| | | Market Snapshot
briefing.com
| Dow | 37683.01 | +216.90 | (0.58%) | | Nasdaq | 14843.77 | +319.70 | (2.20%) | | SP 500 | 4763.54 | +66.30 | (1.41%) | | 10-yr Note | +26/32 | 4.00 |
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| | NYSE | Adv 2119 | Dec 687 | Vol 917 mln | | Nasdaq | Adv 3022 | Dec 1288 | Vol 6.3 bln |
Industry Watch
| Strong: Information Technology, Consumer Discretionary, Real Estate, Communication Services |
| | Weak: Energy |
Moving the Market
-- Big loss in Boeing (BA) after 737 MAX 9 jets get grounded after fuselage blowout on Alaska Airlines (ALK) flight
-- 10-yr note yield settling at 4.00%, but lower than Friday
-- Relative strength in mega cap stocks
-- Bouncing back after last week's losses
-- Drop in oil prices after a Bloomberg report that Saudi Arabia will cut crude prices for February for all regions amid weak demand |
Closing Summary
08-Jan-24 16:25 ET
Dow +216.90 at 37683.01, Nasdaq +319.70 at 14843.77, S&P +66.30 at 4763.54
[BRIEFING.COM] It was a good day for the stock market. The major indices all rallied following last week's losses, which saw the market break its nine-week win streak. The S&P 500 logged a 1.4% gain; the Russell 2000 climbed 1.9%; and the Nasdaq Composite jumped 2.2%.
The Dow Jones Industrial Average was a relative underperformer, logging only a 0.6% gain, due to a loss in Boeing (BA 229.00, -20.00, -8.0%) after 737 MAX 9 jets were grounded after a fuselage blowout on an Alaska Airlines (ALK 37.87, -0.08, -0.2%) flight.
On a related note, United Airlines (UAL 42.92, +1.16, +2.8%) has found some loose bolts on plug doors during its Boeing 737 Max 9 inspections, according to Air Current.
Gains were relatively broad based, but mega cap stocks had an outsized impact on index performance. The Vanguard Mega Cap Growth ETF (MGK) jumped 2.1% today. Semiconductor stocks were another pocket of strength, leaving the PHLX Semiconductor Index up 3.3% today.
The rebound action was supported by a drop in market rates, although Treasuries settled off their highs of the day. The 2-yr note yield fell four basis points to 4.35% after dropping to 4.31% and the 10-yr note yield declined four basis points to 4.00% after falling to 3.97% earlier.
The price action in Treasuries was helped by reduced inflation expectations across all horizons seen in the New York Fed's December Survey of Consumer Expectations, and a drop in crude oil prices ($70.82/bbl, -2.91, -3.9%) that followed a Bloomberg report indicating Saudi Arabia is aiming to cut crude prices for February in all regions because of weak demand.
This move in oil also weighed on the S&P 500 energy sector (-1.2%), which was the lone laggard to close with a loss. Meanwhile, the heavily-weighted information technology (+2.8%), consumer discretionary (+1.8%), and communication services (+1.7%) sectors outperformed thanks to their mega cap constituents. The rate-sensitive real estate sector (+1.4%) also gained more than 1.0% today.
- Dow Jones Industrial Average: UNCH
- S&P 500: -0.1%
- S&P Midcap 400: -1.2%
- Nasdaq Composite: -1.1%
- Russell 2000: -1.9%
Today's economic data was limited to the consumer credit report, which increased by $23.7 bln in November (Briefing.com consensus $9.3 bln) following an upwardly revised $5.8 bln (from $5.2 bln) in October.
- The key takeaway from the report is that revolving credit accounted for the bulk of the November increase, showing perhaps that consumers are leaning more on credit to maintain both discretionary and non-discretionary spending activity.
Tuesday's economic calendar features:
- 08:30 ET: November Trade Balance (Briefing.com consensus -$64.7B; prior -$64.3B)
Stocks remain near highs ahead of the close
08-Jan-24 15:35 ET
Dow +176.56 at 37642.67, Nasdaq +300.41 at 14824.48, S&P +59.77 at 4757.01
[BRIEFING.COM] Things are little changed at the index level over the last half hour.
Consumer credit increased by $23.7 bln in November (Briefing.com consensus $9.3 bln) following an upwardly revised $5.8 bln (from $5.2 bln) in October.
The key takeaway from the report is that revolving credit accounted for the bulk of the November increase, showing perhaps that consumers are leaning more on credit to maintain both discretionary and non-discretionary spending activity.
Elsewhere, the 2-yr note yield fell four basis points to 4.35% and the 10-yr note yield declined four basis points to 4.00%.
Rally continues as 10-yr hits 4.00% again
08-Jan-24 15:05 ET
Dow +153.04 at 37619.15, Nasdaq +291.56 at 14815.63, S&P +56.89 at 4754.13
[BRIEFING.COM] The major indices continue to hit fresh session highs, undeterred by the 10-yr note yield reaching 4.00% again. The 10-yr yield is down four basis points from Friday 4.00%.
Only one of the 11 S&P 500 sectors trades down now while the remaining ten sectors sport gains ranging from 0.2% to 2.5%. The energy sector is the lone laggard trading down 1.6% as oil prices slip on news that Saudi Arabia will cut crude prices for February for all regions in response to weak demand.
Separately, consumer credit increased by $23.75 billion in November (Briefing.com consensus $9.3 billion) following a revised $5.78 billion increase in October (from $5.2 billion).
American Airlines upgraded at Morgan Stanley; Baker Hughes slips in S&P 500 amid falling oil prices
08-Jan-24 14:30 ET
Dow +115.34 at 37581.45, Nasdaq +266.16 at 14790.23, S&P +48.84 at 4746.08
[BRIEFING.COM] The broader market is opening up to some solid gains as we approach the final portion of Monday's trading; the S&P 500 (+1.04%) has now surpassed 1% gains.
Elsewhere, S&P 500 constituents American Airlines (AAL 14.63, +1.03, +7.57%), Baxter (BAX 41.20, +2.04, +5.21%), and Advanced Micro (AMD 146.55, +7.97, +5.75%) are some of today's top gain getters. This morning Morgan Stanley upgraded AAL to Overweight, BAX follows general strength in medtech stocks after Boston Scientific (BSX 58.23, +0.07, +0.12%) agreed to buy Axonics (AXNX 69.08, +11.51, +19.99%) for $71/share in cash, while AMD gains after an upgrade at Melius to Buy as well as news of new chipsets to be announced at CES including Ryzen 8000G Series, Ryzen 5000 Series, and Radeon RX 7600 XT processors.
Meanwhile, Baker Hughes (BKR 32.10, -1.32, -3.95%) underperforms, sliding alongside weakness in oil prices.
Gold slumps as equities rally to open the week
08-Jan-24 14:00 ET
Dow +11.50 at 37477.61, Nasdaq +245.79 at 14769.86, S&P +38.86 at 4736.10
[BRIEFING.COM] With about two hours to go on Monday the tech-heavy Nasdaq Composite (+1.69%) is sporting session-leading gains.
Gold futures settled $16.30 lower (-0.8%) to $2,033.50/oz, unable to to capitalize on today's weakness in treasury yields and the dollar.
Meanwhile, the U.S. Dollar Index is down about -0.1% to $102.32.
Page One
Last Updated: 08-Jan-24 09:04 ET | Archive
Market diverts attention to Boeing and CPI release
The stock market's win streak has ended. It was a wonderful run for nine weeks, but on the tenth week, the major indices rested, relenting to some profit-taking efforts that were led by the small-cap stocks and mega-cap stocks.
This week looks set to begin at least on a mixed track. Currently, the S&P 500 futures are flat and are trading in-line with fair value, the Nasdaq 100 futures are up 18 points and are trading 0.1% above fair value, and the Dow Jones Industrial Average are down 141 points and are trading 0.2% below fair value.
The issue with the Dow Jones Industrial Average futures stems in large part from a 7.7% decline in shares of Boeing (BA), which is selling off after its 737 MAX 9 jets were grounded for inspection in the wake of a scary fuselage blowout on an Alaska Airlines (ALK) flight. American Express (AXP) also has some culpability, trading down 1.3% on a Robert W. Baird downgrade to Underperform from Neutral.
Separately, fellow Dow components Merck (MRK) and Johnson & Johnson (JNJ) have announced some smaller acquisitions. Merck will acquire Harpoon Therapeutics (HARP) for $23.00 per share in cash for an approximate total equity value of $680 million, and Johnson & Johnson will acquire Ambrx Pharmaceuticals (AMAM) for $28.00 per share in cash for a total equity value of approximately $2.0 billion.
Stock market participants are taking a tentative approach overall, though, watching to see how the indices respond to last week's selling interest and digesting a slate of sales and earnings guidance that has been released in front of the ICR and JPMorgan Healthcare Conferences being held this week. The Consumer Electronics Show is also on this week's event docket.
The biggest item this week, though, may be the release of the December Consumer Price Index (CPI) on Thursday. This report is destined to be a driving factor of the market's rate-cut expectations, just as the December Employment Situation Report and December ISM Services PMI were on Friday.
Notably, Dallas Fed President Logan (not an FOMC voter) said in a weekend speech that, because of easing financial conditions, the Fed "shouldn't take the possibility of another rate increase off the table just yet."
The Treasury market seems to have taken this remark in stride, supported somewhat by falling oil prices (-3.3% to $71.41/bbl) amid a Bloomberg report that Saudi Arabia is aiming to lower crude prices in all regions. The 2-yr note yield is down two basis points to 4.37% and the 10-yr note yield is up one basis point to 4.05%. Like stocks, Treasuries will also be waiting anxiously for the CPI release.
-- Patrick J. O'Hare, Briefing.com
lululemon athletica's recent slide continues as raised guidance fails to impress (LULU)
After a remarkable 2023 in which shares soared higher by about 60%, lululemon athletica (LULU) is off to a sluggish start in 2024 and this morning's upwardly revised Q4 guidance isn't helping to turn the tide. The exercise and athletic apparel retailer faces high expectations and trades at a premium valuation. Therefore, even though LULU enjoyed a strong holiday shopping season as sales grew by 14-15% yr/yr, the modest increase to its Q4 sales and EPS guidance is failing to spark much excitement.
- Specifically, LULU now expects Q4 revenue of $3.17-$3.19 bln, up slightly from its prior outlook of $3.135-$3.170 bln, and EPS of $4.96-$5.00, compared to its former outlook of $4.85-$4.93. It's important to note that LULU's original revenue and EPS guidance fell short of expectations. This new revenue guidance is now essentially in line with analysts' initial expectations, while EPS is slightly above the original forecast.
- LULU commented that sales trends remained balanced across channels, categories, and geographies in Q4, but the women's business has been the standout recently. In Q3, the women's business grew 19%, fueled by new product launches, strength in bottoms and ongoing performance in key franchises.
- Last quarter, LULU was a bit more cautious about the men's business, commenting that the uncertain macro environment could cause men to scale back on their apparel purchases. We wonder if some softness in the men's business prevented LULU from raising its sales guidance by a more substantial amount.
- Rival NIKE (NKE) is certainly feeling the impact of slowing apparel sales. When NKE reported Q2 results on December 21, it disclosed that revenue in North America fell by 4% with wholesale revenues declining by 2%. The company also lowered its FY24 revenue growth outlook to approximately 1% from its prior forecast of mid-single-digit growth.
- LULU seems to be in better shape than NKE at the moment, though, as its brand continues to command full pricing amid a highly promotional retail environment. Accordingly, LULU nudged its Q4 non-GAAP gross margin guidance higher to 58.6-58.7% from 58.3-58.6%.
Overall, LULU experienced a successful holiday shopping season, and it remains a bright spot in a rough retail climate. However, given the stock's rich valuation with a P/E north of 60x, LULU's modest guidance increase is making the premium valuation a little more difficult to justify today.
Crocs leaps higher on upbeat Q4 and FY24 revenue guidance (CROX)
Crocs (CROX +20%) leaps higher today after delivering preliminary Q4 results ahead of prior estimates and projecting sustained revenue growth in 2024. The shoemaker, which also owns the HEYDUDE banner, was selling off ahead of its guidance today, slipping by nearly 20% since mid-December highs. Lackluster Q2 (Nov) results from fellow footwear maker NIKE (NKE) last month stung CROX as well as the broader footwear industry. However, with a bearish tone set, CROX was ready for a swift bounce on better-than-feared preliminary Q4 and FY24 numbers.
- CROX was coming off a disappointing quarter of its own in November, contending with powerful headwinds such as persistent inflation, higher interest rates, and the resumption of student loan payments in the U.S. As a result, management forecasted Q4 revs of $903-938 mln, a 1-4% decrease and well below consensus.
- However, there were a few silver linings from Q3, including continued market share capture for the Crocs brand in North America, healthy demand, and meaningful adjusted gross margin expansion. CROX carried these upbeat trends through to the end of the year, resulting in Q4 revs growing over +1% yr/yr, nicely above its previous forecast.
- The Crocs banner led the charge in Q4, registering roughly +10% revenue growth yr/yr, while HEYDUDE performed in-line with internal expectations, experiencing a 19% drop in sales. The holiday shopping season played out like management predicted, with more promotions than normal and a relatively strained end consumer. Although it was a difficult operating environment, CROX planned appropriately, allowing it to overdeliver on its previous financial targets.
- After an +11% bump in revenue yr/yr in FY23, CROX anticipates sales growth to cool somewhat, projecting growth of +3-5% in FY24, its slowest growth rate since FY18. Additionally, adjusted operating margins will likely tick around 2 pts lower to 25%, primarily due to investing in brand-accretive initiatives. Nevertheless, with promotions still elevated, inflation sticky, and consumers continuing to trade down to value products, mid-single-digit revenue growth is commendable, especially since CROX is reasonably solid growth in 2023.
After warning about upcoming demand woes in early November, CROX's buoyant Q4 guidance today is a relief. Even more uplifting was CROX's FY24 revenue forecast, underpinned by sustained demand among CROX's core brand. While hurdles still exist this year, particularly surrounding cumulative inflationary pressures, after its initial outlook today, we have more confidence in CROX's ability to navigate these obstacles, potentially setting up the company to embark on a broader turnaround.
Abercrombie & Fitch looking stylish after raising outlook on strong holiday shopping sales (ANF)
The apparel retail space has generally struggled amid a slowdown in consumer spending, but Abercrombie & Fitch (ANF) continues to defy the challenging industry conditions, as reflected in its impressive quarterly results in 2023. That momentum carried on into the holiday shopping season, enabling ANF to increase its Q4 net sales growth guidance to high-teens growth compared to its prior forecast of low-double-digit growth. Due to the increased sales leverage and limited discounted pricing, ANF also bumped its Q4 operating margin outlook higher to 15%, up from a range of 12-14%.
- ANF's resurgence and the associated 285% surge in its stock price in 2023 has been primarily fueled by its namesake Abercrombie brand. In Q3, the Abercrombie brand delivered remarkable comp growth of 26%. Although the company didn't provide specific Q4 sales figures for its two brands -- Abercrombie and Hollister -- it did state that the strong sales growth in Q4 was again led by Abercrombie brands.
- The women's business in particular was a source of strength, achieving record Q4 sales that were driven by on-trend product assortments. The company's strategy to expand the bottoms business beyond denim is paying off as pants continue to perform well. Dresses has been another strong business.
- A more limited inventory is also working in ANF's favor. At the end of Q3, inventories were down by 20% yr/yr, positioning ANF to benefit from higher pricing during the holiday shopping season. The company did just that, steering clear of the highly promotional retail environment, which underpinned its enhanced margin performance in Q4.
The main takeaway is that ANF distinguished itself as a clear winner in the apparel retail space this holiday shopping season, capitalizing on its clean inventory profile and the building strength of its Abercrombie brand.
Boeing, Alaska Air (ALK), and Spirit Aerosystems (SPR) drop after an incident this weekend (BA)
Boeing (BA -7%) is dropping today after a significant setback over the weekend triggered the FAA to temporarily ground specific Boeing 737 MAX 9 jets operated by U.S. airlines. During an Alaska Air (ALK -1%) flight to Ontario, CA from Portland, OR, part of the aircraft blew off, prompting the pilots to immediately return to Portland International Airport, where they landed the plane safely with no injuries.
The piece that flung off the 737 MAX 9 aircraft was a "plug" where an emergency exit is placed on MAX 9 jets under a certain seat limit. Federal regulations require extra emergency doors on aircraft with at least 180 seats. Since the plane that experienced the incident this weekend had under 180 seats, ALK and United Airlines (UAL), which also operates MAX 9 aircraft, can spec planes with "plugs" instead of doors.
This is where part supplier Spirit Aerosystems (SPR -8%) comes in. According to reports, there are two checks on whether the panel that blew off the aircraft is secure: a first analysis at SPR, which manufactures the "plug" and a second at Boeing.
- As the manufacturer, SPR is getting hit the hardest today. SPR's three largest customers are Boeing at roughly 53% of consolidated FY22 sales, Airbus (EADSY) at 22%, and the U.S. Government at 13%. Investors are growing impatient with the list of setbacks due to quality control issues at SPR. In April, SPR noted a quality issue in the fuselage section of certain 737 models. Meanwhile, in August, SPR identified a new problem involving improperly drilled holes on the aft pressure bulkhead.
- While wiping out all of the rally in December, shares of BA are not under as intense selling pressure as SPR. The market may be diverting much blame to SPR, especially given its history of quality control issues. Still, with Boeing forced to ground a reported 171 MAX 9 jets, it will face near-term cost headwinds. However, 171 jets represent a tiny fraction of the total planes Boeing has in operation.
- ALK and UAL are U.S. airlines configuring the MAX 9 without the extra emergency exits. However, ALK experienced the blowout, placing outsized selling pressure on its shares today. Furthermore, ALK replaced all of its Airbus aircraft with MAX 9 aircraft as of the end of September, which, in hindsight, could not have been worse timing. ALK grounded its fleet of 737 MAX jets, canceling over 150 flights and offering refunds. It is unclear whether BA will be on the hook for lost payments to airlines.
This weekend's incident is weighing on all three companies involved to varying degrees. An investigation will provide further clarity. Until then, BA will likely overcome the setback quicker than SPR, which adds another setback to its expanding list of quality control issues.
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