| | | Market Snapshot
| Dow | 42578.77 | -427.51 | (-0.99%) | | Nasdaq | 18069.26 | -483.48 | (-2.61%) | | SP 500 | 5738.52 | -104.11 | (-1.78%) | | 10-yr Note | -1/32 | 4.29 |
|
| | NYSE | Adv 747 | Dec 1886 | Vol 1.2 bln | | Nasdaq | Adv 1415 | Dec 2934 | Vol 7.7 bln |
Industry Watch
| Strong: Energy |
| | Weak: Financials, Consumer Discretionary, Utilities, Technology |
Moving the Market
-- Reverting back to selling trend after yesterday's rally
-- Worries about tariff uncertainty back in play
-- S&P 500 briefly dipping below 200-day MA; Nasdaq Composite entering correction territory (i.e. 10% decline off high)
-- Disappointing earnings and/or guidance from Marvell Technology (MRVL) and MongoDB (MDB); soft guidance from retailers Macy's (M) and Victoria's Secret (VSCO)
|
Closing Summary
06-Mar-25 16:30 ET
Dow -427.51 at 42578.77, Nasdaq -483.48 at 18069.26, S&P -104.11 at 5738.52
[BRIEFING.COM] The stock market returned to its downside trend after yesterday's brief reprieve. Like recent sessions, headlines around US trade policy engrossed the equity market.
The S&P 500 briefly dropped below its 200-day moving average (5,730), reaching 5,711 at its session low. The index managed to close just above that key technical level, while the Nasdaq Composite (-2.6%) and Russell 2000 (-1.6%) dropped further below their respective 200-day moving averages.
Today's close marks a 10.4% decline off the all-time high for the Nasdaq Composite reached December 16, which leaves the index in correction territory. The S&P 500 is 6.6% below its all-time high close after today's broad retreat.
The market attempted to recover a bit around mid-morning after Commerce Secretary Lutnick told CNBC that all USMCA compliant goods and services will be exempt from new tariffs for one month. The upside attempt was short-lived and the market was in a steady downtrend by the time President Trump signed the executive order detailing the exemptions this afternoon.
Around 62% of Canadian goods and around 50% of Mexican goods are still subject to the tariffs and goods that are exempt will face tariffs again starting April 2.
Fallout in mega caps and chipmakers also impacted the equity market today, reflecting ongoing unwinding of momentum trades. NVIDIA (NVDA 110.57, -6.73, -5.7%) was an influential decliner in that respect.
Weakness in the semiconductor space was due in part to guidance from Marvell Technology (MRVL 72.28, -17.86, -19.8%) failing to meet high expectations.
- Dow Jones Industrial Average: +0.1% YTD
- S&P 500: -2.4% YTD
- S&P Midcap 400: -4.9% YTD
- Nasdaq Composite: -6.4%
- Russell 2000: -7.3% YTD
Reviewing today's economic data:
- January Trade Balance -$131.4 bln (Briefing.com consensus -$93.5 bln); Prior was revised to -$98.1 bln from -$98.4 bln
- The key takeaway from the report is that efforts to get in front of expected tariff actions drove the huge increase in imports, which will be a drag on Q1 GDP forecasts.
- Weekly Initial Claims 221K (Briefing.com consensus 234k); Prior 242K, Weekly Continuing Claims 1.897 mln; Prior was revised to 1.855 mln from 1.862 mln
- The key takeaway from the report is that the reduced level of initial claims -- a leading indicator -- will temper concerns for the time being about the labor market showing more pronounced signs of weakening.
- Q4 Productivity-Rev. 1.5% (Briefing.com consensus 1.2%); Prior 1.2%, Q4 Unit Labor Costs - Rev. 2.2% (Briefing.com consensus 3.0%); Prior 3.0%
- The key takeaway from the report is that both components had the right skew for market sentiment in that productivity was higher than previously reported while unit labor costs (an inflation gauge) were lower than previously reported, aided by the improved productivity.
- January Wholesale Inventories 0.8% (Briefing.com consensus 0.7%); Prior was revised to -0.4% from -0.5%
Looking ahead, market participants receive the Employment Situation Report for February at 8:30 ET. Other data includes the January Consumer Credit report at 3:00 ET.
Treasuries settle mixed
06-Mar-25 15:35 ET
Dow -435.56 at 42570.72, Nasdaq -468.56 at 18084.17, S&P -101.90 at 5740.62
[BRIEFING.COM] The stock market continues to struggle near session lows heading into the close. The Dow Jones Industrial Average trades about 450 points lower, or 1.0%. The Nasdaq Composite sports a 2.6% decline.
Treasuries settled in mixed fashion. The 10-yr yield rose two basis points to 4.29% and the 2-yr yield dropped two basis points to 3.97%.
Looking ahead, market participants receive the Employment Situation Report for February at 8:30 ET. Other data includes the January Consumer Credit report at 3:00 ET.
Stocks briefly move higher after executive order
06-Mar-25 15:00 ET
Dow -539.56 at 42466.72, Nasdaq -507.56 at 18045.17, S&P -116.25 at 5726.27
[BRIEFING.COM] The S&P 500 remains below its 200-day moving average (5,730), down 2.0% from yesterday.
A short time ago, President Trump signed an executive order that exempts USMCA compliant goods from the tariffs on Canada Mexico. 50% of goods from Mexico and 38% of goods from Canada will be exempted until April 2, according to CNBC.
The major indices briefly moved higher in response, but trade little changed from session lows now.
S&P 500 sinks over 2% as Palantir, Netflix, and GE Vernova lead declines
06-Mar-25 14:30 ET
Dow -561.43 at 42444.85, Nasdaq -535.64 at 18017.09, S&P -120.34 at 5722.18
[BRIEFING.COM] The S&P 500 (-2.06%) has now dipped under -2% losses on the day.
Briefly, S&P 500 constituents Palantir Technologies (PLTR 81.47, -8.66, -9.61%), Netflix (NFLX 912.51, -78.41, -7.91%), and GE Vernova (GEV 291.57, -25.23, -7.96%) pepper the bottom of the average. This morning, Palantir Technologies Spain announced a partnership with EYSA, while NFLX and GEV slide despite a dearth of corporate news.
Meanwhile, MarketAxess (MKTX 204.00, +8.15, +4.16%) is today's top performer after this morning announcing February trading volumes.
Gold holds steady near record highs as investors seek safe haven
06-Mar-25 14:00 ET
Dow -519.89 at 42486.39, Nasdaq -468.54 at 18084.19, S&P -110.27 at 5732.25
[BRIEFING.COM] The tech-heavy Nasdaq Composite (-2.53%) is firmly lower on Thursday afternoon, hovering just off session lows in recent trading.
Gold futures settled less than $1 higher to $2,626.60/oz, trading in a narrow range today and within a stone's throw of all-time highs as investors have scooped up the precious metal amid a search for haven bets.
Currently, the U.S. Dollar Index is down less than -0.1% to $104.24.
Zscaler scaling higher after delivering strong beat-and-raise performance (ZS)
While still operating under a challenging IT spending environment, cybersecurity company Zscaler (ZS) delivered a strong beat-and-raise Q2 earnings report with accelerating billings growth. The provider of Zero Trust products is capitalizing on its go-to-market investments and a corresponding improvement in sales productivity, leading to likely market shares against competitors such as Palo Alto Networks (PANW) and Microsoft (MSFT). While PANW no longer provides billings data, its billings growth was in the 9-10% range a couple of quarters ago, while ZS reported billings growth of 18% last night.
Even as ZS ramps up its marketing and sales investments, the company's profitability continues to increase. In Q2, operating profit margin expanded by two percentage points to nearly 22%, while free cash flow margin also hit a new record at 22%.
- The company saw double-digit growth in both the new and upsell businesses, reflecting the stronger sales execution. Moving ahead, ZS expects this higher sales productivity to continue due to the growing number of ramped sales reps and the launch of its new "Zero Trust Everywhere" marketing campaign.
- That marketing campaign centers on the idea that ZS's platform is now capable of securing much more than workforces' PCs, phones, and devices. For instance, its capabilities have expanded into IoT/OT devices and B2B systems.
- Bolstered by its expanded capabilities, ZS believes it's in good position to capitalize on an upcoming hardware refresh cycle that will prompt IT teams to reduce security risks tied to VPNs, SD-WANs, and firewalls.
- Another rising catalyst revolves around GenAI, particularly for data loss and protection with the launch of new apps like 365 Copilot, DeepSeek, and ChatGPT. With the launch of these technologies, the importance of data protection is only increasing, causing more ZS customers to purchase its products in order to gain visibility into public-AI apps.
- Taking into account the above factors, ZS raised its FY26 billings guidance by $24.0 mln to $3.153-$3.168 bln, implying growth of about 21%. Importantly, the healthy growth won't come at the expense of profitability with ZS issuing upside EPS guidance of $3.04-$3.09.
There is little to complain about here as ZS delivered solid, upside results in a difficult and competitive market. Looking ahead, the future looks bright for ZS as the proliferation of new AI technologies will necessitate more tools for data protection and loss.
BJ's Wholesale reports strong earnings/comps; carving a name for itself in warehouse club space (BJ)
BJ's Wholesale Club (BJ +12%) is trading nicely higher to a new all-time high after reporting Q4 (Jan) earnings results this morning. This warehouse club chain beat on EPS. Revenue declined 1.5% yr/yr to $5.28 bln, but that was in-line. However, the mid-point of its FY25 EPS guidance was below analyst expectations. But investors do not seem to mind. BJ expects FY25 comps (ex-fuel) to be +2.0-3.5%.
- The metric that really jumps out at us is its Q4 comps (ex-fuel) at +4.6%. This continues an impressive upward trend in recent quarters: +3.8% in Q3, +2.4% in Q2 and +0.6% in Q1. BJ has been seeing continued strength in traffic, which contributed over 3 pts to its comp. This was BJ's 12th consecutive quarter of traffic growth. Growth in units also drove increased basket size.
- BJ said its strength in perishables has been a recurring theme all year as more members make BJ their weekly destination for produce, dairy and meat. Its perishables Grocery and sundries division delivered over +4% comp growth in Q4. Its general merchandise and services division comps grew by more than +5%, outpacing its consumables business for the first time since the pandemic. BJ cited a refined and expanded assortment in its gifting categories.
- The company's expansion continues. It opened 7 new clubs and 12 gas stations in FY24, including its 250th club in Louisville at the end of Q4, marking entry into its 21st state. Over the past 2 years, BJ has expanded into Tennessee, Alabama and Kentucky. In 2026, it has plans to enter Texas in the Dallas-Fort Worth region. DFW is a high-growth market with favorable demographics.
- BJ also continues to drive strong membership growth with a 7.9% increase in membership fee income in Q4. Membership is at an all-time high, above 7.5 mln members, with another impressive renewal rate performance of 90%. BJ sees membership as the cornerstone of its business. Since FY18, BJ has grown its member base by 40%. BJ also just instituted its first membership fee increase in seven years. Effective January 1, 2025, its Club membership fee increased by $5 to $60 a year and its Club+ fee increased by $10 to $120 a year.
Overall, there is a lot to like in this report, including the big EPS upside and strong comp growth. What really stands out are the comps trends, having accelerated each quarter of the year. BJ has also done a great job improving its grocery assortment as well as its general merchandise offerings. Finally, the stock is trading at a new all-time high following this report. It is trading above $110 for the first time ever and has been showing good momentum. Costco (COST) and Sam's Club (WMT) are still the behemoths in the warehouse space, but BJ's Wholesale is making a name for itself.
Macy's dances around its flatline today following a handful of positives and negatives from Q4 (M)
A mixed Q4 (Jan) report keeps shares of Macy's (M) dancing around its flatline today, sinking to new 52-week lows before attempting to stay in the green. The department store chain crushed earnings estimates in the quarter, returning to its standard double-digit beat cadence. However, revenue growth remained in reverse yr/yr, with comparable sales inching lower yet again; Macy's has not reported positive comp growth since 1Q23 (Apr). Still, investors are encouraged by the company's plans to resume buying back stock since showing little repurchase activity over the past two years.
- Macy's has undergone a comprehensive transformation over the years as it looks to differentiate itself in a world where department stores are losing ground to e-commerce alternatives. Throughout 2024, Macy's focused on its First 50 locations, where it has installed noticeable changes to better align with consumer tastes. Key differences in these stores include focused staffing, enhanced merchandise offerings, and better visuals. In Q4, these stores posted positive comps of +1.2%.
- It is not just the Macy's banner receiving a makeover. The company's luxury nameplates, Bloomingdale's and Bluemercury, have also seen changes, supporting comp growth of +6.5% and +6.2%, respectively, in Q4. All in, total enterprise comp growth (owned-plus-licensed-plus-marketplace comps) was +0.2%, the company's best result since 1Q23. The trio of robust comps underpinned Macy's adjusted EPS of $1.80 in Q4, nicely above its $1.40-1.65 outlook reiterated in mid-January.
- Given the ongoing success of the First 50 locations, Macy's is continuing to shutter underperforming stores, working on closing down the approximately 150 announced last year. At the same time, Macy's is remodeling and opening additional Bloomingdale's and Bluemercury locations. During FY25, Macy's opened three Bloomingdale's stores and 17 Bluemercury locations while remodeling seven.
- Still, Macy's is not where it wants to be. For the year, it will continue to execute its ongoing strategy to help stabilize its business and move closer to profitable growth. However, the economic environment is entirely out of Macy's hands. The company mentioned that consumer health remains fragile, dealing with broad-based inflationary pressures. This dynamic is reflected by Macy's FY26 (Jan) guidance, predicting net sales of $21.0-21.4 bln and comps of negative 0.5-2.0%. The biggest hurdle will be Q1; Macy's anticipates comps to fall by 2.5-4.5%.
While there were several bright spots from Macy's in Q4, there remains plenty of concern over whether the company's turnaround initiatives can spur a return to profitable growth. At the same time, Macy's remains a target for activist investors, fending off past attempts from Arkhouse and Brigade Capital. Activist pressures can keep a fire lit under management to ensure every move it makes has a solid chance of providing long-term shareholder value. For instance, share buybacks were a focal point of activists. Still, these pressures can elevate uncertainty over Macy's fate, possibly keeping investors at bay over the near term.
MongoDB's slowing Atlas growth and aggressive spending plans send shares plunging lower (MDB)
Despite handily beating Q4 EPS and revenue estimates, MongoDB (MDB) is crashing to its lowest levels since early 2023. Similar to last quarter, the company saw a greater-than-expected contribution from multiyear non-Atlas deals, driving the upside quarterly results. The issue, though, is that MDB doesn't expect this outperformance to continue, while Atlas growth simultaneously continues to slow.
Making matters worse, MDB commented during the earnings call that it plans to invest aggressively in R&D, as reflected by its $220 mln acquisition of Voyage AI on February 24. Furthermore, the company will step up its marketing investments in order to drive improved awareness of its platform's capabilities. This combination of slowing growth and increased spending flowed through to MDB's disappointing FY26 guidance, which badly missed EPS and revenue expectations.
- The key metric for MDB is Atlas growth since Atlas -- the company's cloud database service that allows users to deploy and manage unstructured databases in the cloud -- is viewed as its primary growth catalyst. The slowdown in growth continued in Q4 with Atlas revenue increasing by 24% compared to 26% in Q3 and 27% in Q2. Unfortunately, MDB expects the deceleration to continue in 1Q26, forecasting Atlas revenue to be flat to slightly up qtr/qtr, equating to yr/yr growth of about 23%.
- Meanwhile, the non-Atlas business, which mainly comprises of the Enterprise Advanced (EA) product, will present a stiff headwind in FY26. More specifically, MDB is anticipating a headwind of approximately $50 mln from multiyear license revenue as the mix of multiyear non-Atlas revenue will not only sink below the levels of the past two years but will also be below historical norms. The reason for this is that MDB will have a more limited number of large non-Atlas accounts that can sign multiyear deals in FY26.
- Although AI may eventually provide MDB with a strong growth catalyst, that's not expected to be the case in FY26. MDB stated that it expects AI benefits to only be "modestly incremental" in FY26 as most of its enterprise customers are still developing in-house skills to leverage AI effectively. Ultimately, though, the company believes that its opportunity tied to the exponentially expanding data that's fueling AI will become substantial.
The main takeaway is that MDB's Q4 earnings report is like a replay of last quarter, but only worse. Atlas revenue growth is slowing and the company's call for "stable Atlas consumption growth" in FY26 is looking underwhelming. Amid this slowing growth phase, MDB also plans to ramp up spending, which is throwing some gasoline on the fire.
Marvell under pressure today as its AI guidance was a bit lackluster (MRVL)
Marvell (MRVL -17%) is under heavy pressure despite reporting upside with its Q4 (Jan) results last night. One problem was that the upside was more modest than we saw in Q3 (Oct). Also, in Q3, the company guided Q4 a good bit above expectations, but the Q1 (Apr) guidance was just in-line. Furthermore, based on the questions from analysts on last night's call, it sounds like they were a bit letdown by Marvell's AI results/guidance.
- Its Data Center end market, which represented 75% of Q4 sales, up from 54% a year ago, was the primary growth driver, fueled by strong AI demand. In addition, Marvell saw continued demand recovery across its multi-market businesses, including carrier, enterprise, networking, and automotive and industrial.
- Let's start with its Data Center segment. Sales jumped 78% yr/yr and 24% sequentially to a record $1.37 bln. This was in-line with prior guidance of low-to-mid 20% sequential growth. Results were driven by its custom AI silicon programs ramping to high-volume production. Additionally, it benefited from strong shipments of its electro-optics products and Teralynx Ethernet switches.
- The Q1 Data Center guidance was a bit lackluster at mid-single digits. Marvell expects the cloud and AI portion to continue driving sequential double-digit growth. However, for the on-premise portion of its Data Center end market, Marvell expects a seasonal sequential decline to partially offset AI. Nevertheless, the AI guidance seemed a bit muted given the cap-ex announcements recently made by its largest customer (AMZN) and others.
- Turning to its other end markets, Enterprise Networking and Carrier Infrastructure are its next largest segments. Both saw 35+% yr/yr declines, but they both improved nicely on a sequential basis (EN +14% to $171.4 mln; CI +25% to $105.8 mln). Marvell saw continued recovery in both of these end markets and there could be more upside as it's still shipping below end-market consumption. Taken in aggregate (EN and CI), Marvell expects further 10% sequential growth in Q1.
- Consumer segment revenue declined 38% yr/yr and 8% sequentially to $88.7 mln. A 35% sequential decline in Q1 is expected, driven by seasonality in gaming demand. Automotive/Industrial was its only other segment to see yr/yr growth, but it was modest at +4% to $85.7 mln. Marvell continues to see a modest recovery in this end market. For Q1, Marvell expects sequential growth in automotive, but this will be more than offset by a decline in Industrial, where order patterns can be lumpy.
When Marvell's numbers hit the tape last night, we were initially surprised to see the stock fall so much. However, Marvell has really become an AI story and any little chink in the armor sees a big stock reaction. We think Marvell's fairly muted Q1 outlook for DC and AI, in particular, is adding to already existing concerns that the possible AI digestion slowdown this spring/summer people have talked about is a real possibility. Other AI-related chip stocks are also lower (AVGO -4%, NVDA -2%).
|
|
