| | | Market Snapshot
| Dow | 44342.19 | -142.30 | (-0.32%) | | Nasdaq | 20894.28 | +10.01 | (0.05%) | | SP 500 | 6296.79 | -0.57 | (-0.01%) | | 10-yr Note |
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| | NYSE | Adv 1106 | Dec 1627 | Vol 1.27 bln | | Nasdaq | Adv 1799 | Dec 2660 | Vol 9.39 bln |
Industry Watch
| Strong: Utilities, Consumer Discretionary, Real Estate, Materials, Financials |
| | Weak: Communication Services, Information Technology, Energy, Health Care, Consumer Staples, Industrials |
Moving the Market
Fresh batch of earnings reports before the open
Selling activity following yesterday's record-highs for the S&P 500 and Nasdaq Composite
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Flat finish after early record-highs
18-Jul-25 16:35 ET
Dow -142.30 at 44342.19, Nasdaq +10.01 at 20894.28, S&P -0.57 at 6296.79
[BRIEFING.COM] The stock market got off to a strong start following several key earnings reports before the open, but broad-based selling pressure confined the major averages to a tight range that ultimately saw them close little changed from their opening levels.
Futures were only slightly higher following a fresh wave of generally positive earnings reports but ticked higher after the 8:30 ET release of the June Housing Starts and Building Permits Report, which showed better-than-expected headline numbers for starts (1.321 mln, Briefing.com consensus 1.300 mln) and permits (1.397 mln, Briefing.com consensus 1.383 mln).
The details of the report, however, showed weakness in single-unit starts and permits, which stalled the initial momentum and did little to deter the market from the selling trend that ensued shortly after the S&P 500 (unch) and Nasdaq Composite (+0.1%) touched new all-time highs.
The selling activity was broad-based but modest in today's trade and reflected a proclivity towards "selling the news" of companies that beat earnings expectations. Netflix (NFLX 1209.24, -64.93, -5.1%), American Express (AXP 307.95, -7.40, -2.4%), and 3M (MMM 153.23, -5.81, -3.7%) were among the names that faced pressure despite generally positive earnings and guidance.
There were a few winners in the wake of earnings reports. Charles Schwab (SCHW 95.78, +2.68, +2.9%), for instance, reached a new 52-week high, and Comerica (CMA 65.32, +2.90, +4.7%) and Regions Fincl (RF 26.01, +1.50, +6.1%) also fared well.
Five sectors finished in positive territory, though only the consumer discretionary (+1.0%) and lightly weighted utilities (+1.7%) advanced by more than half a percent. The energy (-1.0%) and health care (-0.6%) sectors were the only sectors that declined by more than half a percent.
Today's lack of buying conviction permeated through stocks of all sizes. The market-weighted S&P 500, the equal-weighted S&P 500, and the Vanguard Mega Cap Growth ETF all finished flat for the day.
The S&P MidCap 400 (-0.1%) slightly lagged, and while the Russell 2000 (-0.6%) underperformed, it still managed a 3.0% gain for the week.
U.S. Treasuries finished the week on a higher note with relative strength in shorter tenors driving yields on 5s and 2s to their lowest levels in a week while the long bond continued this week's underperformance.
Fed Governor Waller repeated Thursday evening that a rate cut should be made at the July FOMC meeting, but the fed funds futures market remains highly skeptical of that move, with the CME FedWatch tool showing just a 4.7% implied likelihood of a rate cut on July 30.
The 2-yr note yield settled the session down four basis points at 3.88%, and the 10-yr note yield dropped three basis points to 4.43%.
- Nasdaq Composite: +8.2% YTD
- S&P 500: +7.1% YTD
- DJIA: +4.2% YTD
- S&P 400: +1.6% YTD
- Russell 2000: +0.4% YTD
Reviewing today's data:
- Total housing starts increased 4.6% month-over-month in June to a seasonally adjusted annual rate of 1.321 million units (Briefing.com consensus: 1.300 million). That is the good news. The bad news is that single-unit starts declined 4.6% month-over-month. Total building permits increased 0.2% month-over-month to a seasonally adjusted annual rate of 1.397 million units (Briefing.com consensus: 1.383 million). That is the good news. The bad news is that single-unit permits declined 3.7% month-over-month.
- The key takeaway from the report is that there wasn't any strength in single-unit starts and permits, which is where the strength needs to be to help curtail the affordability constraints in an existing home market that is still relatively light on available inventory for sale.
- The preliminary University of Michigan Consumer Sentiment Index for July edged higher to 61.8 (Briefing.com consensus: 61.5) from the final reading of 60.7 for June, hitting its highest level in five months. In the same period a year ago, the index stood at 66.4.
- The key takeaway from the report is that consumer sentiment, while not strong, has improved in recent months along with inflation expectations.
Sideways drift into final half hour
18-Jul-25 15:25 ET
Dow -164.77 at 44319.72, Nasdaq +7.85 at 20892.12, S&P -1.91 at 6295.45
[BRIEFING.COM] The stock market largely remains in a stalemate entering the final half hour of trading.
A lack of major developments has kept the major averages drifting sideways since falling from session highs this morning.
The utilities (+1.7%), consumer discretionary (+0.9%), and real estate (+0.2%) sectors have spent the majority of the session in the green.
Meanwhile, the financials (flat) and materials (+0.1%) sectors have oscillated around their opening levels, while the six other sectors display modest losses.
Small caps underperform
18-Jul-25 14:55 ET
Dow -190.87 at 44293.62, Nasdaq -0.71 at 20883.56, S&P -3.88 at 6293.48
[BRIEFING.COM] The major averages have changed little since retreating from opening highs this morning, with the S&P 500 (-0.1%) and Nasdaq Composite (flat) in a standoff with their flat lines, while the DJIA (-0.4%) faces a modest loss.
Losses come across six different sectors and stocks of all sizes. The equal-weighted S&P 500 (-0.1%) tracks the market-weighted S&P 500 (-0.1%) nearly identically, as the Vanguard Mega Cap Growth ETF (-0.1%) trades in line with the broader market.
There is an underperformance in small-cap stocks today, with the Russell 2000 retreating 0.5%. The index still holds a 3.0% gain for the week, which is the best among the major indices.
The energy sector (-1.3%) faces the largest decline today.
S&P 500 slips as Molina, West Pharm, and Waters weigh; Invesco soars on QQQ overhaul plan
18-Jul-25 14:30 ET
Dow -211.47 at 44273.02, Nasdaq -3.27 at 20881.00, S&P -5.05 at 6292.31
[BRIEFING.COM] The S&P 500 (-0.08%) is in second place on Friday afternoon, down just 5 points.
Briefly, S&P 500 constituents Molina Healthcare (MOH 188.73, -15.52, -7.60%), West Pharm (WST 207.74, -13.85, -6.25%), and Waters (WAT 286.23, -10.69, -3.60%) dot the bottom of the standings. MOH slides as reports of rising drug denial rates and looming ACA premium hikes sparked concerns about regulatory scrutiny and mounting cost pressures for government-focused insurers, while WST and WAT fall despite a dearth of corporate news.
Meanwhile, Invesco (IVZ 19.76, +2.48, +14.35%) is today's top gain getter, jumping after proposing a structural overhaul of its flagship QQQ ETF that could unlock hundreds of millions in annual profits by converting it from a unit investment trust to an open-ended fund.
American Express's record card spending drives Q2 EPS beat, but cautious guidance disappoints (AXP)
American Express (AXP) delivered another quarter of robust financial performance in 2Q25, surpassing EPS expectations for the sixth consecutive quarter as Billed Business, a critical measure of card member spending, grew 7% yr/yr to $416.3 bln, a slight acceleration from the 6% growth reported in 1Q25. The growth was driven by record card member spending that underscores the resilience of the company’s younger, higher-income customer base.
Despite this strong performance, AXP opted to reaffirm its FY25 guidance of 8-10% revenue growth and EPS of $15.00-$15.50, a cautious stance that disappointed investors expecting an upward revision given the consistent EPS beats and with shares trading near all-time highs.
- The 7% growth in billed business was propelled by a balanced performance across spending categories, with Goods and Services spending rising 7% yr/yr, outpacing Travel and Entertainment (T&E), which grew at a more modest 5%. This marks a slowdown in T&E growth compared to the double-digit increases seen throughout 2023 and 1H24, a period when pent-up travel demand fueled exceptional performance in this category. Nevertheless, T&E spending remains at healthy levels, supported by AXP’s premium cardholder base, particularly in international markets.
- New card acquisitions remained a bright spot, with AXP adding 3.1 mln new proprietary cards in Q2, a testament to its strong brand appeal and targeted marketing efforts. Notably, 63% of global consumer new accounts were from Millennials and Gen Z, reinforcing the company’s success in resonating with younger, affluent consumers who are drawn to its premium, fee-based products.
- Of the new accounts globally, 71% were on fee-paying products, highlighting the effectiveness of AXP’s strategy to prioritize high-value, premium card offerings, such as the Consumer and Business Platinum Cards, which are set to receive significant updates in the U.S. this fall.
- Credit quality continues to be a cornerstone of AXP’s financial strength, with metrics remaining best-in-class. The net write-off rate stood at 2.0%, and the 30+ days past due rate was 1.3%, both consistent with recent trends and significantly outperforming industry averages across all generations. The Federal Reserve’s recent Comprehensive Capital Analysis and Review (CCAR) results further validated the company’s robust risk management, with AXP posting the lowest projected credit card loss rate and the highest projected return on assets among banks subject to the stress test.
AXP delivered another quarter of solid results with adjusted EPS rising 17% yr/yr on record card member spending of $416.3 bln, reflecting its top-tier execution and ability to attract high-spending, premium customers. However, the decision to reaffirm rather than raise its FY25 EPS and revenue growth guidance has disappointed investors, particularly with shares recently trading at record highs, signaling expectations for a more bullish outlook.
Autoliv lower despite top-line growth; light vehicle production outlook weighing on sentiment
Autoliv (ALV -4%) is trading lower today despite reporting a record Q2 that was better than expectations. This Swedish-based automotive supplier of safety products (airbags, seatbelts and steering wheels) reported EPS upside, although the beat was narrower than the previous two quarters. Revenue increased 4.2% yr/yr to $2.71 bln, which marked a return to top-line growth after four consecutive declines. Despite these positives, the stock is down, and that most likely reflects the concerning outlook for light vehicle production (LVP), particularly in North America.
- Revenue growth was driven by strong outperformance relative to LVP in several regions, along with tariff-related compensation. ALV successfully recovered roughly 80% of tariff costs incurred during the quarter and expects to recover most of the remaining in 2H25.
- The good news is that ALV has exposure to lots of geographies, which helps to offset U.S. tariff impacts. China was relatively strong this quarter. Sales to domestic OEMs increased more than 16%, while growth with global customers was 2 percentage points above their LVP.
- In contrast, LVP and higher content-per-vehicle (CPV) markets in North America and Western Europe declined around 3% each, resulting in an unfavorable product mix of about 2.5%. Management noted this had a significant negative impact on overall performance.
- Looking ahead, the North American production outlook has been significantly downgraded due to trade risks and higher vehicle prices from import tariffs. This is expected to be particularly pronounced in Q4, with vehicles produced in Mexico and Canada affected more severely.
- While S&P Global July Data showed global LVP increasing 270bps in Q2 (above the 200bps expected at the start of the quarter), ALV noted the Q3 and 2H25 outlooks have weakened considerably. S&P now forecasts global LVP to grow by 0.4% in FY25, down from 3% in the 1H25. For 2H25 LVP is now expected to decline more than 2%.
Despite top-line growth, ALV is heading lower today. Strength in China, tariff recovery, and encouraging July data are being overshadowed by concerns over North American output and a broader industry slowdown in 2H25. Investor sentiment seems to be driven more by what's ahead than what's in the rearview mirror.
Netflix streams lower despite upside Q2 report; sentiment was running high (NFLX)
Netflix (NFLX -5.4%) is streaming lower following its Q2 report last night. NFLX reported a nice EPS beat, with more modest upside revs. It also guided Q3 above analyst expectations and raised revenue guidance for FY25 to $44.80-45.20 bln and upped its full year operating margin guidance. And yet the stock is lower.
- Unfortunately, Netflix no longer reports paid memberships and ARM on a regular quarterly basis. However, we can still a good sense of how the company performed. Revenue rose a healthy 15.9% yr/yr to $11.08 bln, as NFLX marked its first-ever $11 bln quarter. However, that was only slightly above guidance. Also, the raised full year revenue guidance was primarily F/X-related. We think the F/X aspect to this takes some of the shine off the numbers.
- Revenue growth in Q2 was primarily a function of more members, higher subscription pricing and increased ad revenue. All regions experienced healthy yr/yr revenue growth, with each region posting double-digit F/X neutral increases. UCAN revenue growth accelerated yr/yr to 15% vs. 9% in Q1 due to the full quarter impact of price changes, many of which were implemented in January.
- Operating margin was a standout metric at 34.1% vs 33.3% prior guidance and NFLX guided to Q3 margin of 31.5%. Similar to past years, NFLX expects operating margin in 2H will be lower than 1H due to higher content amortization and sales and marketing costs associated with a larger second half slate. Nevertheless, NFLX raised FY25 guidance for F/X neutral operating margin to 29.5% (vs. 29% previously), or 30% on a reported basis.
- Netflix was asked about any macro concerns. It sees really nothing significant to note in the metrics. Retention remains stable and industry leading. There have been no significant shifts in plan mix or plan take rate. Engagement also remains healthy. Everything looks stable from those indicators. Also, the company noted it has historically been pretty resilient in tougher economic times as it offers an incredible entertainment value, starting at $7.99 in the US.
- Advertising is still a smaller part of the business, but NFLX reaffirmed that ad sales should double in 2025. NFLX completed the rollout of the Netflix Ads Suite, its in-house first-party ad tech platform. Advertisers are excited about the company's growing scale and its audience that's more engaged relative to peers.
So why is the stock down despite the upside? We think it's partly because F/X was a big part of the upside/guidance with the dollar having fallen. Investors would rather see upside driven by operational/demand performance. Another factor is that the stock has run quite a bit (+50% from its April lows), so sentiment was running high and the Q2 upside was not as impressive as in Q1. Despite these issues, this was an impressive quarter and it shows what a monster Netflix has become as others struggle.
3M's beat-and-raise Q2 performance powered by productivity gains and new product launches (MMM)
3M (MMM) delivered a strong beat-and-raise 2Q25 performance, showcasing resilience in a challenging macro environment. While organic sales growth was modest at 1.5%, all three of 3M’s segments -- Safety & Industrial, Transportation & Electronics, and Consumer -- posted positive growth for the third consecutive quarter, supported by 126 new product launches in the first half of 2025. The company raised its FY25 EPS guidance to $7.75-$8.00 from $7.60-$7.90, reflecting robust productivity gains and disciplined cost management, even as it cautiously meters investment increases in response to softening demand. Notably, this updated forecast incorporates the impact of tariffs.
- The Safety & Industrial segment led with 2.6% organic sales growth, a slight improvement over last quarter’s 2.5%. Strong demand in industrial adhesives and tapes, electrical markets, and abrasives drove the segment’s performance, capitalizing on steady industrial activity. However, ongoing weakness in the auto aftermarket space, where consumer and business spending remain restrained, partially offset these gains, highlighting the uneven recovery in certain end markets.
- The Transportation & Electronics segment recorded modest organic sales growth of 1.0%, constrained by declining vehicle builds in the U.S. and Europe, where OEM production continues to face headwinds from supply chain disruptions and labor shortages. Despite these challenges, the segment saw pockets of strength in commercial graphics (e.g., vehicle wraps and signage solutions), aerospace (e.g., adhesives and composites for aircraft manufacturing), and electronics (e.g., thermal management materials and display films), which benefited from targeted demand in niche applications.
- The Consumer segment maintained steady organic sales growth of 3%, consistent with the prior quarter, as sluggish consumer discretionary spending continues to weigh on performance. Pockets of strength emerged in home improvement, particularly in products like ScotchBlue painter’s tape and Command adhesive products, which saw resilient demand from DIY and professional users. However, broader consumer caution, driven by inflationary pressures and economic uncertainty, limited upside potential in this segment.
3M’s Q2 results demonstrate strong execution in a challenging environment, with productivity gains, cost discipline, and new product introductions effectively countering macro-related headwinds. The company’s ability to deliver consistent segment growth and raise guidance underscores its operational resilience and strategic focus on high-margin innovation.
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).
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