Market Snapshot
| Dow | 43408.47 | +139.53 | (0.32%) | | Nasdaq | 18966.17 | -21.32 | (-0.11%) | | SP 500 | 5917.12 | +0.13 | (0.00%) | | 10-yr Note | -1/32 | 4.41 |
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| | NYSE | Adv 1253 | Dec 1463 | Vol 891 mln | | Nasdaq | Adv 2045 | Dec 2205 | Vol 7.1 bln |
Industry Watch
| Strong: Energy, Health Care, Materials, Industrials |
| | Weak: Consumer Discretionary, Consumer Staples, Information Technology |
Moving the Market
-- Focus on earnings news from retail space after Target (TGT), TJX (TJX), and William-Sonoma (WSM) reported results
-- Waiting on influential earnings after the close
-- Weakness in mega caps and semiconductor-related names
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Closing Summary
20-Nov-24 16:30 ET
Dow +139.53 at 43408.47, Nasdaq -21.32 at 18966.17, S&P +0.13 at 5917.12
[BRIEFING.COM] The stock market had a mixed showing. The major indices ultimately settled near their best levels of the session thanks to a late afternoon push higher. The S&P 500 closed less than one point higher than yesterday after being down as much as 1.0%. The Nasdaq Composite traded as low as 1.4% and closed only 0.1% lower. The Dow Jones Industrial Average, which traded down as much as 0.4%, closed 0.3% higher than yesterday.
Many stocks participated in the afternoon improvement, which mostly occurred after the cash session concluded in the bond market. The 10-yr yield settled four basis points higher at 4.41% and the 2-yr yield settled three basis points higher at 4.30%. Treasury yields initially moved lower in response to some geopolitical angst as reports indicated Ukraine had fired UK-made missiles into Russia.
Early safe-haven buying dissipated, though, after Fed Governor Bowman (FOMC voter) indicated that she would like to proceed cautiously in bringing down the policy rate and after today's $16 billion 20-yr bond auction met weak demand.
Weakness in the mega cap space limited index performance throughout the session. Retailers were also noticeably weak after Target's (TGT 121.72, -33.16, -21.4%) disappointing guidance.
S&P 500 sector performance was mixed, leaving the health care (+1.2%) and energy (+1.0%) sectors at the top of the leaderboard while the consumer discretionary (-0.6%), financials (-0.3%), and information technology (-0.2%) sectors brought up the rear.
- Nasdaq Composite: +26.4%
- S&P 500: +24.1%
- S&P Midcap 400: +16.2%
- Dow Jones Industrial Average: +15.2%
- Russell 2000: +14.7%
Reviewing today's economic data:
- Weekly MBA Mortgage Applications Index, which increased 1.7% with purchase applications increasing 2% and refinance applications rising 2%
- Weekly EIA crude oil inventories showed a build of 545,000 barrels
Thursday's economic calendar features:
- Weekly Initial Claims at 8:30 ET (Briefing.com consensus 221K; Prior 217K)
- Weekly Continuing Claims at 8:30 ET (Prior 1873K)
- November Philadelphia Fed Index at 8:30 ET (Briefing.com consensus 7.0; Prior 10.3)
- October Existing Home Sales at 10:00 ET (Briefing.com consensus 3.90 mln; Prior 3.84 mln)
- October Leading Home Sales at 10:00 ET (Briefing.com consensus -0.3%; Prior -0.5%)
Stocks move up ahead of the close
20-Nov-24 15:35 ET
Dow +130.56 at 43399.50, Nasdaq -56.56 at 18930.93, S&P -6.52 at 5910.47
[BRIEFING.COM] The market moved higher over the last half hour. The Dow Jones Industrial Average trade about 140 points higher and the S&P 500 trades near its prior close.
NVIDIA (NVDA 145.00, -2.01, -1.4%) headlines the earnings reports after the close. Palo Alto Networks (PANW 394.51, +6.48, +1.7%), Snowflake (SNOW 129.69, -0.62, -0.5%), and others also report earnings after the close.
Pinduoduo (PDD 166.01, -1.67, -1.4%), Baidu (BIDU 86.36, +0.34, +0.4%), Deere (DE 403.54, +3.45, +0.9%), and others report earnings ahead of Thursday's open.
Stocks move sideways; Thursday's economic calendar
20-Nov-24 15:10 ET
Dow -52.52 at 43216.42, Nasdaq -151.56 at 18835.93, S&P -30.95 at 5886.04
[BRIEFING.COM] The major indices moved mostly sideways in recent action.
Thursday's economic calendar features:
- Weekly Initial Claims at 8:30 ET (Briefing.com consensus 221K; Prior 217K)
- Weekly Continuing Claims at 8:30 ET (Prior 1873K)
- November Philadelphia Fed Index at 8:30 ET (Briefing.com consensus 7.0; Prior 10.3)
- October Existing Home Sales at 10:00 ET (Briefing.com consensus 3.90 mln; Prior 3.84 mln)
- October Leading Home Sales at 10:00 ET (Briefing.com consensus -0.3%; Prior -0.5%)
Qualcomm dips in S&P 500 standings after Investor Day, Keysight gains on earnings
20-Nov-24 14:30 ET
Dow -102.53 at 43166.41, Nasdaq -185.64 at 18801.85, S&P -38.89 at 5878.10
[BRIEFING.COM] The S&P 500 (-0.66%) is in second place on Wednesday afternoon.
Elsewhere, S&P 500 constituents Qualcomm (QCOM 153.90, -10.81, -6.56%), Monolithic Power (MPWR 553.81, -32.06, -5.47%), and Ford Motor (F 10.65, -0.40, -3.62%) show decent losses. QCOM hit a three-month low today after investors were left unimpressed with the company's five-year targets released at its 2024 Investor Day, MPWR continues recent weakness, and F is pressured by reports of job cuts in Europe.
Meanwhile, Keysight (KEYS 161.40, +9.27, +6.09%) hit a 15-month high earlier today in reaction to last night's earnings.
Gold higher on escalating Russia-Ukraine tensions
20-Nov-24 14:00 ET
Dow -118.27 at 43150.67, Nasdaq -168.19 at 18819.30, S&P -37.25 at 5879.74
[BRIEFING.COM] The Nasdaq Composite (-0.89%) is today's worst-performing major average, down now about 170 points.
Gold futures settled $20.70 higher (+0.8%) to $2,651.70/oz, tapping one-week highs owing in part to escalating Russia-Ukraine tensions.
Meanwhile, the U.S. Dollar Index is up about +0.5% to $106.77.
Delta Air Lines remains grounded after issuing slate of guidance (DAL)
Ahead of this morning's annual Investor Day, Delta Air Lines (DAL) released a batch of financial guidance that paints a bullish picture of the air travel demand environment and DAL's plans to capitalize on a rising trend towards premium seats. However, costs are also expected to increase more than expected, dampening an otherwise upbeat outlook.
- DAL reaffirmed its Q4 EPS guidance of $1.60-$1.85 and its revenue growth forecast of +2-4%, adding that the industry backdrop is looking increasingly constructive as unit revenue trends head higher. Recall that when DAL reported Q3 results on October 10, it commented that supply growth continued to rationalize and that in September, both domestic and transatlantic unit revenue growth turned positive. These positive trends appear to be continuing into Q4, positioning DAL to materially improve upon the 3.6% decline in TRASM last quarter.
- A main theme of DAL's Investor Day is that expanding its premium seats and offerings will be a focal point of its growth strategy. In Q3, premium ticket revenue grew by 4%, far outpacing the 5% decline in main cabin ticket revenue. To build on that strength, DAL plans to add more premium seats to its fleet while its marketing efforts home in on millennial travelers who are spending more on travel than any other generation. In fact, DAL stated that nearly two-thirds of millennial customers are willing to pay for luxury travel.
- Compared to main cabin, margins for premium cabin are fifteen percentage points higher. As premium seats account for an increasingly larger portion of total seats -- DAL expects premium to exceed main cabin by 2027 -- the company's operating margins should expand. On that note, DAL's new 3–5-year financial framework calls for mid-teen operating margin expansion, driving 10% average annual EPS growth.
- Rising wages for pilots, flight attendants, and mechanics will continue to act as a headwind on the bottom-line. In Q3, non-fuel CASM increased by a healthy 5.7%, slightly above DAL's guidance of 5.5%. Looking ahead to 2025, the company is expecting non-fuel CASM to increase by low-single-digits yr/yr, compared to analysts' expectation for a yr/yr decline.
The main takeaway is that DAL sees mostly sunny skies ahead and so does the market, as illustrated by the stock's 70% surge higher since the beginning of August. There may be some disappointment that DAL chose to only reaffirm its Q4 guidance instead of raising it, but its plans to drive higher margins and EPS growth through an expanded premium business should bode well for the stock in the long run.
Qualcomm slides on its five-year financial projections for its Automotive and IoT businesses (QCOM)
Qualcomm (QCOM -6%) breaks below early August lows today after outlining new growth targets across its Automotive and Internet of Things (IoT) businesses, projecting to reach $22 bln in combined revenue by FY29 (Sep). Following roughly $8.33 bln combined revenue in FY24, QCOM anticipates compounded annualized growth of over +21% over the next five years.
- Given QCOM's aggressive growth targets, why are shares sliding? Most of the targets were in line with street estimates. On the IoT side, revenue growth recovered nicely in Q4, jumping by 22% to finish the year down just 9% yr/yr. Meanwhile, Automotive revenue surged by 68% in Q4, ending the year 55% higher compared to FY23.
- Inventory woes are mostly behind QCOM, aiding its sharp rebound in IoT. At the same time, Automotive has been capitalizing on new vehicle launches over the past few quarters.
- Slightly disappointing was QCOM's PC revenue target, which is under the IoT business. QCOM projected PC revs of $4.0 bln by FY29, which may be a bit of a letdown given the AI PC buzz lately. While it is unclear how much IoT revenue stemmed from PCs in Q4, AI PCs likely helped pull QCOM's IoT business out of its slump, reflecting growing momentum within the PC market.
- During its conference yesterday, management mentioned that its PC roadmap will soon cover tiers from $600 and up, boasting over 100 designs by 2026, giving it access to 70% of the PC market.
There is still a lot to like about QCOM's financial targets. The company noted that its Automotive design-win pipeline stands at $45 bln, up from $13 bln just three years ago, reflecting healthy demand for connectivity and advanced driver assistance systems. Management added that its current design win pipeline covers 80% of its Automotive revenue goal for FY29, highlighting how very little of its ambition will depend on new business. Furthermore, QCOM's PC sales projection could be leaning conservative, given that it recently ventured into this industry with its Snapdragon X Elite chip. AI-powered Copilot+ PCs may garner more widespread adoption once their features are better known by the market, such as significantly improved battery life and on-device AI capabilities.
Bottom line, QCOM's new five-year financial estimates were decent but likely priced in for the most part. Meanwhile, investors may feel a tad blue over a PC projection that does not align with the outsized AI-related enthusiasm. There could also be some angst brewing ahead of NVIDIA's (NVDA) Q3 (Oct) report today.
TJX's Q4 guidance disappoints, but off-price retailer still thriving in tough retail climate (TJX)
As September quarter earnings reports continue to roll out for the retail sector, a key takeaway that's emerging is that many consumers became even more value conscious, scrutinizing their spending habits and trading down to lower price points. In this tough environment, off-price retailer TJX (TJX) has been thriving, likely taking market share from department stores and big box retailers like Nordstrom (JWN), Kohl's (KSS), and Target (TGT), which reported weak Q3 results this morning, while also guiding Q4 EPS well below expectations.
- Meanwhile, TJX continues to deliver strong results as Q3 EPS and revenue edged past estimates, driven by solid consolidated comparable sales growth of 3% and higher merchandise margins. Taking some of the luster off the better-than-expected Q3 results was the company's Q4 EPS guidance of $1.12-$1.14, which is slightly below expectations. However, it's worth noting that TJX does have a tendency of issuing conservative guidance and then surpassing that guidance when it reports earnings. In fact, this has been the case in each of the past three quarters.
- Like last quarter, TJX's comp growth was entirely driven by an increase in customer transactions, indicating that its product assortment and value proposition are resonating well with consumers. By brand, HomeGoods was the standout again with comps of +3%, which is quite impressive given that it lapped growth of +9% in the year-earlier period. Meanwhile, Marmaxx, which combines TJ Maxx and Marshalls and is the company's largest segment, performed well with a comp of +2% on top of last year's comp of +7%.
- Bolstered by lower freight costs, higher net interest income, and stronger merchandise margins, TJX's pretax margin came in well ahead of the company's plan, expanding to 12.3% from 10.9% last quarter. For Q4, TJX is forecasting pretax profit margin to slip to 10.8-10.9%, but again, the company oftentimes exceeds its own guidance.
In the earnings press release, CEO Ernie Herrman commented that Q4 is off to a strong start and that the company is excited for the holiday shopping season. Indeed, we believe that TJX will again emerge as a winner in the retail space this holiday season as consumers continue to hunt for bargains. With shares hovering around all-time highs, TJX was facing lofty expectations ahead of the Q3 earnings report. The company's conservative downside Q4 EPS guidance provided the catalyst for this morning's profit-taking pullback, but the overall story for TJX remains bright in our view.
Target plunges as positive trends reverse course in Q3; headwinds to persist in Q4 (TGT)
A steep Q3 (Oct) earnings miss, decelerating revenue growth, and gloomy guidance are sending shares of Target (TGT -20%) down to levels not experienced since November 2023. Expectations may not have been soaring ahead of the big-box retailer's Q3 report today as shares were up around just +9% on the year. However, accelerating same-store growth from rival Walmart (WMT) in OctQ did make investors feel rather optimistic about how TGT may perform in the quarter.
That positivity has been wiped away today as TGT's relatively higher exposure to discretionary categories compared to WMT weighed considerably on Q3 results. Around 60% of WMT's U.S. sales stem from groceries, with only a fourth coming from general merchandise. TGT's exposure is essentially the inverse, with just under a fourth of its FY24 (Jan) revenue comprised of Food & Beverage. In a climate bogged down by cumulative inflation, shoppers are consolidating trips and holding off on big-ticket items, disproportionately hurting TGT.
Frustratingly, challenges are expected to stay over the near term, influencing TGT's disappointing Q4 (Jan) forecasts, including flat comps and EPS of $1.85-2.45, representing a 28% decline yr/yr at the midpoint. TGT also cut its FY25 EPS outlook to $8.30-8.90 after raising it last quarter to $9.00-9.70.
- In Q3, TGT's revenue inched 0.9% higher yr/yr to $25.23 bln, slowing from 2.7% last quarter. Same-store sales were +0.3%, landing toward the lower end of its +0.0-2.0% forecast. Comps softened considerably versus a +2% improvement in Q2, reflecting a sharp reduction in discretionary demand and average ticket. Discouragingly, lackluster sales unfolded even as TGT lowered prices on thousands of goods this year, eyeing price reductions on over 10,000 items by year's end.
- A glum combination of lower prices and weaker sales eroded operating margins by 60 bps yr/yr in Q3, fueling TGT's earnings miss, as EPS compressed by 12% yr/yr to $1.85. The impact of merchandise mix on margins was roughly flat in the quarter, down from a decent-sized benefit in Q2, illuminating a rapid slowdown in TGT's highest margin Apparel and Home categories, whose comps decelerated by 4 pts sequentially.
- Among the rough patches were a few bright spots. Traffic sustained its low single-digit yr/yr growth in the quarter, highlighting TGT's guest-focused strategies. Meanwhile, Digital comps surged by +11%, supported by nearly 20% growth in TGT's same-day delivery service and double-digit growth in its drive-up service, which accounted for approximately 8% of Q3 revs. Category-wise, Beauty boasted over +6% comp growth, and Food & Beverage and Essentials both saw low single-digit comps.
Shoppers spending cautiously in Q3, hesitating to buy until the last minute and prioritizing deals took a massive bite out of TGT's performance. What made results so deflating was that just last quarter, TGT delivered upbeat comp growth on improving trends across discretionary categories and raised its FY25 guidance. Such a rapid 180 underscores a retail environment still operating on shaky ground as the cumulative effects of inflation continue to squeeze budgets and produce elevated volatility from quarter to quarter.
Medtronic edges lower after a supplier issue interferes with internal expectations in Q2 (MDT)
Medtronic (MDT -2%) ticks lower today as sellers remain in control of the stock despite the medical device manufacturer delivering beats on its top and bottom lines in Q2 (Oct) while also raising its FY25 (Apr) guidance. MDT has slipped by roughly 7% since reaching one-year highs in late October. Currently, the stock is returning toward mid-August levels, searching for support at its 200-day moving average (84.49).
What was the central issue in Q2? MDT's Cardiac Ablation Solutions (CAS) segment recorded flat yr/yr sales growth in the quarter, missing internal expectations of accelerating sequential growth. New product sales failed to outpace legacy product sales due to a third-party component supplier interruption. MDT mentioned that this supplier has since expanded capacity, allowing it to ramp up new product availability and activate new accounts. However, this minor setback raised concerns about MDT achieving its projected double-digit growth in this business in Q3 (Jan), generating today's moderate selling pressure.
- Aside from the blemish in CAS, MDT delivered consistency in Q2. EPS grew by 1% yr/yr to $1.26, exceeding analyst estimates for the tenth straight quarter. Revs rose by 5% to $8.4 bln, accelerating from the +3% delivered last quarter and topping consensus for the eighth consecutive quarter.
- Strength was spread across MDT's highest growth (20% of revs), established market (50%), and synergistic businesses (30%). In highest growth, which includes CAS, total revs ticked 8% higher in the quarter, supported by Structural Heart, Diabetes, and Hypertension divisions. Established market, vital to MDT's financial model, delivering consistent revenue growth, mid-single digit sales were bolstered by Cranial & Spinal Technologies and Cardiac Rhythm Management. Synergistic businesses grew at a similar pace, underscored by Neuromodulation.
- MDT is confident its diversified growth will continue, raising its FY25 EPS outlook to $5.44-5.50 from $5.42-5.50 and organic revenue growth forecast to +4.75-5.00% from +4.50-5.00%. A business MDT is growing excited about is Hypertension, noting that the condition is the leading cause of cardiovascular disease globally. This makes it a market for the company's Simplicity blood pressure procedure to thrive in, as it plays a critical role in cost-effectively managing hypertension.
MDT is known for its steady quarterly performances, and Q2 was no exception. However, investors are expressing modest discontent over the missed CAS sales growth prediction in the quarter. Meanwhile, with many of MDT's devices dependent on Medicare reimbursement, potential cuts could significantly hurt future growth. That said, MDT remains a healthcare stock worth keeping on the radar given its established credibility in the healthcare sector, capacity for further tuck-in acquisitions, and stable 3.3% annual dividend yield.
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