Market Snapshot
briefing.com
| Dow | 33802.93 | -50.35 | (-0.15%) | | Nasdaq | 10910.46 | -78.89 | (-0.72%) | | SP 500 | 3951.89 | -12.25 | (-0.31%) | | 10-yr Note | -6/32 | 3.75 |
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| | NYSE | Adv 1750 | Dec 1320 | Vol 790 mln | | Nasdaq | Adv 2210 | Dec 2335 | Vol 4.5 bln |
Industry Watch
| Strong: Energy, Real Estate, Financials, Industrials |
| | Weak: Utilities, Information Technology, Consumer Staples, Communication Services, Consumer Discretionary |
Moving the Market
-- Hesitation ahead of Fed Chair Powell's speech Wednesday and key economic releases this week, including November Employment Situation Report on Friday
-- Rising Treasury yields
-- Mega cap stocks weighing on index performance; specific weakness in Apple (AAPL), which is under pressure due to worries about iPhone 14 Pro production shortfalls
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Closing Summary
29-Nov-22 16:25 ET
Dow +3.07 at 33856.35, Nasdaq -65.72 at 10923.63, S&P -6.31 at 3957.83
[BRIEFING.COM] Today's trade started on a more upbeat note, aiming to rebound from yesterday's retreat. The wind got knocked out of the market's sails, however, around 11:00 a.m. ET due to a sharp turn lower in Apple (AAPL 141.17, -3.05, -2.1%) amid ongoing worries about potentially large iPhone 14 Pro production shortfalls this quarter.
Other mega cap stocks suffered losses today, dragging down the main indices. The Vanguard Mega Cap Growth ETF (MGK) logged a 0.9% loss versus a 0.3% gain in the Invesco S&P 500 Equal Weight ETF (RSP).
After the initial leg lower, the market was able to inch off session lows. The Dow Jones Industrial Average snuck into positive territory in the late afternoon, climbing off a 0.6% loss earlier.
The weaker tone to the market was in contrast to Hong Kong's Hang Seng, which rose 5.2% on a growing hope that Chinese authorities will take steps in coming months to shift away from the extreme zero-COVID policy restrictions and pave the way for stronger growth.
That hope was not reflected in U.S. equities. Market participants played a waiting game ahead of Fed Chair Powell's speech at 1:30 p.m. ET on Wednesday at the Brookings Institution entitled Economic Outlook, Inflation, and the Labor Market. That speech will influence the market's policy path expectations, so it is understandable that conviction would be lacking in front of it.
Market participants also await more key economic data this week, including the November Employment Situation Report on Friday. Today's data releases showed a 0.1% month-over-month increase in the September FHFA Housing Price Index (prior +0.7%), a 10.4% year-over-year increase in the S&P Case-Shiller Home Price Index (prior 13.1%), and a 100.2 reading for the November Consumer Confidence Index (prior 102.2) that also included an uptick in year-ahead inflation expectations to 7.2% from 6.9%.
Market internals reflected the mixed action. Advancers led decliners by a roughly 3-to-2 margin at the NYSE and were just about even with decliners at the Nasdaq.
The Russell 2000 (+0.3%) and S&P Mid Cap 400 (+0.3%) were pockets of relative strength today.
Roughly half of the 11 S&P 500 sectors closed in the green. Real estate (+1.7%) and energy (+1.3%) sat atop the leaderboard while information technology (-1.0%) and utilities (-0.7%) fell to the bottom of the pack.
The energy sector was boosted by rising oil prices ($78.42/bbl, +1.24, +1.6%) that moved today on speculation OPEC+ could soon announce a cut in production and the hopeful consideration that oil demand in China will improve with some relaxed COVID restrictions.
Treasury yields settled noticeably higher than levels seen earlier. The 2-yr note yield, which flirted with 4.40% earlier, settled at 4.47%. The 10-yr note yield, which hit 3.65% overnight, settled at 3.75%.
Reviewing today's economic data:
- September FHFA Housing Price Index 0.1%; Prior -0.7%
- September S&P Case-Shiller Home Price Index 10.4% (Briefing.com consensus 10.7%); Prior 13.1%
- November Consumer Confidence 100.2 (Briefing.com consensus 100.0); Prior was revised to 102.2 from 102.5
- The key takeaway from the report is that inflation and interest rate hikes continue to pressure consumer confidence. Intentions to buy homes, autos, and big-ticket appliances have all cooled, according to the report; meanwhile, a reading below 80 for the Expectations Index "suggests the likelihood of a recession remains elevated."
Hormel Foods (HRL) and Petco Health and Wellness (WOOF) are some of the companies reporting earnings ahead of Wednesday's open.
Market participants will receive the following economic data on Wednesday:
- 7:00 ET: Weekly MBA Mortgage Index (prior 2.2%)
- 8:15 ET: November ADP Employment Change (Briefing.com consensus 200,000; prior 239,000)
- 8:30 ET: October international goods trade deficit (prior $92.20 bln), October advance Retail Inventories (prior 0.4%), October advance Wholesale Inventories (prior 0.8%), Q3 GDP -- Second Estimate (Briefing.com consensus 2.7%; prior 2.6%), and Q3 GDP Deflator -- Second Estimate (Briefing.com consensus 4.1%; prior 4.1%)
- 9:45 ET: November Chicago PMI (Briefing.com consensus 47.5; prior 45.2)
- 10:00 ET: October Pending Home Sales (Briefing.com consensus -5.2%; prior -10.2%)
- 10:30 ET: Weekly crude oil inventories (prior -3.69 mln)
- Dow Jones Industrial Average: -6.8% YTD
- S&P Midcap 400: -11.4% YTD
- Russell 2000: -18.2% YTD
- S&P 500: -17.0% YTD
- Nasdaq Composite: -29.8% YTD
Earnings and econ data to expect Wednesday
29-Nov-22 15:30 ET
Dow -39.56 at 33813.72, Nasdaq -77.97 at 10911.38, S&P -10.85 at 3953.29
[BRIEFING.COM] With about 30 minutes left in the session, the main indices are chopping around a slim trading range.
After the close, Hewlett Packard Enterprise (HPE), Intuit (INTU), Workday (WDAY), and CrowdStrike (CRWD) are among the earnings reporters.
KE Holdings (BEKE), Hormel Foods (HRL), and Petco Health and Wellness (WOOF) are some of the companies reporting earnings ahead of Wednesday's open.
Market participants will receive the following economic data on Wednesday:
- 7:00 ET: Weekly MBA Mortgage Index (prior 2.2%)
- 8:15 ET: November ADP Employment Change (Briefing.com consensus 200,000; prior 239,000)
- 8:30 ET: October international goods trade deficit (prior $92.20 bln), October advance Retail Inventories (prior 0.4%), October advance Wholesale Inventories (prior 0.8%), Q3 GDP -- Second Estimate (Briefing.com consensus 2.7%; prior 2.6%), and Q3 GDP Deflator -- Second Estimate (Briefing.com consensus 4.1%; prior 4.1%)
- 9:45 ET: November Chicago PMI (Briefing.com consensus 47.5; prior 45.2)
- 10:00 ET: October Pending Home Sales (Briefing.com consensus -5.2%; prior -10.2%)
- 10:30 ET: Weekly crude oil inventories (prior -3.69 mln)
Apple weighs on Nasdaq
29-Nov-22 15:00 ET
Dow -50.35 at 33802.93, Nasdaq -78.89 at 10910.46, S&P -12.25 at 3951.89
[BRIEFING.COM] The market continues to flounder with sellers and buyers showing little conviction at this stage. The major indices, though, remain tipped in negative territory with modest-sized losses.
The Nasdaq Composite (-0.7%) is the weakest link, having been dragged down by its largest components. The Nasdaq 100 is down 0.8%.
Apple (AAPL 140.60, -3.62, -2.5%) is the biggest laggard, feeling the pressure of concerns about iPhone 14 Pro production issues and perhaps some demand dropping off entirely as opposed to being entirely deferred.
Powell speech looms on Wednesday
29-Nov-22 14:30 ET
Dow -39.84 at 33813.44, Nasdaq -73.04 at 10916.31, S&P -11.63 at 3952.51
[BRIEFING.COM] It doesn't look like the best of days for the stock market, but it's actually better than it looks at the index level. The proof is in the market internals, which favor advancing issues by a roughly 5-to-3 margin at the NYSE and a 6-to-5 margin at the Nasdaq.
In turn, the Invesco S&P 500 Equal Weight ETF (RSP) is up 0.2% versus a 0.3% decline for the market-cap weighted S&P 500. The difference is rooted in the relative weakness of the mega-cap stocks. The Vanguard Mega-Cap Growth ETF (MGK) is down 0.9%.
Buyers, though, aren't being overly aggressive in any area with the specter of a speech on employment, inflation, and the labor market by Fed Chair Powell looming on Wednesday (1:30 p.m. ET). It's not out of the realm of possibility either that market participants are being distracted at the moment by the USA-Iran World Cup game, which started at 2:00 p.m. ET and remains tied at 0-0.
The Russell 3000 Value Index is up 0.4% and the Russell 3000 Growth Index is down 0.4%.
Energy complex futures trade mixed
29-Nov-22 14:00 ET
Dow +34.55 at 33887.83, Nasdaq -52.20 at 10937.15, S&P -4.30 at 3959.84
[BRIEFING.COM] The main indices trade just off session lows.
Energy complex futures trade in mixed fashion. WTI crude oil futures are up 1.8% to $78.52/bbl and natural gas futures are down 0.3% to $7.18/mmbtu. The S&P 500 energy sector (+1.4%) sits atop the leaderboard for the 11 sectors.
The U.S. Dollar Index is flat at 106.70.
Page One
Last Updated: 29-Nov-22 08:58 ET | Archive
Attuned to happenings at home
Hong Kong's Hang Seng Index soared 5.2% on Tuesday on hope/speculation that Chinese authorities will soften the zero-COVID policy in coming months. The move followed a news conference that conveyed a plan to accelerate vaccinations for elderly people and an indication that local officials will be urged to avoid excessive restrictions. This all came on the heels of the social protests that occurred over the weekend.
What is interesting this morning is that the U.S. market has barely reacted to the news or the Hang Seng's rally message.
Currently, the S&P 500 futures are down three points and are trading in-line with fair value, the Nasdaq 100 futures are up five points and are trading 0.2% above fair value, and the Dow Jones Industrial Average futures are down 84 points and are trading 0.2% below fair value.
There hasn't been any carryover momentum from the Chinese markets. Sure, the latest developments have helped temper some of yesterday's selling activity, but they have not ignited buying efforts.
This suggests to us that market participants are more attuned for the time being to happenings closer to home, including a speech from Fed Chair Powell on Wednesday and a host of key economic releases over the remainder of the week, starting today with the November Consumer Confidence Index (Briefing.com consensus 100.00; prior 102.5) and ending Friday with the November Employment Situation Report.
Separately, market participants are keeping tabs on the action in the Treasury market where overnight gains have been effectively erased. The 2-yr note yield, which saw 4.41% overnight, is back up to 4.48%, and the 10-yr note yield, which touched 3.65% overnight, is back up to 3.71%.
The overnight gains were tied in part to Germany, Italy, and Spain reporting some cooler-than-expected inflation readings versus the prior month, aiding the peak inflation narrative.
Still, the good trading vibes haven't lasted. Equity futures have weakened as Treasury yields have moved higher.
Corporate news has been limited, but Dow component UnitedHealth Group (UNH) has drawn some extra attention after reaffirming its FY22 adjusted EPS guidance and issuing a FY23 adjusted EPS guidance range of $24.40-24.90 that falls below analysts' consensus expectation. Shares of UNH, though, are indicated just 0.2% lower in pre-market trading.
Elsewhere, Roku (ROKU) is down 4.0% after being downgraded to Sector Weight from Overweight at KeyBanc Capital Markets, and United Parcel Service (UPS) is up 1.7% after being upgraded to Buy from Hold at Deutsche Bank.
-- Patrick J. O'Hare, Briefing.com
Cerence steps on the gas as its long-term roadmap signals light at the end of the tunnel (CRNC)
Cerence (CRNC +16%) is putting the pedal to the metal today after registering a decent earnings beat and keeping revs from falling further than analysts expected in Q4 (Sep). CRNC also ended the year meeting or topping each of its FY22 targets, including revs, margins, and adjusted EPS. Meanwhile, the company outlined its long-term guidance, which signals a possible bottom forming in FY23.
CRNC's technologies focus on the fully immersive digital vehicle cabin, mainly AI-powered virtual assistants, such as when a BMW (BMWYY) driver says, "Hey, BMW." Although this means that CRNC's primary target is the automobile market, where 51% of all cars shipped contain its software, its technology can apply to other forms of transportation, such as planes and elevators.
Despite nearly every auto manufacturer coming out with refreshed digital displays with virtual assistants, shares of CRNC have not reflected a favorable environment. The stock has nosedived from 52-week highs set in January, tumbling over 75%. Semiconductor and raw material shortages plaguing automakers over the past year have significantly affected CRNC's relatively poor stock performance. As such, perhaps its Q4 results signal the early innings of a more pronounced turnaround.
- Headline results may not have shone, but they topped estimates. Adjusted EPS turned red, falling to $(0.14) from $0.66 in the year-ago period. However, analysts anticipated worse. The same story was true for revs, which experienced the steepest decline since Nuance (MSFT) spun off CRNC in October 2019, falling 40.8% yr/yr to $58.1 mln.
- Another bright spot stemmed from an important performance indicator, growth in billings per car, which ticked 8% higher yr/yr on a TTM basis.
- Likely keeping shares elevated today was CRNC's long-term roadmap. The company CRNC outlined its expectations for the next four years, targeting around 12% annualized sales growth through FY26. However, revs are expected to dip meaningfully in FY23, with CRNC expecting sales of just $280 mln, a 14% dip yr/yr. This builds in a rapid acceleration from FY24 through FY26, meaning that CRNC expects the automotive market to recover quickly after a challenging next twelve months.
- CRNC also outlined its non-GAAP gross margins guidance, expecting a 5 pt dip yr/yr to 67% in FY23, only to expand to 78% by FY26.
Bottom line, the past year has been a struggle for CRNC, marred by declining sales and profitability as the supply-constrained new car market took its toll. However, although not overly exciting, CRNC's Q4 numbers signal that there may finally be light at the end of the tunnel. Management's long-term guidance displays confidence that after one more challenging year, CRNC may be headed for greener pastures.
Bilibili is making some bills for investors, stock sharply higher following Q3 results (BILI)
Bilibili (BILI +24%) is surging today after the Chinese operator of an online video and gaming social media platform reported a narrower than expected loss for Q3 with revenue at the high side of prior guidance (RMB 5.79 bln vs RMB 5.6-5.8 bln guidance). The Q4 revenue outlook of RMB 6.0-6.2 bln was a bit below analyst expectations, but BILI tends to be conservative on guidance.
- The operating metrics also look good with DAUs up 25% yr/yr to 90.3 mln, MAUs also up 25% to 332.6 mln and average monthly paying users (MPUs) up 19% to 28.5 mln. The growth rates slowed a bit from Q2 (+29%, +33%, +32%) but investors do not seem too concerned.
- We think investors are pleased with the overall results in light of the COVID lockdowns being a headwind for BILI. While mobility restrictions may drive some user engagement, BILI gets impacted because advertisers tend to pull back on placing ads. It also likely makes it more difficult to convert consumers to paying customers.
- And it seems to have played out that way, BILI says users remained highly engaged in Q3 and the average daily time spent on Bilibili reached a 96-minute record high. However, it was a bit surprising to see advertising revenue growth increase to +16% yr/yr in Q3 from +10% in Q2. We think investors are responding positively to that metric in particular. Also, mobile gaming revenue grew +6% yr/yr after a decline in Q2.
- Even with the good revenue metrics, BILI still plans to reduce expenses, including efforts to accelerate its monetization and rationalizing headcount. It also plans to cut sales and marketing expenses with the goal of improving margins and narrowing losses and it made some progress in Q3. For example, sales and marketing expense as a percentage of revenue declined to 21% in Q3 from 24% in Q2.
Overall, it is clear that investors were bracing for difficult results in light of the COVID lockdowns in China. However, BILI performed better than expected. In particular, the yr/yr improvement in advertising revenue growth in Q3 as compared to Q2 stood out to us as a metric that looked quite good and eased our fears. There was also a lot of negativity priced in as the stock has been under pressure since BILI reported disappointing Q2 results in early September. We think investors were bracing for another rough quarter, but it was better than expected.
Hibbett faces strong selling pressure on weak Q3 earnings sparked by soft apparel demand (HIBB)
Shares of Hibbett (HIBB -9%) are sinking today after the sporting goods retailer missed earnings and sales expectations in Q3 (Oct). Although HIBB's footwear category, its largest at ~62% of FY22 (Jan) sales, continued to see robust demand, the company's second-largest apparel category faced a highly competitive pricing environment, pressuring sales in the quarter. Meanwhile, elevated freight, fuel, and wage costs continued to weigh on margins, causing the figure to slip by 200 bps yr/yr.
Solid earnings results from some of HIBB's peers, including Dick's Sporting Goods (DKS) and Foot Locker (FL), set the tone ahead of its earnings report, building in expectations that perhaps sporting goods and footwear were more resilient to the inflationary environment.
- This still rang true to a degree for HIBB in Q3. Comps jumped +9.9%, just missing analyst expectations, as footwear sales cushioned against a more pronounced decline in apparel sales. Back-to-school trends were also in full swing during the quarter, further helping HIBB's comp growth and 13.5% sales growth yr/yr to $433.2 mln.
- DKS also commented last week that it still had pockets of apparel inventory overage to address. However, it made healthy progress during OctQ by moving excess apparel items to its value chain. This remark highlighted that apparel was still enduring a significant drop off in demand, forcing DKS to slash prices. FL shared similar comments, noting that apparel was softer in OctQ.
- Still, with apparel comprising around just 29% of total FY22 sales, the market may have expected HIBB to be better defended against this slowdown.
- On the plus side, HIBB reiterated all of its FY23 (Jan) targets, including EPS of $9.75-10.50, revenue growth of low-single digits yr/yr, and same-store sales of flat to positive low-single-digit growth. Management noted that it is well positioned for the holiday season, an influential factor in its confidence in hitting its FY23 forecasts despite a less-than-stellar Q3 report.
As a broad-based weakness in apparel demand forced retailers to target markdowns to liquidate excessive inventory, HIBB's total sales growth in Q3 took a hit as it contended with an aggressive pricing environment. The good news is that its primary footwear category remained buoyant, an encouraging sign that the company is not experiencing weakness across the board. Furthermore, the pricing environment should gradually improve as retailers like DKS, as well as Walmart (WMT) and Target (TGT), work through their excessive inventory to be better positioned heading into 2023. With HIBB reaffirming its FY23 projections, perhaps Q3 signals that the worst inventory-related woes are over.
On a side note, sporting goods retailer Academy Sports + Outdoors (ASO) may face a similar fate as HIBB, given that its apparel products comprised roughly 27% of FY22 (Jan) revs; ASO reports OctQ earnings on December 7.
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