| | | Market Snapshot
briefing.com
| Dow | 38521.36 | +141.24 | (0.37%) | | Nasdaq | 15609.00 | +11.32 | (0.07%) | | SP 500 | 4954.23 | +11.42 | (0.23%) | | 10-yr Note | +28/32 | 4.082 |
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| | NYSE | Adv 1982 | Dec 818 | Vol 934 mln | | Nasdaq | Adv 2701 | Dec 1510 | Vol 4.7 bln |
Industry Watch
| Strong: Materials, Real Estate, Health Care, Industrials, Energy, Consumer Discretionary |
| | Weak: Information Technology, Communication Services |
Moving the Market
-- Not a lot of conviction with the S&P 500 and Dow Jones Industrial Average still relatively close to all-time highs; also, Nasdaq and S&P 500 have been higher in 13 of last 14 weeks
-- Losses in some of the mega cap stocks weighing on broader market; losses in semiconductor stocks weighing on index performance
-- A drop in Treasury yields
-- Digesting another slate of earnings news, headlined by Eli Lilly (LLY), DuPont (DD)
| Closing Summary
06-Feb-24 16:25 ET
Dow +141.24 at 38521.36, Nasdaq +11.32 at 15609.00, S&P +11.42 at 4954.23
[BRIEFING.COM] The stock market had a solid showing today. Advancing issues led declining issues by a 5-to-2 margin at the NYSE and by a nearly 2-to-1 margin at the Nasdaq. Index level performance for the S&P 500 and Nasdaq Composite was a little shaky, though, due to losses in some heavily-weighted components. The S&P 500 was down 0.2% at its low today and the Nasdaq Composite was down as much as 0.5%.
The Nasdaq Composite (+0.1%) and the S&P 500 (+0.2%) managed to close with gains thanks to a late afternoon move higher with no specific catalyst. The Dow Jones Industrial Average (+0.4%) and Russell 2000 (+0.8%), meanwhile, outperformed relative to other major indices throughout the session.
Mega caps and semiconductor shares were relatively weak after their recent outperformance, falling under some profit-taking activity. NVIDIA (NVDA 682.23, -11.09, -1.6%) was among the influential laggards, dropping more than 1.5% today. With this loss, shares are still up 37.7% in 2024. Meta Platforms (META 454.72, -4.69, -1.0%) declined 1.0% today, leaving it up 28.4% this year.
Meta Platforms and NVIDIA, along with other mega cap constituents, drove the underperformance of the S&P 500 information technology (-0.5%) and communication services (-0.2%) sectors, which were alone in negative territory at the close. The info tech sector is still up 6.8% this year and the communication services sector shows a 9.6% gain.
Weak semiconductor shares also weighed on the info tech sector and left the PHLX Semiconductor Index with a 1.1% loss today. Coherent (COHR 58.00, +8.58, +17.4%) went against the grain in the SOX with a big earnings-related move higher while shares of Amkor (AMKR 30.69, -1.62, -5.0%) traded down after reporting quarterly results.
Other influential stocks that reported earnings included DuPont (DD 65.74, +4.53, +7.4%) and Eli Lilly (LLY 705.03, -1.17, -0.2%). The former propelled the materials sector to a 1.7% gain, which was the largest increase among the nine sectors that finished higher.
In other corporate news, shares of New York Community Bank (NYCB 4.20, -1.20, -22.2%) closed sharply lower after a Bloomberg report that the bank was pressured by regulator to cut its dividend. This put renewed pressure on other regional bank shares. The SPDR S&P Regional Banking ETF (KRE) logged a 1.3% decline.
There was no U.S. economic data of note today to influence price action in Treasuries, but there was a $54 billion 3-yr note auction that was met with strong demand coinciding with Treasuries reaching intraday highs. The 10-yr note yield declined seven basis points to 4.09% and the 2-yr note yield fell six basis points to 4.40%. This activity provided a boost to equities, which struggled to find upside momentum as Treasuries logged sharp declines of late.
- S&P 500: +3.9%
- Nasdaq Composite: +4.0%
- Dow Jones Industrial Average: +2.2%
- S&P Midcap 400: -1.2%
- Russell 2000: -3.6%
Looking ahead, Wednesday's economic calendar features:
- 7:00 ET: Weekly MBA Mortgage Index (prior -7.2%)
- 8:30 ET: December Trade Balance (Briefing.com consensus -$62.0 bln; prior -$63.2 bln)
- 10:30 ET: Weekly crude oil inventories (prior +1.23 mln)
- 15:00 ET: December Consumer Credit (Briefing.com consensus $16.3 bln; prior $23.7 bln)
Treasuries break losing streak
06-Feb-24 15:35 ET
Dow +52.97 at 38433.09, Nasdaq -40.83 at 15556.85, S&P -0.94 at 4941.87
[BRIEFING.COM] The S&P 500 slipped below yesterday's closing level again with no specific catalyst to account for the move.
Treasuries settled with gains following steep losses of late. The 10-yr note yield declined seven basis points to 4.09% and the 2-yr note yield fell six basis points to 4.40%.
Separately, Alibaba (BABA), CVS Health (CVS), Bunge (BG), Penske Auto (PAG), Fox Corporation (FOXA), CDW (CDW), Emerson (WMR), Yum! Brands (YUM), Roblox (RBLX), and others report earnings ahead of the open tomorrow.
Major indices climb after quick dip with no catalyst
06-Feb-24 15:00 ET
Dow +60.86 at 38440.98, Nasdaq -16.48 at 15581.20, S&P +3.33 at 4946.14
[BRIEFING.COM] The major indices have been climbing over the last half hour. Many stocks are participating in upside moves with no specific catalyst.
The Invesco S&P 500 Equal Weight ETF (RSP) is up 0.5% versus a 0.1% gain in the market-cap weighted S&P 500.
Looking ahead, Ford (F), Prudential (PRU), Amgen (AMGN), Gilead Sciences (GILD), Cognizant Tech (CTSH), Omnicom (OMC), Lumen Technologies (LUMN), V.F. Corp (VFC), Chipotle Mexican Grill (CMG), Yum China (YUMC), Fortinet (FTNT), Snap (SNAP), and others report earnings after today's close.
S&P 500 slips back into the red; UPS higher on UBS upgrade
06-Feb-24 14:30 ET
Dow +46.33 at 38426.45, Nasdaq -52.93 at 15544.75, S&P -2.63 at 4940.18
[BRIEFING.COM] The S&P 500 (-0.05%) is in second place on Tuesday afternoon, having fallen back into the red over the prior half hour.
Elsewhere, S&P 500 constituents Willis Towers Watson (WTW 267.34, +16.88, +6.74%), Align Tech (ALGN 290.69, +15.11, +5.48%), and UPS (UPS 145.27, +6.19, +4.45%) pepper the top of today's standings. WTW is higher on earnings, and UPS caught an upgrade to Buy at UBS.
Meanwhile, FMC Corp (FMC 54.28, -6.14, -10.16%) is today's top laggard following last night's miss and lower guide alongside comments from the conference call of a workforce reduction plan.
Gold slightly higher as yields, dollar dip
06-Feb-24 14:00 ET
Dow +113.14 at 38493.26, Nasdaq -28.03 at 15569.65, S&P +5.13 at 4947.94
[BRIEFING.COM] With about two hours to go on Tuesday the tech-heavy Nasdaq Composite (-0.18%) is now the sole declining major average.
Gold futures settled $8.50 higher (+0.4%) to $2,051.40/oz, allowed higher by a slightly weaker dollar and falling yields.
Meanwhile, the U.S. Dollar Index is down about -0.2% to $104.20.
Page One
Last Updated: 06-Feb-24 09:02 ET | Archive
A mostly sunny disposition still in mega-cap land
We said yesterday that market participants were trying to get a read on the stock market's temperature by reading the price action. Well, the read they got yesterday was akin to a meteorologist saying there would be rain and sun on the same day at the same time.
The rain was seen in small-cap land. The sun was seen in mega-cap land. The Russell 2000 declined 1.3%, but had been down as much as 2.1%. The Vanguard Mega-Cap Growth ETF (ETF) ended the session roughly flat after having been down as much as 0.8% and up as much as 0.3%.
Flat might be seen by some as the equivalent of an overcast sky, but the sun in that reading was the resilience to selling pressure (in most cases). NVIDIA (NVDA) for its part gained another 4.8%, leaving it up, ho hum, 40% year-to-date. Just to be clear: that is 40% in just over five weeks after NVDA gained 239% in 2023.
The fear of missing out on further gains is palpable in stocks like NVDA, Meta Platforms (META), Microsoft (MSFT), and Amazon.com (AMZN), but perhaps not as much for the rest of the market. The Equal-Weighted S&P 500 is down 0.7% year-to-date, the Russell 2000 is down 4.4%, and the S&P Midcap 400 is down 1.6%.
The rest of the market it seems is giving in to some consolidation activity following the huge run to end 2023. Shifting rate-cut expectations (to fewer from more) are getting most of the blame.
The 2-yr note yield is unchanged at 4.46% and the 10-yr note yield is unchanged at 4.16%, licking their wounds after the selloff that followed the stronger-than-expected employment report and ISM Non-Manufacturing PMI for January. There is no U.S. economic data of note today.
The Treasury market will be welcoming some new supply this week. There is a $54 billion 3-yr note auction today. Results will be announced at 1:00 p.m. ET. A $42 billion 10-yr note auction will be held on Wednesday and a $25 billion 30-yr bond auction will follow on Thursday.
The auction results will garner increased attention. For now, market participants are raining praise on Eli Lilly (LLY) for posting better-than-expected Q4 results and issuing better-than-expected FY24 revenue guidance. Shares of LLY -- a mega-cap to be sure with a $670 billion market capitalization (and climbing) -- are up 5.4% in pre-market trading.
That move will give the health care sector a booster shot and it is providing support for the broader market.
Currently, the S&P 500 futures are up eight points and are trading 0.1% above fair value, the Nasdaq 100 futures are up 40 points and are trading 0.4% above fair value, and the Dow Jones Industrial Average futures are up 15 points and are trading in-line with fair value.
The moves aren't much, but with the S&P 500 and the Nasdaq Composite trading higher in 13 of the last 14 weeks, the lack of selling interest at the index level is like sun breaking through an overcast sky.
On a related note, the sun broke through dark clouds today on China's Shanghai Composite. It soared 3.2% amid reports of government intervention to prop up the stock market. Regulators are going to be meeting with President Xi, according to Bloomberg, to discuss the market. Including today's gain, the Shanghai Composite is down 6.2% year-to-date.
Interestingly, the Vanguard Mega-Cap Growth ETF is up 6.3% year-to-date. It hasn't been a perfectly sunny move. There has been an isolated thunderstorm (see Tesla), but the price action overall has yet to suggest that the sun has stopped shining in mega-cap land.
-- Patrick J. O'Hare, Briefing.com
DuPont rebounds on hopes that destocking will abate in Q1 and on new share buyback program (DD)
After chemicals company DuPont (DD) warned on January 24 that ongoing inventory destocking among its industrial customers, particularly in China, was impacting its business worse than it anticipated, expectations were reset significantly lower ahead of its Q4 earnings report.
- Due to this channel inventory destocking, DD issued Q4 EPS and revenue guidance that was slightly below expectations on January 24, while guiding Q1 EPS and revenue far below estimates. Following that discouraging update, DD sank by 18%, not including today's rebound higher.
- With the bad news already baked into the stock, DD was poised for a snap-back higher, and the company's new $1.0 bln share repurchase program and 6% increase in its quarterly dividend is adding fuel to the fire.
Business conditions are still quite challenging, though, as reflected in the 10% organic sales decrease for Q4.
- When DD issued that dismal guidance, it singled out the Water Solutions segment as a source of weakness. That was indeed the case as organic sales declined by 15% for Water & Protection, driving a mid-single-digit decline for the Industrial Solutions segment overall. Lower volume for medical packaging, especially in China, contributed to the decline.
- The downturn in China is problematic for DD because approximately 20% of the company's revenue is generated there. Unfortunately for DD, the company is seeing similar destocking trends play out in China in 2024.
- The Interconnect Solutions segment didn't fare any better with organic sales also down mid-single-digits. This segment, which manufacturers circuit packaging film and laminate materials used in printed circuit boards and electronic finishing applications, is also contending with channel inventory destocking.
These issues were well-known heading into the earnings report, so market participants were looking for signs of a bottoming out and a potential recovery. There were a few positive items to latch on to.
- Most notably, revenue increased by 2% sequentially for Semiconductor Technologies, boosted by improving semiconductor fab utilization rates as demand for consumer electronics improves. On a yr/yr basis, sales were down by high-single-digits, but that marks a nice improvement from the high-teens decrease experienced in Q3.
- Although DD still expects destocking to impact volume for Industrial Solutions, it believes that orders will improve after troughing in Q1 as customer inventory levels normalize. As such, DD is forecasting sequential sales improvement and an approximate 10% increase in operating EBITDA in Q2 from Q1
The main takeaway is that a rough earnings report was already anticipated after DD issued bleak guidance in late January, setting the stage for a rebound higher. That rebound is fueled by the expectation that business will improve after bottoming out in Q1, along with DD's new share buyback program.
Spotify streaming to multi-year highs after guiding for positive operating profit in Q1 (SPOT)
Spotify (SPOT) ended its fiscal year on a high note with 4Q23 results showing healthy subscriber growth and meaningful improvements on the bottom-line due to price increases and cost-cutting measures, including workforce reductions.
The leading audio company is making good on its promise to improve its profitability and it expects those improvements to kick into a higher gear in FY24. SPOT guided for Q1 operating income of €180 mln compared to an operating loss of €(231) mln in the year-earlier period. In Q4, the company generated adjusted operating income of €68 mln.
- A key factor underlying SPOT's bottom-line turnaround is the solid growth of its premium subscribers, and, by extension, its premium revenue. Following growth of 16% last quarter, premium subscribers were up by 15% in Q4 to 236 mln, beating its guidance by 1.0 mln subscribers.
- In addition to the subscriber growth, average revenue per user (ARPU) edged higher by 1%, driven by price increases that helped to offset discounted plans at lower price points.
- Altogether, premium revenue increased by 17% yr/yr to €3.17 bln.
- Meanwhile, the company's strategy of becoming a more well-rounded audio company, rather than just a music streaming company, is paying dividends. Thanks to the popularity of Joe Rogan's podcast, and others such as New Heights with Jason and Travis Kelce, advertising revenue grew by 12% to an all-time record of €501 mln.
SPOT has never had much difficulty growing its user base and its revenue growth has been in solid double-digit territory for its entire existence as a publicly traded company. Yet, the company has still struggled to achieve profitability. However, last quarter, SPOT delivered a surprise profit of €0.33, and while EPS swung back into the red at €(0.36) for Q4, the company did make significant strides.
- In addition to the positive adjusted operating income noted above, SPOT generated record free cash flow of €396 mln, up sharply from €216 mln in Q3. Capital expenditures were lower by €4.0 mln, while SPOT also kept a tight lid on other expenses.
- Operating expenses were highly by only 2% yr/yr and are poised to stay constrained after SPOT announced a 17% workforce reduction initiative in early December.
The main takeaway is that after years of sizable losses, SPOT finally seems to be turning a corner as it prioritizes profits. This is music to investors ears and SPOT is being rewarded today as its stock soars to its highest levels since early 2022.
Eli Lilly posts another impressive earnings result, fueled by higher selling prices (LLY)
Eli Lilly (LLY) is trading flat after wrapping up 2023 on an upbeat note. The pharma giant handily beat analyst expectations with its Q4 earnings report this morning. LLY recorded its third consecutive double-digit EPS beat while revenue grew a robust 28.1% yr/yr to $9.35 bln. Much of the growth was driven by higher selling prices for its drugs.
- Specifically, the 28% revenue growth n Q4 was driven by increases of 16% from higher realized prices. Volume growth also played a role, up 11% while the remaining 1% came from favorable FX. Higher prices were driven by Mounjaro (antidiabetic medication used for weight loss) in the US, partially offset by lower prices for Humalog (insulin) and Trulicity (diabetes/weight loss).
- Growth was particularly strong in the US, fueled by weight loss drugs, particularly Mounjaro. Revenue in the US increased 39% yr/yr to $6.46 bln, driven by a 27% increase in prices and a 12% increase in volume. When excluding Mounjaro, LLY said that realized prices in the US declined by high-single digits for the quarter. As such, you can see the impact of that one drug. The increase in US volume was driven by Mounjaro, Zepbound, Verzenio, Jardiance and Taltz, partially offset by a decrease in Trulicity.
- Revenue growth outside the US was more muted, but still up a solid 10% yr/yr to $2.90 bln, driven by a 10% increase in volume and favorable FX. This was partially offset by a 3% decrease due to lower realized prices. Revenue also benefited from $65 mln associated with milestones for the EU approval and launch of Ebglyss (itchy skin).
- In terms of individual drugs, LLY had three $1 bln drugs in Q4. Mounjaro sales have risen quickly and it was LLY's largest revenue generator in Q4 at $2.2 bln vs just $279 mln last year. That was followed by Trulicity at $1.67 bln, down 14% yr/yr, and Verzenio at $1.15 bln, up 42% yr/yr. For all of 2023, Trulicity took the top spot at $7.13 bln, but that was down 4%. Mounjaro was number two at $5.16 bln and it looks poised to be LLY's largest drug in 2024 if current growth rates continue.
- Looking ahead, investors will keep an eye on Zepbound, which recently won FDA approval for obesity in Q4 and posted sales of $175.8 mln in the quarter. It is a weekly injection with the same active ingredient as Mounjaro. This approval was a big deal for LLY and boosts its GLP-1 class of drugs, which have become very popular for weight loss in the US. Others include Wegovy and Ozempic, which are owned by Novo Nordisk.
Overall, this was a very good quarter for Eli Lilly. The stock has been on a strong upward trend for most of the past year. Investors are excited about its exposure to GLP-1 obesity drugs and the recent approval of Zepbound only adds to that excitement. That has been helping to propel the stock higher. We are not seeing a big reaction today as we suspect a good result was priced in already.
Palantir Technologies surges on robust U.S. commercial demand and bullish FY24 sales guidance (PLTR)
Palantir Technologies (PLTR +23%) is surging after issuing a bullish FY24 revenue outlook, eclipsing rather tame numbers from Q4, including earnings and revs matching analyst forecasts and downbeat Q1 revenue guidance. However, an encouraging FY24 revenue estimate was not the only highlight from the quarter. The AI-based data analytics software developer surpassed $1.0 bln in commercial revs over the past 12 months for the first time, completed more AIP boot camps (training seminars) than initially expected, and forecasted a reacceleration of its U.S. government business this year.
- When PLTR was formed over two decades ago, its business catered entirely to the U.S. government, steadily branching out to the private sector. When the company went public in late 2020, investors were largely interested in PLTR's commercial prospects. As such, the market applauds the company's $1.0 bln in revenue achievement. Equally impressive was PLTR registering a 70% spike in its U.S. commercial revenue yr/yr in Q4, fueled by upward momentum in AIP. International commercial sales lagged but still saw decent growth of 11% yr/yr, aided by AIP.
- PLTR has not been offering AIP for a long time, launching the program mid-way through 2023. However, over 560 boot camps across 465 organizations have already finished during this short period, exceeding PLTR's goal of 500. One of the key issues with PLTR's expansion plans was a lack of knowledge of its product suite. Training enterprises on what PLTR's software can achieve creates a smoother path toward expanding its addressable market.
- PLTR has noticed boot camps significantly compress sales cycles and accelerate new customer acquisition, which climbed 22% sequentially within U.S. commercial compared to a +12% and +4% increase in Q3 and Q2, respectively. Furthermore, PLTR has more than doubled the number of U.S. commercial deals carrying a total contract value of $1.0 mln or more yr/yr in Q4.
- The 32% jump in PLTR's total commercial business outpaced the 11% growth in government revenue, carrying its overall top-line growth of 19.6% yr/yr to $608.35 mln. Management mentioned that the strength of its U.S. government business is not reflected in Q4 results, partly due to the continuing resolution and timing of large potential contract awards. However, PLTR is confident in its U.S. government business reaccelerating this year as the government continues scaling its AI efforts.
- This reacceleration will likely not occur until toward the second half of the year, evidenced by PLTR's bearish Q1 revenue outlook of $612-616 mln. However, once PLTR clears this near-term hurdle, it anticipates smoother sailing ahead, underpinned by its upbeat FY24 revenue outlook of $2.652-2.668 bln, a 20% improvement yr/yr at the midpoint, a modest increase over the +17% increase in FY23.
With elevated interest in AI firmly established, PLTR is amid a potentially long-lasting tailwind. While Q4 results were not outstanding, investors are more interested in management's confidence in an accelerating demand backdrop in 2024, sending shares toward one-year highs today.
ON Semiconductor powers higher following sufficient Q4 numbers (ON)
On Semiconductor (ON +9%) may not have exactly turned on the afterburners during Q4, delivering modest top and bottom line upside while guiding Q1 figures somewhat below analyst forecasts. However, with shares stuck in a rut, down over 30% from August 2023 highs leading up to Q4 results, it was sufficient to renew buying interest in the stock. It also helped that On Semi followed lukewarm results from several of its peers, including STMicroelectronics (STM), Texas Instruments (TXN), and Wolfspeed (WOLF).
- On Semi's counterparts were negatively affected by a material slowdown in industrial and automotive end-market activity. This trend did not bode well for On Semi, given these two markets comprise 80% of the company's total annual revenue. However, while industrial activity was soft in the quarter, driving a 10% decline in industrial revenue yr/yr, it was not as bad as the market feared, particularly given that demand across other product categories held up relatively well.
- In On Semi's Power Solutions Group (PSG) segment, its largest, revenue climbed by 4% yr/yr, supported by an increase in silicon carbide (SiC) revs from the automotive and energy end markets. SiC is a vital component in developing electric vehicles (EVs), making On Semi a compelling long-term play on the continued rise in EVs.
- PSG's growth was still insufficient to offset the laggards in the quarter, including Advanced Solutions Group (ASG) and Intelligent Sensing Group (ISG), which recorded double-digit revenue declines of 11% and 13%, respectively. The tepid industrial activity was evidenced across these segments, as compute edged lower in ASG and total utilization fell 6 pts sequentially in ISG.
- However, guidance was a primary differentiator between On Semi and its competitors. The midpoint of On Semi's Q1 adjusted EPS projection of $0.98-1.10 still missed analyst targets, while revenue guidance of $1.80-1.90 fell short completely. Nevertheless, it was markedly better than TXN's, STM's, and WOLF's MarQ outlooks, which were largely well below consensus. Another highlight embedded in On Semi's Q1 outlook was margins. The company anticipates holding its gross margins above the mid-40% floor, similar to its Q4 margins of 46.7%.
Overall, it was a decent quarter for On Semi. Demand remains lackluster, particularly in industrial, while SiC revs continued to climb, underscoring some lumpiness surrounding a global economic rebound. Still, On Semi remains confident in its market position, engaging in long-term supply agreements and staying on track to achieve long-term gross margins of 53%. However, in the interim, 2024 may continue to throw unexpected obstacles in On Semi's path, making it challenging for shares to sustain their current upward momentum.
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