| | | Market Snapshot
briefing.com
| Dow | 35430.42 | +13.44 | (0.04%) | | Nasdaq | 14258.49 | -23.27 | (-0.16%) | | SP 500 | 4550.58 | -4.31 | (-0.09%) | | 10-yr Note | +5/32 | 4.270 |
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| | NYSE | Adv 1841 | Dec 979 | Vol 987 mln | | Nasdaq | Adv 2542 | Dec 1754 | Vol 4.9 bln |
Industry Watch
| Strong: Real Estate, Financials, Industrials, Materials |
| | Weak: Consumer Staples, Energy, Communication Services, Utilities |
Moving the Market
-- A further drop in market rates
-- Relative weakness in mega cap stocks weighing on index performance
-- Recalibrating the likelihood of the Fed cutting rates in the first half of 2024
-- Digesting better-than-expected Q3 GDP, which was aided by a strong labor market and disinflation that fueled healthy consumer spending activity
-- Positive reactions to earnings news
-- Fear of missing out on further gains in a seasonally strong period for stocks |
Closing Summary
29-Nov-23 16:30 ET
Dow +13.44 at 35430.42, Nasdaq -23.27 at 14258.49, S&P -4.31 at 4550.58
[BRIEFING.COM] The S&P 500 and Nasdaq Composite closed near their lows of the day, registering slim declines due to relative weakness in the mega cap space. The Dow Jones Industrial Average, meanwhile, eked out a 0.04% gain while the Russell 2000 and S&P Mid Cap 400 rose 0.6% and 0.4%, respectively.
There was an underlying positive bias throughout the session, but buyer enthusiasm faded somewhat as the session progressed. Shortly after the open, advancers led decliners by a better than 9-to-2 margin at the NYSE and a better than 3-to-1 margin at the Nasdaq. At the close, advancing issues had a less than 2-to-1 lead at the NYSE and a 3-to-2 lead at the Nasdaq. The equal-weighted S&P 500 logged a 0.4% gain, but had been up as much as 1.1% at its high.
Six of the S&P 500 sectors closed higher while five of them declined. The real estate sector (+0.7%) led the gainers while the communication services sector (-1.1%) saw the biggest decline due to its lagging mega cap constituents.
A drop in Treasury yields provided a measure of support for stocks in this seasonally strong period for the market. The 2-yr note yield settled seven basis points lower than yesterday at 4.66% and the 10-yr note yield declined seven basis points to 4.27%.
Those moves were partially a reaction to some pleasing inflation data out of Germany, Spain, and Australia, and the notion that the Fed could cut rates in the first half of 2024. Notably, however, Richmond Fed President Barkin (2024 FOMC voter) said today at the CNBC CFO Council Summit that he thinks it is premature to talk rate cuts and that he is not taking the possibility of further rate hikes off the table, as he believes inflation is likely to be more stubborn than he would like it to be.
Still, the fed funds futures market is still pricing in a 79.8% probability of a rate cut at the May FOMC meeting versus a 54.7% probability one week ago, according to the CME FedWatch Tool.
Other factors that helped to drive today's positive bias included an upward revision to Q3 real GDP to 5.2% from 4.9%, General Motors (GM 31.60, +2.71, +9.4%) announcing an accelerated $10 billion share buyback program and 33% increase in its dividend, and the favorable response to earnings results from CrowdStrike (CRWD 234.44, +22.09, +10.4%), NetApp (NTAP 89.54, +11.43, +14.6%), Intuit (INTU 577.23, +12.16, +2.2%), Workday (WDAY 263.49, +26.16, +11.0%), and Foot Locker (FL 27.67, +3.83, +16.1%).
Market participants were also digesting the Fed's November Beige Book, which did not move the stock or bond markets that much. The main point from the release was that, on balance, economic activity slowed since the previous report and demand for labor continued to ease.
- Nasdaq Composite: +36.2%
- S&P 500: +18.5%
- Dow Jones industrial Average: +5.7%
- S&P Midcap 400: +4.9%
- Russell 2000: +2.4%
Reviewing today's economic data:
- Weekly MBA Mortgage Applications Index 0.3%; Prior 3.0%
- Q3 GDP - Second Estimate 5.2% (Briefing.com consensus 4.9%); Prior 4.9%; Q3 GDP Deflator - Second Estimate 3.6% (Briefing.com consensus 3.8%); Prior 3.5%
- The key takeaway from the report is that the U.S. economy was effectively booming in the third quarter despite higher interest rates, aided by a strong labor market and disinflation that fueled healthy consumer spending activity.
- October Adv. Intl. Trade in Goods -$89.8 bln; Prior was revised to -$86.8 bln from -$85.8 bln
- October Adv. Retail Inventories 0.0%; Prior was revised to 0.4% from 0.9%
- October Adv. Wholesale Inventories -0.2%; Prior was revised to 0.1% from 0.0%
Looking ahead, Thursday's economic calendar features:
- 8:30 ET: Weekly Initial Claims (Briefing.com consensus 215,000; prior 209,000), Continuing Claims (prior 1.840 mln), October Personal Income (Briefing.com consensus 0.2%; prior 0.3%), Personal Spending (Briefing.com consensus 0.2%; prior 0.3%), PCE Prices (Briefing.com consensus 0.1%; prior 0.4%), and Core PCE Prices (Briefing.com consensus 0.2%; prior 0.3%)
- 9:45 ET: November Chicago PMI (Briefing.com consensus 45.0; prior 44.0)
- 10:00 ET: October Pending Home Sales (Briefing.com consensus -2.3%; prior 1.1%)
- 10:30 ET: Weekly natural gas inventories (prior -7 bcf)
Treasuries build on gains; Econ data on Thursday
29-Nov-23 15:30 ET
Dow +11.58 at 35428.56, Nasdaq -25.16 at 14256.60, S&P -5.29 at 4549.60
[BRIEFING.COM] The S&P 500 turned lower and slipped into negative territory recently. The equal-weighted S&P 500 is still trading up 0.4%.
The 2-yr note yield settled seven basis points lower at 4.66% and the 10-yr note yield declined seven basis points to 4.27%.
Looking ahead, Thursday's economic calendar features:
- 8:30 ET: Weekly Initial Claims (Briefing.com consensus 215,000; prior 209,000), Continuing Claims (prior 1.840 mln), October Personal Income (Briefing.com consensus 0.2%; prior 0.3%), Personal Spending (Briefing.com consensus 0.2%; prior 0.3%), PCE Prices (Briefing.com consensus 0.1%; prior 0.4%), and Core PCE Prices (Briefing.com consensus 0.2%; prior 0.3%)
- 9:45 ET: November Chicago PMI (Briefing.com consensus 45.0; prior 44.0)
- 10:00 ET: October Pending Home Sales (Briefing.com consensus -2.3%; prior 1.1%)
- 10:30 ET: Weekly natural gas inventories (prior -7 bcf)
Energy complex futures settle mixed
29-Nov-23 15:05 ET
Dow +67.90 at 35484.88, Nasdaq +1.31 at 14283.07, S&P +3.05 at 4557.94
[BRIEFING.COM] Things are little changed at the index level over the last half hour.
WTI crude oil futures rose 1.8% to $77.84/bbl and natural gas futures fell 1.4% to $2.80/mmbtu. On a related note, the S&P 500 energy sector (-0.3%) is among the top laggards.
Separately, the US Dollar Index is up 0.1% to 102.78.
Beige Book says economic activity slowed since the previous report; markets undisturbed by report
29-Nov-23 14:30 ET
Dow +133.74 at 35550.72, Nasdaq +15.23 at 14296.99, S&P +9.31 at 4564.20
[BRIEFING.COM] The broader market reaction to the Fed's November Beige Book was decidedly timid; the S&P 500 (+0.20%) has essentially moved sideways over the prior half hour. The main point from the release was that, on balance, economic activity slowed since the previous report, with four Districts reporting modest growth, two indicating conditions were flat to slightly down, and six noting slight declines in activity. The release also noted that demand for labor continued to ease, as most Districts reported flat to modest increases in overall employment.
Turning to the S&P 500, top performers today include NetApp (NTAP 90.14, +12.03, +15.40%), Hewlett Packard Enterprise (HPE 16.61, +1.09, +7.02%), and Illumina (ILMN 102.67, +6.13, +6.35%). NTAP and HPE gain on earnings, while ILMN was the subject of an Endpoints News report out late last night highlighting management comments that there's outside interest in Grail.
One of today's worst performers is Constellation Energy (CEG 121.01, -3.44, -2.76%), fueled by a downgrade to Neutral from Seaport Research Partners citing valuation.
Gold narrowly higher into November Beige Book
29-Nov-23 13:55 ET
Dow +134.40 at 35551.38, Nasdaq +23.28 at 14305.04, S&P +11.84 at 4566.73
[BRIEFING.COM] With about two hours to go on Wednesday the tech-heavy Nasdaq Composite (+0.16%) brings up the rear; the Fed's November Beige Book is due at the top of the hour.
Gold futures settled $6.90 higher (+0.3%) to $2,067.10/oz, aided in part by slumping yields and an overnight 3-month low in the greenback, which has since eased off a bit.
Meanwhile, the U.S. Dollar Index is up less than +0.1% to $102.79.
Page One
Last Updated: 29-Nov-23 09:07 ET | Archive
November gains to be extended at the open
Can this month get any better? The short answer is yes. The long answer is, yes, the equity futures market is in a position that suggests more gains will be seen at today's open.
Currently, the S&P 500 futures are up 21 points and are trading 0.5% above fair value, the Nasdaq 100 futures are up 101 points and are trading 0.7% above fair value, and the Dow Jones Industrial Average futures are up 104 points and are trading 0.3% above fair value.
There are various factors driving the positive bias this morning, but one factor stands above all: falling interest rates.
The 2-yr note yield is down six basis points to 4.67% as market participants price in the possibility of the Fed cutting rates in the first half of 2024. That view was stoked yesterday by Fed Governor Waller, who said rates could be lowered if inflation continues to fall for several more months, and it has been stirred again this morning with Bloomberg reporting that hedge fund manager Bill Ackman thinks a rate cut could come as soon as the first quarter due to the economic pressures associated with rising real rates.
The 10-yr note yield is down five basis points to 4.29%, supported by some pleasing inflation data out of Germany, Spain, and Australia. The 10-yr note yield went as low as 4.25% overnight.
The second estimate for Q3 GDP didn't convey any economic pressures. On the contrary, it showed real GDP increasing at an annual rate of 5.2% (Briefing.com consensus 4.9%), up from the preliminary estimate of 4.9%. The GDP Price Deflator was revised up to 3.6% (Briefing.com consensus 3.8%) from 3.5%. Notably, the PCE Price Index was revised lower to 2.8% from 2.9% while the core PCE Price Index was revised down to 2.3% from 2.4%.
The key takeaway from the report is that the U.S. economy was effectively booming in the third quarter despite higher interest rates, aided by a strong labor market and disinflation that fueled healthy consumer spending activity.
Fourth quarter activity isn't expected to be as robust, but it is still expected to be stronger than one might think given the scope of rate hikes since March 2022. The Atlanta Fed GDPNow model estimate for real GDP growth in the fourth quarter is 2.1%.
Treasury yields moved higher initially after the GDP report, which is a little curious given the report's dated nature. Nonetheless, the outsized growth in the third quarter is perhaps leading to some assumptions that there will be enough carryover momentum to keep the economy humming in the fourth quarter, too, and the Fed in a higher-for-longer state of mind.
In other news aiding the equity futures market, CrowdStrike (CRWD), NetApp (NTAP), Workday (WDAY), Intuit (INTU), and Foot Locker (FL) are all posting sizable pre-market gains following their earnings reports, and General Motors (GM) is up nearly 10% after reinstating its FY23 guidance, increasing its dividend by 33%, and announcing a $10 billion accelerated stock repurchase plan.
Then, there is the intangible factor that is the fear of missing out on further gains. That fear is present with the S&P 500 closing in on 4,600 after flirting with 4,100 in late October.
With a move like that, some will surely be questioning if the market has gotten too complacent or too "bulled up," leaving it vulnerable to some pullback action. The answer for some might be found in the latest Investors Intelligence Survey, which showed the highest reading for bulls (55.7%) since late July or perhaps in the 13.5% move in GameStop (GME) on no fundamental news of note.
-- Patrick J. O'Hare, Briefing.com
CrowdStrike securing strong gains as rising win rates fuel another beat-and-raise performance (CRWD)
Although business conditions haven't improved much from last quarter as budget constraints and extended sales cycles continue to define the IT spending environment, cybersecurity company CrowdStrike (CRWD) delivered another impressive beat-and-raise earnings report.
- About two weeks earlier, competitor Palo Alto Networks (PANW) issued disappointing FY24 billings guidance, citing persistently high interest rates as a main impediment to its outlook. More specifically, PANW stated that higher-for-longer interest rates are causing some customers to ask for deferred payment terms, or to ask for additional discounts for paying upfront, creating more variability in the timing of payments.
- CRWD acknowledged that heightened deal scrutiny and elongated sales cycles are still commonplace, while also predicting that the typical Q4 budget flush will not take place this year due to macroeconomic headwinds.
However, the company provided a more bullish outlook for Q4, commenting that a record pipeline and the competitive gap between itself and its rivals positions the company for a strong quarter.
- Broadly speaking, the rise in cyber threats and the increasing complexity of those threats -- particularly as it relates to the usage of AI -- is driving robust demand for CRWD's Falcon platform. Simply stated, cybersecurity is considered to be mission-critical for virtually every IT team.
- From a company-specific perspective, CRWD is setting itself apart from the competition and achieving higher win rates due to its robust capabilities that span across endpoint, cloud, and identity protection products. Enterprises and organizations are looking to consolidate their cybersecurity tools onto a single platform and CRWD's platform covers all of the bases for many customers.
- On that note, deals with eight or more modules grew by 78% yr/yr as customers transition from a patchwork of various cybersecurity products onto CRWD's platform. This trend is pushing annual recurring revenue (ARR) higher, which surpassed the $3.0 mln milestone in Q3 and included a record net new ARR of $233 mln.
- Demand was healthy across CRWD's products, but cloud security was a notable area of strength as the company enters Q4 with a record pipeline. The number of customers that CRWD protects in the public cloud jumped by 45% yr/yr, reflecting an acceleration in this business.
Overall, CRWD delivered another strong performance amid a difficult backdrop, illustrating why the company is considered to be a premier name in the cybersecurity space.
Dollar Tree trades modestly higher as investors focus on the silver linings from OctQ (DLTR)
Dollar Tree (DLTR +3%) trades in the green today despite falling shy of analyst earnings and sales estimates in Q3 (Oct). DLTR, which also owns Family Dollar, delivered earnings of $0.97, revs of $7.31 bln, a 5.4% improvement yr/yr, and Enterprise comps of +3.9%.
DLTR warned of a challenging quarter in August, commenting on how margin compression, branching from higher shrink, lower discretionary spending, and elevated supply chain costs, would likely persist over the near term. The cautionary Q3 guidance sent shares over 10% lower, dropping by as much as 18% as of yesterday's close. With low expectations ahead of DLTR's Q3 report, investors are focusing on the silver linings today.
- The primary highlight was DLTR's Q4 (Jan) outlook, projecting EPS of $2.58-2.78 and revs of $8.6-8.7 bln. While both metrics were consistent with analyst forecasts, the midpoint of DLTR's earnings projection exceeded consensus by a meaningful degree, signaling that its past margin woes are finally abating.
- Management noted that freight costs are easing, while shrink, albeit elevated, has aligned with internal expectations. These developments mirror what we have observed from several other retailers lately.
- DLTR's outlook also underscores resilience within its core Dollar Tree banner. During Q3, Dollar Tree comps expanded by +5.4% despite lapping challenging +8.6% comps from the year-ago period, boosted by a 7.0% jump in traffic. Consumables comps were the star, surging by +11.1%, while discretionary comps remained suppressed, increasing just +1.1%. Notably, Dollar Tree is widening its audience; most new customers over the past year boasted household incomes above $125,000.
- On a side note, such relatively high incomes trading down to Dollar Tree is a notable development, boding well for off-priced retailers, including Burlington Stores (BURL), Ross Stores (ROST), and TJX (TJX), to name a few.
- Family Dollar may not be performing up to the level of Dollar Tree, registering comps of +2.0%. However, this was due to a weak -12.5% drop in discretionary comps, particularly among the home décor, electronics, and toys categories. Soft discretionary spending was mostly anticipated ahead of DLTR's Q3 report, so this blemish was not overly surprising. Also, lower-income customers were particularly pressured during the quarter due to a 23% drop in SNAP benefits, a considerable decline from the 16% reduction in Q2 and 5% in Q1.
- Additionally, regarding Family Dollar, DLTR initiated a comprehensive review of this portfolio to address underperforming stores not aligned with its longer-term vision, including possible closure or relocation.
Overall, after such deflating results last quarter, DLTR's improvements in Q3 were sufficient to spark some buying interest today. The retailer still has hurdles to clear over the near term, especially regarding suppressed discretionary spending. However, DLTR looks much healthier now than it was following Q2 (Jul) numbers in late August.
Finally, DLTR's results provide another feather in the cap for off-priced retail, boding well for its peers' upcoming OctQ reports, including Big Lots (BIG) on November 30 before the open, Ollie's Bargain Outlet (OLLI) on December 6 before the open, and Dollar General (DG) on December 7 before the open.
Workday getting promoted today after posting another beat-and-raise report (WDAY)
After delivering another beat-and-raise quarterly report, Workday's (WDAY) strong positioning in the financial and HR enterprise software space was once again on display last night. Despite the challenging backdrop for IT spending, demand for WDAY's platform remains healthy with the company experiencing broad-based strength across medium and large-sized enterprises in both the U.S. and European markets. In fact, for the first time in its history, WDAY surpassed $1.0 bln in annual recurring revenue for EMEA, illustrating that its investments in the region are paying dividends.
- The company's upside results and brighter outlook come on the heels of disappointing earnings reports from competitors Paycom Software (PAYC) and Paylocity (PCTY) earlier this month. Both of those companies issued downside revenue guidance for the quarter ahead with PCTY noting during its earnings call that yr/yr employee growth on its platform came in below its expectations.
There are a few factors that are driving WDAY's outperformance relative to its competition.
- WDAY has been ahead of the curve as it relates to building out and embedding AI capabilities into its core products. For instance, the company recently unveiled AI-powered features that can create job descriptions in minutes rather than hours.
- Another example is the ability to analyze and correct contracts for more accurate revenue recognition.
- Conversational AI is also being incorporated into the platform, providing for a more seamless, user-friendly experience that improves content search and document understanding.
- A more extensive product portfolio that spans across both financial and HR planning needs is another key competitive advantage. Corporations are looking to consolidate their IT stack onto fewer platforms in order to control costs and to simplify operations.
- Lastly, WDAY believes that its products are mission-critical and that retaining talent in this macro environment is a priority for many executive teams. However, keeping a lid on costs is also imperative. Therefore, WDAY's ability to drive enhanced productivity, reduce attrition, and streamline business operations is especially appealing to many corporations.
Bolstered by these factors, WDAY nudged its FY24 subscription revenue guidance higher to $6.598 bln from $6.57-$6.59 bln, representing yr/yr growth of 19%. Looking out to FY25, the company expects subscription revenue growth to remain pretty stable at 17-18%.
The bottom line is that WDAY's beat-and-raise report highlights its positioning as a best-in-breed ERP and HCP software company.
Intuit spools up the turbos, jumps to one-year highs following solid OctQ results (INTU)
Intuit (INTU +3%) is spooling up the turbos, jumping to 52-week highs following a wide earnings beat and accelerating yr/yr revenue growth in Q1 (Oct). The small business and consumer software provider, owning TurboTax, QuickBooks, Mint, Credit Karma, and Mailchimp, did issue cautious Q2 (Jan) guidance, projecting earnings and sales below consensus. However, investors are shrugging this off, given that it will likely be a minor bump in the road during FY24 since INTU still reiterated its FY24 financial targets.
- Like last quarter, INTU's Small Business and Self-Employed Group (SBSE) was a notable standout, expanding sales by 18% yr/yr to $2.3 bln, primarily driving the company's overall revenue growth of 14.7% to $2.98 bln, an acceleration from the +12.3% growth posted last quarter. SBSE's growth was broad-based. QuickBooks Online Accounting revs grew by 19%, aided largely by higher prices but also helped along with improving customer counts. Likewise, Online Services grew 20%, underpinned by growth across payroll, Mailchimp, and payments.
- Meanwhile, INTU's other segments showcased positive reversals from last quarter, with Consumer Group and ProTax Group shooting 25% and 24% higher, respectively. However, when tax season has passed, these segments represent small dollar amounts, totaling just $234 mln this quarter.
- Credit Karma remained a laggard, illuminating the challenging macroeconomic environment. Revenue edged 5% lower to $405 mln, just missing INTU's FY24 forecast of negative 3% to positive 3% growth and extending its streak of yr/yr declines to four consecutive quarters. INTU noticed that partners took a conservative approach when extending credit across personal loans and credit cards during OctQ. Still, it should be noted that Credit Karma remains amid ongoing stability, illustrated by the decent revenue growth improvement from the -9% drop in Q4 (Jul), -12% in Q3 (Apr), and -16% in Q2 (Jan).
- While INTU was prudent in its near-term forecast, projecting adjusted EPS of $2.25-2.31 and revs of +11-12%, both missing analyst targets, it still reiterated its FY24 predictions, keeping adjusted EPS of $16.17-16.47 and revs of $15.890-16.105 bln unchanged.
- Management was excited about its numerous innovations, primarily centered around AI, potentially spurring solid growth over the upcoming tax season. The central focus is Intuit Assist, the company's Gen AI-powered assistant for its SBSE segment, which launched in September. Since INTU's offerings are meant to empower small business owners and individuals, its AI assistant could attract many new users next year.
Overall, INTU started FY24 on a high note. Its JanQ outlook was a minor blemish, but INTU followed it up with some reassurance of a solid year ahead, bolstered by its long-term investments in AI. Its SBSE segment remains a star, giving INTU a solid base during the off-tax season. Meanwhile, Credit Karma continues to show meaningful signs of improvement. |
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