Market Snapshot
| Dow | 42387.57 | +273.17 | (0.65%) | | Nasdaq | 18567.19 | +48.58 | (0.26%) | | SP 500 | 5823.52 | +15.40 | (0.27%) | | 10-yr Note | -24/32 | 4.28 |
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| | NYSE | Adv 1788 | Dec 946 | Vol 871 mln | | Nasdaq | Adv 2916 | Dec 1358 | Vol 5.6 bln |
Industry Watch
| Strong: Financials, Materials, Real Estate, Consumer Discretionary, Utilities, Communication Services |
| | Weak: Energy, Information Technology |
Moving the Market
-- Buying on weakness after first down week in S&P 500 after six-week winning streak
-- Easing geopolitical tensions after Israel's retaliation against Iran was limited to military targets, resulting in sharp decline in oil prices
-- Treasury yields moving higher, which has not deterred buying in equities
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Closing Summary
28-Oct-24 16:35 ET
Dow +273.17 at 42387.57, Nasdaq +48.58 at 18567.19, S&P +15.40 at 5823.52
[BRIEFING.COM] The equity market closed with gains in major indices. The S&P 500 and Nasdaq Composite each closed 0.3% higher than Friday, the Dow Jones Industrial Average gained 0.7%, and the Russell 2000 jumped 1.6%.
Many stocks participated in upside moves following last week's index-level declines. Advancers led decliners by a roughly 2-to-1 margin at the NYSE and at the Nasdaq. The upside bias was in front of a busy week in terms of earnings news.
Gains in some influential names that also report earnings this week were a support factor for the major indices today. Alphabet (GOOG 168.34, +1.35, +0.8%), which reports on Tuesday, Meta Platforms (META 578.16, +4.91, +0.9%), which reports on Wednesday, and Apple (AAPL 233.40, +1.99, +0.9%) and Amazon.com (AMZN 188.39, +0.56, +0.3%), which report on Thursday are standouts in that respect.
Microsoft (MSFT 426.59, -1.56, -0.4%) also reports results on Wednesday, but closed lower today. This price action, along with losses in NVIDIA (NVDA 140.52, -1.02, -0.7%) and Broadcom (AVGO 172.02, -0.98, -0.6%), led the information technology sector to close 0.1% lower.
The only other sector to close with a loss was energy (-0.7%), which reacted to dropping oil prices. WTI crude oil futures slid 6.1% to $67.39/bbl after Israel's retaliation against Iran was limited to military targets, sparing oil and nuclear facilities.
Stocks maintained an upside bias through the entire session despite rising Treasury yields. The 2-yr yield settled four basis points higher at 4.14% lower and the 10-yr yield settled five basis points higher at 4.28%. This followed a $69 bln 2-yr note auction, which met poor demand, and a $70 bln 5-yr note sale priced worse than expected, but featured decent internals.
- Nasdaq Composite: +23.7% YTD
- S&P 500: +22.1% YTD
- Dow Jones Industrial Average: +12.5% YTD
- S&P Midcap 400: +12.9% YTD
- Russell 2000: +10.7% YTD
There was no US economic data of note today. Tuesday's economic lineup features:
- 9:00 ET: August FHFA Housing Price Index, August S&P Case-Shiller Home Price Index
- 10:00 ET: October Consumer Confidence, September JOLTS - Job Openings
Treasuries settled with losses
28-Oct-24 15:40 ET
Dow +330.56 at 42444.96, Nasdaq +82.56 at 18601.16, S&P +24.29 at 5832.41
[BRIEFING.COM] The major indices move mostly sideways ahead of the close.
The 2-yr yield settled four basis points higher at 4.14% lower and the 10-yr yield settled five basis points higher at 4.28%. This followed a $69 bln 2-yr note auction, which met poor demand, and a $70 bln 5-yr note sale priced worse than expected, but featured decent internals.
Separately, WTI crude oil futures slid 6.1% to $67.39/bbl.
Tuesday's economic lineup
28-Oct-24 15:15 ET
Dow +296.56 at 42410.96, Nasdaq +75.11 at 18593.71, S&P +21.80 at 5829.92
[BRIEFING.COM] The market-cap weighted S&P 500 shows a 0.4% gain and the equal-weighted S&P 500 is 0.6% higher.
Ford Motor (F), Waste Mgmt (WM), V.F. Corp (VFC), and Cadence Design (CDNS) are among the names reporting earnings after the close. Comcast (CMCSA), Pfizer (PFE), D.R. Horton (DHI), McDonald's (MCD), Tenet Healthcare (THC), Royal Caribbean (RCL), Stanley Black & Decker (SWK), and Jetblue Airways (JBLU) are among the names reporting ahead of Tuesday's open.
Separately, Tuesday's economic lineup features:
- 9:00 ET: August FHFA Housing Price Index, August S&P Case-Shiller Home Price Index
- 10:00 ET: October Consumer Confidence, September JOLTS - Job Openings
Recent spin-off Amentum gains in S&P 500 after Navy contract; Centene falls
28-Oct-24 14:30 ET
Dow +304.37 at 42418.77, Nasdaq +86.05 at 18604.65, S&P +23.46 at 5831.58
[BRIEFING.COM] The S&P 500 (+0.40%) is up about 23 points on Monday afternoon, little changed over the last half hour.
Elsewhere, S&P 500 constituents Carnival (CCL 21.91, +1.00, +4.78%), Albemarle (ALB 97.70, +4.19, +4.48%), and Amentum Holdings (AMTM 30.63, +0.98, +3.31%) pepper the top of the standings. CCL and ALB move higher despite a dearth of corporate news, while AMTM gains after being awarded a $490 mln contract from the U.S. Navy.
Meanwhile, Missouri-based managed care firm Centene (CNC 61.47, -2.75, -4.28%) falls to the bottom of the average as recent volatility continues following last week's earnings.
Gold little changed to start the week
28-Oct-24 14:00 ET
Dow +330.35 at 42444.75, Nasdaq +105.82 at 18624.42, S&P +26.87 at 5834.99
[BRIEFING.COM] The Nasdaq Composite (+0.57%) is in second place with about two hours to go on Monday.
Gold futures settled $1.30 higher to $2,755.90/oz, trading in the yellow metal held in check by gains in yields and a middling move in the greenback.
Meanwhile, the U.S. Dollar Index is up less than +0.1% to $104.29.
Robinhood Markets reaches new 52-week highs after announcing event contracts today (HOOD)
Robinhood Markets (HOOD +3%) hits a new 52-week high today after the brokerage platform announced it will roll out presidential election event contracts today. Since sinking to lows in early August alongside the broader markets, HOOD has acted like a rocket, shooting over +70% higher. The company does have Q3 earnings results coming up on October 30 after the close, which could introduce volatility. It is critical to note that the event contracts announced today will not affect Q3 numbers, given its October launch date.
- HOOD's move to offer election betting follows in the footsteps of fellow brokerage firm Interactive Brokers (IBKR), which launched Forecast Contracts earlier this month, allowing users to bet on the outcome of the upcoming presidential election. IBKR has sustained its upward momentum since announcing its election-focused contracts, particularly after noting that it observed substantial demand for the offering less than a week after launch.
- Furthermore, IBKR mentioned during its Q3 earnings call two weeks ago that volume within its ForecastEx business, where political event betting is housed, swelled after the launch of election contracts. Management stated that election contracts are the primary feature resonating with its clientele. Additionally, election contracts are only available to U.S. clients, underpinning substantial upside potential that has yet to be realized through overseas expansion.
- HOOD's event contracts operate similarly. They allow customers to trade on the outcome of specific events, like whether a candidate will win an election. Only a week remains until the U.S. presidential election, and HOOD rolled out its event contracts to a limited number of customers today. Given this, HOOD's event contracts may not spur material growth in Q4.
- Still, HOOD's event contract feature could fuel future growth. The offering will not be exclusive to betting on the outcomes of elections. Instead, HOOD sees event contracts as a tool to engage in real-time decision-making, unlocking a new asset class
While not having any bearing on Q3 numbers scheduled for release this week, HOOD's event contracts offering is another feature that can attract more users. The company recently announced plans to launch futures trading, providing another channel to expand its user base. While a healthy market remains pivotal to HOOD's short-term success, its attention on keeping its platform fresh through its constant updates and new features positions it for long-term success.
ON Semiconductor on target today as rebound in EV market helps spark improved results (ON)
ON Semiconductor (ON), an analog chip maker with significant exposure to the automotive and industrial end markets, has contended with persistent macroeconomic headwinds in the form of high interest rates and a cautious consumer, resulting in five consecutive quarters of yr/yr sales declines. Those challenges continued into 3Q24, but ON still managed to edge past top and bottom-line expectations as revenue grew sequentially (+1.5%) since the first time since 3Q23.
The company's struggles this year are reflected by the stock's 15% year-to-date decline and the choppy, sideways action over the past several weeks suggested that expectations were muted heading into the Q3 report. Those tempered expectations are partly a function of competitor Texas Instruments' (TXN) soft Q3 earnings report from October 22 in which the fellow analog chip maker guided Q4 revenue and EPS below expectations. During the earnings call, TXN commented that the automotive end market, outside of China, is still searching for a bottom.
- However, the EV market -- especially in China -- has received a jolt lately, thanks to increased government subsidies and aggressive price cuts from OEMs. In turn, ON's Power Solutions Group (PSG), which makes semiconductors for the EV industry and is ON's largest segment at 47% of Q3 revenue, saw revenue decline by just 1% qtr/qtr compared to the 4% drop seen last quarter.
- The improvement was even more pronounced within ON's two other segments, Advanced Solutions (AMG) and Intelligent Sensing Group (ISG). In AMG, revenue growth swung into positive territory at +1% qtr/qtr to $653.7 mln compared to last quarter's -7% mark, while a rebound in demand for consumer electronics helped push revenue higher by 11% qtr/qtr versus -13% in Q2.
- Looking ahead, ON is bullish on its growth prospects in the AI data center space, where power usage and consumption is rising at a breakneck pace. The company estimates its total addressable market within AI data center is $4.4 bln, while growing at a CAGR of nearly 19% from 2024-2028.
- Still, the company's Q4 guidance was somewhat lackluster with the midpoints of its EPS ($0.92-$1.04) and revenue ($1.71-$7.8 bln) guidance both falling slightly below expectations. It's worth noting, though, that ON's Q3 results came in at the high end of its guidance ranges, so the company may be taking a conservative approach again with its outlook. Furthermore, its longer-term outlook, which calls for revenue growth of 10-12% on a CAGR basis through 2027, and gross margin of 53% in 2027, looks solid and is helping to offset any disappointment from the Q4 guidance.
The main takeaway is that while business certainly isn't booming for ON, it is strengthening, and the worst now appears to be behind the company. With a stock that's lower by 15% on the year, that's good enough to spark some gains today.
Philips encounters deteriorating conditions in China in Q3; clips FY24 guidance (PHG)
A surprising turn of events in China during Q3 battered Philips (PHG -16%), spurring a sharp reduction in its FY24 comparable sales growth outlook. Last quarter, the medical and personal health device maker was optimistic that business in China, which comprises around 10% of revenue, had stabilized, adding that the region should gradually contribute to positive order growth over the coming quarters. Given this context, investors are stunned by the fact that not only did China fail to add to order growth in the quarter, but that conditions deteriorated, driving today's significant sell-off.
- PHG missed earnings estimates in Q3 by a few pennies, a common occurrence for the company, making this development not overly surprising. In fact, PHG fell short of EPS expectations last quarter and still enjoyed a surging stock price. What helped dwarf this blemish was a solid adjusted EBITA margin bump of 160 bps yr/yr to 11.8%. PHG's steady EBITA margin reflects continuous productivity enhancements and higher royalty income. These actions underpinned PHG's confidence in achieving the high end of its FY24 margin outlook at around 11.5%.
- Unfortunately, margins were insufficient to white out the problems in China, where consumer and hospital demand withered. Personal Health comparable sales contracted by a double-digit percentage yr/yr in the region, weighing significantly on overall comparable sales, which came up flat yr/yr. Orders fell by a similar margin in China, dragging overall orders down by 2% in the quarter.
- Headwinds in China were an extension of those from Q2, including anti-corruption measures and a lack of impact of the National Renewal Program, which affects order and lead times. Echoing last quarter's comments, PHG stated that visibility around the ongoing impact of anti-corruption measures and the timing of the government program remains cloudy. However, unlike its remarks in July, PHG no longer conveyed optimism that China will still gradually contribute to order growth over the coming quarters. Instead, uncertainty was the central theme.
- The obstacles in China offset otherwise solid numbers from PHG's other key markets, each registering positive comparable sales growth. It also eroded PHG's former FY24 comparable sales growth guidance, targeting just +0.5-1.5% versus +3.0-5.0%. However, a slim silver lining was that PHG continues to anticipate +3.0-5.0% growth outside of China.
When removing China from the equation, PHG recorded solid numbers in Q3, including impressive progress regarding ongoing productivity actions. However, the troubles in China cannot be so quickly overlooked. China is a central component of PHG's overall business, with management reiterating the region's importance relative to long-term growth. Without a clear timetable on when stabilization, let alone recovery, will materialize, investors are expressing considerable discomfort today.
Lastly, PHG's China-related issues are an alarming sign ahead of some of its peers' upcoming quarterly reports, particularly GE HealthCare (GEHC) on October 30. GEHC derives around 30% more revenue from China than PHG.
PROCEPT BioRobotics surges on stronger than expected Q3 results, new system performing well (PRCT)
PROCEPT BioRobotics (PRCT +27%) is trading sharply higher after reporting a Q3 loss that was narrower than expected. Revenue jumped 66.4% yr/yr to $58.4 mln, which was also better than expected. It also increased FY24 revenue guidance to $222.5-223.0 mln. This surgical robotics company focuses on urology using Aquablation therapy to treat males suffering from lower urinary tract symptoms or LUTS, due to BPH.
- The company said that growth in the quarter was driven by strong demand and higher average selling prices for its robotic system. PRCT also benefitted from increased utilization from an expanded US installed base and record international revenue. PRCT exited Q3 with a US installed base of 445 systems, up 64% yr/yr. Additionally, PRCT exceeded its utilization per account expectations in Q3. International revenue more than doubled yr/yr to $6.2 mln.
- PRCT sold 45 robotic systems in the US at an average price of approximately $432,000. Of these 45 systems, approximately 80% were HYDROS and the majority of these sales were to new customers. It's also important to understand that PRCT continues to generate revenue even after equipment is sold. And that revenue was even larger than system sales. US handpiece and consumables revenue jumped 74% yr/yr in Q3 to $29.6 mln.
- On August 21, PRCT announced FDA 510(k) clearance of its next-generation platform, the HYDROS Robotic System. It features FirstAssist AI treatment planning, advanced image guidance, robotic resection, and a streamlined workflow. HYDROS is designed to improve efficiency, enhance surgeon and staff experience and deliver a more accurate and consistent treatment plan for better clinical outcomes.
- PRCT is pretty excited about HYDROS as it introduces significant technological advancements designed for mass-market adoption, and it believes HYDROS will power its next phase of growth. As soon as it received FDA clearance, PRCT said its capital sales team immediately shifted its focus to educating hospitals and surgeons on the benefits of the new system. In addition to its next generation system, the company is expanding into prostate cancer. The FDA recently approved a pivotal IDE clinical trial comparing Aquablation therapy to radical prostatectomy.
Overall, it is clear investors are impressed with PRCT's Q3 report. The company posted strong results despite transitioning to its new HYDROS system. Also, its consumables business was particularly strong, which tells us customers are using its system at a good clip. PRCT is not a name that is widely followed, but it is worth keeping an eye on. It's narrowly focused on urology, but BPH is also the most common prostate disease and impacts approximately 40 mln men in the US. On a final note, we are not making a prediction, but if PRCT keeps posting good results, we would not be surprised to see a larger surgical robotics company consider acquiring the company.
Boston Beer Co brews up an earnings beat, but growth slowing across the portfolio (SAM)
Thanks to another uptick in gross margin and an active share repurchase program, Boston Beer Co (SAM) poured out better-than-expected earnings in 3Q24, but from a growth perspective, the alcoholic beverage maker's results and outlook fell flat. Once again, Truly Hard Seltzer was a notable laggard in Q3, underperforming a category that experienced an 11% volume decline in measured channels this quarter. Market share losses, combined with a challenging consumer spending environment, have upended SAM's hard seltzer business, which is pacing towards a low-20% yr/yr drop in sales this year.
To reflect the persistently weak hard seltzer category trends, macroeconomic headwinds, and gross margin improvements, SAM narrowed its FY24 EPS guidance to $8-$10 from its prior guidance of $7-$11. The midpoint of this new guidance range, though, is below analysts' expectations, which isn't helping the stock's cause today.
- Slowing growth and the lack of an identifiable near-term growth catalyst is the root issue that's weighing on SAM. Depletions, a key demand metric that measures the number of cases sold to retailers by distributors, declined by 3% in Q3. The company also lowered its FY24 depletions guidance again, forecasting a low-single-digit decline. Rewinding to last quarter, SAM cut its outlook to down low-single-digits to zero, from down low-single-digits to up low-single-digits.
- SAM's struggles with turning around Truly Hard Seltzer are the most obvious, but it's not the only challenge its facing. For instance, growth is slowing for Twisted Tea (+8% in Q3), the company's star performer that has helped to soften the blow from Truly's downturn. With an 85% market share in the category, growth is naturally going to decelerate, but the problem for SAM is that there's not a clear replacement in the product portfolio to mitigate the impact from the slowing growth.
- In the core beer business, there's not much to raise a glass too, either, as sales were down by mid-to-high single digits. SAM is enthusiastic about its new Sam Adams American Light beer, stating that it has seen positive consumer acceptance in its early markets of New England, Florida, and Texas. The company is planning for a full national rollout of American Light in early 2025.
- However, the key to turning the business around still rests with the struggling Truly Hard Seltzer business. The company acknowledged that it had too many line extensions with Truly, so part of its strategy moving forward is to be more strategic with the flavors and styles it adds. In particular, SAM is seeing a bifurcation in flavor preferences, with bolder flavors underperforming lighter flavors. Therefore, the company will optimize the product portfolio to skew towards lighter flavors.
Overall, it's a mixed bag for SAM as the company is in a bit of a rut in terms of top-line growth but is doing well to keep margins churning higher through price increases, supply chain optimization initiatives, and brewery optimization efforts. However, until the Truly Hard Seltzer business stabilizes and turns around in a meaningful way, SAM will be hard pressed to significantly improve its growth profile.
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