| | | Market Snapshot
| Dow | 40896.53 | +236.77 | (0.58%) | | Nasdaq | 17876.76 | +245.05 | (1.39%) | | SP 500 | 5608.25 | +54.00 | (0.97%) | | 10-yr Note | +23/32 | 3.87 |
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| | NYSE | Adv 2102 | Dec 670 | Vol 784 mln | | Nasdaq | Adv 3068 | Dec 1192 | Vol 5.6 bln |
Industry Watch
| Strong: Communication Services, Consumer Discretionary, Real Estate, Energy, Financials, Materials |
| | Weak: -- |
Moving the Market
-- Not a lot of conviction after solid gains last week and in front of market-moving events this week, including FOMC Minutes on Wednesday and Fed Chair Powell speech on Friday
-- Slightly positive bias supported by upside momentum
-- Turnaround action in semiconductor space limiting index performance
| Closing Summary
19-Aug-24 16:30 ET
Dow +236.77 at 40896.53, Nasdaq +245.05 at 17876.76, S&P +54.00 at 5608.25
[BRIEFING.COM] The stock market entered the new week with a continuation of last week's rally. A last minute push higher had the S&P 500 (+1.0%), Nasdaq Composite (+1.4%), Dow Jones Industrial Average (+0.6%), and Russell 2000 (+1.2%) hit new session highs ahead of the close. Today's action left the S&P 500 1.1% below its all-time high.
Volume was below-average at the NYSE today as investors wait on potentially market-moving events this week. Some of the key events include the release of the FOMC Minutes for the July 30-31 FOMC meeting on Wednesday and Fed Chair Powell's speech on the Economic Outlook at the Jackson Hole Economic Symposium on Friday.
Participants are looking for Mr. Powell to corroborate the market's optimistic views on economic growth, the labor market, and rate cuts beginning in September, which have driven recent upside moves in equities.
Influential economic releases include the weekly initial jobless claims and existing home sales report for July on Thursday and the new home sales report for July on Friday.
Also, earnings reporting in the retail space picks up steam this week. Lowe's (LOW 243.21, +2.06, +0.9%), Target (TGT 144.63, +0.59, +0.4%), TJX (TJX 112.49, +1.04, +0.9%), Urban Outfitters (URBN 41.17, +0.43, +1.1%), and Dollar Tree (DLTR 100.51, +1.73, +1.8%) are among the standouts, settling higher in front of their quarterly reports.
Broad buying activity left all 11 S&P 500 sectors higher led by communication services (+1.4%) and information technology (+1.4%).
The 10-yr note yield settled two basis points lower at 3.87% and the 2-yr note yield rose one basis point to 4.07%.
- Nasdaq Composite:+19.1% YTD
- S&P 500: +17.6% YTD
- S&P Midcap 400: +9.3% YTD
- Dow Jones Industrial Average: +8.5% YTD
- Russell 2000: +6.9% YTD
Today's economic data was limited to the Leading Indicators Index, which dropped 0.6% in July (Briefing.com consensus -0.3%) following a 0.2% decline in June. There is no economic data of note on Tuesday.
X drops on Trump comments; Many stocks participate in upside moves
19-Aug-24 15:05 ET
Dow +185.95 at 40845.71, Nasdaq +159.88 at 17791.59, S&P +37.12 at 5591.37
[BRIEFING.COM] The major indices trade near their best levels of the day.
U.S. Steel (X 40.35, -1.44, -3.5%) is dropping toward its lows after former President Trump repeated that he will block the Nippon Steel (NPSCY) acquisition of US Steel.
Still, many stocks trade higher. The equal-weighted S&P 500 shows a 0.8% gain.
Semiconductor stocks and some mega caps trade off early lows
19-Aug-24 14:35 ET
Dow +147.16 at 40806.92, Nasdaq +155.16 at 17786.87, S&P +35.21 at 5589.46
[BRIEFING.COM] The market trades near session highs. The Nasdaq Composite sports a 0.8% gain.
Microsoft (MSFT 419.35, +0.88, +0.2%) and Amazon.com (AMZN 177.80, +0.74, +0.4%) each traded as low as 0.5% earlier before bouncing. The Vanguard Mega Cap Growth ETF (MGK) was trading down 0.3% earlier, but sports a 0.7% gain.
Semiconductor stocks have also staged a recovery. The PHLX Semiconductor Index (SOX) traded down as much as 1.4%, but shows a 0.9% gain now.
MCD leads DJIA, AAPL, BA lag
19-Aug-24 14:05 ET
Dow +166.29 at 40826.05, Nasdaq +135.72 at 17767.43, S&P +37.08 at 5591.33
[BRIEFING.COM] The Dow Jones Industrial Average trades more than 150 points higher, up 0.4%.
McDonald's (MCD 287.75, +9.26, +3.4%) is the best performing stock in the DJIA followed by Intel (INTC 21.34, +0.47, +2.3%) and Walt Disney (DIS 90.76, +1.46, +1.6%). Seven of the 30 Dow components are trading lower, including Boeing (BA 178.15, -1.84, -1.0%) and Apple (AAPL 224.41, -1.65, -0.7%).
Separately, WTI crude oil futures turned lower, down 2.5% to $73.64/bbl.
Semiconductor stocks boost index gains
19-Aug-24 13:35 ET
Dow +166.71 at 40826.47, Nasdaq +108.92 at 17740.63, S&P +29.13 at 5583.38
[BRIEFING.COM] The three major indices moved mostly sideways in recent action.
Turnaround action in the semiconductor space has contributed to index level gains. The PHLX Semiconductor Index (SOX) trades 0.3% higher now, but traded down as much as 1.4% earlier.
Broadcom (AVGO 163.98, -1.74, -1.1%) is an influential laggard from the space while shares of NVIDIA (NVDA 128.29, +3.70, +3.0%) build up gains.
fuboTV surges after competing platform Venu Sports gets blocked from launching this fall (FUBO)
Sports streaming platform fuboTV (FUBO +19%) soars after winning a preliminary injunction against a joint venture between Walt Disney (DIS), Fox Corp (FOXA), and Warner Bros Discovery (WBD). These cable and streaming titans planned to launch Venu Sports, a live streaming platform, this fall. The court ruling, which was officially announced after the close on Friday, comes as a major win for FUBO.
- The Venu Sports announcement, which at the time in early February had no name, was a devastating hit to FUBO, which revolves around live sports. Venu Sports was also scheduled to launch in the fall, coinciding with the critically important NFL and college football seasons, as well as the MLB playoffs and many other major sporting events.
- The issue FUBO faced with Venu Sports was that the streaming giants behind the platform would include some sports-focused channels that were also on FUBO but now charge the company more to carry them. Furthermore, at a planned price of $42.99/month, Venu Sports significantly undercut FUBO's prices, which start at $79.99/month.
- With its market position threatened, FUBO announced in February that it was suing these corporations for antitrust practices. At the time, the lawsuit did not trigger any reversals in FUBO shares, likely because investors were not confident in a favorable outcome. However, now that FUBO has won a preliminary injunction against the Venu Sports joint venture, which is now blocked from launching, its stock is exploding.
Blocking the joint venture between DIS, FOX, and WBD is a significant victory for FUBO. However, nothing is set in stone. The three cable giants plan to appeal, which could then bring Venu Sports back on the scene, threatening FUBO's live sports streaming market share. Nevertheless, for the time being, FUBO's win comes at a critical time as the fall sports schedule heats up.
Advanced Micro up nicely on its $4.9 bln acquisition of ZT Systems to bolster its AI presence (AMD)
Advanced Micro (AMD +2%) continues to fortify its AI business with its agreement to acquire ZT Systems for $4.9 bln in cash and stock. The acquisition follows AMD's July 10 purchase of Silo AI for a much smaller price of $665 mln. However, while the price tags differ, the market's reaction is similar as it sends shares of the chip designer, competing against NVIDIA (NVDA) and Intel (INTC), moderately higher today.
- What is ZT Systems? The company engages in full rack deployment -- a block filled with servers, storage, switches, etc. -- for hyperscale data centers. ZT also commands a data center infrastructure manufacturing business, for which AMD announced it would seek out a strategic partner to offload this part of the company.
- What makes it a suitable fit for AMD? With massive exposure to cloud and enterprise organizations, such as Microsoft (MSFT), ZT Systems expands AMD's market and bolsters its AI business as it can couple its chips into the server racks ZT deploys. AMD can also take advantage of its ecosystem of original equipment manufacturers and original design manufacturers, delivering AI infrastructure at scale.
- While AMD did not disclose ZT Systems' financials, it anticipates the acquisition to be accretive on a non-GAAP basis by the end of next year, shortly after the expected closing date of 1H25. Incorporating today's nearly $5.0 bln purchase, AMD will have spent over $6.0 bln to improve its AI presence to better compete with NVDA and INTC in this hotly contested space.
- The amount AMD has poured into AI appears to be a sound investment thus far. Last quarter, AMD lifted its Data Center GPU revenue to exceed $4.5 bln this year, up from the $4.0 bln it targeted three months earlier. While it is unclear how much of this stems directly from the demand for AI, it was still an encouraging development, especially given that one of the recurring criticisms of the ongoing AI frenzy is that too much money is being allocated to the technology relative to the minor returns it has produced so far.
AMD's $4.9 bln acquisition of ZT Systems may just be the beginning of a long line of future purchases to strengthen its position in the AI industry and maintain a competitive footing with NVDA, which is leaps ahead of AMD from a revenue standpoint. For instance, while AMD projects $4.5 bln in Data Center GPU revs this year, NVDA recorded $47.5 bln in Data Center revs during FY24 (Jan) and is on pace to double this in FY25 following a healthy showing in Q1 (Apr).
Even though AMD has a long way to go to catch up to NVDA, if it ever does, AMD is outpacing INTC, which saw its Data Center revs contract yr/yr last quarter. Adding ZT Systems can put further distance between AMD and INTC in the Data Center industry while helping it gain some ground on NVDA. Lastly, AMD's ZT Systems purchase highlights the unwavering demand for AI, boding well for future quarterly performances.
Marriott and Sonder partner up in licensing deal that looks like a win-win for both companies (MAR)
In a quiet morning overall in terms of market moving news, a major deal has been struck in the hotel industry as Marriott (MAR) and Sonder (SOND) have entered into a licensing agreement whereby SOND's portfolio of properties will be added to the MAR system. SOND, which had a market cap of just $29 mln as of last Friday and has struggled mightily since going public via a SPAC in January 2022, also announced that it has secured $146 mln in new financing. This combination of news has shares of SOND rocketing higher as its revenue growth prospects and balance sheet health have both brightened considerably.
- SOND is unique in the hospitality industry in that it owns and operates apartment-style properties that are primarily located in urban settings. The company's 10,500 rooms -- 9,000 of which will be added to MAR's portfolio this year -- will help expand MAR's reach into the longer-term accommodation market. Furthermore, the addition of SOND's portfolio enabled MAR to bump its FY24 net rooms growth guidance to 6.0-6.5% from its prior outlook of 5.5-6.0%.
- MAR will also receive a royalty fee based on a percentage of SOND gross room revenue. In a win-win scenario for both companies, SOND's properties will be made available throughout MAR's extensive distribution channels, and they will also be included in MAR's loyalty program.
- For SOND, the financial implications of this agreement are potentially massive. The company, which has never been profitable and has dealt with accounting issues causing it to delay the filing of its financials, expects the agreement with MAR to drive a substantial uplift in revenue and RevPAR over time. For some context, SOND generated $439 mln in total revenue for the nine months ended September 30, 2023, and had an operating loss of $(183.7) mln for this period. Its Rev PAR for 3Q23 -- its most recent available earnings report -- was $153.
- The company has also significantly shored up its balance sheet by improving its liquidity by $146 mln through the issuance of new convertible preferred equity, and from the monetization of existing security deposits with current noteholders. With this funding in hand, SOND will be able to finance the initial integration costs of the MAR agreement. Over time, though, SOND expects to realize substantial cost savings as improved distribution channel mix and preferred distribution channel rates drive customer acquisition costs lower.
The main takeaway is that this licensing agreement looks like a win-win for both companies, but it has the potential to be a real game-changer for the struggling SOND as it benefits from MAR's extensive marketing and distribution capabilities.
Estee Lauder trades flat despite weak guidance; seems troubling outlook was priced in (EL)
Estée Lauder (EL) is trading roughly flat after wrapping up FY24 on a mixed note. The cosmetics giant beat handily on EPS for Q4 (Jun) with more modest upside on the top line. However, the main problem was the guidance as EL guided EPS and revs well below expectations for Q1 (Sep) and FY25, reflecting ongoing softness in overall prestige beauty in mainland China and a decline in Asia travel retail. In addition to earnings, EL also announced that CEO Fabrizio Freda will retire at the end of FY25.
- The company has been struggling over the past couple of years. However, organic net sales growth, which excludes F/X impacts and royalty revenue from the acquisition of the TOM FORD brand, returned to growth in the second half of FY24 after a challenging first half. In Q4, organic revenue grew a healthy 8% yr/yr to $3.87 bln, despite a slowdown in key geographic areas, primarily mainland China, Asia travel retail and North America. EMEA was very strong in Q4.
- What stood out to us was that EL saw organic sales growth in all product areas, led by Skin Care which jumped 15% yr/yr, driven by its global travel retail business. This represented an acceleration from the 6% growth in Q3 (Mar). Skin Care growth was clearly the main growth driver as its other segments (Makeup, Fragrance, Hair Care) were all up only +1-2%. The good thing here is that Skin Care is by far EL's largest segment, so it's always good to see the strongest growth there.
- In terms of its outlook, the company expects global prestige beauty to grow 2-3% in FY25, reflecting strength in many developed and emerging markets, albeit with more tempered growth in certain markets, such as North America, partially offset by continued declines in mainland China and Asia travel retail due to low consumer sentiment and conversion rates. EL then expects global prestige beauty to re-accelerate to historical mid-single-digit growth in FY26.
- With a decent industry outlook in FY25 and even better in FY26, why was EL's guidance so weak? That is mainly because it has significant exposure to mainland China and Asia travel retail. Asia Pacific represented 31% of total sales in FY24. EL says consumer confidence remains subdued in China.
- North America is not great either as consumers continue to face inflationary pressures. EL also noted an ongoing intensely competitive environment as well as an overall slowdown in growth in prestige beauty. This is especially in brick and mortar channels in North America, which has particularly impacted its skincare and makeup categories.
Despite some very weak guidance, especially for Q1, the stock is holding up better than we initially thought it would. The trading action tells us that a lot of negativity appears to be priced in already. The stock had been holding up fairly well in the early months of 2024, but has steadily declined from around $150 in early April to around $95 currently. It seems investors were expecting a bleak outlook. China is a real problem area and US consumers appear to be trading down to lower priced cosmetics. The gudiance gives us that feeling that a turnaround is going to take some time. Finally, we think a new CEO would help to offer a fresh perspective, but even that is not going to happen until the end of FY25.
Rivian Automotive loses some charge on production headwinds related to Amazon delivery vans (RIVN)
Rivian Automotive (RIVN -3%) hits a pothole today after Bloomberg reported that the electric vehicle maker paused its Amazon (AMZN) delivery truck production due to part shortages. Today's announcement does not affect the production of its truck and SUV, the R1T and R1S. Also, AMZN reportedly mentioned that the issues should not have much impact. Nevertheless, it comes as another setback in a long line of hurdles RIVN has had to clear throughout its time as a publicly traded company.
- RIVN was coming off a decent quarterly report last week. While earnings estimates were missed, RIVN did reiterate its FY24 guidance, including the production of 57,000 vehicles and low-single-digit delivery growth yr/yr. A constant problem for RIVN, however, has been expenses. The company continues to lose money on every vehicle produced.
- Temporary pauses in production are nothing new at RIVN, which shut down production at its Normal, IL facility in April for a few weeks and plans to halt production again for over a month during 2H25 to upgrade equipment ahead of its 1H26 R2 launch. Still, hiccups in production, including delivery vans to AMZN, can exacerbate the company's margin woes.
- On the plus side, investors still have RIVN's joint venture with Volkswagen (VWAGY) to be excited about. As previously announced, Volkswagen invested $1.0 bln into RIVN, with up to $4.0 bln in planned additional investments. However, to earn the additional funds, RIVN must meet definitive agreements, achieve certain milestones, and receive regulatory approvals. These factors add some uncertainty over whether RIVN will ultimately receive the total $5.0 bln. Production snags only hike this uncertainty.
Shares of RIVN are up nicely from 2024 lows. However, they still trade around 35% lower this year, reflecting an overall bearish sentiment. The company's reiterated FY24 production and delivery guidance is encouraging, as is its confidence in reaching around 25% gross margins and high-teens adjusted EBITDA margins over the long run. We like that the company is focused on cutting expenses and expanding its addressable market with the upcoming launch of its lower-cost R2 model. However, while production interruptions are one thing, the currently unfavorable macroeconomic environment is another. When combining the two, RIVN has a tall hill to climb to realize the total potential investment from Volkswagen and ultimately reach its long-term financial goals.
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