Market Snapshot
| Dow | 43077.70 | +337.28 | (0.79%) | | Nasdaq | 18367.08 | +51.49 | (0.28%) | | SP 500 | 5842.47 | +27.21 | (0.47%) | | 10-yr Note | +2/32 |
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| | NYSE | Adv 2107 | Dec 641 | Vol 818 mln | | Nasdaq | Adv 3105 | Dec 1138 | Vol 5.3 bln |
Industry Watch
| Strong: Utilities, Financials, Materials, Industrials, Energy, Real Estate |
| | Weak: Communication Services, Consumer Staples |
Moving the Market
-- Not a lot of conviction after yesterday's chipmaker-led declines
-- Leadership from financial sector after earnings from the space received positive responses
-- Weakness in some mega cap stocks
-- Recovery in some chipmakers
-- Buy-the-dip interest in other areas of the market
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Closing Summary
16-Oct-24 16:30 ET
Dow +337.28 at 43077.70, Nasdaq +51.49 at 18367.08, S&P +27.21 at 5842.47
[BRIEFING.COM] The stock market had a solid showing today. The Russell 2000 continued its recent outperformance, jumping 1.6%, bringing its weekly gain to 2.5%. The S&P 500 (+0.5%), Nasdaq Composite (+0.3%), and Dow Jones Industrial Average (+0.8%) settled with solid gains near their highs of the day.
The influential financial sector (+1.2%) played a leadership role today after earnings news from the space received positive responses. Morgan Stanley (MS 119.51, +7.29, +6.5%), First Horizon (FHN 17.39, +0.68, +4.1%), and Synchrony Financial (SYF 56.52, +3.23, +6.1%) are among the standouts in that respect.
Rebound action in some semiconductor-related names after yesterday's sharp selling also contributed to the upside bias today, along with buy-the-dip interest in other areas of the market. NVIDIA (NVDA 135.72, +4.12, +3.1%) and Broadcom (AVGO 176.82, +0.84, +0.5%) were top performers from the PHLX Semiconductor Index (SOX), which settled 0.2% higher.
Many stocks participated in today's advance. Advancers led decliners by a 4-to-1 margin at the NYSE and by a nearly 3-to-1 margin at the Nasdaq. The equal-weighted S&P 500 settled 0.7% higher.
The 10-yr yield settled two basis points lower to 4.02% and the 2-yr yield dropped one basis point to 3.94%.
- Nasdaq Composite: +22.4% YTD
- S&P 500: +22.5% YTD
- S&P Midcap 400: +14.8% YTD
- Dow Jones Industrial Average: +14.3% YTD
- Russell 2000: +12.8% YTD
Reviewing today's economic data:
- Weekly MBA Mortgage Applications Index -17.0%; Prior -5.1%
- September Import Prices -0.4%; Prior was revised to -0.2% from 0.8%
- September Import Prices ex-oil 0.1%; Prior was revised to 0.1% from -0.1%
- September Export Prices -0.7%; Prior was revised to -0.9% from -0.7%
- September Export Prices ex-ag. -0.9%; Prior was revised to -0.7% from -0.6%
There's a lot of economic releases to get through tomorrow, including:
- 08:30 ET: Initial Jobless Claims (Briefing.com consensus 270K; prior 258K) and Continuing Jobless Claims (Prior 1861K); September Retail Sales (Briefing.com consensus 0.2%; prior 0.1%) and Retail Sales Ex-Auto (Briefing.com consensus 0.1%; prior 0.1%); October Philadelphia Fed Index (Briefing.com consensus 4.0; prior 1.7)
- 09:15 ET: September Industrial Production (Briefing.com consensus -0.1%; prior 0.8%) and Capacity Utilization (Briefing.com consensus 77.9%; prior 78.0%)
- 10:00 ET: August Business Inventories (Briefing.com consensus 0.3%; prior 0.4%); October NAHB Housing Market Index (Briefing.com consensus 43; prior 41)
- 10:30 ET: EIA Natural Gas Inventories (Prior +82 bcf)
- 11:00 ET: EIA Crude Oil Inventories (Prior +5.81M)
- 16:00 ET: August Net Long-Term TIC Flows (Prior $135.4B)
Treasuries settled with gains
16-Oct-24 15:35 ET
Dow +342.34 at 43082.76, Nasdaq +50.72 at 18366.31, S&P +27.90 at 5843.16
[BRIEFING.COM] There hasn't been much up or down action at the index level in recent trading.
The 10-yr yield settled two basis points lower to 4.02% and the 2-yr yield dropped one basis point to 3.94%.
There's a lot of economic releases to get through tomorrow, including:
- 08:30 ET: Initial Jobless Claims (Briefing.com consensus 270K; prior 258K) and Continuing Jobless Claims (Prior 1861K); September Retail Sales (Briefing.com consensus 0.2%; prior 0.1%) and Retail Sales Ex-Auto (Briefing.com consensus 0.1%; prior 0.1%); October Philadelphia Fed Index (Briefing.com consensus 4.0; prior 1.7)
- 09:15 ET: September Industrial Production (Briefing.com consensus -0.1%; prior 0.8%) and Capacity Utilization (Briefing.com consensus 77.9%; prior 78.0%)
- 10:00 ET: August Business Inventories (Briefing.com consensus 0.3%; prior 0.4%); October NAHB Housing Market Index (Briefing.com consensus 43; prior 41)
- 10:30 ET: EIA Natural Gas Inventories (Prior +82 bcf)
- 11:00 ET: EIA Crude Oil Inventories (Prior +5.81M)
- 16:00 ET: August Net Long-Term TIC Flows (Prior $135.4B)
Earnings ahead this afternoon and tomorrow morning
16-Oct-24 15:05 ET
Dow +321.44 at 43061.86, Nasdaq +48.44 at 18364.03, S&P +24.59 at 5839.85
[BRIEFING.COM] The major indices sit near session highs. The Dow Jones Industrial Average trades up nearly 340 points and the S&P 500 is almost 30 points higher.
PPG Industries (PPG), Discover Financial Services (DFC), Steel Dynamics (STLD), Kinder Morgan (KMI), CSX (CSX), and Alcoa (AA) are among the names reporting earnings this afternoon.
Elevance Health (ELV), Travelers (TRV), Truist (TFC), KeyCorp (KEY), and Taiwan Semiconductor Manufacturing (TSM) are some of the names reporting earnings tomorrow morning.
Delta gains in sympathy to United's earnings move; S&P 500 in second place
16-Oct-24 14:25 ET
Dow +299.91 at 43040.33, Nasdaq +39.79 at 18355.38, S&P +22.58 at 5837.84
[BRIEFING.COM] The S&P 500 (+0.39%) is in second place on Wednesday afternoon, now near HoDs.
Elsewhere, S&P 500 constituents Delta Air Lines (DAL 56.23, +3.50, +6.64%), Warner Bros. Discovery (WBD 8.01, +0.41, +5.39%), and Prologis (PLD 127.16, +5.77, +4.75%) dot the top of the standings. DAL moves higher in sympathy to United Airlines' (UAL 73.12, +9.07, +14.16%) post earnings move, while PLD moves higher after after strong Q3 results.
Meanwhile, Agilent (A 138.96, -5.62, -3.89%) is at the bottom of the average; chatter on the Street suggests Swiss firm Tecan (TCHBF 310.00) lowered its outlook for this year owing to weakness in China; medtech and diagnostic peers RVTY -3.59%, MTD -2.70%, WAT -2.57%, IDXX -2.18%, and DHR -1.99% are also lower today.
Gold higher amid yield weakness, geopolitical tensions
16-Oct-24 14:00 ET
Dow +235.25 at 42975.67, Nasdaq +28.18 at 18343.77, S&P +17.39 at 5832.65
[BRIEFING.COM] With about two hours to go on Wednesday the tech-heavy Nasdaq Composite (+0.15%) is at the bottom of the major averages.
Gold futures settled $12.40 higher (+0.5%) to $2,691.30/oz, as bond yield weakness, rate cut expectations, and geopolitical tensions drive gains.
Meanwhile, the U.S. Dollar Index is up about +0.3% to $103.53.
Abbott Labs maintains its positive trend following solid Q3 results today (ABT)
Abbott Labs (ABT +1%) trades modestly higher today after squeaking out another bottom-line beat in Q3 on revenue growth consistent with analyst estimates. There were some mixed feelings heading into ABT's Q3 report following a notable weakness from peer Johnson & Johnson's (JNJ) Q3 performance yesterday. JNJ endured softness in Asia-Pacific, primarily China, where ABT derives around a fifth of annual revs. However, ABT commented that it felt good about China as it remains an attractive market. At the same time, ABT's Q3 results were sound, providing investors the confidence to keep shares trending positively.
- Sales increased 4.9% yr/yr in Q3 and 7.6% on an organic basis (removing FX impacts) to $10.63 bln. When backing out COVID testing sales, ABT's top line was even more robust, expanding by 8.2%. Segment performance was split on a reported basis. Nutrition and Diagnostics delivered sales declines of 0.3% and 1.5%, respectively. Conversely, Established Pharmaceuticals and Medical Devices boasted a 2.7% and 11.7% improvement, respectively. However, when removing FX impacts and COVID-19 testing sales, growth was positive across the board.
- In Nutrition, the U.S. exhibited relative strength, pushing sales 11.9% higher yr/yr on an adjusted organic basis, including a 12% lift in Pediatric Nutrition supported by market share gains in the infant formula business. Similarly, in Adult Nutrition, ABT enjoyed an 11.5% bump in sales, capitalizing on the growing demand for products offering high protein and low sugar, such as those under the Ensure and Glucerna banners.
- Diagnostics was the main laggard in the quarter due to its heavy exposure to COVID-19 testing kits. However, excluding this impact, the segment performed decently, registering a 3.3% revenue increase. ABT saw decent gains in Core Laboratory Diagnostics, boasting significant account wins that the company expects will sustain growth into 2025.
- Established Pharmaceuticals, or EPE, and Medical Devices were the stars of Q3. EPE's revenue stems entirely from international markets, a central factor to the 4.3 pt hit revenue took due to currency fluctuations. Several countries across Latin America, Southeast Asia, and the Middle East, delivered double-digit growth. In Medical Devices, sales were bolstered by growth across many products within the Diabetes Care and Heart Failure categories. A notable standout was in Diabetes Care, where sales of continuous glucose monitors ballooned by 19.1%.
- As typically is the case with ABT, the company maintained a conservative outlook, leaving its FY24 organic growth outlook of +9.5-10% unchanged. Furthermore, ABT projected Q4 adjusted EPS of $1.31-1.37, in-line with consensus.
Investors like what they saw from ABT in Q3, igniting a similar reaction to what we saw with JNJ yesterday following its Q3 numbers. The market was well aware of ABT's history guiding conservatively, so even though it did not raise its outlook despite the modest upside in the quarter, this is not kindling any negative feelings.
Morgan Stanley trades to new all-time highs on big earnings beat as investment banking rebounds (MS)
Morgan Stanley (MS +6%) is trading nicely higher after reporting healthy EPS upside with its Q3 report this morning. This was Morgan Stanley's third consecutive double-digit EPS beat and was significantly larger than Q2's beat. Revenue grew a robust 15.9% yr/yr to $15.38 bln, which was more than $1 bln better than expected.
- Its Institutional Securities segment posted impressive results with revenue jumping 20.2% yr/yr to $6.82 bln, reflecting strong performances in Equity and Fixed Income on higher client activity. Also, MS is seeing increased momentum in Investment Banking, with revs surging 56% yr/yr to $1.46 bln as fixed income underwriting more than doubled. Equity revenue increased 21% driven by increased client activity, particularly in the Americas and Asia.
- The company cited improved underwriting markets combined with increasing participation among financial sponsors and corporates across investment banking. Also, activity outside the US drove the segment's outperformance. Its global footprint positioned MS to capture share as risk events around the world drove activity, including the Bank of Japan's monetary policy changes, shifting expectations around the size and the timing of the Fed's first rate cut and China's announced stimulus.
- Wealth Management, its largest segment, was another bright spot with revs up 13.5% yr/yr to $7.27 bln. The increase was fueled by higher asset levels and the cumulative impact of positive fee-based flows. And finally, Investment Management segment revenue grew 9% yr/yr to $1.46 bln as asset management and related fees increased from a year ago on higher average AUM driven by higher market levels.
- Morgan Stanley noted that, just over the past year, total client assets are up almost $1.4 trillion. Total client assets across Wealth and Investment Management have now reached $7.6 trillion on the road to $10 trillion.
Overall, this was a great quarter for Morgan Stanley, similar to what we have seen from the other investment banks thus far. The headline numbers were quite good with big beats on both EPS and revenue. What really jumped out was the huge growth in investment banking revs for a second consecutive quarter, fueled by fixed income underwriting more than doubling.
Something that also jumps out at us is Morgan Stanley's large exposure to Wealth Mgmt. Morgan Stanley's exposure is bigger than many other investment banks. With the Fed cutting rates and the stock market near new highs, that has caused investor assets to swell which is great news for the company. With MS saying it's on the path to $10 trillion in client assets, this is an area which should fuel earnings growth in the future. Finally, the stock recently broke above its $90-110 multi-month trading range to hit new all-time highs and this report is fueling further gains.
United Airlines taking flight after delivering solid Q3 results as capacity continues to fall (UAL)
Delta Air Lines (DAL) is typically thought of as the cream of the crop in the commercial airline industry when it comes to financial performance and execution, but United Airlines (UAL) is giving the company a run for its money. After the close last night, UAL delivered another strong earnings report, exceeding EPS and revenue estimates, while also announcing a new $1.5 bln share repurchase plan. Thanks to UAL's increasing levels of cash flow, the company stated that this buyback is just the beginning of a consistent and disciplined return of capital approach.
On that note, UAL's cash flow from operations in Q3 grew by more than 70% yr/yr to nearly $1.5 bln. That increasing cash flow generation is a function of UAL's improving profitability which is being driven by the company's solid cost management and a more favorable supply and demand dynamic in the industry.
- Last quarter, CEO Scott Kirby predicted that the industry-wide overcapacity issues that drove fares lower would reach an inflection point in mid-August. That forecast came to fruition as domestic unit revenue turned positive in August and into September. Overall, TRASM was lower by just 1.6% compared to last quarter's 2.6% decline, and also ahead of DAL's decrease of 3.6% in Q3.
- Meanwhile, CASM-ex was higher by 6.5% as UAL operated a busier network -- capacity was up 4.1% yr/yr -- but adjusted pre-tax margin still came in at a healthy 9.7%. For a point of comparison, DAL's adjusted pre-tax margin in Q3 was 8.6%.
- Similar to DAL, UAL continued to capitalize on the strength in the corporate and premium revenue categories. In September, corporate revenue was up by 13% yr/yr, and for Q3, premium revenue was up by 5%, following last quarter's 8.5% increase.
- If there was a disappointment, it was that UAL's Q4 EPS guidance of $2.50-$3.00 was merely inline with expectations. However, we believe that UAL may be taking a conservative approach with its guidance, based on the strengthening trends for both UAL and the industry overall. For instance, Mr. Kirby stated that corporate travel demand became stronger in October, and that holiday bookings for Q4 are looking good.
The main takeaway is that UAL has emerged as the top-performing airline during this swing and correction in capacity across the industry. The company's revenue diversity, including its international, premium, and corporate businesses, is working in its favor and the near-term horizon looks bright as airlines continue to reduce their flight schedules.
J.B. Hunt Transport changes gears in Q3; returns to delivering positive Intermodal volumes (JBHT)
J.B. Hunt Transport (JBHT +4%) is hitting the road at a brisk pace today after snapping back to delivering earnings and revenue upside in Q3 on a welcomed return to positive intermodal volumes. JBHT, an intermodal trucking company, has been trending sideways since April as many consecutive downbeat earnings reports and weak intermodal volumes deflated shareholders. Just before 2023, economic conditions turned; absent peak season activity leading up to the holidays in late 2022 served as a massive red flag. Demand conditions soured, creating intense headwinds for JBHT for several quarters. The environment has remained gloomy throughout 2024, with intermodal volumes struggling to grow in Q1 and Q2, earnings missing estimates by double-digits, and revenue falling short of consensus.
Given this history, investors are cheering JBHT's lively Q3 performance, which may have signaled a long-awaited turning point.
- Economic conditions are still unfavorable, as highlighted by JBHT's 17% drop in EPS yr/yr to $1.49 and a 3% decline in revenue to $3.07 bln. Inflationary cost pressures continued eroding the company's overall margin performance across each segment.
- Pricing remains the biggest lever for improving margins. However, too many bidders are competing for too little demand, an imbalance leading to pricing pressures. JBHT noted that it will be stuck with a significant portion of current pricing through 1H25. However, management maintained that pricing remains unsustainable over the long term. Also, JBHT recently observed shippers converting small amounts of freight from truck to rail, an uplifting development for the company's Intermodal segment, its largest and most critical business.
- Speaking of which, Intermodal volumes flipped back to positive territory in Q3, expanding by 5% yr/yr. Some of this growth was pulled forward, though JBHT is unsure how much, which could lead to relatively weaker volumes in Q4. Breaking it down, JBHT enjoyed a 7% jump in transcontinental volumes. Southern California outbound volumes were up by double digits, and East volumes edged 3% higher. JBHT reiterated its long-term view that a significant amount of freight should eventually be converted from over-the-road to intermodal.
- JBHT's other segments posted mixed results. Dedicated Contract Services continued to run into fleet size pressures due to customer downsizing and bankruptcies, but JBHT believes the market remains stable. In Final Mile, demand for bulky items, including furniture and appliances, stayed suppressed while customer churn ticked higher, clipping top and bottom-line results. In Integrated Capacity Solutions, a constantly competitive brokerage environment pressures volumes, but JBHT was encouraged by its progress in stabilizing trends.
JBHT is finally breaking free from its sideways action after changing gears in Q3 and returning to delivering upbeat numbers. However, the economic landscape remains troubling, keeping uncertainty elevated and potentially generating volatility over the near term. Still, the positive developments from Q3 were encouraging, setting a more enthusiastic tone ahead of peers' upcoming reports, including MRTN, KNX, ODFL, and XPO.
Walgreens Boots Alliance surges on early restructuring achievements and FY25 sales guidance (WBA)
Walgreens Boots Alliance (WBA +12%) is nicely aligned with investors today, roaring higher following the pharmaceutical retailer's decent-sized Q4 (Aug) earnings and revenue beats. WBA faced enormous setbacks over the past couple of years as its aggressive M&A and investment activity under its former CEO hindered earnings growth at a time when macroeconomic headwinds were intensifying, eviscerating front-store sales volumes.
Without improving economic conditions, WBA -- now under CEO Tim Wentworth since last October -- has already begun enacting sweeping changes. Last quarter, WBA announced the closure of 25% of its stores, with plans to shutter additional locations if performance does not improve. Today, WBA finalized these plans, targeting around 1,200 sites over the next three years (around 14% of total stores), including 500 in FY25. The company anticipates that the closures will be immediately accretive to adjusted EPS and free cash flow.
These actions, alongside several highlights from Q4, including benefits from previous restructuring programs, have sparked a buying frenzy today, fueling a breakout in the stock today as it clears its 50-day moving average (9.44) for the first time since last year.
- Today's central highlight was that WBA successfully achieved its three goals: cutting costs by over $1.0 bln, reducing CapEx by over $700 mln, and realizing over $600 mln in benefits from working capital initiatives. As a result of these early wins, WBA delivered a less pronounced contraction in its EPS yr/yr in Q4, registering a 42% drop to $0.39.
- WBA also recorded a decent 5.9% uptick in sales yr/yr to $37.5 bln, supported by strength across the board. U.S. Retail Pharmacy sales enjoyed a 6.5% jump on comps of +8.3%, led by the pharmacy side as retail sales continued to compress, reflecting a stubbornly challenging demand environment and persistent competitive pressures. In U.S. Healthcare, sales expanded by 7.1% yr/yr, led by Shields, which boasted a whopping 27.8% leap. International revenue edged 3.2% higher.
- A hindrance to top-line growth recently has been lower reimbursement from pharmacy benefit managers or PBMs like Caremark (CVS) and OptumRx (UNH). WBA has been working with PBMs to bring stability and predictability to its reimbursement, achieving high visibility into reimbursement for around 80% of the anticipated script volume in FY25.
- As a result, WBA issued bullish FY25 revenue guidance, predicting $147.0-151.0 bln, the midpoint of which was well ahead of consensus. Earnings will remain wobbly; WBA targeted $1.40-1.80 next year, the midpoint falling short of analyst expectations. However, WBA is focused on cash flow generation to improve its debt position and stabilize its core operations.
After so much turbulence, WBA's Q4 report was a welcomed change of pace. We noted yesterday that benefits from WBA's recent restructuring actions would likely be required before investors warmed up to WBA. Following its achievements in Q4, the market may be coming back around to WBA. However, given its recent history, investors may need to see more proof that Mr. Wentworth's changes are igniting a firm turnaround
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