Market Snapshot
| Dow | 44156.73 | +130.92 | (0.30%) | | Nasdaq | 20009.34 | +252.56 | (1.28%) | | SP 500 | 6086.36 | +37.12 | (0.61%) | | 10-yr Note | -2/32 | 4.60 |
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| | NYSE | Adv 900 | Dec 1812 | Vol 964 mln | | Nasdaq | Adv 1774 | Dec 2594 | Vol 7.2 bln |
Industry Watch
| Strong: Information Technology, Communication Services |
| | Weak: Real Estate, Utilities, Energy, Financials, Materials |
Moving the Market
-- Some modest consolidation activity impacting many stocks after solid start to 2025
-- Positive responses to earnings from Netflix (NFLX), United Airlines (UAL), Procter & Gamble (PG), Travelers (TRV), and Johnson & Johnson (JNJ)
-- AI enthusiasm after President Trump at press conference alongside CEOs of OpenAI, Softbank (SFTBY), and Oracle confirm partnership to invest up to $500 billion in infrastructure connected to artificial intelligence
-- Calm activity in Treasuries
| Closing Summary
22-Jan-25 16:25 ET
Dow +130.92 at 44156.73, Nasdaq +252.56 at 20009.34, S&P +37.12 at 6086.36
[BRIEFING.COM] The stock market experienced some selling pressure today, but index-level performance didn't reflect that. The S&P 500 (+0.6%) reached a fresh all-time high of 6,100.81, powered by mega caps and chipmakers.
The Vanguard Mega Cap Growth ETF (MGK) closed 1.7% higher while the PHLX Semiconductor Index (SOX) gained 1.7%, buoyed by enthusiasm around AI initiatives. This followed President Trump’s $500 billion AI infrastructure announcement, which brought together notable industry leaders like Oracle's (ORCL 184.22, +11.65, +6.8%) Chairman Larry Ellison, SoftBank CEO Masayoshi Son, and OpenAI CEO Sam Altman, helping propel sentiment in the tech space.
Market internals painted a different picture. At both the NYSE and Nasdaq, decliners outpaced advancers and the equal-weighted S&P 500 closed 0.4% lower. Also, the Russell 2000 (-0.6%) and S&P Mid Cap 400 (-0.4%) closed lower.
This more subdued performance comes after a period of notable outperformance to kick off the year. The Russell 2000 and S&P Mid Cap 400 are still 3.3% and 5.1% higher, respectively, in 2025. Areas of the market that aren't seen as benefitting directly from the AI hype exhibited some consolidation activity today with the exception of some names that reported earnings results.
Netflix (NFLX 953.99, +84.31, +9.7%) was one of the day’s standout performers, surging after delivering the largest quarter of global streaming paid net ads in its history. Blue-chip names, including Procter & Gamble (PG 164.74, +3.02, +1.9%) and Dow component Travelers (TRV 246.72, +7.56, +3.2%), were also among the standouts, reporting strong earnings that bolstered investor confidence.
The 10-yr yield settled three basis points higher at 4.60% and the 2-yr yield settled two basis points higher at 4.30%. Treasuries moved to session lows after the $13 billion 20-yr bond reopening, which met stellar demand.
- S&P Midcap 400: +5.1% YTD
- Dow Jones Industrial Average: +3.8% YTD
- Nasdaq Composite: +3.6% YTD
- S&P 500: +3.5% YTD
- Russell 2000: +3.3% YTD
Reviewing today's economic data:
- Weekly MBA Mortgage Applications Index 0.1%; Prior 33.3%
- December Leading Indicators -0.1% (Briefing.com consensus 0.0%); Prior was revised to 0.4% from 0.3%
Thursday's economic data includes:
- 8:30 ET: Weekly Initial Claims (Briefing.com consensus 219,000; prior 217,000) and Continuing Claims (prior 1.859 mln)
- 10:30 ET: Weekly natural gas inventories (prior -258 bcf)
- 12:00 ET: Weekly crude oil inventories (prior -1.96 mln)
Stocks trade lower ahead of earnings
22-Jan-25 15:00 ET
Dow +160.00 at 44185.81, Nasdaq +275.45 at 20032.23, S&P +47.83 at 6097.07
[BRIEFING.COM] The major indices remain near session highs.
Many names that report earnings this afternoon or Thursday morning are lower in today's consolidation trade. Kinder Morgan (KMI 30.95, -0.27, -0.9%), Steel Dynamics (STLD 123.38, -1.31, -1.1%), American Airlines (AAL 18.54, -0.09, -0.5%), Union Pacific (UNP 236.54, -0.19, -0.1%), Freeport-McMoRan (FCX 39.30, -0.98, -2.5%), Alaska Air (ALK 67.42, -1.45, -2.1%), and Northern Trust (NTRS 107.30, -0.44, -0.4%) are standouts in that respect.
Elevance Health (ELV 391.46, +2.24, +0.6%), GE Aerospace (GE 188.46, +0.90, +0.5%), Alcoa (AA 38.95, +0.33, +0.9%), and Discover Financial (DFS 197.63, +8.37, +4.4%) are going against the downside grain, moving up ahead of their earnings reports.
S&P 500 gains as Monolithic Power, Moderna, and Seagate lead; Solar stocks lag
22-Jan-25 14:30 ET
Dow +113.60 at 44139.41, Nasdaq +259.77 at 20016.55, S&P +41.86 at 6091.10
[BRIEFING.COM] The S&P 500 (+0.69%) is in second place on Wednesday afternoon.
Briefly, S&P 500 constituents Monolithic Power (MPWR 691.01, 52.52, +8.23%), Moderna (MRNA 38.64, +2.75, +7.66%), and Seagate Tech (STX 108.60, +7.35, +7.26%) dot the top of the standings. MPWR is today's top performer in the PHLX Semiconductor Index (SOX), while STX outperforms following earnings out overnight.
Meanwhile, First Solar (FSLR 174.94, -8.57, -4.67%) is weaker, underperforming alongside fellow solar stocks amid initial climate and energy orders from President Donald Trump.
Treasuries settle with losses
22-Jan-25 15:30 ET
Dow +144.02 at 44169.83, Nasdaq +263.23 at 20020.01, S&P +44.80 at 6094.04
[BRIEFING.COM] The market remains near highs ahead of the close.
The 10-yr yield settled three basis points higher to 4.60% and the 2-yr yield settled two basis points higher to 4.30%.
Looking ahead to Thursday, market participants receive the following economic data:
- 8:30 ET: Weekly Initial Claims (Briefing.com consensus 219,000; prior 217,000) and Continuing Claims (prior 1.859 mln)
- 10:30 ET: Weekly natural gas inventories (prior -258 bcf)
- 12:00 ET: Weekly crude oil inventories (prior -1.96 mln)
Gold climbs 0.4% amid trade policy concerns and dollar strength
22-Jan-25 14:00 ET
Dow +108.78 at 44134.59, Nasdaq +257.55 at 20014.33, S&P +42.28 at 6091.52
[BRIEFING.COM] The Nasdaq Composite (+1.30%) is in front handily with about two hours remaining on Wednesday afternoon.
Gold futures settled $11.70 higher (+0.4%) to $2,770.90/oz, stronger amid concerns about President Trump's stance on trade policy.
Currently, the U.S. Dollar Index is up about +0.2% to $108.20.
Seagate Tech continues its impressive rally following upbeat Q2 results (STX)
Seagate Tech (STX +8%) piles onto its impressive rally today after delivering sizeable bottom-line upside on healthy revenue growth in Q2 (Dec). Shares of the hard disk drive (HDD) manufacturer have been on a tear lately, appreciating by nearly +30% in 2025 as investors continue to bet on proliferating AI-related demand. As a leading HDD maker, STX has capitalized on a growing appetite for cheap and fast storage. HDDs continue to offer an attractive combination of the two, maintaining certain advantages over flash storage -- rival Western Digital's (WDC) forte. Speaking of WDC, the company provided a better-than-feared outlook last week, adding kindling to STX's rally leading into Q2 results.
- STX delivered EPS of $2.03, a nearly 16x improvement yr/yr as it was lapping the beginning of a long-awaited recovery from a prolonged bearish cycle. Non-GAAP operating margins surged by 14.9 points yr/yr to 23.1%, further reflecting the outsized challenges STX was facing just one year ago.
- Revenue jumped by 51.6% yr/yr to $2.33 bln, a nice uptick from the +49.1% increase last quarter. Cloud remained the primary revenue driver, benefiting from accelerating nearline product demand, aligning with a nearly 50% rise in cloud capital investments made by customers last year. Partially pushing against this tailwind were supply constraints STX touched on during a conference last month. While STX confirmed that the issue has been resolved, it is expected to weigh on Q3 (Mar) financials.
- STX anticipates cloud customers to continue expanding their investments in 2025 to support the growing demand for traditional services and Gen AI applications. CEO William Mosley expressed outsized enthusiasm for Gen AI and how it will underpin tremendous growth at STX, noting that since a substantial volume of data will be stored on HDDs, Gen AI will drive significant mass capacity storage growth. Meanwhile, in edge computing, STX expects enterprises to store more data at the edge as AI computing gravitates toward the source of data generation.
- To capitalize on this trend, STX has its new Mozaic HAMR (heat-assisted magnetic recording) platform, ramping volume to address demand at the exabyte (used to store massive data) scale. STX has achieved certain qualifications that set the foundation for the next phase of its Mozaic volume ramp during the back half of 2025.
One of the notable weaknesses of STX's Q2 report was its Q3 guidance. STX projected EPS of $1.50-1.90 and revs of $1.95-2.25. The midpoint of its earnings forecast met estimates, while the midpoint of its revenue forecast missed consensus slightly. The problem stems from a seasonal decline in the VIA (edge computing market) and legacy (PCs, laptops, etc.) markets alongside an approximately $200 mln revenue headwind from aforementioned supply constraints limiting STX's ability to respond to in-quarter volume opportunities.
Nevertheless, since it appears to be a minor speed bump, investors are brushing it aside, focused on constant demand for STX's latest generation nearline products, such as Mozaic, and the unwavering demand for AI, all of which can keep STX's tremendous upward momentum active.
United Airlines' shareholders flying the friendly skies following strong Q4 earnings report (UAL)
With shares skyrocketing by over 90% since the beginning of October, and with competitor Delta Air Lines (DAL) posting an impressive Q4 earnings report on January 10, United Airlines (UAL) needed to deliver exceptional Q4 results in order to avoid a sell-the-news reaction. The company did just that, flying past EPS and revenue expectations due to robust demand across each of its businesses -- premium revenue was up 10%, while corporate and economy were up 7% and 20%, respectively -- and due to some unit cost improvement.
Given that strong Q4 results were all but a given in the wake of DAL's upside report, the focal point mainly rested on UAL's guidance. The company didn't disappoint in that regard either, guiding Q1 EPS well above expectations while commenting that it anticipates the robust demand trends to continue this quarter. Accordingly, UAL expects domestic unit revenue, or RASM, to turn solidly positive on a yr/yr basis in Q1, with international RASM showing continued improvement.
- Staying on the topic of RASM, the industry-wide efforts to rein in capacity are paying off in the form of stronger pricing power, and, in turn, higher profit margins. In Q4, RASM swung into positive territory for UAL at +1.6% versus last quarter's -1.6% performance. The improvement doesn't come as a major surprise, though, because UAL noted last quarter that it experienced positive domestic unit revenue in August and September, setting the stage for this return to quarterly RASM growth.
- Alongside the rebound in RASM, lower fuel costs pushed CASM down by 1.6%, providing another boost to profits. Adjusted pre-tax margin expanded by 350 bps yr/yr to 9.7% and adjusted EPS jumped by 63% to $3.26.
- The one blemish is that UAL expects that its non-fuel costs will remain pressured from prior capacity reductions in its domestic and Atlantic schedules. In Q4, CASM-ex increased by 5.0% as capacity growth decelerated to 6.3%. For a point of comparison, in the year-earlier quarter, capacity surged by 14.7% as UAL scrambled to meet rising demand while low-cost carriers like Frontier Group (ULCC) and Spirit Airlines also flooded the market with more seats.
- Because of this more cautious outlook on costs, the company's FY25 EPS guidance of $11.50-$13.50 fell just short of estimates at the midpoint of the range. Still, CEO Scott Kirby is predicting double-digit pre-tax margins in 2025 as the airline capitalizes on the same premiumization trend that DAL is banking on.
Anything short of a remarkable earnings report from UAL likely would have created some turbulence for a stock that is flying at record highs. Other than some unit cost pressure that's arising from UAL's efforts to reduce capacity and push fares higher, the report was pristine, and the company's outlook indicates that clear skies are on the horizon.
Procter & Gamble bounces today as Q2 results further signal a stable end consumer (PG)
The tides may be turning for Procter & Gamble (PG +3%) as its shares bounce today following an 11% correction from December highs on better-than-expected earnings and sales figures in Q2 (Dec). Volumes also improved slightly, ticking 1% higher yr/yr and returning to positive growth following flat volumes last quarter. Meanwhile, revenue squeaked out a gain in Q2, flipping positive after back-to-back quarters of negative growth.
While PG kept its FY25 (Jun) outlook unchanged despite the decent upside in Q2, it is largely due to increasing FX headwinds. After initially anticipating a net headwind of around $500 mln from commodity costs and FX fluctuations, PG's outlooked improved modestly last quarter, predicting an approximately $200 mln commodity cost headwind while FX was expected to be neutral. However, today, PG essentially flipped back to its initial outlook, predicting a net headwind of roughly $500 mln, clipping $0.20 off EPS.
- In Q2, most categories experienced positive volume growth on a modest uptick in net sales, supporting a 2.1% bump in overall revenue yr/yr to $21.88 bln. Organic volumes, which back out the impact of M&A, and organic sales, which excludes FX and M&A impacts, were also improved over last quarter, up 1 pt, with no category slipping into negative territory across either metric, supporting a 2% and 3% uptick, respectively.
- Beauty and Health Care were the laggards in the quarter, delivering flat organic volume growth, mired by sticky headwinds in China. However, organic sales in China fell by just 3% yr/yr in Q2, far better than the 16% drop posted in Q1 (Sep).
- Conversely, Grooming, Fabric & Home Care, and Baby, Feminine & Family Care enjoyed a decent lift in organic volumes, expanding by at least 2%, with a 4% jump in Feminine & Family Care. Highlights include sustained demand for the Gillete banner, outsized growth in North America, and consistent growth in PG's Family Care division. Baby Care was a notable weak point, with organic sales falling by low single digits on volume compression. This category continues to endure pressure as it remains subject to decreasing birth rates.
- PG reiterated its FY25 guidance, projecting adjusted EPS of $6.91-7.05 and revenue growth of +2-4%. While PG is tracking below these targets thus far in FY25, it continues to expect stronger results in the back half of the year. Also, if not for the impact of FX fluctuations, PG would have been in a position to possibly raise its earnings outlook for the year. Given this, the market is slightly more forgiving today, focusing on the quarter's positives, particularly surrounding improving domestic and international demand.
PG's Q2 performance showcased a stable consumer and price promotion environment, a continuation of the trends that unfolded last quarter. Private label shares continue to flatline or decline in the U.S. and Europe, underscoring consumers' capacity to spend slightly more on name brands regarding household durables. As a result, we continue to like PG for the long term as its portfolio touts incredible brand recognition, often offering products with noticeable upside to competing and private label brands.
Netflix streams to new all-time high following robust Q4 results (NFLX)
Netflix (NFLX +12%) is making a big move following its impressive Q4 earnings report last night. NFLX reported a decent EPS and revenue beat, but not huge upside. NFLX hit a milestone by recording its first-ever $10 bln revenue quarter in Q4 and expects to do that again in Q1. NFLX also slightly raised its 2025 revenue guidance to $43.50-44.50 bln despite FX headwinds. The one blemish was downside EPS/revs guidance for Q1.
- The other big news was Netflix announcing price increases in the US and Canada. Its standard monthly membership without ads will go to $17.99 from $15.49, this tier's first hike in three years, while its standard account with ads will rise by $1 to $7.99. Its highest-priced premium tier, which includes 4K video, will increase to $24.99 from $22.99.
- Let's dig into the Q4 results. The metric that jumped out was Q4 global streaming paid net adds coming in at +18.91 mln, well above prior guidance of "higher than Q3's +5.07 mln." Q4 marked Netflix's largest-ever quarter for net adds growth in company history. Membership growth in Q4 was driven by broad strength across its content slate, improved product/market fit and typical Q4 seasonality.
- Unfortunately, beginning with its Q1 report in April, Netflix will no longer report paid memberships and ARM on a regular quarterly basis, however, it will announce paid memberships as it crosses key milestones. And starting in Q2, Netflix will publish a bi-annual engagement report in tandem with its Q2 and Q4 earnings results.
- Advertising was a bright spot in Q4 with ads membership up 30% quarter on quarter. Of note, ads plan accounted for over 55% of sign-ups in its ads countries (has not been rolled out everywhere yet). NFLX is even more excited that engagement from its ads members remains healthy with view hours per member similar to engagement on non-ads plan. Netflix doubled its ads revenue in 2024 and expects to double again in 2025.
- Importantly, Netflix described 2025 as the year when its ads segment transitions from crawl to walk. A big part of that is standing up its own ad stack. It has launched in Canada and will get rolled out across the rest of its 12 ads countries in 2025, starting with the US in April. The biggest initial benefit of using its own ad server is the ability to offer more flexibility, more ways of buying for advertisers, fewer activation hurdles etc. This should drive sales and the ease of transacting with Netflix.
- Another metric that stands out is operating margin, which we think will become a more important measuring stick as NFLX phases out reporting its net add metric in 1Q25. In Q4, it came in at 22.2% vs 21.6% prior guidance, primarily due to higher-than-forecasted revenue. NFLX also increased 2025 operating margin guidance to 29% from 28%, a slight improvement from 27% in 2024. NFLX expects Q1 operating margin to be 28.2%.
Overall, Netflix's huge net adds number is the main driver of today's big move. It is a shame that reporting on this metric is going away in Q1. Nevertheless, it shows that expanding its offering with an ads tier was the right move and NFLX expects its ads segment to transition to walk from crawl in 2025. Also, Netflix's decision to raise prices demonstrates its confidence in its offering. It's is quite remarkable how successful Netflix has become even as other streamers struggle to make a profit.
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