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What Happened in the Stock Market Today

By Jim Crumly - May 11, 2018 at 5:11PM

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Stocks closed the week with gains, with NVIDIA reporting strong growth and Symantec getting crushed after announcing an internal investigation by its audit committee.

Stocks rallied in the final hour on Friday, and the Dow Jones Industrial Average (^DJI 1.27%) and the S&P 500 (^GSPC 1.73%) closed with small gains to end a positive week.

Today's stock market

Index Percentage Change Point Change
Dow 0.37% 91.64
S&P 500 0.17% 4.65

Data source: Yahoo! Finance.

Biotech stocks had a big day, with the iShares NASDAQ Biotechnology ETF (IBB 0.94%) jumping 2.8%. The broad technology sector slipped, and the Technology Select Sector SPDR ETF (XLK 1.99%) lost 0.1%.

As for individual stocks, NVIDIA (NVDA 4.28%) reported excellent quarterly results and Symantec Corporation (NLOK 0.58%) crashed after announcing an internal investigation.

Front of the New York Stock Exchange.

Image source: Getty Images.

Yet another blow-out quarter from NVIDIA

Chipmaker NVIDIA reported fiscal first-quarter results that crushed expectations, but the stock, which had run up in anticipation, slipped 2.2% on the news. Record revenue of $3.21 billion increased 66% from last year, GAAP EPS was up 151% to $1.98, and adjusted EPS rose 141% to $2.05. The analyst consensus was for revenue growth of 50% and an increase in adjusted EPS of 71%.

The hottest areas of growth were in the gaming market, which grew sales 68% to $1.72 billion, and data center sales, which were soared 71% to $701 million. The OEM and IP segment grew 148%, thanks to $289 million in sales of GPUs for cryptocurrency mining. The company guided to Q2 revenue of $3.1 billion, above Wall Street expectations of $2.95 billion.

"At the heart of our opportunity is the incredible growth of computing demand of [artificial intelligence], just as traditional computing has slowed," said CEO Jensen Huang. "The GPU computing approach we have pioneered is ideal for filling this vacuum." 

The quarter was outstanding, but investors are now looking forward. On the call, NVIDIA management said that a good portion of the Q1 business related to replenishing the channel due to shortages in Q4. As a result, cryptocurrency-related sales in Q2 are expected to be one-third that of Q1. Still, NVIDIA provided a great outlook for the current quarter, based on continued strong demand.

Symantec drops a bomb

The market hates uncertainty, and cybersecurity company Symantec served up a heaping portion of it to its shareholders today, who promptly knocked 33.1% off the value of the stock. Along with fiscal fourth-quarter results, the company announced that the audit committee of the board of directors "has commenced an internal investigation in connection with concerns raised by a former employee." Despite providing few details on the investigation in the earnings report, the company refused to answer questions about it in the conference call. In fact, the company refused to answer any questions at all, unexpectedly canceling the Q&A portion of the call.

Symantec said it has voluntarily contacted the SEC about the investigation, which is in its early stages and won't be complete in time for the company to file its annual report. But the potential seriousness of the matter was highlighted when Symantec said in the press release, "The Company's financial results and guidance may be subject to change based on the outcome of the Audit Committee investigation."

Fourth-quarter results were good, with a 9.6% revenue increase and 64% gain in non-GAAP EPS beating analysts' estimates. But compounding investor worry was unexpectedly weak forward guidance, calling for flat revenue growth for both Q1 and 2019 and a 7% drop in EPS for the full year, all of which was below Wall Street expectations.

It's hard to imagine a worse way to deliver bad news. Not only were analysts left wondering what the impact of the audit would be -- but given a hint that it could result in a restatement of results -- they had no way of asking about the puzzling outlook. It's not surprising that the stock was downgraded by multiple analysts today and investors headed for the exits.

Jim Crumly owns shares of Nvidia. The Motley Fool owns shares of and recommends Nvidia. The Motley Fool has a disclosure policy.

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Stocks Mentioned

NVIDIA Corporation Stock Quote
NVIDIA Corporation
NVDA
$187.09 (4.28%) $7.67
NortonLifeLock Inc. Stock Quote
NortonLifeLock Inc.
NLOK
$24.19 (0.58%) $0.14
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$33,761.05 (1.27%) $424.38
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,280.15 (1.73%) $72.88
iShares Trust - iShares Nasdaq Biotechnology ETF Stock Quote
iShares Trust - iShares Nasdaq Biotechnology ETF
IBB
$132.52 (0.94%) $1.23
The Select Sector SPDR Trust - The Technology Select Sector SPDR Fund Stock Quote
The Select Sector SPDR Trust - The Technology Select Sector SPDR Fund
XLK
$150.61 (1.99%) $2.94

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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