Market Snapshot
| Dow | 42427.74 | -91.90 | (-0.22%) | | Nasdaq | 19460.47 | +61.53 | (0.32%) | | SP 500 | 5970.81 | +0.44 | (0.01%) | | 10-yr Note |
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| | NYSE | Adv 1380 | Dec 1372 | Vol 1.03 bln | | Nasdaq | Adv 2421 | Dec 2042 | Vol 7.74 bln |
Industry Watch
| Strong: Communication Services, Health Care, Materials, Real Estate, Information Technology |
| | Weak: Energy, Consumer Staples, Financials, Utilities, Consumer Discretionary |
Moving the Market
-- Disappointing economic data, including below-consensus ADP Employment Change for May (37,000; Briefing.com consensus 115,000) and May ISM Services (49.9%; Briefing.com consensus 52.0%)
-- Treasuries on the rise, with yields down sharply
-- Relative strength in mega-cap space
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Closing Stock Market Summary
04-Jun-25 16:25 ET
Dow -91.90 at 42427.74, Nasdaq +61.53 at 19460.47, S&P +0.44 at 5970.81
[BRIEFING.COM] The stock market churned, but it did not burn in a session marred by some disappointing economic data and an acknowledgment by President Trump that President Xi is "very tough, and extremely hard to make a deal with."
There was no other context behind the president's remark, as speculation swirled that the two leaders could speak on Friday, but it was enough to cast some doubt on the state of the U.S.-China relationship and where their respective tariff rates and trade restrictions could go.
The market, for the most part, chopped around today in a lightly traded session that lacked conviction on the part of buyers and sellers. Still, the market cap-weighted indices managed to hold their form with the help of some relative strength among the mega-cap stocks, namely Meta Platforms (META 687.95, +21.10, +3.2%), Amazon.com (AMZN 207.23, +1.52, +0.7%), and NVIDIA (NVDA 141.92, +0.70, +0.5%).
Their gains helped mitigate the weakness in CrowdStrike (CRWD 460.56, -28.20, -5.8%) after its earnings report and disappointing revenue guidance and the weakness in Apple (AAPL 202.82, -0.45, -0.2%) after it was downgraded at Needham to Hold from Buy.
Once again, the semiconductor stocks stood out from the crowd, evidenced by the 1.4% gain in the Philadelphia Semiconductor Index. They were an outlier in a hesitant market that was also grappling with growth concerns driven by today's main economic reports.
The ADP Employment Change Report for May indicated that there were only 37,000 jobs added to private-sector payrolls (Briefing.com consensus 115,000) and none for small businesses, which lost 13,000 jobs. That report came out at 8:15 a.m. ET, and it was followed at 10:00 a.m. ET by the ISM Services PMI for May, which printed a contractionary reading (49.9%) for only the fourth time in the last 60 months.
Treasury yields turned lower in the wake of both reports. The 2-yr note yield, at 3.96% just before the ADP release, settled at 3.88%, down eight basis points. The 10-yr note yield, at 4.46% just before the ADP release, settled at 4.36%, down 10 basis points.
The dollar traded lower in conjunction with Treasury yields, but the drop in rates failed to motivate a hot stock market that took a breather in a consolidation trade. Entering today, the S&P 500 was up 23.5% from its April 7 low and trading at 21.6x forward 12-month earnings, which is a 17% premium to its 10-yr average, according to FactSet.
The communication services sector (+1.4%) was the best-performing sector and the only sector up at least 1.0%. The materials (+0.3%) and real estate (+0.3%) sectors were the next best-performing sectors. The energy (-1.9%) and utilities (-1.7%) sectors were today's biggest losers.
- S&P 500: +1.5% YTD
- Nasdaq: +0.8% YTD
- DJIA: -0.3% YTD
- S&P 400: -3.1% YTD
- Russell 2000: -5.9% YTD
Reviewing today's economic data:
- The ISM Services PMI fell to 49.9% in May (Briefing.com consensus 52.0%) from 51.6% in April. The dividing line between expansion and contraction is 50.0%, so the May reading reflects services sector activity pivoting to contraction from growth in the prior month. This is only the fourth time in the last 60 months that the Services PMI has been below 50.0%.
- The key takeaway from the report is that it signaled a worrying mix of a contraction in growth for the largest economic sector and a continued increase in prices. That will be interpreted as a stagflation report (even though the employment index tipped back into an expansion mode). In any case, the overarching message of the report is that growth has slowed amid all the tariff uncertainty.
- ADP said private sector employment increased by 37,000 in May (Briefing.com consensus 115,000) following a downwardly revised 60,000 (from 62,000) in April. The goods-producing sector saw a loss of 2,000 jobs, while the service-providing sector saw an increase of 36,000. Mid-sized firms added 49,000 jobs, but small firms shed 13,000 jobs, and large firms saw a loss of 3,000 jobs.
- The S&P Global US Services PMI checked in at 53.7 versus its prior reading of 50.8.
- The MBA's Mortgage Applications Index was down 3.9% wk/wk, with refinance applications down 4% and purchase applications down 4%.
Mega-cap stocks remain in support position
04-Jun-25 15:30 ET
Dow -13.74 at 42505.90, Nasdaq +78.08 at 19477.02, S&P +9.32 at 5979.69
[BRIEFING.COM] The S&P 500 continues to sport a modest gain, having seen its attempt to reclaim the 6,000 level run into resistance at 5,990.
Once again, the mega-cap stocks have been an influential source of support for the market cap-weighted indices in another session where volume has been running below average. The equal-weighted S&P 500 is flat for the day.
The Vanguard Mega-Cap Growth ETF (MGK) is up 0.4% and trading near its highs for the session, led by Meta Platforms (META 685.49, +18.64, +2.8%) and Amazon.com (AMZN 207.75, +2.04, +1.0%).
Treasury yields drop on growth concerns
04-Jun-25 15:05 ET
Dow -18.46 at 42501.18, Nasdaq +91.21 at 19490.15, S&P +11.88 at 5982.25
[BRIEFING.COM] The major indices are little changed but continue to operate with an air of resilience to selling pressure.
Lower interest rates and the thought of the Fed responding sooner rather than later to signs of a weakening economy have acted as underpinning factors.
The 2-yr note yield, which is sensitive to changes in the fed funds rate, is down eight basis points to 3.88%, while the 10-yr note yield has declined 10 basis points to 4.36%.
Sector action is mixed, with communication services (+1.4%) leading to the upside and energy (-1.8%) leading to the downside.
Stocks hold gains after Beige Book shows slight economic slippage, elevated uncertainty
04-Jun-25 14:30 ET
Dow +40.50 at 42560.14, Nasdaq +75.16 at 19474.10, S&P +13.80 at 5984.17
[BRIEFING.COM] The broader market has held higher ground following the release of the Fed's Beige Book, published at the bottom of the hour; the report across the twelve Federal Reserve Districts indicated that economic activity had declined slightly since the previous report. Half of the Districts reported slight to moderate declines in activity, three Districts reported no change, and three Districts reported slight growth. All Districts reported elevated levels of economic and policy uncertainty, which have led to hesitancy and a cautious approach to business and household decisions. Currently, the S&P 500 (+0.23%) holds firm in second place.
- Among other notable points from the report, employment had been little changed since the previous report. Most Districts described employment as flat, three Districts reported slight-to-modest increases, and two Districts reported slight declines. Many Districts reported lower employee turnover rates and more applicants for open positions. Comments about uncertainty delaying hiring were widespread.
- Some Districts reported layoffs in certain sectors, but these layoffs were not pervasive.
- Prices had increased at a moderate pace since the previous report. There were widespread reports of contacts expecting costs and prices to rise at a faster rate going forward.
- On balance, the outlook remains slightly pessimistic and uncertain, unchanged relative to the previous report. However, a few District reports indicate the outlook has deteriorated while a few others indicate the outlook has improved.
Currently, the yield on the benchmark 10-yr treasury note has held its lines in the last half hour, down about 11 basis points to 4.363%.
Gold slips despite bullish backdrop as traders eye Fed outlook, geopolitical tensions simmer
04-Jun-25 13:55 ET
Dow +61.59 at 42581.23, Nasdaq +72.16 at 19471.10, S&P +14.70 at 5985.07
[BRIEFING.COM] With about two hours to go on the session the tech-heavy Nasdaq Composite (+0.37%) holds a modest lead, this ahead of the release of the Fed's Beige Book, which is due at the top of the hour.
Gold futures settled $20.10 lower (-0.6%) at $3.377.10/oz, driven by expectations of central bank rate cuts and rising geopolitical tensions, particularly between the U.S. and China. Additional support came from strong physical demand and tightening supply in key markets like London and COMEX.
Meanwhile, the U.S. Dollar Index is down -0.5% to $98.73.
Dollar Tree under pressure as tariffs are expected to pressure profits in Q2 (DLTR)
Dollar Tree (DLTR -7%) is under pressure following its Q1 (Apr) earnings report this morning. The dollar store chain beat on EPS and revs. It also reaffirmed FY25 guidance for revenue from continuing operations at $18.5-19.1 bln and reaffirmed full year comps at +3-5%. It also increased adjusted EPS guidance, which is essentially the same net income range as its previous outlook, adjusted to reflect aggressive share repurchases.
- As a quick housekeeping matter, recall that Dollar Tree announced in late March it will sell its Family Dollar business to Brigade and Macellum for just north of $1 bln with net proceeds of approx $800 mln. The deal is expected to close in early summer. The results of Family Dollar have been reclassified as discontinued operations.
- Same-store comps in Q1 increased +5.4%, above prior guidance of +3-5%. Dollar Tree's comp was nicely balanced, with traffic up +2.5% and ticket up +2.8%. Category performance was strong across the board, with its consumables comp +6.4% and discretionary comp +4.6%, its highest discretionary comp since 4Q22. DLTR says its low prices and smaller pack sizes are perfect for families trying to manage a tight household budget, and its expanded assortment is attractive across every income level.
- In recent quarters, higher income customers have been a meaningful growth driver for Dollar Tree. In Q1, DLTR said it had measurable sales improvement across all income levels, with the most growth coming from higher income customers. DLTR believes Q2 (Jul) comps will be towards the higher end its full year outlook of +3-5%.
- Regarding tariffs, DLTR says it has multiple tools in place, including negotiating with suppliers, respecting products, moving country of origin, dropping non-economic items and leveraging multi-price capabilities. However, in the near term, DLTR expects to see some volatility relating to timing issues.
- While DLTR delayed some shipments in early April when the tariff adjustments were first announced, some products did arrive in the US that were subject to the highest tariffs. As such, Q2 profits will be meaningfully lower than last year in light of higher tariffs and other costs. Its Q2 adjusted EPS from continuing operations could be down as much as 45-50% yr/yr before reaccelerating in Q3 and Q4.
Overall, the Q1 results were good, especially the robust comps. However, the weakness seems mostly related to the sizeable tariff impact expected on its Q2 profitability. This report was not quite as positive as Dollar General's (DG) report yesterday when DG reported a much larger EPS beat. But the bigger concern for DLTR is the near term tariff impact on profits.
Guidewire Software's pivot to cloud-based model yields strong results as growth accelerates (GWRE)
Guidewire Software (GWRE) delivered a strong beat-and-raise 3Q25 earnings report, decisively surpassing EPS and revenue expectations, marking a significant improvement from last quarter when the company fell just short of the EPS consensus estimate. Furthermore, revenue growth re-accelerated to 22% yr/yr in Q3 from 20% in Q2, signaling strengthening momentum, and annual recurring revenue (ARR) reached $960 mln, well above the company’s guidance range of $942-$947 mln, underscoring strong demand for its cloud-based offerings.
Looking ahead, GWRE provided upbeat Q4 guidance, projecting revenue of $332-$340 mln, which is ahead of the consensus estimate at the midpoint of the range, while slightly raising its full-year ARR outlook to $1.012-$1.022 bln, reflecting 17-18% yr/yr growth. This encouraging guidance is underpinned by the company’s exceptional Q3 performance, driven by record sales activity, including 17 cloud deals, and a robust pipeline that signals sustained demand for its cloud platform.
- The beat-and-raise performance was bolstered by GWRE’s successful transition from an on-premise to a cloud-based software provider, capitalizing on the property and casualty (P&C) insurance industry’s ongoing shift toward modernized systems. The P&C sector, often reliant on inefficient and outdated back-office systems, represents a $20 bln opportunity for cloud-based solutions, and GWRE’s leadership in this space is evident through its 17 cloud deals in Q3, up from 12 in Q2, including seven with Tier 1 insurers and three with Tier 2 insurers.
- This transition has enabled GWRE to meet the industry’s demand for scalable, flexible platforms like InsuranceSuite and InsuranceNow, driving recurring revenue (subscription revenue) to 62% of total revenue, up from 55% a year ago, and reinforcing its competitive edge in a market ripe for digital transformation.
- ARR, a critical metric for GWRE, reached $960 mln in Q3, an 11% increase from $864 mln in the year-earlier period, driven by strong cloud adoption and record-low ARR attrition rates. The company’s sales success, particularly in closing 14 InsuranceSuite and three InsuranceNow cloud deals, reflects its ability to penetrate high-end markets, with notable strength among complex global insurers.
- Subscription and support revenue, another key indicator of GWRE’s cloud transition, surged 32% yr/yr to $181.8 mln, fueled by robust adoption of its cloud platform and a $4 mln credit from a cloud service provider that boosted margins. The combination of high sales momentum, low churn, and structured ARR ramps from prior deals provides clear visibility into GWRE’s path to exceed $1 bln in ARR in Q4.
- GWRE’s profitability continues to improve, with Q3 non-GAAP operating income rising to $46.1 mln from $20.8 mln in the year-earlier quarter, a testament to its operational discipline and cloud-driven margin expansion. Key drivers include the transition to a subscription-based model, which has improved subscription and support gross margins to 71% from 66% a year ago, aided by economies of scale and the aforementioned cloud provider credit.
GWRE's Q3 earnings showcased exceptional financial performance, with significant EPS and revenue beats driven by robust cloud adoption and a record 17 cloud deals. The company’s successful pivot to a subscription-based model, coupled with strong demand from the P&C insurance industry’s modernization efforts, underpins its raised full-year guidance and positions it for sustained growth as it approaches its $1 bln ARR milestone.
CrowdStrike takes a hit as lingering effects of Customer Commitment Packages weigh on outlook (CRWD)
Despite CrowdStrike (CRWD) surpassing 1Q26 EPS expectations and announcing a new $1.0 bln share repurchase program, the stock is selling off sharply as the cybersecurity company's Q2 and FY26 guidance disappointed investors. Specifically, CRWD's downside Q2 revenue guidance of $1.145-$1.152 bln, and its essentially unchanged FY26 revenue guidance of $4.744-$4.806 bln, is the primary source of disappointment. With shares trading at record highs prior to the report, and with CRWD's strong historical performance, it was evident that expectations were high, setting the stage for today's profit-taking pullback.
The lingering effects of CRWD’s Customer Commitment Packages (CCPs), introduced in response to the July 2024 Falcon sensor outage that disrupted millions of Windows systems, continue to create a revenue headwind. In Q1, CCP-related incentives reduced revenue by approximately $11 mln, with the company anticipating a further $10-$15 mln quarterly impact through the remaining quarters of FY26. While the CCP program concluded in 4Q25, the extended terms offered to affected customers, such as subscription discounts or additional services, are deferring revenue recognition into future periods.
- CRWD's annual recurring revenue (ARR) in Q1 grew 22% yr/yr to $4.44 bln, a solid increase but slightly below some analyst expectations. More critically, net new ARR, a closely watched metric for gauging growth momentum, came in at $193.8 mln, down sequentially from $224.3 mln in Q4 and $211.7 mln in 1Q25. This decline reflects several factors, including the revenue deferrals caused by CCPs, which temporarily suppress ARR recognition as customers utilize extended contract terms. Additionally, macroeconomic headwinds and elongated sales cycles, particularly among smaller customers, have impacted deal closures, echoing challenges noted in prior quarters.
- Despite these challenges, CRWD demonstrated significant success in Q1 with large deal wins, as enterprises increasingly consolidate their cybersecurity solutions onto the Falcon Platform. The company reported a module adoption rate of 48% for customers using six or more modules, 32% for seven or more, and 22% for eight or more, reflecting the platform’s growing appeal as a comprehensive, AI-native cybersecurity solution.
- This multi-module adoption underscores CRWD’s ability to displace point solutions and compete effectively across endpoint security, cloud security, identity protection, and next-gen SIEM. Strategic partnerships with Microsoft (MSFT), Google Cloud (GOOG), and NVIDIA (NVDA), along with innovations like Falcon Privileged Access and Charlotte AI Agentic Workflows, further bolster its competitive moat.
- CRWD’s management expressed confidence in a rebound in net new ARR growth, driven by the momentum of its Falcon Flex subscription model, early expansions of existing Flex contracts, strong competitive win rates, and a robust pipeline for 2H26. Falcon Flex, a flexible subscription framework launched less than two years ago, allows customers to tailor their adoption of Falcon Platform modules, resulting in larger deal sizes, longer contract durations, and faster deployment. The model has driven $3.2 bln in total deal value across more than 820 accounts, with 39 customers already returning for “reflex” expansions within an average of five months.
CRWD’s Q1 earnings reflect a solid performance overshadowed by revenue headwinds from the Customer Commitment Packages, which have contributed to a cautious guidance outlook and investor disappointment. Nevertheless, CRWD remains a premier name in cybersecurity, with its strong win rates, multi-module adoption, and Falcon Flex momentum positioning it for robust growth once the CCP impact subsides.
Thor Industries higher on better-than-feared report but next two quarters will be rough (THO)
Thor Industries (THO +3%) is trekking higher following its Q3 (Apr) earnings report this morning. Thor, the world's largest RV manufacturer, reported a huge EPS beat. Revenue rose 3.3% yr/yr to $2.89 bln. While not huge growth, this broke a string of ten consecutive quarters of yr/yr revenue declines. Analysts were expecting a 7% decline. THO also reaffirmed FY25 guidance, which was welcome after EPS guidance cuts in two of the past three quarters.
- THO does not guide on a quarterly basis, but did say it expects Q4 (Jul) and Q1 (Oct) to be challenging. The current economic uncertainty has led to downward pressure on consumer confidence and has negatively impacted retail pull-through. THO is navigating what it describes as a prolonged industry downturn.
- The company noted that its history has proven its ability to weather difficult macro circumstances and to come back stronger when market conditions improve. THO described the current level of uncertainty as unprecedented, and the next two fiscal quarters will be challenging for the RV industry as a whole.
- What really drove the upside EPS results was a further emphasis on driving down its cost profile. This led to improved margins despite only modest top line growth. THO says its operating model, particularly within North America, is designed to ramp upward and downward in an incredibly efficient manner and that its Q3 performance exhibited the strength and flexibility of this operating model.
- Specifically, THO's ability to align production with retail sales helps on the cost side. THO works closely with its independent dealer partners to ensure rational inventory levels for a suppressed retail marketplace. Of note, its North American Towable segment, in particular, generated meaningful margin improvement, posting a 200 basis point yr/yr increase. However, overall margin pressures persist as THO manages through softer retail and wholesale demand in its North American Motorized and European segments.
Overall, this was not a blowout quarter by any stretch given the modest top line growth. However, it was much better than feared given that the RV industry is going through a prolonged downturn. In particular, investors were happy to see the surprise revenue growth as an 11th consecutive decline was expected. We could quibble about THO not raising EPS guidance given the huge beat, but we think it's prudent to be conservative given the post-tariff drop in consumer confidence.
Credo Tech surging as it wraps up FY25 on a high note; lesser known play on AI buildout
Credo Technology (CRDO +18%) is surging today following its Q4 (Apr) earnings report last night. This supplier of interconnection gear (both copper and optical) in the data center wrapped up FY25 on a high note and sounds bullish on FY26 as well. It beat on EPS while revenue jumped 179% yr/yr and 26% sequentially to $170 mln, also nicely above expectations.
- Probably even more impressive was its huge Q1 (Jul) revenue guidance of $185-195 mln, which was much better than expected. On the call, Credo said it expects FY26 revs to exceed $800 mln vs $437 mln in FY25. Credo sees growing demand for high-speed connectivity products across its hyperscaler customers to power advanced AI services, a trend it expects will continue for the foreseeable future.
- Credo described FY25 as a pivotal year, achieving record revenue, profit, and market adoption of its connectivity products hitting an inflection point. Credo says it pioneered a market that transformed how hyperscalers connect switches and servers, which has positioned it to capture significant opportunities in the global AI infrastructure wave.
- Drilling down a bit, Credo is enthusiastic about the ongoing expansion of the AEC market. Credo has said it 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 growing traction with hyperscalers is evident with strong customer forecasts and new design wins.
- On the optical side, Credo described FY25 as a standout year. It closed the year with strong momentum, expanding customer diversity across lane rates, port speeds and applications. In Q4, it secured a significant DSP win for an 800-gig transceiver with initial deployments expected on a US hyperscaler in FY26.
Overall, this was an impressive quarter for Credo, especially the Q1 and FY26 guidance. 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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