| | | Market Snapshot
briefing.com
| Dow | 32928.96 | +511.37 | (1.58%) | | Nasdaq | 12789.48 | +146.47 | (1.16%) | | SP 500 | 4166.82 | +49.45 | (1.20%) | | 10-yr Note | -3/32 | 4.877 |
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| | NYSE | Adv 1923 | Dec 893 | Vol 904 mln | | Nasdaq | Adv 2681 | Dec 1651 | Vol 4.1 bln |
Industry Watch
| Strong: Communication Services, Information Technology, Consumer Discretionary, Financials |
| | Weak: -- |
Moving the Market
-- Bouncing back after the S&P 500 entered correction territory with Friday's close
-- Looking ahead to a busy week
-- Strength in mega caps
-- Watching movement in Treasuries
-- Other factors include impressive results from McDonald's (MCD), news that Stellantis (STLA) and UAW reached tentative agreement, and some M&A activity
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Closing Summary
30-Oct-23 16:30 ET
Dow +511.37 at 32928.96, Nasdaq +146.47 at 12789.48, S&P +49.45 at 4166.82
[BRIEFING.COM] The major indices closed near their best levels of the day with gains ranging from 0.7% to 1.6%. Stocks experienced somewhat choppy action early on, but the rebound built up steam in the afternoon trade after Friday's close brought the the S&P 500 into correction territory (i.e., down 10%+ from a prior closing high).
Gains were fairly broad based, paced by outperforming mega caps. The Vanguard Mega Cap Growth ETF (MGK) jumped 1.5% versus a 1.2% gain in the market-cap weighted S&P 500. Apple (AAPL 170.29, +2.07, +1.2%) for its part logged a 1.0% gain ahead of its earnings report on Thursday.
The equal weighted S&P 500 climbed 0.8% and all 11 sectors registered a gain. The communication services (+2.1%) and financials (+1.7%) sectors led the pack while an additional five sectors climbed more than 1.0%. The energy sector (+0.3%) saw the slimmest gain.
The positive bias was partially tied to a buy-the-dip mentality after Friday's disappointing finish, aided by some corporate news and relief that the Israel-Hamas War is still a two-party war.
McDonald's (MCD 260.15, +4.39, +1.7%) reported impressive quarterly results; Stellantis (STLA 18.00, -0.04, -0.2%) and General Motors (GM 27.36, +0.14, +0.5%) reached tentative deals with the UAW; and Healthpeak (PEAK 15.98, -0.44, -2.7%) and Physicians Realty Trust (DOC 11.01, -0.06, -0.5%) announced an all-stock merger of equals valued at approximately $21 billion.
Participants were also gearing up for a busy week that includes the Bank of Japan policy decision overnight that might feature a tweak to the yield curve control policy, the ISM Manufacturing PMI on Tuesday, the FOMC decision on Wednesday, the Bank of England policy decision on Thursday, and the October Employment Situation Report and ISM Services PMI on Friday.
Semiconductor stocks were a notable pocket of weakness, sliding alongside ON Semiconductor (ON 65.34, -18.18, -21.8%), which reported better-than-expected Q3 results, but issued disappointing Q4 guidance. The PHLX Semiconductor Index fell 1.3%.
The U.S. Treasury quarterly refunding statement showed plans to borrow $776 billion in Q4, which is $76 billion below the estimate from three months ago. The 2-yr note yield rose two basis points to 5.05% and the 10-yr note yield climbed three basis points to 4.88%.
There was no U.S. economic data of note today.
- Nasdaq Composite: +22.2% YTD
- S&P 500: +8.5% YTD
- Dow Jones Industrial Average: -0.7% YTD
- S&P Midcap 400: -3.5% YTD
- Russell 2000: -6.5% YTD
Looking ahead, Tuesday's economic calendar features:
- 8:30 ET: October Chicago PMI (Briefing.com consensus 45.0; prior 44.1) and Q3 Employment Cost Index (Briefing.com consensus 1.0%; prior 1.0%)
- 9:00 ET: August FHFA Housing Price Index (prior 0.8%) and August S&P Case-Shiller Home Price Index (Briefing.com consensus 0.3%; prior 0.1%)
- 10:00 ET: October Consumer Confidence (Briefing.com consensus 100.0; prior 103.0)
Market remains near highs
30-Oct-23 15:35 ET
Dow +552.63 at 32970.22, Nasdaq +169.80 at 12812.81, S&P +55.10 at 4172.47
[BRIEFING.COM] The major indices remain near session highs ahead of the close.
The 2-yr note yield rose two basis points to 5.05% and the 10-yr note yield climbed three basis points to 4.88%.
Looking ahead, Tuesday's economic calendar features:
- 8:30 ET: October Chicago PMI (Briefing.com consensus 45.0; prior 44.1) and Q3 Employment Cost Index (Briefing.com consensus 1.0%; prior 1.0%)
- 9:00 ET: August FHFA Housing Price Index (prior 0.8%) and August S&P Case-Shiller Home Price Index (Briefing.com consensus 0.3%; prior 0.1%)
- 10:00 ET: October Consumer Confidence (Briefing.com consensus 100.0; prior 103.0)
Stocks moving sideways; energy complex settles mixed
30-Oct-23 15:05 ET
Dow +566.63 at 32984.22, Nasdaq +166.69 at 12809.70, S&P +54.26 at 4171.63
[BRIEFING.COM] The major indices are little changed over the last half hour.
WTI crude oil futures fell 3.9% to $82.24/bbl and natural gas futures rose 13.6% to $3.59/mmbtu.
After today's close, Tenet Healthcare (THC), V.F. Corp (VFC), Amkor (AMKR), Public Storage (PSA), Matson (MATX), Pinterest (PINS), Monolithic Power (MPWR), Wolfspeed (WOLF), and Lattice Semi (LSCC) are among the earnings reporters.
Marathon Petroleum (MPC), Sysco (SYY), Caterpillar (CAT), Pfizer (PFE), Amgen (AMGN), Eaton (ETN), GE HealthCare (GEHC), JetBlue Airways (JBLU), Global Payments (GPN), BP (BP), and Anheuser-Busch InBev (BUD) are among the names reporting earnings ahead of Tuesday's open.
Charter, Eastman among post-earnings recovery leaders in S&P 500
30-Oct-23 14:30 ET
Dow +504.05 at 32921.64, Nasdaq +139.11 at 12782.12, S&P +46.05 at 4163.42
[BRIEFING.COM] The S&P 500 (+1.12%) is narrowly in second place, up about 46 points in recent trading.
S&P 500 constituents Charter (CHTR 390.18, +18.18, +4.89%), Eastman Chemical (EMN 75.26, +2.68, +3.69%), and Adobe (ADBE 526.81, +18.69, +3.68%) dot the top of the standings. CHTR recoups a portion of Friday's post-earnings selloff, while EMN continues Friday's post-earnings rally, and ADBE is on pace to cut its recent losing streak at four sessions.
Meanwhile, First Solar (FSLR 135.62, -7.64, -5.33%) is near the bottom of the S&P as solar displays general weakness amid recent weak guidance from the likes of Enphase Energy (ENPH 78.60, -3.48, -4.25%) and SolarEdge Technologies (SEDG 74.94, -2.05, -2.66%).
Gold modestly higher with Middle East in focus, Fed policy decision on the horizon
30-Oct-23 14:00 ET
Dow +501.33 at 32918.92, Nasdaq +144.83 at 12787.84, S&P +48.31 at 4165.68
[BRIEFING.COM] With about two hours to go on Monday the tech-heavy Nasdaq Composite (+1.15%) is at the bottom of the major averages, albeit on gains of more than 144 points.
Gold futures settled $7.10 higher (+0.4%) to $2,005.60/oz with the market keeping an eye on developments from the Middle East ahead of this week's Fed policy decision.
Meanwhile, the U.S. Dollar Index is down about -0.3% to $106.17.
Page One
Last Updated: 30-Oct-23 09:03 ET | Archive
Poised for a technical rebound
It is a new week, which will eventually include a new month for the stock market. That seems like a welcome development considering the S&P 500 is down 4.0% so far in October, has traded below its 200-day moving average, and is now in a technical correction after last week's losses pulled it more than 10% off its July closing high. The Nasdaq, down 4.4% in October, is also in a technical correction.
It's not over yet, however. There are two more trading days to go in October. The hopeful news is that the first of those trading days is slated to start on a solidly higher note even though the 10-yr note yield is up five basis points to 4.90%.
Currently, the S&P 500 futures are up 24 points and are trading 0.6% above fair value, the Nasdaq 100 futures are up 95 points and are trading 0.7% above fair value, and the Dow Jones Industrial Average futures are up 196 points and are trading 0.6% above fair value.
This positive disposition has a lot to do with the negative disposition that has preceded it. Entering the "correction zone" has triggered some buy-the-weakness interest predicated on the speculation that the market is due for a bounce.
That speculation has ramped up a bit with the awareness that the Israel-Hamas War did not escalate into a wider regional conflict over the weekend. Israeli troops entered Gaza over the weekend, but the understanding at this point is that it is still a war between Israel and Hamas.
That understanding has helped deflate oil prices some. WTI crude futures are down 2.0% to $83.84 per barrel.
Other factors lending to the positive bias include the impressive earnings results from McDonald's (MCD), the UAW and Stellantis (STLA) reaching a tentative agreement on a new labor contract, some M&A activity that has featured a $21 billion all-stock merger of equals between Healthpeak (PEAK) and Physicians Realty Trust (DOC), and positive price action in the mega-cap stocks.
The latter includes Apple (AAPL), which is up 0.3% and will report its earnings results after Thursday's close. Apple, however, is trailing other mega-cap stocks in pre-market action as it is also contending with a Bloomberg report that suggests iPhone 15 sales may not be as strong as expected in China.
Apple highlights another huge week of earnings reporting that will include quarterly results from over 150 S&P 500 companies. But, wait, there's more.
This week will also include policy decisions by the Bank of Japan (tonight), the Federal Reserve (Wednesday), and the Bank of England (Thursday), the Treasury's Q4 borrowing estimates (today at 3:00 p.m. ET) and quarterly refunding announcement (Wednesday), the Consumer Confidence Index (Tuesday), the ISM Manufacturing PMI (Tuesday), the ISM Services PMI (Friday), and the October Employment Situation Report (Friday).
In other words, this is going to be a huge week of news that is going to create a lot of trading opportunities. The first opportunity comes today, and at the moment, participants look ready to take advantage of things from a technical standpoint.
-- Patrick J. O'Hare, Briefing.com
(CORRECTION: the original post indicated the S&P 500 was down 5.6% for the month. It should have said down 4.0% for the month. It is the equal-weighted S&P 500 that was down 5.6% for the month. The comment has been corrected).
Revvity sinks on reduced FY23 forecasts and withdrawn 2024-2026 financial goals (RVTY)
Revvity (RVTY -14%), formerly PerkinElmer, missed earnings and revenue forecasts in Q3, a 180 from its upbeat figures last quarter. While lackluster headline performance is casting a cloud over shares of the diagnostic, life science, and industrial testing organization, the overwhelming issue today is RVTY's reduced FY23 outlook. The company slashed its adjusted earnings and revenue forecasts to $4.53-4.57 from $4.70-4.90 and $2.72-2.74 bln from $2.80-2.85 bln, respectively. Today's lowered guidance marks the third consecutive quarter RVTY has had to adjust its FY23 outlook lower.
- What happened? Softness occurred late in the quarter due to a downturn in demand from RVTY's pharma and biotech customers. This drove a low-single-digit organic drop in the company' Life Sciences business. This trend had a spillover effect, pressuring RVTY's applied genomics and genomic lab divisions within its Diagnostics segment, causing this business to register sales growth of just 4% organically yr/yr, excluding COVID.
- Both of these segments' revenue figures were lower than RVTY forecasted last quarter. As a result, total revenue of $670.3 mln, a 5.9% drop yr/yr, fell short of internal and analyst expectations.
- Discouragingly, the bad news did not stop at a problematic Q3. RVTY anticipates the headwinds from the quarter to carry over into Q4, resulting in non-COVID organic revenue growth to be down in the mid-single digits yr/yr, bringing FY23 growth to approximately +2%, considerably down from the company's +4-6% estimate outlined three months ago. Furthermore, these challenges are not letting off the gas after 2023 is completed. RVTY projects the pharma/biotech issues to persist into at least 1H24.
- While cautiously optimistic undertones could have helped prevent such a striking sell-off today, management did not offer much to alleviate newfound fears. Alongside its cut FY23 guidance, RVTY withdrew its previously provided 2024-2026 mid-term financial goals, pending an updated analysis of how industry demand may play out over that timeframe. Management expects a new forecast by the end of the year.
- To contend with the unfavorable demand landscape, RVTY is focusing on costs, looking to take additional actions heading into next year beyond the approximately $80 mln of expenses it should have already cut by the end of 2023.
Bottom line, RVTY is amid more market pressure than it previously anticipated. The company believes its business is better insulated from macro and industry pressures than some of its peers. However, that does not mean it is immune to a softer spending environment. Recently hitting 52-week lows, the healthcare sector has been struggling lately. RVTY's lowered FY23 guidance and withdrawn mid-term financial outlook do not help put the healthcare industry in a better light. Nevertheless, there are silver linings from RVTY's Q3 report, including robust Software and Immunodiagnostics demand. Unfortunately for the company, it could take time until the bulk of its business begins to enjoy a meaningful turnaround.
Western Digital shares head north after posting upside results and announcing Flash spin-off (WDC)
Western Digital (WDC), a manufacturer of memory and data storage devices, is spiking higher on a pair of positive developments after its stock plunged by about 9% last week. The company reported better-than-expected 1Q24 results and issued guidance that indicated a continuation of its recovery, but the bigger story revolves around its plan to separate its hard disk drive (HDD) and flash businesses through a spin-off.
- Last Thursday, the stock dove lower after reports surfaced that WDC and Japan-based Kioxia Holdings called off talks of a potential merger that would have created the world's third largest memory company. Resistance from SK Hynix, a major shareholder in Kioxia, and concerns that the merger wouldn't gain regulatory approval in China are a couple possible reasons why WDC cut the cord on the deal.
- The move to abandon merger talks set the stage for WDC to go down the spin-off path, which carries less uncertainty than going the M&A route. While both HDD and Flash have struggled through a steep down cycle as its PC and smartphone OEM customers work through high inventory levels, the Flash business in particular has been hit hard.
- In FY23 (ending June 30), Flash revenue plummeted by 38% to $6.1 bln, while non-GAAP gross margin crated to 7.1% from 36.2% a year-earlier.
- In comparison, HDD experienced a 30% drop in revenue with non-GAAP gross margin slipping to 24.1% from 29.4%.
- Market participants are applauding the decision because it will allow each business to focus more intently on their specific growth opportunities, while also improving the operational efficiencies for each.
- For example, HDD will be free to ramp up its investments in its product portfolio, particularly targeting the cloud market. Meanwhile, Flash will be better positioned to fully capitalize on the recovery in the PC and smartphone markets.
- On that note, the cloud end market continued to experience softness in Q1 with revenue decreasing by 12% and representing about 32% of total revenue. However, WDC stated that it now expects the cloud business to grow moving forward.
- As illustrated by Intel's (INTC) solid beat-and-raise report last week, the PC market is on the cusp of returning to growth again, which is providing a lift for the flash-centric Client and Consumer end markets.
- In Q1, revenue in Client was up 11% qtr/qtr, while Consumer generated growth of 14%. Looking ahead to Q2, WDC expects the recovery in Flash to progress, forecasting modest byte growth and ASP improvement.
The main takeaway is that WDC's upside results and better-than-expected Q2 EPS and revenue guidance indicate that its turnaround is taking hold. With both the HDD and Flash businesses stabilizing, WDC is now in a better position to separate the two in a move that should drive stronger shareholder value.
ON Semiconductor turns investors off today by guiding Q4 figures below consensus (ON)
A lighter-than-expected Q4 outlook is turning investors off from ON Semiconductor (ON -18%) today. The power and signal management semiconductor manufacturer, primarily selling to the automotive world, exceeded top and bottom line estimates in Q3, reflecting some positive momentum from last quarter trickling into the succeeding three months. However, after three straight quarters of improving financial performance, ON is projecting headline numbers to track lower sequentially in Q4.
While downbeat Q4 guidance from peers Texas Instruments (TXN) and STMicroelectronics (STM) earlier this month were clear warning signs ahead of ON's report today, investors were unprepared for the company's unnerving remarks. Management stated that it is taking a "very cautious" approach after observing pockets of softness with Tier 1 customers (its largest) in Europe, a sizeable market for ON. As a result, ON forecasted Q4 figures below consensus, fueling investor angst today and keeping a boot on its share price, which had already given up over 20% since July highs.
- What is happening? Prominent European customers are still working through their inventories, extending the timeline of a potential recovery. STM touched on this last week, mentioning that orders for auto are dropping significantly, particularly in Europe.
- Meanwhile, ON commented that a single automotive OEM reduced its demand, impacting its $1.0 bln silicon carbide (SiC) target, a critical component used amongst EV makers, expecting to ship roughly $800 mln. The automotive industry comprises the bulk of ON's annual revenue, slightly over 40% in FY22, far exceeding its next-largest end market, industrial, at 28%, making a hit to its automotive sales substantial.
- As we saw for TXN, the industrial market is also starting to grow more challenging. ON's is witnessing greater sequential declines within its industrial business.
- As a result of underwhelming demand conditions, ON is proactively lowering its SiC utilization from 72% in Q3 to the mid to high 60% range going forward. This measure will produce a minor margin headwind; ON anticipates Q4 non-GAAP gross margins between 45.5-47.5%, a possible retreat from 47.3% delivered in Q3.
- With the midpoint of ON's margins projected to contract sequentially in Q4, it predicted EPS to do the same, targeting $1.13-1.27, a 14% decline from Q3 at the midpoint. Revenue is also expected to slip, landing between $1.95-2.05 bln.
There was still some good news. ON registered a similar performance to previous quarters in Q3, posting a mild 4% drop in EPS yr/yr to $1.39 and a 0.5% contraction in revenue to $2.18 bln, both better than expected. ON's market share is also expanding, estimated at grow to over 25% of the silicon carbide (SiC) market by the end of this year.
Still, ON's tempered near-term outlook, primarily emanating from softness in Europe, is spooking the market today. Longer-term dynamics, such as auto OEMs shifting toward total EV production, remain favorable. However, in the meantime, new lackluster developments in Europe are triggering significant unease.
McDonald's trades modestly higher on Q3 results; comps were good but traffic was down (MCD)
McDonald's (MCD +1%) is trading modestly higher after reporting yet another nice EPS and revenue beat. The Q3 EPS upside was not quite the blowouts we saw in Q1-Q2, but it was still a healthy double-digit beat. What really stood out were MCD's Q3 global comps at +8.8% and that is despite lapping some pretty tough +9.5% comps a year ago. Again, it was not quite the double digit comps we saw in Q1-Q2, but this was still a very good number.
- US comps also came in at a robust +8.1%, which again was not quite the level of the Q1-Q2 double digit comps, but still very good given the macro headwinds. US comps benefited from strong average check growth, driven by strategic menu price increases. MCD says the US consumer continues to be more discriminating because of inflation and rising rates. MCD notes that the pressure is felt more by lower income consumers.
- Outside of the US, International Operated Markets (IOM) comps increased +8.3%, driven by strong comps in most markets, led by the UK, Germany and Canada. International Developmental Licensed (IDL) comps increased +10.5%, with strong sales in all geographic regions.
- Industry traffic was down in Q3, as it has been for the last couple of quarters. However, MCD believes it maintained its QSR traffic market share in Q3. MCD also continues to see strong share gains in both beef and chicken. Even with weaker traffic, MCD notes that its comp sales continue to lead the industry. MCD says its digital platform is coming to life at scale, which is allowing it to really interact with customers on a much more individualized basis. MCD also feels its marketing execution has been elevated and is resonating in a more culturally relevant way, especially in the US.
- MCD gained share with both middle and higher income consumers as the company is benefitting from a trade down from more expensive alternatives. MCD says it held share with the lower income consumers in a pretty competitive marketplace. However, traffic from lower income consumers was down. MCD is seeing some step-up in promotional activity by some competitors but nothing alarming. MCD plans to maintain its value leadership, which goes beyond just price. It includes a better overall customer experience, which MCD is doing through faster service times.
Overall, this quarter had some cross currents. On the positive side, MCD reported nice upside for EPS and revs, albeit the upside was more narrow than Q1-Q2. Also, US comps were nicely higher. However, we think investors are maybe discounting that a bit because a lot of that was driven by price hikes. MCD's comments about weaker traffic, especially among lower income customers, seem to be worrying investors. Also, MCD struck us as sounding a bit more negative on the call generally than it has on recent calls. Based on the stock having pulled back a good bit since late July, we think investors were bracing for a more downbeat quarter and they got it. That is likely why the stock is not lower today.
Ford Motor hits speed bump with EPS miss, FY23 guidance withdrawal (F)
Ford Motor (F -12%) is trading sharply lower today following its Q3 earnings report last night. It missed on EPS and withdrew FY23 guidance, just as GM did earlier this week. Before digging into it, recall that Ford recently changed its business segment reporting. Ford segments now consist of Ford Model e (EV segment), Ford Blue (gas and hybrid vehicles), and Ford Pro (commercial vehicles).
- Adjusted EBIT in Q3 was $2.2 bln with a margin of 5%. Both improved yr/yr, however, costs increased, underscoring the fact that Ford still has more work to do especially on warranty expense and material cost. In terms of withdrawing guidance, Ford says it was on track to comfortably deliver on prior guidance of full-year adjusted EBIT of $11-12 bln. However, the UAW strike created significant uncertainty. Even though Ford reached a tentative UAW agreement and its employees are returning to work, there is still disruption in the industry with ongoing strikes and the impact to the shared supply base. Plus, the ramp up of production will take time.
- We did not get a lot of specifics on the UAW deal. Once the deal is ratified, Ford will provide a deeper look at the contract and its impact. Right now, Ford is focused on restarting three important assembly plants, calling back more than 20,000 Ford employees to work, supporting its suppliers as they restart etc.
- Its Model e segment posted $(1.3) bln of losses in the quarter, reflecting continued investments and a more challenging market. Given the dynamic EV environment, Ford is being judicious about production and adjusting future capacity to better match market demand. For example, Ford notes it took out some Mustang Mach-E production and it has been slowing down on several investments.
- Ford Blue posted Q3 EBIT of $1.7 bln, up $300 mln yr/yr, driven by lower commodity costs and higher pricing that more than offset higher warranty costs. Ford notes it has a wave of new products coming in the next few months: the new F-150, the Ranger, a brand-new Explorer and Expedition and Navigator. Close to 60% of its volume and revenue in the US will be new and refreshed next year.
- Ford Pro generated EBIT of $1.7 bln and delivered a strong double-digit margin of 12%. Ford describes Pro as a massive driver of Ford's overall growth and profitability. Ford says its competitors seem to be trying to cut and paste its Pro strategy, but the moat will not be easy to cross. Commercial order banks are healthy, fueled by a large backlog of infrastructure projects (5G, road construction). Pro also continued to see strong growth in both new software subscriptions and mobile repair orders.
Overall, the EPS miss and withdrawal of guidance are weighing on the stock today. Ford's cautious comments on the EV market are also likely adding to the weakness. We also think investors wanted more details on the UAW agreement. As such, a lot of uncertainty remains. However, we should get more clarity when Ford reports Q4 results in early February. We will then get our first look at FY24 guidance.
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