Market Snapshot
| Dow | 44592.57 | +123.24 | (0.28%) | | Nasdaq | 19725.76 | -70.41 | (-0.36%) | | SP 500 | 6068.50 | +2.06 | (0.03%) | | 10-yr Note | -25/32 | 4.54 |
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| | NYSE | Adv 1365 | Dec 1326 | Vol 950 mln | | Nasdaq | Adv 1760 | Dec 2576 | Vol 9.2 bln |
Industry Watch
| Strong: Energy, Materials, Technology, Consumer Staples, Financials, Real Estate |
| | Weak: Health Care, Consumer Discretionary, Industrials, Utilities |
Moving the Market
-- Fed Chairman Powell repeats to Senate Banking Committee that there is no rush to adjust policy stance
-- Volatile moves in mega caps weighing down indices; AAPL shares are an exception after news it's developing AI for China iPhone users
-- Responding to tariff talk
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Closing Summary
11-Feb-25 16:30 ET
Dow +123.24 at 44592.57, Nasdaq -70.41 at 19725.76, S&P +2.06 at 6068.50
[BRIEFING.COM] The stock market had a mixed showing today with major indices trading above and below prior closing levels. There wasn't a lot of conviction on either side of the tape and the choppy action followed the ebb and flow of mega cap names.
The Dow Jones Industrial Average, which closed 0.3% higher, outperformed the S&P 500 (+0.03%) and Nasdaq Composite (-0.4%) through the entire session.
NVIDIA (NVDA 132.80, -0.77, -0.6%) was a standout in the mega cap space, trading up as much as 0.7% at its high and and down as much as 1.9% at its low.
The technology sector still logged a 0.2% gain, bolstered by a sizable move in Apple (AAPL 232.62, +4.97, +2.2%) shares after news that it's aiming to partner with Alibaba (BABA 112.78, +1.46, +1.3%) to develop artificial intelligence for China iPhone users, according to The Information.
The market was digesting more news about tariffs and was focused on Fed Chair Powell's semiannual testimony before Congress, which began today in the Senate Banking Committee. Mr. Powell again said that there is no hurry to adjust the policy stance, repeating comments made at the conclusion of the January FOMC policy meeting.
The tariff talk wasn't exactly breaking news with President Trump imposing the previously announced 25% tariffs on steel and aluminum, which will go into effect on March 12 with Australia potentially receiving an exemption.
Treasuries settled with losses. The 2-yr yield rose two basis points to 4.29% and the 10-yr yield settled four basis points higher at 4.54%. The market had a muted reaction to the $58 bln 3-yr note sale, which met strong demand.
Today's economic lineup was limited to the NFIB Small Business Optimism survey, which declined to 102.8 from 105.1 in December.
- Dow Jones Industrial Average: +4.8% YTD
- S&P Midcap 400: +2.3% YTD
- Russell 2000: +2.0% YTD
- S&P 500: +3.2% YTD
- Nasdaq Composite: +1.7% YTD
Looking ahead to Wednesday, market participants receive the following data:
- 7:00 ET: Weekly MBA Mortgage Index (prior 2.2%)
- 8:30 ET: January CPI (Briefing.com consensus 0.3%; prior 0.4%), and January Core CPI (Briefing.com consensus 0.3%; prior 0.2%)
- 10:30 ET: Weekly crude oil inventories (prior +8.66 mln)
- 14:00 ET: January Treasury Budget (prior -$87.0 bln)
Treasuries settle with losses
11-Feb-25 15:30 ET
Dow +152.38 at 44621.71, Nasdaq -50.31 at 19745.86, S&P +4.54 at 6070.98
[BRIEFING.COM] The major indices remain near session highs heading into the close.
Treasuries settled with losses. The 2-yr yield rose two basis points to 4.29% and the 10-yr yield settled four basis points higher at 4.54%.
Looking ahead to Wednesday, market participants receive the following data:
- 7:00 ET: Weekly MBA Mortgage Index (prior 2.2%)
- 8:30 ET: January CPI (Briefing.com consensus 0.3%; prior 0.4%), and January Core CPI (Briefing.com consensus 0.3%; prior 0.2%)
- 10:30 ET: Weekly crude oil inventories (prior +8.66 mln)
- 14:00 ET: January Treasury Budget (prior -$87.0 bln)
Stocks move up, market breadth reflects mixed action
11-Feb-25 15:00 ET
Dow +125.56 at 44594.89, Nasdaq -34.17 at 19762.00, S&P +6.08 at 6072.52
[BRIEFING.COM] The S&P 500 hit its best level of the day in recent trading, up about ten points or 0.1%. The equal-weighted S&P 500 still trades lower, though, showing a 0.1% decline.
The index improvement occurred as NVIDIA (NVDA 133.57, +0.01, +0.01%) moved above its prior close.
Other stocks participated in upside moves, leading more S&P 500 sectors to trade up compared to earlier. Seven sectors are in the green after the communication services (+0.1%) and financial (+0.3%) sector turned positive.
Market breadth was negative earlier, but shows mixed action now. Advancers are in-line with decliners at the NYSE while decliners still have a 3-to-2 margin over advancers at the Nasdaq.
Mega caps turn positive, but market still lingers in negative territory
11-Feb-25 14:30 ET
Dow +56.30 at 44525.63, Nasdaq -60.69 at 19735.48, S&P -0.95 at 6065.49
[BRIEFING.COM] The market has mostly meandered sideways in recent trading. The Nasdaq Composite trades about 60 points, or 0.3%, lower.
Some mega cap names have turned positive, but that hasn't been enough to boost the broader equity market. Meta Platforms (META 720.66, +2.70, +0.4%) is a standout in that respect.
Looking ahead, Gilead Sciences (GILD 95.70, +0.22, +0.2%), Super Micro Computer (SMCI 39.76, -2.89, -6.7%), DoorDash (DASH 193.00, +0.37, +0.2%), Lyft (LYFT 14.48, -0.64, -4.2%), Avis Budget (CAR 89.51, -0.92, -1.0%), and other report earnings after the close.
DJIA outperforms S&P 500, Nasdaq
11-Feb-25 14:00 ET
Dow +25.95 at 44495.28, Nasdaq -50.41 at 19745.76, S&P -1.75 at 6064.69
[BRIEFING.COM] The Dow Jones Industrial Average trades 0.1% higher, outperforming the S&P 500 (-0.04%) and Nasdaq Composite (-0.3%).
A look inside the DJIA shows Coca-Cola (KO 66.95, +2.40, +3.7%), which reported above-consensus earnings, and Apple (AAPL 233.78, +6.13, +2.7%) leading the 15 components trading higher.
Salesforce (CRM 323.20, -4.00, -1.3%) and Travelers (TRV 240.16, -2.26, -0.9%) show the largest declines among the Dow components trading lower.
Separately, the Treasury market has been fairly steady today while the stock market exhibited volatile action at the index level. The 10-yr yield is up three basis points from yesterday at 4.53% and the 2-yr yield is up one basis point to 4.28%. The market had a muted reaction to the $58 bln 3-yr note sale, which met strong demand.
DuPont's exposure to AI fuels another solid quarterly report as Electronics spin-off looms (DD)
Chemical and specialty materials company DuPont (DD) cruised past Q4 EPS estimates and issued solid guidance, including a forecast for mid-single-digit organic growth in FY25, supported by continued strength in its Electronics & Industrial segment. That strength is mainly emanating from the emergence of new AI applications and stronger demand for consumer electronics in China, resulting in low-teens organic sales growth in the Semiconductor Technologies business and low-double-digit growth for Interconnect Solutions.
- With momentum building for the Electronics business, which produces materials during the fabrication, assembly, and advanced packaging of semiconductors, DD's timing to spin that business off may be right on point. On January 15, the company announced that it was accelerating the separation and is targeting November 1, 2025, to complete the transaction. This morning, the company reaffirmed that timeline, and reiterated another update from January 15: namely, that it now plans to retain the Water business after initially announcing that it intends to separate that business, too.
- Circling back to DD's Q4 results, the sizable EPS beat comes as a bit of a surprise given that the company also reaffirmed its EPS outlook of $0.98 in that January 15 press release. Ultimately, the company generated EPS of $1.13, representing strong yr/yr growth of 30%. Cost discipline and volume gains across the business, leading to greater manufacturing efficiencies, helped drive earnings higher.
- Although the Electronics segment was the clear standout once again, the Water & Protection unit also contributed to the better-than-expected results. In particular, the medical packaging end market saw an upswing in demand, pushing the segment's net sales higher by 6% yr/yr to $1.36 bln. The one soft spot was Shelter Solutions, which serves the residential and commercial construction markets with its protection and insulation products (Tyvek, Styrofoam, ArmorWall). For the quarter, sales for Shelter Solutions were flat on an organic basis.
The main takeaway is that DD's AI exposure continues to pay dividends for the company and is setting it up for a successful spin-off of the Electronics business in November. Following in the footsteps of other industrial giants like General Electric, 3M (MMM), and Honeywell (HON), we anticipate that DD's spin-off will be well-received, providing the stock with a potent catalyst. While a sluggish housing market is keeping a lid on the Shelter Solutions business, the prospect for lower interest rates down the road should provide a lift.
Coca-Cola delivers a refreshing Q4 performance, returning to volume growth (KO)
Coca-Cola's (KO +3%) Q4 performance was refreshing, returning to volume growth, delivering accelerating organic revenue growth, and projecting encouraging FY25 figures. The beverage behemoth was coming off a weak performance in Q3, as volumes went negative by 1%, following a 2% improvement in the preceding quarter. KO chalked up the deterioration to a slow start to the quarter but noted that trends quickly reversed course during August and September, building positive momentum heading into Q4.
- KO followed through in Q4, posting total volume growth of 2%, supporting a 6% improvement in net revs yr/yr to $11.54 bln, crushing analyst expectations. While FX headwinds still clipped several points off KO's top line, it was not as aggressive as analysts anticipated. Organic revenue, which backs out currency fluctuations and M&A impacts, jumped by 14% yr/yr, a 5 pt acceleration from last quarter, aided largely by a 9% uptick in price.
- Inflation was widespread, climbing by 11% in EMEA, 12% in North America, and 23% in Latin America, where Argentina's hyperinflationary dynamics continue to fuel rapid price increases. The Asia Pacific was the only region where prices fell, inching 5% lower. However, despite higher prices, volumes were decent, edging 2% higher in Latin America, 1% in North America, and staying flat in EMEA. In Asia Pacific, volumes rose by 6%.
- Compared to its closest rival, PepsiCo (PEP), KO maintained its impressive volume outperformance, a bright reflection of brand leadership. For comparison, PEP's total volumes inched just 1% higher in Q4, with its North American beverage volumes contracting by 3% for the second consecutive quarter.
- Underpinned by constantly inflating prices and healthy organic revenue growth, offsetting higher input costs and currency headwinds, KO improved its non-GAAP operating margins in Q4, touting a 90 bp improvement yr/yr to 24.0%. As a result, the company was positioned to maintain its streak of topping earnings estimates in the quarter, delivering adjusted EPS of $0.55.
- KO issued relatively promising FY25 guidance, targeting adjusted EPS growth of +2-3% yr/yr and organic sales growth of +5-6%, both representing slowdowns from a caffeinated FY24, when earnings and organic revs jumped by 7% and 12%, respectively. Currency fluctuations will remain a headwind in FY25; KO estimates a roughly 3-4 pt hit to comparable net revs and 6-7 pt disruptions to comparable EPS.
As we saw from PEP last week, the overall consumer environment is stabilizing, supporting KO's decent outperformance in Q4. That does not mean that pockets of weakness exist. Management cautioned that the lower-income segments in the U.S. and Europe are under meaningful pressure, a trend unlikely to budge in 2025. Meanwhile, volatility is more prevalent in emerging markets, leading to ups and downs throughout each quarter. However, KO is extracting healthy gains despite shaky consumer demand, showcasing its brand advantage over PEP in the process. As such, we continue to like KO over the long term.
Shopify's outlook mildly disappoints, but business healthy for eCommerce platform provider (SHOP)
After eCommerce platform provider Shopify (SHOP) disclosed on December 3 that its merchants generated a record $11.5 bln in sales over the Black Friday - Cyber Monday weekend, good for a 24% yr/yr increase, it was a near lock that the company would deliver a strong Q4 earnings report. The company did just that, beating revenue and GMV estimates with the former increasing by 31% to $2.81 bln and the latter jumping by nearly 26% yr/yr to $94.46 bln.
However, given that a solid Q4 performance was already baked into the equation, as illustrated by the stock's 30% rally since SHOP's Q3 earnings report, the focus landed on the company's 1Q25 guidance. In this regard, SHOP disappointed by guiding revenue merely in-line, forecasting growth in the mid-twenty percent range, while also forecasting a drop in free cash flow margin to the mid-teens. The company achieved free cash flow margin of 22% in Q4, ahead of its guidance and above the 19% it registered in Q3.
- It should be noted, though, that Q1 is SHOP's seasonally slowest quarter in terms of GMV, so the company may be taking a conservative approach with its revenue guidance. Also, the decline in free cash flow margin is a result of SHOP ramping up investments in areas like B2B, international, enterprise, and the core platform, in order to drive strong growth. The company has a proven track record of capitalizing on its investments.
- For example, SHOP has traditionally been known as an eCommerce company that typically caters to entrepreneurs and small businesses. However, the company has steadily added new features and services that cater to enterprises -- such as Shop Pay and Shop Pay Installments -- and those efforts are now paying off. A few notable enterprises that are scaling their usage on SHOP's platform include Boot Barn, Crocs, GameStop, Reebok, and Hanes Brands.
- Of course, ramping up AI investments is another key component of SHOP's growth strategy. The company recently launched its first AI-powered search integration, enabling buyers to more easily find merchants, and it leveraged AI to enhance Shopify Inbox, making customer communications more efficient.
Outside of the mild disappointment stemming from SHOP's Q1 guidance, this was another impressive earnings report from the company, highlighting its ability to buck the macro-related headwinds as it continues to gain market share and gain traction with larger enterprises.
Harmonic heads sharply lower as timing of deployments causes guidance shortfall (HLIT)
Harmonic (HLIT -13%), a supplier of virtualized cable access and video delivery systems, is trading sharply lower following its Q4 report last night. It reported nice upside for Q4, including 33% yr/yr revenue growth to a record $222.2 mln, which was better than expected. The main problem was some pretty significant downside guidance for both Q1 and FY25. Harmonic also announced a new $200 mln share repurchase program, but that does not seem to be having too much impact.
- Most of Harmonic's growth comes from its Broadband segment and that was the case again in Q4. Broadband segment revs jumped 48% yr/yr to $171 mln, while its Video segment posted a 2% decline to $51.1 mln. Both Broadband and Video revenue exceeded internal expectations. The cable industry is transitioning to Unified DOCSIS 4.0, which offers a major upgrade in speed boost that puts cable on par with Fiber operators.
- Harmonic said its 2025 guidance reflected shifts in customer deployment timing as operators transition to Unified DOCSIS 4.0. These trends are industry-wide and Harmonic believes they are short-term in nature. The company expects to resume above market growth in 2026 as adoption of DOCSIS 4.0 accelerates and cable capital spending returns to its long-term growth trajectory.
- Harmonic is navigating the industry-wide transition to unify DOCSIS 4.0 as best it can. While this change is expected to result in a below trend year for Broadband revenue in 2025, Harmonic says its technology leadership position in Unified DOCSIS 4.0 remains clear. Also, despite short-term headwinds in Broadband during 2025, the company still expects to continue to generate strong cash flow.
- Bigger picture, the company believes the broadband industry is at a pivotal turning point. Service providers are facing increasing competition from telco and fixed wireless access providers. To stay ahead, operators must modernize their networks with DAA and virtualized CMTS. These technologies improve network reliability, enhance speeds, lower operating costs etc. Competition is not the only driver as cable operators must also contend with higher demands for bandwidth from subscribers given the surge in live sports streaming, major gaming releases etc.
Overall, it is clear that investors were surprised to see such a shortfall in guidance for 2025. The reasoning makes sense given shifts in customer deployment timing to Unified DOCSIS 4.0. However, a knock on Harmonic is its high customer concentration (Comcast 43% of Q4 revs, Charter at 24%). As such, we have to assume one or both of these made a change in its deployment timing and it is having a huge impact on HLIT's outlook. This is a good illustration of concentration risk. Finally, the silver lining was that HLIT was notably more bullish on the long term, with growth expected to resume in 2026. However, that is down the road and 2025 will be rough in the meantime.
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.
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