Market Snapshot
| Dow | 44469.33 | +167.01 | (0.38%) | | Nasdaq | 19796.17 | +190.87 | (0.97%) | | SP 500 | 6066.44 | +40.45 | (0.67%) | | 10-yr Note | 0/32 | 4.49 |
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| | NYSE | Adv 1643 | Dec 1070 | Vol 1.0 bln | | Nasdaq | Adv 2412 | Dec 1966 | Vol 9.5 bln |
Industry Watch
| Strong: Energy, Information Technology, Consumer Discretionary, Industrials |
| | Weak: Health Care, Financials |
Moving the Market
-- Gains in mega caps supporting index moves
-- Price action in Treasuries acting as support for stocks
-- Buy-the-dip trade after Friday's retreat
-- Not reacting much to news about tariffs on steel and aluminum
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Closing Summary
10-Feb-25 16:30 ET
Dow +167.01 at 44469.33, Nasdaq +190.87 at 19796.17, S&P +40.45 at 6066.44
[BRIEFING.COM] The stock market kicked off the week with an upbeat start, bouncing back from Friday's declines in a buy-the-dip trade. The Nasdaq Composite jumped 1.0%, the S&P 500 rose 0.7%, and the Dow Jones Industrial Average closed 0.4% higher. The major indices closed their highs of the day with many stocks participating in index gains.
Mega-cap stocks played a crucial role, leading the upside charge. NVIDIA (NVDA 133.57, +3.73, +2.9%), Microsoft (MSFT 412.22, +2.47, +0.6%), and Amazon.com (AMZN 233.14, +3.99, +1.7%) were standouts from the space. The Vanguard Mega Cap Growth ETF (MGK) closed 1.0% higher.
Earnings reports also fueled buying interest. McDonald's (MCD 308.42, +14.12, +4.8%) posted strong results, along with Rockwell Automation (ROK 302.34, +33.94, +12.7%) and Monday.com (MNDY 326.58, +68.34, +26.5%).
Sentiment wasn't impacted by President Trump's announcement of new 25% tariffs on steel and aluminum. Stocks directly linked to these metals saw noticeable gains. Nucor (NUE 137.53, +7.27, +5.6%) and Alcoa (AA 36.92, +0.80, +2.2%) were among the winners.
The New York Fed's Survey of Consumer Expectations also had little impact on the equity market. Inflation expectations remained stable, with one-year and three-year projections unchanged at 3.0%, while five-year expectations edged up by 0.3% to 3.0%.
On the bond side, yields were steady. The 10-year Treasury yield settled one basis point higher at 4.49%.
There was no US economic data of note today and tomorrow's calendar is limited to the January NFIB Small Business Optimism survey at 6:00 ET.
- Dow Jones Industrial Average: +4.5% YTD
- S&P Midcap 400: +2.8% YTD
- Russell 2000: +2.6% YTD
- S&P 500: +3.1% YTD
- Nasdaq Composite: +2.1% YTD
Treasuries settle mixed
10-Feb-25 15:30 ET
Dow +129.68 at 44432.00, Nasdaq +212.46 at 19817.76, S&P +40.60 at 6066.59
[BRIEFING.COM] Stocks remain near highs ahead of the close.
There was no US economic data of note today and tomorrow's calendar is limited to the January NFIB Small Business Optimism survey.
Elsewhere, the 10-yr yield settled one basis point higher at 4.49% and the 2-yr yield settled one basis point lower at 4.27%.
Many stocks move up
10-Feb-25 15:00 ET
Dow +131.31 at 44433.63, Nasdaq +208.88 at 19814.18, S&P +40.65 at 6066.64
[BRIEFING.COM] The market-cap weighted S&P 500 trades 0.7% higher and the equal-weighted S&P 500 trades 0.3% above Friday's close.
Only two S&P 500 sectors trade down in an otherwise upside tape. The financial sector shows the largest decline, down 0.7%, followed by health care (-0.2%).
On the flip side, the energy sector leads the pack (+2.2%) followed by information technology (+1.6%).
Earnings pick up tomorrow morning
10-Feb-25 14:30 ET
Dow +173.12 at 44475.44, Nasdaq +224.46 at 19829.76, S&P +45.56 at 6071.55
[BRIEFING.COM] The major indices remain near session highs.
There hasn't been a lot of earnings news today, but tomorrow's calendar features results from Humana (HUM 266.68, -7.64, -2.8%), Coca-Cola (KO 64.02, +0.18, +0.3%), AutoNation (AN 191.68, +0.54, +0.3%), DuPont (DD 76.03, +0.25, +0.3%), and others ahead of the open.
Separately, the 10-yr yield moved up to 4.50%.
Some but-the-dip motivation
10-Feb-25 13:55 ET
Dow +165.03 at 44467.35, Nasdaq +230.69 at 19835.99, S&P +44.20 at 6070.19
[BRIEFING.COM] The stock market did most of its lifting early, yet it has managed to remain relatively strong in the early portion of the afternoon trade.
Sellers haven't been able to exert any convincing pressure on the market, which has the mega-cap stocks as its primary source of support and buy-the-dip interest (from Friday) as its primary motivation.
Notably, the market cap-weighted S&P 500 and equal-weighted S&P 500 are in a dead heat right now in terms of year-to-date performance. Both are up 3.2% since January 1, which is to say the year is off to a good start in general.
Both, though, continue to look up at the Dow Jones Industrial Average, which is up 4.5% year-to-date, including today's gain.
Rockwell Automation hits fresh 52-week highs following better-than-feared Q1 results (ROK)
Rockwell Automation (ROK +14%) delivers a sturdy Q1 (Dec) performance, returning to delivering double-digit earnings upside on shrinking revenue declines. The automated device maker touts an expansive portfolio of automation-based products, covering uses from circuit protection and energy monitoring to network security and industrial control products. ROK's product suite has benefited in an age when enterprises are searching for ways to extract efficiencies and cut costs.
- ROK has been cutting costs of its own, noting today that its plan to achieve $250 mln in productivity benefits compared to last year remains on track despite encountering headwinds, such as significant FX impacts and recently announced tariffs. Speaking of which, ROK commented that it was working on various scenarios before the election to mitigate tariff-related impacts. As a result of its ongoing cost-cutting, ROK crushed analyst earnings estimates in Q1, delivering a much narrower yr/yr decline at 10% to $1.83 than expected.
- Revenue still fell, contracting by 8.3% yr/yr to $1.88 bln. However, this represented an encouraging improvement from the 20.6% drop last quarter. Management witnessed better-than-expected order performance in Q1, with sequential growth across all regions and business segments. Furthermore, orders surpassed shipments, up 10% yr/yr and mid-single-digits sequentially, providing additional backlog for the remainder of the year.
- It is worth pointing out that ROK won multi-million dollar orders across several key industries in Q1, particularly in its home market, the U.S., even as macroeconomic uncertainty throttled customers' CapEx plans. This builds a solid foundation from which ROK could reignite revenue growth once economic uncertainty begins to ease.
- Nevertheless, aside from the U.S., weakness still persisted across the globe. In the EMEA region, sales slid by 14% yr/yr in Q1. ROK continued to notice softness across most of this region, especially Germany and France. In Asia-Pacific, revenue fell by 9%, led by a double-digit drop in China. ROK stated that while this region's automation market should stabilize sometime in 2025, it anticipates Asia Pacific will be its weakest region in FY25 (Sep).
- As a result of the macroeconomic unevenness, ROK kept its FY25 guidance mostly unchanged from last quarter, projecting EPS of $8.60-9.80 (unchanged), organic revenue growth of negative 4% to positive 2% (unchanged), and reported revenue growth of negative 5.5% to positive 0.5%, a slight decrease from its previous projection due to a roughly 150 bp impact from FX headwinds.
While ROK's Q1 performance was decent, there are still areas of concern as most markets outside the U.S. remain weak, not to mention looming tariff impacts, the full scope of which have yet to be determined. However, investors are looking beyond these potential setbacks, liking ROK's mostly reiterated FY25 guidance and sustained signs of life in the U.S. despite macroeconomic headwinds. Given that the stock entered correction territory, depreciating by over 10% from December highs, leading into today's report, the market likely feared worse.
Monday.com ascends as an emerging AI play after strong beat-and-raise Q4 report (MNDY)
There's no case of the "Mondays" today for project management software company Monday.com (MNDY) after it reported an impressive beat-and-raise Q4 earnings report, sending the stock rocketing higher. Similar to competitor Atlassian (TEAM), which delivered its own beat-and-raise performance on January 30, MNDY saw strong demand from enterprises as the number of customers with over $100K in ARR jumped by 45% yr/yr to 1,207. These enterprises are gravitating towards MNDY's new AI tools and products, including its recently launched Monday Service product, a platform that consolidates requests, incidents, projects, and business data that's now available to all of its customers.
- MNDY has an established track record of easily beating EPS and revenue estimates -- it has done so in every quarter over the past five years -- but its guidance has disappointed from time to time. For instance, last quarter, the stock plunged after the company's Q4 revenue guidance was merely in-line with expectations and signaled a sharp slowdown in growth to about 29% from nearly 50% in Q3. This time around, MDNY guided 1Q25 and FY25 revenue slightly ahead of expectations, fueling excitement that its AI investments will pay off in an even bigger way this year.
- Looking beyond Monday Service, the company is also rolling out AI Blocks, Product Power-ups, and Digital Workforce as key focus areas for 2025. AI Blocks are pre-built AI functions that are accessible and integrated into its automation tools, such as project management, that handle more repetitive work, enabling the user to focus on higher-level tasks. Power-ups are a suite of products, covering areas like resource management, CRM data automation, and predictive risk management, that will be embedded into MNDY's platform.
- The downside is that the company's rising AI investments will weigh on its profitability in FY25. MNDY is forecasting non-GAAP operating margin to slide to 11-12% in FY25 from 14% in FY24, but investors are shrugging this modest decline off, instead focusing on the company's AI-centered growth opportunities.
- Opportunities to up-sell and cross-sell new AI products should only bolster MNDY's already strong net dollar retention rate, which ticked higher to 112% from 111% last quarter. This metric was even higher for customers with more than $100,000 in ARR at 116%.
The main takeaway is that MNDY is emerging as a favored AI play as adoption grows for new products like Monday Service and as it launches a set of new AI tools. With a forward P/E north of 68x, the stock is far from cheap, but MNDY's track record of outperformance and its consistent top-line growth of 30%+ warrants a premium valuation in our view.
ON Semiconductor turns off investors with its bleak Q1 guidance; shares hit fresh 52-week lows (ON)
ON Semiconductor (ON -8%) turns off investors today with its bleak Q1 guidance, projecting earnings and revenue markedly below consensus as the automotive industry continues encountering weak electric vehicle (EV) demand. ON is a leading producer of silicon carbide semiconductors, a component preferred by OEMs in EV production due to its more efficient properties versus normal silicon, allowing for extended range.
ON cautioned last quarter that the pace of recovery in the automotive landscape would likely be gradual as the demand environment stayed muted due to ongoing inventory digestion. A similar trend was unfolding across the industrial sector, which had not broadly recovered outside a few pockets in utility-scale solar, aerospace, and defense.
- Gloomy trends from Q3 carried into Q4, leading to ON missing earnings and revenue estimates, posting $0.95 and $1.72 bln, a 14.6% decline yr/yr, respectively. Management mentioned that demand contracted late in the quarter, persisting into January.
- Regional revs fell sequentially in all geographical markets except North America, which remained flat; Japan endured the steepest decline. Non-core markets were the culprit in the sequential drop. ON's industrial revs decreased by 5% qtr/qtr, displaying weakness in the traditional parts of the business, reflecting suppressed PMI across all major regions compounded by ongoing inventory digestion. On the flip side, the automotive industry improved 8% from Q3, driven by an 18% lift in China.
- However, the upbeat gains in China are not expected to trickle into Q1 as the Chinese New Year and extended shutdown period took a bite out of January deliveries. Meanwhile, demand from every other region crumbled toward the end of Q4, carrying into Q1. In the U.S., a slower EV ramp than ON anticipated is materializing due to weak global demand. Furthermore, the looming impact of tariffs is keeping ON's customers on edge.
- As a result, ON projected bleak Q1 numbers, targeting adjusted EPS of $0.45-0.55, a 54% decline yr/yr at the midpoint, and revs of $1.35-1.45 bln, a 25% drop. On a lighter note, smaller but growing components of ON's business, including its AI data center and defense divisions, have been enjoying outsized growth lately, expanding by 40% and 50% yr/yr, respectively, in 2024. ON does not see this slowing down in 2025. Beyond this year, management continues to see electrification, AI, and renewable energy as major growth drivers.
Like last quarter, ON's business continues to feel the sting of a muted global economy, weighed down by elevated interest rates and an inflationary environment. Adding tariffs to the mix only increases uncertainty, tossing another hurdle for ON to clear over the near term. The silver lining is that ON's non-core business is relatively small. ON is also continuously shrinking the size of this portfolio. Meanwhile, the future for silicon carbide remains bright as countries shift to a greater mix of EVs, where a longer range is a must to lure hesitant ICE-loyal drivers. As such, ON could enjoy a swift turnaround once demand rebounds. The variable, however, is when this begins to take shape.
McDonald's trades above $300 despite EPS miss as E. coli outbreak impact was better than feared(MCD)
McDonald's (MCD +5%) is trading nicely higher following its Q4 results this morning despite missing on both EPS and revs. Recall from our preview on Friday that the key issue here was the E. coli outbreak in Q4 for its Quarter Pounders. We think a key reason the stock is higher today because the impact was not as bad as feared. Yes, MCD missed but it was a pretty modest miss and could have been much worse. Even after outbreaks are contained, some consumers stay away for a long time out of fear.
- Global comps came in at +0.4%, not a huge number but it is notable because MCD returned to positive territory following back-to-back negative global comps (-1.5% in Q3 and -1.0% in Q2). It was lapping decent +3.4% comps in 4Q23. Comp sales performance saw mixed results across individual markets, including negative comps in the UK, while QSR industry traffic was positive in only two of MCD's big five markets.
- Its IDL (Intl Developmental Licensed) segment comps were a notable bright spot at +4.1%, largely driven by positive results in the Middle East and Japan. In the Middle East, MCD was lapping the impact of the war that began in October 2023, and in China, MCD is seeing encouraging signs of stabilization.
- US comps were more pressured at -1.4% in Q4, down from +0.3% in Q3. But again, given the E. coli outbreak, we think investors are reacting positively to this US comps for not being worse. MCD says it hit its low point in Q4 in early November, followed by sequential improvement through the balance of the quarter, which has now continued into Q1. As MCD transitions into 2025, it noted several factors that give it confidence that its performance will return to proper form over the next several quarters. The US food safety issue is now largely behind it and MCD expects to have fully recovered by the beginning of Q2.
- MCD says that pressure on spending persists and this is particularly true for two of MCD's significant cohorts: low income and families, particularly in Europe. In the US, MCD has rolled out its McValue menu. It includes its popular $5 meal deal, which was launched earlier this year. However, it now also includes Buy One, Add One for $1 option, including breakfast. The new McValue menu also includes additional app-exclusive offers and is being promoted by wrestler/actor John Cena. MCD is pleased with its early performance. The thing about it is that while the $5 meal is a compelling value, it's driving other purchases. So the average check on a $5 meal deal in the US is north of $10. So it's doing what MCD hoped it would.
Overall, we see MCD making a nice move today despite the EPS miss for several reasons: 1) most importantly, the impact E. coli outbreak in the US was not as bad as feared, 2) the issue is now largely behind it, 3) global comps returned to positive territory, and 4) MCD is seeing encouraging signs of stabilization in China, which is a big deal. Investors can now put the outbreak in the rearview mirror as that cloud has dissipated and focus on the future. The consumer remains challenged, but MCD has smartly turned up the dial on value offerings, which should help. |
