Market Snapshot
| Dow | 42319.74 | -108.00 | (-0.25%) | | Nasdaq | 19298.43 | -162.04 | (-0.83%) | | SP 500 | 5939.30 | -31.51 | (-0.53%) | | 10-yr Note |
|
|
|
| | NYSE | Adv 1379 | Dec 1372 | Vol 1.06 bln | | Nasdaq | Adv 1848 | Dec 2593 | Vol 8.85 bln |
Industry Watch
| Strong: Communication Services |
| | Weak: Consumer Staples, Consumer Discretionary, Materials |
Moving the Market
-- Some trade-related optimism amid reports President Trump spoke with China's President Xi
-- Relative strength among chipmakers ahead of Broadcom's (AVGO) quarterly report after the close
-- Tesla down big as Elon Musk attacks reconciliation bill, drawing ire of President Trump
-- Mixed economic data
|
Closing Stock Market Summary
05-Jun-25 16:25 ET
Dow -108.00 at 42319.74, Nasdaq -162.04 at 19298.43, S&P -31.51 at 5939.30
[BRIEFING.COM] Today was a fluid day in terms of major news items. We'll synthesize them in a bullet-point format while pointing out that the stock market acted well in the morning session and poorly in the afternoon session.
The S&P 500 climbed as high as 5,999.70 but just couldn't make it over the 6,000 threshold and was eventually driven as low as 5,921.20, with stocks like Tesla (TSLA 284.68, -47.37, -14.3%), Costco (COST 1010.81, -40.88, -3.9%), Brown-Forman (BF.B 27.25, -5.95, -17.9%), and Palantir Technologies (PLTR 119.91, -10.10, -7.8%) in the driver's seat.
Here is a glimpse of what unfolded today:
- President Trump and President Xi had a phone call and agreed to have their respective teams meet again soon. This news hit early, and market participants seemed to like the idea that the tone of the call sounded more conciliatory than combative.
- Elon Musk decried the one big, beautiful bill on social media and urged lawmakers to "kill the bill," which ultimately drew the ire of President Trump, who expressed his disappointment in Elon Musk and suggested in his own social media post that terminating Elon's government subsidies and contracts would be the easiest way to save billions and billions of dollars in the budget.
- The European Central Bank voted to cut its key interest rates by 25 basis points. While that news was expected, it did not weigh on the euro, which was up 0.2% against the dollar.
- Q1 productivity decreased 1.5% (Briefing.com consensus -0.8%) versus the preliminary report of a 0.8% decrease. Unit labor costs, meanwhile, were revised up to 6.6% (Briefing.com consensus 5.7%) from the preliminary reading of 5.7%.
- Initial jobless claims for the week ending May 31 increased by 8,000 to 247,000 (Briefing.com consensus: 235,000). Continuing jobless claims for the week ending May 24 decreased by 3,000 to 1.904 million; however, the four-week moving average of 1,895,250 is the highest level since November 27, 2021.
- The trade deficit plunged in April to $61.6 billion (Briefing.com consensus: -$117.2 billion) from an upwardly revised deficit of $138.3 billion (from -$140.5 billion) in March. Exports were $8.3 billion more than March exports, but imports were $68.4 billion less than March imports.
- Circle Internet Group (CRCL 83.23, +52.23, +168.5%) had a wildly successful debut. After pricing its IPO at $31.00 per share, the global fintech specializing in stablecoins traded as high as $103.75 before closing the session at 83.23.
Briefly, there was some good and some bad in today's newsflow, so it was rather fitting that breadth figures reflected a mixed disposition. Advancers and decliners were about even at the NYSE, while decliners led advancers by a 13-to-9 margin at the Nasdaq.
Tesla was the biggest drag on the underperforming Nasdaq and fellow growth stocks, which underperformed value stocks today. Overall, buying interest was subdued, as the totality of today's news wasn't enough to maintain the market's bullish momentum in front of tomorrow's Employment Situation Report.
There was only one sector that eked out a gain. That was the communication services sector (+0.06%). The consumer discretionary sector (-2.5%), hurt by Tesla, was the worst-performing sector, followed by consumer staples (-1.2%), which felt the pressure of losses in Costco after a report showing a moderation in same-store sales for May and losses in Brown-Forman, which disappointed with its earnings results and FY26 outlook.
The remaining sectors logged losses between 0.1% and 0.6%.
- S&P 500: +1.0% YTD
- Nasdaq: -0.1% YTD
- DJIA -0.5% YTD
- S&P 400: -3.2% YTD
- Russell 2000: -6.0% YTD
Reviewing today's economic data:
- Q1 productivity decreased 1.5% (Briefing.com consensus -0.8%) versus the preliminary report of a 0.8% decrease. Unit labor costs, meanwhile, were revised up to 6.6% (Briefing.com consensus 5.7%) from the preliminary reading of 5.7%.
- Briefing.com Analyst Insight: The combination of declining productivity and the big jump in unit labor costs has stagflation undertones that will complicate the Fed's assessment of the overall economic picture and what to do with its policy rate.
- Initial jobless claims for the week ending May 31 increased by 8,000 to 247,000. Continuing jobless claims for the week ending May 24 decreased by 3,000 to 1.904 million; however, the four-week moving average of 1,895,250 is the highest level since November 27, 2021.
- Briefing.com Analyst Insight: These data point to some softening in the labor market but altogether don't ring any loud alarm bells for the economic outlook. Yes, initial jobless claims -- a leading indicator -- have risen, but they remain well below levels associated with a recession. It won't be until the initial claims numbers start to exceed 300,000 on a regular basis that alarms will sound with respect to the labor market and the economy's growth trajectory.
- One thing that became crystal clear this morning is that the trade deficit plunged in April to $61.6 billion (Briefing.com consensus -$117.2 billion) from an upwardly revised deficit of $138.3 billion (from -$140.5 billion) in March. Exports were $8.3 billion more than March exports, but imports were $68.4 billion less than March imports.
- Briefing.com Analyst Insight: Bear in mind that the March trade deficit was at a record level, driven by a surge in imports that was a function of frontrunning the tariffs. With the April report, there is little question that the tariff actions upended import activity. The result is that there was a major dent made in the trade deficit, which President Trump will enjoy seeing. Another takeaway is that the plunge in imports will result in the net exports component making a materially positive contribution to Q2 GDP and economists raising their Q2 GDP forecasts.
New session lows reached
05-Jun-25 15:35 ET
Dow -128.87 at 42298.87, Nasdaq -151.14 at 19309.33, S&P -31.09 at 5939.72
[BRIEFING.COM] The indices fell to new session lows in the past half hour, with Tesla (TSLA 283.77, -48.28, -14.5%) acting as a major drag. Notably, the S&P 500 was within a whisker of cracking the 6,000 level earlier today but got rejected at the door, peaking at 5,999.70.
Some technical selling pressure kicked in when the 6,000 level couldn't be cracked, and then buying interest faded throughout the afternoon session.
The impact of Tesla's losses has been felt in the consumer discretionary sector (-2.4%), which is today's worst-performing area despite a 0.7% gain in Amazon.com (AMZN 208.63, +1.40, +0.7%).
There was an interesting batch of economic data released before today's open, and the economic calendar promises to be a focal point Friday with the release of the May Employment Situation Report at 8:30 a.m. ET.
President Trump hits back at Elon Musk
05-Jun-25 15:05 ET
Dow +48.43 at 42476.17, Nasdaq -67.54 at 19392.93, S&P -9.20 at 5961.61
[BRIEFING.COM] The market is operating in a mixed state as participants counterbalance some softish economic data with some seeming optimism regarding the U.S. and China working out their trade/tariff differences.
At the moment, though, there isn't as much optimism among Tesla (TSLA 287.19, -44.86, -13.6%) shareholders that Elon Musk, who has been vocally critical of President Trump's "one big, beautiful bill," and the president being able to work out their differences.
Tesla is getting clobbered today, which is weighing a bit on the broader market, and the outlook has gotten murkier for the stock with President Trump recently posting on Truth Social that, "The easiest way to save money in our Budget, Billions and Billions of Dollars, is to terminate Elon's Governmental Subsidies and Contracts."
The Vanguard Mega-Cap Growth ETF (MGK) is down 0.3% after being up as much as 0.8% earlier.
Cruise and retail names lift S&P standings as PLTR slides on political risk
05-Jun-25 14:35 ET
Dow +26.75 at 42454.49, Nasdaq -40.49 at 19419.98, S&P -6.57 at 5964.24
[BRIEFING.COM] The S&P 500 (-0.11%) is in a familiar second place once more on Thursday afternoon.
Briefly, S&P 500 constituents Dollar Tree (DLTR 96.37, +7.75, +8.75%), Norwegian Cruise Line (NCLH 19.54, +1.14, +6.20%), and Cooper (COO 71.29, +3.87, +5.74%) dot the top of the standings. DLTR pops today on favorable sell side analyst commentary, while NCLH outperforms largely driven by bullish commentary from Stifel following recent management meetings. The firm reiterated its Buy rating and $26 price target, noting a notably more optimistic tone from management around booking trends compared to just a few weeks ago. Stifel believes demand rebounded strongly in May, and in a more stable macro/media environment, demand looks "incredibly healthy." While Q3 may face load factor pressure in Europe, NCLH is prioritizing pricing over volume, which could support margin resilience — and potentially lead to upside to 2025 guidance if current trends hold.
Meanwhile, Palantir Technologies (PLTR 122.55, -7.46, -5.74%) faulters after a Semafor report revealed Republican lawmakers are criticizing the company's role in a Trump-era initiative to consolidate massive government datasets on Americans, raising serious privacy concerns. The bipartisan backlash introduces new political risk and threatens Palantir's reputation and future government contract prospects, prompting investors to reprice the stock.
Gold slips 0.7% as traders weigh weak U.S. data, Fed tariff concerns, and Trump rate cut push
05-Jun-25 14:00 ET
Dow +89.43 at 42517.17, Nasdaq -3.15 at 19457.32, S&P +2.01 at 5972.82
[BRIEFING.COM] The tech-heavy Nasdaq Composite (-0.02%) now holds modest losses, a hair lower from levels half an hour ago.
Gold futures settled $24.10 lower (-0.7%) at $3,375.10/oz; notably, weaker-than-expected U.S. economic indicators, including the first contraction in the services sector in nearly a year and the slowest private sector job growth in over two years, have heightened anticipation for the upcoming nonfarm payroll data. Additionally, the Federal Reserve reported increasing costs tied to higher tariffs, and President Trump reiterated his call for interest rate cuts while intensifying trade tensions with China. These developments have kept gold in a holding pattern, supported by safe-haven demand but hesitant to surpass recent highs.
Meanwhile, the U.S. Dollar Index is less than -0.1% lower to $98.79.
Ciena EPS miss is spurring investors to lock in some recent gains
Ciena (CIEN -14%) is pulling back sharply after the telecom/networking equipment giant missed pretty badly on Q2 (Apr) EPS. However, revenue grew nicely, up 23.6% yr/yr to $1.13 bln, at the upper end of prior guidance of $1.05-1.13 bln. Revenue guidance for Q3 (Jul) was quite good at $1.13-$1.21 bln, which is above analyst expectations.
- Ciena continues to see strong demand across all customer segments, geographic regions and its diversified portfolio. Notably, revenue from cloud providers stood out as a key driver in Q2. Ciena achieved record direct Cloud Provider revenue in Q2 (38% of total revs), grew 85% yr/yr to more than $400 mln. This was the first time Ciena reached this level in a single quarter.
- The company said its strength in its direct Cloud Provider segment really demonstrates the accelerating investments in AI infrastructure and Ciena's leadership in addressing this demand. Of note, three of its top five customers in Q2 were cloud providers, underscoring their sustained investments in AI infrastructure and network expansion. And that was evident in the fact that Q2 orders were again significantly greater than revenue. Ciena says it's on track for cloud provider orders to double in FY25.
- Regarding tariffs, Ciena navigated a new and, in the early days, a rapidly changing US tariff environment. It responded in real time with mitigation strategies to minimize the impact. However, as a result of the dynamic conditions, as well as the need to adjust billing systems and customers' systems, Ciena absorbed a net impact to its bottom line in Q2. However, it expects that the net tariff effect to its bottom line in future quarters will be immaterial.
Clearly, investors are focusing on the tariff hit to profitability in Q2. However, the company sounded generally pretty optimistic on the call with respect to both demand and its ability to mitigate tariff impacts in the future. Another factor is that we may be seeing a bit of a sell-the-news impact. The stock had run about 67% since early April, so the EPS miss provided an opportunity to lock in some profits.
MongoDB soars as Atlas growth reaccelerates, underpinning Q1 beat and bullish FY26 forecast (MDB)
MongoDB (MDB) is surging following a strong 1Q26 earnings report and the announcement of an $800 mln expansion of its share repurchase program. This rally marks a sharp reversal for the stock which had declined by approximately 15% on a year-to-date basis after a 43% plunge in 2024, reflecting investors' muted expectations. Relatedly, the Q1 performance comes on the heels of a disappointing 4Q25 earnings report on March 5, where MDB exceeded EPS and revenue expectations but issued FY26 guidance significantly below analysts' estimates.
- That Q4 outperformance was driven by an unexpected $50 mln contribution from multiyear non-Atlas deals, particularly in its Enterprise Advanced business, which bolstered revenue but disappointed investors due to its non-recurring nature. Management cautioned that this tailwind would not persist into FY26, creating a revenue headwind, primarily in the second half of the year, as renewals from these deals taper off. Additionally, MDB projected a continued slowdown in Atlas growth, forecasting a 23% yr/yr increase for 1Q26, down from a 24% exit rate in Q4, further dampening investor confidence.
- Contrary to expectations, Atlas, MDB’s cloud database service for deploying and managing unstructured databases, delivered a reacceleration for Q1, with revenue growth of 26% yr/yr. This outperformance, with Atlas contributing 72% of total revenue, is a primary catalyst for the stock’s rally, as Atlas growth is a critical metric for investors. Key growth drivers for Atlas include broad-based consumption growth across vintages and geographies and a record 2,600 customer additions (totaling 57,100).
- Furthermore, the launch of new AI-focused offerings, such as Voyage 3.5 and 3.5 Lite retrieval models and the MongoDB Model Context Protocol Server in public preview, likely bolstered Atlas adoption by enhancing its appeal for AI workloads, particularly in regulated industries requiring trust and accuracy.
- MDB guided Q2 EPS above expectations and its revenue guidance also slightly topped estimates at the midpoint of the guidance range. The company also raised its FY26 EPS and revenue forecasts, significantly boosting its EPS outlook to $2.94-$3.12 from its prior projection of $2.44-$2.62. This improved profitability stems from operational efficiencies, disciplined spending under new CFO Mike Berry, and Atlas’s high-margin contribution. Atlas’s 72% share of revenue, with its scalable cloud model, reduces reliance on lower-margin non-Atlas offerings, which are expected to decline in the high single digits yr/yr.
- MDB’s long-term growth potential, particularly in AI, remains promising but underdeveloped. The company has noted that AI workloads are expected to contribute only “modestly incremental” revenue in FY26, as most enterprise customers are still building in-house AI capabilities. However, MDB’s strategic investments, including the Voyage AI acquisition and the MCP Server, position it to capitalize on the exponential growth of data fueling AI applications.
In conclusion, MDB’s Q1 earnings, driven by a 26% reacceleration in Atlas growth, have reignited investor confidence, powering a significant stock rally. The company’s focus on operational efficiency and AI investments positions it for sustained growth, with Atlas’s robust performance and the $800 mln share repurchase program underscoring a compelling path toward long-term shareholder value.
Five Below gets a high-five from investors, surges to new 52-wk high following upbeat report (FIVE)
Five Below (FIVE +8%) is getting a high-five from investors after reporting Q1 (Apr) results last night. The value retailer had already guided for Q1 for May 2, so not a lot of mystery there. The results were a bit better than the guidance.
- We knew that all eyes were going to be on the Q2 (Jul) and FY26 guidance. Given the tariff situation and Dollar Tree's (DLTR) weak profitability guidance yesterday, we had concerns for Five Below's Q2 guidance, in particular. However, FIVE guided Q2 revs above analyst expectations and the mid-point of EPS guidance was better than expected.
- Let's start with Q1 same store comps, which came in at a robust +7.1% vs +6.7% prior guidance. FIVE said it made great strides on sourcing amazing product for Easter, spring break, trend-right beauty, novelty food and candy as well as relevant cultural zeitgeist moments like Minecraft. FIVE saw broad-based outperformance across the majority of its worlds. Shelves were stocked with spring break must-haves, including boogie boards, beach towels and a new assortment of on-trend totes.
- What was even more reassuring was the robust comp guidance. For Q2, FIVE expects comps in the +7-9% range and it raised full year comp guidance to +3-5% from +0-3%. In fairness, FIVE is lapping a pretty easy -5.7% comp in Q2 of last year, but this was still welcome news. The better comp performance can be traced, at least in part, to an improved store experience, including increasing labor. Its crew is now better able to assist customers while also ensuring shelves are stocked.
- Also, FIVE made it a priority to maintain in-stock positions in key areas like tech. FIVE wants to be the go-to place for affordable items, like cables, chargers, phone cases and Bluetooth audio.
- Regarding tariffs, FIVE has been moving swiftly on mitigation plans, which include vendor negotiations, diversification of sourcing, new value pack products, as well as assortment and pricing adjustments with a focus on reducing the number of price points. FIVE has been sourcing new product in different countries and expanding its vendor base. Its efforts have already resulted in a reduction in goods sourced from China by about 10 percentage points for the back half of the year.
Our sense is that investors shared our concerns heading into this report, especially after Dollar Tree's weak Q2 profitability outlook yesterday. Granted, the companies have different merchandise, but they both focus on value. FIVE seems to be handling tariffs better than we expected. And what also made us nervous is that FIVE has a high degree of discretionary merchandise, which tends to get squeezed in tough economic times. Taken together, investors have to be pleased with the Q1 results and especially the Q2 guidance, including robust comps.
Nintendo's awaited Switch 2 launch could power a major turnaround for gaming company (NTDOY)
Shares of Nintendo (NTDOY) have surged by over 40% on a year-to-date basis, reflecting robust market enthusiasm for today's Switch 2 launch, following a challenging year for the gaming company. That enthusiasm is fueled by expectations of strong demand, with retailers like GameStop (GME) and Best Buy (BBY) anticipating sell-outs on launch day. Pre-order data from Japan alone, with 2.2 mln applications, underscores the pent-up demand for the successor to the original Switch, which has sold over 150 mln units since 2017. This fervor suggests NTDOY is poised to capitalize on its loyal customer base and potentially expand its market share, provided supply constraints do not hinder initial momentum.
- The Switch 2 is pivotal for NTDOY’s future, as the company’s growth trajectory hinges almost entirely on this product’s success. In FY25 (ended March 31, 2025), the company faced significant headwinds, with net sales declining 30.3% yr/yr to ¥1.16 trillion ($8.3 bln) and operating profit plummeting 46.6% to ¥282.5 bln ($1.9 bln). This downturn was exacerbated by a 31.2% drop in original Switch hardware sales to 10.8 mln units, likely due to consumers deferring purchases in anticipation of the Switch 2.
- These figures highlight the urgency for NTDOY to deliver a successful console launch to reverse declining hardware and software sales trends, which have been further pressured by a lack of major first-party title releases in FY25.
- NTDOY forecasts 15.0 mln Switch 2 hardware units and 45.0 mln software units sold in FY26, a projection some analysts view as conservative given the eight-year gap since the original Switch’s debut. The pent-up demand, coupled with backward compatibility and enhanced hardware capable of supporting AAA titles (games with the highest development budgets and production values), positions the Switch 2 to potentially exceed these targets.
- A successful launch should transform NTDOY’s financials in FY26 and beyond, with the company projecting a rebound in net sales to ¥1.9 trillion (+63% yr/yr), driven by high-margin software sales and a robust first-party title lineup, including potential blockbusters like new Mario or Zelda games. The console’s ability to attract both existing Switch owners and new demographics, particularly with mature titles, could sustain long-term growth.
- However, concerns linger regarding the Switch 2’s $450 price point, a significant increase from the original Switch’s $299 launch price. Potential U.S. tariffs and rising logistics costs could force NTDOY to raise prices further, risking reduced accessibility and dampening longer-term sales potential, especially in price-sensitive markets. Mitigating this, the Switch 2 offers notable upgrades, including a custom NVIDIA (NVDA) GPU for smoother gameplay, sharper visuals, and AI-driven enhancements.
- NTDOY’s planned release of a lower-priced Switch 2 variant in 2026 could also broaden its appeal, driving higher software sales, which typically yield 70–80% gross margins compared to hardware’s 30–40% (or lower) gross margin, thus bolstering profitability.
- The Switch 2 launch is set to invigorate the broader gaming ecosystem. Retailers like GME and BBY will see revenue spikes from console, game, and accessory sales. Third-party publishers, including Electronic Arts (EA), with three titles planned, Take-Two Interactive (TTWO), and others like Ubisoft and Square Enix, are also poised to capitalize.
Switch 2 carries lofty expectations as a potential game-changer for NTDOY, with the capacity to reverse FY25’s financial declines and drive robust growth in FY26 and beyond. A successful launch, supported by strong demand and strategic pricing adjustments, could significantly enhance NTDOY’s profitability while providing a meaningful boost to retailers, game developers, and hardware partners like NVDA.
Dollar Tree under pressure as tariffs are expected to pressure profits in Q2 (DLTR)
Dollar Tree (DLTR -7%) is under pressure following its Q1 (Apr) earnings report this morning. The dollar store chain beat on EPS and revs. It also reaffirmed FY25 guidance for revenue from continuing operations at $18.5-19.1 bln and reaffirmed full year comps at +3-5%. It also increased adjusted EPS guidance, which is essentially the same net income range as its previous outlook, adjusted to reflect aggressive share repurchases.
- As a quick housekeeping matter, recall that Dollar Tree announced in late March it will sell its Family Dollar business to Brigade and Macellum for just north of $1 bln with net proceeds of approx $800 mln. The deal is expected to close in early summer. The results of Family Dollar have been reclassified as discontinued operations.
- Same-store comps in Q1 increased +5.4%, above prior guidance of +3-5%. Dollar Tree's comp was nicely balanced, with traffic up +2.5% and ticket up +2.8%. Category performance was strong across the board, with its consumables comp +6.4% and discretionary comp +4.6%, its highest discretionary comp since 4Q22. DLTR says its low prices and smaller pack sizes are perfect for families trying to manage a tight household budget, and its expanded assortment is attractive across every income level.
- In recent quarters, higher income customers have been a meaningful growth driver for Dollar Tree. In Q1, DLTR said it had measurable sales improvement across all income levels, with the most growth coming from higher income customers. DLTR believes Q2 (Jul) comps will be towards the higher end its full year outlook of +3-5%.
- Regarding tariffs, DLTR says it has multiple tools in place, including negotiating with suppliers, respecting products, moving country of origin, dropping non-economic items and leveraging multi-price capabilities. However, in the near term, DLTR expects to see some volatility relating to timing issues.
- While DLTR delayed some shipments in early April when the tariff adjustments were first announced, some products did arrive in the US that were subject to the highest tariffs. As such, Q2 profits will be meaningfully lower than last year in light of higher tariffs and other costs. Its Q2 adjusted EPS from continuing operations could be down as much as 45-50% yr/yr before reaccelerating in Q3 and Q4.
Overall, the Q1 results were good, especially the robust comps. However, the weakness seems mostly related to the sizeable tariff impact expected on its Q2 profitability. This report was not quite as positive as Dollar General's (DG) report yesterday when DG reported a much larger EPS beat. But the bigger concern for DLTR is the near term tariff impact on profits.
|
