Market Snapshot
briefing.com
| Dow | 34283.10 | +391.16 | (1.15%) | | Nasdaq | 13798.11 | +276.66 | (2.05%) | | SP 500 | 4415.24 | +67.89 | (1.56%) | | 10-yr Note | -22/32 | 4.63 |
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| | NYSE | Adv 2024 | Dec 739 | Vol 876 mln | | Nasdaq | Adv 2521 | Dec 1779 | Vol 4.7 bln |
Industry Watch
| Strong: Information Technology, Communication Services, Consumer Discretionary, Industrials, Materials |
| | Weak: -- |
Moving the Market
-- Treasury yields climbing off overnight lows in response to this morning's data
-- Digesting the preliminary November University of Michigan Index of Consumer Sentiment, which reflected an increase in year-ahead and five-year inflation expectations
-- Relative strength in mega caps and strong gains in semiconductor stocks
-- S&P 500 climbs above 4,400 level
| Closing Summary
10-Nov-23 16:25 ET
Dow +391.16 at 34283.10, Nasdaq +276.66 at 13798.11, S&P +67.89 at 4415.24
[BRIEFING.COM] The stock market closed out the week in rally-mode. A strong showing from mega cap stocks, and semiconductor stocks, which rallied on a pleasing October sales update from Taiwan Semiconductor Manufacturing Co. (TSM 97.44, +5.82, +6.4%), had an outsized influence on index gains. Many other stocks, though, participated in today's upside move. The major indices all closed near their highs of the day, which had the S&P 500 above the 4,400 level.
The Vanguard Mega Cap Growth ETF (MGK) rose 2.0%, which brought its gain this week to 3.4%, and the PHLX Semiconductor Index jumped 4.0%. Apple (AAPL 186.40, +4.23, +2.3%), Microsoft (MSFT 369.67, +8.98, +2.5%), Amazon.com (AMZN 143.56, +2.96, +2.1%), and NVIDIA (NVDA 483.35, +13.85, +3.0%) all jumped more than 2.0% today.
Meanwhile, the market-cap weighted S&P 500 logged a 1.6% gain today and a 1.3% gain on the week. The S&P 500 equal weighted index was up 1.2% today, but declined 0.6% for the week.
Price action in the early going was more muted as Treasury yields climbed off overnight lows in response to this morning's release of the preliminary November University of Michigan Index of Consumer Sentiment.
The report showed a drop in sentiment to 60.4 from 63.8 in October, marking the fourth straight monthly decline, and a bump in year-ahead inflation expectations to 4.4% from 4.2% and five-year inflation expectations to 3.2% from 3.0%.
The 10-yr note yield, at 4.59% just before the 10:00 a.m. ET release, settled at 4.63%, which was unchanged from yesterday. The 2-yr note yield, at 4.98% just before the data, climbed four basis points today to 5.05%.
Despite the move in yields, buying activity picked up in equities around 11:00 a.m. ET with no specific catalyst. Just about everything came along for the afternoon rally. 26 of the 30 Dow components logged a gain and all 11 S&P 500 sectors closed in the green with eight sectors logging a gain of at least 1.1%.
The information technology sector (+2.6%) led the pack thanks to gains in Apple, Microsoft, and NVIDIA. The defensive-oriented utilities (+0.6%) and health care (+0.5%) sectors saw the slimmest gains.
- Nasdaq Composite: +31.8% YTD
- S&P 500: +15.0% YTD
- Dow Jones Industrial Average: +3.4% YTD
- S&P Midcap 400: +0.4% YTD
- Russell 2000: -3.2% YTD
Reviewing today's economic data:
- November Univ. of Michigan Consumer Sentiment - Prelim 60.4 (Briefing.com consensus 63.7); Prior 63.8
- The key takeaway from the report is the jump in inflation expectations, which is not what the Fed wants to see following 525 basis points worth of tightening already. It is the type of indication that will keep the Fed entertaining the thought that further tightening may still be necessary.
Looking ahead, there is no economic data of note on Monday.
Treasuries settle the week higher
10-Nov-23 15:30 ET
Dow +382.56 at 34274.50, Nasdaq +267.56 at 13789.01, S&P +65.03 at 4412.38
[BRIEFING.COM] The major indices hit fresh session highs heading into the close.
The 2-yr note yield rose four basis points today, and 19 basis points this week, to 5.05%. The 10-yr note yield settled unchanged, and rose seven basis points this week, to 4.63%.
Looking ahead, there is no economic data of note on Monday.
Small and mid cap stocks join rally
10-Nov-23 15:05 ET
Dow +320.91 at 34212.85, Nasdaq +253.65 at 13775.10, S&P +59.11 at 4406.46
[BRIEFING.COM] The S&P 500 is trading right around the 4,400 level.
Small and mid cap stocks have joined the rally. The Russell 2000 is up 1.2% and the S&P Mid Cap 400 is up 1.1%.
The US Dollar Index is flat at 105.88.
Energy complex futures settle mixed
10-Nov-23 14:35 ET
Dow +321.23 at 34213.17, Nasdaq +249.56 at 13771.01, S&P +56.56 at 4403.91
[BRIEFING.COM] The Nasdaq Composite sports the largest gain among major indices, up 1.9%.
Gold futures slid 1.6% to $1,939.10/oz today and copper futures fell 1.4% to $3.59/lb.
Energy complex futures settled in mixed fashion. WTI crude oil futures rose 2.1% to $77.21/bbl and natural gas futures fell 1.4% to $3.28/mmbtu.
MSFT, INTC lead Dow; DIS lags
10-Nov-23 14:05 ET
Dow +312.56 at 34204.50, Nasdaq +245.56 at 13767.01, S&P +57.46 at 4404.81
[BRIEFING.COM] The Dow Jones Industrial Average is up 0.9%, trailing behind the S&P 500 and Nasdaq.
25 of the 30 Dow components are trading up in today's broad rally.
Intel (INTC 38.94, +1.14, +3.0%) sports the biggest gain among DJIA constituents followed by Microsoft (MSFT 369.03, +8.34, +2.3%). On the flip side, Walt Disney (DIS 87.40, -2.94, -3.3) is the worst performer in the DJIA.
Page One
Last Updated: 10-Nov-23 09:01 ET | Archive
Regrouping after win streak comes to an end
Not all wining streaks are meant to last. Just ask the 2007 New England Patriots. Some winning streaks when they end, however, hurt more than others. Just ask the 2007 New England Patriots.
The winning streak the market had been on (eight sessions for the S&P 500 and nine sessions for the Nasdaq) came to an end yesterday, but it didn't really hurt all that much. The S&P 500 declined 0.8% and the Nasdaq declined 0.9% -- reasonable and tidy pullbacks given that they had gone up as much as 6.7% and 8.8%, respectively, during the course of their winning streaks.
A lousy 30-yr bond auction and Fed Chair Powell saying the Fed won't hesitate to raise rates again if it needed to were the reported catalysts for the loss. Treasury yields moved higher in their wake, and as Treasury yields moved higher, stock prices headed lower.
There has been some regrouping this morning, however.
The 10-yr note yield is down six basis points to 4.57%, and it seems that traders might be allowing themselves to accept that yesterday's bond auction, which saw the lowest demand since 2016, might not have been as bad as advertised.
That's because subsequent reports have indicated that the U.S. financial services division of China's Industrial and Commercial Bank was hit by a ransomware cyberattack yesterday that disrupted trades in the Treasury market. Accordingly, there has been some allowance for the possibility that this issue contributed to the weak auction.
It's unlikely that was the only issue; nonetheless, an awareness of the issue has reduced some of the demand angst that followed that auction. Strikingly, the 30-yr bond yield, which was at 4.72% just before the auction results and jumped to 4.82% after their release, is at 4.70% this morning.
The recovery in yields today has been a key source of support for the equity futures market along with a seeming desire to hold the technical line at the 50-day moving average for the S&P 500 (4,336) and Nasdaq Composite (13,395).
Currently, the S&P 500 futures are up 19 points and are trading 0.4% above fair value, the Nasdaq 100 futures are up 60 points and are trading 0.4% above fair value, and the Dow Jones Industrial Average futures are up 137 points and are trading 0.4% above fair value.
These indications put the major indices on track for a higher open or a buy-the-dip trade that has been a popular trade in November.
There isn't any corporate news that is moving the needle today, even though there has been plenty of corporate earnings news since yesterday's close. The economic calendar is also on the light side today, featuring the preliminary University of Michigan Index of Consumer Sentiment at 10:00 a.m. ET.
Aside from the overall sentiment reading, market participants will be paying close attention to consumers' inflation expectations, which could be a market mover.
-- Patrick J. O'Hare, Briefing.com
Synaptics gaps higher as demand stabilization carried into Q1; anticipates a recovery in 2024 (SYNA)
Synaptics (SYNA +14%) is receiving enthusiastic feedback for its impressive Q1 (Sep) earnings report, which included solid top and bottom-line outperformance and, most importantly, continued stabilization. The human interface software and hardware provider also anticipates a recovery to materialize in 2024. We noted ahead of SYNA's SepQ report yesterday that a demand stabilization follow-through, as well as a return to growth in 2024, would be incredibly encouraging. This proves the case today, fueling enough buy orders to snap SYNA out of its recent consolidation pattern.
- Due to product mix, margins of 45% in SepQ were below SYNA's target model. However, by maintaining spending discipline, SYNA was still able to deliver adjusted EPS ahead of the midpoint of its $0.15-0.55 forecast, helping keep its bottom line from contracting by as much as analysts feared to $0.52 from $3.52 in the year-ago period. Also, management expects a return to standard enterprise numbers should put margins back on the company's long-term target of around 57%.
- Slowing revenue declines, down -47% yr/yr to $237.7 mln from -52% in Q4 (Jun), also assisted SYNA's better-than-expected adjusted EPS. On a sequential basis, revs ticked 5% higher, further illuminating the ongoing stability in demand. Enterprise PC products performed better than expected, while IoT and mobile products met expectations.
- The year ahead is what is igniting such exuberance today. SYNA provided several bullish talking points regarding the increasingly likely possibility that demand has already bottomed. The company observed solid traction across several focus areas within enterprise, such as human presence detection in laptops performing better than initially forecasted.
- Additionally, despite new product ramps happening slower than usual due to engineering cutbacks, design wins remained robust. For example, SYNA won multiple designs in the high-performance IoT market (comprised of sports cameras, drones, and sound bars) while also being engaged in additional logistics and industrial automation opportunities. As a result, SYNA commented that a return to a regular run rate was only a matter of time.
- While Q2 (Dec) guidance merely aligned with estimates, projecting revs of $220-250 mln and adjusted EPS of $0.25-0.65, investors are much more excited about 2024.
A possible turnaround in 2024 is precisely what the market was looking for from SYNA. Visibility to the strength and scope of a recovery next year are still hazy. However, demand stabilization through two quarters is a promising sign that management is correct in its expectation that inventories will revert to normal levels over the next several quarters, boosting its overall mix and margins.
Doximity's beat-and-raise report helps to revive an ailing stock as upsell activity improves (DOCS)
In each of the past six quarters, Doximity (DOCS) had issued downside revenue guidance for the quarter ahead, but the digital platform provider for physicians and healthcare professionals ended that unfortunate streak last night with a solid beat-and-raise 2Q24 earnings report.
- During the most recent part of that rough stretch, the company's close rates on upsells fell short of expectations as pharmaceutical customers tightened their budgets. Last night, however, DOCS noted that close rates on upsells have improved over the past three months and that customers are spending more freely.
- The drop-off in close rates was mostly attributable to softness among DOCS' small and medium-sized customers, while the company's largest customers continued to expand their usage and spending on the platform. Although upsell close rates improved overall, this turnaround in Q2 was mainly driven by that same trend of larger customers leading DOCS' growth.
- DOCS ended the quarter with 290 customers contributing at least $100,000 in subscription-based revenue on a trailing 12-month basis, and 51 customers contributing at least $1.0 mln, up 28% from a year ago. Furthermore, the company's top 20 customers ended the quarter with a net revenue retention rate of 119%, compared to an overall net retention rate of 114%.
Improving close rates are only half the story.
- As DOCS' growth slowed in the wake of the pandemic, the company reined in its own spending, which is now providing leverage on the bottom-line as the demand picture improves. Excluding restructuring charges, total operating expenses were higher by only 4% in Q2.
- This solid cost containment helped push adjusted EBITDA higher by 18% yr/yr to $54.2 mln. Looking ahead to Q3, DOCS is forecasting adjusted EBITDA of $61-$62 mln, representing yr/yr growth of about 11%.
- The cherry on top is that DOCS also authorized a stock repurchase program for up to $70 mln of its common stock, reflecting its view that its stock is a good value with shares hovering around all-time lows prior to today's rally.
One quarter of improved results doesn't equate to a complete turnaround, but this was a good starting point for DOCS as it looks to win back credibility from investors. If the company can build on this momentum and deliver another beat-and-raise report in February, then investor confidence will return in a more lasting way.
The Trade Desk is trading sharply lower on cautious guidance as some verticals reduce ad spend (TTD)
The Trade Desk (TTD -18%) is trading sharply lower following its Q3 report last night. This operator of a cloud-based online advertising-buying platform has been performing well despite the industry facing difficult macro headwinds. However, while it reported nice upside for Q3, its Q4 guidance/commentary was a bit worrisome.
- Quickly on Q3, TTD reported robust 25% revenue growth to $493.3 mln, nicely ahead of prior guidance. And TTD stressed that was despite lapping 30+% growth last year, when many of its competitors were shrinking or barely growing. TTD also noted that it gained market share in both years and at a higher rate than it had previously done so. Profitability was good too, with Q3 adjusted EBITDA rising 22.6% yr/yr to $199.5 mln, nicely ahead of prior guidance of approx $185 mln.
- CTV led TTD's growth again by a wide margin in Q3. Video, which includes CTV, represented a mid-40% share of the business and continues to grow as a percentage of TTD's mix. Mobile represented a mid-30% share of spend. Display continued to represent a low-double digit percent share with audio rounding out the last 5%. In terms of verticals, TTD continued to see strong performance in food and drink, travel, and automotive. Health/fitness were below average.
- Let's turn to the Q4 guidance, which was clearly at top of mind for the analysts on the call last night. Q4 is important for an ad company because it's the holiday quarter. First off, unlike most companies, TTD guides without an upper range. It sees Q4 revs of "at least $580 mln." The obvious question is how much more? $5 mln or $50 mln? It's a little difficult to gauge without an upper limit. With that said, the spread between Q4's "at least" guidance and consensus was wider than what is typical for TTD. As such, we think investors are interpreting this as a guide down.
- The commentary on the call was a bit cautious as well. Basically, starting about the second week of October, TTD saw some advertisers become more cautious in their spend. This included automotive, consumer electronics and handsets and media/entertainment. TTD believes some of the caution is transitory due to labor strikes in autos and in entertainment. Thie good news is that in early November, TTD started to see spend stabilize and it's cautiously optimistic for the remainder of Q4. TTD explains that its business is largely based on the world's largest brands across many verticals. So if there is a little caution due to macro uncertainty facing everyone, TTD is not immune from feeling the effects.
Overall, it is clear that the Q4 guidance is spooking investors. It's the holiday quarter and TTD's largest revenue quarter of the year, so we do not blame investors for focusing on that. The guidance was also disappointing because it followed decent, in-line Q4 guidance from online ad-dependent companies like Pinterest (PINS) and Snap (SNAP) this earnings season. Looking ahead, TTD should benefit from a Presidential election year in 2024 which always creates a lot of ad demand.
Unity Software could be amid a turnaround as its new CEO begins implementing meaningful changes (U)
Unity Software (U) bounces off 52-week lows hit after falling short of analysts' revenue targets in Q3. The software development provider's revenue did meet internal expectations, exceeding the low end of its prior forecast by roughly $4.0 mln. However, Unity conceded that it could do better. Unity also filed for $1.0 bln convertible senior notes due 2027.
Perhaps most striking was recently appointed CEO James Whitehurst, who succeeded former CEO John Riccitiello upon his retirement last month, withdrawing the company's previous guidance for FY23 as he looks to potentially shake up its product portfolio. Mr. Whitehurst commented that several weeks ago, Unity began assessing its portfolio. Without providing too many specifics, there is uncertainty surrounding what Mr. Whitehurst plans to sell off, keep, or improve. CFO Luis Felipe Visoso added that changes will occur during Q4, with full implementation of the company's actions to be finished by the end of 1Q24. At the same time, Unity announced it will reduce its workforce and office locations over the next few months.
- Unity's biggest blemish in the quarter was revenue. The company grew its top line 68.5% yr/yr to $544.21 mln, missing consensus and representing a deceleration from the +79.6% growth posted last quarter.
- Create Solutions, Unity's segment catering to software developers, weighed on revenue in Q3, delivering flat growth yr/yr at $189 mln. China was an underlying factor as Unity continues to deal with a stricter crackdown on gaming in the country. Meanwhile, Unity Game Services, a division within Create Solutions, faced a challenging yr/yr comp when the business delivered record revenue from several new game launches.
- The good news is that Unity's monetization segment, Grow Solutions, expanded sales by 166% yr/yr and 12% pro forma to $355 mln. However, tempering enthusiasm was management's remarks that this business endured some revenue softness toward the end of the quarter and carrying into October due to the previously announced, but mostly in the past, runtime fee introduction.
- Also worth noting was Unity reducing its GAAP net loss in half compared to the year-ago period, resulting in a net loss margin of (23)%, compared to (77)% in 3Q22. Furthermore, adjusted EBITDA of $131 mln, above Unity's $90-100 mln forecast, was also a highlight.
With shares tracking over 10% lower on the year and roughly 85% below all-time highs hit in late 2021, Unity has constantly faced disruptions since the Federal Reserve began its rate-raising campaign. Fading demand for video games and advertising remains a formidable challenge. While video game publishers like Take-Two (TTWO) and Electronic Arts (EA) have already seen signs of demand stabilization, Unity struggles to capitalize on these encouraging trends.
Nevertheless, we think a CEO shakeup was necessary to pull Unity out of its funk; the previous CEO's recent decisions led to investor backlash. Becoming a leaner organization could be what Unity needs to return to profitability, and shares could begin a broader turnaround once more information surrounding the current portfolio review is presented.
Affirm's back-to-back quarters of accelerating growth in Q1 triggers massive buying interest (AFRM)
Better-than-expected headline results on accelerating gross merchandise volume (GMV) in Q1 (Sep) are igniting significant buying interest in shares of Affirm (AFRM +18%). The buy-now-pay-later company also projected Q2 revs in-line with consensus, with the midpoint exceeding forecasts. With short interest of 20% leading into its SepQ report, these results were sufficient to trigger a short squeeze, a post-earnings occurrence that has taken hold for two consecutive quarters.
Closely-tracked metrics shined compared to Q4 (Jun), including a narrowing net loss of $(0.57) per share, accelerating revenue growth of 37.3% yr/yr to $496.55 mln, and a second straight quarter of improving GMV growth, expanding by 28% yr/yr to $5.6 bln.
As interest rates remain elevated while inflationary pressures drive a severe slowdown in discretionary spending, how has AFRM delivered back-to-back quarters of impressive results?
- Categories that were significant decliners over the past several quarters, such as sporting goods, home & lifestyle, and personal electronics, have either stopped enduring such pronounced declines or returned to more flattish growth.
- Meanwhile, inflation is acting as a double-edged sword. While, on the one hand, inflation's forces erode consumers' purchasing power, reducing their overall spending, it also hikes the costs of everyday items. As prices swell, consumers may opt for the buy-now-pay-later option, benefiting AFRM.
- AFRM is also present across some of the largest platforms in e-commerce, such as Shopify (SHOP), which saw accelerating volumes once again in SepQ. The breadth of exposure carries comprehensive category coverage, providing a healthy degree of product diversity.
- Speaking of which, services have gained momentum at the expense of goods. With less disposable income after higher interest payments and inflation, individuals have shifted their tastes toward experiences such as travel. While some travel-based companies like Airbnb (ABNB) and Booking Holdings (BKNG) endured selling pressure following their Q3 earnings reports, the theme was clear: travel demand remains robust. Vacation packages, lodging accommodations, car rentals, etc., tend to get pricey, acting as another nudge toward buy-now-pay-later.
There were still some concerning items from AFRM's report, including its DecQ GMV guidance of $6.70-6.90 bln. This range represents a deceleration from SepQ, reflecting a soft holiday shopping season, a development hit on by eBay (EBAY) earlier this week. AFRM also saw a modest seasonal increase in delinquencies, albeit not necessarily a weak point, but something to keep an eye on, especially as student loan payments resume in the U.S.
After two straight quarters of uplifting results, AFRM is beginning to show signs of stabilization. Shares are still down over 80% from all-time highs in late 2021. However, finding success despite numerous hurdles this year is an encouraging sign. |
