| | | Market Snapshot
briefing.com
| Dow | 34337.87 | +54.77 | (0.16%) | | Nasdaq | 13767.74 | -30.36 | (-0.22%) | | SP 500 | 4411.55 | -3.69 | (-0.08%) | | 10-yr Note | +1/32 | 4.63 |
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| | NYSE | Adv 1356 | Dec 1448 | Vol 788 mln | | Nasdaq | Adv 2181 | Dec 2081 | Vol 4.3 bln |
Industry Watch
| Strong: Energy, Health Care, Consumer Staples, Consumer Discretionary, Industrials |
| | Weak: Utilities, Real Estate, Information Technology, Communication Services, Financials |
Moving the Market
-- Not a lot of conviction in a market many believe is due for some consolidation
-- A wait-and-see mentality in front of Tuesday's release of October Consumer Price Index
-- Treasury yields pulling back from earlier highs providing some support for stocks
-- S&P 500 finding some support after slipping below 4,400
| Closing Summary
13-Nov-23 16:20 ET
Dow +54.77 at 34337.87, Nasdaq -30.36 at 13767.74, S&P -3.69 at 4411.55
[BRIEFING.COM] The major indices settled the session little changed on the heels of Friday's rally. Early selling pressure, driven in part by a sense that the market is due for some consolidation, had stocks modestly lower right out of the gate. The major indices climbed off their worst levels, though, after the S&P 500 found support on a test of the 4,400 level, hitting 4,393 at its low.
There was a general lack of conviction from both buyers and sellers ahead of tomorrow's release of the October Consumer Price Index. That tentative price action left five of the 11 S&P 500 sectors higher and six lower. In turn, 15 of the 30 Dow components were up and 15 were down. Boeing (BA 204.54, +7.89, +4.0%) was a standout winner in the DJIA after news that it received multiple orders at the Dubai Airshow and a Bloomberg report that China is considering ending its freeze of Boeing with a new 737 Max deal.
The energy sector (+0.7%) saw the largest gain, rising alongside oil ($78.34/bbl, +1.13, +1.5%), followed by the health care (+0.6%) and consumer staples (+0.4%) sectors. The utilities (-1.2%), real estate (-0.8%), and information technology (-0.5%) sectors were the worst performers.
The move higher in the stock market also coincided with Treasuries pulling back from intraday high yields. The 2-yr note yield, which hit 5.07% this morning, settled one basis point lower than Friday at 5.04%. The 10-yr note yield settled unchanged from Friday at 4.63% after hitting 4.69% this morning.
Notably, Treasuries did not react much to the report from Moody's after Friday's close that it had downgraded the U.S. credit outlook to negative from stable based in part on concerns about partisan politics and the potential for budget deficits that remain very large. Moody's, however, did not downgrade its U.S. credit rating, which remains AAA.
- Nasdaq Composite: +31.5% YTD
- S&P 500: +14.9% YTD
- Dow Jones Industrial Average: +3.6% YTD
- S&P Midcap 400: +0.2% YTD
- Russell 2000: -3.2% YTD
Today's economic data was limited to the October Treasury Budget, which showed a deficit of $66.6 billion compared to a deficit of $87.9 billion in the same period a year ago. The deficit in October resulted from outlays ($470.0 billion) exceeding receipts ($403.4 billion). The Treasury Budget data is not seasonally adjusted so the October 2023 deficit cannot be compared to the September deficit of $170.7 billion.
- The key takeaway from the report is that the month of October marks the start of the government's fiscal year, and FY24 started with a deficit like FY23 did, albeit a smaller one.
Looking ahead, the October Consumer Price Index report will be released at 8:30 a.m. ET tomorrow.
Stocks little changed heading into the close
13-Nov-23 15:35 ET
Dow +73.58 at 34356.68, Nasdaq -16.55 at 13781.56, S&P -0.41 at 4414.83
[BRIEFING.COM] Things are little changed heading into the close.
The 2-yr note yield fell one basis point to 5.04% and the 10-yr note yield settled unchanged from Friday at 4.63%.
Looking ahead, the October Consumer Price Index report will be released at 8:30 a.m. ET tomorrow.
Energy complex settles higher
13-Nov-23 14:55 ET
Dow +71.59 at 34354.69, Nasdaq -6.50 at 13791.61, S&P +1.18 at 4416.42
[BRIEFING.COM] The market continues to move mostly sideways.
Energy complex futures settled higher. WTI crude oil futures rose 1.5% to $78.34/bbl and natural gas futures jumped 4.1% to $3.41/mmbtu. On a related note, the S&P 500 energy sector (+0.8%) sports the largest gain.
Utilities is the only sector moving more than 1.0%, down -1.2%, followed by the real estate (-0.9%) and information technology (-0.3%) sectors.
Stocks sticking to narrow range
13-Nov-23 14:30 ET
Dow +77.30 at 34360.40, Nasdaq -3.31 at 13794.80, S&P +2.20 at 4417.44
[BRIEFING.COM] Stocks are sticking to fairly narrow ranges.
The October Treasury Budget showed a deficit of $66.6 billion compared to a deficit of $87.9 bln in the same period a year ago. The deficit in October resulted from outlays ($470.0 billion) exceeding receipts ($403.4 billion). The Treasury Budget data is not seasonally adjusted so the October 2023 deficit cannot be compared to the September deficit of $170.7 billion.
The key takeaway from the report is that the month of October marks the start of the government's fiscal year, and FY24 started with a deficit like FY23 did, albeit a smaller one.
Treasury yields are little changed after the data. The 10-yr note yield remains at 4.63% and the 2-yr note yield was at 5.03%, but sits at 5.04% now.
Gold and copper futures settle higher
13-Nov-23 14:00 ET
Dow +52.44 at 34335.54, Nasdaq -18.34 at 13779.77, S&P -1.07 at 4414.17
[BRIEFING.COM] The major indices are little changed over the last half hour.
Gold futures rose 0.6% to $1,950.10/oz and copper futures climbed 2.1% to $3.67/mmbtu.
Elsewhere, the US Dollar Index is down 0.2% to 105.63.
Page One
Last Updated: 13-Nov-23 09:02 ET | Archive
Waiting on market-moving news
The stock market ended last week with a flourish, which was a welcome sight for any participant who was not short the market and/or short the mega-cap stocks. The start to today's session, however, is shaping up to be a subdued one.
Currently, the S&P 500 futures are down 14 points and are trading 0.3% below fair value, the Nasdaq 100 futures are down 63 points and are trading 0.4% below fair value, and the Dow Jones Industrial Average futures are down 68 points and are trading 0.2% below fair value.
The subdued action relates in part to an expectation that there could be some consolidation activity following Friday's rally effort, yet most of the hesitation is being attributed to a wait-and-see mentality in front of tomorrow's release of the October Consumer Price Index (CPI).
The CPI data are going to factor prominently in the market's expectations for Fed policy, which is why there is a sense of anxiousness surrounding the report. Other key economic data this week will include the Retail Sales, Producer Price Index, Initial Jobless Claims, and Housing Starts reports.
Tucked in between those releases will be a bevy of earnings reports from some of the nation's leading retailers, including Home Depot (HD), Walmart (WMT), Target (TGT), TJX Cos. (TJX), and Macy's (M).
Understandably, there will be some mid-week focus on the APEC Summit in San Francisco. President Biden and President Xi are confirmed to meet on the sidelines there on November 15 in a bid to ease some of the diplomatic tension that has been building between the two governments.
To that end, Bloomberg reports that China is considering ending its freeze on Boeing (BA) with a new 737 MAX deal. That news, and reports of multiple new orders at the Dubai Airshow, has Boeing up nearly 4.0% in pre-market action.
On another governmental note, there is ongoing tension in Congress between, and within, the parties. That tension could be on display this week, as Congress needs to agree to a continuing resolution to keep the government funded past November 17 or risk a shutdown.
House Speaker Johnson is advancing a two-step continuing resolution that keeps funding at current levels for certain areas through January 19 and other areas through February 2.
After Friday's close, Moody's lowered its U.S. credit rating outlook to negative from stable, calling attention to partisan politics as a basis for doing so along with the government's very large fiscal deficits. Importantly, though, Moody's affirmed the U.S.'s AAA credit rating.
The Treasury market has flopped around in the wake of Moody's call and in front of this week's key economic releases. The 2-yr note yield is up one basis point to 5.06% and the 10-yr note yield is up three basis points to 4.66%.
-- Patrick J. O'Hare, Briefing.com
Tower Semi roars back from intraday lows of -9% as FY24 starts to look like a turnaround year (TSEM)
Tower Semi (TSEM +3%) forms a towering green candle today as shares rebound off intraday lows of -9%. The initial sell-off was likely sparked by tepid Q3 results, including another quarter of double-digit revenue declines and light Q4 revenue guidance, with the midpoint falling short of analyst expectations.
The year has not been too kind to TSEM, especially following optimism last year emanating from Intel (INTC) agreeing to acquire the company for a 60% premium compared to price levels at the time of the announcement in February. Closure of the merger started to appear grim earlier this year, with the final nail in the coffin coming in mid-August, when INTC terminated its pending acquisition, citing an inability to obtain regulatory approvals promptly. Instead, INTC formed a foundry service agreement with TSEM, whereby INTC would provide manufacturing capacity. While the service agreement with INTC was a positive development, it did not keep shares from sinking rapidly, hitting 52-week lows in October.
However, the service agreement provides a nice tailwind while TSEM notices favorable turnaround dynamics similar to its peers, signaling a much smoother road ahead in FY24.
- Headline results in Q3 were not particularly exciting, as revs fell 16.1% yr/yr to $358.2 mln, matching analyst expectations. Adjusted EPS of $0.54 may have topped estimates, a reversal from last quarter's miss, but it was still down over 20% versus the year-ago period.
- Still, within these sluggish figures were a few green shoots. Management noted that a reversion across several areas toward rational inventory levels is materializing at the same time customer forecasts are growing more optimistic, meaning figures are projected ahead of analyst expectations.
- Meanwhile, after a soft year for the handset market, TSEM is observing signs of a potential recovery, evidenced by sequential quarterly revenue gains throughout this year, marking Q1 as a likely bottom. TSEM is excited about a robust market recovery over the longer term, while increased adoption of 5G across developing countries adds further kindling.
- Speaking of longer-term financial forecasts, TSEM is confident in achieving annual revenue of around $2.50-2.65 bln next year, over 85% higher than the annualized run rate in FY23. A significant component of TSEM's outlook stems from its recent foundry service agreement with INTC, showcasing the outsized benefits of this agreement.
- Nevertheless, in the interim, Q4 revenue projections of $332.5-367.5 mln, representing $350 mln at the midpoint, translates to another quarter of double-digit declines.
While TSEM closes FY23 on a stale note -- the theme for this year -- it is heading into FY24 in a significantly improved position from where it entered FY23. Recovering conditions across TSEM's end markets provide a sturdy foundation to jumpstart FY24 while its recent service agreement with INTC adds further kindling. Headwinds are still present and could quickly intensify, given how much uncertainty lingers within the macroeconomic landscape. However, at the moment, the future is looking bright.
Monday.com starts week off on strong note after delivering another beat-and-raise report (MNDY)
Since going public in June of 2021, work management platform provider Monday.com (MNDY) has crushed EPS expectations in every quarter, while routinely issuing upside revenue guidance for the quarter ahead, despite operating under challenging business conditions. That impressive trend continued this morning as MNDY cruised past Q3 earnings expectations and guided Q4 revenue above analysts' estimates, providing the stock with a much-needed spark after diving by about 13% since early October.
- However, the company did miss revenue expectations for the first time in its history and the degree to which it missed was pretty substantial. Furthermore, MNDY's revenue growth continued to decelerate, coming in at 23% in Q3 compared to 42% last quarter and 50% in Q1.
- Rewinding to early September, competitor Asana (ASAN) posted a beat-and-raise Q4 earnings report, but cautious commentary from its executives regarding macroeconomic trends clouded over the upside results and outlook. In particular, ASAN noted that seat consolidation became an issue as customers continued to scrutinize their IT spending budgets.
- Similarly, MDNY warned last quarter that it anticipates net dollar retention (NDR) to remain under some pressure throughout the remainder of FY23 due to lingering macroeconomic challenges. After dropping by about five percentage points in Q2 from over 115% in Q1, NDR was flat on a qtr/qtr basis at around 110%.
- The good news is that larger customers are still expanding their usage and spending. NDR for customers with over $50,000 in annual recurring revenue was over 115%, which is partly due to the successful launch and ongoing rollout of mondayDB. With the launch of mondayDB, the company is capable of running larger applications on its platform since it upgraded the infrastructure. In turn, this creates the opportunity to win larger installments and different use cases.
- MDNY's rapid improvement in profitability also stands out. In fact, the company achieved non-GAAP profitability two years ahead of schedule, generating non-GAAP operating margin of 13% compared to (2)% in the year-earlier quarter. As the company's scale increases, its productivity and operating efficiencies have simultaneously improved.
The main takeaway is that MNDY continues to produce strong results amid a difficult business climate. Its work management platform, which enables companies to do more with less, is still experiencing healthy demand, especially among larger customers. Bolstered by this healthy demand, MNDY's profitability has improved at a much faster-than-expected rate.
Henry Schein higher despite lackluster results/guidance; results better than feared (HSIC)
Henry Schein (HSIC +7%) is nicely higher lower following its Q3 report this morning. The headline numbers for this distributor of dental and medical supplies were decent with both EPS and revenue being generally in-line.
- The main problem was the guidance. HSIC lowered FY23 adjusted EPS pretty substantially to $4.43-4.71 from $5.18-5.35 and it lowered its FY23 revenue outlook to -3% to -1% from +1-3% prior guidance. HSIC cited a softening macro picture and a pretty substantial business interruption impact from a previously announced cybersecurity incident.
- On the positive side, HSIC was pleased with its 3.1% overall sales growth to $3.16 bln. This was despite continued lower sales of PPE products and COVID-19 test kits. It helps that HSIC is very large a wide variety of clients. HSIC has 1+ mln customers, primarily office-based practitioners including dentists, physicians in alternate care settings. HSIC also serves dental labs, urgent care centers, surgery centers, dialysis centers etc.
- Profitability was aided by HSIC's continuing strategy of moving into higher margin areas. Distributors are known for having very thin margins, so HSIC has been branching into providing technology and value-added services to its clients, including practice management services. HSIC also has a growing business in the specialty dental arena, including implants, bone regeneration products, endodontics, aligners. Adding it all up, these higher margin segments account for around 25% of sales and just under 40% of operating income.
- In terms of the cybersecurity incident, HSIC says its distribution businesses are now operational and it is initiating the reactivation of its ecommerce platform early this week. HSIC has also made significant progress resuming its high levels of service its customers have come to expect. HSIC estimates the overall impact to EPS was $0.55-0.75. However, that excludes any future insurance claim recovery.
- Despite the near term softening macro environment, HSIC believes it is benefitting from positive industry trends. Specifically, HSIC has noted previously it is not in the acute care area and procedures are moving from the acute care environment to the physician office, ambulatory surgical center etc. HSIC also notes that in dentistry, there is a growing understanding of the importance of oral care and connection between oral care and healthcare in general.
Overall, we think the positive move in the stock today is investors coming to the realization that the results/guidance were better than feared. This incident really impacted its business. The stock had pulled back pretty sharply since HSIC disclosed the cybersecurity incident in mid-October. But now there is certainty on the EPS impact and HSIC provided an encouraging update in terms of getting back to normal. Also, a good chunk of the guidance decrease was related to the cybersecurity incident and not demand.
Tyson Foods reverses its string of earnings misses in Q4; FY24 presenting turnaround potential (TSN)
The recent decision to shutter four chicken facilities as part of broader efforts to control costs helped Tyson Foods (TSN) reverse its long string of earnings misses in Q4 (Sep), exceeding analyst expectations by high single digits. The food processing giant fell short of bottom-line estimates for five consecutive quarters leading into its SepQ report today, illuminating the persistent headwinds it has faced for over a year.
A bottom-line beat alone did not initially cut it today, as investors recoiled at TSN's missed revenue expectations for the fourth straight quarter and flat FY24 (Sep) yr/yr revenue growth projection, below the mild positive growth analysts anticipated. However, some signs are pointing to demand finally bottoming.
- TSN delivered its second quarter of sequential adjusted operating income improvements, fueling its 147% spike in adjusted EPS in SepQ compared to Q3 (Jun) to $0.37. While this bottom-line result was still 77% below the year-ago figure, it was considerably improved from last quarter and Q2 (Mar), when it posted a net loss, underscoring a quick tilt toward profitability during a turbulent economic period.
- However, this volatile environment still clipped revenue growth in SepQ, resulting in a 3% decline yr/yr to $13.35 bln. While TSN's Beef segment enjoyed a modest 4% sales growth yr/yr in the quarter, every other core business saw sales slip from last year. Chicken suffered the most, experiencing a 10% drop in revenue, while Pork closely followed, declining by 7%.
- Tumbling prices underpinned weak sales. Beef was the only segment to see prices climb, ticking 10% higher. However, this resulted in a 7% volume decline. Furthermore, even though prices fell across the board, edging 9% lower in Chicken, 7% in Pork, 5% in International, and 2% in Prepared Foods, volumes were mostly unchanged yr/yr. International was the sole exception, seeing a solid 5% volume bump. On a consolidated basis, prices moved 1.4% lower, yet volumes continued to decrease, slipping into negative territory at -0.6% following a 0.3% improvement last quarter.
While FY23 was a story of tenacious headwinds, FY24 is shaping up to be less chaotic. TSN still guided to underwhelming revenue growth in FY24, forecasting $52.9 bln, but it started to convey a more upbeat tone. Management observed stabilizing consumer protein demand during SepQ, optimistic this will carry into FY24. Meanwhile, the benefits from the recent factory shutdowns materialized rapidly, and TSN will continue maintaining cost discipline, keeping margins afloat. Additionally, it should be noted that TSN's volume grew across the retail channel in SepQ while most of its peers endured volume contraction, showcasing sturdy brand recognition and loyalty.
Bottom line, after several dismal quarters, TSN may finally be encountering a turning point. Plenty of metrics were still disappointing during SepQ. However, they were far better than some of the drop-offs we saw earlier this year, making current price levels attractive as a potential turnaround play.
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.
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