine conflict. The price of crude oil, one of Canada’s major exports, jumped to its strongest level in around three months at $119.98 per barrel, but closed lower after a report showed that some OPEC (Organization of the Petroleum Exporting Countries) members were looking to suspend Russia’s participation in an oil-output agreement.

Investors also responded to positive economic data showing that Canada’s economy had expanded at an annualised rate of 3.1% in the first quarter. Although the recent figure was below the 6.6% rate in the fourth quarter, it represented a monthly expansion of 0.2% in April, triggering hopes of further growth in the current quarter, and increasing the prospects of another half-percentage-point rate hike by the country’s central bank.

The US Fed is also expected to hike rates by a half percentage point at its upcoming meetings in a bid to control inflation.

The CAD/USD jumped to its highest level since April 22, at 1.2630 during Tuesday’s session but settled at 1.2650. For the month, the forex pair gained around 1.7%, its highest monthly increase since October 2021.

What to watch: Traders will keep an eye on Bank of Canada’s interest rate decision today. The country’s central bank, which increased its target for the overnight rate by 50bps to 1% on April 13, is expected to raise rates again to 1.5%.

The release of manufacturing PMI data will also remain in focus today. The S&P Global manufacturing PMI is projected to decline to 55 in May, from 56.2 in April.

Other Markets: European trading indices closed mostly lower on Tuesday, with the DAX 40, CAC 40 and STOXX Europe 600 down by 1.29%, 1.43% and 0.72%, respectively, and the FTSE 100 higher by 0.10%.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD – 1.0708 and 1.0718 Positive
GBP/USD – 1.2591 and 1.2599 Positive
WTI Crude Oil – 115.23 and 115.57 Positive
Natural Gas – 8.250 and 8.286 Negative
FTSE 100 – 7582.36 and 7617.97 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0715, -0.19%) Dow ($33,174, 0.62%) Brent ($116.01, 0.4%)
GBP/USD (1.2598, -0.04%) S&P500 ($4,151, 0.47%) WTI ($115.19, 0.5%)
USD/JPY (129.04, 0.28%) Nasdaq ($12,700, 0.42%) Gold ($1,840, -0.5%)

What else to watch today

Germany’s retail sales and manufacturing PMI, UK’s Nationwide house price index and manufacturing PMI, France’s government budget value, car registrations and manufacturing PMI, Spain’s foreign tourist arrivals, manufacturing PMI and total vehicle sales, Turkey’s manufacturing PMI, Italy’s manufacturing PMI, car registrations and unemployment rate, Eurozone’s manufacturing PMI and unemployment rate, South Africa’s manufacturing PMI and total vehicle sales, Mexico’s manufacturing confidence index, foreign exchange reserves and manufacturing PMI, US MBA mortgage applications, Redbook index, manufacturing PMI, job openings, construction spending, Dallas Fed services index, ISM manufacturing PMI, Fed Beige Book and API’s crude oil stocks, India’s money supply M3, Brazil’s manufacturing PMI and balance of trade, as well as Russia’s manufacturing PMI, unemployment rate, industrial production, real wages, retail sales, corporate profits, money supply M2 and economic growth.


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