Market Snapshot
briefing.com
| Dow | 34112.27 | -40.33 | (-0.12%) | | Nasdaq | 13650.42 | +10.56 | (0.08%) | | SP 500 | 4382.78 | +4.40 | (0.10%) | | 10-yr Note | +3/32 | 4.52 |
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| | NYSE | Adv 1176 | Dec 1599 | Vol 886 mln | | Nasdaq | Adv 1676 | Dec 2614 | Vol 4.7 bln |
Industry Watch
| Strong: Real Estate, Information Technology, Industrials, Materials |
| | Weak: Utilities, Energy, Consumer Discretionary, Health Care, Consumer Staples |
Moving the Market
-- Growing sense that the market is due for a pullback after multi-session winning streak
-- Watching activity in Treasuries following a decent $40 billion 10-yr note sale
-- Sharp decline in oil related to growth concerns
| Closing Summary
08-Nov-23 16:30 ET
Dow -40.33 at 34112.27, Nasdaq +10.56 at 13650.42, S&P +4.40 at 4382.78
[BRIEFING.COM] Today's trade was somewhat lackluster. The market was in a steady grind lower through most of the morning without any strong directional drivers. The major indices ultimately climbed off session lows in the afternoon trade, which left the market little changed from yesterday.
The afternoon improvement in the stock market was helped by mega cap leadership, along with a decent $40 billion 10-yr note sale. Treasuries, meanwhile, were little changed following the results of the auction. The 10-yr note yield, at 4.53% just before the results were announced at 1:00 p.m. ET, settled the session at 4.52%.
The overall muted vibe in today's trade was partially driven growth worries, which manifested themselves in oil prices ($75.42/bbl, -1.91, -2.5%) and the underperformance of the Russell 2000 (-1.1%). A growing sense that the market is due for a pullback also contributed to the negative bias. The S&P 500 is up 4.5% so far in November and the Nasdaq is up 6.2% for the month.
S&P 500 sector performance was somewhat mixed. The heavily-weighted information technology sector (+0.6%) led the outperformers while the energy sector (-1.2%) saw the largest decline by a decent margin.
Some individual stocks made big moves after reporting earnings. Robinhood (HOOD 8.36, -1.39, -14.3%) and eBay (EBAY 39.95, -0.92, -2.0%) were losing standouts in that regard. Extra Space Storage (EXR 118.53, +11.33, +10.6%), meanwhile, logged a big gain following its earnings report and was among the top components in the S&P 500.
- Nasdaq Composite: +30.4% YTD
- S&P 500: +14.2% YTD
- Dow Jones Industrial Average: +2.9% YTD
- S&P Midcap 400: +0.2% YTD
- Russell 2000: -2.7% YTD
Reviewing today's economic data:
- Weekly MBA Mortgage Applications Index 2.5%; Prior -2.1%
- September Wholesale Inventories 0.2% (Briefing.com consensus 0.0%); Prior -0.1%
Thursday's economic calendar features:
- 8:30 ET: Weekly Initial Claims (Briefing.com consensus 220,000; prior 217,000), Continuing Claims (prior 1.818 mln)
- 10:30 ET: Weekly natural gas inventories (prior +79 bcf)
Market moves mostly sideways ahead of the close
08-Nov-23 15:30 ET
Dow -81.45 at 34071.15, Nasdaq -10.22 at 13629.64, S&P -0.33 at 4378.05
[BRIEFING.COM] The major indices are moving mostly sideways.
The 2-yr note yield rose one basis point to 4.93% and the 10-yr note yield fell five basis points to 4.52%.
Walt Disney (DIS), MGM Resorts (MGM), Take-Two (TTWO), AMC Entertainment (AMC), Lyft (LYFT), and Twilio (TWLO) are among the names reporting earnings after the close.
Thursday's economic calendar features:
- 8:30 ET: Weekly Initial Claims (Briefing.com consensus 220,000; prior 217,000), Continuing Claims (prior 1.818 mln)
- 10:30 ET: Weekly natural gas inventories (prior +79 bcf)
Energy complex falls
08-Nov-23 15:00 ET
Dow -92.84 at 34059.76, Nasdaq -11.94 at 13627.92, S&P -2.62 at 4375.76
[BRIEFING.COM] The major indices moved mostly sideways over the last half hour.
Mega cap stocks powered the after rebound. The Vanguard Mega Cap Growth ETF (MGK) is up 0.3%.
Energy complex futures settle the session lower, responding to growth concerns. WTI crude oil futures fell 2.5% to $75.42/bbl and natural gas futures fell 2.7% to $3.38/mmbtu. The energy sector is down 1.1%.
Take-Two rallies on speculation about next GTA title
08-Nov-23 14:30 ET
Dow -73.83 at 34078.77, Nasdaq +9.18 at 13649.04, S&P +1.66 at 4380.04
[BRIEFING.COM] The S&P 500 (+0.04%) is in second place on Wednesday afternoon, up a little shy of 2 points.
S&P 500 constituents Take-Two (TTWO 145.35, +8.99, +6.59%), Mosaic (MOS 33.40, +1.47, +4.60%), and Axon (AXON 225.37, +9.00, +4.16%) pepper the top of the standings. TTWO gains after speculation about the next installment in the Grand Theft Auto franchise, while MOS and AXON jump on earnings.
Meanwhile, media giant Warner Bros. Discovery (WBD 9.60, -2.01, -17.31%) is at the bottom of the S&P following this morning's Q3 miss.
Gold continues recent fade
08-Nov-23 14:00 ET
Dow -71.85 at 34080.75, Nasdaq -5.21 at 13634.65, S&P -1.62 at 4376.76
[BRIEFING.COM] With about two hours to go on Wednesday the tech-heavy Nasdaq Composite (-0.04%) is slightly lower, down just 5 points vs. 66 at today's lows.
Gold futures settled $15.70 lower (-0.8%) to $1,957.80/oz, pushing losses to about -2.1% week-to-date.
Meanwhile, the U.S. Dollar Index is narrowly higher at $105.53.
Page One
Last Updated: 08-Nov-23 09:04 ET | Archive
Winning streaks extended on limited leadership
The winning streaks for the S&P 500 and Nasdaq Composite were extended yesterday to seven and eight sessions, respectively. The extension, however, has gotten limited, which is to say there haven't been as many winners as one might think.
Entering today, the market-cap weighted S&P 500 is up 0.5% for the week. The S&P 500 Equal-Weighted Index, however, is down 0.7%. In other words, the winning streaks are being forged on the back of the mega-cap stocks, which have massive backs.
The Vanguard Mega-Cap Growth ETF (MGK) is up 1.8% for the week, making it easy to see why the market-cap weighted S&P 500 remains a winner.
Currently, the S&P 500 futures are up three points and are trading 0.1% above fair value, the Nasdaq 100 futures are flat and are trading fractionally above fair value, and the Dow Jones Industrial Average futures are up 35 points and are trading 0.1% above fair value.
There is not a lot of conviction in this morning's trade. The most transparent explanation for that is that there is a nagging sense the market is due for a pullback.
A less transparent explanation is that growth concerns are percolating beneath the surface. That sense of things emanates from the ongoing drop in crude oil futures ($76.40, -0.97, -1.2%), the underperformance of the Russell 2000 (-1.6%), the 2.4% decline this week in the SPDR S&P Regional Banking ETF (KRE), and the relative weakness in cyclical sectors like energy (-3.4%), materials (-2.4%), and industrials (-0.5%).
Separately, there is also some weakness in rate-sensitive sectors like utilities (-1.0%) and real estate (-2.3%).
It is an interesting disconnect between the enthusiasm for falling rates, which seems to be lifting the mega-cap stocks and other growth stocks, and the misgivings about the growth outlook that are raising questions about the achievability of forward earnings estimates.
This disconnect likely helps explain some of the churning taking place right now, as market participants struggle to reconcile if interest rates are going down entirely for the right reasons. The Big Picture column this week, Stuck in no man's land, touches on this view.
Like yesterday, there will be some added attention on the Treasury market, specifically at 1:00 p.m. ET. That is when the results of the $40 billion 10-yr note auction will be released. The $48 billion 3-yr note auction yesterday went off just fine, which was a relief for the market to see, but with the growing budget deficit, the growing debt level, and the growing concerns about an economic slowdown, it seems that the market will be holding its breath in front of every auction.
Separately, there was another large batch of earnings results released since yesterday's close. Nothing in that batch, though, has swayed the broader market's behavior. The reactions are at the micro level, not the macro level -- or it comes across that way given the lack of market-cap heft among the companies that reported.
Gilead Sciences (GILD) tops the list at $100 billion, which is 3.5% of Apple's total market capitalization.
Fed Chair Powell, on the other hand, carries market-moving weight. He will be giving the opening remarks at 9:15 a.m. ET at the Division of Research and Statistics Centennial Conference. If he wanted to walk anything back from his post-FOMC press conference, he could possibly make a pass at that in this speech. It seems an unlikely venue to make such a pass, but the market has some wait-and-see angst anyway. No Q&A is expected.
-- Patrick J. O'Hare, Briefing.com
Robinhood Markets misses the mark in Q3 as revs fall short of analyst estimates (HOOD)
Robinhood Markets (HOOD -14%) missed the mark in Q3, delivering a GAAP net loss after achieving its first quarter of GAAP profitability in Q2 while falling short of analysts' revenue expectations. While a reversion back to operating in the red after registering a major accomplishment last quarter can incite selling pressure, HOOD's revenue miss and a few other blunders likely contribute most to today's sell-the-news reaction. Also, HOOD's net loss of $0.09 per share was fueled by a previously disclosed one-time regulatory accrual. Plus, it still topped analyst forecasts.
- HOOD's top line did expand by 29.4% yr/yr to $467 mln. However, this not only represented a considerable deceleration from the +52.8% growth in Q2, but it also marked the company's first revenue miss since 4Q22.
- A component of HOOD's lackluster revenue growth was a relatively steep decline in monthly active users (MAUs), which contracted by 16% yr/yr and 5% sequentially to 10.3 mln. While the sequential decline was less pronounced than the 8% drop posted in Q2, it still translated to HOOD's second straight quarter of sliding MAUs qtr/qtr, a development not seen since 2022, which was plagued by a significant bear market.
- Alongside weak MAU numbers, transaction-based revenue and seasonally lower proxy revenue were other factors underlying HOOD's revenue miss. Transaction-based revs took a 4% spill sequentially due to lower crypto volumes. Bitcoin dropped around 9% during the quarter, only to spike in October, so Q4 crypto volumes may pick back up.
- On a more uplifting note, net deposits remained buoyant despite a seasonally slow quarter, coming in at $4.0 bln, an 18% annual growth rate. HOOD is also confident in delivering record annual revenue in FY23, while its adjusted EBITDA is on track to be approximately three times greater than its prior record.
- New growth opportunities also remain ripe, particularly surrounding overseas expansion. HOOD is strategizing launches across Europe, launching its brokerage operations in the U.K. in the coming weeks and then crypto trading across the European Union. Meanwhile, Robinhood Gold, its membership program, remains the company's top priority relating to deepening customer relationships. Today, just 6% of HOOD's customers are Gold subscribers, providing plenty of untapped potential in growing this offering.
While slipping back into the red after reaching its first quarter of GAAP profitability is frustrating, it was already anticipated. Conversely, missing revenue expectations was a surprise. With revenue growth a critical aspect of driving profitability, HOOD could be staring at a bumpy path back toward sustaining profitability if this trend continues. With the broader equity markets remaining relatively upbeat throughout Q3, declining MAUs and transaction revs are discouraging and set a gloomy tone if markets begin to reverse.
Dutch Bros reports good comps and higher margins which led to EPS upside (BROS)
Dutch Bros (BROS) perked up nicely following its Q3 report last night, but has pulled back. It was the coffee chain's largest EPS beat since 3Q21. Revenue jumped 33% yr/yr to $264.5 mln, which was ahead of analyst expectations. That reversed a trend of two consecutive revenue misses, so that was good to see. BROS also reaffirmed FY23 revs coming in toward the lower end of its $950 mln to $1 bln guidance.
- System same shop sales in Q3 grew +4.0%. This metric has been trending up in recent quarters, from +3.8% in Q2 and -2.0% in Q1. BROS cited the launch of three seasonal LTOs in the quarter, rewards program enhancements, selective promotions (its Fill-a-Tray program has been popular) and increased paid media spend, which is raising brand awareness. However, BROS did see a little bit of traffic deceleration between Q2 and Q3. BROS raised prices a bit in Q3, which typically leads to a dip in traffic. Also, BROS was lapping a tougher compare in Q3 relative to Q2.
- Higher margins also helped propel the strong EPS upside. Company-operated shop gross margin jumped to 24.1%, a 410 bps yr/yr increase. Company-operated shop contribution margin improved to 31.0%, up 540 bps. Margins were driven primarily by a combination of pricing, shop level operational improvements and moderating SG&A growth.
- BROS take a hybrid approach to shop operations. It operates most of its stores, but also has a sizable franchise component. In October, the company opened its 800th shop. In Q3, BROS opened its 500th company operated shop, which is up 38% yr/yr. BROS confirmed last night that it expects to open at least 150 new shops in 2023, of which at least 130 will be company-operated. However, BROS concedes it is dealing with a difficult development environment (elevated build costs, supply chain shocks, permitting delays, rising rates).
Overall, this was a good quarter, albeit the bar was fairly low. BROS has been struggling as is evident by its declining share price. Consumers are feeling the pinch. We also think BROS is perhaps being a bit too aggressive in terms of opening new shops too quickly. Importantly and as previously announced, Christine Barone will be taking over as CEO on January 1. In preparation, she has been active in formulating the company's real estate strategy, data analytics and marketing. We think her background as a former Starbucks (SBUX) executive is particularly appealing to investors. Hopefully, she can get the company turned around. We look forward to getting more details on her vision soon.
Rivian revving up production and narrowing its losses amid a tough EV market (RIVN)
The electric vehicle (EV) market has seen its fair share of discouraging news lately, including a rather dismal earnings report from Tesla (TSLA) on October 18, but Rivian Automotive (RIVN) is a bright spot today following its Q3 results. As a start-up company that's in the early stages of its growth curve, the headline EPS and revenue numbers don't carry much weight yet. Instead, the focal points center on production increases and profitability improvements and on both of those accounts, RIVN showed solid progress once again.
- In Q3, the company produced 16,304 vehicles, reflecting yr/yr growth of 121% and representing its strongest quarterly production volume to date. Additionally, thanks to better efficiencies on the production lines, as well as the ramp up of the in-house motor line, RIVN bumped its FY23 production guidance higher to 54,000 from 52,000. This new forecast implies Q4 production of 14,300 vehicles, which is slightly ahead of estimates.
- RIVN's operating losses and cash burn have been a cause for concern ever since it went public in November 2021. On October 2, The Wall Street Journal published an article that highlighted RIVN's staggering losses, noting that the company was losing $33,000 on every vehicle it sold. Although the company is still deep in the red, posting a net loss of $(1.37) bln in Q3, it's making meaningful strides towards profitability as it scales production.
- Gross profit per vehicle improved by $2,000 sequentially to $(30,648) while RIVN's adjusted EBITDA loss narrowed to $(942) mln from $(1.3) bln in the year-earlier period. Part of this improvement is related to a healthier supply chain, but RIVN's cost containment efforts and greater manufacturing efficiencies are also key factors.
- Addition progress is anticipated for the remainder of the year, too, with RIVN guiding for an adjusted EBITDA loss of $(4.0) bln compared to its prior forecast of $(4.2) bln. In 2Q23, RIVN guided for an adjusted EBITDA loss of $(4.3) bln.
The Q3 earnings report isn't the only item that's moving the stock today.
- RIVN also announced that it will enable other companies to purchase its EDVs (electric delivery vehicles), ending an exclusive agreement with Amazon (AMZN). The original agreement, which was forged in 2019 and prohibited RIVN from selling EDVs to other customers, called for AMZN to purchase 100,000 EDVs by 2030.
- Importantly, that part of the deal remains in place, leaving AMZN with about 90,000 more EDVs to buy over the next seven years. Considering that AMZN holds about a 17% stake in RIVN, the prospect of RIVN selling more EDVs is also beneficial to AMZN.
Overall, this was another encouraging earnings report for RIVN, especially in light of a gloomier EV market that's feeling the sting of higher interest rates. The company still has a long road ahead of it, but a path to profitability is becoming a little more realistic with each passing quarter.
eBay sinks to 52-week lows as a deteriorating buying environment weighs on Q4 sales guidance (EBAY)
An unfavorable economic backdrop at home and overseas is taking its toll on eBay (EBAY -5%). The e-commerce auction and "buy-it-now" platform may have squeaked out its third straight earnings beat in Q3 on in-line revenue growth, but disappointing Q4 sales guidance, a pivotal quarter given the holiday shopping season, is sending shares to 52-week lows today. A challenged consumer is materializing in the U.S. and across EBAY's key geographies, including the U.K. and Germany, its second and third-largest markets.
EBAY is not alone. Peers Amazon (AMZN) and Etsy (ETSY) discussed alarming trends emerging from their end consumers. AMZN observed lower discretionary spending and consumer trade-down in Q3, with staples like beauty and personal care items being the few categories bucking the overall trend. ETSY stated earlier this month that significant pressure on buyers is mounting as inflation, interest rates, and an emphasis on experience-based consumption translate to little discretionary income, especially among lower-income buyers.
- These developments did not necessarily impact EBAY immediately during Q3, evidenced by relatively decent headline numbers, including adjusted EPS of $1.03, a 3% improvement yr/yr, and revs of $2.5 bln, a 5% increase. Gross merchandise volume (GMV) was also decent, down 1% organically but flat on a total FX-neutral basis to $18.0 bln.
- However, the economic situation turned rapidly as EBAY exited the summer months. In the U.S., GMV edged 2% lower yr/yr. Consumers shifted their tastes toward EBAY's Cross Border Trade sellers, goods from Asia Pacific, illuminating the heightened trade-down activity to lower-priced goods.
- Internationally, GMV was roughly flat on an FX-neutral basis and up 4% as reported. EBAY's international markets are amid more severe macroeconomic pressures than the U.S. Specifically, the U.K. has seen consistently negative e-commerce growth since 2022, while Germany has dealt with multiple quarters of economic contraction. Like in the U.S., some of this pressure is being mitigated by demand in Cross Border Trade, which has helped offset far weaker trends across Europe.
- On a lighter note, margins and active buyers displayed relative strength in Q3, a solid improvement over the last quarter. Adjusted operating margins did contract by 250 bps yr/yr but EBAY anticipates Q4 margins between 26.1-26.7%, resulting in the metric landing near the high end of the company's previous FY23 guidance. Meanwhile, trailing 12-month active buyers remained stable at 132 mln, the number it has rested at for the third consecutive quarter.
- Still, with macro softness taking hold quickly toward the end of Q3, EBAY was prudent in its Q4 forecast, projecting adjusted EPS of $1.00-1.05 and revs of $2.47-2.53 bln.
EBAY is amid another post-earnings sell-off as consumer demand is struggling to rebound. Making matters worse was a rapid deterioration in September that is carrying over into Q4, putting EBAY in a position to forecast underwhelming revenue growth for its holiday quarter. Lastly, e-commerce giants warning of a troublesome retail environment adds some nerves ahead of physical retailers' OctQ earnings reports and JanQ guidance later this month.
NXP Semi registered decent Q3 results; expects improving demand in 2024 (NXPI)
NXP Semi (NXPI +1%) shares maintain their recent upward momentum today, buoyed by better-than-expected bottom-line results in Q3 on relatively flat revenue growth. The semiconductor manufacturer operating across the automotive, industrial, mobile, and communications markets also projected Q4 earnings and revs consistent with analyst expectations.
However, although shares are enjoying modest buying activity today, NXPI's Q3 report contained several opposing dynamics, potentially keeping a lid on the stock's near-future appreciation.
- Headline numbers in Q3 were consistent with what NXPI has reported lately: mild earnings upside on stagnant yr/yr revenue growth. Specifically, adjusted EPS climbed 32.6% to $3.70, despite a 190 bp contraction in adjusted operating margins yr/yr, sufficient for NXPI's second consecutive earnings beat, while revenue contracted by 0.3% to $3.43 bln, the company's third straight quarter of a slight yr/yr sales decline.
- Still, aside from communication infrastructure, which despite growing revs by 8% yr/yr to $559 mln, was still below the midpoint of NXPI's prior forecast, each of the company's end markets performed in-line or better than expected in Q3. Automotive revs grew 5% yr/yr to $1.89 bln, industrial revs fell 15% to $607 mln, and mobile revs declined 8% to $377 mln.
- Geographically, NXPI experienced incremental improvements across most regions, with China, its most crucial region comprising 36% of FY22 revs, advancing solidly compared to Q2, marking another quarter of sequential gains.
- Still, looking toward the year's final quarter, NXPI anticipates earnings of $3.44-3.86 per share and revs of $3.30-3.50 bln, similar to its Q3 outlook, implying another quarter of relatively mild results.
- NXPI also provided an early look at FY24, commenting that it continues observing an operating environment filled with cross currents. The macroeconomic situation remains weak, with demand in China, albeit improving, staying subdued, the geopolitical picture remaining uneasy, and inflation staying elevated.
- On a more positive note, management is optimistic about a return to yr/yr revenue growth in 2024, anticipating a soft landing for the business. Strength will stem from global automotive production ticking 1% higher yr/yr and shifting toward semiconductor-rich EVs, as well as industrial trends promoting content growth similar to automotive. Conversely, communication infrastructure will likely remain weak.
Bottom line, NXPI's Q3 report may not have been exceptional, underpinned by trends consistent with previous forecasts. However, a meaningful silver lining was a notably more upbeat year ahead. We have heard from others in the industry, such as KLA Corp (KLAC) and Lam Research (LRCX), indicating an improving demand profile in 2024. NXPI's remarks reinforce this brighter future, albeit tempered by lingering uncertainties.
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