| | | Market Snapshot
briefing.com
| Dow | 35273.03 | +184.74 | (0.53%) | | Nasdaq | 14265.86 | +65.88 | (0.46%) | | SP 500 | 4556.62 | +18.43 | (0.41%) | | 10-yr Note | unch | 4.42 |
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| | NYSE | Adv 1811 | Dec 1014 | Vol 705 mln | | Nasdaq | Adv 2675 | Dec 1597 | Vol 3.87 bln |
Industry Watch
| Strong: communication services, consumer staples, health care, consumer discretionary |
| | Weak: energy |
Moving the Market
--Strong results and reassuring guidance form NVIDIA (NVDA)
--Mega-cap leadership
--Seasonality
--OPEC+ delays weekend meeting until November 30 without explanation; Drop in oil and gas prices viewed as relief point for consumers
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Closing Stock Market Summary
22-Nov-23 16:20 ET
Dow +184.74 at 35273.03, Nasdaq +65.88 at 14265.86, S&P +18.43 at 4556.62
[BRIEFING.COM] The stock market went into Thursday's Thanksgiving Day holiday giving investors more for which to be thankful. Fortified by yet another impressive earnings report from NVIDIA (NVDA 487.16, -12.28, -2.5%), which fell prone to a sell-the-news response, an encouraging initial jobless claims report, Israel and Hamas agreeing to a four day pause in fighting as part of a hostage release deal, and the lingering fear of missing out on further gains, the major indices padded their gains for the month.
The gains were modest but ultimately underpinned by broad-based buying interest and a general lack of selling interest at the index level. Advancers led decliners by a workmanlike 9-to-5 margin at the NYSE and by a 13-to-8 margin at the Nasdaq. The Invesco S&P 500 Equal-Weight ETF (RSP) gained 0.5%, as did the Vanguard Mega-Cap Growth ETF (MGK).
Deere (DE 370.74, -11.91, -3.1%), Guess? (GES 20.81, -2.91, -12.3%), Urban Outfitters (URBN 31.82, -4.49, -12.4%), Nordstrom (JWN 14.21, -0.69, -4.6%), and Autodesk (ADSK 202.66, -15.01, -6.9%) were some individual laggards of note following their earnings reports. Tesla (TSLA 234.21, -6.99, -2.9%), meanwhile, broke down below its 50-day moving average (237.99).
Otherwise, the market had a predominately positive disposition, holding its line in the afternoon trade following the news that Rainbow Bridge at Niagara Falls had been closed after a vehicle traveling to the U.S. from Canada had exploded. A follow-up report from NBC News said law enforcement officials were not calling this an act of terrorism.
Every sector finished the session higher with the exception of the energy sector (-0.1%). Gains for the other sectors ranged from 0.1% to 0.9%.
The energy sector trailed all day amid a roller-coaster session for oil prices, which traded as low as $73.90 per barrel before settling the session at $77.05 per barrel, down just 0.7%. A report that OPEC+ is delaying its weekend meeting until November 30 triggered the initial sell-off as Bloomberg suggested the delay was due to Saudi Arabia's dissatisfaction with the oil production levels of other members.
The implication was that the other members have been overproducing. Prices likely rebounded on a sense that Saudi Arabia will aim to get that overproduction in check.
Today's trading volume was certainly held in check. It was light, which was no surprise ahead of the holiday. As a reminder, the stock market will be closed on Thursday and will end trading early at 1:00 p.m. ET on Friday.
Happy Thanksgiving!
- Nasdaq Composite: +36.3% YTD
- S&P 500: +18.7% YTD
- Dow Jones Industrial Average: +6.4% YTD
- S&P Midcap 400: +4.9% YTD
- Russell 2000: +1.9% YTD
Reviewing today's economic data:
- Initial jobless claims for the week ending November 18 decreased by 24,000 to 209,000 (Briefing.com consensus 227,000) while continuing jobless claims for the week ending November 11 decreased by 22,000 to 1.840 million.
- The key takeaway from the report is that this report covers the period in which the survey for the November employment report is conducted, so the low level of initial jobless claims should support expectations for some decent growth -- certainly at this point in the Fed's tightening cycle -- for nonfarm payrolls.
- Durable goods orders for October declined 5.4% month-over-month (Briefing.com consensus -3.1%) following a downwardly revised 4.0% increase (from 4.7%) in September. Excluding transportation, durable goods orders were flat month-over-month (Briefing.com consensus 0.2%) following a downwardly revised 0.2% increase (from 0.5%) in September.
- The key takeaway from the report rests in the recognition that nondefense capital goods orders, excluding aircraft -- a proxy for business spending -- dipped 0.1% month-over-month following a 0.2% decline in September. That isn't a major drop-off by any means, but it does fit with a softening environment in the manufacturing space.
- The final reading for the University of Michigan Consumer Sentiment Index for November came in at 61.3 (Briefing.com consensus 60.9), versus the preliminary reading of 60.4 and October's final reading of 63.8. In the same period a year ago, the index stood at 56.7. November marks the fourth straight month that consumer sentiment has declined.
- 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.
- The MBA Mortgage Applications Index was up 3.0% week-over-week with refinance applications up 2% and purchase applications up 3%
Friday's economic calendar features:
- 09:45 ET: Preliminary November S&P Global US Manufacturing PMI (Prior 50.0)
- 09:45 ET: Preliminary November S&P Global US Services PMI (Prior 50.6)
Respecting a higher trading range
22-Nov-23 15:30 ET
Dow +194.01 at 35282.30, Nasdaq +67.96 at 14267.94, S&P +18.96 at 4557.15
[BRIEFING.COM] The major indices logged the bulk of today's gains shortly after the open. There have been a few dips and wiggles in the interim, but for the most part, the indices have kept to fairly tight trading ranges for the bulk of today's trade.
They have managed to do so fortified by a sense of relief that NVIDIA's (NVDA 486.50, -12.94, -2.6%) earnings results and guidance lived up to the high expectations and then some. That view doesn't necessarily show up in NIVIDIA's stock price today, but it didn't need to. It already had in the 25% gain the stock enjoyed from its October 26 low. It's worth pointing out, too, that NVIDIA has seen some buying on today's early dip. It is down 2.6% now, but it had been down as much as 4.4%.
Heading into the closing stretch, every sector is positive, except the energy sector (-0.2%), which has also battled back from larger losses. It had been down 2.6%, but recovered as oil prices recovered from their worst levels of the session.
WTI crude oil futures saw $73.90 at today's low, but settled the session at $77.05, down just 0.7%.
Taking up space in positive territory
22-Nov-23 15:00 ET
Dow +154.81 at 35243.10, Nasdaq +63.59 at 14263.57, S&P +15.60 at 4553.79
[BRIEFING.COM] The major indices have seen a little slippage, but continue to occupy space comfortably above the unchanged line.
There was a report a little after 2:00 p.m. ET that Rainbow Bridge in Niagara Falls had been closed after a car traveling to the U.S. from Canada exploded. Naturally, an investigation has been opened to determine if it was an act of terrorism. In any case, neither the stock market nor the bond market reacted much to this news, which suggests participants aren't viewing it with any undue alarm.
Sector performance today continues to skew to the plus side, although there hasn't been a great deal of conviction behind the gains, which are fairly modest. The communication services sector (+0.8%) is today's best-performing sector.
Separately, the 2-yr note yield is up three basis points to 4.90% and the 10-yr note yield is down one basis point to 4.41%, as the Treasury market's cash session is about to settle for the day.
S&P 500 consolidating afternoon gains; AMD, other chipmakers higher after NVDA beat
22-Nov-23 14:30 ET
Dow +171.12 at 35259.41, Nasdaq +90.80 at 14290.78, S&P +21.84 at 4560.03
[BRIEFING.COM] The S&P 500 (+0.48%) is near the middle of today's range, consolidating afternoon gains in recent trading.
Elsewhere, S&P 500 constituents Advanced Micro (AMD 123.00, +3.84, +3.22%), Enphase Energy (ENPH 101.00, +2.68, +2.73%), and Insulet (PODD 186.56, +5.24, +2.89%) show solid gains despite a dearth of corporate news.
Meanwhile, Jacobs Engineering (J 122.84, -2.24, -1.79%) is one of today's top laggards, pressured by a downgrade to Mkt Perform at Raymond James.
Gold lower ahead of holiday break
22-Nov-23 14:00 ET
Dow +175.19 at 35263.48, Nasdaq +100.39 at 14300.37, S&P +22.27 at 4560.46
[BRIEFING.COM] With about two hours remaining on Wednesday the tech-heavy Nasdaq Composite (+0.71%) is still atop the major averages.
Gold futures settled $8.80 lower (-0.4%) to $1,992.80/oz, pressured by a rising dollar and a rebound in treasury yields.
Meanwhile, the U.S. Dollar Index is up about +0.4% to $103.92.
Page One
Last Updated: 22-Nov-23 09:04 ET | Archive
Feeling mostly thankful
With the Thanksgiving Day holiday quickly approaching, one might think that there isn't a lot to talk about when it comes to news affecting the stock market. That isn't the case.
There has been quite a bit of news since yesterday's close, and for the most part, it is news for which market participants can be mostly thankful.
To begin, NVIDIA (NVDA) stayed true to its AI self and blew past analysts' high expectations for fiscal Q3 revenue and earnings. Just as important, NVIDIA provided Q4 revenue guidance well above the consensus estimate and said that, while U.S. export curbs to China are adversely affecting sales there, that is being more than offset by strong growth in other regions.
Shares of NVDA are up "only" 0.6% in pre-market action, but considering they had risen 25% from their October 26 low going into the report, that small gain still registers in a big way for a market that has enjoyed its leadership.
It is possible that gain fades away in today's trading in some sell-the-news action, but even if it does, NVDA proved its mettle with its latest report, which has helped overshadow some disappointing results and/or guidance from other companies like Autodesk (ADSK), Deere (DE), HP, Inc. (HPQ), Jack in the Box (JACK), and Guess? (GES).
Currently, the S&P 500 futures are up 15 points and are trading 0.4% above fair value, the Nasdaq 100 futures are up 76 points and are trading 0.5% above fair value, and the Dow Jones Industrial Average futures are up 49 points and are trading 0.2% above fair value.
Other news of note includes reports that Sam Altman is returning to OpenAI as CEO, that Israel and Hamas have agreed to a four day pause in fighting that is part of a hostage release deal, and that OPEC+ is delaying its weekend meeting, without explanation, until November 30.
Bloomberg reported earlier that Saudi Arabia has expressed dissatisfaction with other members' oil production levels. Whatever the case may be, WTI crude futures are down 3.9% to $74.74 per barrel, which is a nice site for the airlines to see, as well as for consumers to see as they set their sights on Black Friday shopping, envisioning lower gas prices.
There was some good news to see in the latest mortgage applications index. It was up 3.0% week-over-week with refinance applications up 2% and purchase applications up 3%. That good news stemmed from the drop in mortgage rates in recent weeks that has coincided with the drop in market rates.
The 10-yr note yield, which peeked above 5.00% in late October, saw 4.36% this morning before climbing to 4.40% following some other data this morning.
Specifically, initial jobless claims for the week ending November 18 decreased by 24,000 to 209,000 (Briefing.com consensus 227,000) while continuing jobless claims for the week ending November 11 decreased by 22,000 to 1.840 million.
The key takeaway from the report is that this report covers the period in which the survey for the November employment report is conducted, so the low level of initial jobless claims should support expectations for some decent growth -- certainly at this point in the Fed's tightening cycle -- for nonfarm payrolls.
Durable goods orders for October, meanwhile, declined 5.4% month-over-month (Briefing.com consensus -3.1%) following a downwardly revised 4.0% increase (from 4.7%) in September. Excluding transportation, durable goods orders were flat month-over-month (Briefing.com consensus 0.2%) following a downwardly revised 0.2% increase (from 0.5%) in September.
The key takeaway from the report rests in the recognition that nondefense capital goods orders, excluding aircraft -- a proxy for business spending -- dipped 0.1% month-over-month following a 0.2% decline in September. That isn't a major drop-off by any means, but it does fit with a softening environment in the manufacturing space.
Happy Thanksgiving! As a reminder, the market is closed Thursday and will close early at 1:00 p.m. ET on Friday.
-- Patrick J. O'Hare, Briefing.com
HP Inc. computes some nice gains as it reports its first upside revenue result in four quarters(HPQ)
HP Inc. (HPQ +3%) is computing some nice gains following its Q4 (Oct) earnings report last night. The headline numbers were decent but not great with in-line EPS and the mid-point of Q1 EPS guidance being below expectations. Revenue fell 6.5% yr/yr but grew 5% sequentially to $13.82 bln. This was slightly better than analyst expectations. We think investors are focusing on the top line number, even if it was small upside, because it breaks a streak of three consecutive revenue misses.
- HPQ says its markets largely behaved as expected in Q4. And its baseline scenario of market stabilization across FY24 has not changed. Its Consumer segment showed a more typical seasonal uptick. Commercial customers remain cautious, but HPQ saw some signs of stabilization, especially in Personal Systems. HPQ continues to see demand weakness in China due to challenging economic conditions.
- On the Personal Systems (PS) side, revenue fell 8% yr/yr (-7% CC) to $9.4 bln with 6.7% operating margin. PS revenue rose 5% sequentially, reflecting seasonal strength ahead of the holiday season. Total units were flat on a net basis, with Commercial down 6% and Consumer up 9%. Commercial revenue declines on a yr/yr basis stabilized sequentially, even as Commercial customers remain cautious. Consumer revenue was down 1%, and Commercial was down 11%. Competitive pricing pressures eased somewhat in Q4, resulting in increased ASPs. Its channel inventory is back to normalized levels.
- On the Print side, revenue fell 3% yr/yr (-2% CC) to $4.4 bln with 18.9% operating margin. Print revenue grew 4% sequentially, while units were flat. HPQ remains focused on regaining profitable Print share and improving its performance in office, and HPQ said it's starting to see the impact of these efforts, with solid share recovery in Americas, parts of Europe, and China quarter-over-quarter.
- Looking ahead to FY24, HPQ continues to assume the market will stabilize. And in Q1, HPQ expects the economic and demand environment to remain challenging but stable. As it continues to manage costs aggressively, HPQ expects operating margins for both PS and Print to be toward the high end of the respective target ranges for the quarter.
Overall, this was a solid quarter for HPQ. The numbers were not great and the Q1 guidance was a bit tepid. However, we think investors are focusing on HPQ's first top line beat in four quarters. Also, the company reaffirmed FY24 EPS guidance and, more importantly, reaffirmed its view that its markets should stabilize in FY24. Also, what struck us is that HPQ generally sounded a little more positive on this call than it had on its prior two calls. Basically, we think today's move in the stock is being driven by a better-than-feared sentiment. We think this report bodes well for Dell's (DELL) report next week.
Autodesk's designs on updated business model creating near-term headwinds (ADSK)
Computer-aided software provider Autodesk (ADSK) benefitted from larger-than-expected expansions of enterprise business agreements (EBAs) in Q3, fueling a top and bottom-line beat, but tepid guidance for Q1 and FY25 is weighing on the stock.
- Despite the high interest rate environment, ADSK saw growing momentum in its construction end market, especially among its larger customers. In fact, ADSK secured its largest ever EBA during the quarter and received record contributions from its construction and water verticals.
- However, when excluding the impact of that record-setting EBA, ADSK's underlying results don't look as strong. While remaining performance obligations (RPO) were up by 12% yr/yr, to $3.5 bln, RPO actually slightly decelerated from last quarter if that EBA is excluded.
- The qtr/qtr decrease is mainly due to a lower mix of multi-year contracts in FY24 compared to FY23 -- a trend that has been slowly building over the past couple of quarters.
- Relatedly, ADSK is in the process of transitioning from upfront to annual billings for multi-year contracts, thereby eliminating the upfront discount that it previously offered. This shift is negatively affecting ADSK's RPO and billings growth rates, as well as its free cash flow.
- Specifically, billings decreased by 11% to $1.2 bln, following a decline of 8% last quarter, while free cash flow plunged to $13 mln from $128 mln last quarter.
- Although this transition is creating a significant short-term headwind, ADSK believes that in the long run it will create more predictable and sustainable recurring revenue and cash flow.
- As this transition plays out, ADSK is also implementing a new transaction model for its indirect business across all of its major markets. In this new model, ADSK's partners will now provide a quote to customers, while the actual transaction still occurs directly between ADSK and the customer.
- This shift will add another layer to the near-term headwinds that are impacting ADSK's financials, but the optimization created by this transition is expected to boost revenue, operating income, and free cash flow over time.
- Beyond these business model shifts, macroeconomic headwinds are another factor behind ADSK's downside Q4 EPS guidance and tepid FY25 revenue growth forecast of about 9%+. In particular, demand from medium-sized customers is softening, while momentum in the media and entertainment vertical has also deteriorated.
Overall, there are many moving parts to consider, making for a complex story that market participants are trying to digest. The bottom line is that these changes to ADSK's business model will have a significant impact on its financials in the near-term, while at the same time, macroeconomic pressures are taking a toll on its smaller and medium-sized customers.
NVIDIA trades lower despite another huge beat-and-raise; seeing sell-the-news reaction (NVDA)
Nvidia (NVDA -3%) reported another monster quarter with huge EPS upside for Q3 (Oct). It also guided Q4 (Jan) revenue well above analyst expectations. All eyes were on its Data Center segment and NVDA did not disappoint.
- DC segment revenue jumped 279% yr/yr and 41% sequentially to a record $14.51 bln. The continued ramp of the NVIDIA HGX platform along with InfiniBand networking drove results. The company noted that some of the most exciting generative AI applications are built and run on NVIDIA, including Adobe Firefly, ChatGPT, Microsoft 365 co-pilot, CoAssist now assist with ServiceNow, and Zoom AI Companion.
- NVDA says that most major consumer Internet companies are racing to ramp-up generative AI deployment. Consumer Internet companies and enterprises were big growth drivers in Q3, comprising roughly half of Data Center revenue. Of note, NVDA says the enterprise wave of AI adoption is now beginning. Enterprise software companies, like Adobe, Databricks, Snowflake and ServiceNow are adding AI co-pilot and assistants to their platforms. Cloud service providers drove roughly the other half of Data Center revenue in OctQ as demand was strong from all hyperscale CSPs.
- An area to watch in Q4 will be China. The US govt recently announced a new set of export control regulations for China. NVDA's sales of some products to China and other affected countries are now subject to licensing requirements. This represents about 20-25% of DC segment revenue. NVDA expects sales to these destinations will decline significantly in Q4, but also expects sales will be more than offset by strong growth in other regions.
- Its next biggest segment is Gaming, which grew a robust 81% yr/yr and 15% sequentially to $2.86 bln, helped by strong demand during the back-to-school season. NVDA notes that Gaming has doubled relative to pre-COVID levels, even against the backdrop of lackluster PC demand. The number of games supporting NVDA's technologies has exploded, driving upgrade demand and attracting new buyers. In Q4, Gaming will likely decline sequentially as it's now more aligned with notebook seasonality.
- Finally, its Professional Visualization segment saw revs more than double yr/yr to $416 mln as it sees RTX being the workstation platform of choice for professional design, engineering and simulation. AI is emerging as a powerful demand driver. Automotive segment revenue rose just 4% yr/yr to $261 mln, primarily driven by continued growth in self-driving platforms.
Overall, this was another great quarter for NVDA. The company says the era of generative AI is taking off and that has been apparent in recent quarters. However, we are seeing a muted reaction in the shares following the report. We think a good report was likely priced in already. The stock has run about $100 thus far in November. Also, the expected big drop in China sales from the US export restrictions may be weighing on NVDA as well today.
Deere running lower as steep projected drop in FY24 earnings suggests company reached its peak (DE)
After harvesting some very healthy earnings gains in FY23, including a much better-than-expected EPS increase of 11% in Q4, farming and ag equipment maker Deere (DE) is forecasting a steep decline in earnings for FY24.
- This weaker-than-expected outlook, which calls for net income to fall by over 20% yr/yr based on the midpoint of the $7.75-$8.25 bln guidance range, is clouding over another top and bottom-line beat for DE. It's also confirming the notion that FY23 marked a near-term peak for ag equipment sales in the U.S. with DE also forecasting a 10-15% drop in the large ag equipment industry for FY24.
- For the first time in three years, DE's revenue declined on a yr/yr basis, dipping by about 4% to $13.8 bln. Strong farming incomes, supported by high crop prices, combined with a replacement/upgrade cycle for new smart equipment, has provided a potent growth catalyst for DE.
- However, that catalyst is now losing steam, as illustrated by the 6% drop in net sales for the Production & Precision Agriculture segment.
- In the preceding three quarters, net sales growth for DE's largest segment came in at 12% (Q3), 53% (Q2), and 55% (Q1).
- Inflationary pressures have been easing relative to early 2023 and 2022, and that includes lower prices for commodities such as corn, soybeans, and wheat. That means lower incomes for farmers, and, in turn, lower demand for new farming equipment.
- High interest rates and their impact on homeowners, small farmers, and business owners is also taking a toll on DE's Small Ag & Turf segment. This segment, which sells smaller tractors and utility vehicles, is also more exposed to the slowdown in consumer spending, especially for big-ticket items.
- After edging higher by just 3% last quarter, net sales fell by 13% in Q4 -- the weakest performance across DE's business segments.
- The one bright spot for DE was the Construction & Forestry segment. Net sales in Q4 increased by 11% to $3.7 bln, while operating profit jumped by 25% to $516 mln. Favorable pricing and higher shipment volumes were the key factors underlying the growth.
The main takeaway is that while it doesn't come as a major surprise that DE is anticipating business to cool down from the red-hot levels seen in FY23, the magnitude of the forecasted drop-off in FY24 is catching investors off guard. It's worth point out, though, that DE does tend to guide conservatively. For instance, the company originally guided for FY23 net income of $8.0-$8.5 bln in its 4Q22 earnings press release, before raising its guidance in Q1, Q2, and again in Q3. Net income for FY23 ultimately came in at $10.2 bln. So, while a sharp pullback from the peak sales levels of FY23 doesn't necessarily bode well for the stock, it's possible that FY24 could turn out better than expected, especially since farming incomes are still projected to be strong.
Baidu issues mixed Q3 results, but focus centering on AI growth opportunities (BIDU)
Chinese tech giant Baidu (BIDU) beat muted expectations in Q3 as revenue growth slowed amid stiff macroeconomic headwinds, but the company's current quarterly results aren't necessarily the main attraction. Rather, BIDU's latest version of its AI chatbot, ERNIE 4.0, is under the spotlight after launching last month.
- As BIDU's answer to OpenAI's ChatGPT, ERNIE failed to impress the public and investors when the original version launched last February. In fact, the company didn't even offer a live demo of the chatbot, opting to only provide a pre-recorded video of ERNIE, leaving many to wonder if its capabilities would stack up to ChatGPT's.
- After a few upgrades, though, it now appears that ERNIE 4.0 is ready for prime time. On that note, BIDU is now charging a small monthly fee to use ERNIE 4.0, which is embedded into various BIDU products, such as maps, file sharing, and search.
- While this revenue wasn't included in BIDU's Q3 results, ERNIE will begin contributing to the topline in Q4. During the earnings call, BIDU stated that ERNIE will help generate "hundreds of millions of yuan in additional ad revenue" in Q4.
That is good news, because BIDU's core business of online search and advertising is badly in need of a growth catalyst.
- In Q3, revenue for Baidu Core was up by just 5% to RMB 26.6 bln, down from last quarter's growth rate of 14%. In terms of new monthly active users, growth there was also pretty tepid at 5% to 663 mln.
- Along with macroeconomic pressures, BIDU is facing intensifying competition from Alibaba (BABA) and ByteDance, which has seen its market share increase in recent quarters.
- On the topic of BABA, when the Chinese e-commerce and cloud computing giant reported earnings last week, it disclosed that it no longer plans to spin-off its cloud segment due to uncertainties stemming from U.S. export controls on high-performance chips.
- Although BIDU didn't echo BABA's concerns about sourcing chips to power AI tech, the export restrictions do represent a potential risk as the company looks to ramp up its AI investments.
Overall, it was a mixed performance in Q3 as BIDU comfortably topped EPS estimates, even as revenue growth decelerated. However, enthusiasm is building for BIDU's rising AI growth opportunities, which is underpinning the stock's gains today.
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