Market Snapshot
briefing.com
| Dow | 34010.26 | -78.96 | (-0.23%) | | Nasdaq | 12024.76 | +64.59 | (0.54%) | | SP 500 | 4134.33 | -1.80 | (-0.04%) | | 10-yr Note | -5/32 | 3.81 |
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| | NYSE | Adv 1720 | Dec 1237 | Vol 838 mln | | Nasdaq | Adv 2790 | Dec 1732 | Vol 4.9 bln |
Industry Watch
| Strong: Consumer Discretionary, Communication Services, Industrials, Utilities, Materials, Information Technology |
| | Weak: Energy, Health Care |
Moving the Market
-- Digesting the stronger than expected January retail sales data, contributing to concerns that the Fed will raise rates more than expected
-- Recent rise in market rates fueling worries about valuation constraints and competition for stocks
-- Upside leadership from several mega cap names
-- Gains in high-beta stocks pacing today's advance
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Closing Summary
15-Feb-23 16:30 ET
Dow +38.78 at 34128.00, Nasdaq +110.45 at 12070.62, S&P +11.47 at 4147.60
[BRIEFING.COM] Market participants received a much stronger than expected January retail sales report this morning, which reflected continued strength in the economy, but left the market concerned that the Fed will raise rates more than expected. Briefly, total sales in January were up 3.0% month-over-month (Briefing.com consensus 1.7%) and sales, excluding autos, up 2.3% (Briefing.com consensus 0.8%).
Price action in the Treasury market today was indicative of ongoing rate hike concerns. The 10-yr note yield rose five basis points to 3.81%, initially fueling worries about valuation constraints and competition for stocks.
Equities also started the day in retreat mode, but true to 2023 form, investors stepped in to buy the early weakness. The main indices all closed the session at or near their best levels of the day. The rebound in the stock market, in spite of rising market rates, suggests perhaps that buyers were influenced more by the hopeful economic implications of the January retail sales data than its potentially adverse implications for monetary policy.
High-beta stocks, uplifted by the positive earnings news and guidance from the likes of Airbnb (ABNB 137.01, +16.14, +13.4%), Roblox (RBLX 45.08, +9.41, +26.4%), and Analog Devices (ADI 196.18, +13.64, +7.5%), paced today's gains. Several mega cap stocks also offered support to the broader market. Alphabet (GOOG 97.10, +2.15, +2.3%) and Tesla (TSLA 214.24, +4.99, +2.4%) were among the standouts in that regard.
Alphabet and Tesla helped to propel their respective S&P 500 sectors -- communication services (+1.2%) and consumer discretionary (+1.2%) -- to first place on the leaderboard today. Meanwhile, the health care (-0.5%) and energy (-1.8%) sectors were alone in negative territory by the close. The latter was dragged down by a big earnings-driven loss in Devon Energy (DVN 57.23, -6.71, -10.5%).
Notably, small cap stocks performed better than their larger peers today. The Russell 2000 (+1.1%) logged the biggest gain among the major indices.
- Nasdaq Composite: +15.3% YTD
- Russell 2000: +11.3% YTD
- S&P Midcap 400: +10.6% YTD
- S&P 500: +8.0% YTD
- Dow Jones Industrial Average: +3.0% YTD
Reviewing today's economic data:
- Weekly MBA Mortgage Applications Index -7.7%; Prior -7.4%
- January Retail Sales 3.0% (Briefing.com consensus 1.7%); Prior -1.1%; January Retail Sales ex-auto 2.3% (Briefing.com consensus 0.8%); Prior was revised to -0.9% from -1.1%
- The key takeaway from the report is that consumers were spending freely on goods in January despite the ongoing inflation pressure; in fact, every single sales category showed a month-over-month increase, led by a 7.2% surge in sales at food services and drinking places.
- February Empire State Manufacturing -5.8 (Briefing.com consensus -19.0); Prior -32.9
- January Industrial Production 0.0% (Briefing.com consensus 0.5%); Prior was revised to -1.0% from -0.7%; January Capacity Utilization 78.3% (Briefing.com consensus 79.1%); Prior was revised to 78.4% from 78.8%
- The key takeaway from the report is that the soft reading for January can be attributed entirely to a drop in the output of utilities. Otherwise, there was some welcome rebound strength in both mining and manufacturing output, the latter of which saw advances in durable, nondurable, and other manufacturing activity.
- December Business Inventories 0.3% (Briefing.com consensus 0.3%); Prior was revised to 0.3% from 0.4%
- February NAHB Housing Market Index 42 (Briefing.com consensus 37); Prior 35
Ahead of tomorrow's open, Crocs (CROX), Hasbro (HAS), Hyatt Hotels (H), Paramount Global (PARA), Shake Shack (SHAK), Toast (TOST), and US Foods (USFD) will headline the earnings reports.
Looking ahead to Thursday, market participants will receive the following economic data:
- 8:30 ET: January Housing Starts (Briefing.com consensus 1.355 mln; prior 1.382 mln), Building Permits (Briefing.com consensus 1.350 mln; prior 1.330 mln), January PPI (Briefing.com consensus 0.4%; prior -0.5%), Core PPI (Briefing.com consensus 0.3%; prior 0.1%), weekly Initial Claims (Briefing.com consensus 203,000; prior 196,000), Continuing Claims (prior 1.688 mln), and February Philadelphia Fed survey (Briefing.com consensus -8.0; prior -8.9)
- 10:30 ET: Weekly natural gas inventories (prior -217 bcf)
Market maintains position ahead of the close
15-Feb-23 15:30 ET
Dow -36.20 at 34053.02, Nasdaq +68.28 at 12028.45, S&P -0.12 at 4136.01
[BRIEFING.COM] Things are little changed in the last half hour. The Dow and S&P 500 trade just below their flat lines while the Nasdaq maintains a decent gain.
Ahead of tomorrow's open, Crocs (CROX), Hasbro (HAS), Hyatt Hotels (H), Paramount Global (PARA), Shake Shack (SHAK), Toast (TOST), and US Foods (USFD) will headline the earnings reports.
Looking ahead to Thursday, market participants will receive the following economic data:
- 8:30 ET: January Housing Starts (Briefing.com consensus 1.355 mln; prior 1.382 mln), Building Permits (Briefing.com consensus 1.350 mln; prior 1.330 mln), January PPI (Briefing.com consensus 0.4%; prior -0.5%), Core PPI (Briefing.com consensus 0.3%; prior 0.1%), weekly Initial Claims (Briefing.com consensus 203,000; prior 196,000), Continuing Claims (prior 1.688 mln), and February Philadelphia Fed survey (Briefing.com consensus -8.0; prior -8.9)
- 10:30 ET: Weekly natural gas inventories (prior -217 bcf)
Indices pullback
15-Feb-23 15:00 ET
Dow -78.96 at 34010.26, Nasdaq +64.59 at 12024.76, S&P -1.80 at 4134.33
[BRIEFING.COM] The main indices took a sharp turn lower recently and the S&P 500 fell back into negative territory. There is not a specific catalyst for the pullback and many stocks are falling from their highs.
Energy complex futures settled the session lower. WTI crude oil futures fell 0.7% to $78.56/bbl and natural gas futures fell 4.6% to $2.45/mmbtu.
After the close today, Boston Beer (SAM), Cisco Systems (CSCO), Fastly (FSLY), RingCentral (RNG), Roku (ROKU), Shopify (SHOP), SunPower (SPWR), Twilio (TWLO), and Zillow Group (ZG) headline the earnings reports.
Etsy higher ahead of next week's results; S&P 500 fades slightly off highs
15-Feb-23 14:30 ET
Dow -35.73 at 34053.49, Nasdaq +79.51 at 12039.68, S&P +3.53 at 4139.66
[BRIEFING.COM] The S&P 500 (+0.09%) found session highs in the last half hour, though now stands modestly off those levels.
S&P 500 constituents SolarEdge Technologies (SEDG 341.46, +26.03, +8.25%), Martin Marietta (MLM 381.33, +25.13, +7.06%), and Etsy (ETSY 142.85,+ 9.10, +6.80%) pepper the top of today's standings. SEDG continues its earnings-based recovery from Monday evening, MLM also reported earnings, while ETSY's results are due out next week.
Meanwhile, Akamai Tech (AKAM 79.25, -8.54, -9.73%) holds the second-worst losses in the S&P following earnings, guidance, and a sell side downgrade.
Gold pressured on Wednesday by rise in the dollar
15-Feb-23 14:00 ET
Dow -28.47 at 34060.75, Nasdaq +60.38 at 12020.55, S&P +1.17 at 4137.30
[BRIEFING.COM] With about two hours to go on Wednesday the tech-heavy Nasdaq Composite (+0.50%) holds firm atop the standings, now at HoDs.
Gold futures settled $20.10 lower (-1.1%) to $1,845.30/oz, slipping as a rise in the greenback applies pressure.
Meanwhile, the U.S. Dollar Index is now up about +0.7% to $103.97.
Page One
Last Updated: 15-Feb-23 09:01 ET | Archive
January retail sales surge, but market slow to follow suit
If there as any question about the line in the sand that puts bulls and bears in an excitable state, it was answered yesterday. That line for the S&P 500 is 4,100, which acted as a clear pivot point in yesterday's trading action following the January Consumer Price Index.
Following some early roller-coaster action that included a nice upswing at the open and a subsequent downswing soon thereafter, the S&P 500 got back on track following a brief dip below 4,100. Notably, the low for the stock market yesterday lined up almost perfectly with the high in Treasury yields yesterday. That would be 4,095 for the S&P 500, 4.65% for the 2-yr note yield, and 3.79% for the 10-yr note yield.
The S&P 500 managed to fight its way back to the doorstep of unchanged for the session and closed the day at 4,136.13. Meanwhile, the 2-yr note yield settled at 4.63% and the 10-yr note yield settled at 3.76%.
Currently, the S&P 500 futures are down 13 points and are trading 0.4% below fair value; the Nasdaq 100 futures are down 29 points and are trading 0.2% below fair value; and the Dow Jones Industrial Average futures are down 106 points and are trading 0.3% below fair value.
It could be another roller-coaster ride today, too, knowing that the January Retail Sales Report was much stronger than expected. That understanding should temper the "hard landing" narrative for now, but at the same time it will contribute to the burgeoning concern that the Fed will raise rates more than expected, leave them at a high level for longer than expected, and potentially trigger a hard landing later.
Total retail sales increased 3.0% month-over-month (Briefing.com consensus +1.7%) following an unrevised 1.1% decline in December. Excluding autos, retail sales jumped 2.3% (Briefing.com consensus +0.8%) following an upwardly revised 0.9% decline (from -1.1%) in December.
The key takeaway from the report is that consumers were spending freely on goods in January despite the ongoing inflation pressure; in fact, every single sales category showed a month-over-month increase, led by a 7.2% surge in sales at food services and drinking places.
Separately, the Empire State Manufacturing Index for February took a step in an improved direction, too. It checked in at -5.8 (Briefing.com consensus -19.0) versus -32.9 for January. The dividing line between expansion and contraction for this measure is 0.0. What the February reading suggests is that manufacturing activity in the New York Fed region contracted, but at a slower pace than what was reported in January.
Like yesterday, there has been some knee-jerk volatility in the Treasury market and equity futures market in the wake of the economic data.
The 2-yr note yield spiked to 4.70% but is back down to 4.65%. The 10-yr note yield skimmed 3.78% but is back down to 3.76%. That has tempered some of the selling interest in the equity futures market, although things are still positioned there for a lower open. It is worth noting, however, that the futures for the major indices have improved since the release of the data.
What happens at the index level, though, isn't going to be universal. Airbnb (ABNB), Roblox (RBLX), and Analog Devices (ADI), for example, are up 8.7%, 17.5%, and 4.0%, respectively, in pre-market trading following their well-received earnings reports and/or guidance.
That is some nice price action, but overall, look for the interplay between Treasury yields and stocks to keep driving the roller coaster.
-- Patrick J. O'Hare, Briefing.com
Krispy Kreme baking up some gains after delivering sweeter results in Q4 (DNUT)
Krispy Kreme (DNUT) is making investors some dough today after delivering better-than-expected Q4 results that were sweetened by a pick-up in organic sales growth and an expansion in margins. The main ingredients that went into DNUT's upside performance included strong sales of its higher-priced holiday specialty doughnuts, the highest growth for its e-commerce channel since the pandemic at +23%, and a 14% yr/yr increase in points-of-access.
- Coming off back-to-back EPS misses in Q3 and Q2, and the release of disappointing long-term financial targets at its Investor Day on December 15, this earnings report is helping to brighten sentiment for a stock that's desperately in need of some good news. Since returning to the public markets on July 1, 2021, shares have lost about 20% of their value from the IPO opening price.
- DNUT's most recent troubles have revolved around rising labor and commodity costs, combined with sluggish demand, as consumers tighten their belts to combat inflation and rising interest rates.
- Last quarter, adjusted EBITDA margin contracted by 190 bps yr/yr to 10.2%, even though DNUT has been raising prices to offset the impact of higher costs. The pullback in discretionary spending reared its head in Q2 when the company fell short of revenue estimates on a sharp sequential deceleration in organic revenue growth to 8.9% from 15.0%. The company also issued downside EPS and revenue guidance for FY22.
- In Q4, DNUT's organic revenue growth ticked higher to 12.5%, driven by strength in its Delivered Fresh Daily (DFD) model, the aforementioned price increases, and double-digit same store sales growth for Insomnia Cookies.
- Those price increases, along with some moderation in commodity costs, also helped turn the tide for DNUT's margins. For the quarter, adjusted EBITDA margin expanded by 360 bps qtr/qtr to 13.8%.
- The end result of the above factors is that adjusted EPS came in at $0.11, the second highest figure since its IPO.
Looking ahead, DNUT's outlook for FY23 doesn't look overly appetizing as its EPS forecast is below expectations. Meanwhile, the revenue guidance is merely in line with estimates. However, considering that DNUT had a low bar to hurdle, thanks to its recent stumbles, the fact that its EPS guidance is in the vicinity of the consensus estimate is viewed as good enough. Furthermore, the company's expansion plans do represent a legitimate growth catalyst as it looks to expand its points of access to 75,000 from the current amount of 11,837 over the long term.
Roblox surges on solid Q4 numbers and encouraging January metrics (RBLX)
Roblox (RBLX +24%) is surging today on an excellent Q4 report, alleviating rising fears that the video game developer would begin running into inflation-related headwinds that plagued DecQ results from peers Take-Two (TTWO) and Electronic Arts (EA). It is worth noting that shares are gapping toward previous resistance around the $45-50 mark, which has preceded significant pullbacks over the past year.
- Q4 metrics were solid, with bookings expanding by 17% yr/yr to $899.4 mln, while EPS edged past analyst estimates. Average Daily Active Users (DAUs) climbed 19% yr/yr to 58.8 mln, while hours engaged grew similarly to 12.8 bln.
- However, January figures shone even brighter, slightly accelerating from December, underscoring robust demand even as inflation dampens discretionary spending. January bookings improved by an estimated 19-21% yr/yr to $267-271 mln, a quicker pace than the +20% jump in December at the high end.
- Meanwhile, RBLX boasted its highest-ever DAUs in January at 65 mln.
- The 17-24-year-old cohort, an important age group for RBLX, saw considerable strength, with bookings leaping 39% yr/yr in January.
- Globally, RBLX's business is strong, boasting 29% bookings growth yr/yr in Europe and APAC in January. With these regions being less mature than the U.S., there is plenty of headroom for continually strong bookings growth in subsequent quarters.
- Looking ahead, RBLX is heavily focused on driving robust sign-ups, retention, frequency, engagement, and monetization, which continue to be near or at all-time highs months after the pandemic.
What separates RBLX from a lot of the competition is its focus on the social component of gaming. It is not diverting its attention from this attribute, remaining singularly focused on communication, i.e., voice and facial animation, eye and arm tracking, etc. RBLX is also excited about its platform being used for educational purposes, citing the Museum of Science in Boston rolling out large immersive interactive experiences as an early example.
Overall, RBLX reported an impressive quarter, illuminated by accelerating numbers toward the end of Q4 and into early 2023. While competing video game studios can see their quarterly numbers take a hit due to delays or a lackluster pipeline, RBLX's focus on improving its core offering, adding customization and new features to keep engagement elevated, cushions it from these risks. RBLX's continually expanding DAUs and user engagement also highlight that this business model is not causing its platform to become stale.
Akamai Tech's rise to the cloud encounters some turbulence as company issues soft guidance (AKAM)
Akamai Tech (AKAM) beat 4Q22 EPS and revenue estimates on notable strength from its up-and-coming Compute segment, but the upside results are being overshadowed by a disappointing outlook for 1Q23 and FY23. That forecast, which includes downside revenue guidance for Q1 and a weaker-than-expected EPS outlook for both periods, is disheartening because AKAM's transition to a security and cloud computing company seemed to be gaining momentum.
- More traditionally known as a content delivery network company, AKAM is steadily deemphasizing that business as it recasts itself as a cloud computing and cybersecurity company.
- Last quarter, AKAM's Compute (includes cloud) and Security segments generated a strong combined revenue growth rate of 28% in constant currency.
- Those two segments helped to offset the struggling Delivery business, which suffered from a deceleration in traffic among AKAM's top customers. After experiencing a 15% decline in revenue last quarter, Delivery revenue dropped by 12% in Q4.
- The company also issued inline Q4 revenue guidance of $890-$915 mln with CEO Tom Leighton highlighting the massive cloud computing opportunity that's in front of AKAM. More specifically, he said that he sees cloud computing as a $100 bln market opportunity that's growing at a rapid rate.
This stirred up plenty of hope and excitement, as illustrated by the stock's 6% gain the day after AKAM's Q3 earnings report hit, but those good feelings are souring today.
- Security and Compute revenue growth tapered off a bit to 22%, reflecting more challenging business conditions as customers scrutinize their spending more closely.
- The drop-off in growth isn't overly surprising, though, because leading cybersecurity and cloud companies, like Crowdstrike (CRWD), Palo Alto (PANW), Microsoft (MSFT), and Amazon (AMZN) Web Services, have noted the more cautious spending patterns throughout the past two earnings seasons.
- Yesterday, AKAM officially launched its Connected Cloud platform and it will compete head-to-head with cloud giants such as MSFT, AMZN, and Google (GOOG).
- Connected Cloud, which combines AKAM's existing edge computing network with the recently acquired Linode, will require the build out of more than 50 distributed cloud computing sites.
- As the company invests in and expands this network, its margins will continue to be pressured. In Q4, non-GAAP gross margin fell by 3 percentage points to 28%.
With operating margins likely to remain below 30% in the near-term, and with revenue growth slowing to a halt -- AKAM's Q1 guidance range calls for flat yr/yr growth at the midpoint -- earnings will be negatively impacted. That realization is what's especially hurting the stock today.
Analog Devices: tech names are cautious and laying off people, but ADI posting solid numbers (ADI)
Analog Devices (ADI +6%) is making a nice move higher following its Q1 (Jan) earnings report this morning. It beat handily on EPS and revs. It also guided nicely above analyst expectations for Q2 (Apr) and it even increased its quarterly dividend by 13% to $0.86, which computes as a 1.9% yield. The metric that jumps out at us are its huge adjusted operating margins, which at 51.1% in Q1, was up sharply from 45.8% a year ago. It also guided to Q2 at 50.3-51.7%.
- Despite the macro uncertainty, ADI says demand remains resilient in its Industrial and Automotive markets, driven by automation and electrification. Looking ahead, ADI says pervasive sensing, AI-driven edge computing, and ubiquitous connectivity are enabling new applications for its chips. ADI sees itself as the bridge between the physical and digital worlds.
- Industrial is by far ADI's largest segment at 52% of Q1 revs and it grew nicely, up 26% yr/yr to $1.69 bln, which was better than overall company growth of 21%. Automotive, its second largest segment at 22% of revs, was the best of the bunch, growing 29% yr/yr to $718 mln. It is always a great sign to see the largest segments of a company showing the strongest growth. Communications segment revenue grew 18% yr/yr while Consumer was the lone decliner with sales dropping 5% yr/yr. But when it's your smallest segment showing the worse growth, that is not all bad.
- ADI has been benefitting from a huge backlog, which likely helps explain the robust Q2 guidance. In fact, ADI has been working with customers to get them to cancel some orders to reduce that backlog. Typically, its backlog would only cover about 9-10 weeks, but it had gotten to the point where its backlog exceeded its ability to ship by several quarters.
Overall, this was an impressive quarter. While many tech names are sounding cautious and laying off people, ADI is posting strong numbers. We also like its huge margins, its backlog is robust, it boosted its dividend and the stock has recently broken above a long term trading range in the $140-180 area. That is a chart pattern we like to see.
Airbnb journeys to price levels not seen since May following upbeat Q4 results, Q1 guidance (ABNB)
Shares of Airbnb (ABNB +12%) embark on a considerable incline, reaching levels not seen since May 2022, after the alternative accommodations marketplace registered beats on its top and bottom lines in Q4. ABNB was also upbeat in its 1Q23 guidance, expecting revs well ahead of consensus, as well as Nights and Experiences Booked growth to resemble the strength seen in Q4. Although, given that Q4 is typically the quietest quarter of the year for ABNB, this could be viewed as a minor weak point.
- Echoing bullish sentiments from organizations in the travel industry, like Expedia Group (EXPE), Marriott (MAR), and United Airlines (UAL), ABNB commented that travel demand remained strong in Q4. The company enjoyed its highest number of active bookers ever during the quarter, resulting in GAAP EPS exploding to $0.48 from $0.08 in the year-ago period and revs maintaining an over 20% growth rate for the seventh-straight quarter, appreciating 24.2% yr/yr to $1.90 bln. Likewise, Nights and Experiences booked climbed 20% yr/yr.
- Much of the positive themes during Q4 were a continuation of previous quarters. For instance, guests increasingly returned to city centers and cross-border travel -- ABNB's biggest revenue generator pre-pandemic -- with nights booked climbing 22% and 49% yr/yr, respectively. Meanwhile, non-urban and domestic travel remains sturdy. Additionally, longer stays on ABNB's platform remained stable in Q4 from the year-ago period boasting 21% of total gross nights booked.
- Internationally, where ABNB derives half its annual sales, cross-border travel to all regions increased in Q4. Although the Asia Pacific region experienced the biggest leap in Nights and Experiences Booked yr/yr, cross-border travel is still significantly down from pre-pandemic levels. Still, ABNB was optimistic that China's recent removal of travel restrictions would propel a continued recovery in the region. EXPE shared similar comments, noting that APAC is recovering quickly but still has a long way to go.
- In EMEA and Latin America, Nights and Experiences Booked outpaced overall bookings growth jumping 25% and 23% yr/yr, respectively.
- The buoyant tone carried through to ABNB's guidance, forecasting revs of $1.75-1.82 bln in Q1, an 18% increase at the midpoint yr/yr. However, ABNB expects the average daily rate (ADR) to be slightly lower in Q1 compared to the year-ago period, with downward pressure increasing throughout FY23 from mix shift (travelers returning to cities, softening in longer stays, etc.) and improved discounting tools. Still, ABNB predicts its FY23 EBITDA margins to be roughly the same as in FY22, meaning that internal efficiencies will offset the headwinds from the lower ADR.
After numerous travel-based firms registered solid quarterly reports in recent weeks, underscoring the resilient demand for travel, the market was pricing in lofty expectations for the hotel chain competitor. However, ABNB's Q4 results exceeded this high bar, a testament to the firm's capacity to grow alongside industry players, especially considering that ABNB's ADRs are 36% higher than they were in 2019. Lastly, the robust travel demand bodes well for Booking Holdings (BKNG), which reports Q4 earnings on February 23.
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