| | | Market Snapshot
briefing.com
| Dow | 36117.38 | +62.95 | (0.17%) | | Nasdaq | 14339.99 | +193.28 | (1.37%) | | SP 500 | 4585.59 | +36.25 | (0.80%) | | 10-yr Note | -1/32 | 4.13 |
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| | NYSE | Adv 1879 | Dec 923 | Vol 886 mln | | Nasdaq | Adv 2628 | Dec 1663 | Vol 5.7 bln |
Industry Watch
| Strong: Communication Services, Energy, Information Technology, Materials, Consumer Discretionary, Financials |
| | Weak: Energy, Health Care, Utilities |
Moving the Market
-- Inclination to buy on weakness after yesterday's retreat
-- Treasury yields pulling back from post-data highs
-- Big move higher in Alphabet (GOOG) on AI news; other mega caps also showing strength
-- Reacting to relatively pleasing economic data |
Closing Summary
07-Dec-23 16:30 ET
Dow +62.95 at 36117.38, Nasdaq +193.28 at 14339.99, S&P +36.25 at 4585.59
[BRIEFING.COM] Stocks rebounded today following yesterday's modest declines. The major indices all closed near their best levels of the day with gains ranging from 0.2% to 1.4%. The S&P 500 was approaching the 4,600 level, reaching 4,590 at today's high.
Mega cap stocks had an outsized influence on index gains, but there was some buying activity under the surface, too. Alphabet (GOOG 138.45, +7.02, +5.3%), which jumped more than 5% after introducing its Gemini AI model, Apple (AAPL 194.27, +1.95, +1.0%), and Amazon.com (AMZN 146.88, +2.36, +1.6%) were some of the top performers today. The Vanguard Mega Cap Growth ETF (MGK) logged a 1.3% gain.
Semiconductor stocks also outperformed the broader market. The PHLX Semiconductor Index climbed 2.8%. Advanced Micro (AMD 128.37, +11.55, +9.9%) was a notable winner, jumping nearly 10% on news that Meta Platforms (META 326.59, +9.14, +2.9%) and Microsoft (MSFT 370.95, +2.15, +0.6%) will use AMD's latest technology, according to CNBC.
Relatively modest buying activity in the broader market led to a 0.5% gain in the equal-weighted S&P 500 closed. Advancers had a 2-to-1 lead over decliners at the NYSE and a 3-to-2 lead at the Nasdaq.
The S&P 500 communication services sector (+3.2%) saw the biggest gain thanks to Meta Platforms and Alphabet. The information technology sector was the next best performer, climbing 1.3%. Meanwhile, the energy sector (-0.6%) registered the largest decline.
Today's positive bias was also stemming from relatively pleasing economic data that fit with the soft landing narrative. Specifically, weekly initial jobless claims were little changed at 220,000 and continuing jobless claims fell by 64,000 to 1.861 million.
The 2-yr note yield fell four basis points to 4.57% and the 10-yr note yield rose one basis point to 4.13%.
In other news, the yen jumped more than 2.5% against the dollar to 143.48 amid speculation that a BoJ policy shift may be closer than the market had expected
- Nasdaq Composite: +37.0%
- S&P 500: +19.4%
- Dow Jones industrial Average: +9.0%
- S&P Midcap 400: +7.8%
- Russell 2000: +6.1%
Reviewing today's economic data:
- Initial jobless claims for the week ending December 2 increased by 1,000 to 220,000 (Briefing.com consensus 223,000) and continuing jobless claims for the week ending November 25 decreased by 64,000 to 1.861 million.
- The key takeaway from the report is that it isn't producing any major shockwaves as it relates to the labor market. It fits the narrative of the labor market loosening a bit, but not coming undone amid a stream of layoff announcements. Therefore, the market is viewing it through a soft-landing lens.
- October Wholesale Inventories -0.4% vs. -0.2% Briefing.com consensus; prior revised to 0.0% from 0.2%.
- EIA Natural Gas Inventories showed a draw of 117 bcf vs a build of 10 bcf last week
Friday's economic calendar includes:
- 8:30 ET: November Nonfarm Payrolls (Briefing.com consensus 175,000; prior 150,000), Nonfarm Private Payrolls (Briefing.com consensus 155,000; prior 99,000), Average Hourly Earnings (Briefing.com consensus 0.2%; prior 0.2%), Unemployment Rate (Briefing.com consensus 3.9%; prior 3.9%), and Average Workweek (Briefing.com consensus 34.3; prior 34.3)
- 10:00 ET: Preliminary December University of Michigan Consumer Sentiment survey (Briefing.com consensus 62.6; prior 61.3)
Stocks remain near highs
07-Dec-23 15:30 ET
Dow +64.59 at 36119.02, Nasdaq +190.06 at 14336.77, S&P +35.87 at 4585.21
[BRIEFING.COM] The major indices are just below session highs heading into the close.
The 2-yr note yield fell four basis points to 4.57% and the 10-yr note yield rose one basis point to 4.13%.
Consumer credit increased by $5.2 bln in October (Briefing.com consensus $9.0 bln) following an upwardly revised $12.2 bln (from $9.0 bln) in September.
The key takeaway from the report is that tighter lending standards and reduced borrowing demand in the face of higher interest rates have slowed the pace of credit expansion.
Friday's economic calendar includes:
- 8:30 ET: November Nonfarm Payrolls (Briefing.com consensus 175,000; prior 150,000), Nonfarm Private Payrolls (Briefing.com consensus 155,000; prior 99,000), Average Hourly Earnings (Briefing.com consensus 0.2%; prior 0.2%), Unemployment Rate (Briefing.com consensus 3.9%; prior 3.9%), and Average Workweek (Briefing.com consensus 34.3; prior 34.3)
- 10:00 ET: Preliminary December University of Michigan Consumer Sentiment survey (Briefing.com consensus 62.6; prior 61.3)
Energy sector underperforms after oil prices fall
07-Dec-23 15:00 ET
Dow +72.67 at 36127.10, Nasdaq +176.56 at 14323.27, S&P +34.05 at 4583.39
[BRIEFING.COM] The three major indices traded in fairly narrow ranges over the last half hour.
WTI crude oil futures settled 0.1% lower at $69.30/bbl. Natural gas futures climbed 0.8% to $2.59/mmbtu. The S&P 500 energy sector (-0.8%) sports the largest decline by a decent margin.
The next worst performing sectors are utilities and health care, both of which show a modest 0.1% decline.
Advanced Micro continues rally, among S&P 500's best; Generac slips
07-Dec-23 14:30 ET
Dow +83.04 at 36137.47, Nasdaq +197.13 at 14343.84, S&P +38.92 at 4588.26
[BRIEFING.COM] The S&P 500 (+0.86%) is in second place in recent trading, hovering just off session highs.
Elsewhere, S&P 500 constituents Advanced Micro (AMD 128.29, +11.47, +9.82%), Kenvue (KVUE 21.36, +1.97, +10.16%), and Southwest Air (LUV 29.14, +1.15, +4.11%) pepper the top of today's standings. AMD moves higher today as analysts and the Street gauge the company's AI event from yesterday, while KVUE appears to be higher on a favorable court ruling related to Tylenol's link to autism, and LUV mirror's JBLU's post-guidance move.
Meanwhile, Generac (GNRC 119.75, -3.32, -2.70%) is one of today's top laggards.
Gold narrowly lower on Thursday
07-Dec-23 14:00 ET
Dow +88.82 at 36143.25, Nasdaq +184.14 at 14330.85, S&P +36.04 at 4585.38
[BRIEFING.COM] The tech-heavy Nasdaq Composite (+1.30%) is today's top-performing major average with about two hours to go on the session.
Gold futures settled $1.50 lower (-0.1%) to $2,046.40/oz, held lower by rising stocks with losses capped by a modestly weaker greenback.
Meanwhile, the U.S. Dollar Index is down about -0.6% to $103.51.
Page One
Last Updated: 07-Dec-23 09:04 ET | Archive
The stock market thinks it can, but will it?
The stock market looked good for a while yesterday, but its best moments (literally) were at the start of trading. After that, it was a steady reversal of the early gains and then some. The closing bell rang with the major indices staring at modest losses. A 0.2% decline in the Russell 2000, however, belied a larger pullback from an early 1.8% gain.
The trade itself, which happened against a backdrop of falling long-term rates, was the picture of a consolidation trade. The indices thought they could, thought they could, thought they could, but they just couldn't muster enough power to get over the hill and fell back on profit-taking interest.
It happens, especially after a run like we have witnessed since late October.
The early indication today is that the market will start today's session in a mixed fashion. Currently, the S&P 500 futures are up 14 points and are trading 0.3% above fair value, the Nasdaq 100 futures are up 98 points and are trading 0.7% above fair value, and the Dow Jones Industrial Average futures are up three points and are trading roughly in-line with fair value.
This, too, is the picture of a consolidation trade. There isn't a lot of conviction on the part of buyers and there isn't a lot of conviction on the part of sellers. Accordingly, the market is churning, waiting it seems for a new catalyst to give it some new direction for either a breakout or a breakdown.
There is an old catalyst in play again this morning. That would be the relative strength of the mega-cap stocks. They are driving the outperformance of the Nasdaq 100 futures, but an old stumbling block -- the lethargy of many other stocks -- is keeping the broader market in check.
There was some familiar economic data released this morning. That would be the weekly initial and continuing jobless claims report.
Initial jobless claims for the week ending December 2 increased by 1,000 to 220,000 (Briefing.com consensus 223,000) and continuing jobless claims for the week ending November 25 decreased by 64,000 to 1.861 million.
The key takeaway from the report is that it isn't producing any major shockwaves as it relates to the labor market. It fits the narrative of the labor market loosening a bit, but not coming undone amid a stream of layoff announcements. Therefore, the market is viewing it through a soft-landing lens.
There was some knee-jerk trading activity in the Treasury market in response to the report that sent yields higher, but they have come back down to lend some support to the equity futures market. The 2-yr note yield, at 4.60% before the release, flirted with 4.64% after the release but is now back to 4.58%. The 10-yr note yield, at 4.15% before the release, skimmed 4.18% after the release but is now back to 4.14%.
Tomorrow will feature the November Employment Situation Report. That could be a "new" news catalyst for the stock market, but for now, it is more of the same chugging to try to get over the hill.
-- Patrick J. O'Hare, Briefing.com
JetBlue Airways taking off today as upwardly revised guidance eases demand concerns (JBLU)
A key concern for the airline industry exiting the Q3 earnings season was that demand appeared to have peaked and was softening amid a pullback in consumer spending, but JetBlue Airway's (JBLU) upwardly revised Q4 guidance suggests that those fears may have been overblown. That's especially the case since its brighter outlook, which now calls for Q4 revenue to be down by 4-7% instead of its prior forecast of 6.5-10.0%, comes on the heels of Delta Air Lines (DAL) reaffirming its Q4 guidance yesterday with the airline citing record revenue for the Thanksgiving period.
- JBLU, which is currently battling regulators to get its merger with Spirit Airlines (SAVE) approved, echoed the bullish commentary regarding holiday travel demand in the SEC filing. Specifically, the company stated, "Since late October, close-in bookings have outperformed expectations for both holiday peak and non-holiday travel periods.”
- Recall that when JBLU reported disappointing Q3 results on October 31, it warned that it was continuing to see discounted fares through the pre-Thanksgiving period and that the anticipated return to a normal demand and pricing environment for the peak holiday season was not materializing.
- Perhaps with inflation and interest rates cooling off a bit since then, consumers are feeling a little more comfortable with paying for airfare to travel for the holidays.
- Given that JBLU and other discount airlines generally aren't insulated by the strength in international travel demand like DAL, United Airlines (UAL), and American Airlines (AAL) are, its upwardly revised guidance is directly linked to strengthening demand from the U.S. consumer and businesses.
- With that in mind, it makes sense that Southwest Airlines (LUV) is one of the strongest airline stocks today.
- Higher fuel costs have been another thorn in the side of airlines, prompting many carriers to cut their earnings guidance in September. However, this headwind has also dissipated in recent weeks as crude oil prices have slid sharply lower.
- JBLU nudged its Q4 estimated fuel price per gallon forecast a bit lower to $3.05-$3.15 from $3.05-$3.20, while reaffirming its CASM ex-fuel guidance for an increase of 8.5-10.5%.
- Along with the improved revenue outlook, the modest drop in fuel costs enabled JBLU to raise its Q4 EPS guidance to ($0.35)-($0.25) from ($0.55)-($0.35).
The bottom line is that JBLU and its low-cost competitors like Frontier Group (ULCC) and SAVE have been hit especially hard over the past few months on concerns that demand is slowing. JBLU's updated guidance is helping to alleviate those concerns today.
C3.ai sells off as lengthening sales cycles weigh on current and future revenue growth (AI)
C3.ai (AI -11%) gaps lower despite upbeat Q2 (Oct) earnings, the third straight quarter investors initiated a sell-the-news reaction on better-than-expected results. The constant trend of C3.ai enduring intense profit-taking despite posting solid quarterly results underscores consistently elevated expectations as AI technology remains increasingly popular. Management has only grown more excited over the immense untapped potential of AI, citing a Goldman Sachs prediction during its OctQ conference call that generative AI would raise global GDP by 7%.
However, coinciding with outsized interest in AI applications are intense macroeconomic headwinds.
- C3.ai noted that it is observing lengthening decision cycles. The reason for this boils down to an added step. Over the past six months, organizations have formed new AI governance functions as part of their decision-making processes. These functions assess and approve AI applications. This added step lengthened regular sales cycles, provided a headwind during the quarter, and led to C3.ai falling modestly short of revenue estimates, posting growth of 17.3% yr/yr to $73.2 mln.
- This development also led to the midpoint of C3.ai's Q3 (Jan) and FY24 (Jan) revenue forecasts of $74-78 mln and $295-320 mln, respectively, missing analyst projections.
- Meanwhile, C3.ai's performance in Europe was dismal, posting an 11% drop in sales yr/yr to $10.6 mln, compared to a 28% jump in North America. Management acknowledged its lackluster performance, mentioning that its European sales execution was candidly unacceptable. However, the company has taken organizational steps to improve sales in the region immediately, so subsequent performances may not be as disappointing.
- Underwhelming revenue growth did not stop there. Recall C3.ai's ongoing transition from subscription-based pricing to consumption-based pricing, quickly becoming the cloud pricing standard as it is used across several giants in the industry, like Snowflake (SNOW) and AWS (AMZN). Before the transition, C3.ai was inking massive enterprise deals from $1.0 mln to $50.0 mln. Now, the company is experiencing lumpiness in bookings, lengthening sales cycles, and low levels of revenue predictability.
- On the plus side, consumption-based pricing has made acquiring new customers easier and less costly. As a result, C3.ai ended the quarter with 81% more customer engagements compared to the year-ago period.
While C3.ai's top line was a letdown, its headaches may quickly fade. Eventually, the company will finish its transition to a consumption-based model, stabilizing average selling prices and remaining performance obligation growth. Furthermore, lengthening decision cycles primarily result from the relative immaturity of AI technology. Once organizations have a clearer picture of what AI can do, their governance boards may not drag their feet when approving applications.
Nevertheless, as far as AI goes, C3.ai, an application developer, may have a tougher time over the near term as opposed to AI chip designers like NVIDIA (NVDA) and Advanced Micro (AMD). Plenty of developers can compete for a slice of organizations' budgets, while the semiconductor industry is much less fragmented. Lastly, with shares of C3.ai already up over 130% on the year, expectations will likely remain elevated.
AbbVie continues reloading its drug portfolio with acquisition of Cerevel Therapeutics (ABBV)
Shortly after Reuters broke the story that AbbVie (ABBV) was considering acquiring Cerevel Therapeutics (CERE), the companies confirmed after the market close yesterday that a deal was indeed agreed upon with ABBV purchasing CERE for $45/share in cash for a total value of $8.7 bln. The acquisition comes exactly one week after ABBV announced its intention to acquire oncology-focused ImmunoGen (IMGN) for about $10 bln.
- ABBV's aggressive M&A approach comes as the pharmaceutical company's growth has come to a halt in the wake of Humira losing its patent protection earlier this year. In Q3, sales of the blockbuster rheumatoid arthritis and plaque psoriasis drug plunged by 39% to $3.02 bln, causing ABBV's total revenue to drop by 6% yr/yr -- its third consecutive quarterly decline.
- While the acquisition of IMGN will pay more immediate dividends, thanks to the breakthrough success of ovarian cancer drug ELAHERE, which generated Q3 sales of $105.2 mln, the payoff from CERE is further out on the horizon.
- CERE, a clinical-stage biotech company focused on psychiatric and neurological disorders, has five drugs in development, but potential revenue generation from any of them is likely to be more than a year away.
- The drug candidate that's furthest along is Tavapadon, a treatment for Parkinson's disease that's currently in three separate Phase 3 studies (TEMPO 1, 2, and 3). In September of 2019, CERE reported that Tavapadon met its primary endpoint by recording a statistically significant improvement in patient's motor systems compared to patients treated with the placebo.
- The drug also showed a favorable safety and tolerability profile.
- Data for TEMPO 3 is expected in 1H24, while data from TEMPO 1 and 2 are anticipated in 2H24.
- Although Tavapadon is the most advanced drug candidate, Emraclindine may be the crown jewel of the acquisition. That drug is being developed as a treatment for schizophrenia, a debilitating neurological disorder that affects about 24 mln people globally.
- There are treatments currently available for schizophrenia -- notably including Intra-Cellular's (ITCI) Caplyta -- but the side-effects and tolerability are oftentimes an issue.
- In a Phase 1b study, Emraclindine demonstrated an encouraging efficacy and safety profile. Last December, The Lancet published key findings from the clinical trial, including data showing that the drug did not induce an increase in blood pressure -- an issue the FDA wanted more clarity on.
- Looking ahead, a data readout from the Phase 2 trial is expected to be released in 2H24, which is later than originally planned due to slower patient enrollment in the U.S, and delays at some international clinical sites.
The main takeaway is that ABBV is making a huge push to reload its drug portfolio and reignite its growth. With $13.3 bln in cash on the books as of September 30, 2023, the company has plenty of dry powder available and this pair of acquisitions looks like a good use of that cash.
Chewy has a bite taken out of its shares following a Q3 EPS miss and weak Q4 revenue guidance (CHWY)
Following a Q3 (Oct) earnings miss and bearish Q4 (Jan) revenue guidance, investors continue to flee Chewy (CHWY -2%). Shares of the e-commerce pet food and supplies giant have corrected by roughly 50% since the beginning of the year. The primary issue for CHWY is a softening discretionary spending environment, spurring a reduction in sales of beds, toys, and grooming supplies, as well as an ongoing shift from wet pet food to dry.
The good news is that CHWY has yet to observe this trend taking hold amongst its Autoship customer base, which comprises over 75% of total sales. We noticed a similar resilience from premium fresh pet food supplier Freshpet (FRPT), which accelerated revenue growth on buoyant volumes last month. Instead, the softness emanates from its non-Autoship business, which is disproportionately weighted toward discretionary categories.
While only contributing to 25% of CHWY's overall revenue base, the pullback in discretionary spending amongst its non-Autoship customers is strong enough to weigh meaningfully on its financial performance. CHWY anticipates this trend to persist over the near term, explaining its disappointing Q4 revenue outlook of $2.78-2.80 bln, a tepid 3.0% improvement yr/yr, CHWY's lightest quarter of growth since IPO-ing in June 2019.
- Alongside a downbeat near-term forecast, CHWY's headline Q3 results were not uplifting. The company registered its first bottom-line miss since 4Q22, posting a net loss of $(0.08) per share, a reversal from the $0.01 delivered last year. Meanwhile, revenue growth continued decelerating, expanding by just 8.2% yr/yr to $2.74 bln, hitting single-digit growth for the first time as a public company.
- However, CHWY commented that non-discretionary consumables and health categories anchor its business, representing around 85% of Q3 sales. At the same time, its pharmacy business continued to outpace overall revenue growth in the quarter, representing an over $1.0 bln business.
- CHWY also implemented further actions to improve profitability in November, including reducing its headcount across certain areas of the organization. The company is also tightly managing promotional spending. With gross margins remaining solid, reaching a record in Q3 at 28.5%, and management anticipating the figure to continue hovering around 28%, CHWY's Q3 net loss may be a one-off event, returning to positive earnings in subsequent quarters.
CHWY's Q3 results reflected a development that could continue to hang over the company for as long as consumers remain highly conscious about their spending habits. To save on costs, i.e., be slightly more inconvenienced, consumers may purchase pet food and other consumables at mass merchants like Walmart (WMT) and club stores like Costco (COST). In fact, upon purchasing a membership, large grocers offer to ship pet food for free, directly competing with CHWY's primary business model. Meanwhile, encroaching on CHWY's Autoship feature is Amazon's (AMZN) subscribe and save offer, setting up recurring deliveries at discounted prices.
Slashing pet food budgets likely sits toward the bottom of pet owners' budgeting priorities, boding well for CHWY throughout the current inflationary environment. However, its non-Autoship customer base may continue to weigh on quarterly results. |
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