Market Snapshot
| Dow | 43221.55 | +703.27 | (1.65%) | | Nasdaq | 19511.23 | +466.84 | (2.45%) | | SP 500 | 5953.53 | +107.00 | (1.83%) | | 10-yr Note | +33/32 | 4.65 |
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| | NYSE | Adv 2327 | Dec 425 | Vol 1.0 bln | | Nasdaq | Adv 3325 | Dec 1017 | Vol 7.2 bln |
Industry Watch
| Strong: Communication Services, Materials, Information Technology, Industrials, Real Estate, Financials, Consumer Discretionary |
| | Weak: Consumer Staples |
Moving the Market
--Treasury yields down sharply after better-than-feared December CPI report
--Short-covering activity
--Rebound in mega-cap stocks amid broad-based buying interest
--Slate of better-than-expected earnings from some of nation's largest financial institutions: JPM, C, GS, WFC, BLK
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Closing Summary
15-Jan-25 16:25 ET
Dow +703.27 at 43221.55, Nasdaq +466.84 at 19511.23, S&P +107.00 at 5953.53
[BRIEFING.COM] The stock market rallied following pleasing inflation data in the form of the December Consumer Price Index (CPI) report. The S&P 500 (+1.8%) traded above its 50-day moving average (5,957) at its session high before closing shy of that key technical level.
The CPI report reflected a drop in the year-over-year rate in core-CPI to 3.2% from 3.3%. The 10-yr yield, which is most sensitive to changes in inflation, settled 14 basis points lower at 4.65% and the 2-yr yield settled ten basis points lower at 4.26%. The 30-yr bond yield, which settled just below 5.00% yesterday, declined 11 basis points from yesterday to 4.88%.
Broad-based buying interest in the stock market was also supported by solid earnings results from influential names in the financial sector, along with short-covering activity that drove additional buying in the bond market, too.
JPMorgan Chase (JPM 252.35, +4.88, +2.0%) and Citigroup (C 78.27, +4.77, +6.5%) were among the top performing names in the financial space, reaching fresh 52-week highs after better-than-expected earnings.
The S&P 500 financial sector benefitted from the positive responses to earnings results, gaining 2.6% compared to yesterday's close. The consumer discretionary (+3.0%), communication services (+2.7%), and information technology (+2.2%) sectors were also top performers, reflecting rebound action in the mega cap space.
The defensive-oriented consumer staples (-0.1%) and health care (+0.2%) sectors were at the bottom of the lineup among the 11 sectors.
- S&P Midcap 400: +2.6% YTD
- Dow Jones Industrial Average: +1.6% YTD
- Russell 2000: +1.5% YTD
- S&P 500: +1.2% YTD
- Nasdaq Composite: +1.0% YTD
Reviewing today's economic data:
- Weekly MBA Mortgage Applications Index 33.3%; Prior -3.7%
- December CPI 0.4% (Briefing.com consensus 0.3%); Prior 0.3%, December Core CPI 0.2% (Briefing.com consensus 0.2%); Prior 0.3%
- The key takeaway from the report for a market worried about inflation heating up again is that these results were better than feared which, at first blush, shrouded the reality that the consumer inflation rate is still running well above the Fed's 2% target (albeit a target tied to the PCE Price Index).
- January Empire State Manufacturing -12.6 (Briefing.com consensus -2.0); Prior was revised to 2.1 from 0.2
Looking ahead to Thursday, market participants receive the following economic data:
- 8:30 ET: December Retail Sales (Briefing.com consensus 0.5%; prior 0.7%), Retail Sales ex-auto (Briefing.com consensus 0.5%; prior 0.2%), weekly Initial Claims (Briefing.com consensus 212,000; prior 201,000), Continuing Claims (prior 1.867 mln), January Philadelphia Fed survey (Briefing.com consensus -6.0; prior -16.4), December Import Prices (prior 0.1%), Import Prices ex-oil (prior 0.0%), Export Prices (prior 0.0%), and Export Prices ex-agriculture (prior 0.1%)
- 10:00 ET: November Business Inventories (Briefing.com consensus 0.1%; prior 0.1%) and January NAHB Housing Market Index (Briefing.com consensus 45; prior 46)
- 10:30 ET: Weekly natural gas inventories (prior -40 bcf)
Treasury yields sink
15-Jan-25 15:30 ET
Dow +765.89 at 43284.17, Nasdaq +493.90 at 19538.29, S&P +115.90 at 5962.43
[BRIEFING.COM] The major indices are at session highs heading into the close.
The 10-yr yield settled 14 basis points lower at 4.65% and the 2-yr yield settled ten basis points lower at 4.26%. The 30-yr bond yield, which settled just below 5.00% yesterday, declined 11 basis points from yesterday to 4.88%.
Looking ahead to Thursday, market participants receive the following economic data:
- 8:30 ET: December Retail Sales (Briefing.com consensus 0.5%; prior 0.7%), Retail Sales ex-auto (Briefing.com consensus 0.5%; prior 0.2%), weekly Initial Claims (Briefing.com consensus 212,000; prior 201,000), Continuing Claims (prior 1.867 mln), January Philadelphia Fed survey (Briefing.com consensus -6.0; prior -16.4), December Import Prices (prior 0.1%), Import Prices ex-oil (prior 0.0%), Export Prices (prior 0.0%), and Export Prices ex-agriculture (prior 0.1%)
- 10:00 ET: November Business Inventories (Briefing.com consensus 0.1%; prior 0.1%) and January NAHB Housing Market Index (Briefing.com consensus 45; prior 46)
- 10:30 ET: Weekly natural gas inventories (prior -40 bcf)
Mega caps lead broad advance
15-Jan-25 15:00 ET
Dow +776.09 at 43294.37, Nasdaq +471.02 at 19515.41, S&P +112.12 at 5958.65
[BRIEFING.COM] The major indices are back at session highs. The S&P 500 hit its 50-day moving average (5,957) earlier and trades just below that level now.
Mega cap continue to have an outsized impact on index gains, but many other names are participating in upside moves. The equal-weighted S&P 500 trades 1.1% higher.
The Vanguard Mega Cap Growth ETF (MGK) trades 2.5% higher and the S&P 500 sectors that house mega cap constituents sit at the top of the leaderboard. The communication services (+3.0%), consumer discretionary (+2.8%), and information technology (+2.2%) sectors are the best performers along with financials (+2.6%).
Fed's Beige Book highlights modest economic gains and optimism for 2025, markets little changed
15-Jan-25 14:30 ET
Dow +707.94 at 43226.22, Nasdaq +454.56 at 19498.95, S&P +105.93 at 5952.46
[BRIEFING.COM] The broader market is little changed following the Fed's January Beige Book, released at the bottom of the hour; the report showed economic activity increased slightly to moderately across the twelve Federal Reserve Districts in late November and December. Also, employment ticked up on balance, with six Districts reporting a slight increase and six reporting no change; additionally, prices increased modestly overall, with growth rates ranging from flat to moderate. Currently, the S&P 500 (+1.81%) is in second place, up about 105 points.
- Among other notable points from the report, manufacturing decreased slightly on net, and a number of Districts said manufacturers were stockpiling inventories in anticipation of higher tariffs.
- The spread of avian flu reduced egg supplies and pushed up prices.
- More contacts were optimistic about the outlook for 2025 than were pessimistic about it, though contacts in several Districts expressed concerns that changes in immigration and tariff policy could negatively affect the economy.
Currently, the yield on the benchmark 10-yr treasury note is down about 14 bps to 4.656%.
Gold rises as dollar and Treasury yields slide following inflation data
15-Jan-25 13:55 ET
Dow +729.05 at 43247.33, Nasdaq +437.84 at 19482.23, S&P +103.75 at 5950.28
[BRIEFING.COM] With about two hours to go on Wednesday afternoon the tech-heavy Nasdaq Composite (+2.30%) holds a decent lead over its major counterparts, up about 437 points.
Gold futures settled $35.50 higher (+1.3%) to $2,717.80/oz, following inflation data and as the dollar and Treasury yields slipped.
Currently, the U.S. Dollar Index is down about -0.1% to $109.11.
Intuitive Surgical surging to record highs after guiding Q4 revenue above expectations (ISRG)
Following a banner year in 2024 in which shares rocketed higher by 55%, the bullish trend is continuing in 2025 for Intuitive Surgical (ISRG) as the stock breaks out to new all-time highs after the company guided Q4 revenue well above expectations. The robotic surgery leader, which had been contending with supply chain issues and COVID-related headwinds, especially in China, has put those issues in the rearview mirror and is now capitalizing on some key growth catalysts, most notably including strong demand for its new da Vinci 5 system.
- In March 2024, ISRG received FDA clearance for its da Vinci 5 robotic system, but the initial rollout of that system was limited as the company optimized its manufacturing capacity and worked through supply chain bottlenecks. In Q3, though, the ramp up gained steam with ISRG placing 110 da Vinci 5 robots, up from 70 placements in Q2. That momentum continued into Q4, illustrated by the company placing 174 da Vinci 5 systems, which feature several notable upgrades from the last version, such as Force Feedback technology and more realistic 3D imaging.
- Similar to the razor/razorblade model, more systems sales for ISRG leads to higher sales of instruments and accessories. With total system sales increasing by 19% yr/yr to 493, Q4 instruments and accessories revenue grew by an estimated 23% yr/yr to $1.41 bln.
- On neither a positive nor negative basis, ISRG is no longer experiencing any impact on procedure volume due to COVID-19. A resurgence in COVID-19 infections across parts of China pressured procedure volume growth in various periods in 2023 and 2024, while the unwinding of a procedure backlog in the U.S. due to patients delaying treatment during the pandemic has now fully played out. Underlying procedure demand is healthy, as evidenced by an 18% increase in procedures in Q4, driven by strength in general surgery procedures in the U.S. (+19%) and international procedure growth of 23%.
- The one hiccup, though, is that ISRG expects global da Vinci procedure growth to slow to 13-16% in 2025 after growing by 17% in 2024. However, the company seems to be taking a conservative approach with its outlook given the momentum for da Vinci 5, and the reaction in the stock suggests that the market is betting that is indeed the case.
The main takeaway is that after a sluggish start, ISRG's da Vinci 5 system is gaining strong adoption, providing the company with a potent growth catalyst. It's worth noting, though, that the stock is quite expensive with a 1-year forward P/E that's now approaching 70x, leaving little room for error when ISRG reports earnings and issues guidance on January 23.
Microsoft takes a leap higher today on the announcement of its Quantum Ready program (MSFT)
Microsoft (MSFT +2%) takes a leap higher today after announcing its new Quantum Ready program, marking another step further into the quantum computing field. The news has had a ripple effect on numerous quantum computing stocks, such as QBTS and IONQ, sending them soaring after a recent gap-down last week following comments from AI chip leader NVIDIA's (NVDA) CEO, who suggested that useful quantum computers are at a minimum 15 years away.
What is quantum computing? The term is used to describe how a computer processes data, using qubits instead of bits. While bits can hold only one combination of on and off, qubits can have multiple combinations, allowing quantum processors to sift through vast data sets in a way that traditional processors cannot.
However, there are many hurdles to clear before quantum computing can reach the mainstream. For instance, because qubits can be both on and off simultaneously, they are susceptible to interference, leading to errors and unusable results. To reduce the error rate, companies like Google (GOOG), which sparked a quantum computing frenzy in early December with its Willow chip, up the number of qubits used. However, these chips, including Google's, remain proof of concept, an underlying factor in NVDA's CEO tapping the brakes on quantum computing.
Nevertheless, MSFT's announcement today could signal a shifting landscape where AI may be beginning to take a backseat in quantum computing.
- The Quantum Ready program aims to assist companies, investment funds, and governments in their multi-billion dollar quantum computing investments. Currently, many of these entities are planning a quantum-ready strategy but may be encountering challenges in assessing risk and return, as well as creating a roadmap surrounding quantum computing. As such, the Quantum Ready program provides organizations with the tools needed to address these hurdles.
- Throughout 2024, MSFT announced a string of developments surrounding Azure Quantum, its quantum-focused cloud-based platform. In April, MSFT announced it was entering the next phase for solving problems with reliable quantum computers through logical qubits, which combine multiple physical qubits and touted a better error rate than physical qubits. In September, MSFT noted that these logical qubits demonstrated noticeable improvements.
- By reaching organizations early with its Quantum Ready program, MSFT is looking to be the tech company businesses turn to when trying to implement what could be the next significant technological breakthrough. This strategy could be MSFT's next leg of growth over the long term if the challenges associated with quantum computing are resolved.
Over the next year, MSFT expects the pace of quantum R&D to accelerate. However, the company did not add when retail or commercial applications would be available. Instead, 2025 is shaping up to likely revolve around quantum computing R&D. As such, quantum names could continue to see considerable volatility as news over potential breakthroughs or possible setbacks pour in.
Citigroup banking some solid gains as momentum across business lines fuels upside Q4 results (C)
The 4Q24 earnings season is off to a good start for the banking industry after Citigroup (C) joined JPMorgan Chase (JPM) and Wells Fargo (WFC) in delivering better-than-expected earnings this morning with the company seeing revenue growth in each of its five business segments. Additionally, Citigroup, which embarked on a major transformation plan in 2024 in an effort to unlock value and drive higher returns, took a big step in achieving that goal by authorizing a new $20.0 bln stock buyback program.
Beyond its progress in carrying out its transformation initiatives, which helped lower operating expenses by 18% in Q4, Citigroup also benefitted from more benign foreign exchange impacts. In particular, a smaller impact from the devaluation of the Argentina currency provided a boost as total revenue grew by 12% yr/yr to $19.58 bln, compared to a 7% increase when excluding the effect of the devaluation.
At the same time, the upswing in M&A activity and IPOs continued in Q4, lifting revenues for banks' investment banking arms, and Citigroup was no exception.
- On that note, Citigroup's Banking segment generated revenue growth of 27% to $1.2 bln, fueled by a 35% jump in investment banking revenue. The company saw growth across all categories -- debt capital markets, equity capital markets, and advisory -- thanks to a more conducive macroeconomic environment for deals. With the incoming Trump Administration likely taking a more lenient approach to business regulations, and with the possibility of more interest rate cuts this year, the backdrop looks pretty bright for the Banking segment in 2025.
- The star of the show, though, was Citigroup's Markets segment. Revenue soared by 36% to $4.6 bln, easily topping expectations, as the company saw strength in both fixed income and equity markets. On the fixed income side, healthy demand for rates, currencies, and spreads products drove a 37% jump in revenue to $3.5 bln, while record highs for the stock market in Q4 pushed prime balances higher by 23% and facilitated revenue growth of 34%.
- Turning to the consumer side of the business, high interest rates continue to drive credit card balances higher in the U.S. Personal Banking (USPB) segment, while Citigroup also kept a tight lid on expenses. In branded cards, revenue increased by 7% to $2.8 bln as interest-earning balances also grew by 7%, but higher net credit losses due to the elevated interest rate environment provided a headwind. Overall, net income for USPB decreased by 25% qtr/qtr to $392 mln, but on a yr/yr basis, net income was up by 95%.
- Lastly, CEO Jane Fraser stated that Citigroup entered 2025 with momentum across its business lines, which is reflected in the upside FY25 revenue guidance of $83.5-$84.5 bln. If there is a blemish, it's that Citigroup slightly lowered its return on tangible common equity (RoTCE) outlook to 10-11% by the end of next year, compared to its prior forecast of 11-12%.
The main takeaway is that a combination of company-specific (Citigroup's turnaround initiatives), macroeconomic, and industry-wide drivers underpinned a strong Q4 earnings report, propelling shares to new multi-year highs. While plenty of risks remain, including geopolitical uncertainties and stubbornly high interest rates, Citigroup's outlook for FY25 remains bright.
JPMorgan Chase reaches record highs today on another healthy earnings report in Q4 (JPM)
JPMorgan Chase (JPM +1%) attains fresh record highs today following another sizeable earnings beat in Q4 on energetic top-line growth. The prominent bank has notched double-digit earnings beats in 9 out of the past 10 quarters, underscoring impressive bottom-line consistency. Meanwhile, revs accelerated from the +6.5% yr/yr bump last quarter to return to double-digits at 10.9% to $43.31 bln, supported by a 30% surge in noninterest revenue, excluding Markets, to $13.7 bln, which helped offset a 2% dip in net interest income.
- Starting with the minor drawbacks from the quarter, JPM's Consumer & Community Banking (CCB) segment trailed in Q4, registering a meager 1% increase in net revs yr/yr to $18.36 bln. The culprit was Banking & Wealth Management, which recorded a 7% drop in sales, reflecting lower rates, deposit margin compression, and lower deposit balances as consumers continue to seek higher-yielding instruments, such as high-yield savings accounts. However, JPM noted that average deposits were flat sequentially, suggesting stabilized consumer balances.
- Furthermore, JPM's provision for credit losses was $2.6 bln, reflecting net charge-offs of $2.4 bln, a minor uptick from last quarter's $2.1 bln. The sequential jump was driven by Card Services, underpinning moderate weakness from the end consumers as they battle a dynamic economic backdrop.
- Nevertheless, on the whole, JPM delivered uplifting numbers. The other components of CCB, including Home Lending and Card Services & Auto, performed nicely, chalking up 12% and 14% revenue increases, respectively, driven by higher production revs in Home Lending and higher revolving balances and sales volume in Card & Auto.
- In Commercial & Investment Bank (CIB), net revs surged 18% yr/yr to $17.6 bln, supported by a 15% jump in Banking & Payments and 20% in Markets & Securities Services. In Banking, growth was underscored by a 49% leap in investment banking fees; JPM reiterated its confidence in its M&A pipeline. In Payments, revenue expanded by 3%, excluding the net impact of equity investments, underpinned by higher deposit balances and fee growth. Markets & Securities Services growth was assisted by robust market activity, sending fee growth higher.
- CEO Jamie Dimon, who stated today that yesterday's promotion of Jennifer Piepszak to COO does not change the succession timeline, provided color on the economy. Just last week, Mr. Dimon remarked that he was cautiously pessimistic about the U.S. economy; this measured tone continued today. The CEO stated that while the economy has been resilient, with unemployment low and consumer spending healthy, two significant risks remain. For one, inflationary conditions may persist for some time. Secondly, geopolitical tensions remain complicated.
The minor weak points in JPM's Q4 report, including sliding revenue in Banking & Wealth Management and higher net charge-offs, were more than offset by several highlights. However, today's response is more muted than last quarter as the stock trades at a relatively rich valuation, with its forward P/E multiple of 14x exceeding some of its closest peers, such as BAC at 13x, WFC at 12x, and C at 10x. Still, JPM's results set a bullish tone ahead of other bank's earnings reports in the coming days.
Eli Lilly struggles to meet sky-high expectations as Q4 Mounjaro and Zepbound sales fall short (LLY)
Sales of Eli Lilly's (LLY) blockbuster diabetes and weight loss drugs, Mounjaro and Zepbound, are very strong, but they're not quite as robust as the company and analysts had anticipated in Q4. Therefore, the company issued downside Q4 revenue guidance of $13.5 bln, igniting a sharp selloff in the stock that has now taken shares lower by about 24% from the record highs set last August.
The pharmaceutical giant also guided for FY25 revenue of $58-$61 bln, equating to estimated yr/yr growth of approximately 32% and beating expectations at the midpoint of the range. However, the lofty expectations and rich valuation -- LLY is currently trading with a 1-year Forward P/E of 35x -- is leaving little room for error and the company's second straight quarterly revenue miss is enough of a blemish to instigate a pullback.
- Rewinding to last quarter, the story was much the same as today. While demand for Mounjaro and Zepbound was very strong, as reflected by Mounjaro sales surging by 121% yr/yr to $3.11 bln and Zepbound generating sales of nearly $1.3 bln, inventory decreases in the wholesale channel prevented growth from being even stronger. LLY estimated that these decreases negatively impacted Q3 sales of Mounjaro and Zepbound by a mid-single-digit rate.
- Similarly, in this morning's press release, LLY cited lower-than-expected channel inventory as a factor in its softer-than-expected Q4 results. Furthermore, the anticipated bump in December sales that typically results from customers bolstering prescriptions before deductibles reset in January did not play out as expected.
- Looking beyond Mounjaro and Zepbound, most of LLY's portfolio is also performing quite well. In fact, its non-incretin products generated strong growth of 20% in Q4, marking an acceleration from last quarter's growth of 17%. Verzenio, a treatment for metastatic breast cancer, has been a standout with sales up by 37% in Q3, while autoimmune disease drug Taltz has also seen solid growth. The clear laggard has been Trulicity, a diabetes/weight loss drug that has been cannibalized by the surge in sales for Mounjaro and Zepbound. In Q3, Trulicity sales tumbled by 22% to $1.30 bln.
The main takeaway is that business is still quite strong for LLY and that FY25 is setting up to be another highly successful year, led by high double-digit growth for Mounjaro and Zepbound. Expectations are sky-high for the company, so any disappointment is going to be amplified, but many companies -- especially mature pharmaceutical companies -- would gladly accept 30%+ top-line growth.
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