Market Snapshot
| Dow | 44736.57 | +440.06 | (0.99%) | | Nasdaq | 19054.84 | +51.18 | (0.27%) | | SP 500 | 5987.37 | +18.03 | (0.30%) | | 10-yr Note | +33/32 | 4.27 |
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| | NYSE | Adv 2031 | Dec 718 | Vol 1.8 bln | | Nasdaq | Adv 2952 | Dec 1406 | Vol 8.0 bln |
Industry Watch
| Strong: Consumer Discretionary, Real Estate, Communication Services, Financials, Health Care |
| | Weak: Energy, Information Technology |
Moving the Market
-- Buying stocks and bonds in response to President-elect Trump nominating Scott Bessent for Treasury Secretary
-- Equities garnering added support from drop in yields
-- Below-average volume in front of Thanksgiving holiday
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Closing Summary
25-Nov-24 16:30 ET
Dow +440.06 at 44736.57, Nasdaq +51.18 at 19054.84, S&P +18.03 at 5987.37
[BRIEFING.COM] The stock market started this holiday-shortened week on an upbeat note, responding favorably to President-elect Trump’s nomination of Scott Bessent for Treasury Secretary. The Dow Jones Industrial Average (+1.0%), Russell 2000 (+1.5%), and S&P Mid Cap 400 (+1.5%) logged decent gains while the S&P 500 (+0.3%) and Nasdaq Composite (+0.3%) trailed their peers.
The relative underperformance of the S&P 500 and Nasdaq Composite reflected some rotation out of influential names that are sitting on huge gains since the start of the year. NVIDIA (NVDA 136.02, -5.93, -4.2%), which is still 174.7% higher this year, and Tesla (TSLA 338.59, -13.97, -4.0%), which is up 36.3% in 2024, were among the key players in that regard.
Mr. Trump's pick to lead the Department of the Treasury is perceived as "market-friendly" due to his background as a hedge fund manager, which fueled the overall upside bias in the equity market. According to The Wall Street Journal, Bessent has expressed his priority to advance the Trump administration tax-cut proposals.
The bond market also rallied due to optimism that Mr. Bessent, while focusing on tax cuts, will also focus on reducing the national debt, cutting the budget deficit to 3% of GDP, and advocating for a more gradual approach to tariffs in order to prevent runaway inflation.
The 10-yr yield dropped 15 basis points to 4.27% and the 2-yr yield dropped ten basis points to 4.27%. Also, the U.S. Treasury kicked off this week's note auction slate with a stellar $69 billion 2-yr note offering.
The everything rally in the stock market left nine of the S&P 500 sectors higher led by real estate (+1.3%), which reacted to the drop in rates. The consumer discretionary sector was the next best performer, gaining 1.0%.
The energy sector was the weakest performer, dropped 2.0% as oil prices slid following news that Israel and Hezbollah could be nearing a ceasefire agreement. WTI crude futures settled 3.3% lower at $68.93/bbl.
There was no US economic data of note.
- Nasdaq Composite: +26.9%
- S&P 500: +25.5%
- S&P Midcap 400: +21.9%
- Russell 2000: +20.5%
- Dow Jones Industrial Average: +18.7%
Looking ahead, Tuesday's economic calendar features:
- 9:00 ET: September FHFA Housing Price Index (prior 0.3%) and September S&P Case-Shiller Home Price Index (Briefing.com consensus 4.7%; prior 5.2%)
- 10:00 ET: November Consumer Confidence (Briefing.com consensus 113.0; prior 108.7) and October New Home Sales (Briefing.com consensus 718,000; prior 738,000)
Treasury yields drop sharply after Treasury Secretary nomination
25-Nov-24 15:35 ET
Dow +398.44 at 44694.95, Nasdaq +37.56 at 19041.24, S&P +14.58 at 5983.93
[BRIEFING.COM] The three major indices show gains ranging from 0.2% to 0.9% heading into the close.
Treasury yields settled sharply lower, emboldened by news of what is thought to be a capable nominee to lead the Department of the Treasury. The 10-yr yield dropped 15 basis points to 4.27% and the 2-yr yield dropped ten basis points to 4.27%. Also, the U.S. Treasury kicked off this week's note auction slate with a stellar $69 bln 2-yr note offering.
Looking ahead, Tuesday's economic calendar features:
- 9:00 ET: September FHFA Housing Price Index (prior 0.3%) and September S&P Case-Shiller Home Price Index (Briefing.com consensus 4.7%; prior 5.2%)
- 10:00 ET: November Consumer Confidence (Briefing.com consensus 113.0; prior 108.7) and October New Home Sales (Briefing.com consensus 718,000; prior 738,000)
A, ZM, ANF, BBY, KSS, others report earnings
25-Nov-24 15:05 ET
Dow +366.65 at 44663.16, Nasdaq +23.34 at 19027.02, S&P +9.63 at 5978.98
[BRIEFING.COM] There hasn't been much up or down movement at the index level over recent action.
Agilent Tech (A 134.04, +0.20, +0.2%) and Zoom Video (ZM 89.04, +3.16, +3.7%) are among the names reporting earnings after the close.
Retailers Abercrombie & Fitch (ANF 155.98, +3.99, +2.6%), Best Buy (BBY 93.03, +3.49, +3.9%), and Kohl's (KSS 18.49, +1.43, +8.6%) are among the names reporting results in front of Tuesday's open.
Ulta Beauty, Pool Corp. among top S&P 500 performers on Monday
25-Nov-24 14:30 ET
Dow +379.86 at 44676.37, Nasdaq +26.27 at 19029.95, S&P +11.25 at 5980.60
[BRIEFING.COM] The S&P 500 (+0.19%) is in second place on Monday afternoon, showing modest gains yet decently behind the Dow Jones Industrial Average (+0.86%).
Elsewhere, S&P 500 constituents Ulta Beauty (ULTA 363.57, +25.19, +7.44%), Pool (POOL 390.58, +24.09, +6.57%), and Align Tech (ALGN 239.95, +14.06, +6.22%) pepper the top of the standings. POOL makes 7-month highs today, while ULTA and ALGN bounce despite a dearth of corporate news.
Meanwhile, defense firm Lockheed Martin (LMT 518.37, -23.85, -4.40%) is one of today's top laggards after headlines that Israel and Hezbollah could be close to a ceasefire.
Gold worked over as Middle East ceasefire headlines fuel haven fade
25-Nov-24 14:00 ET
Dow +401.44 at 44697.95, Nasdaq +26.98 at 19030.66, S&P +14.19 at 5983.54
[BRIEFING.COM] With about two hours remaining on Monday the tech-heavy Nasdaq Composite (+0.14%) is today's shallowest gaining major average.
Gold futures settled $93.70 lower (-3.5%) to $2,618.50/oz on news that Israel and Hezbollah could be on the cusp of a ceasefire agreement.
Meanwhile, the U.S. Dollar Index is down about -0.7% to $106.85.
Sony adds to its upward momentum following reports it could be working on a portable console (SONY)
Sony (SONY +1%) adds to its upward momentum today after Bloomberg reported that the media giant was mulling a return to the portable console market. Sony, which owns the PlayStation brand, currently has a portable console on the market, the PlayStation Portal. However, it is merely a streaming device that requires a PlayStation 5 to operate. Therefore, the Portal is not much of a competitor to Sony's Japanese rival, Nintendo (NTDOY), which has dominated the portable console industry with its Nintendo Switch since Sony discontinued the PlayStation Vita in 2019.
Since the release of the Vita, the portable gaming market has seen a drastic change. Several Windows (MSFT), Android (GOOG), and Linux-based handhelds have entered the industry. Meanwhile, mobile gaming has snowballed, comprising more than half of all video game revenue globally. However, there are a few reasons why Nintendo continues to succeed and why it could spill over to Sony.
- Widespread retail availability and familiar intellectual property (IP) are factors behind Nintendo's success. Sony already has established its presence at retail and online shops with its PlayStation console and boasts plenty of popular IP, such as God of War and Gran Turismo, giving it a leg up on lesser-known systems based on Windows, Android, and Linux while helping it lure mobile gamers.
- Sony has experience in the handheld market. While it shipped half as many units as its Nintendo counterpart, Sony enjoyed outsized success with its PlayStation Portable device, which was released in 2004 and discontinued a decade later. Its successor console, the Vita, may have flopped compared to the PlayStation Portable, but past mistakes provide much-needed experience in developing a true rival to the Switch.
- The appetite for portable gaming remains robust. Even though sales for Nintendo have slowed in 2024 compared to years previous, this is largely due to the age of the Switch, which has entered its eighth year on the market. Nintendo mentioned earlier this month that despite yr/yr declines in Switch hardware and software, sales are strong compared to previous systems in their eighth year. Furthermore, Take-Two (TTWO), which owns mobile game publisher Zynga, remarked earlier this month that it was optimistic about the mobile game industry, further reflecting healthy portable gaming demand.
There is no confirmation that Sony will ultimately bring an actual portable console to market. Still, rumors of the company developing a successor to its PlayStation Vita are being met with some excitement today as it could prove disruptive to the long-standing portable console leader, capitalizing on a steady demand for handheld gaming.
Intel's federal grant reduced, but other transactions may more than make up the difference (INTC)
In a busy news morning for struggling chip maker Intel (INTC), the New York Times has reported that the U.S. government is planning to cut INTL's grant to under $8.0 bln from the initial preliminary amount of $8.5 bln. The grant, which originated from the CHIPS and Science Act, will help bridge a wide funding gap as INTC continues to embark on an ambitious U.S. manufacturing expansion plan that will require over $100.0 mln in capital to build factories in Ohio, Arizona, and New Mexico. According to the report, the decision to reduce the grant is related to the $3.0 bln award INTC received from the U.S. government in September to produce advanced chips for the Department of Defense.
- However, it's also plausible that INTC's ongoing woes played a role in the government's decision to hold back some capital. Earlier this year, the company announced that its Ohio plants were delayed by an additional two years, extending production until no earlier than 2027. Since then, INTC's quarterly results have been disappointing to say the least as it has fallen even further behind NVIDIA (NVDA) and Advanced Micro Devices (AMD) in the AI data center market. Cost-cutting actions, including the elimination of 15,000 jobs, and the suspension of its quarterly dividend have followed the poor results.
- The stock is shaking off news of the grant reduction, though, as investors focus on a pair of more positive developments. First, Bloomberg reported that Lattice Semiconductor (LSCC) is considering making an offer for INTC's full Altera unit, which makes chips used in telecom networks. INTC had been planning to sell a minority stake in Altera in an effort to streamline its operations and raise more capital, but for the right price, the company may divest the whole business.
- Private equity firms Bain Capital, Francisco Partners, and Silver Lake are also reportedly looking into a possible bid. It's unclear how much Altera could fetch, but it's worth noting that INTC purchased Altera for about $17.0 bln in 2015. In 3Q23, revenue for Altera plunged by 44% yr/yr to $412 mln. Given Altera's weak recent results, INTC will most likely have to take a sizable haircut on a deal, but the injection of capital from the sale would be viewed as a positive overall.
- Lastly, INTC also announced that it plans to sell and lease back its Folsom, California site in a move that will help the company save more money and generate cash from its real estate portfolio. The facility, which is home to approximately 5,000 employees, would remain fully operational after the transaction.
The main takeaway is that while the reduction in the federal grant is a disappointment, when taken together, this morning's news events indicate that INTC may be poised to generate and free up more capital to be allocated to its manufacturing expansion strategy.
Bath & Body Works is smelling wonderful to investors; stock surges on Q3 report (BBWI)
Bath & Body Works (BBWI +17%) is surging today following its Q3 (Oct) earnings report this morning. At first glance, the outsized move seems unwarranted given the pretty modest EPS upside. Also, revenues rose just 3.1% yr/yr to $1.61 bln, a bit better than analyst expectations. Guidance for the all-important Q4 (Jan) holiday quarter was solid with the mid-point of EPS above expectations while revenue guidance was in-line.
- As one of the world's largest specialty retailers of fragrances for the body (fragrance mist, body lotion, body cream) and home (candles, fragrance diffusers, soap), BBWI was a huge beneficiary during the pandemic with soaps and sanitizers flying off the shelves. However, the retail chain has struggled in recent years as shopping patterns normalize.
- Digging into the Q3 results, we actually view the 3.1% sales growth a positive as it was BBWI's strongest yr/yr growth in 10 quarters, which has seen a lot of declines. In US and Canadian stores, sales growth was even stronger, up 4.4% to $1.2 bln. BBWI says consumers are responding positively to its seasonal merchandise. Each of its core categories (body care, home fragrance, soaps/sanitizers) grew low single digits.
- BBWI said it's innovating across its portfolio and raising the quality of its products, including updating ingredients, packaging, and fragrances. Its home fragrance performance was fueled by growth in the candle business due to marketing and a successful new promotional event. BBWI concedes candles are a competitive market with a value-conscious consumer, a trend that has continued. BBWI is responding with a compelling assortment at a range of price points. Normalization of the candle market has impacted BBWI this year, however, BBWI does not expect it to have a material impact in 2025 and beyond.
- A key strategy for BBWI has been to move away from malls. Approximately 55% of its North American stores are now in off-mall locations, and the portfolio remains very healthy. Also, international markets represent only 5% of sales, but BBWI sees a significant long-term opportunity as it enters new markets and expands in existing markets. BBWI recently opened its 500th international store in London.
Overall, the headline numbers do not blow us away. However, there has been a lot of negativity around BBWI as its products are highly discretionary, especially candles. Consumers are really watching their spend on discretionary items, so these results/guidance were better-than-feared. Also, with a late Thanksgiving, this is a short holiday season and BBWI relies more on in-store foot traffic than other retailers as smell is a big selling point and that needs to be in-person.
Couple that with a tight consumer, and we think investors are pleased with Q4 guidance, which is BBWI's largest revenue quarter by far. So it's very important. Finally, the stock has been under pressure since early June, but has consolidated in recent months bouncing around in the $27-32 area since early August. This report has led to a break above that range, which is a generally positive sign.
Macy's moves lower today despite upbeat Q3 guidance; delayed report weighs (M)
Macy's (M -2%) heads lower today despite projecting Q3 (Oct) revenue and comparable sales ahead of consensus. Injecting some uncertainty into the stock today was that the department store chain found errors surrounding delivery expenses from an employee, prompting it to delay its Q3 earnings report by another week or two. Macy's noted that it should have its full quarterly report by December 11, including its updated FY25 (Jan) outlook.
Without knowing how Macy's sees its holiday season shaping out, investors are cautious about igniting a more meaningful rally today. However, delaying the report until after Black Friday should provide better insight into how the holiday season will shake out. Shares continue to trade in a tight range, recently bouncing nicely on Friday following moderate selling pressure due to Target's (TGT) gloomy OctQ report last week.
- For Q3, Macy's anticipates revenue of $4.74 bln, a 2.5% decline yr/yr, marking the company's tenth consecutive quarter of yr/yr sales compression. Last quarter, Macy's CEO Antony Spring mentioned that the end consumer has grown more discerning, contributing to the company's lowered FY25 sales outlook to $22.1-22.4 bln. Still, Mr. Spring hinted at improving trends, commenting in a conference two weeks later that performance was slightly stronger during the end of August and through Labor Day compared to Q2 (Jul).
- These trends seeped into Q3, not only pushing estimated sales ahead of consensus but also go-forward same-store sales growth, which slipped by -2.0% on an owned basis and -0.9% on an owned and licensed basis. The Macy's banner saw go-forward comps of -2.6% on an owned basis. However, Macy's First 50 locations, where the company is testing a new format, such as emphasizing certain brands, including Birkenstock (BIRK) and NIKE (NKE), enjoyed a +1.9% expected bump in comp growth in Q3.
- Macy's continues to see First 50 as a leading indicator of the performance of Macy's brand. These stores have consistently outperformed Macy's other locations, boasting higher traffic and conversion, which management chalks up to a steadier flow of inventory, better staffing, and a more appealing visual presentation of products.
- Macy's other banners, including Bloomingdales and Bluemercury, partially offset the company's projected negative comp growth in Q3. Bloomingdales comps edged an estimated +1.0% higher, supported by relative strength in contemporary apparel, beauty, and digital. Meanwhile, Bluemercury, which focuses on cosmetics, registered an expected +3.3% comp, marking its 15th straight period of growth, reflecting the relative demand resilience of the banner's skincare offerings.
Today's reaction is reserved, underscoring mixed feelings surrounding Macy's Q3 guidance. Target delivered a surprisingly glum report last week while Walmart (WMT) registered upbeat OctQ numbers, highlighting significant unevenness across the retail landscape. Given this uncertainty, the market is hesitant today, potentially waiting for Macy's full report before pulling the stock noticeably in either direction.
Gap jumps higher following encouraging Q3 report, turnaround making progress (GAP)
Investors are clearly pleased with Gap's (GAP +11.8%) Q3 (Oct) earnings results. The apparel company, which has been in turnaround mode, also raised full year guidance, which bodes well heading into the holiday season. GAP noted that it grew net sales for the fourth consecutive quarter, expanded gross margin, delivered its highest Q3 operating margin in seven years, and gained market share for the seventh consecutive quarter.
- Total comps were +1%, down a bit from +3% in Q2 (Jul), but still decent. Let's start with Old Navy, its largest brand by far. Old Navy comps were flat, but it notched market share gains despite facing weather-related headwinds. Old Navy had meaningful strength in its important men's and women's businesses while its more weather-sensitive kids and baby business slowed mid-quarter due to unseasonably warm weather after a strong back-to-school.
- As soon as the weather cooled, Old Navy saw a pickup in sales, reinforcing its confidence for the holiday selling season. Gap says its Old Navy brand is presenting its merchandising narratives and style better, and its customers are taking notice. It's providing more clarity around pricing and more compelling marketing, promoting great value. Speaking of the holidays. Old Navy should benefit from enhanced store visuals, holiday shops, and an ad campaign starring Jennifer Hudson.
- Gap brand comps were +3%, marking its fourth consecutive quarter of positive comps and the sixth consecutive quarter of market share gains. Gap says its campaigns and collaborations are attracting a new generation to Gap. For example, in Q3, Gap successfully executed the Get Loose campaign, which was rooted in denim and featured Troye Sivan, opening the door to younger consumers.
- Banana Republic was the only brand with a negative comp in Q3 at -1%. Gap is seeking to reestablish the brand in the premium lifestyle space. In Q3, the men's business remained strong while there is still work to be done in women's. BR is moving to evolve its assortment and improve fit. BR expects to enter this holiday season with improved in-stock plans for key basics. Also, BR is shifting its media mix towards more social and influencer marketing.
- Athleta comps were the best of the bunch at +5% in Q3. Athleta has been working hard to improve its product, marketing, and stores. It still has work to do to increase traffic, but its brand communication is beginning to resonate with customers in a more meaningful way.
Overall, this quarter showed that Gap is making progress on its turnaround and it seems to be heading into the holiday season with momentum in each of its brands. Although it sounds like Banana Republic is going to take a bit more time. The stock popped on Q1 earnings in early June but quickly pulled back and has consolidated in the $20-24 area. But this report is providing an opportunity to test the upper limits of this range. |
