Market Snapshot
| Dow | 38386.09 | +146.43 | (0.38%) | | Nasdaq | 15983.08 | +55.18 | (0.35%) | | SP 500 | 5116.17 | +16.21 | (0.32%) | | 10-yr Note | +26/32 | 4.61 |
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| | NYSE | Adv 1951 | Dec 806 | Vol 869 mln | | Nasdaq | Adv 1951 | Dec 806 | Vol 4.9 bln |
Industry Watch
| Strong: Utilities, Real Estate, Consumer Discretionary, Materials, Industrials, Energy |
| | Weak: Communication Services, Financials |
Moving the Market
-- Carryover momentum after rebound last week
-- Tesla (TSLA) makes big move after getting approval in China for self-driving service
-- Apple (AAPL) up nicely after upgrade to Outperform from Market Perform at Bernstein
-- Losses in other mega caps (GOOG, META, MSFT, AVGO) weighing over broader market
-- S&P 500 and Nasdaq Composite encounter resistance near their 50-day moving averages
-- Pickup in volatility in front of the close coinciding with the Treasury Department releasing its quarterly borrowing estimates
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Closing Summary
29-Apr-24 16:30 ET
Dow +146.43 at 38386.09, Nasdaq +55.18 at 15983.08, S&P +16.21 at 5116.17
[BRIEFING.COM] The stock market traded higher through most of the session today following rebound action in the major indices last week. There was some volatility, however, in the afternoon trade that coincided with the Treasury Department releasing its quarterly borrowing estimates.
Stocks quickly moved lower at 3:00 ET after the Treasury announced that borrowing in Q2 is expected to reach $243 billion, which is $41 billion higher than estimated at the end of Q4. The downside action was short-lived and the major indices spent the last hour of trading climbing off their lows.
Many stocks finished the session with gains, leading the equal-weighted S&P 500 to close with a 0.7% gain. Losses in some mega cap names like Meta Platforms (META 432.62, -10.67, -2.4%), Alphabet (GOOG 167.90, -5.79, -3.3%), and Microsoft (MSFT 402.25, -4.07, -1.0%) limited upside moves for the major indices.
Another limiting factor today was technical resistance in the S&P 500 and Nasdaq Composite as the indices approached their respective 50-day moving averages (5,125 for the S&P 500 and 16,053 for the Nasdaq Composite).
Gains in Tesla (TSLA 194.05, +25.76, +15.3%) after it won temporary approval in China for its self-driving service, according to The Wall Street Journal, and in Apple (AAPL 432.62, -10.67, -2.4%), which was upgrade to Outperform from Market Perform at Bernstein, acted as offsetting support to broader market.
Only two of the S&P 500 sectors closed with losses -- communication services (-2.1%) and financials (-0.2%) -- while the consumer discretionary sector (+2.0%) logged the biggest gain.
It is a busy week of potentially market-moving events. More than 170 S&P 500 companies will be reporting their March quarter results, there is an FOMC decision and press conference on Wednesday, along with slate of economic releases. The April ISM Manufacturing Index will be released on Wednesday and the April Employment Report will be released on Friday.
- S&P 500:+7.3% YTD
- Nasdaq Composite: +6.5% YTD
- S&P Midcap 400: +4.7% YTD
- Dow Jones Industrial Average: +1.9% YTD
- Russell 2000: -0.6% YTD
Tuesday's economic calendar features:
- 8:30 ET: Q1 Employment Cost Index (Briefing.com consensus 1.0%; prior 0.9%)
- 9:00 ET: February FHFA Housing Price Index (prior -0.1%) and February S&P Case-Shiller Home Price Index (Briefing.com consensus 6.7%; prior 6.6%)
- 9:45 ET: April Chicago PMI (Briefing.com consensus 44.5; prior 41.4)
- 10:00 ET: April Consumer Confidence (Briefing.com consensus 104.0; prior 104.7)
Stocks recover after somewhat after trading lower
29-Apr-24 15:30 ET
Dow +72.00 at 38311.66, Nasdaq +4.72 at 15932.62, S&P +0.31 at 5100.27
[BRIEFING.COM] The recent index-level deterioration coincided with the U.S. Treasury announcing at the cash close that borrowing in Q2 is expected to reach $243 billion, which is $41 billion higher than estimated at the end of Q4.
Stocks are trying to rebound, however, leading the S&P 500 to trade above its prior close again. Only three of the S&P 500 sectors show declines. The communication services sector (-2.3%) is the worst performer by a wide margin, due to sizable declines in Meta Platforms (META 430.15, -13.14, -3.0%) and Alphabet (GOOG 167.75, -5.94, -3.4%).
Separately, Paramount Global (PARA), NXP Semi (NXPI), Amkor (AMKR), and others report earnings after the close. Marathon Petroleum (MPC), Archer-Daniels (ADM), Sysco (SYY), Coca-Cola (KO), Eli Lilly (LLY), PACCAR (PCAR), 3M (MMM), Penske Auto (PAG), PayPal (PYPL), McDonald's (MCD), Eaton (ETN), Tenet Healthcare (THC), GE Healthcare (GEHC), Corning (GLW), Molson Coors Brewing (TAP), and others report earnings in front of tomorrow's open.
Major indices turn lower, A-D line still positive
29-Apr-24 15:05 ET
Dow +51.16 at 38290.82, Nasdaq -2.76 at 15925.14, S&P -1.64 at 5098.32
[BRIEFING.COM] The market exhibited choppy action over the last half hour. The major indices took a quick dip then briefly turned higher before returning to session lows.
Market breadth still reflects an underlying positive bias. Advancers lead decliners by a 5-to-2 margin at the NYSE and by a nearly 2-to-1 margin at the Nasdaq.
The equal-weighted S&P 500 is still up 0.4%.
Albemarle, Quest Diagnostics outperforming in S&P 500 on Monday
29-Apr-24 14:30 ET
Dow +113.12 at 38352.78, Nasdaq +39.12 at 15967.02, S&P +10.37 at 5110.33
[BRIEFING.COM] The S&P 500 (+0.20%) is in last place on Monday afternoon, up about 10 points.
Elsewhere, S&P 500 constituents Albemarle (ALB 124.73, +7.85, +6.72%), Int'l Paper (IP 35.28, +1.45, +4.29%), and Quest Diagnostics (DGX 140.10, +5.84, +4.35%) are outperforming. ALB moves higher ahead of earnings this week, while DGX gains after news that the FDA was taking action aimed at helping to ensure the safety and effectiveness of laboratory developed tests.
Meanwhile, Franklin Resources (BEN 23.85, -1.14, -4.56%) is today's top laggard following earnings.
Gold starts the week higher ahead of FOMC policy decision
29-Apr-24 14:00 ET
Dow +165.80 at 38405.46, Nasdaq +79.45 at 16007.35, S&P +18.52 at 5118.48
[BRIEFING.COM] The tech-heavy Nasdaq Composite (+0.50%) is today's best-performing major average, up about 80 points with two hours to go on Monday.
Gold futures settled $10.50 higher (+0.5%) to $2,357.70/oz, higher amid weaker treasury yields and a lower dollar; investors are eyeing Wednesday's FOMC policy decision and its impact on gold futures.
Meanwhile, the U.S. Dollar Index is down about -0.3% to $105.60.
ON Semiconductor powers up on decent Q1 results; remains cautious on 2H24 outlook (ON)
By delivering earnings and revs above consensus in Q1, On Semiconductor (ON +4%) is receiving a modest push higher today. While the market has come to expect decent upside from the chip maker specializing in power and signal management, given it has not missed on either line since 1Q20, investors are relieved to still see it today following the sluggish pace of recovery touched on by peers Texas Instruments (TXN) and STMicroelectronics (STM) last week.
However, zoomed out, shares of ON are still in a downward trend since peaking in July of last year. In fact, the stock fell to one-year lows last week in front of its counterparts' MarQ reports, illuminating a relatively low bar ahead of the company's Q1 results today. The steady decline stems from a lengthy inventory rebalancing cycle among ON's customers.
While the cycle may be at or close to a bottom, that does not translate to an immediate recovery, as evidenced by ON's downbeat Q2 outlook. Management remarked that it remains cautious about its second-half outlook. Although, it expects customer inventory levels to normalize and the market to stabilize this year.
- As expected, like we saw with TXN, ON's end-market demand continued to weaken in Q1, with revs contracting by 4.9% yr/yr and 7.7% from Q4 to $1.86 bln, hitting the midpoint of its $1.80-1.90 bln forecast. Likewise, adjusted EPS of $1.08 represented a yr/yr and sequential drop.
- ON commented that incremental softness, mainly within its automotive and industrial markets, which comprise 80% of its total business, hindered growth in the quarter. Inventory digestion persisted but did begin to stabilize across the traditional pieces of its industrial business.
- Conversely, within the silicon carbide industry -- a material of choice within the electric vehicle (EV) industry -- ON is constantly gaining market share. It continues to anticipate its total addressable market to expand, albeit at a lower rate than previously expected. Still, ON reiterated its prediction that revenue growth will double market growth in 2024.
- Nevertheless, in the immediate run, demand remains weak, leading to ON's underwhelming Q2 outlook. The company estimates adjusted EPS of $0.86-0.98 and revs of $1.68-1.78 bln, both representing another quarter of yr/yr and sequential drops.
ON's Q1 report was not exactly a knockout but was better than investors feared after warnings from peers last week. Despite a stubbornly unfavorable demand backdrop, there were signs of ON's competitive edge. For example, in automotive, the shift toward higher-resolution image sensors for ADAS safety systems benefits ON's image sensor portfolio, the uptick in over-the-counter hearing aid options lifts its medical end-market revs, and AI server installs provide solid ROI potential on its data center investments. Still, without a broader recovery across ON's markets, it could struggle to break out of its sideways trading.
Tesla executing sharp U-turn as growth prospects suddenly brighten (TSLA)
Tesla (TSLA) is executing a sharp U-turn after shares sank to their lowest levels since January 2023 early last week, rallying by about 30% following the EV maker's Q1 earnings report on April 23. The initial spark was disclosed in that earnings release -- namely, the acceleration of production for new vehicle models, including the launch of a lower-cost model -- but a significant development regarding TSLA's full self-driving (FSD) system is fanning the flames today. Specifically, the Wall Street Journal reported that China's government offered tentative approval for TSLA's FSD technology, potentially opening the door to another new growth catalyst, further easing fears that TSLA's growth would remain in neutral or reverse in the coming years.
- Not only would receiving approval in China create a new substantial subscription revenue stream, but it would also help to stop the bleeding in terms of market share losses. TSLA's recent struggles in China are well known with sales in its second largest market slipping by about 4% in Q1 as EV makers like BYD Company (BYDDY), Xpeng (XPEV), and NIO (NIO) take share. Given that some of these Chinese EV companies, including XPEV, already offer advanced driver assistance systems, TSLA could close that competitive gap by including FSD technology.
- In the face of declining deliveries (-9% in Q1) and eroding ASPs due to price cuts, Elon Musk has tried to steer investors' attention towards TSLA's AI and FSD progress as he attempts to rebrand the company as an AI/software company. In particular, he has touted TSLA's robotaxi as a centerpiece of the company's future, announcing that robotaxi will be unveiled on August 8.
- Until this past week, Musk's messaging wasn't sitting well at all since it appeared as if he threw in the towel for near-term growth, while waiting for TSLA's massive investments to hopefully pay off a few years down the road. For some context, capital expenditures jumped by 24% in FY23 to nearly $9.0 bln.
- Now, however, the tables have turned because the emergence of two potentially substantial growth catalysts (Model 2, FSD in China) have materialized, helping TSLA to bridge the gap between this recent slowdown and the launch of robotaxi and more software-based revenue. Assuming TSLA is granted full approval in China, it should hit the ground running given its partnership with Chinese tech giant Baidu (BIDU). According the Wall Street Journal, TSLA secured a mapping and navigation agreement with BIDU, which also eases Chinese regulators' concerns about data security risks.
Just one week ago, it was all doom and gloom for TSLA as investors stared down a bleak growth outlook for the next couple of years. Although plenty of uncertainty remains, including around TSLA's ability to meet Musk's accelerated timeline for new vehicle production, hope is being restored as TSLA reprioritizes its closer-in growth drivers.
Domino's Pizza making some dough for investors, robust US comps and strong EPS upside (DPZ)
Domino's Pizza (DPZ +4%) is trading nicely higher after reporting a sizeable Q1 EPS beat this morning. Revenue rose 5.9% yr/yr to $1.08 bln, which was in-line with analyst expectations. But what seems to be really pushing the stock higher are the nice US comps and some commentary on the call.
- US comps had been disappointing in recent quarters, but the trend has been improving quite a bit. In Q1, DPZ reported healthy US same store comps of +5.6%. That follows +2.8% in Q4, -0.6% in Q3 and +0.1% in Q2. DPZ previously said it expected international comps to be soft in 1H with improvement in 2H. That played out in Q1 with international comps of +0.9%.
- Importantly, its US comp growth was achieved with positive order counts in both its carryout and delivery businesses for the second quarter in a row. Further, this order growth was across all income cohorts, but DPZ saw the largest growth in its lower income cohorts that are benefiting from the value that DPZ is offering.
- Another milestone in Q1 was DPZ going live with marketing on its recent Uber Eats partnership. The company remains excited about the Uber Eats partnership. It has estimated that approx 65% of those Uber customers are going to be incremental to DPZ. And Uber's customers tend to be more on the higher income side. DPZ says it remains on track to exit the year at 3% or more of sales coming through this new channel.
- Another tailwind recently has been its Emergency pizza promotion. It has performed better than any BOGO offer. It was a meaningful driver to comps in both Q4 and in Q1. It not only drove increased orders, but also the acquisition of members into its loyalty program. Speaking of its loyalty program, Domino's Rewards continues to perform extremely well and was a key driver of its strong US comps in Q1. DPZ is particularly pleased with the increase in carryout customers made possible in part by DPZ's decision to reduce its minimum spend to just $5 to earn points.
- Looking ahead, DPZ continues to expects 2024 US comps to be above its 3+% long-term guide as a result of the Uber and loyalty catalysts. DPZ expects US comps to be 3% or more in each quarter of the year, however, Q2 comps ae expected to be slightly below Q1 as the Emergency Pizza promotion rolls off, partially offset by a ramp in Uber. Sales through Uber are expected to increase throughout the year as marketing spend and awareness increases. DPZ is also excited to announce that its first product innovation of the year is New York Style Pizza, which launches on air today.
Overall, this was a very good way for DPZ to start 2024. The highlights were the huge US comps in Q1 and the strong EPS upside. Also, management sound pretty excited about 2024, driven by Uber Eats and its revamped loyalty program. In particular, DPZ sounds pretty confident Uber will bring in a lot of new customers, and they tend to be higher income. Investors definitely are excited about 2024 and this report confirmed those beliefs.
Philips breathes easier after settling Respironics litigation; demand to improve in China (PHG)
Medical and personal device maker Philips (PHG +31%) is breathing much easier today after settling its ongoing Respironics litigation for $1.1 bln, shoving aside relatively sluggish Q1 results, including minor top and bottom-line misses. PHG was engaged in resolving the consequences of a June 2021 recall of its Respironics lineup (sleep and respiratory products). The recall meant that PHG was no longer allowed to sell its Respironics devices in the U.S., a meaningful setback given that the region totaled over 40% of annual sales, making it the company's largest.
However, by reaching a final agreement on the consent decree with the DOJ and FDA, PHG has a roadmap of defined actions to return to selling these devices in the U.S. While PHG cannot yet sell any of the devices until the relevant requirements of the consent decree are met, investors are relieved to see this overhang finally begin to subside, especially given how crucial the U.S. market is for PHG. As a result, the stock is rocketing toward $30.00/share, a level not seen in over two years.
- The news surrounding PHG's Respironics ligation is receiving most of the attention today, pushing aside the company's Q1 results, which were headlined a 0.7% drop in revs yr/yr to €4.14 bln on -3.8% comparable order intake growth. The decline in order intake was primarily attributed to China, whose government-imposed anticorruption measures hindered hospitals' decision-making. However, PHG is confident that order growth will resume in China during 2H24, supporting a positive figure overall for FY24.
- PHG registered a relatively upbeat quarter outside China, boasting positive order intake growth across its other regions. Additionally, even when incorporating China's tepid performance, PHG still delivered positive comparable sales growth at +2.4% in Q1, driven by +3.0% growth in Diagnosis & Treatment and Personal Health, which offset a 1% drop in Connected Care.
- Like last quarter, PHG remained confident in its 2023-2025 financial goals, including mid-single-digit comp growth, low-teen adjusted EBITDA margins, and €1.4-1.6 bln free cash flow. PHG also reaffirmed its FY24 outlook, continuing to project +3.0-5.0% comp sales growth and adjusted EBITDA margins of 11.0-11.5%.
- Regarding PHG's free cash flow target, the $1.1 bln settlement will be funded from PHG's cash flow generation, which may translate to no new share buyback program. PHG completed its €1.5 bln repurchase plan this month and has not yet announced any new capital allocation plan.
PHG's Q1 results were decent, but today's real attention-grabber was its $1.1 bln settlement over its Respironics recall. It will likely take some time before PHG checks off each of the DOJ and FDA's requirements and begins selling its devices in the U.S. Still, it cleared a significant cloud that hung over the company since the initial recall, allowing some sun to finally begin shining down on PHG at the same time it is observing uplifting demand signals in China.
Intel's Q1 earnings report only raises more doubts about its turnaround prospects (INTC)
A painful correction in shares of Intel (INTC) is taking a turn for the worse today after the chip maker issued EPS and revenue guidance for Q2 that badly missed expectations, exacerbating concerns that the company has simply fallen too far behind competitors NVIDIA (NVDA), Advanced Micro Devices (AMD), and Taiwan Semiconductor (TSM). Including today's losses, INTC has plummeted by about 36% on a year-to-date basis, reflecting investors' rising doubts that its ongoing transition to a foundry model will return the company to its past glory as a semiconductor juggernaut.
It was only a few months ago that INTC was riding high on a bullish swing in sentiment that was underpinned by a strong recovery in the PC market and hopes that its data center business would begin turning a corner. On both accounts, INTC's Q1 results provided some disappointment, even as the Client Computing Group (CCG) generated strong revenue growth of 31%.
- The growth in the CCG segment could have been even stronger, if not for component shortages at INTC's packaging facilities. While CEO Pat Gelsinger has acknowledged that INTC largely missed out on the initial wave of AI-based demand in data center as NVDA's Grace Hopper GH200 and H200 processors dominate the market, he has made the case that INTC will be at the forefront of AI-enabled PCs.
- That prediction isn't fully materializing, though, because INTC is unable to fully meet the rising demand for its new Core Ultra processors, which are designed to run AI technologies on laptops, due to supply constraints. The good news is that the company expects growth to accelerate in the back half of 2024.
- On the data center side, the news is more discouraging as revenue edged higher by just 5% yr/yr to $3.0 bln in the DCAI segment -- despite lapping a very favorable yr/yr comparison in which revenue dove by 39%. Demand for traditional data center chips continues to be weak as enterprises are still focused on building out AI infrastructure. INTC believes that Q1 represents a bottom and that a recovery in data center will gain steam later this year, but the main focus remains on whether it can make some inroads on the AI side.
- To that end, INTC announced on April 3 that it launched Gaudi 3, its enterprise level AI chip that will compete with NVDA and AMD. Last night, INTC disclosed that it's expecting the Gaudi 3 chip to generate approximately $500 mln in sales this year, which is a drop in the bucket compared to what NVDA is achieving.
- For some context, NVDA's data center revenue soared by 409% yr/yr last quarter to $18.4 bln, driven by its Hopper GPU platform.
- Trying to make up some ground on NVDA is only part of the struggle for INTC. The company's vision of transforming into a contract manufacturer, or foundry, in the semiconductor industry is looking even blurrier.
- On April 3, the company announced a new financial reporting structure that was implemented for the first time in the Q1 earnings report, with the idea being that the new structure will better align INTC with its foundry operating model. In that press release, INTC also disclosed that the foundry business had an operating loss of nearly ($7.0) bln in FY23 as revenue fell by 31% to $18.9 bln.
- The Q1 earnings report further highlighted the troubles for foundry, showing that revenue decreased by 10% to $4.4 bln, while the operating loss worsened to ($2.5) bln from ($1.3) bln in Q4.
- One silver lining is that INTC added another customer for its production technology called 18A, bringing the total number of customers to six. One of those customers happens to be Microsoft (MSFT), so there is some reason for optimism there.
Overall, though, there seems to be more questions than answers for INTC right now and investors aren't willing to stick around for a few years to find out if its manufacturing ambitions will eventually pay off
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