Market Snapshot
briefing.com
| Dow | 35950.89 | +520.47 | (1.47%) | | Nasdaq | 14226.22 | -32.27 | (-0.23%) | | SP 500 | 4567.80 | +17.22 | (0.38%) | | 10-yr Note | -7/32 | 4.35 |
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| | NYSE | Adv 1755 | Dec 1034 | Vol 1.9 bln | | Nasdaq | Adv 2197 | Dec 2151 | Vol 5.7 bln |
Industry Watch
| Strong: Health Care, Financials, Materials, Industrials, Consumer Staples, Utilities |
| | Weak: Information Technology, Consumer Discretionary, Communication Services |
Moving the Market
-- Mostly positive responses to earnings news, headlined by Salesforce (CRM)
-- Relative weakness in mega caps
-- Rising Treasury yields after this morning's economic data keeping stocks in check
-- Digesting relatively pleasing data
-- Decline in oil prices
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Closing Summary
30-Nov-23 16:25 ET
Dow +520.47 at 35950.89, Nasdaq -32.27 at 14226.22, S&P +17.22 at 4567.80
[BRIEFING.COM] Today's price action was somewhat mixed. The Dow Jones Industrial Average was a relative outperformer, climbing 1.5%, due in part to a big gain in Salesforce (CRM 251.90, +21.55, +9.4%) after impressing with its earnings results and outlook after yesterday's close.
The S&P 500 and Nasdaq Composite, meanwhile, spent most of the session pinned in negative territory due to lagging mega cap constituents. The Vanguard Mega Cap Growth ETF (MGK) closed with a 0.1% loss and the Nasdaq Composite fell 0.2%.
An uptick in buying activity in the last half hour of trading left the S&P 500 near its high of the day with a 0.4% gain. The equal-weighted S&P 500, which outperformed the market-cap weighed index throughout the session, rose 0.9% today.
The S&P 500 sectors also reflected the underperformance of mega cap stocks. Communication services (-1.0%), consumer discretionary (-0.2%), and information technology (-0.1%) were the only sectors to register a decline today. The health care (+1.3%), industrials (+1.1%), financials (+1.0%), and materials (+1.0%) sectors all climbed at least 1.0%.
The outperformance of the broader market comes in the wake some economic data today that featured a moderation in income and spending, and disinflation in the PCE Price Indexes in October, a much stronger-than-expected Chicago PMI for November, and a relatively low level of initial jobless claims.
Treasury yields backed up some in response to the data, which kept some buyer enthusiasm in check in the stock market. The 2-yr note yield, at 4.61% before 8:30 a.m. ET, settled four basis points higher at 4.70%. The 10-yr note yield, at 4.27% before the data, settled eight basis points higher at 4.35%. Still, yields have come down a lot since the start of November. The 2-yr note and 10-yr note declined 38 basis points and 53 basis points, respectively, this month.
In other news, WTI crude oil futures fell 2.4% today to $75.96/bbl after briefly climbing past their 200-day moving average (78.15). On a related note, several OPEC+ countries confirmed additional voluntary cuts to the total of 2.2 million barrels per day, beginning January 1 through the end of March 2024.
- Nasdaq Composite: +35.9%
- S&P 500: +19.0%
- Dow Jones industrial Average: +8.5%
- S&P Midcap 400: +5.5%
- Russell 2000: +2.7%
Reviewing today's economic data:
- October Personal Income 0.2% (Briefing.com consensus 0.2%); Prior was revised to 0.4% from 0.3%; October Personal Spending 0.2% (Briefing.com consensus 0.2%); Prior 0.7%; October PCE Prices 0.0% (Briefing.com consensus 0.1%); Prior 0.4%; October PCE Price - Core 0.2% (Briefing.com consensus 0.2%); Prior 0.3%
- The key takeaway from this report is the disinflation seen in the PCE Price Indexes, which is good; however, the 3.5% increase in core PCE, which is what the Fed focuses on, remains well above the 2.0% target. It's moving in the right direction fortunately, but that isn't the type of reading that will move the Fed to think about cutting rates soon.
- Weekly Initial Claims 218K (Briefing.com consensus 215K); Prior was revised to 211K from 209K; Weekly Continuing Claims 1.927 mln; Prior was revised to 1.841 mln from 1.840 mln
- The key takeaway from the report is that layoff activity remains relatively subdued, which is a good thing. The bad thing, and what fits with a softening labor market, is that it is becoming more difficult to find a job after a layoff.
- November Chicago PMI 55.8 (Briefing.com consensus 45.0); Prior 44.0
- October Pending Home Sales -1.5% (Briefing.com consensus -2.3%); Prior was revised to 1.0% from 1.1%
Friday's economic calendar features:
- 9:45 ET: Final November S&P Global U.S. Manufacturing PMI (prior 49.4)
- 10:00 ET: November ISM Manufacturing Index (Briefing.com consensus 47.5%; prior 46.7%) and October Construction Spending (Briefing.com consensus 0.3%; prior 0.4%)
Treasury yields climb today, but fall in November
30-Nov-23 15:25 ET
Dow +331.62 at 35762.04, Nasdaq -118.06 at 14140.43, S&P -7.40 at 4543.18
[BRIEFING.COM] The major indices are moving somewhat lower ahead of the close.
The 2-yr note yield rose four basis points today, and fell 38 basis points in November, to 4.70%. The 10-yr note yield rose eight basis points today, and fell 53 basis points in November, to 4.35%.
Friday's economic calendar features:
- 9:45 ET: Final November S&P Global U.S. Manufacturing PMI (prior 49.4)
- 10:00 ET: November ISM Manufacturing Index (Briefing.com consensus 47.5%; prior 46.7%) and October Construction Spending (Briefing.com consensus 0.3%; prior 0.4%)
S&P 500 dips slightly, but equal-weighted S&P 500 remains near high of the day
30-Nov-23 15:05 ET
Dow +367.56 at 35797.98, Nasdaq -93.80 at 14164.69, S&P -1.90 at 4548.68
[BRIEFING.COM] The S&P 500 turned slightly lower recently, but remains in positive territory. The Invesco S&P 500 Equal Weight ETF (RSP) is up 0.5%, trading near its high of the day.
WTI crude oil futures are down 2.2% to $76.17/bbl and natural gas futures are up 0.2% to $2.81/mmbtu. The S&P 500 energy sector is up 0.5%.
Separately, the US Dollar Index is up 0.7% to 103.51.
Phillips 66 bucks broader S&P 500 trend lower after saying it will continue to engage with Elliott
30-Nov-23 14:30 ET
Dow +343.22 at 35773.64, Nasdaq -103.49 at 14155.00, S&P -3.12 at 4547.46
[BRIEFING.COM] The S&P 500 (-0.07%) is in second place on Thursday afternoon, hovering near the middle of today's range.
Elsewhere, S&P 500 constituents Ford Motor (F 10.23, -0.36, -3.40%), Warner Bros. Discovery (WBD 10.44, +0.34, +3.15%), and Dominion Energy (D 45.33, -0.73, -1.59%) pepper the bottom of today's trading. F slips following guidance, cost expectations update related to UAW contract, while D's stock goes ex-dividend today.
Meanwhile, Phillips 66 (PSX 129.34, +7.12, +5.83%) is one of today's better performers, aided in part by comments that the company will continue to engage in constructive dialogue with Elliott Investment.
Gold slides on Thursday, ends higher on the month
30-Nov-23 14:00 ET
Dow +284.57 at 35714.99, Nasdaq -123.34 at 14135.15, S&P -9.82 at 4540.76
[BRIEFING.COM] With about two hours remaining in trading for the month of November the tech-heavy Nasdaq Composite (-0.87%) sits not too far off session lows.
Gold futures settled $9.90 lower (-0.5%) to $2,057.20/oz, up about +3.2% on the month, as Fed rate cut prospects fueled a rise in the yellow metal, which in turn saw a dip in both treasury yields and the greenback.
Meanwhile, the U.S. Dollar Index is up about +0.7% to $103.53.
Page One
Last Updated: 30-Nov-23 09:02 ET | Archive
Walking the line to a good start
The stock market had a good start on Wednesday, but that was the high point. It faded as the day progressed, largely because the mega-cap stocks faded as the day progressed, and settled the session with a slight loss. Once again, though, the stock market is on track to have a good start.
Currently, the S&P 500 futures are up 12 points and are trading 0.3% above fair value, the Nasdaq 100 futures are up 30 points and are trading 0.2% above fair value, and the Dow Jones Industrial Average futures are up 211 points and are trading 0.7% above fair value.
That's a nice opening line, drawn from the strength in Salesforce (CRM), a Dow component, and Snowflake (SNOW) following their better-than-expected earnings results and guidance, some encouraging CPI data out of the eurozone, some M&A buzz with AbbVie (ABBV) acquiring ImmunoGen (IMGN) at a 95% premium, and the lingering fear of missing out on further gains.
Another component in the mix is economic data out of the U.S. this morning that, more or less, went the Fed's way of aiming for a slowing of the economy and a moderation in inflation pressures.
Personal income increased 0.2% month-over-month in October, as expected, following an upwardly revised 0.4% increase (from 0.3%) in September. Personal spending was also up 0.2% month-over-month, as expected, following an unrevised 0.7% increase in September. The PCE Price Index was unchanged in October (Briefing.com consensus 0.1%) while the core PCE Price Index, which excludes food and energy, was up 0.2%, as expected.
On a year-over-year basis, the PCE Price Index was up 3.0%, versus 3.4% in September, and the core PCE Price Index was up 3.5%, versus 3.7% in September.
The key takeaway from this report is the disinflation seen in the PCE Price Indexes, which is good; however, the 3.5% increase in core PCE, which is what the Fed focuses on, remains well above the 2.0% target. It's moving in the right direction fortunately, but that isn't the type of reading that will move the Fed to think about cutting rates soon.
Separately, initial jobless claims for the week ending November 25 increased by 7,000 to 218,000 (Briefing.com consensus 215,000). Continuing jobless claims for the week ending November 18 increased by 86,000 to 1.927 million, hitting their highest level since November 27, 2021.
The key takeaway from the report is that layoff activity remains relatively subdued, which is a good thing. The bad thing, and what fits with a softening labor market, is that it is becoming more difficult to find a job after a layoff.
There was a bit of selling in the Treasury market following the data. The equity futures market, meanwhile, has dipped a bit, but is still walking the line to a good start.
The 2-yr note yield, at 4.61% before the data, is at 4.67% now, up one basis point from yesterday's settlement. The 10-yr note yield, at 4.27% before the data, is at 4.33% now, up six basis points from yesterday's settlement.
In other developments, China's November Manufacturing PMI dipped to 49.4 from 49.5 while its non-Manufacturing PMI fell to 50.2 from 50.6, and OPEC+ is likely to agree to cut oil output by an additional one million barrels per day, according to Reuters. WTI crude futures are up 1.1% to $78.70/bbl and Brent crude futures are up 1.2% to $83.84/bbl.
-- Patrick J. O'Hare, Briefing.com
AbbViefinds its next growth catalyst with acquisition of oncology-focused ImmunoGen (ABBV)
M&A activity has been subdued in this high interest rate environment, but one sector that has seen some high-profile deals come through the pipeline is healthcare and that continued this morning with AbbVie's (ABBV) $10.1 bln acquisition of ImmunoGen (IMGN). Pharmaceutical and biotech companies are looking to bolster their drug portfolios, particularly in the areas of oncology and immunology, leading to several recent blockbuster deals such as Pfizer's (PFE) $43 bln acquisition of Seagen (SGEN) and Merck's (MRK) $10.8 bln acquisition of Prometheus Biosciences (RXDX).
- For ABBV, the addition of IMGN is especially appealing because it will significantly bolster its oncology treatment product line, at the same time that growth slows for its rheumatoid arthritis and plaque psoriasis drug Humira.
- However, the company is paying a steep price for IMGN and its high-growth ovarian cancer drug ELAHERE. The $31.26/share offer price represents a whopping 95% premium over yesterday's closing price for IMGN.
There doesn't appear to be any sticker shock, though, as shares of ABBV climb higher on the news. It is rare to see the acquiring company's stock also trade higher on the day of the announcement, but we can see why investors are applauding this deal.
- For starters, ELAHERE, which gained FDA approval last year, is experiencing strong growth and is only in the early innings of its growth curve. In Q3, the drug generated U.S. sales of $105.2 mln, up 36% on a qtr/qtr basis, helping IMGN to post its first profitable quarter in its history.
- IMGN's revenue is expected to surge by a triple-digit rate in FY23 to over $370 mln, fueled almost entirely by the successful launch of ELAHERE in the U.S. By the end of FY24, ELAHERE is expected to gain approval in Europe and in China, providing another potent growth catalyst.
- Furthermore, the drug is being evaluated for earlier lines of therapy for ovarian cancer, potentially expanding the patient population pool.
- The acquisition also helps to take the sting out of sagging sales for Humira, which lost patent protection and U.S. exclusivity this year. In Q3, U.S. Humira sales plunged by 39% to $3.02 bln (22% of total revenue).
- ABBV's other immunology drugs, Skyrizi and Rinvoq, are performing well, generating growth of 52% and 60% in Q3, but that was not enough to prevent ABBV's overall revenue from falling by 6% in Q3 -- the company's third consecutive quarter of sales declines.
Although the acquisition isn't expected to be accretive to earnings until 2027, the acquisition removes some uncertainty regarding where ABBV's next major growth catalyst will come from. Therefore, an overhang on the stock, which was down by 14% year-to-date prior to today, has at least been partially removed.
Kroger produces solid Q3 results; leads to a quick rebound in the stock today (KR)
Kroger (KR +2%) produced better-than-expected Q3 (Oct) results today, providing the fuel needed to help shares quickly dig themselves out of an initial hole, returning to roughly breakeven for the year. The national grocer also raised the low end of its previous FY24 (Jan) earnings outlook by $0.05. However, KR trimmed its FY24 identical sales without fuel forecast, reflecting some lingering macroeconomic uncertainties.
- Despite economic pressures, KR still managed to deliver sound headline numbers during the quarter, including an 8% bump in adjusted EPS yr/yr to $0.95 and a decent improvement in yr/yr revs, falling just 0.7% to $33.96 bln compared to a 2.3% drop last quarter.
- Inflation is decelerating, ending the quarter approximately 270 bps lower sequentially, acting as a double-edged sword for KR. Prices are not climbing as fast as in previous quarters, which eases consumers' financial burden. However, by that same token, the slowing price increases lead to lower overall revenue for KR.
- Nonetheless, KR achieved its tenth consecutive quarter of total household growth in Q3, aided by an 11% sales jump in its digital business. Additionally, digital offers continued to increase, driving a 13% spike in digitally-engaged households, a crucial component of KR's business model since they spend nearly three times more than the average household.
- With rival Walmart (WMT) noticing shifts in consumer buying behavior following the surging popularity of weight-loss medications (GLP-1 drugs), investor sentiment has turned cautious toward grocers and other consumer packaged goods companies like PepsiCo (PEP) lately. However, while KR continued witnessing rapid growth in GLP 1 drugs across its retail pharmacies, it is not seeing any major macro shifts. Management was also not overly concerned about long-term impacts to its business, mentioning that it is well-positioned to support shifts in consumer tastes.
- On a side note, the rise in GLP 1s will continue to be worth tracking. Some consumer packaged goods organizations have discussed how it could be a net benefit as it can lean on smaller snack pack sizes, which tend to carry higher prices.
- Shrink remained a headwind during Q3, weighing on gross margins, which increased just 3 bps yr/yr. KR continues to invest in initiatives to mitigate shrink. However, the company anticipates a similar margin outcome over the near term.
- Speaking of which, KR's FY24 outlook was decent, targeting adjusted EPS of $4.50-4.60, up from $4.45-4.60. The company remains on track to deliver its sixth year of $1.0 bln in cost savings. Meanwhile, comps without fuel slipped to +0.6-1.0%, down from +1.0-2.0%. While disinflation played a part, much of the reduced guidance resulted from KR divesting its Express Scripts business, which is clipping around 150 bps off its identical sales growth for the year.
KR's Q3 report was solid and could provide the kindling needed for a broader rally. While disinflation can weigh on overall sales, it is mostly a net benefit as it typically leads to volume improvements. Meanwhile, KR remains on track to close its proposed merger with Albertsons (ACI) in early 2024, removing a long-lasting overhang.
Snowflake sees spending budgets thawing out at largest customers, fueling upside Q3 report (SNOW)
Snowflake (SNOW) joined an expanding list of enterprise software companies to issue a strong beat-and-raise quarterly report, illustrating that corporations are spending more freely on software again following a multi-quarter slowdown. In early November, fellow big data company Datadog (DDOG) reported upside Q3 results while guiding Q4 EPS and revenue above expectations, providing an early indication that this stabilization, especially among larger customers, would also bolster SNOW's quarterly results.
Fast forward to this week, and this bullish earnings trend for cloud software companies continued with Workday (WDAY), CrowdStrike (CRWD), and Salesforce (CRM) each delivering beat-and-raise performances.
- During last night's earnings call, SNOW CEO Frank Slootman echoed the encouraging commentary from other cloud software executives, stating that SNOW's results reflect a "broadly stabilizing macro environment."
- Due to the company's consumption-based model in which its product revenue generation is based on customer usage, SNOW is more sensitive to macroeconomic swings than most software companies.
- Therefore, this improving IT spending environment is having a relatively larger impact on SNOW's financial results, and it shows in its Q3 earnings report.
- Most notably, product revenue -- SNOW's key demand metric that measures how much its customers are spending on its platform to store or analyze data -- came in significantly higher than expected at $698.5 mln, up 34%. The result easily beat the company's guidance of $670-$675 mln and nearly matched last quarter's growth of 37%.
- The primary driver underlying this outperformance was an upswing in spending from SNOW's largest customers. In fact, nine of its top ten customers increased their spending from last quarter.
- Furthermore, the number of customers spending $1.0 mln or more over the past year grew to 436 from 402 in the previous quarter.
- Along with the more favorable business conditions, Mr. Slootman credits SNOW's innovations around generative AI as a catalyst for the company's brightening growth prospects.
- As an example, SNOW recently introduced Snowflake Cortex, a product using machine learning-based functions that enables customers to quickly analyze data and build AI applications within the Snowflake platform.
- This combination of AI-based product momentum and strengthening demand for SNOW's core data storage/analytics is at the center of the company's better-than-expected Q4 product revenue guidance of $716-$721 mln.
- Although SNOW forecasted Q4 non-GAAP operating margin to decrease to 4% from 10% this quarter, it's worth noting that the company has a track record of exceeding its projections. For instance, SNOW guided for Q3 non-GAAP operating margin of just 4% and it easily beat that outlook.
The main takeaways are that momentum is building for SNOW as IT budgets thaw out, especially for enterprise software, and that the company looks poised to capitalize on the anticipated surge in AI applications in the coming years.
Five Below gets a high-five from investors on solid guidance for holiday quarter (FIVE)
Five Below (FIVE) is trading roughly flat after reporting Q3 (Oct) results last night. FIVE focuses on discretionary items, so that was a concern going in as consumers have been shifting spend to food/consumables. However, this retailer of items priced $5 and below did better than expected. FIVE beat on EPS and revenue. Not huge beats, but quite good, especially on the top line. The top line beat was good to see after an in-line result in Q2 (Jul).
- Perhaps the even better news was the guidance. As we said in our preview, we were a bit nervous about the Q4 (Jan) guidance, which includes the all-important holiday season and is FIVE's largest revenue quarter. The mid-point of FIVE's Q4 EPS guidance was above analyst expectations with in-line revs. FIVE had guided EPS below consensus in each of the prior three quarters, so this was great to see.
- Another positive metric was same store comps of +2.5%, which were above prior guidance of +0-2%. Comps continued to be driven by transactions. FIVE saw a comp transaction increase of 3.1% in Q3, partially offset by a comp ticket decrease of 0.6%. This was FIVE's fourth consecutive quarter of positive comp transactions, which FIVE uses as a proxy for traffic. For Q4, FIVE guided to comps of +2-3%, which was solid as well.
- In terms of the consumer, FIVE continues to see customers focused on needs-based product, which for Five Below is primarily seen in its consumables offering in the Candy World and beauty department. In addition, its focus on value is strongly resonating with customers as reflected in discretionary category strength in games and toys and seasonal offerings with Halloween. Hello Kitty, squish, anime and collectibles were also very popular.
Overall, we view this as a great quarter for FIVE. It reported decent upside, and more importantly, provided impressive guidance for the Q4 holiday period. After three consecutive EPS guide-downs, we think investors are quite pleased with the mid-point of EPS guidance coming above analyst expectations. FIVE's high exposure on the discretionary side of the retail spectrum made us nervous as shoppers focus more on needs. However, we think FIVE's value positioning helped to mitigate those headwinds and drew in traffic.
Do not let the modest move in the stock today fool you. That is not because investors do not like the results, the muted response is more because the stock had rallied 32% from its late Sept low of $144.57. We think sentiment has been improving following good reports/guidance from other off-price retailers like TGT, ROST, BURL and others. As such, a good result seems to have been mostly priced in.
Salesforce remains a force to be reckoned with as outsized Q3 results keeps buyers in control (CRM)
Salesforce (CRM +6%) remains a force to be reckoned with this year as shares pop to December 2021 levels today following outsized Q3 (Oct) performance. The customer relationship management software behemoth, the third-largest enterprise software company by revenue globally, stayed consistent in the quarter, topping earnings and sales expectations. CRM also provided relatively healthy Q4 (Jan) guidance, projecting earnings ahead of consensus and revs consistent with consensus.
CRM delivered these results despite working with an unfavorable macroeconomic backdrop. CEO Marc Benioff was not ready to firmly state that economic conditions have turned a corner. Customers are still measured in their buying environments, particularly within CRM's professional services business, which remained a laggard in Q3. Nevertheless, Mr. Benioff mentioned that conditions are improving, observing a distinct reduction in measured buying environments. Customers are also eager about AI and the technology's possibilities over the long term.
- These positive developments sustained CRM's upward momentum in Q3, delivering adjusted EPS of $2.11, a 50.7% jump yr/yr, and revs of $8.72 bln, an 11.3% improvement. Deals over $1.0 mln surging by 80% yr/yr were a significant factor behind CRM's solid growth in the quarter. Also, MuleSoft remained a notable standout, being in eight of CRM's top ten deals during the quarter, underpinning robust demand for the product.
- Geographically, sales growth branched from each of CRM's major markets, expanding by 9% in the Americas, 14% in EMEA, and 18% in APAC. New business primarily emanated from India, Brazil, and Japan, while parts of EMEA were more constrained. From an industry perspective, the public sector was a highlight, while high tech remained more measured.
- Non-GAAP operating margins expanded considerably during Q3, surging by 850 bps yr/yr to 31.2%. While this did represent a minor slowdown from the past two quarters of over 1,000 bps of margin expansion, it was still a testament to CRM's financial discipline. Recall that CRM announced plans to cut over 10% of its workforce by the end of FY24, following in the footsteps of other software companies, like Microsoft (MSFT) and HubSpot (HUBS).
- Current remaining performance obligation (cRPO), representing the next 12 months of revenue under contract, ended the quarter up 14% yr/yr to $23.9 bln, ahead of CRM's expectations. Strong renewal performance and a large customer win during Q3 were primary contributors.
- Looking toward the end of FY24, CRM expects to sustain its positive momentum, projecting adjusted EPS of $2.25-2.26, a 34% improvement yr/yr, and revs of $9.18-9.23 bln, roughly 10% growth at the midpoint.
With shares soaring by over 70% ahead of CRM's Q3 results, it was under pressure to supply investors with attractive results. CRM did not buckle, staying true to its consistent form and delivering another quarter of impressive headline results. Even more notable is that CRM did so despite plenty of lingering uncertainties among organizations, which have kept deal scrutiny elevated and buying urgency low.
Finally, at current extended price levels, we think a pullback would provide a more attractive entry point. Over the long term, CRM is nicely positioned for further upside as AI becomes increasingly more mainstream and economic conditions recover.
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