Market Snapshot
| Dow | 39112.16 | -299.05 | (-0.76%) | | Nasdaq | 17717.66 | +220.84 | (1.26%) | | SP 500 | 5469.30 | +21.43 | (0.39%) | | 10-yr Note | -1/32 | 4.24 |
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| | NYSE | Adv 996 | Dec 1770 | Vol 996 mln | | Nasdaq | Adv 1624 | Dec 2612 | Vol 4.8 bln |
Industry Watch
| Strong: Information Technology, Communication Services, Energy |
| | Weak: Real Estate, Materials, Industrials, Utilities, Financials, Consumer Staples |
Moving the Market
-- Rebound action in NVIDIA (NVDA) after solid declines in recent sessions
-- Gains in other mega cap stocks providing support to broader market
-- Underlying negative bias driven by consolidation activity
| Closing Summary
25-Jun-24 16:30 ET
Dow -299.05 at 39112.16, Nasdaq +220.84 at 17717.66, S&P +21.43 at 5469.30
[BRIEFING.COM] The S&P 500 (+0.4%) and Nasdaq Composite (+1.3%) closed near their highs of the day, propelled by gains in mega cap and semiconductor-related names. The overall vibe in the market was negative, though. Declining issues had a roughly 3-to-2 lead over advancing issues at both the NYSE and at the Nasdaq.
Meanwhile, the equal-weighted S&P 500 logged a 0.7% decline, the Dow Jones Industrial Average registered a 0.8% loss, and the Russell 2000 settled 0.4% lower. The downside moves were relatively modest thanks to support from NVIDIA (NVDA 126.09, +7.98, +6.8%), which rallied after solid losses in recent sessions, and other mega cap names.
Carnival (CCL 17.82, +1.43, +8.7%) was the top performer in the S&P 500 after reporting better than expected earnings and revenue, along with above-consensus guidance.
Other cruise line stocks closed higher in sympathy. Norwegian Cruise Line (NCLH 18.29, +0.89, +5.1%) and Royal Caribbean (RCL 160.73, +6.21, +4.0%) were also among the top performing stocks in the S&P 500.
Meanwhile, Pool (POOL 310.74, -27.17, -8.0%) showed the largest decline among S&P 500 stocks after cutting FY24 guidance.
Eight of the S&P 500 sectors logged declines while the heavily-weighted information technology (+1.8%) and communication services (+1.9%) sectors led the outperformers, supported by gains in mega cap components.
The market was also reacting to the Conference Board's Consumer Confidence Index for June, which slipped to 100.4 from 101.3 in May as expectations for future income weakened. Treasuries didn't moved much in response to the data, settling little changed from yesterday. The 2-yr note yield was unchanged from Monday at 4.73% and the 10-yr note yield fell one basis point to 4.24%.
The Treasury market was also digesting today's $69 billion 2-yr note sale, which met solid demand.
- Nasdaq Composite: +18.0% YTD
- S&P 500:+14.7% YTD
- S&P Midcap 400: +5.0% YTD
- Dow Jones Industrial Average: +3.8% YTD
- Russell 2000: -0.2% YTD
Reviewing today's economic data:
- April FHFA Housing Price Index 0.2%; Prior 0.1%
- April S&P Case-Shiller Home Price Index 7.2% (Briefing.com consensus 6.9%); Prior was revised to 7.5% from 7.4%
- June Consumer Confidence 100.4 (Briefing.com consensus 100.0); Prior was revised to 101.3 from 102.0
- The key takeaway from the report is that expectations for future income weakened. If that perception builds and/or is realized, then it is apt to detract from discretionary spending activity.
Looking ahead, market participants will receive the following data on Wednesday:
- 7:00 ET: Weekly MBA Mortgage Index (prior 0.9%)
- 10:00 ET: May New Home Sales (Briefing.com consensus 650,000; prior 634,000)
- 10:30 ET: Weekly crude oil inventories (prior -2.55 mln)
FDX trades flat in front of earnings report; Wednesday's economic lineup
25-Jun-24 15:35 ET
Dow -280.62 at 39130.59, Nasdaq +228.16 at 17724.98, S&P +21.99 at 5469.86
[BRIEFING.COM] The market is holding steady in front of the close.
FedEx (FDX 256.29, -0.19, -0.1%) shares are roughly flat in front of its earnings report after the close.
Looking ahead, market participants will receive the following data on Wednesday:
- 7:00 ET: Weekly MBA Mortgage Index (prior 0.9%)
- 10:00 ET: May New Home Sales (Briefing.com consensus 650,000; prior 634,000)
- 10:30 ET: Weekly crude oil inventories (prior -2.55 mln)
Treasuries move off intraday high yields
25-Jun-24 15:05 ET
Dow -261.23 at 39149.98, Nasdaq +209.94 at 17706.76, S&P +19.19 at 5467.06
[BRIEFING.COM] The major indices have traded in narrow ranges through the last half hour. The S&P 500 is trading 0.3% higher versus a 0.7% decline in the Invesco S&P 500 Equal Weight ETF (RSP).
Treasuries moved off intraday high yields, but that hasn't translated into support for equities. The 10-yr note yield, which was at 4.26% earlier, sits at 4.23% now.
Mega caps continue to support index-level gains. The Vanguard Mega Cap Growth ETF (MGK) is up 1.4%.
Skyworks higher on semi/NVDA strength; Pentair down in S&P 500 after Pool Corp. guidance cut
25-Jun-24 14:30 ET
Dow -273.33 at 39137.88, Nasdaq +198.22 at 17695.04, S&P +18.63 at 5466.50
[BRIEFING.COM] The S&P 500 (+0.34%) is at HoDs, decently in second place on Tuesday afternoon.
Elsewhere, S&P 500 constituents Skyworks (SWKS 107.96, +3.00, +2.86%), Intuitive Surgical (ISRG 441.72, +12.68, +2.96%), and Hewlett Packard Enterprise (HPE 21.00, +0.53, +2.59%) pepper the top of the standings despite a dearth of corporate news. SWKS appears to be benefiting from semi/NVIDIA (NVDA 124.68, +6.57, +5.56%) strength.
Meanwhile, Pentair (PNR 74.92, -5.08, -6.35%) slides in the average following product distribution partner Pool's (POOL 312.69, -25.22, -7.46%) guidance cut.
Gold pressured by dollar, yield gains
25-Jun-24 14:00 ET
Dow -311.72 at 39099.49, Nasdaq +192.41 at 17689.23, S&P +13.69 at 5461.56
[BRIEFING.COM] The Nasdaq Composite (+1.10%) holds a commanding lead with about two hours to go on Tuesday.
Gold futures settled $13.60 lower (-0.6%) to $2,330.80/oz, pressured by the two pronged gains in both yields and the dollar.
Meanwhile, the U.S. Dollar Index is up about +0.2% to $105.63.
Carnival amid smooth sailing as consumers continue spending on experiences, lifting Q2 results (CCL)
Carnival (CCL +7%) enjoys smooth sailing today after registering a healthy beat-and-raise in Q2 (May) on record numbers, underscoring the compounding effect of mounting demand across its cruise brands. CCL's impressive quarterly report is not just lifting the cruise line industry, as rivals Norwegian Cruise Line Holdings (NCLH) and Royal Caribbean (RCL) spring higher, but also the general travel industry, with Expedia Group (EXPE), Airbnb (ABNB), and Booking Holdings (BKNG) all experiencing positive price action today.
The uplifting effect across the broader travel market is not without good reason. CCL's Q2 report showcased a sustained demand to spend money on experiences over things. CCL does not expect the current demand levels to dwindle anytime soon either, reiterating that the demand it is seeing is not pent-up demand. Instead, it reflects the strength of the consumer, as CCL benefits from growth in repeat guests and new guests, both of which climbed by 10% yr/yr in Q2.
- Supported by this sustained growth, CCL delivered revs, earnings, and booking levels above its guidance in Q3. Sales rose by 17.7% yr/yr to $5.78 bln, supporting a return to positive EPS at $0.11 following two straight quarters of net losses and $(0.31) in the year-ago period. Meanwhile, booking volumes continued to expand, leading to record levels for 2025 sailings. CCL added that while it is still early, the cumulative advanced booked position for 2025 is higher than that for 2024 across price and occupancy.
- Strength was broad-based, with significant yield improvement across CCL's European and North American brands, up 20% and 7%, respectively.
- Also, CCL's adjusted EBITDA surpassed the number delivered during 2Q19, marking its highest in over 15 years.
- CCL mentioned that limited inventory remains for sale for the rest of 2024, putting it in a prime position to raise ticket prices. Management also stated that over the near term, pricing on bookings taken during Q2 has continued to run higher for Q3 (Aug) and Q4 (Nov). As a result, CCL was confident in raising its FY24 (Nov) EPS outlook to $1.18 from $0.98 and issuing a 75 bp bump in FY24 net yields to 10.25%.
Since taking the reins nearly two years ago, CEO Martin Schneider has steered CCL through a choppy landscape. Mr. Schneider implemented actions to improve the company's commercial operations and strengthen its global network of ships while aggressively managing down debt and interest expenses. These actions have helped put CCL on track toward investment grade metrics, no small feat given how disruptive the pandemic was to the company's financials. It is also impressive, given how the economic landscape is far from picturesque. While consumers are not losing their ability to spend, they are more conscientious about where they allocate their budgets, producing some headwinds in consumer demand. However, by still opting to travel, a firmer base of consumers across the cruise line industry is forming, helping keep the wind in CCL's sails over the long run.
Tesla's Cybertruck dented by another recall, but rebound in China provides stock with a spark (TSLA)
Tesla (TSLA) is no stranger to vehicle recalls and the company is now facing another one, but this time the recall impacts its recently launched Cybertruck, adding to a string of disappointments for the futuristic-looking EV. According to Reuters, TSLA is recalling 11,688 Cybertrucks due to faulty windshield wipers that could reduce visibility, and it's also recalling 11,383 Cybertrucks because a trim in the trunk bed may have been improperly secured, increasing the risk that it may detach, creating a road hazard.
- To say it's been a bumpy ride for Cybertruck since its highly publicized (and oft-delayed) launch on December 1, 2023, would be a major understatement. For starters, during the launch event, TSLA announced that only its most expensive version -- which costs about $80,000 -- would be available in 2024.
- Despite that high price tag, there has been no shortage of issues with the vehicle. On April 19, the U.S. National Highway Traffic Safety Administration (NHTSA) ordered TSLA to recall every Cybertruck it had made, about 3,900 units, in order to fix an accelerator pedal that can get stuck.
- More broadly, the vehicle's expensive and rigid stainless-steel body comes with its own set of problems. For instance, some Cybertruck owners have complained about possible rusting on the panels, while others have expressed safety concerns due to the lack of shock absorption from the metal.
- Furthermore, unlike the massive recall related to TSLA's Autopilot system, which impacted more than 2 mln vehicles last December, the Cybertruck recalls will require owners to bring their vehicles into the shop for costly physical repairs. In contrast, the Autopilot system recall was more like a software update that could be done at home.
While the developments surrounding Cybertruck continue to disappoint, the news isn't all negative for TSLA today.
- Rising competition and macroeconomic headwinds have weighed on TSLA's business in China, but demand has received a jolt recently. In April, China shipments decreased by 18%, prompting TSLA to reduce its headcount by 10% at its Shanghai factory. However, in May, China deliveries jumped by nearly 17% versus April, helping to push total Q2 delivery expectations higher.
- On July 2, TSLA is expected to release Q2 deliveries with estimates calling for a qtr/qtr increase of around 15%.
The main takeaway is that the recalls add another dent to the Cybertruck story, but the financial impact should be limited given the relatively small number of Cybertrucks currently on the road. Therefore, the more upbeat sales trends in China are likely having more of an impact on the stock today.
TD Synnex lower on Q2 miss; however, billings metric shows IT spending improving (SNX)
TD Synnex (SNX -8%) is under pressure today after reporting a Q2 (May) EPS miss, following three quarters of double-digit EPS beats. In fairness, EPS came in around the mid-point of prior guidance of $2.50-3.00, but analysts were looking for more. Revenue fell 0.8% yr/yr to $13.95 bln, which also was below analyst expectations. Q2 marked SNX's sixth consecutive quarter of yr/yr revenue declines. Guidance for Q3 (Aug) was a bit better with in-line EPS and revs.
- SNX is a name we like to keep an eye on to gauge enterprise spending levels for network equipment and PCs. Also, SNX reports early in the earnings reporting cycle, so it gives us a sense of what to expect when earnings season rolls in. TD Synnex does not manufacture anything. It's more of a distributor of third party IT products, from software to servers and storage systems. When a business wants to spend on IT, SNX acts as the point person, putting everything together.
- Despite the earnings miss today, SNX says its markets have continued to stabilize. Results in Q2 were aided by an improving IT spending environment with gross billings growth in Endpoint Solutions, Advanced Solutions and Strategic Technologies.
- Looking ahead, SNX believes it's well-positioned to benefit from accelerated growth in Q3-Q4 as the IT spending market is rebounding. That was evident with non-GAAP gross billings returning to positive growth following a prolonged period with challenging market conditions. In Q2, this metric grew 3% yr/yr to $19.3 bln, which was on the higher end of its $18.4-19.6 bln prior guidance. And its Q3 guidance for this metric was healthy at $18.9-20.1 bln.
- Importantly, SNX believes AI is a meaningful opportunity for the company over the foreseeable future. SNX believes AI will be the next great transformative era for the technology sector. SNX says a portion of that spend will come through business partner ecosystem and SNX should see benefits across components, devices, data center, cloud storage, networking, as well as the related software applications and services.
Overall, investors are a bit disappointed in SNX's Q2 results. After three double-digit EPS beats, a miss on EPS was a letdown. Also, investors want to see SNX return to yr/yr revenue growth but we got another decrease this quarter. The silver lining is that SNX's gross billings did finally turn positive yr/yr. Also, its billings numbers do seem to support SNX's view that IT spending is recovering. We think that bodes well for tech names as we begin earnings season in a few weeks. Looking ahead, we should note that new CEO Patrick Zammit is taking the helm on September 1. He succeeds Rich Hume, who will retire. Zammit is currently COO and is being promoted. We look forward to his viewpoints on the next earnings call.
Pool's slashed FY24 guidance creates ripple effect across the industry (POOL)
Pool (POOL -6%) sinks to 52-week lows today after slashing its FY24 guidance, creating a ripple effect across the industry as peers Latham Group (SWIM) and Leslie's (LESL) turn lower. The pool supplies and equipment maker operates in a highly discretionary and seasonal field, forming a drought since demand spiked during the pandemic. Most markets where POOL operates, including North America and Europe, experience annual weather unfit for swimming, eliminating many households from ever discussing the desire to add or purchase a home with a pool. At the same time, pools command significant upkeep and maintenance throughout the year, making them much more of a headache during an inflationary environment.
Meanwhile, the housing market continues to be bogged down by elevated interest rates. POOL mentioned in late April that interest rates have weighed heavily on new pool starts, reflected by a 15-20% drop in permits yr/yr in Q1, more than management expected. These headwinds have generated choppy waters for POOL. After enjoying a powerful rally in November underpinned by the enthusiasm surrounding interest rate cuts in 2024, shares of POOL have declined as rapidly as they rose, giving up around 30% since late March highs.
- POOL's reduced guidance is particularly frustrating today, given its remarks from late April when management expressed confidence that easier yr/yr comps and early signs of a bottom materializing across several of its markets would lead to FY24 construction levels in line with its initial outlook of flat to down 10%. POOL further added that consumer interest had already rebounded in key markets.
- However, new pool construction and remodel activity failed to trend as management had anticipated, driving its slashed guidance. The company now expects FY24 EPS of $11.04-11.44, down from its previously raised guidance of $13.19-14.19 and below its initial $13.00-14.00 outlook from February. Furthermore, POOL believes new pool units could plunge by 15-20% yr/yr in FY24, far worse than the possibly flat outlook previously issued.
- On a lighter note, POOL commented that non-discretionary and recurring pool maintenance demand remains steady. While this is not much of a silver lining, it is uplifting that consumers continue to choose POOL for maintenance as it helps drive further organic market share capture.
- Management also remarked that despite the numerous economic headwinds, it is confident that the appetite for swimming pools and outdoor living projects remains strong, leading to an eventual uptick in overall industry growth.
POOL may be right about a more substantial base of consumer demand for swimming pools. The pandemic sparked a migration to the suburbs, prompting a renewed desire for swimming pools. Like other outdoor lifestyles, such as camping and skiing, COVID likely produced a secular tailwind, permanently shifting demand. However, macroeconomic conditions since the pandemic have deteriorated, dampening the short-term lust for these highly discretionary outdoor activities. As such, while POOL's recent sell-off offers a compelling entry point for the long run, short-run challenges paint a cloudy picture, which could throw several obstacles in POOL's path in turning around its business.
Alnylam Pharma's positive trial results for rare heart disorder drug sends shares soaring (ALNY)
Alnylam Pharmaceuticals (ALNY) is soaring to its highest levels since mid-February after reporting encouraging results from its Phase 3 study of Vutrisiran, an RNAi treatment for ATTR amyloidosis with cardiomyopathy (ATTR-CM). With shares down by about 18% on a year-to-date basis prior to today's surge, ALNY was in need of a spark and this development is lighting a fire under the stock as it has the potential to be a game-changer for the company.
- Marketed under the Amvuttra brand name, Vutrisiran is already an FDA approved and commercially available product for a related disease called hereditary transthyretin-mediated amyloidosis (hATTR). In Q4, Amvuttra generated global revenue of $175 mln, making it the company's top-selling drug, but its total addressable market may be set to expand significantly if it receives regulatory approval for ATTR-CM.
- While ATTR-CM, a debilitating and fatal disease caused by misfolded transthyretin (TTR) proteins, is still considered to be a rare condition, an increasing number of people are being diagnosed with the disorder due to advancements in medical technology and improved testing and screening. According to ALNY, approximately 250,000-350,000 people are affected by the two different kinds of ATTR.
The results from this Phase 3 trial suggest that Vutrisiran has the potential to become the standard of care for ATTR-CM.
- In the study, a cohort of the 655 adults took Vutrisiran, while another cohort took the placebo subcutaneously once every three months for up to 36 months. Additionally, a portion of the study population was also already taking a Pfizer (PFE) approved drug for this condition, called Vyndamax, while another subset was not.
- ALNY's goal was to see if the drug reduced death and hospitalizations in both the Pfizer and non-Pfizer populations and the results were quite positive. Specifically, Vutrisiran achieved a 28% and 33% reduction in death and heart-related hospitalizations in those groups, respectively, meeting the study's primary endpoint.
- Furthermore, the study also showed statistically significant improvements across all secondary endpoints in both populations, while the drug demonstrated a safety and tolerability profile that was consistent with its established profile.
- Looking ahead, the next step for ALNY will be to file a New Drug Applications (NDA) with the FDA, which should happen later this year. If the FDA votes to approve Vutrisiran, then ALNY could potentially begin manufacturing the drug in mid-2025.
From a financial standpoint, an approval would represent a major turning point for the company. Currently, analysts are expecting ALNY to generate a little less than $2.0 bln in revenue this year. For some context, PFE's Vyndamax is expected to achieve revenue of at least $4.0 bln this year. ALNY is far from being profitable right now, but that could change quickly if it receives a favorable FDA decision in the coming months. |
