Market Snapshot
| Dow | 44484.49 | +229.71 | (0.52%) | | Nasdaq | 20884.27 | +153.78 | (0.74%) | | SP 500 | 6297.36 | +33.66 | (0.54%) | | 10-yr Note |
|
|
|
| | NYSE | Adv 1855 | Dec 882 | Vol 1.21 bln | | Nasdaq | Adv 3101 | Dec 1371 | Vol 10.02 bln |
Industry Watch
| Strong: Industrials, Information Technology, Consumer Staples, Financials |
| | Weak: Health Care, Real Estate |
Moving the Market
Encouraging Retail Sales and Jobless Claims reports
Fresh batch of earnings reports before the open
Strong performance in technology following Taiwan Semiconductor Manufacturing (TSM) issuing strong guidance
|
Positive data stimulates market
17-Jul-25 16:40 ET
Dow +229.71 at 44484.49, Nasdaq +153.78 at 20884.27, S&P +33.66 at 6297.36
[BRIEFING.COM] The stock market was encouraged by some key economic data releases and earnings reports before the open that prompted a day of broad-based gains, ultimately propelling the S&P 500 (0.5%) and Nasdaq Composite (+0.7%) to new all-time highs.
Travelers (TRV 261.81, +9.62, +3.81%), PepsiCo (PEP 145.44, +10.09, +7.5%), Citizens Financial Group (CFG 48.82, +1.85, +3.9%), Snap-On (SNA 337.80, +24.79, +7.92%), and Taiwan Semiconductor Manufacturing (TSM 245.60, +8.04, +3.38%) were among the more notable companies to report better-than-expected earnings and to trade higher after their reports.
Notably, equity futures were little changed following these encouraging earnings reports, but that changed after the 8:30 ET release of the retail sales and initial jobless claims reports triggered a positive opening that got extended over the entirety of the session.
Total retail sales rose 0.6% month-over-month in June after two consecutive months of decline, and initial jobless claims for the previous week decreased by 7,000 to 221,000.
The increase in retail sales and the surprisingly low level of layoffs conveyed an upbeat message about consumer spending and consumer spending potential that was reflected in the pro-cyclical advance by the stock market.
Broad-based buying interest saw nine sectors finish in positive territory, with sector strength and breadth figures improving throughout the session.
The information technology sector (+0.9%) was among the top performers, with chipmakers displaying strength after Taiwan Semi’s report. The PHLX Semiconductor Index finished with a gain of 0.7%. The strength in tech stocks contributed to the Nasdaq Composite (+0.7%) reaching a new all-time high of 20,911.83.
Large tech names were not the only beneficiaries of today's risk-on move, as strength was seen across stocks of all sizes.
In fact, small-cap stocks outperformed the broader market, evidenced by a 1.2% gain in the Russell 2000. Mid-caps performed similarly, with the S&P Mid Cap 400 finishing up 1.1%.
Mega-caps, for their part, did not underperform; smaller caps simply fared better today, with economic growth optimism contributing to their outperformance.
The Vanguard Mega Cap Growth ETF closed with a gain of 0.6%, a slight edge over the S&P 500 (+0.5%).
The Treasury market got stymied by the positive economic news and some remarks from New York Fed President Williams (FOMC voter) and Fed Governor Kugler (FOMC voter). Both Fed officials indicated that the current policy rate is appropriate for the conditions they see in front of them, which includes the possibility of tariff-driven inflation in coming months. Treasuries, however, suffered only modest losses, with shorter-dated securities faring worse than longer-dated securities in a curve-flattening trade.
The 2-year note yield finished up 3 basis points at 3.92%, and the 10-year note yield finished up one basis point at 4.47%. The U.S. Dollar Index increased 0.3% to 98.68.
- Nasdaq Composite +8.15% YTD
- S&P 500 +7.1% YTD
- DJIA: +4.6% YTD
- S&P 400: +1.7% YTD
- Russell 2000: +1.1% YTD
Reviewing today's data:
- Total retail sales increased 0.6% month-over-month in June (Briefing.com consensus: 0.2%) following a 0.9% decline in May. Excluding autos, retail sales rose 0.5% month-over-month (Briefing.com consensus: 0.3%) following an upwardly revised 0.2% decline (from -0.3%) in May.
- The key takeaway from the report is that the sales pickup was fairly broad-based across retail businesses following declines in April and May. Importantly, the June report also conveyed increases in discretionary spending activity, captured in areas like autos (+1.2%), apparel (+0.9%), building materials and garden equipment supplies (+0.9%), and food services and drinking places (+0.6%).
- Initial jobless claims for the week ending July 12 decreased by 7,000 to 221,000 (Briefing.com consensus: 230,000). Continuing jobless claims for the week ending July 5 increased by 2,000 to 1.956 million.
- The key takeaway from the report is the remarkably low level of initial jobless claims, which connotes limited layoff activity that fits hand-in-hand with good business conditions and a good outlook.
- The Philadelphia Fed Index jumped to 15.9 in July (Briefing.com consensus: -0.2) from -4.0 in June, led by increases in the indexes for new orders, shipments, and the number of employees. However, there were also increases registered in the indexes for prices paid and prices received. The dividing line between expansion and contraction is 0.0.
- Import prices in June were up 0.1%, as were nonfuel import prices. Export prices, meanwhile, jumped 0.5% month-over-month, as did non-agricultural export prices. On a year-over-year basis, import prices were down 0.2%, nonfuel import prices were up 1.2%, export prices increased 2.8%, and nonagricultural export prices jumped 2.9%.
- July NAHB Housing Market Index (Actual 33; Briefing.com consensus: 32; prior 32)
- May Business Inventories (Actual 0.0%; Briefing.com consensus -0.1%; prior 0.0%)
Smaller-cap stocks outperform
17-Jul-25 15:30 ET
Dow +256.87 at 44511.65, Nasdaq +172.72 at 20903.21, S&P +37.45 at 6301.15
[BRIEFING.COM] The major averages sit at their best levels of the day, with the S&P 500 (+0.6%) touching a new all-time high at 6,304.69.
Stocks have performed well today, with support coming from nine different sectors and stocks of all sizes.
Small-cap stocks are outperforming, as shown by a notable 1.3% gain in the Russell 2000.
Mid-caps are displaying similar strength, with the S&P Mid Cap 400 up 1.2% today.
That's not to say that mega-caps are underperforming, but rather that smaller-cap stocks are simply faring better today, with economic growth optimis contributing to their outperformance. The Vanguard Mega Cap Growth ETF is up 0.6%, which tracks in line with the S&P 500 (+0.6%).
Earning boosts financial sector
17-Jul-25 15:05 ET
Dow +282.60 at 44537.38, Nasdaq +169.34 at 20899.83, S&P +38.25 at 6301.95
[BRIEFING.COM] The major averages trade just below session highs as the market heads into the final hour of today's action, which has largely been driven by encouraging economic data and earnings reports.
The financials sector (+0.9%) has benefitted from a wave of earnings reports from regional banks before the open. Citizens Financial Group (CFG 48.98, +2.02, +4.3%) is the top mover within the sector. The outperformance of the regional banks is also reflected in the KBW Regional Bank ETF (KRE 63.05, +1.14, +1.8%).
American Express (AXP 315.67, +3.77, +1.2%), Truist (TFC 45.08, +0.72, +1.6%), and Charles Schwab (SCHW 92.88, +1.62, +1.8%), which are set to report their earnings before the open tomorrow, are also showing nice gains today.
S&P 500 hovers near record highs as ETN, CFG, ALB lead; ELV sinks on guidance cut
17-Jul-25 14:25 ET
Dow +230.69 at 44485.47, Nasdaq +165.27 at 20895.76, S&P +32.12 at 6295.82
[BRIEFING.COM] The S&P 500 (+0.51%) is just off HoDs, just failing to top ATHs from Tuesday.
Briefly, S&P 500 constituents Albemarle (ALB 76.13, +5.72, +8.12%), Citizens Financial Group (CFG 49.25, +2.28, +4.85%), and Eaton (ETN 379.00, +16.11, +4.44%) pepper the top of the standings. CFG outperforms after earnings, while ETN is higher likely in sympathy with a strong Q2 earnings report from Swiss peer ABB (ABBNY 64.97, +5.33, +8.94%).
Meanwhile, Elevance Health (ELV 304.30, -40.25, -11.68%) slides to the bottom of the average after the company missed Q2 earnings and sharply cut its 2025 EPS outlook due to rising medical costs in ACA and Medicaid plans.
Gold slips as strong dollar and firm data dim rate-cut hopes
17-Jul-25 14:00 ET
Dow +201.40 at 44456.18, Nasdaq +167.23 at 20897.72, S&P +30.88 at 6294.58
[BRIEFING.COM] The tech-heavy Nasdaq Composite (+0.81%) is atop the standings on Thursday afternoon, up about 167 points with two hours to go.
Gold futures settled $13.80 lower (-0.4%) at $3,345.30/oz, as a stronger dollar and rising Treasury yields kept pressure on the metal. Solid US retail sales and jobless claims suggested the economy's holding up, making it less likely the Fed will cut rates anytime soon. Fed officials echoed that sentiment, signaling they're in no rush to ease. While gold usually gets a boost from uncertainty, for now, steady data and firm yields are keeping buyers on the sidelines.
Meanwhile, the U.S. Dollar Index is now up +0.5% to $98.73.
PepsiCo sharply higher on Q2 results marking a return to EPS upside and top-line growth
PepsiCo (PEP +6%) is seeing a nice move higher today after reporting its Q2 results this morning. This beverage and snack food giant returned to EPS upside after a rare miss in Q1. Revenue grew 1% yr/yr to $22.72 bln. While this number may be modest, it did mark a return to growth after declines in the last three quarters. Organic revenue rose 2.1%, accelerating from Q1's 1.2%. This is perhaps another cause for the positive reaction as PEP is effectively navigating through trade volatility, rising supply chain costs, and subdued consumer demand.
- PepsiCo's Foods North America (PFNA) segment, which includes Frito-Lay and Quaker Foods, saw sequential improvement in organic volume trends. Encouragingly, its savory snack segment, primarily Frito-Lay, saw organic volume trends improve despite a variety of headwinds last quarter.
- Another positive is that PEP saw improvement in its market share trends in subcategories like curls and puffs, variety multipacks, corn chips, and flavored tortilla chips.
- Investors have been closely watching its PepsiCo Beverages North America (PBNA) segment. Organic revenue rose 1%, with organic volume trends improving from the prior quarter. Its Pepsi brand gained market share in the soft drink and cola categories, with Pepsi-Zero delivering double digit volume and net revenue growth. The completed acquisition of Poppi is helping PEP reach younger consumers and health-conscious buyers looking for soda alternatives.
- Amid the pressures from higher supply chain and input costs, its pricing and productivity initiatives (automation, standardization and data analytics) helped PBNA grow its core operating margin during the quarter, while PFNA is expected to improve margins in 2H25.
- PEP's away-from-home business and international business were standouts this quarter. Away-from-home saw high single digit revenue growth and local restaurant share gains, while its international business delivered a 6% increase in organic revenue, its 17th consecutive quarter of at least mid-single digit growth.
The stock has been generally trending lower since October 2024 and the stock took a hit following its Q1 report. There are several positives this quarter that helped settle investors' nerves. And that helps to explain the out-sized move today. After hitting a low point in late June, shares have been climbing steadily and are extending those gains today. The return to EPS upside and top-line growth, along with the sequential improvements across key segments, is encouraging investors. Looking ahead, its main peer Coca-Cola (KO) is reporting next week (July 22).
GE Aerospace capitalizes on rising aircraft shop visits, delivers stellar Q2 report (GE)
GE Aerospace (GE) delivered a stellar 2Q25, handily surpassing Wall Street’s EPS and revenue expectations, while also raising its FY25 guidance for EPS and revenue growth. The beat-and-raise performance was propelled by broad-based strength across the organization, with the Commercial Engines & Services (CES) segment shining due to a 29% surge in services revenue, driven by a more than 20% year-over-year increase in shop visits and enhanced output. The growth in shop visits reflects robust air travel demand, as airlines extend the life of older, less fuel-efficient aircraft amid supply chain constraints limiting new plane deliveries, boosting aftermarket services as carriers prioritize maintenance to keep fleets operational.
- The CES segment showcased remarkable momentum, with orders soaring 28% to $11.69 bln, underpinned by both robust services demand and a 35% spike in equipment revenue. The equipment revenue surge was fueled by strong unit volume growth, particularly in LEAP engine deliveries, supported by improved supply chain dynamics and favorable pricing strategies. GE’s efforts to address supply chain bottlenecks through its FLIGHT DECK lean operating model have significantly enhanced material inputs, enabling higher production rates to meet airframer and airline demand.
- In the smaller Defense & Propulsion Technologies (DPT) segment, orders jumped 24% to $2.9 bln, reflecting strong demand in both Defense & Systems and Propulsion & Additive Technologies. Key drivers included significant contracts, such as a $1.1 bln order from the U.S. Army for T700 engine production through 2029 and commitments for T700 engines to power Poland’s anticipated acquisition of 96 Boeing Apache Guardian helicopters.
- The 38% increase in LEAP deliveries in Q2, primarily for commercial applications, indirectly supported DPT by freeing up production capacity and highlighting GE’s ability to scale output across segments despite ongoing supply chain challenges. These wins underscore GE’s growing footprint in global defense markets and its ability to capitalize on long-term contracts.
- GE raised its FY25 guidance, projecting adjusted EPS of $5.60–$5.80 (up from $5.15–$5.45) and mid-teens revenue growth, while also boosting its 2028 outlook to a double-digit revenue CAGR from 2024–2028 (previously high single-digit from 2025–2028) and operating profit of approximately $11.5 billion, compared to the prior $10.0 billion target. The upgraded 2028 forecast is driven by a robust commercial services backlog exceeding $140 bln, continued momentum in shop visits, and anticipated growth in LEAP and other engine deliveries as supply chain constraints ease. Investments in MRO capacity, including a $1 bln commitment over five years and the opening of a Services Technology Acceleration Center in Ohio, position the company to capitalize on aftermarket demand.
GE is firing on all cylinders, with robust demand in both commercial airline and defense markets driving exceptional performance. The company’s ability to navigate supply chain challenges while capitalizing on strong services and equipment growth underscores its resilience and strategic focus. With a burgeoning backlog and operational improvements via FLIGHT DECK, GE is well-positioned for sustained growth through 2028.
Cintas trading roughly flat on smaller beat than normal with downside FY26 EPS guidance (CTAS)
Cintas (CTAS) is trading roughly flat after wrapping up FY25 on a bit of a lackluster note. It reported Q4 (May) EPS upside, but it was narrower than usual and followed a huge beat in Q3 (Feb). Revenue rose 8% yr/yr (+9% organic) to $2.67 bln, which was modestly above expectations. Probably the biggest issue was the guidance. With FY25 wrapping up, we got our first look at FY26 guidance. Revs were in-line, but EPS was below expectations.
- Cintas reached a milestone in FY25 as it reported its first-ever $10 bln revenue fiscal year and now it's expecting its first $11 bln year in FY26. The company is known for its stable revenue growth and consistent EPS growth. While it is not the fastest growing company we cover, it has been steady and consistent growth company. And that is a welcome characteristic given the current macro environment.
- We like to keep an eye on Cintas because it is a window into how businesses see their near term prospects. Cintas is more than just the largest supplier of work uniforms in the US, it also gets more than half of its revenue from facility services (cleaning supplies, mops, first aid cabinets, fire extinguishers, alarms etc.)
- Its Uniform Rental and Facility Services is the much larger segment of the two. Segment revenue rose 6.3% yr/yr to $2.03 bln. Other revenue, of which its First Aid segment accounts for a big part, rose 13.8% yr/yr to $637 mln. Cintas's reports follows a lackluster report from peer UniFirst (UNF), which recently reported a top line miss.
- Something that stands out to us is that Cintas is a highly profitable company. Operating margin in Q4 was a healthy 22.4%, up slightly from 22.2% in the year ago period. There are not a ton of non-tech companies boasting 22+% operating margins. Full year operating margin was 22.8% vs 21.6% in FY24. CTAS says its retention rates are right at all-time highs and pricing continues to be at historical levels.
- The caveat here is that the FY26 EPS guidance was below range despite in-line revenue guidance. That combination tells us management may be expecting some margin compression in FY26. Cintas said on the call that it has been spending on technology that makes it easier for its employee partners to do their jobs. This includes its SAP system and SmartTruck platform, investments in its infrastructure to increase capacity, as well as investments in management, trainees and selling resources.
Shares of Cintas have been trending lower since early June, which tells us investors were a bit nervous about what we may see for its FY26 guidance and that concern came to fruition with EPS being light. There have been a lot of press reports where companies are holding off on hiring new people until there is more clarity on the macro picture. On the call, CTAS said while it's not seeing a lot of change in terms of customer behavior, sales cycles, new business etc., there is more uncertainty in the marketplace due to tariffs. That was our concern coming into this report and we think that may have impacted guidance. Looking ahead, its peer Aramark (ARMK) reports on August 5.
United Airlines posts mixed Q2 results, but upbeat 2H25 outlook lifts shares higher (UAL)
United Airlines (UAL) reported mixed 2Q25 results as EPS surpassed expectations while revenue narrowly missing estimates, reflecting strong cost control and operational efficiencies in the face of significant disruptions at Newark International Airport -- a major hub for UAL. The company also issued FY25 EPS guidance of $9.00–$11.00, aligning with consensus expectations but notably removing the recessionary-case guidance provided in 1Q25, signaling increased confidence in the macroeconomic environment. The company highlighted a robust demand recovery starting in July, with a 6-point acceleration in overall demand and a double-digit surge in business travel demand compared to Q2, suggesting a positive momentum shift heading into Q3.
- DAL set a high bar last week with a strong Q2 earnings report, beating both EPS and revenue expectations while restoring its FY25 guidance, reflecting operational resilience and robust demand. UAL’s performance, while solid, didn’t quite match DAL’s vigor. For instance, UAL’s total revenue per available seat mile (TRASM) declined 4.0% yr/yr, underperforming DAL’s 3.0% TRASM decline, highlighting relative weakness in pricing power.
- A significant drag on UAL’s results was a $218 mln financial hit from disruptions at Newark Liberty International Airport, which reduced Q2 margins by 1.2 percentage points. These disruptions, driven by air traffic control staffing shortages, equipment failures, and runway construction, forced UAL to cut 10% of its Newark schedule. CEO Scott Kirby expressed optimism about Newark’s recovery, noting that operational stability improved by June and that Federal Aviation Administration (FAA) interventions should prevent financial impacts in Q4.
- UAL’s TRASM performance deteriorated notably from Q1’s modest 0.5% increase. This downturn was primarily driven by a 5.9% increase in capacity, which outpaced demand growth and pressured yields in a soft domestic pricing environment. Domestic passenger revenue per available seat mile (PRASM) dropped sharply by 7.0%, reflecting competitive pricing pressures and an oversupply of seats.
- Internationally, PRASM weakened as well, with Europe down 3.5% and Latin America down 2.3%, impacted by currency fluctuations and uneven demand recovery. The Pacific region, however, emerged as a bright spot, with PRASM rising 2.9%, bolstered by strong demand for premium cabins and recovering travel to Asia.
- Capacity growth was a key factor in Q2, with available seat miles (ASMs) up 5.9% yr/yr, reflecting UAL’s aggressive network expansion to capitalize on demand recovery. However, this capacity surge contributed to the TRASM decline by diluting pricing power, particularly in domestic markets. To address this, UAL plans to moderate capacity growth in 2H25, targeting a low-to-mid-single-digit ASM increase for Q3 and Q4. This strategic pullback aims to tighten supply, stabilize yields, and drive TRASM higher, particularly in high-margin business and international segments.
- UAL’s FY25 EPS guidance of $9.00–$11.00, while in line with expectations, appears conservative given the Q2 EPS beat and the strong demand acceleration in July. However, Kirby noted that the guidance embeds a conservative outlook, with potential upside if demand trends -- particularly the double-digit business travel growth -- persist.
UAL delivered mixed 2Q25 results, but with Newark’s operational issues largely resolved and early Q3 demand showing significant strength, UAL’s conservative FY25 outlook offers potential upside, contributing to a favorable stock reaction as investors look past Q2 challenges toward a stronger second half.
ASML facing heavy pressure on weak guidance, dragging down industry peers
ASML (ASML -9%) is sharply lower today after releasing its Q2 results. This manufacturer of semiconductor equipment reported revenue growth of 23.2% yr/yr to €7.7 bln, which was a slight beat on expectations primarily due to one-time revenue recognition and business upgrades. The company handily beat on Q2 EPS expectations, its largest in over five years.
While the Q2 results were impressive, investors were clearly disappointed that ASML guided well below analyst expectations for both Q3 and FY25.
- In terms of why the guidance was weak, ASML said that customers are facing macro and geopolitical headwinds. Specifically, some customers are navigating specific challenges that may impact the timing of their cap-ex spend. Tariffs seem to have an impact on timing as well.
- These concerns prompted management to state, "while we are still praying for growth in 2026, we cannot confirm it at this stage." This comment seems to be adding to investors' concerns.
- Specifically, ASML now expects Q3 revenue between €7.4-7.9 bln and FY25 revenue to grow 15%, both are a good bit below expectations.
- ASML's weak guidance and cautious commentary is clearly raising concerns among investors about the semi cap equipment space heading into earnings season. As a result we are seeing some selling pressure in some of its peers like Applied Materials (AMAT -3%), LAM Research (LRCX -2%), and KLA Corporation (KLAC -2%).
While ASML's Q2 results were impressive, the cautious guidance/commentary for Q3 and FY25 are overshadowing the Q2 results. Investors appear concerned that other semi cap equipment names may have cautious outlooks as well when they report in the next few weeks.
|
