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Market Snapshot
briefing.com
| Dow | 33130.21 | +85.21 | (0.26%) | | Nasdaq | 11585.80 | +78.73 | (0.68%) | | SP 500 | 4011.69 | +20.64 | (0.52%) | | 10-yr Note | +4/32 | 3.88 |
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| | NYSE | Adv 1958 | Dec 974 | Vol 854 mln | | Nasdaq | Adv 2508 | Dec 1938 | Vol 4.6 bln |
Industry Watch
| Strong: Information Technology, Energy, Real Estate, Industrials, Health Care, Materials |
| | Weak: Communication Services, Consumer Discretionary, Utilities, Consumer Staples |
Moving the Market
-- Good response to NVIDIA's (NVDA) earnings and guidance
-- Noticeable pullback in Treasury yields after 10-yr note yield tested 4.00% earlier, hitting 3.97%
-- Disappointing earnings and/or guidance from many companies in the consumer discretionary space, stoking concerns about slower growth in coming quarters that may bring further downward revisions to earnings estimates
-- Upside leadership from mega cap stocks
-- S&P 500 finding support after breaching its 50-day moving average (3,980)
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Closing Summary
23-Feb-23 16:30 ET
Dow +108.82 at 33153.82, Nasdaq +83.33 at 11590.40, S&P +21.27 at 4012.32
[BRIEFING.COM] Today's trade started, and ended, on a more upbeat note. The S&P 500 was able to break a four day losing streak following pleasing earnings and guidance from NVIDIA (NVDA 236.64, +29.10, +14.0%), which fueled buying interest in mega cap and growth stocks.
The main indices did, however, spend a good portion of today's session pinned below their flat lines as investors digested disappointing earnings and/or guidance from many consumer-oriented companies. eBay (EBAY 45.35, -2.50, -5.2%), Dollar General (DG 217.11, -8.16, -3.6%), Domino's Pizza (DPZ 307.86, -40.60, -11.7%), Dutch Bros. (BROS 34.03, -3.96, -10.4%), and Wayfair (W 38.33, -11.48, -23.1%) were among the more notable standouts in that regard.
The main sticking point for stock market participants was that less discretionary spending is apt to translate to slower growth and further cuts to earnings estimates while the Fed looks intent on raising rates higher than expected for longer than expected.
The downside moves today had the S&P 500 fall below the 4,000 level, then its 50-day moving average at 3,980. Buyers stepped in to buy the dip, though, and the main indices all finished the session with decent gains.
Buying interest in mega cap and growth stocks drove the afternoon rebound effort. The Vanguard Mega Cap Growth ETF (MGK) rose 0.9% versus a 0.5% gain in the S&P 500 and the Russell 3000 Growth Index rose 0.8% versus a 0.2% gain in the Russell 3000 Value Index.
Most of the 11 S&P 500 sectors logged a gain today led by information technology (+1.6%) and energy (+1.3%). The communication services (-0.7%) and utilities (-0.5%) sectors, meanwhile, fell to the bottom of the pack.
A pullback in Treasury yields was another supportive factor for equities. Strikingly, market rates declined following some initial jobless claims and Q4 GDP data that supported the Fed's case for continuing to raise rates. The 10-yr note yield, which reached 3.97% earlier, settled the session down four basis points to 3.88%. The 2-yr note yield fell one basis point to 4.69%.
- Nasdaq Composite: +10.7% YTD
- Russell 2000: +8.3% YTD
- S&P Midcap 400: +7.7% YTD
- S&P 500: +4.5% YTD
- Dow Jones Industrial Average: UNCH YTD
Reviewing today's economic data:
- Initial jobless claims for the week ending February 18 declined by 3,000 to 192,000 (Briefing.com consensus 200,000). Continuing jobless claims for the week ending February 11 decreased by 37,000 to 1.654 million.
- The key takeaway from the report is that it covers the period in which the survey for the February employment report was taken. The remarkably low level of initial claims will contribute to expectations for another strong gain in nonfarm payrolls and the Fed sticking to its tightening ways.
- The second estimate for fourth quarter GDP showed a downward revision to 2.7% growth (Briefing.com consensus 2.9%) from the advance estimate of 2.9%. That was driven by a downward revision in personal spending growth to 1.4% from 2.1%. The GDP Price Deflator was revised up to 3.9% (Briefing.com consensus 3.5%) from 3.5%. The personal consumption expenditures index, meanwhile, was revised up to 3.7% from 3.2%.
- The key takeaway from the report is that it is an off-putting mix for the Fed. Growth is still running above potential and inflation is still running above target.
- Weekly EIA crude oil inventories showed a build of 7.65 million barrels following last week's build of 16.28 million barrels.
- Weekly EIA Natural Gas Inventories showed a draw of 71 bcf versus a draw of 100 bcf last week.
Market participants will receive the following economic data tomorrow:
- 8:30 ET: January Personal Income (Briefing.com consensus 0.9%; prior 0.2%), Personal Spending (Briefing.com consensus 1.3%; prior -0.2%), PCE Prices (Briefing.com consensus 0.4%; prior 0.1%), and Core PCE Prices (Briefing.com consensus 0.4%; prior 0.3%)
- 10:00 ET: January New Home Sales (Briefing.com consensus 620,000; prior 616,000) and final February University of Michigan Consumer Sentiment survey (Briefing.com consensus 66.6; prior 66.4)
Nearing session highs ahead of the close
23-Feb-23 15:30 ET
Dow +137.85 at 33182.85, Nasdaq +110.07 at 11617.14, S&P +29.45 at 4020.50
[BRIEFING.COM] The stock market is trending towards this morning's high heading into the closing bell.
After the close today, Warner Bros. Discovery (WBD), EOG Resources (EOG), Block (SQ), Booking Holdings (BKNG), Live Nation (LYV), Carvana (CVNA), Autodesk (ADSK), Intuit (INTU), and Opendoor Technologies (OPEN) are among the more notable companies reporting earnings.
Market participants will receive the following economic data tomorrow:
- 8:30 ET: January Personal Income (Briefing.com consensus 0.9%; prior 0.2%), Personal Spending (Briefing.com consensus 1.3%; prior -0.2%), PCE Prices (Briefing.com consensus 0.4%; prior 0.1%), and Core PCE Prices (Briefing.com consensus 0.4%; prior 0.3%)
- 10:00 ET: January New Home Sales (Briefing.com consensus 620,000; prior 616,000) and final February University of Michigan Consumer Sentiment survey (Briefing.com consensus 66.6; prior 66.4)
Market continues to inch higher
23-Feb-23 15:00 ET
Dow +85.21 at 33130.21, Nasdaq +78.73 at 11585.80, S&P +20.64 at 4011.69
[BRIEFING.COM] The main indices have continued to inch higher in the last half hour.
The upside moves coincided with many mega cap stocks reclaiming a positive position today. The Vanguard Mega Cap Growth ETF (MGK) is up 0.7% versus a 0.3% gain in the Invesco S&P 500 Equal Weight ETF (RSP) and a 0.5% gain in the S&P 500.
Treasury yields have also been pulling back at the same time. The 2-yr note yield is down one basis point to 4.69% and the 10-yr note yield is down four basis points to 3.88%.
Energy complex futures settled the session higher. WTI crude oil futures rose 2.0% to $75.37/bbl and natural gas futures rose 6.1% to $2.30/mmbtu.
Earnings movers dominate both sides of S&P 500
23-Feb-23 14:25 ET
Dow +0.21 at 33045.21, Nasdaq +53.58 at 11560.65, S&P +11.52 at 4002.57
[BRIEFING.COM] All three major averages have rendezvoused back in positive territory, the S&P 500 (+0.29%) in second place.
S&P 500 constituents ANSYS (ANSS 294.00, +27.22, +10.20%), Quanta Services (PWR 159.19, +10.79, +7.27%), and Newell Brands (NWL 14.90, 0.72, +5.08%) pepper the top of the standings. ANSS and PWR move higher following earnings, while NWL advances following news of an insider purchase from an executive. Also, NWL presents at the Consumer Analyst Group of New York (CAGNY) Conference tomorrow.
Meanwhile, Denver-based medical services firm DaVita (DVA 80.80, -4.57, -5.35%) is near the bottom of the S&P in light of underwhelming full year earnings guidance.
Nasdaq peeks back into the green, gold ends lower
23-Feb-23 14:00 ET
Dow -101.06 at 32943.94, Nasdaq +0.34 at 11507.41, S&P -2.07 at 3988.98
[BRIEFING.COM] With about two hours to go the tech-heavy Nasdaq Composite (flat) has peeked its head slightly above flat lines.
Gold futures settled $14.70 lower (-0.8%) to $1,826.80/oz, a YTD low as investors eyed yesterday's FOMC minutes as well as this morning's GDP data and jobless claims for clues on interest rates.
Meanwhile, the U.S. Dollar Index is up about +0.1% to $104.67.
Page One
Last Updated: 23-Feb-23 09:03 ET | Archive
A velveteen response to NVIDIA earnings report
A stock market on a losing streak got just what it needed to feel less like a loser. A mega-cap stock... a growth stock... a heavily-traded stock... and an "AI" stock posted better than expected fourth quarter results and issued first quarter guidance that was also better than expected.
That would be NVIDIA (NVDA), which is up 12.4% in pre-market action and is driving the gains in the S&P 500 and Nasdaq 100 futures.
Currently, the S&P 500 futures are up 20 points and are trading 0.6% above fair value, the Nasdaq 100 futures are up 126 points and are trading 1.1% above fair value, and the Dow Jones Industrial Average futures are up 67 points and are trading 0.2% above fair value.
This particular trade, though, feels a little gratuitous and we'll explain why.
NVIDIA's non-GAAP net income was down 35% year-over-year, its revenues were down 21% year-over-year, and the midpoint of its Q1 revenue guidance of $6.37-6.63 billion is down 21.6% year-over-year. That "good news" is somehow translating into an approximately $65 billion increase in NVIDIA's market capitalization and setting the equity futures market aglow.
That seems like an AI chatbot response gone wrong in our estimation, but it is happening in the real world and it is translating into real gains for NVIDIA shareholders and the broader market.
The question is, will this real-world reaction prove to be illusory or end up being the real thing today?
Again, we point to interest rates as a potential spoiler in the mix. The 1-yr T-bill yield is up one basis point to 5.12%, the 2-yr note yield is up one basis point to 4.71%, and the 10-yr note yield is up four basis points to 3.96%.
Those moves qualify as subdued in the current market environment, but if the 10-yr note yield stretches closer to 4.00%, or exceeds 4.0%, then this morning's velveteen market may just go back to being unloved.
Right now, it is getting the benefit of investors loving NVIDIA's report and loving the support that seems to be coming in with the S&P 500 sitting on top of its 50-day moving average (3,980). That love has overshadowed the distaste for disappointing earnings news and/or guidance from Moderna (MRNA), Unity Software (U), NetApp (NTAP), and Dollar General (DG) to name a few others that have shown all is not well.
All seems to be okay in the labor market, however. Initial jobless claims for the week ending February 18 declined by 3,000 to 192,000 (Briefing.com consensus 200,000). Continuing jobless claims for the week ending February 11 decreased by 37,000 to 1.654 million.
The key takeaway from the report is that it covers the period in which the survey for the February employment report was taken. The remarkably low level of initial claims will contribute to expectations for another strong gain in nonfarm payrolls and the Fed sticking to its tightening ways.
The second estimate for fourth quarter GDP showed a downward revision to 2.7% growth (Briefing.com consensus 2.9%) from the advance estimate of 2.9%. That was driven by a downward revision in personal spending growth to 1.4% from 2.1%. The GDP Price Deflator was revised up to 3.9% (Briefing.com consensus 3.5%) from 3.5%. The personal consumption expenditures index, meanwhile, was revised up to 3.7% from 3.2%.
The key takeaway from the report is that it is an off-putting mix for the Fed. Growth is still running above potential and inflation is still running above target.
Market participants took stock of the data but didn't fall out of love with the equity futures. They are still pointing to real gains for the indices when trading begins.
-- Patrick J. O'Hare, Briefing.com
NetApp gets lost in the clouds as slowing enterprise IT spending dents results and outlook (NTAP)
Last quarter, cloud storage company NetApp (NTAP) warned that its enterprise customers were optimizing their cloud spending and that scrutiny on IT budgets was increasing, resulting in longer selling cycles and smaller deal sizes. Unfortunately, those headwinds persisted in 3Q23 with particular weakness seen once again in the large enterprise and the America tech markets. NTAP's spending discipline and hiring freeze enabled it to exceed operating margin and EPS expectations despite revenue declining by 5.5% to $1.53 bln, missing analysts' estimates. However, the main story revolves around NTAP's slowing growth for the Public Cloud business, which was expected to reinvigorate the company's growth profile.
- The Public Cloud segment is mainly consumption-based and its performance is highly dependent upon customer spending levels at NTAP's three major hyperscaler partners -- Microsoft (MSFT), Google (GOOG), and Amazon (AMZN) Web Services.
- As NTAP's customers continue to optimize their cloud spending, its Cloud ARR growth has decelerated and is becoming more difficult to forecast. In Q3, Cloud ARR grew by 29% yr/yr to $605 mln, falling short of the company's internal expectations.
- Looking ahead, NTAP doesn't anticipate conditions improving anytime soon for Cloud. In fact, the company forecasted Cloud revenue and ARR to be about flat on a sequential basis in Q4.
- For other storage companies that are transitioning to a cloud-based model, such as Dell (DELL) and Hewlett-Packard Enterprise (HPE), the soft results and outlook for NTAP's cloud business is pretty discouraging. On a related note, both DELL and HPE are scheduled to report earnings on March 2.
- Besides scaling back on its own spending levels, NTAP is also leaning more on its products and Hybrid Cloud businesses to help mitigate the Public Cloud slowdown. For instance, the company introduced a portfolio of capacity flash arrays that support cost-sensitive customers.
- CEO George Kurian acknowledged that the company was slow to embrace customers' desire for lower-cost capacity all-flash systems, but the initial response to the new series has been very positive.
Although NTAP is refocusing on its storage business, it's not taking its eye off the ball as it relates to Public Cloud. Longer-term, the company still believes there is a massive growth opportunity there with gross margins that are accretive to its overall business. At the moment, though, the Cloud business is struggling under a cloudy macroeconomic picture that's showing no signs of clearing up soon.
Wayfair shares plummet after Q4 results and Q1 sales forecasts fail to meet growing expectations (W)
Wayfair (W -28%) is dropping sharply today after posting a wider-than-expected net loss in Q4 and forecasting Q1 revs to tumble more than analysts anticipated. The e-commerce furniture and home goods company was staring at a high bar leading into its Q4 report. After announcing buoyant Black Friday and Cyber Monday sales, shares shot up by over 30% in just two days. Then, last month, the stock reached highs of over $74, a 90% jump over two weeks, on management's cost-efficiency plans, primarily its decision to trim its workforce by approximately 10% resulting in breakeven adjusted EBITDA sooner than expected.
With the stock appreciating considerably over the past few months, largely on Wayfair's cost-savings plans, its earnings miss and bearish revenue forecast were all it took for investors to rapidly sell the news.
- In Q4, adjusted EPS fell more than analysts expected, dropping to $(1.67) from $(0.92). However, Wayfair's sales decline of 4.6% yr/yr to $3.1 bln did top estimates. Also, although Wayfair's 9.2% sequential jump in revs was likely baked into the price as the company tends to see a seasonal increase quarter/quarter in Q4, its solid 25% sequential climb in orders may not have been.
- The more significant jump in order growth than Wayfair initially expected was fueled by inflationary pressures beginning to revert during the quarter, a positive development for future order growth.
- The landscape overseas was similar to what Wayfair experienced in Q3. Macroeconomic pressures continued to weigh more heavily in regions outside the U.S., evidenced by international revs falling 20% yr/yr while U.S. sales were down just 2%. However, during the first half of last year, demand internationally was greater than in the U.S., so the disparity between the two segments may improve as the year progresses and comps normalize.
- Looking ahead, Q1 revenue-to-date is not shaping out as nicely as Wayfair may have wanted, trending down around 10% yr/yr. Management did comment that it is seeing a return to traditional seasonality in its core business, leading to its expectation of net revs ending Q1 down in the high single digits. Still, this forecast was below consensus.
- On a lighter note, Wayfair reiterated its timetable to reach adjusted EBITDA breakeven this year.
Before Wayfair's Q4 report, we cautioned that expectations were rising, especially after rival La-Z-Boy (LZB) sprang considerably higher on excellent JanQ results. Unfortunately for Wayfair, its Q4 report did not meet these growing expectations, causing its shares to plummet well below their 200-day moving average (46.83). With the housing market, which is highly correlated with Wayfair's sales and order growth, currently depressed, the company may continue to endure elevated volatility over the near term. However, if inflationary pressures continue to ease, as Wayfair witnessed during Q4, it could catalyze the stock. Furthermore, Wayfair is still on track to achieve its adjusted EBITDA breakeven goal this year, which, when actually reached, could also spark buying interest.
NVIDIA powers chip space with beat-and-raise report as its AI investments begin to pay off (NVDA)
High inventory levels across the consumer electronics space, a slowdown in enterprise IT spending, and macroeconomic uncertainties have plagued the semiconductor industry, but NVIDIA's (NVDA) beat-and-raise Q4 earnings report is brightening the gloomy sentiment today.
- Last quarter, NVDA predicted that its PC-centric gaming segment (~30% of Q4 revenue) would see a rebound in Q4 as channel inventory levels continue to correct. That forecast came to fruition with gaming revenue increasing by 16% sequentially to $1.83 bln, handily beating analysts' estimates.
- Although NVDA may have been more proficient than other chip makers in managing the supply and demand imbalance by significantly reducing shipments in Q2 and Q3, the qtr/qtr improvement still signals that the worst of the correction may be over. That's good news for companies like Advanced Micro Devices (AMD), Intel (INTC), and Micron (MU).
- After jumping by 31% in Q3, revenue in NVDA's Data Center segment grew at a much more modest pace in Q4, increasing by 11% yr/yr to $3.62 bln, missing expectations. Persistent weakness in China -- NVDA's second largest market -- has weighed on sales of the company's graphic processing units (GPUs). However, NVDA is anticipating an acceleration of growth for Data Center this fiscal year as China's economy reopens and as hyperscalers continue to ramp up their investments.
These are encouraging data points for the semiconductor industry overall, but NVDA looks poised to outperform the field for the foreseeable future.
- The company's superior growth prospects are tied to the substantial investments it has made in AI-powered technology over the past several years. During last night's earnings call, CEO Jensen Huang commented that AI adoption is at an inflection point as the company prepares to launch new cloud-based AI products.
- Specifically, NVDA's new AI supercomputer, which runs on its H100 GPU, is now in full production. The company's strategy is to offer AI-as-a-Service to enterprises, enabling them to deploy large language models and other AI workflows.
- Working in NVDA's favor is the fact that GPUs are a natural fit for powering the kind of high-level computing that's involved in AI, including for chat bots like OpenAI's ChatGPT. By far, NVDA is the global leader in the GPU market with a share greater than 75%.
- NVDA's dominance in GPUs and the emergence of AI technology bodes very well for its Data Center segment as demand for its H100 processor accelerates and as it expands its AI cloud service. On the latter point, NVDA is partnering with cloud computing giants like Microsoft (MSFT) and Google (GOOG) to enable customers to access its AI platform via a browser.
Along with the improving gaming climate, this building momentum in the Data Center segment underpinned NVDA's upside Q1 revenue guidance. The future does indeed look very bright for NVDA, which is distancing itself from other chip makers thanks to its AI-based growth prospects.
Etsy heads lower despite upside quarter as cautious Q1 guidance weighs on shares
Etsy (ETSY -2%) is heading lower following Q4 results/guidance last night. This was an important quarter because the Q4 holiday period is typically Etsy's largest of the year at 30-32% of GMS. Revenue and adjusted EBITDA were both above the high end of prior guidance, while GMS of $4.0 bln was at the high end of prior guidance. However, the Q1 guidance/commentary seems to be making investors a bit nervous.
- Etsy saw strong trends in apparel, bags, purses and other gifts, as well as in Paper & Party driven by more in-person holiday gatherings this year. Top selling items during the holiday included personalized gifts, such as custom named necklaces and jewelry boxes. It also helped that Etsy boosted marketing spend with holiday ad campaigns in the US, UK and Germany which gave the quarter a push.
- Etsy does not provide an adjusted EPS number, so we think Adjusted EBITDA is a better profitability metric rather than GAAP EPS. In Q4, it rose 3.8% yr/yr to a record $227.2 mln, well ahead of $189-211 mln guidance when you apply margin guidance to EBITDA guidance. Adjusted EBITDA margin of 28%, was down about 300 bps yr/yr, but above prior guidance of 27%. The decline was primarily due to higher marketing spend. Given macro uncertainty, Etsy is guiding to Q1 margin of just 26-27%.
- Probably one of the more important big picture takeaways from the report is that Etsy has been able to keep many of the customers it picked up during the pandemic. Revenue is nearly 3x the size it was pre-pandemic. Etsy also has nearly twice as many active buyers as it did in 2019. These metrics are easing investors' fears that Etsy would see a sharp decline as stores opened back up. In fact, it appears the pandemic introduced a lot of new customers to Etsy and they are sticking with the brand.
- Etsy ended 2022 with 89.4 mln active buyers, which was down slightly yr/yr but has held up very well through reopening. Etsy added 9.5 mln new buyers in Q4, down 6% yr/yr but 51% higher on a sequential basis and significantly higher than the 44% sequential growth in new buyers in the prior year. Another metric that stood out was Etsy reactivating 24 mln buyers who lapsed over the prior 12 months, the most ever reactivated in one year.
Overall, the Q4 results were really quite good and we applaud Etsy's decision to step on the gas in terms of higher marketing spend. It seems like it paid off. Etsy has also made it a priority to recapture lapsed buyers and it has been successful. Also, from a bigger picture perspective, we think 2022 results overall showed that Etsy is going to be fine post-pandemic. The feared drop-off in its business has not materialized, which is good news and we suspect that argument will fade away. Finally, we share Etsy's concerns about a possible shift in consumer demand to services and household supplies, like groceries, and away from discretionary categories. However, Etsy seems to have accounted for this with its pretty cautious Q1 guidance.
eBay sells off as its lack of FY23 guidance and cautionary remarks spooks investors (EBAY)
eBay (EBAY -7%) is struggling to entice many bidders today despite surpassing analyst earnings and sales estimates in Q4. The online auction and shopping platform also piled on several other highlights, including Gross Merchandise Volume (GMV) that exceeded prior projections, an upbeat Q1 revenue forecast, and a 14% quarterly dividend hike. At the same time, the midpoint of EBAY's Q1 earnings outlook met analyst targets.
So why are investors unimpressed? EBAY did not provide its full-year expectations, as it did in prior quarters, due to the "dynamic operating environment." Management did outline some of its thoughts on how 2023 may play out, but it was primarily bearish. Its baseline expectation is that demand does not materially improve during 1H23 due to lingering uncertainty across the company's largest markets. Conversely, EBAY sees potential for improving underlying economic conditions as the year progresses but noted that it is still too early to confidently predict a second-half recovery.
Leading into EBAY's Q4 report, we spotlighted the importance of the company's FY23 outlook aligning with its Investor Day predictions detailed in March 2022. Last quarter, management remained confident in achieving its goals of adjusted EPS growing roughly +10% yr/yr in FY23, accelerating to mid-teens growth in FY24, GMV climbing +4% yr/yr in FY23, accelerating to +5% in FY24, and revs outpacing GMV for the foreseeable future, driven by the company's payments and ads businesses. As such, the lack of confidence just three months later is discouraging.
- Still, EBAY did touch on a few of these points. Ads and payments were solid in Q4, with first-party advertising products, mainly Promoted Listings, delivering $276 mln of revenue, a 19% jump yr/yr, easily outpacing GMV, which slipped 12% to $18.2 bln. EBAY stated that it is tracking nicely towards its Investor Day targets, resulting in the businesses likely outpacing GMV growth in FY23.
- GMV growth in FY23 was less clear. Management stated that the timing of its GMV framework outlined at Investor Day was a function of the potential severity and duration of the current economic climate.
- Adjusted EPS for the year was also hazy. Management did not delve into details beyond its comprehensive Q1 guidance, only mentioning that its priority in 2023 is to offset share dilution while continuing to balance the company's capital needs.
Bottom line, without formal guidance reiterating EBAY's long-term Investor Day targets, investors are proceeding with caution today. The unclear outlook also casts a dark cloud on otherwise decent Q4 results, which showed notable improvements over prior quarters, such as stabilization in active buyers and excellent advertising growth. Still, although EBAY is not immune to inflationary pressures, its auction format is attractive for consumers looking for the best bang for their buck, which could prove the difference in FY23.
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