Editor’s note: This article was updated on May 5 to reflect that Zscaler (NASDAQ:ZS) closed up on Wednesday, May 4.
Cybersecurity stocks were in focus on Wednesday with quarterly results just around the corner. CrowdStrike (NASDAQ:CRWD), Zscaler (NASDAQ:ZS) and Fortinet (NASDAQ:FTNT) recovered from intraday losses. Palo Alto Networks (NASDAQ:PANW) was not so fortunate, closing down slightly.
So what is going on with cybersecurity stocks today?
It seems there are a few catalysts. Fortinet reported its Q1 results after the market closed on Wednesday. Its earnings per share of 94 cents and revenue of $954.8 million beat estimates. Although its current outlook for the second quarter misses consensus estimates, it seems investors are shrugging that off.
Additionally, Wall Street is gearing up for financial results from PANW and CRWD.
CrowdStrike said it would report earnings for its fiscal first quarter of 2023, which ended on April 30, on June 2 of this year. Investors are likely encouraged after CRWD stock handily beat estimates for its fiscal Q4 2022. Palo Alto will report its fiscal third quarter results on May 19.
Fed Rate Hike Catalyzes Cybersecurity Stocks
While earnings are certainly in focus, investors should also note the pressure the Federal Reserve put on the stock market today. Tech stocks — including cybersecurity firms — struggled in the first part of the day. That changed approaching the closing bell, with the S&P 500 and the Nasdaq each closing up about 3%. It seems investors are reacting positively to news the Fed will raise interest rates by 50 basis points.
Indeed, Fed Chair Jerome Powell announced the Fed will raise interest rates by 50 basis points, the biggest hike in more than two decades. However, Powell also assured investors the Fed was not “actively considering” larger rate hikes. Previously, some investors were worried a 75-basis-points hike was on the horizon.
The news comes as a general bullish signal for the markets as a whole as the Fed combats inflation, but could be considered a bearish indicator for certain high-growth sectors hurt by the increased borrowing rates. This is likely part of the story behind the volatility in cybersecurity stocks today.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
