Market Snapshot
| Dow | 44705.53 | -76.47 | (-0.17%) | | Nasdaq | 19480.91 | +76.96 | (0.40%) | | SP 500 | 6049.88 | +2.73 | (0.05%) | | 10-yr Note | -2/32 | 4.22 |
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| | NYSE | Adv 1103 | Dec 1605 | Vol 948 mln | | Nasdaq | Adv 1612 | Dec 2685 | Vol 6.0 bln |
Industry Watch
| Strong: Communication Services, Information Technology, Health Care, Energy |
| | Weak: Industrials, Financials, Consumer Staples, Consumer Discretionary, Materials |
Moving the Market
-- Not a lot of conviction after record highs for the S&P 500 and Nasdaq Composite following solid November
-- Valuation concerns keeping buying in check, yet upside momentum keeping selling in check
-- Gains in mega caps limiting downside moves
| Closing Summary
03-Dec-24 16:30 ET
Dow -76.47 at 44705.53, Nasdaq +76.96 at 19480.91, S&P +2.73 at 6049.88
[BRIEFING.COM] The S&P 500 (+0.1%) and Nasdaq Composite (+0.4%) moved further into record territory. There wasn't a lot of conviction behind the upside moves, which were driven largely by mega cap gains, and the overall vibe in the market was more negative. The Dow Jones Industrial Average (-0.2%) settled slightly lower than yesterday while the Russell 2000 underperformed, dropping 0.7%.
Apple (AAPL 242.65, +3.06, +1.3%) and Meta Platforms (META 613.65, +20.82, +3.5%), which hit fresh 52-week highs, were top performers from the mega cap space, along with Amazon.com (AMZN 213.44, +2.73, +1.3%), NVIDIA (NVDA 140.26, +1.63, +1.2%), and Eli Lilly (LLY 813.33, +13.53, +1.7%).
Tesla (TSLA 351.42, -5.67, -1.6%) lagged its mega cap peers, settling lower in response to CEO Elon Musk's pay package getting rejected by a Delaware judge, according to Bloomberg, and after China-produced electric vehicle sales fell 4.3% in November, according to Reuters.
Gains in some of the aforementioned names propelled their respective S&P 500 sectors to close higher. The communication services (+1.1%), information technology (+0.6%), and consumer discretionary (+0.1%) sectors were alone in the green at the close while the remaining eight sectors registered losses ranging from 0.1% to 0.9%.
Treasuries settled mixed, keeping buying in check in equities. The 10-yr yield, which hit 4.17% earlier, settled three basis points higher than yesterday at 4.22%. The increase in selling followed the JOLTS - Job openings report, which totaled 7.744 million in October, up from a revised count of 7.372 million in September (from 7.443 million). The 2-yr yield declined three basis points to 4.17%.
- Nasdaq Composite: +29.8%
- S&P 500: +26.8%
- S&P Midcap 400: +20.4%
- Russell 2000: +19.2%
- Dow Jones Industrial Average: +18.6%
Wednesday's calendar features the following economic data:
- 7:00 ET: Weekly MBA Mortgage Index (prior 6.3%)
- 8:15 ET: November ADP Employment Change (Briefing.com consensus 170,000; prior 233,000)
- 10:00 ET: November ISM Non-Manufacturing Index (Briefing.com consensus 55.5%; prior 56.0%)
- 10:30 ET: Weekly crude oil inventories (prior -1.84 mln)
Treasuries settle mixed
03-Dec-24 15:35 ET
Dow -45.99 at 44736.01, Nasdaq +50.22 at 19454.17, S&P +2.60 at 6049.75
[BRIEFING.COM] The major indices remain near session highs ahead of the close.
The 10-yr yield settled three basis points higher at 4.22% and the 2-yr yield dropped three basis points to 4.17%.
Wednesday's calendar features the following economic data:
- 7:00 ET: Weekly MBA Mortgage Index (prior 6.3%)
- 8:15 ET: November ADP Employment Change (Briefing.com consensus 170,000; prior 233,000)
- 10:00 ET: November ISM Non-Manufacturing Index (Briefing.com consensus 55.5%; prior 56.0%)
- 10:30 ET: Weekly crude oil inventories (prior -1.84 mln)
Earnings reports after the close
03-Dec-24 15:00 ET
Dow -54.58 at 44727.42, Nasdaq +53.25 at 19457.20, S&P +2.88 at 6050.03
[BRIEFING.COM] The S&P 500 (+0.1%) and Nasdaq Composite (+0.3%) trade at or near session highs.
Salesforce (CRM 330.11, -0.90, -0.3%), Marvell (MRVL 96.47, -0.39, -0.4%), Pure Storage (PSTG 53.45, +0.41, +0.8%), Okta (OKTA 80.93, +0.07, +0.1%), and others report earnings after the close. Looking ahead, Dollar Tree (DLTR 73.44, +0.62, +0.9%), Hormel Foods (HRL 32.01, -0.13, -0.4%), Chewy (CHWY 34.01, +0.37, +1.1%), Campbell Soup (CPB 46.65, -0.58, -1.3%), and others report earnings ahead of Wednesday's open.
Elsewhere, the 10-yr yield hit 4.22%.
Palantir higher after earning FedRAMP High Authorization, Seagate dips in S&P 500 after warning
03-Dec-24 14:30 ET
Dow -60.32 at 44721.68, Nasdaq +30.00 at 19433.95, S&P -1.22 at 6045.93
[BRIEFING.COM] The S&P 500 (-0.02%) is narrowly lower on Tuesday afternoon.
Elsewhere, S&P 500 constituents Palantir Technologies (PLTR 71.18, +4.79, +7.21%), Axon (AXON 669.00, +32.61, +5.12%), and Molina Healthcare (MOH 313.61, +11.74, +3.89%) dot the top of the standings. PLTR leads after announcing it achieved FedRAMP High Authorization, while AXON caught a morning upgrade to Overweight at Morgan Stanley citing durable growth, strong police tech budgets, and AI adoption potential.
Meanwhile, Seagate Tech (STX 98.17, -4.99, -4.84%) is underperforming, weaker after announcing a Q3 revenue impact of $200 mln due to certain production delays.
Gold slightly higher on Tuesday
03-Dec-24 14:00 ET
Dow -92.29 at 44689.71, Nasdaq +23.71 at 19427.66, S&P -3.49 at 6043.66
[BRIEFING.COM] The tech-heavy Nasdaq Composite (+0.12%) is up about 23 points on Tuesday afternoon.
Gold futures settled $9 higher (+0.3%) to $2,667.50/oz, allowed higher by a modestly weaker greenback as well as split action in the equity market.
Meanwhile, the U.S. Dollar Index is down about -0.3% to $106.14.
Honeywell's guidance cut keeps shares grounded despite signing huge deal with Bombardier (HON)
One of the main megatrends that Honeywell (HON) has identified as a focal point under its new simplified business structure is the future of aviation and the industrial company took a big step in acting on that secular trend today. Specifically, HON announced a new deal with business jet manufacturer Bombardier (BDRBF) in which the two companies will develop advanced technology that will facilitate upgrades for existing and future Bombardier jets, while they also work together to certify HON's JetWave X high-speed in-flight connectivity product.
- The partnership should be quite lucrative for HON in the long-run -- the company estimates the deal to be worth $17.0 bln over its lifespan -- but not before some initial turbulence shakes its financials. Investments in research & development will be required as HON develops new products for avionics, propulsion, and satellite communications, negatively impacting sales, margins, EPS, and free cash flow.
- For Q4, the company expects to take a $400 mln hit on the top-line, while adjusted EPS is reduced by $0.47. HON's FY24 free cash flow guidance was also cut by $500 mln to $4.6-$4.9 bln.
- This guidance cut comes on the heels of HON's mixed FY24 guidance in its Q3 earnings report back on October 24. While HON raised its EPS outlook, it lowered its sales forecast to reflect a slower recovery in industrial automation, as well as more tempered expectations surrounding the aerospace and energy markets in Q4.
- HON's struggles and underperforming stock (shares are by just 7% year-to-date) have caught the attention of activist investment firm Elliott Investment Management, which has amassed a $5.0 bln stake in the company. On November 12, Elliott sent a letter to HON's Board of Directors, pushing the company to pursue a separation of its Aerospace and Automation businesses, taking a page out of General Electric's playbook
- Since separating its Aerospace and Defense business from its Energy and Power businesses on April 2, 2024, GE Aerospace (GE) has jumped by 32%, while GE Vernova (GEV) has soared by 135%. While a similar outcome for HON is not guaranteed, there's certainly an argument to be made that a split would be well received by the market.
- For its part, HON has been working to simplify and streamline its business. On November 22, the company announced the divestiture of its Personal Protective Equipment (PPE) business for $1.325 bln, which was preceded by an October 8 announcement to spin-off its Advanced Materials business into a new publicly traded company in 2025 or early 2026. The Advanced Materials unit, which is part of HON's Energy and Sustainability Solutions segment, manufactures additives and polymers that are used in a wide variety of products, such as plastics, paints, and asphalt.
The main takeaway is that the new partnership with Bombardier represents a meaningful growth catalyst in the long-term, but another downward revision to HON's FY24 outlook is clouding over the positive aspects of the deal.
Zscaler's guidance underwhelms while CFO departure adds some uncertainty, sending shares lower (ZS)
Following in the footsteps of fellow cybersecurity companies Palo Alto Networks (PANW) and CrowdStrike (CRWD), Zscaler (ZS) reported strong quarterly results that exceeded EPS and revenue estimates but offered guidance that failed to live up to the market's lofty expectations. Adding to investors' dismay, the company also disclosed that longtime CFO Remo Canessa plans to retire after serving in that role since 2017. Given that ZS is still working through a new go-to-market sales strategy amid a challenging and highly competitive market, the timing of departure is creating some unease, especially surrounding the company's 2H25 guidance.
- During last night's Q1 earnings call, ZS reiterated that it still expects scheduled contracted billings growth of just 7% in 1H25, with growth accelerating meaningfully to 23% in 2H25. Attaining that jump in growth will be a tough task for whoever the incoming CFO will be. However, there are a few factors giving ZS confidence that it will reach its target. Specifically, the company is seeing strong signs of interest for its new AI offerings, it has a healthy and growing pipeline, and the ramp up of its sales capacity has accelerated.
- Still, the company's updated outlook for FY25 fell flat with investors who were looking for more. While ZS nudged its EPS and revenue guidance higher to $2.94-$2.99 and $2.623-$2.643 bln, respectively, the amount it increased its FY25 forecast by is essentially the same amount it beat Q2 EPS and revenue estimates by. In other words, the company's outlook for the remainder of FY25 is merely in line with analysts' expectations.
- Mr. Canessa commented that customer scrutiny surrounding large deals continued in Q1, which likely contributed to the company's cautious outlook for FY25. Furthermore, ZS is still transitioning its go-to-market strategy to account-centric selling as opposed to opportunity-based selling -- a shift it began in November 2023. Although the company has made significant progress and is starting to see strong customer engagements, better close rates, and a higher quality pipeline, its sales productivity isn't as effective as it can be.
- The company is also excited about its AI growth opportunities as it launches new innovations and products. For example, Zscaler for Copilots is helping customers to securely adopt AI apps such as ChatGPT, Microsoft Copilot, and GitHub Copilot. Additionally, the company's ZDX Copilot, its automated digital experience tool, is contributing to larger deal wins.
While ZS delivered another solid quarterly performance, especially in terms of upsells and winning larger deals ($1.0+ mln ARR customers grew 25% yr/yr), its guidance underwhelmed investors and the unexpected retirement of CFO Remo Canessa is adding another layer of uncertainty.
Credo Technology surges as OctQ marked its long-awaited revenue inflection point (CRDO)
Credo Tech (CRDO +43%) is surging following its Q2 (Oct) report last night. This supplier of interconnection gear (both copper and optical) in the data center has been saying for several quarters that it had expected an inflection point in revenue during the second half of FY25. Credo said on its call last night that this inflection point has arrived. It is experiencing greater demand than initially projected, driven by AI deployments and deepening customer relationships.
- Credo reported its typical modest EPS upside, but revenue grew a robust 63.6% yr/yr and 20.6% sequentially to $72 mln, which was nicely above the high end of its $63-68 mln prior guidance. What jumped out even more was its huge Q3 (Jan) revenue guidance at $115-125 mln, which was way above analyst expectations. We think the guidance is largely responsible for today's outsized move.
- The company describes Q2 as its most successful to date with record revenue across its three main product lines: AECs (Active Electrical Cables), optical DSPs, and line card re-timers. Credo explained that AI cluster architectures are enabling increasingly dense and scalable clusters. Addressing or eliminating link flaps, which are momentary disruptions in network links, are essential. As such, high-speed connectivity gear is crucial. Credo says its AECs excel in maintaining signal integrity, optimizing power efficiency and delivering unparalleled reliability as data speeds continue to increase.
- Starting with AECs, Credo reported record revenue in Q2, driven by strong demand from its top two customers and an emerging hyperscaler. Credo believes AEC technology is still in the early stages of widespread adoption and that Credo is well-positioned as the market leader. The company explains that AECs outperform laser-based optics, offering lower power, reduced cost, and maybe most importantly, greater reliability.
- Credo says its 2H revenue growth will be driven by AECs with continued growth beyond FY25 as market adoption expands across the data center ecosystem. Its optical DSP segment also posted record revenue, fueled by a broad range of 50-gig and 100-gig per lane offerings. Credo is seeing robust industry demand. Looking ahead, Credo is enthusiastic about the potential of its 200-gig per lane technology.
Overall, this was an impressive quarter for Credo, especially the Q3 guidance. Credo's talk about revenue finally hitting that long-talked-about inflection point is helping propel the stock as well. Credo is not one of the first names investors think about as a play on the buildout of AI infrastructure at data centers. However, it is clearly benefitting, especially its AEC segment. While not directly involved in the AI servers, having reliable connectivity gear between the servers is extremely important for them to work at their best.
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