Market Snapshot
briefing.com
| Dow | 33891.94 | -220.33 | (-0.65%) | | Nasdaq | 13521.45 | -128.97 | (-0.94%) | | SP 500 | 4347.35 | -35.43 | (-0.81%) | | 10-yr Note | -53/32 | 4.63 |
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| | NYSE | Adv 709 | Dec 2088 | Vol 899 mln | | Nasdaq | Adv 1124 | Dec 3141 | Vol 5.3 bln |
Industry Watch
| Strong: -- |
| | Weak: Health Care, Consumer Discretionary, Real Estate, Consumer Staples, Utilities, Materials, Financials |
Moving the Market
-- Extended winning streak for S&P 500 (eight) and Nasdaq (nine) fuels expectations for consolidation period
-- Reacting to a disappointing 30-yr bond auction and commentary from Fed Chair Powell
-- Digesting a big batch of earnings
| Closing Summary
09-Nov-23 16:30 ET
Dow -220.33 at 33891.94, Nasdaq -128.97 at 13521.45, S&P -35.43 at 4347.35
[BRIEFING.COM] Today's trade looked similar to recent sessions in the early going. The major indices traded in narrow ranges as participants awaited the results of today's $24 billion 30-yr bond auction at 1:00 p.m. ET followed by Fed Chair Powell's IMF panel discussion at 2:00 p.m. ET. Selling picked up in response to those events, which left the major indices near their worst levels of the day at the close.
Stocks took a sharp turn lower and Treasury yields turned higher immediately after results from today's $24 billion 30-yr bond auction showed much weaker demand than sales of 3- and 10-yr notes over the past two days. The 10-yr note yield, at 4.57% just before the results, settled at 4.63%, up 11 basis points from yesterday's settlement, and the 30-yr bond yield, at 4.72% just before the results, settled at 4.78%, up 12 basis points from yesterday's settlement.
The major indices continued to decline during Fed Chair Powell's IMF panel discussion. His comments largely reiterated what he had to say at his post-FOMC press conference on November 1.
Just about everything, including the mega caps that had been supporting index gains this week, relented to a pullback that many thought was overdue. Including today's losses, the S&P 500 and Nasdaq Composite are still up 3.7% and 5.2%, respectively, so far in November.
The Dow Jones Industrial Average logged the smallest decline among the major indices thanks in part to a big gain in Disney (DIS 90.34, +5.84, +6.9%) after reporting earnings.
All 11 S&P 500 sectors closed in the red with losses ranging from 0.2% (industrials) to 2.1% (health care).
- Nasdaq Composite: +29.2% YTD
- S&P 500: +13.2% YTD
- Dow Jones Industrial Average: +2.3% YTD
- S&P Midcap 400: -0.9% YTD
- Russell 2000: -4.2% YTD
Reviewing today's economic data:
- Weekly Initial Claims 217K (Briefing.com consensus 220K); Prior was revised to 220K from 217K; Weekly Continuing Claims 1.834 mln; Prior was revised to 1.812 mln from 1.818 mln
- The key takeaway from the report is that continuing jobless claims have reached their highest level since April, lending some resonance to the idea that there has been some softening in what is still a generally tight labor market.
Friday's economic calendar features:
- 10:00 ET: Preliminary November University of Michigan Consumer Sentiment (Briefing.com consensus 63.7; prior 63.8)
- 14:00 ET: October Treasury Budget (prior -$171.0 bln)
Treasuries settle with losses after disappointing 30-yr bond auction
09-Nov-23 15:30 ET
Dow -230.56 at 33881.71, Nasdaq -125.65 at 13524.77, S&P -34.02 at 4348.76
[BRIEFING.COM] The major indices are moving sideways near session lows.
The 2-yr note yield climbed eight basis points to 5.01% and the 10-yr note yield jumped 11 basis points to 4.63%.
Friday's economic calendar features:
- 10:00 ET: Preliminary November University of Michigan Consumer Sentiment (Briefing.com consensus 63.7; prior 63.8)
- 14:00 ET: October Treasury Budget (prior -$171.0 bln)
Energy complex futures settle mixed
09-Nov-23 15:05 ET
Dow -215.65 at 33896.62, Nasdaq -128.65 at 13521.77, S&P -35.64 at 4347.14
[BRIEFING.COM] Stocks continue to decline. The major indices all trade near session lows.
Energy complex futures settled mixed. WTI crude oil futures rose 0.2% to $75.59/bbl and natural gas futures fell 1.5% to $3.33/mmbtu.
The S&P 500 energy sector (-0.1%) sports the slimmest loss among the 11 sectors.
Transdigm outperforming in S&P 500 after earnings, M&A
09-Nov-23 14:30 ET
Dow -168.55 at 33943.72, Nasdaq -71.84 at 13578.58, S&P -22.89 at 4359.89
[BRIEFING.COM] The S&P 500 (-0.52%) is now narrowly in second place, having moved essentially sideways over the prior half hour, laregly unphased after Fed Chair J. Powell released comments ahead of his speaking engagement at the IMF; among the key points from Mr. Powell's comments he noted that the Fed was not confident it had achieved sufficiently restrictive policy and that, if it becomes appropriate to tighten further, the Fed will not hesitate.
Elsewhere, S&P 500 constituents Alexandria RE (ARE 94.75, -5.19, -5.19%), FMC (FMC 49.82, -2.60, -4.96%), and Eli Lilly (LLY 592.55, -26.58, -4.29%) dot the bottom of of the standings. REITs, including ARE, are weaker on Thursday in part due to today's strength in yields, while LLY gives back some of yesterday's Zepbound approval-related strength.
Meanwhile, Transdigm Group (TDG 970.00, +74.79, +8.35%) is atop the S&P after earnings, Electron Device deal.
Gold snaps recent losing streak on Thursday
09-Nov-23 14:00 ET
Dow -133.28 at 33978.99, Nasdaq -55.55 at 13594.87, S&P -19.32 at 4363.46
[BRIEFING.COM] With about two hours to go on Thursday the tech-heavy Nasdaq Composite (-0.41%) is now in second place.
Gold futures settled $12.00 higher (+0.6%) to $1,969.80/oz, snapping the recent losing streak which saw the yellow metal down more than -2% week-to-date heading into today's trading.
Meanwhile, the U.S. Dollar Index is narrowly higher to $105.61.
Page One
Last Updated: 09-Nov-23 08:59 ET | Archive
A resilient "market"
There are the mega-cap stocks this week and then there is everything else. That might be an oversimplification, yet it is a fair representation of what has been driving "the market" this week. The market-cap weighted S&P 500 is up 2.2% and the equal-weighted S&P 500 is down 0.9%.
The divergence continued yesterday along with the winning streaks for the market-cap weighted S&P 500 (eight sessions) and the Nasdaq Composite (nine sessions). Anyone sitting in a market-cap weighted index fund shouldn't have any complaints, because everything is adding up in their favor even if there is a good bit of subtraction taking place beneath the surface.
Still, things look a lot more pleasing from a market-cap weighted and equal-weighted index perspective from only a few weeks ago. A drop in market rates, which has been sustained for the most part this week, has acted as a salve.
The 10-yr note yield is up two basis points to 4.54% this morning, but well below the 5.02% yield that was reached only a few weeks ago, and that is after digesting $88 billion in debt issuance this week, including yesterday's $40 billion 10-yr note auction. There is a $24 billion 30-yr bond auction today that will complete the issuance this week. Results will be announced at 1:00 p.m. ET.
Shortly after that, Fed Chair Powell will be participating in an IMF panel discussion at 2:00 p.m. ET. The market will be listening intently then to hear if Mr. Powell says anything surprising about the monetary policy outlook.
In the meantime, there is plenty of news for market participants to digest.
- Dow component Walt Disney (DIS) is up 4.0% after posting better-than-expected fiscal Q4 earnings and Disney+ subscription numbers, and increasing its cost reduction plan by $2 billion to roughly $7.5 billion.
- China's October CPI was down 0.2% year-over-year (prior 0.0%) and its PPI was down 2.6% year-over-year (prior -2.5%).
- A tentative agreement has been reached that ends the actors' strike against the studios.
- HSBC initiated coverage of Tesla (TSLA) with a Reduce rating and $146 price target.
- There is chatter about Congress not being able to reach an agreement on a continuing resolution that will keep the government funded after the current continuing resolution expires November 17.
- Initial jobless claims for the week ending November 4 decreased by 3,000 to 217,000 (Briefing.com consensus 220,000). Continuing jobless claims for the week ending October 28 increased by 22,000 to 1.834 million.
- The key takeaway from the report is that continuing jobless claims have reached their highest level since April, lending some resonance to the idea that there has been some softening in what is still a generally tight labor market.
One thing that jumps out, however, is that "the market" still isn't showing any signs of caving to selling pressure.
Currently, the S&P 500 futures are up 11 points and are trading 0.3% above fair value, the Nasdaq 100 futures are up 13 points and are trading 0.1% above fair value, and the Dow Jones Industrial Average futures are up 100 points and are trading 0.3% above fair value.
-- Patrick J. O'Hare, Briefing.com
Affirm's back-to-back quarters of accelerating growth in Q1 triggers massive buying interest (AFRM)
Better-than-expected headline results on accelerating gross merchandise volume (GMV) in Q1 (Sep) are igniting significant buying interest in shares of Affirm (AFRM +18%). The buy-now-pay-later company also projected Q2 revs in-line with consensus, with the midpoint exceeding forecasts. With short interest of 20% leading into its SepQ report, these results were sufficient to trigger a short squeeze, a post-earnings occurrence that has taken hold for two consecutive quarters.
Closely-tracked metrics shined compared to Q4 (Jun), including a narrowing net loss of $(0.57) per share, accelerating revenue growth of 37.3% yr/yr to $496.55 mln, and a second straight quarter of improving GMV growth, expanding by 28% yr/yr to $5.6 bln.
As interest rates remain elevated while inflationary pressures drive a severe slowdown in discretionary spending, how has AFRM delivered back-to-back quarters of impressive results?
- Categories that were significant decliners over the past several quarters, such as sporting goods, home & lifestyle, and personal electronics, have either stopped enduring such pronounced declines or returned to more flattish growth.
- Meanwhile, inflation is acting as a double-edged sword. While, on the one hand, inflation's forces erode consumers' purchasing power, reducing their overall spending, it also hikes the costs of everyday items. As prices swell, consumers may opt for the buy-now-pay-later option, benefiting AFRM.
- AFRM is also present across some of the largest platforms in e-commerce, such as Shopify (SHOP), which saw accelerating volumes once again in SepQ. The breadth of exposure carries comprehensive category coverage, providing a healthy degree of product diversity.
- Speaking of which, services have gained momentum at the expense of goods. With less disposable income after higher interest payments and inflation, individuals have shifted their tastes toward experiences such as travel. While some travel-based companies like Airbnb (ABNB) and Booking Holdings (BKNG) endured selling pressure following their Q3 earnings reports, the theme was clear: travel demand remains robust. Vacation packages, lodging accommodations, car rentals, etc., tend to get pricey, acting as another nudge toward buy-now-pay-later.
There were still some concerning items from AFRM's report, including its DecQ GMV guidance of $6.70-6.90 bln. This range represents a deceleration from SepQ, reflecting a soft holiday shopping season, a development hit on by eBay (EBAY) earlier this week. AFRM also saw a modest seasonal increase in delinquencies, albeit not necessarily a weak point, but something to keep an eye on, especially as student loan payments resume in the U.S.
After two straight quarters of uplifting results, AFRM is beginning to show signs of stabilization. Shares are still down over 80% from all-time highs in late 2021. However, finding success despite numerous hurdles this year is an encouraging sign.
Walt Disney gets some magic back as turnaround may have storybook ending after all (DIS)
During Walt Disney's (DIS) Q4 earnings call last night, CEO Bob Iger proclaimed that the company is now moving onto the next phase of its turnaround plan as it shifts from a period of fixing to a period of building. With each of DIS's three operating segments -- Entertainment, Sports, and Experiences -- achieving significant yr/yr growth in operating income, facilitating a comfortable EPS beat, that declaration certainly has merit.
- In terms of profitability, no business needed more fixing that the Direct-to-Consumer (DTC) streaming business, which is now part of the Entertainment segment. Through a combination of cost-cutting measures and price increases for Disney+, DTC shaved nearly $1.0 bln off its operating losses from a year ago. With the operating loss shrinking to $(420) mln in 4Q23, DIS remains confident that the streaming business will reach profitability in 4Q24.
- Those price increases for Disney+ had slowed subscriber growth to a standstill, but the streaming platform experienced a rebound this quarter. After Disney+ Core subscribers increased by just 1% last quarter to 105.7 mln, subscribers grew by a better-than-expected 7% in Q4 to 112.6 mln.
- However, interim CFO Kevin Landsberry reminded market participants that subscriber growth won't necessarily be linear as DIS focuses on profitable growth for the streaming business.
- On that note, DIS expects Disney+ Core subscribers to decline slightly in Q4 as churn ticks higher following another price increase, before rebounding again later in the fiscal year.
- Another key pillar of DIS's growth strategy revolves around ESPN and the company's plan to transform it into the preeminent sports streaming platform. While DIS's other cable channels (ABC, FX, and National Geographic) continue to struggle due to the ongoing cord-cutting trend, ESPN has performed relatively well under difficult circumstances.
- In Q4, Linear Networks revenue declined by 9% to $2.6 bln, while the Sports segment -- which is essentially just ESPN -- held revenue steady on a yr/yr basis at $3.9 bln.
- Furthermore, in both FY22 and FY23, ESPN generated positive revenue and operating income growth against the backdrop of significant linear cable declines across the industry.
- Mr. Iger has made it clear that the cable TV business is no longer a core asset for DIS. Accordingly, the company has conducted a strategic review of the business and has concluded that there are substantial cost opportunities remaining.
- Ideally, Mr. Iger would probably like to divest the cable TV business, but a prospective buyer has yet to materialize. In the meantime, DIS will remove more costs, enabling it to increase its company-wide cost-cutting target by $2.0 bln for a total of $7.5 bln.
- Turning to the Experiences segment, revenue grew by 13% to $8.16 bln and operating income jumped by 31% to $1.76 bln. Similar to last quarter, DIS's international parks stole the show with revenue surging by 55% with each park generating yr/yr growth.
- One blemish is that Walt Disney World saw a decline in results again, partly due to inflationary impacts and unfavorable yr/yr comparisons as it laps the 50th Anniversary Celebration from last year. However, we also believe that the more broad-based slowdown in domestic leisure travel is also playing a role.
Although DIS hasn't fully turned the corner yet, its turnaround is starting to gain more traction. As the streaming business marches towards profitability, and as ESPN eventually transitions into its next streaming platform, DIS's turnaround should begin to look even more magical.
Twilio trades higher following strong Q3 upside as its business shows signs of stabilization
Twilio (TWLO +3%) is nicely higher today after reporting Q3 results last night. The company beat handily on EPS while the revenue upside was more modest. What really stood out to us was the guidance. Twilio guided Q4 EPS well ahead of analyst expectations with in-line revenue. That was a notable improvement from last quarter when TWLO provided more modest upside EPS guidance, and actually guided below consensus for revs.
- Twilio had prepared investors on its Q2 call that its Q3 revenue growth rate would be negatively impacted by headwinds from customers in the crypto industry. While the impact has started to moderate, Twilio still expects about 200 bps of crypto-related revenue headwinds in Q4. That's an improvement from a 370 bps impact in Q2 and a 290 bps impact in Q3.
- Communications segment revenue was $907 mln, up 5% yr/yr, while Data & Applications segment revenue grew 9% yr/yr to $127 mln. The Communications segment has been a bit soft recently as the usage-based nature of this business makes it sensitive to macro conditions. However, the good news was TWLO saying on the call last night that it continued to see stabilization in volumes across its usage-based products throughout the quarter.
- On the D&A side, the company saw a modest improvement in bookings in Q3 but they are still not yet where the company wants them to be. While D&A is a small portion of the business today, Twilio believes in the segment and its foundations for AI, in particular, are key assets for Twilio's future. The company saw a number of exciting customer wins across both Flex and Segment in the quarter.
- However, Twilio concedes it has seen increased churn and contraction in D&A, reflecting the current dynamic environment and issues some of its customers are experiencing in growth with their businesses. Despite this, Twilio is still landing exciting new customer deals across both Flex and Segment. It saw several Flex customer wins this quarter, including a competitive 7-figure deal.
Overall, this was a solid report for Twilio. The numbers were impressive, but it was also good to hear management talk about how its business is stabilizing. Finally, the stock has been trending sideways to lower for much of 2023. We think investors want to see real signs of improvement before pushing the stock higher. This quarter was a good start, but investors will want to see continued improvement.
Arm Holdings slips below its IPO price as pricey valuation weighs following mild guidance (ARM)
In its first earnings report since going public in September, Arm Holdings (ARM -6%) is receiving the cold shoulder from investors today despite registering decent-sized earnings and revenue upside in Q2 (Sep). The designer of chips used across the personal electronic market (particularly mobile devices) also issued solid guidance, predicting Q3 (Dec) and FY24 (Mar) figures in-line with consensus.
So why are shares selling off? Guidance may have matched analyst expectations, but management's commentary added uncertainty, potentially making its forecasts relatively flimsy. ARM noted uncertainty related to the exact timing of some deals. Furthermore, while the semiconductor industry is showing signs of recovery, benefiting ARM's royalty revenue, the trajectory of said recovery is unclear, as the industry remains vulnerable to macroeconomic changes.
ARM's remarks are not drastically different from those expressed by its peers. For instance, Taiwan Semi's (TSM) customers remained cautious about adding too much inventory during Q3, reflecting a weak macroeconomic environment. Meanwhile, Intel's (INTC) CPU segment still saw a yr/yr revenue decline in Q3. However, its peers still touched on uplifting trends, namely, recovering PC and personal electronics markets. INTC's declining CPU business represented a considerable turn from the previous quarter. TSM observed signs of stabilization in the PC and smartphone markets. Also, Advanced Micro's (AMD) CPU business exploded in Q3, further underpinning a broader recovery.
- ARM's performance was still solid in SepQ, delivering adjusted EPS of $0.36 and revenue growth of 27.9% to $806 mln. Multiple high-value license agreements leading to a 106% jump in license revenue and market share gains driving a double-digit increase in royalty revs helped prop up ARM's solid overall growth.
- Thanks to its robust licensing revenue, margins remained impressive, boasting non-GAAP operating margins of 47.3% during the quarter.
- Looking ahead, ARM predicts Q3 adjusted EPS of $0.21-0.28 and revs of $720-800 mln, both representing a slight dip sequentially. For FY24, ARM expects adjusted EPS of $1.00-1.10 and revs of $2.96-3.08 bln, the midpoints of which both exceeded analyst forecasts.
While ARM is still overall bullish on long-term trends, especially after delivering better-than-expected headline results in SepQ, by maintaining a relatively conservative outlook for the upcoming quarter and the rest of its fiscal year, investors are finding it difficult to justify the company's comparably pricey valuation, sparking today's downbeat reaction. ARM trades at 44x forward earnings, significantly more than AMD at 31x, NVIDIA (NVDA) at 30x, and INTC at 21x. The same is true when looking at ARM's forward sales, currently at 16x, above arguably expensive NVDA at 15x.
There were still encouraging developments in the pipes for ARM; the company mentioned how it is central to the acceleration of AI workloads, with demand for the technology remaining buoyant. However, ARM may stay under selling pressure for the next several months without more upbeat guidance to reflect these trends. Shares are now modestly below their IPO price of $51.0 and roughly 25% below highs reached the day after going public.
Robinhood Markets misses the mark in Q3 as revs fall short of analyst estimates (HOOD)
Robinhood Markets (HOOD -14%) missed the mark in Q3, delivering a GAAP net loss after achieving its first quarter of GAAP profitability in Q2 while falling short of analysts' revenue expectations. While a reversion back to operating in the red after registering a major accomplishment last quarter can incite selling pressure, HOOD's revenue miss and a few other blunders likely contribute most to today's sell-the-news reaction. Also, HOOD's net loss of $0.09 per share was fueled by a previously disclosed one-time regulatory accrual. Plus, it still topped analyst forecasts.
- HOOD's top line did expand by 29.4% yr/yr to $467 mln. However, this not only represented a considerable deceleration from the +52.8% growth in Q2, but it also marked the company's first revenue miss since 4Q22.
- A component of HOOD's lackluster revenue growth was a relatively steep decline in monthly active users (MAUs), which contracted by 16% yr/yr and 5% sequentially to 10.3 mln. While the sequential decline was less pronounced than the 8% drop posted in Q2, it still translated to HOOD's second straight quarter of sliding MAUs qtr/qtr, a development not seen since 2022, which was plagued by a significant bear market.
- Alongside weak MAU numbers, transaction-based revenue and seasonally lower proxy revenue were other factors underlying HOOD's revenue miss. Transaction-based revs took a 4% spill sequentially due to lower crypto volumes. Bitcoin dropped around 9% during the quarter, only to spike in October, so Q4 crypto volumes may pick back up.
- On a more uplifting note, net deposits remained buoyant despite a seasonally slow quarter, coming in at $4.0 bln, an 18% annual growth rate. HOOD is also confident in delivering record annual revenue in FY23, while its adjusted EBITDA is on track to be approximately three times greater than its prior record.
- New growth opportunities also remain ripe, particularly surrounding overseas expansion. HOOD is strategizing launches across Europe, launching its brokerage operations in the U.K. in the coming weeks and then crypto trading across the European Union. Meanwhile, Robinhood Gold, its membership program, remains the company's top priority relating to deepening customer relationships. Today, just 6% of HOOD's customers are Gold subscribers, providing plenty of untapped potential in growing this offering.
While slipping back into the red after reaching its first quarter of GAAP profitability is frustrating, it was already anticipated. Conversely, missing revenue expectations was a surprise. With revenue growth a critical aspect of driving profitability, HOOD could be staring at a bumpy path back toward sustaining profitability if this trend continues. With the broader equity markets remaining relatively upbeat throughout Q3, declining MAUs and transaction revs are discouraging and set a gloomy tone if markets begin to reverse.
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