Market Snapshot
briefing.com
| Dow | 33245.06 | +200.55 | (0.61%) | | Nasdaq | 11081.90 | +229.64 | (2.12%) | | SP 500 | 3952.62 | +53.77 | (1.38%) | | 10-yr Note | -29/32 | 3.48 |
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| | NYSE | Adv 2400 | Dec 621 | Vol 999 mln | | Nasdaq | Adv 3241 | Dec 1307 | Vol 5.8 bln |
Industry Watch
| Strong: Communication Services, Information Technology, Financials, Consumer Discretionary |
| | Weak: -- |
Moving the Market
-- Gains in mega caps helping boost index performance
-- S&P 500 finding support at the 3,900 level, surged past its 50-day moving average at 3,927, and closed above its 200-day moving average (3,968)
-- Digesting slate of corporate news, receiving mostly positive reactions
-- Rebound after sizable losses recently
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Closing Summary
20-Jan-23 16:25 ET
Dow +330.93 at 33375.44, Nasdaq +288.17 at 11140.43, S&P +73.76 at 3972.61
[BRIEFING.COM] The stock market finished the week on a positive note after recent weakness. The broad rebound effort had the Nasdaq Composite recoup all of its losses for the week while the S&P 500 and Dow Jones Industrial Average put a nice dent in their weekly losses.
Investors reacted positively to some corporate news released since yesterday's close. Specifically, Netflix (NFLX 342.50, +26.72, +8.5%) surged after reporting quarterly results and Alphabet (GOOG 99.28, +5.37, +5.7%) registered a sizable gain after announcing plans to reduce its workforce by approximately 12,000 roles.
All 11 S&P 500 sectors closed with a gain. Communication services (+4.0%) led the pack by a wide margin thanks to Netflix and Alphabet. Other top performers today were the information technology (+2.7%) and consumer discretionary (+2.5%) sectors, reflecting renewed interest in the mega cap space.
The Vanguard Mega Cap Growth ETF (MGK) logged a 3.0% gain versus a 1.7% gain in the Invesco S&P 500 Equal Weight ETF (RSP) and a 1.9% gain in the S&P 500.
Notably, the countercyclical sectors -- utilities (+0.6%), health care (+0.6%), and consumer staples (+0.8%) -- fell to the bottom of the pack today with the slimmest gains.
The positive bias picked up strength as the session progressed. Earlier, advancers led decliners by a roughly 2-to-1 margin at both the NYSE and the Nasdaq. By the close, advancers led decliners by a 4-to-1 margin at the NYSE and a nearly 3-to-1 margin at the Nasdaq.
Right out of the gate, the S&P 500 fell below the 3,900 level before the rally effort had the index surge past its 50-day moving average (3,927) and close the session above its 200-day moving average (3,968).
The 2-yr Treasury note yield rose eight basis points today, and fell two basis points this week, to 4.20%. The 10-yr note yield rose nine basis points today, and fell three basis points this week, to 3.48%.
- Nasdaq Composite: +6.4% YTD
- Russell 2000: +6.0% YTD
- S&P Midcap 400: +5.3% YTD
- S&P 500: +3.5% YTD
- Dow Jones Industrial Average: +0.7% YTD
Reviewing today's economic data:
- December Existing Home Sales 4.02 mln (Briefing.com consensus 3.96 mln); Prior was revised to 4.08 mln from 4.09 mln
- The key takeaway from the report is that sales remained pressured by high mortgage rates and rising prices, sending the seasonally adjusted annual rate (4.02 million) toward its pandemic low (3.91 million) that was reached in May 2020.
Ahead of Monday's open, Baker Hughes (BKR), Synchrony Financial (SYF), and Bank of Hawaii (BOH) will report earnings.
Economic data on Monday is limited to the December Leading Indicators (Briefing.com consensus -0.7%; prior -1.0%) at 10:00 a.m. ET.
S&P 500 tests 200-day moving average
20-Jan-23 15:30 ET
Dow +285.53 at 33330.04, Nasdaq +265.12 at 11117.38, S&P +65.59 at 3964.44
[BRIEFING.COM] The S&P 500 got rejected right above its 200-day moving average (3,968) and pulled back slightly from its session high.
The 2-yr Treasury note yield rose eight basis points today, and fell two basis points this week, to 4.20%. The 10-yr note yield rose nine basis points today, and fell three basis points this week, to 3.48%.
Ahead of Monday's open, Baker Hughes (BKR), Synchrony Financial (SYF), and Bank of Hawaii (BOH) will report earnings.
Economic data on Monday is limited to the December Leading Indicators (Briefing.com consensus -0.7%; prior -1.0%) at 10:00 a.m. ET.
SLB weighs on energy sector
20-Jan-23 14:55 ET
Dow +200.55 at 33245.06, Nasdaq +229.64 at 11081.90, S&P +53.77 at 3952.62
[BRIEFING.COM] The main indices have continued their steady rise in recent trading. With a 2.2% gain currently, the Nasdaq Composite turned positive for the week.
Energy complex futures settled the session mixed. WTI crude oil futures rose 1.2% to $81.67/bbl and natural gas futures fell 2.4% to $3.04/mmbtu.
Rising oil prices helped propel the S&P 500 energy sector to a 0.8% gain, although it's still lagging the S&P 500 (+1.3%). The sector is partially weighed down by a loss in SLB (SLB 56.78, -0.59, -1.0%) after the company reported earnings.
The upside moves brought all of the S&P 500 sectors into positive territory except utilities (-0.1%).
Averages continue afternoon advance; Eli Lilly slips after FDA's CRL on Alzheimer's treatment
20-Jan-23 14:30 ET
Dow +189.66 at 33234.17, Nasdaq +228.78 at 11081.04, S&P +52.50 at 3951.35
[BRIEFING.COM] The S&P 500 (+1.35%) is firmly situated in second place at this point on Friday, continuing to advance to session highs in the last half hour.
S&P 500 constituents SVB Financial Group (SIVB 285.96, +35.92, +14.37%), Match Group (MTCH 50.64, +2.80, +5.85%), and NVIDIA (NVDA 177.42, +9.77, +5.83%) are among today's top gain getters. SIVB jumps on earnings, while NVDA follows broader strength in tech and semis, leading the PHLX Semiconductor Index (SOX 2,771.30, +60.86, +2.25%).
Meanwhile, Eli Lilly (LLY 343.81, -7.27, -2.07%) falls among the worst performers in the S&P today after last night's news of an FDA complete response letter related to the company's Alzheimer's disease treatment, donanemab.
Gold extends weekly winning streak to five
20-Jan-23 14:00 ET
Dow +152.67 at 33197.18, Nasdaq +206.26 at 11058.52, S&P +46.23 at 3945.08
[BRIEFING.COM] With about two hours to go on Friday the tech-heavy Nasdaq Composite (+1.90%) remains atop the standings, having pushed to session highs in the last half hour.
Gold futures settled $4.30 higher (+0.2%) to $1,928.20/oz, ending the week up about +0.3%, thereby extending its weekly winning streak to five.
Meanwhile, the U.S. Dollar Index trades flat at $102.06.
Page One
Last Updated: 20-Jan-23 09:08 ET | Archive
Lack of conviction following sizable losses
The S&P 500 futures are up 8 points and are trading 0.2% above fair value. The Nasdaq 100 futures are up 68 points and are trading 0.6% above fair value. The Dow Jones Industrial Average futures are down 11 points and are trading slightly below fair value.
Equity futures are mixed, but little changed from their flat lines as investors digest the latest slate of earnings news. There's likely some hesitation in play after several downbeat sessions had the main indices give back some of their 2023 gains.
The S&P 500 and Nasdaq 100 futures are getting a boost from Alphabet (GOOG), which decided to reduce its workforce by approximately 12,000 roles, and Netflix (NFLX), which pleased with its earnings report and announced new co-CEOs.
Treasury yields and the U.S. Dollar Index are moving higher this morning. The 2-yr note yield is up four basis points to 4.16% and the 10-yr note yield is up three basis points to 3.43%. The U.S. Dollar Index is up 0.3% to 102.35 with USD/JPY +1.3% to 130.10.
The movement of the yen follows the sharpest increase in Japan's CPI since 1982, up 4.0% yr/yr in December.
In other economic news, December retail sales in the U.K. fell at their fastest pace for the month since the start of the series in 1989.
European Commissioner for trade Dombrovskis said that growth in the region has been above expectations and that a recession will probably be avoided.
Energy complex futures are mixed. WTI crude oil futures are up 0.6% to $81.09/bbl and natural gas futures are down 0.7% to $3.10/mmbtu.
Economic data today is limited to the December Existing Home Sales (Briefing.com consensus 3.96 million; prior 4.09 million) at 10:00 a.m. ET.
Alphabet's workforce reduction plan spells out to gains for the stock (GOOG)
Google parent Alphabet (GOOG) is providing the broader market with a needed boost today after announcing plans to reduce its workforce by approximately 12,000 positions, equating to about 6% of its staff.
- Layoffs across the tech sector have become commonplace lately, with Microsoft (MSFT) disclosing its intention to cut 10,000 jobs on Wednesday, preceded by workforce reductions at Amazon (AMZN), Meta Platforms (META), Twitter, and others.
- However, despite repeatedly pledging to slow its pace of hiring, GOOG had remained a hold out in this layoff cycle. In fact, to the surprise of many, the company actually ramped up its hiring last quarter, adding nearly 13,000 employees.
- That hiring spree pushed Q3 operating expenses higher by nearly 18%, far outpacing GOOG's topline growth of 6%, resulting in the company's third consecutive earnings miss. With growth slowing across the board, including YouTube's first ever yr/yr revenue decline (-2%) in Q3, it's obvious that GOOG was too slow in changing its course.
- Since the macroeconomic picture and outlook for advertising demand in FY23 has only become murkier since the end of Q3, CEO Sundar Pichai is now acknowledging that the company "hired for a different economic reality than the one we face today."
- The stock is reacting positively to the news, illustrating how investors continue to value margins and profits over growth. One of the more stunning aspects of GOOG's Q3 earnings report was that operating margin plunged by 7 percentage points yr/yr to 25%. That figure should represent a low point for the company as its streamlining actions take hold in the coming months.
Overall, this isn't a very surprising move for GOOG given the soft demand backdrop and the job cuts seen across the tech sector. The company simply got ahead of itself with the rapid pace of its hiring, and now it's in correction mode. Ultimately, the action should result in a rebound for margins and profitability, which is music to investors' ears.
PPG Industries' weak Q1 outlook brushed aside as investors focus on uplifting long-term color (PPG)
Investors are brushing aside PPG Industries' (PPG +6%) downbeat Q1 EPS guidance today, focusing on the paints, coatings, and specialty materials supplier's better-than-feared Q4 results and uplifting comments. There were concerns that increasingly challenging economic conditions noted by peer RPM Inc (RPM) earlier this month could clip growth for PPG in Q4. However, PPG put these fears to bed, delivering sales nicely above analyst expectations and bottom-line upside meaningfully higher than last quarter.
- Total volumes still contracted by 5% yr/yr as manufacturing activity slowed in most regions. As a result, revs fell 0.1% yr/yr to $4.18 bln, PPG's first quarter of declining sales growth since 3Q20. However, FX headwinds also played a key role, trimming roughly 5 pts off total growth in Q4.
- Strong U.S. automotive refinish volume expansion sparked by moderating supply chain disruptions helped buoy PPG's sales in Q4. The company also commented that its order book in this business remains robust. Additionally, PPG's aerospace division remained on a healthy recovery track, delivering organic sales growth of over 20% yr/yr despite ongoing supply chain issues. PPG expects this business to stay strong in 2023 due to China reopening its economy, a substantial global order book, and higher military-related growth.
- Demand recovery in China is a crucial component of PPG reaccelerating sales growth. Recall last quarter that disappointing performance in China weighed on overall results.
- However, the situation remained challenging in Europe as demand continued to exhibit weakness. Nevertheless, earnings in the region were similar to the prior year due to favorable selling price realization and cost management stemming from PPG's previously announced restructuring programs, which added roughly $20 mln of savings in Q4.
- PPG expects obstacles to remain in its path in the near term, explaining its Q1 projections of EPS dropping 16% yr/yr at the midpoint of its estimated $1.10-1.20 range and aggregate sales volumes declining by mid-single-digits yr/yr.
- However, PPG is upbeat on how the year will play out, citing several catalysts enabling earnings growth and supply chain improvements, driving down raw material costs. In China and Europe, PPG is optimistic that it will begin seeing favorable dynamics as China's reopening progresses and demand stabilizes throughout Europe. In the U.S., ongoing recovery in the aerospace and automotive refinish markets combined with order book strength should also contribute positively to PPG's financial performance.
The main takeaway is that although Q1 guidance paints a hazy view of the near term, PPG is confident that conditions will improve as the year progresses, resulting in earnings growth. These comments bode well for Axalta Coating Systems (AXTA) and Sherwin-Williams (SHW), which report Q4 earnings on January 25 and 26, respectively.
Nordstrom's holiday season not a merry one as company ramped up markdowns (JWN)
It's no secret that this holiday shopping season was a disappointing one for many retailers, but for department store owner Nordstrom (JWN), it was especially gloomy. Last night, the company sharply lowered its FY22 EPS guidance to $1.50-$1.70 from its prior outlook of $2.30-$2.60 as net sales for the nine-week holiday period decreased by 3.5% yr/yr. Due to the weak holiday performance, JWN now expects FY22 sales growth to come in at the low end of its prior forecast of 5-7%.
Prior to JWN lowering its guidance, some evidence emerged suggesting that the company probably had a rough December.
- For instance, on Wednesday morning, retail sales data for December were released and the results missed expectations by a fairly wide margin. Specifically, retail sales, excluding auto sales, declined by 1.1% compared to the Briefing.com Consensus of a drop of 0.5%.
- Additionally, on January 6, competitor Macy's (M) cut its Q4 outlook, saying that it expects revenue to only reach the low-end to mid-point of its previous guidance of $8.161-$8.401 bln. Unlike JWN, though, the company's holiday sales performance was generally ahead of plan. The problem for Macy's is that sales during the non-peak holiday weeks have fallen off at a steeper-than-anticipated rate.
However, relative to JWN, Macy's is navigating through the inflationary and rising interest rate environment much more effectively.
- A key competitive advantage for Macy's is its affluent customer base which is more capable of withstanding the macroeconomic headwinds.
- JWN, on the other hand, generates about 30% of its sales from its discount Nordstrom Rack banner. That business continues to struggle with net sales decreasing by 7.6% for the holiday period, compared to a 1.7% decline for the main Nordstrom brand.
- In last night's press release, CEO Erik Nordstrom repeated this theme from last quarter, commenting that the company's higher income customers are showing greater resilience, while other customers are being more selective with their spending. Consequently, JWN became even more promotional in Q4, ramping up markdowns in order to clear out inventory. Accordingly, Q4 adjusted EBIT margin is now expected to be 3.1-3.3% versus its previous guidance of 4.3-4.7%.
The silver lining is that year-end inventory levels are down by double-digits and are approaching 2019 levels. That should put JWN in a much better position heading into the spring season, but the underlying merchandising issue at Rack still needs to be resolved. On that note, Rack is refreshing its product assortment with more premium brands, including those that are currently sold at Nordstrom. The bottom line, though, is that the stock will likely struggle to generate any sustained upward momentum until a meaningful turnaround at Rack is achieved.
Netflix shares binge on gains following numerous highlights in Q4 (NFLX)
Netflix (NFLX +6%) shares are binging on gains today, breaking above previous resistance around the $335 mark, following the streaming giant's Q4 earnings report, which contained several positive standouts and exceeded relatively high expectations. NFLX also announced that CEO Reed Hastings will step down and become Executive Chairman, completing the company's succession plan, with COO Greg Peters stepping up to become co-CEO with Ted Sarandos (previously was co-CEO with Mr. Hastings).
- The highlights in Q4 were plentiful. NFLX crushed its paid net adds forecast in the quarter, boasting +7.66 mln compared to its outlook of just +4.50 mln. Additionally, net adds are projected to see modest positive growth in 1Q23 from the -0.2 mln in the year-ago period, a significant plus as it signals NFLX's return to yr/yr net adds growth since 3Q21.
- NFLX attributed substantial acquisition and retention as the two leading factors for its massive net adds in Q4, primarily fueled by its content slate.
- Meanwhile, although not an expansion, operating margins of 7%, a 1 pt dip yr/yr, toppled NFLX's expectation of just 4%. The company also anticipates a return to margin expansion in FY23, guiding to roughly 21-22% margins, up from its prior target of 19-20%.
- Also, free cash flow is expected to nearly double yr/yr in FY23 to at least $3.0 bln.
- Paid sharing, NFLX's solution to the password sharing issue, is expected to roll out more broadly later in 1Q23, likely resulting in a very different quarterly paid net adds pattern during the year. NFLX expects net adds in 2Q23 to likely surpass numbers in 1Q23 since initial tests have shown immediate cancel reaction affecting near-term member growth.
- Regarding its ad-supported tier, which has been active in 12 countries since November, NFLX remarked that there is plenty to do to improve targeting and measurement but is pleased with its progress thus far. Reactions have confirmed NFLX's view that its ad-supported plan will generate incremental revenue and profit. Still, the company conceded that the impact on FY23 will be modest.
- Long-term objectives remained unchanged. NFLX continues to set its sights on double-digit revenue growth, expanding operating margins, and positive free cash flow.
Overall, even after a string of solid earnings results raised the bar for NFLX heading into its Q4 report, it smashed expectations on many fronts. The company's numerous bright spots also engulfed the few minor blemishes in the quarter, including an earnings miss, muted sales growth of just 1.9% yr/yr to $7.85 bln, and an underwhelming Q1 earnings forecast, all of which were driven by a strong U.S. dollar.
Bottom line, NFLX's many developments, including a projected return to positive net adds growth, an ad-supported plan, paid sharing, and video game offerings, are keeping the enthusiasm surrounding the stock elevated.
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