| | | Market Snapshot
| Dow | 40093.40 | +486.83 | (1.23%) | | Nasdaq | 17166.03 | +457.99 | (2.74%) | | SP 500 | 5484.79 | +108.91 | (2.03%) | | 10-yr Note | +28/32 | 4.311 |
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| | NYSE | Adv 2247 | Dec 447 | Vol 1.0 bln | | Nasdaq | Adv 3371 | Dec 993 | Vol 7.6 bln |
Industry Watch
| Strong: Technology, Communication Services, Energy, Materials, Industrials |
| | Weak: Consumer Staples |
Moving the Market
-- Digesting a slate of mixed earnings news since yesterday's close; Southwest Airlines (LUV), IBM (IBM), Procter & Gamble (PG), and Merck (MRK) all lower, ServiceNow (NOW) and Texas Instruments (TXN) all higher
-- Reacting to this morning's economic data
-- 10-yr yield dropping
-- Short-covering and fear of missing out on further gains
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Closing Summary
24-Apr-25 16:30 ET
Dow +486.83 at 40093.40, Nasdaq +457.99 at 17166.03, S&P +108.91 at 5484.79
[BRIEFING.COM] The stock market rallied for the third consecutive session. The Dow Jones Industrial Average jumped nearly 500 points, the S&P 500 registered a 2.0% gain, and the Nasdaq Composite gained 2.7%.
With today's move, the S&P 500 is 10.1% above its low close in April 8 (4,982.77). Short-covering and a fear of missing out on further gains contributed to the upside moves, boosted by strength in the mega cap and chipmakers spaces.
The PHLX Semiconductor Index (SOX) surged 5.6% and the Vanguard Mega Cap Growth ETF (MGK) rose 3.1% from yesterday. It wasn't just mega caps and chipmakers, though. Many stocks benefitted from broad buying interest that was further supported by dropping market rates and positive economic data.
The 10-yr yield settled eight basis points lower at 4.31%. The 2-yr yield settled seven basis points lower at 3.79%. Treasury yields were already lower before the market received another solid weekly initial claims number (222,000) and ahead of the $44 billion 7-yr note sale, which met soft demand.
Earnings news since yesterday's close has been a mixed bag. Chipotle Mexican Grill (CMG 49.54, +0.78, +1.6%), Southwest Airlines (LUV 26.46, +0.94, +3.7%), IBM (IBM 229.33, -16.15, -6.6%), and Merck (MRK 79.84, +1.10, +1.4%) issued some cautious-sounding guidance.
Names like Texas Instruments (TXN 162.13, +9.98, +6.6%), ServiceNow (NOW 938.57, +125.87, +15.5%), Whirlpool (WHR 78.97, +1.23, +1.6%) reported pleasing earnings and/or guidance.
- Dow Jones Industrial Average: -5.8% YTD
- S&P 500: -6.8% YTD
- S&P Midcap 400: -8.9% YTD
- Nasdaq Composite: -11.1% YTD
- Russell 2000: -12.2% YTD
Reviewing today's economic data:
- March Durable Orders 9.2% (Briefing.com consensus 1.5%); Prior 0.9%, March Durable Goods -ex transportation 0.0% (Briefing.com consensus 0.3%); Prior 0.7%
- The key takeaway from the report is that there was a rebound in nondefense capital goods, excluding aircraft, which rose 0.1% following a 0.3% decline in February. This is indicative of a modest pickup in business spending, albeit before the reciprocal tariff upset on Liberation Day. New orders for primary metals increased 0.7% following a 1.3% increase in February.
- Weekly Initial Claims 222K (Briefing.com consensus 220K); Prior was revised to 216K from 215K, Weekly Continuing Claims 1.841 mln; Prior was revised to 1.878 mln from 1.885 mln
- The key takeaway continues to be found in the leading indicator of initial jobless claims, which continue to run at low levels that are nowhere close to being associated with a recession.
- March Existing Home Sales 4.02 mln (Briefing.com consensus 4.20 mln); Prior was revised to 4.27 mln from 4.26 mln
- The key takeaway from the report is that existing home sales declined month-over-month in all regions, while the median selling price increased month-over-month in all regions, signaling the affordability constraints buyers are facing with higher prices and relatively higher mortgage rates.
Looking ahead to Friday, market participants receive the following data:
- 10:00 ET: Final April University of Michigan Consumer Sentiment (Briefing.com consensus 48.5; prior 50.8)
Treasury yields drop, supporting stocks
24-Apr-25 15:30 ET
Dow +413.56 at 40020.13, Nasdaq +390.85 at 17098.89, S&P +94.93 at 5470.81
[BRIEFING.COM] The market remains near session highs ahead of the close.
Lower Treasury yields provided support to the equity market through the entire session. The 10-yr yield settled eight basis points lower at 4.31%. The 2-yr yield settled seven basis points lower at 3.79%.
Looking ahead to Friday, market participants receive the following data:
- 10:00 ET: Final April University of Michigan Consumer Sentiment (Briefing.com consensus 48.5; prior 50.8)
GOOG leads in front of earnings
24-Apr-25 15:05 ET
Dow +423.56 at 40030.13, Nasdaq +399.57 at 17107.61, S&P +94.65 at 5470.53
[BRIEFING.COM] The market moved mostly sideways at the index level in recent trading.
Alphabet (GOOG 161.03, +3.31, +2.1%) continues to trade up in front of its earnings report. Other mega caps also lead the broader equity market.
The Vanguard Mega Cap Growth ETF (MGK) shows a 2.9% gain.
Other notable names reporting earnings this afternoon include T-Mobile (TMUS 261.96, +2.61, +1.0%), Intel (INTC 21.31, +0.71, +3.5%), and Eastman Chemical (EMN 80.47, +1.63, +2.1%).
S&P 500 up 1.79%, Hasbro, Microchip, and ResMed lead; Fiserv drops after earnings
24-Apr-25 14:30 ET
Dow +387.02 at 39993.59, Nasdaq +409.49 at 17117.53, S&P +96.39 at 5472.27
[BRIEFING.COM] The S&P 500 (+1.79%) is once more in second place on Thursday afternoon, up just shy of 100 points.
Briefly, S&P 500 constituents Hasbro (HAS 60.94, +8.25, +15.66%), Microchip (MCHP 46.91, +4.98, +11.88%), and ResMed (RMD 238.05, +23.61, +11.01%) pepper the top of the standings. HAS and RMD advance following earnings, while MCHP's gains are tied to the announcement of the release of the MCPF1412, a highly efficient and integrated 12A power module.
Meanwhile, Milwaukee-based fintech firm Fiserv (FI 178.43, -38.67, -17.81%) is underperforming following earnings/guidance.
Gold rebounds on bargain hunting, safe-haven demand amid volatility
24-Apr-25 14:00 ET
Dow +382.08 at 39988.65, Nasdaq +392.58 at 17100.62, S&P +94.36 at 5470.24
[BRIEFING.COM] The tech-heavy Nasdaq Composite (+2.35%) is comfortably in the lead among the major average with about two hours to go on Thursday.
Gold futures settled $54.70 higher (+1.7%) at $3,348.80/oz, recovering from yesterday's dip. The gains were driven by bargain hunting and investor caution amid ongoing market volatility. The prior session's decline followed President Trump's retraction of his threat to dismiss Fed Chair Jerome Powell and his expression of optimism about a potential trade agreement with China, which had momentarily reduced demand for gold as a safe-haven asset.
Meanwhile, the U.S. Dollar Index is now down -0.5% to $99.42.
Procter & Gamble hits 52-week lows as tariffs, FX rates, and commodity costs clip FY25 guidance (PG)
Procter & Gamble (PG -4%) is amid meaningful selling pressure today after lowering its FY25 (Jun) outlook over the material impact of tariffs. The household durables giant, known for numerous brands like Tide and Pampers, reduced its adjusted EPS forecast for the year by $0.21 at the midpoint to account for a more pronounced headwind tied to FX rates, commodity costs, and tariffs, assuming they hold at current rates. Management mentioned that the largest tariff-related impact stems from raw and packaging materials as well as some finished products sourced from China. Even though the region comprises slightly over 10% of total imports for PG, the tariff rate is high enough to produce a sizeable hit to the company's earnings.
The trade policy problems for PG mirror what we saw from peer Kimberly-Clark (KMB) earlier this week, which lowered its adjusted EPS outlook for 2025. While the reciprocal tariff rates on China from earlier this month are reportedly set to change, the uncertainty surrounding the final number and the consequences remain elevated, clouding the near future and sparking alarm among investors, sending shares of PG to 52-week lows today.
- Adding to today's sell-off was PG's mixed Q3 (Mar) results, registering adjusted EPS of $1.54, marking its ninth straight beat on slightly lower-than-expected revenue of $19.78 bln, a 2.1% decline yr/yr. On an organic basis, which excludes FX and M&A impacts, sales ticked 1% higher. Volumes on a reported basis were sluggish, sliding by 1%, while organic volumes were flat.
- By category, Grooming was the notable standout and the only one to post positive reported volume growth in Q3. On an organic basis, Beauty also delivered volume growth. Health Care and Fabric & Home Care posted a 1% drop in reported volumes while Baby, Feminine & Family Care was the weakest, posting a 2% drop in reported and organic volumes.
- Prices climbed by 1% on a consolidated basis, potentially nudging some consumers to pull back their spending or shift toward lower-cost alternatives. However, on that note, PG commented that it continues to grow or maintain its market share across the U.S. and Europe as private label shares continue to trend lower, accelerating downwards in Europe. PG is leveraging this clear brand loyalty to potentially hike prices in the coming months.
- Still, in the interim, PG is wading through choppy waters. The company sliced its FY25 adjusted EPS outlook to $6.72-6.82 from $6.91-7.05 and revs to $84.04 bln from $85.72-87.40 bln, implying stagnant yr/yr growth this year.
CFO Andrew Schulten noted that the company's playbook centers on delivering balanced top and bottom-line growth over a two-to-three-year period, conceding that it will not hit that goal every quarter. As such, PG is pulling the right levers now, such as hiking prices, to place it in a more advantageous position for longer-term growth. However, this comes at a gamble as consumers are still feeling the sting of cumulative inflationary pressures and may gravitate toward private labels or pull back their spending. Meanwhile, without clarity surrounding how tariffs will shake out, investors are beginning to steer clear of PG, a trend that could persist over the near term.
PepsiCo's snack business struggles continue, while tariffs to take a bite out of EPS growth (PEP)
For the first time since 4Q20, PepsiCo (PEP) fell short of EPS expectations in 1Q25, underscoring how challenging conditions have become for the beverage and snack food giant. For the third consecutive quarter, PepsiCo Foods North America (PFNA), which houses the Frito-Lay brand, posted both organic revenue and volume declines. Ongoing softness in consumer demand and value-conscious shopping behavior -- especially in the savory snack category -- continues to weigh on Frito-Lay. Compounding the issue, PEP is anticipating an increase in supply chain costs due to tariffs and global trade developments, causing it to lower its FY25 core constant currency EPS growth forecast to flat from its prior outlook of mid-single-digit growth.
- Organic revenue and volume both dipped lower by 1% for PepsiCo Foods North America, driven by subdued demand across the Frito-Lay portfolio. A variety of headwinds are pressuring demand here, including persistently high inflation that's squeezing consumer budgets, leading shoppers to cut back on discretionary purchases like salty snacks or switch to less expensive private-label brands. Also, declining foot traffic in convenience stores -- a channel that represents about 21% of Frito-Lay's net sales -- has been a strong headwind, while a growing focus on health and nutrition among consumers is also a factor.
- There are some pockets of strength. For instance, Quaker Foods delivered solid double-digit organic revenue growth, rebounding sharply from the prior year's recall impact. Additionally, select convenient food brands like Chester's, Miss Vickie's, and Gamesa delivered net revenue growth in Q1.
- Turning to PepsiCo Beverages North America (PBNA), organic revenue edged higher by 1% despite a 3% drop in volume, thanks to PEP's strategic pricing initiatives. Non-carbonated drinks were a laggard with volume down by 6%, but strength in the Pepsi brand, which gained share in the carbonated soft drinks category, helped to offset the weakness. The successful national rollout of Mountain Dew Baja Blast also provided a boost.
- Although PBNA is facing pressures from higher supply chain and input costs, its pricing and productivity initiatives are helping it to overcome those obstacles. Specifically, PEP has implemented a multi-year program that leverages automation, standardization, and data analytics to drive savings. As a result, PBNA's operating profit grew by 24% on a core constant currency basis.
- From a revenue growth standpoint, the International Beverages Franchise stood out again as a 5% increase in volume drove net revenue higher by 3%, despite a significant 5 percentage point FX headwind. Brand expansion with an emphasis on global growth for PEP's core brands (Lay's, Cheetos, Doritos, Pepsi, Gatorade) is a key component of PEP's international growth strategy.
PEP delivered subdued Q1 results that featured a 4% drop in core constant currency EPS and modest organic revenue growth of 1.2%. Soft consumer demand, especially in the Frito-Lay snack business, new tariffs, and rising supply chain costs are combining to create a challenging business climate, prompting PEP to lower its FY25 EPS outlook to flat growth. The International segment remains a bright spot, delivering healthy organic revenue growth of 11%.
IBM reports a solid beat-and-raise but cautious macro view weighing on Big Blue today (IBM)
IBM (IBM -6%) is pulling back sharply despite reporting quite healthy upside results for Q1 last night. This was its second largest EPS beat in the last 17 quarters. Revenue inched up 0.5% yr/yr to $14.54 bln, but that was a bit better than expected. Of note, Q1 is IBM's smallest revenue quarter each year, but it's still important for setting the tone for the year. IBM also guided for upside Q2 revs and reaffirmed FY25 guidance with revenue growth of at least 5% CC. It also reaffirmed FCF of about $13.5 bln.
- Its Software segment was the star of the show with revenue up +7% (+9% CC) to $6.3 bln with strength across key categories of Red Hat (+13% CC), Automation (+15% CC), Data (+7% CC) and Transaction Processing (+2% CC). Software is now about 45% of its business with 80% recurring revenue. Red Hat growth was driven by bookings growth in the high teens. Also, OpenShift is now at $1.5 bln ARR, growing about 25%.
- Consulting segment revenue was down -2% (flat CC) to $5.1 bln. IBM said it's seeing clients delay decision-making, especially in discretionary projects which impacted IBM's in-period signings. A silver lining is that IBM had good growth in transformational offerings like Hybrid Cloud and Data. It also continues to build its Consulting generative AI book of business, which is now over $5 bln inception to date.
- Infrastructure segment revenue was down -6% (-4% CC) to $2.9 bln. Hybrid Infrastructure was down -7% CC, comprised of IBM Z being down -14% CC and Distributed Infrastructure -4% CC. However, this segment's results are not all that meaningful. All eyes are on the upcoming launch of its next generation z17 mainframe in mid-2025, which delivers enhanced AI acceleration. IBM says z17 discussions have resonated with clients, given significantly lower power requirements, higher capacity growth and increased performance over z16.
- In terms of its macro view, IBM believes uncertainty may cause clients to pause and take a wait-and-see approach. There are some areas of strength and there are some areas of its business where volatility acts as a catalyst for demand. This played out over the last couple of weeks amongst its financial services clients.
- However, for clients with a more direct impact from current policy, the slowdown may be more pronounced. In particular, Consulting is more susceptible to discretionary pullbacks and DOGE-related initiatives. With that said, IBM has not seen a material change in client buying behavior early in Q2, which likely helped persuade management to reaffirm FY25 guidance.
Overall, IBM's Q1 report was quite strong and even the guidance was encouraging. In fact, we believe this was the first time IBM provided specific revenue guidance, not just its CC outlook, in many quarters which was a nice positive. The problem was the macro commentary on the call, namely that some clients are being cautious in the near term. IBM's Consulting segment seems to be the most vulnerable and it tends to see headwinds before other parts of the business. On a final note, we would have liked a bit more color on the upcoming z17 launch. With the macro uncertainty, the timing of the launch does not seem to be the best.
Texas Instruments displays further signs of a recovery in Q1; no impact thus far from tariffs (TXN)
Investors are singing Texas Instruments' (TXN +6%) praises today after the analog and embedded chip manufacturer posted wide earnings and revenue beats in Q1 and issued upbeat Q2 guidance, mentioning that thus far, it has yet to see any material impact from tariffs. At the same time, management stated that it has continued to observe a recovery across its end markets, including industrial, its largest segment, which finally returned to sequential growth following seven straight quarters of declines.
Given the current uncertain macroeconomic environment, which TXN warned could still cause disruptions to its business, customers, and suppliers, these highlights were sufficient to ignite a relief rally today, helping shares rebound following a 25% sell-off from late February highs.
- Supported by a long-awaited return to growth in industrial, TXN delivered yr/yr consolidated revenue growth for the first time since 3Q22, posting an 11.1% improvement to $4.07 bln. Sequentially, revenue inched 1.5% higher. When backing out a one-time $0.05 benefit, EPS grew to $1.23, marking TXN's widest beat in almost three years.
- Outside of personal electronics, which endured typical seasonality, leading to a mid-teens decline, every end market registered sequential gains in Q1. Industrial, which comprises around 35% of overall revenue, expanded by upper-single digits. Automotive, which also accounts for 35% of total sales, increased by low single digits. Enterprise systems and communications equipment grew by mid-single digits and around 10%, respectively.
- TXN is approaching current market dynamics from a cautiously optimistic perspective. On the one hand, trade policy is fluid, changing weekly and sometimes daily, stirring unease across the global landscape. However, on the other hand, TXN commented that it is at the bottom of the semiconductor cycle with customer inventories at low levels across all end markets. Management stressed the importance of having capacity and inventory during a period like this, adding that it is well-positioned on those fronts.
- As a result, TXN issued upbeat Q2 guidance, projecting EPS of $1.21-1.47 and revs of $4.17-4.53 bln, the midpoints of both exceeding analyst forecasts. The company noted that, at the moment, it sees no near-term impacts to Q2 numbers but added that the future is cloudy, bracing for a range of possible scenarios for the back half of 2025 and going into 2026.
After hints of a broad recovery last quarter, TXN followed through in Q1. Management reiterated that the cycle has hit bottom, pointing to stacking evidence from customers that they are considerably short on inventory, with some reporting just a few days of inventory on hand. The most promising sign from Q1 is that the recovery is branching out to more channels and geographies as well as finally affecting TXN's critical industrial end market. While tariffs keep TXN cautious, the company may be finally turning a corner following an extended inventory correction cycle.
Boeing flying higher with a return to top line growth in Q1; business seems to be stabilizing (BA)
Boeing (BA +6.5%) is trading nicely higher following its Q1 report this morning. As expected, Boeing reported another large loss, its 15th consecutive quarterly loss. But it was much narrower than expected. Revenue grew a healthy 17.7% yr/yr to $19.50 bln, which was in-line. It was good to see Boeing return to yr/yr revenue growth after four consecutive declines. It helped a lot that the IAM work stoppage ended in Q4 and Boeing is resuming deliveries.
- Its Commercial Airplanes segment was the star of the show with revs surging 75% yr/yr to $8.15 bln with (6.6)% segment operating margin vs (24.6)% a year ago. CA segment results primarily reflect higher deliveries. Importantly, BA has made changes to strengthen its quality system and it is delivering results. BA says almost every customer it talks to reports an improvement in quality.
- Boeing is currently producing 737s in the low 30s per month, and expects that to grow to 38/mo over the next few months. The company then plans to request an increase to 42/mo with the FAA later this year. The 787 program continued to stabilize production at 5/mo in Q1 and expects to increase to 7/mo this year. The 777X program began expanded FAA certification flight testing in Q1 and BA reaffirmed its goal of a first delivery of the 777-9 in 2026.
- Boeing's Defense segment did not perform as well with revs down 9% yr/yr to $6.30 bln, but op margin improved slightly to 2.5% from 2.2%. More importantly, Boeing said it's seeing a stabilizing operational performance in Defense. Defense also snagged a key win in Q1 as the US Air Force chose Boeing to build the F-47, its next-generation fighter aircraft. The F-47 is expected to have a significantly longer range and more advanced stealth.
- Tariffs were a key topic on the call. Boeing is not being impacted much on the input cost side with much of its supply chain being based in the US. However, many customers in China have indicated they will not take delivery. As such, BA is actively assessing options for remarketing already built or in process airplanes. The silver lining is that BA has many customers who want near term deliveries, so the plan is to redirect the supply to the stable demand.
The key takeaway from the Q1 report is that Boeing's business seems to be stabilizing. That was readily apparent in its plans to increase production later this year. Also, the balance sheet is in better shape thanks to an equity raise in late 2024 and BA announced yesterday it will sell portions of its Digital Aviation Solutions business to Thoma Bravo for $10.55 bln, which will allow it to focus more on its core business.
It has been a rough few years for Boeing given all its well-documented safety issues, production delays, and the IAM strike. Recall that the Boeing recently named Robert "Kelly" Ortberg as its new CEO. He took the helm on August 8, 2024 and has been making important changes, including making the company leaner and focusing more on quality.
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