| | | Market Snapshot
| Dow | 42233.05 | -154.52 | (-0.36%) | | Nasdaq | 18712.75 | +145.56 | (0.78%) | | SP 500 | 5832.92 | +9.40 | (0.16%) | | 10-yr Note | +2/32 | 4.267 |
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| | NYSE | Adv 857 | Dec 1797 | Vol 902 mln | | Nasdaq | Adv 1968 | Dec 2293 | Vol 6.9 bln |
Industry Watch
| Strong: Communication Services, Information Technology |
| | Weak: Utilities, Energy, Consumer Staples, Real Estate, Materials, Financials |
Moving the Market
-- Rising market rates
-- Gains in some mega cap names
-- Losses in McDonald's (MCD) after earnings, and Boeing (BA) after capital raise, weighing down DJIA
-- Waiting on earnings from Alphabet (GOOG) after the close
| Closing Summary
29-Oct-24 16:30 ET
Dow -154.52 at 42233.05, Nasdaq +145.56 at 18712.75, S&P +9.40 at 5832.92
[BRIEFING.COM] The Nasdaq Composite reached a record close, settling 0.8% higher than yesterday. The S&P 500 rose 0.2%, or about ten points. Mega caps and chipmakers contributed to the upside moves. The PHLX Semiconductor Index (SOX) closed 2.3% higher and the Vanguard Mega Cap Growth ETF (MGK) settled 0.9% higher.
Alphabet (GOOG 171.14, +2.80, +1.7%) was an influential winner ahead of its earnings report after today's close.
Market internals reflect an underlying negative bias in today's trade. Decliners led advancers by a 2-to-1 margin at the NYSE and by a 4-to-3 margin at the Nasdaq. Also, the Dow Jones Industrial Average (-0.4%) and Russell 2000 (-0.3%) closed lower.
The price action in Treasuries kept buying in check in the equity market. Yields moved higher following a strong Consumer Confidence report for October, but ultimately settled little changed from yesterday after a strong $44 billion 7-yr note sale that made for a welcome respite from recent all-around weakness in auction demand and intraday trade. The 10-yr yield settled unchanged at 4.27% and the 2-yr yield declined two basis points to 4.12%.
Market participants were also digesting a mixed slate of earnings news. D.R. Horton (DHI 167.32, -13.06, -7.2%), Ford (F 10.41, -0.96, -8.4%), and Pfizer (PFE 28.46, -0.40, -1.4%) are some of the names that closed lower after reporting results, along with Dow component McDonald's (MCD 295.00, -1.79, -0.6%),
V.F. Corp (VFC 21.63, +4.60, +27.0%) and Royal Caribbean (RCL 210.10, +6.58, +3.2%) were some of the earnings-related winners today.
- Nasdaq Composite: +24.7% YTD
- S&P 500: +22.3% YTD
- Dow Jones Industrial Average: +12.1% YTD
- S&P Midcap 400: +13.0% YTD
- Russell 2000: +10.4% YTD
Reviewing today's economic data:
- August FHFA Housing Price Index 0.3%; Prior was revised to 0.2% from 0.1%
- August S&P Case-Shiller Home Price Index 5.2% (Briefing.com consensus 5.1%); Prior 5.9%
- October Consumer Confidence 108.7 (Briefing.com consensus 99.0); Prior was revised to 99.2 from 98.7
- The key takeaway from the report is that the increase in confidence in October was broad-based across all age groups and most income groups, and featured a substantially more optimistic view about future business conditions than the prior month. That sets up to be a supportive component for consumer spending.
- September JOLTS - Job Openings 7.443 mln; Prior was revised to 7.861 mln from 8.040 mln
- September Adv. Intl. Trade in Goods -$108.2 bln; Prior was revised to -$94.2 bln from -$94.3 bln
- September Adv. Retail Inventories 0.8%; Prior was revised to 0.7% from 0.5%
- September Adv. Wholesale Inventories -0.1%; Prior 0.2%
Wednesday's economic calendar features:
- 7:00 ET: Weekly MBA Mortgage Index (prior -6.7%
- 8:15 ET: October ADP Employment Change (Briefing.com consensus 105,000; prior 143,000)
- 8:30 ET: Advance Q3 GDP (Briefing.com consensus 3.0%; prior 3.0%) and advance Q3 GDP Chain Deflator (Briefing.com consensus 2.3%; prior 2.5%)
- 10:00 ET: September Pending Home Sales (Briefing.com consensus 2.5%; prior 0.6%)
- 10:30 ET: Weekly crude oil inventories (prior +5.47 mln)
Stocks move sideways in front of the close
29-Oct-24 15:35 ET
Dow -80.82 at 42306.75, Nasdaq +181.23 at 18748.42, S&P +22.95 at 5846.47
[BRIEFING.COM] There hasn't been up or down action at the index level in recent trading.
Wednesday's economic calendar features:
- 7:00 ET: Weekly MBA Mortgage Index (prior -6.7%
- 8:15 ET: October ADP Employment Change (Briefing.com consensus 105,000; prior 143,000)
- 8:30 ET: Advance Q3 GDP (Briefing.com consensus 3.0%; prior 3.0%) and advance Q3 GDP Chain Deflator (Briefing.com consensus 2.3%; prior 2.5%)
- 10:00 ET: September Pending Home Sales (Briefing.com consensus 2.5%; prior 0.6%)
- 10:30 ET: Weekly crude oil inventories (prior +5.47 mln)
GOOG outperforms in front of earnings
29-Oct-24 15:05 ET
Dow -72.83 at 42314.74, Nasdaq +155.09 at 18722.28, S&P +18.91 at 5842.43
[BRIEFING.COM] The S&P 500 trades nearly 20 points, or 0.3%, higher and the Dow Jones Industrial Average trades down about 70 points, or 0.2%.
Alphabet (GOOG 171.33, +2.5, +1.8%) is an influential winner in front of its earnings report after the close. Dow component Visa (V 283.64, -0.54, -0.2%), Chubb (CB 288.20, -1.81, -0.6%), and Mondelez (MDLZ 69.29, -0.25, -0.4%) are among the names trading down in front of their quarterly reports this afternoon.
Separately, semiconductor stocks are showing some strength this afternoon, leading the PHLX Semiconductor Index (SOX) to trade 2.1% higher.
Incyte, Leidos among top S&P 500 gainers post earnings
29-Oct-24 14:30 ET
Dow -73.10 at 42314.47, Nasdaq +142.35 at 18709.54, S&P +15.65 at 5839.17
[BRIEFING.COM] The S&P 500 (+0.27%) is in second place on Tuesday afternoon, having consolidated the morning advance for the past few hours.
Elsewhere, S&P 500 constituents Incyte (INCY 73.65, +7.96, +12.12%), Leidos (LDOS 185.55, +15.82, +9.32%), and Corning (GLW 49.90, +3.06, +6.53%) dot the top of the standings following earnings.
Meanwhile, Connecticut-based tool and hardware firm Stanley Black & Decker (SWK 93.33, -9.59, -9.32%) is the worst-performing constituent after missing on revenues and noting challenges in the automotive market in this morning's earnings.
Gold higher in part due to election uncertainty
29-Oct-24 14:00 ET
Dow -67.78 at 42319.79, Nasdaq +133.51 at 18700.70, S&P +14.82 at 5838.34
[BRIEFING.COM] The tech-heavy Nasdaq Composite (+0.72%) is in first place on Tuesday afternoon.
Gold futures settled $25.20 higher to $2,781.10/oz amid U.S. election uncertainty, Fed rate cut expectations, and Middle East tensions.
Meanwhile, the U.S. Dollar Index is up just a hair less than +0.1% to $104.39.
V.F. Corp pops after Q2 results and 2H24 guidance showcase further turnaround progress (VFC)
After sliding moderately ahead of Q2 (Sep) results, shares of V.F. Corp (VFC +23%) did an about-face, surging today on further upward progress surrounding the company's ongoing turnaround plan, dubbed "Reinvent." The apparel maker, famous for The North Face, Vans, and Timberland banners, exceeded top and bottom-line estimates in the quarter, supported by further improvements across its brands. Meanwhile, although Q3 (Dec) revenue guidance fell mildly short of consensus, the projection signals further sequential improvements. At the same time, VFC expected Q4 (Mar) to show another round of sequential progress in yr/yr revenue trends. This string of uplifting news is propelling the stock to new one-year highs, an over +70% spike from 2024 lows hit in April.
- Revenue in the quarter still contracted by 5.6% yr/yr to $2.76 bln, marking VFC's ninth consecutive quarter of negative revenue growth. However, the sales decline translated to further improvement from the -16.2% in 3Q24, -13.4% in 4Q24, and -8.9% in Q1 (Jun). VFC also noticed moderating declines in the Americas, which registered a -9% drop versus a -13% decline last quarter, alongside several other important markets. For instance, in EMEA, September marked the biggest month ever for the region. Meanwhile, APAC enjoyed a 5% bump.
- One of the brightest highlights of Q2 was VFC's massive adjusted EPS beat, delivering its first double-digit outperformance since 3Q23. The impressive earnings reflected excellent progress on the first priority of VFC's Reinvent plan: lowering its cost base. During the quarter, VFC generated another $65 mln in cost savings, reaching its $300 mln target before the end of the year. VFC intends to go beyond these initial savings.
- Further highlights branched from VFC's Reinvent plan, such as strengthening its balance sheet. The company continued to normalize inventories, reducing them by 13% yr/yr. Furthermore, VFC made further progress in paying down debt and is on track to retire the next term loan of $750 mln by the end of the year.
- Perhaps the most critical components of Reinvent, fixing the U.S. business and turning around the Vans banner, was where most eyes were fixated. Fortunately, more good news emerged from these priorities. The constant revenue declines in VFC's Americas business slowed. Meanwhile, Vans' overall performance in Q2 slid by just 11%, a huge improvement over the 21% plunge last quarter.
- Outside of Reinvent, The North Face and Timberland performed well. The latter did endure a sequential step-down in revs due to challenging comps. However, the brand enjoyed strong performance for backpacks, with sustained resilience in the APAC and EMEA regions. Timberland revenue improved from last quarter to a mild 3% dip yr/yr.
The overarching theme from Q2 was continuous success surrounding an ambitious turnaround plan under CEO Bracken Darrell, an individual with turnaround experience who took over last year. VFC still has work to do to return to positive yr/yr growth. However, as we mentioned in April, we continue to like the company for the long term as VFC boasts a portfolio of globally recognizable brands that can support a meaningful recovery.
F5 Networks gets a high five as upswing in software growth fuels beat-and-raise Q4 report (FFIV)
Building off an encouraging Q3 earnings report in which F5 Networks (FFIV) experienced improved close rates and an upswing in new business wins, the network security and application delivery company posted one of its strongest quarterly reports in recent history last night. Not only did FFIV comfortably exceed Q4 EPS and revenue estimates while returning to positive top-line growth after three consecutive quarters of yr/yr declines, but it also issued 1Q25 and FY25 EPS and revenue guidance that was mostly above analysts' expectations. To top it off, the company authorized an additional $1.0 bln for its stock repurchase program, speaking to its more bullish view heading into FY25.
- The company's FY25 guidance, which calls for revenue growth to accelerate to 4-5% from flat in FY24, assumes that the macro environment remains stable without any meaningful improvement. Therefore, the upswing is a function of company-specific drivers, most notably including its successful transition to a software-centric company from a hardware-centric one that relies on a single product.
- For some context on this transition, in FY17 software accounted for only 13% of total revenue. Today, that percentage has jumped to about 58% of total product revenue. Furthermore, subscriptions now represent 85% of FFIV's total software revenue compared to 20% in FY17. This transition has enabled the company to diversify its revenue stream, reduce volatility and improve the predictability of revenue, and enable it to more fully capitalize on the hybrid multi-cloud trend.
- Strength from existing software customers was a key factor behind FFIV's beat-and-raise performance. Overall, software revenue increased by 19% to $228 mln, representing a significant acceleration from last quarter's 3% growth. Looking ahead, the company sees a substantial opportunity for software renewals, providing it with good visibility into FY25.
- On the hardware side, the turnaround for Systems continued to gain traction as revenue decreased by just 3%, marking a vast improvement from the 16% drop last quarter and the 32% plunge in Q2. During the earnings call, FFIV noted that customers are beginning to refresh older systems, while its also winning more deals against competitors. In FY25, the company expects Systems revenue to grow by mid-single-digits after falling by 20% in FY24.
- From a longer-term perspective, FFIV remains bullish about its AI growth opportunities. More specifically, the company believes it will benefit from the massive amount of data generated from AI model training, requiring high performance traffic management technologies. Additionally, FFIV is focusing on leveraging web application firewall and API protection, and it already has deployments addressing this use case today.
Following a rough stretch in 2H23-1H24, FFIV has turned the corner as a combination of a more stable macro environment and a successful transition to a software-centric company has bolstered its turnaround. With the proliferation of AI technology, the company looks positioned to keep this momentum going and deliver even stronger growth down the road.
McDonald's up slightly as $5 value meal drew in customers; E. coli issue seems to be contained (MCD)
McDonald's (MCD) is trading roughly flat following its Q3 results this morning. After back-to-back EPS misses in Q1-Q2, it was good to see MCD get back to reporting EPS upside in Q3, albeit modest upside. Also, after MCD reported its first yr/yr revenue decline last quarter since 4Q22, it was good to see MCD post top line growth in Q3. Revenue rose 2.7% yr/yr to $6.87 bln, slightly better than expected.
- As we said in our preview, the E. coli issue was going to be front and center and it was. The good news is that MCD said the situation appears to be contained. It was able to quickly link the cases to slivered onions from one facility and it has stopped sourcing from this facility indefinitely. Importantly, the Colorado Dept of Ag confirmed that they did not detect E. coli in beef patties and there are no further plans to test. MCD is confident it can return quarter pounders to menus soon.
- MCD has now posted back-to-back negative global comps. In Q3, the -1.5% comp were roughly similar to Q2's -1.0%. But that is down from +1.9% in Q1 and +3.4% in Q4, so not a great trend. In fairness, MCD was lapping robust +8.8% comps in 3Q23. The main problem was international markets. IOM comps were -2.1%, driven by weakness in France and the UK. IDL comps were -3.5% as the war in the Middle East and negative comps in China more than offset positive comps in Latin America.
- US comps were a bit of a bright spot as they edged up +0.3%. Not huge comps, but better than the -0.7% comp in Q2. MCD says the $5 value meal has drawn customers back into its restaurants, particularly lower income consumers. MCD also noted it launched the Collectors Edition campaign in Q3. That drove customers to its restaurants, especially in the US, where the promotion ran alongside the $5 meal deal. The Chicken Big Mac was also successful.
We think MCD deserves credit for pivoting more to value in recent quarters after being caught flat-footed and a bit late as peers turned to value more quickly. MCD has committed to extending the $5 meal deal into December and it plans to introduce more value options in 1Q25 as value has been at the forefront of conversations. And not just in the US. MCD launched free Euro Happy Meals in France, three for three pounds in the UK and in Canada, MCD is providing value through coffee starting at just $1.
Overall, investors seem to like the quarter. Getting the E. coli issue contained was top of mind for investors and it seems MCD has done that. The Q3 results were decent but not great with modest upside to EPS and revs. Also, comps remain weak, but it was good to see US comps return to positive territory. Looking ahead, we are a bit worried about the E.coli impact on Q4 results. This all started after Q3 had wrapped, but Q4 will see an impact. It is one thing to contain the issue, and it looks like MCD has done that, but it will be another thing for consumer to feel safe returning. That will take time. Hopefully, it is just a one quarter impact.
PayPal's Q3 revenue and Q4 sales guidance misses the mark; produces a sell-the-news reaction (PYPL)
PayPal (PYPL -5%) is rejected today following its slight Q3 revenue miss and Q4 revenue growth guidance below consensus. The payment processing firm did deliver Q3 earnings above consensus, sustained decent total payment volume (TPV) growth, and enjoyed a modest bump in active accounts yr/yr and sequentially. However, even though PYPL remains in a transition year, keeping the pace of recovery volatile from one quarter to the next, the stock was trading at a 52-week high heading into Q3 numbers, elevating expectations. As a result, the revenue-related weak points overshadowed the quarter's highlights, triggering today's mild profit-taking.
- Stacked against the previous quarter, PYPL's growth in Q3 represented a minor deceleration. Revenue grew 6% yr/yr to $7.85 bln, supported by TPV growth of 9% and payment transactions growth of 6%. However, it is important to note that PYPL was lapping more challenging comparisons in Q3 than Q2.
- Adjusted EPS swelled by 22% yr/yr relative to the company's guidance to $1.20, assisted by several factors, including ongoing optimization of transaction loss, Venmo, and improvements in credit. Transaction margin dollars, which measure payment processing profitability, accelerated slightly sequentially, increasing by 8% yr/yr in Q3. Braintree, an online payment systems platform focused on smaller businesses, contributed materially to transaction margin dollars.
- The steady numbers showcase the underlying stability of PYPL's operations despite engaging in a significant transformation to shift from a payments company to a commerce platform to unlock the full potential of PayPal and Venmo. Speaking of which, PYPL has been taking a fresh look at Venmo, finding ways to upgrade the user experience. Thus far, PYPL has seen mild progress, boasting a 30% uptick in monthly active debit card accounts. However, only 5% of active Venmo accounts are monthly, displaying plenty of runway left.
- Other transformation initiatives are progressing steadily. For instance, global branded checkout volumes inched 6% higher FXN, consistent with the mid-single-digit growth PYPL has observed for the past three years. Meanwhile, PayPal Complete Payments Platform, or PCP, which caters to small and medium-sized businesses (SMBs), launched in China and Hong Kong last month, with more markets slated for 2025. Where PCP is live, PYPL has steadily converted volume from its legacy products, with 40% of SMB volume now on the platform.
- While these developments are promising, PYPL's Q4 guidance left something to be desired, projecting a low to mid-single-digit increase in adjusted EPS yr/yr and a low single-digit improvement in revenue. The projections are not much of a divergence from the company's previous outlook for the year, reflecting an assumption of consistent macroeconomic and consumer spending conditions. However, Braintree is eating into expected revenue as PYPL focuses on margins over volumes, which the company anticipates will persist through 2025.
Bottom line, PYPL's Q3 performance was decent, with several highlights surrounding its ongoing transformation. However, Q3 and expected revenue to close out 2024 is disappointing, producing a sell-the-news reaction as investors lock in profits following one-year highs yesterday.
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.
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