Market Snapshot
briefing.com
| Dow | 33529.39 | +153.95 | (0.46%) | | Nasdaq | 11313.01 | +172.58 | (1.55%) | | SP 500 | 4006.14 | +33.53 | (0.84%) | | 10-yr Note | -26/32 | 3.53 |
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| | NYSE | Adv 2177 | Dec 810 | Vol 816 mln | | Nasdaq | Adv 2911 | Dec 1692 | Vol 5.9 bln |
Industry Watch
| Strong: Information Technology, Communication Services, Energy, Industrials, Consumer Discretionary |
| | Weak: Energy |
Moving the Market
-- S&P 500 maintaining a position above its 200-day moving average at 3,966 and pushing past the 4,000 level
-- Carryover momentum from Friday's rally effort
-- Strength in the mega cap space boosting index level gains
-- Reuters report that the latest NABE survey of businesses indicated there is a 56% possibility that the U.S. economy is already in, or will be in, a recession in 2023 versus a nearly two-thirds possibility at the time of the last survey
-- Wall Street Journal article by Nick Timiraos that highlighted the likelihood of the Fed raising rates by 25 basis points at next week's FOMC meeting and possibly starting to debate when to pause its rate hikes
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Closing Summary
23-Jan-23 16:30 ET
Dow +254.07 at 33629.51, Nasdaq +223.98 at 11364.41, S&P +47.20 at 4019.81
[BRIEFING.COM] Equities logged sizable gains today, building on Friday's rally. Upside moves had the S&P 500 extend its position above its 200-day moving average (3,966) and close the session comfortably above the 4,000 level.
The positive bias seemed to be partially fueled by the notion that the U.S. economy may achieve a soft landing. That narrative was fueled by a Wall Street Journal article over the weekend by Nick Timiraos highlighting the possibility of the Fed pausing its rate hikes this spring, along with a recent survey of businesses by the NABE that conveyed a lower possibility (56% vs nearly two-thirds before) of the U.S. being in a recession or entering one.
Buying interest in the mega cap space was an important factor behind today's gains. Tesla (TSLA 143.75, +10.33, +7.7%) was among the more notable standouts in that regard ahead of its earnings report after the close on Wednesday. The Vanguard Mega Cap Growth (MGK) rose 1.7%.
S&P 500 sector performance reflected mega cap leadership. The information technology (+2.3%), communication services (+1.8%), and consumer discretionary (+1.6%) sectors led the outperformers.
The energy sector, meanwhile, was alone in negative territory by the close with a 0.2% loss.
Semiconductor stocks were a specific pocket of strength today. This followed upgrades of Adv. Micro Devices (AMD 76.53, +6.46, +9.2%), Qualcomm (QCOM 131.03, +8.13, +6.6%) and Skyworks Solutions (SWKS 109.61, +6.55, +6.4%) to Overweight from Equal Weight at Barclays. Notably, semiconductor equipment companies Applied Materials (AMAT 114.15, +4.51, +4.1%) and KLA Corp (KLAC 425.58, +11.73, +2.8%) came along for the rally despite being downgraded to Equal Weight from Overweight at Barclays. The PHLX Semiconductor Index rose 5.0%.
Although the main indices all registered decent gains today, there was pullback from session highs in the afternoon trade. The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average were up 1.7%, 2.4%, and 1.2%, respectively, at their highs of the day.
The downturn coincided with many stocks giving back some gains. The Invesco S&P 500 Equal Weight ETF (RSP) settled the session up 1.3% after reaching a 1.7% gain at its intraday high.
There may have been some short-covering activity driving today's gains as earnings season ramps up with the likes of Microsoft (MSFT 242.58, +2.36, +1.0%) and Tesla (TSLA) also reporting later this week.
Market participants also receive key economic data later this week, including the advanced Q4 GDP reading on Thursday followed by the Personal Income and Spending report for December on Friday, which includes the Fed's preferred inflation gauge in the form of the core-PCE Price Index.
- Nasdaq Composite: +8.6% YTD
- Russell 2000: +7.4% YTD
- S&P Midcap 400: +6.6% YTD
- S&P 500: +4.7% YTD
- Dow Jones Industrial Average: +1.5% YTD
Economic data today was limited to the Leading Indicators for December, which fell 1.0% (Briefing.com consensus -0.7%) following a revised 1.1% decline in November (from 1.0%).
Ahead of tomorrow's open, Verizon (VZ), Johnson & Johnson (JNJ), General Electric (GE), Lockheed Martin (LMT), Raytheon Technologies (RTX), Travelers (TRV), 3M (MMM), Danaher (DHR), PACCAR (PCAR), D.R. Horton (DHI), Union Pacific (UNP), and Halliburton (HAL) are among the more notable earnings reporters.
Looking ahead to Tuesday, market participants will receive the preliminary IHS Markit Manufacturing PMI (prior 46.2) and Services PMI (prior 44.7) for January at 9:45 a.m. ET.
Treasury yields settle higher; looking ahead to data tomorrow
23-Jan-23 15:30 ET
Dow +170.51 at 33545.95, Nasdaq +181.89 at 11322.32, S&P +34.81 at 4007.42
[BRIEFING.COM] The main indices are trying to recover from the recent dip, but remain well off session highs.
Treasury yields settled higher. The 2-yr note yield rose three basis points to 4.23% and the 10-yr note yield rose four basis points to 3.53%.
Logitech Int'l SA (LOGI), Brown & Brown (BRO), Zions Bancorp (ZION), and Crane (CR) are among the names reporting earnings after the close.
Ahead of tomorrow's open, Verizon (VZ), Johnson & Johnson (JNJ), General Electric (GE), Lockheed Martin (LMT), Raytheon Technologies (RTX), Travelers (TRV), 3M (MMM), Danaher (DHR), PACCAR (PCAR), D.R. Horton (DHI), Union Pacific (UNP), and Halliburton (HAL) are among the more notable earnings reporters.
Looking ahead to Tuesday, market participants will receive the preliminary IHS Markit Manufacturing PMI (prior 46.2) and Services PMI (prior 44.7) for January at 9:45 a.m. ET.
Many stocks fall from highs, dragging on index performance
23-Jan-23 15:05 ET
Dow +153.95 at 33529.39, Nasdaq +172.58 at 11313.01, S&P +33.53 at 4006.14
[BRIEFING.COM] The main indices took a sharp turn lower recently. The S&P 500 found support at the 4,000 level, currently hovering just above that level.
The downside moves coincided with many stocks falling from session highs. The Vanguard Mega Cap Growth ETF (MGK) was up 2.2% at its session high, but trades up 1.4% now. The Invesco S&P 500 Equal Weight ETF (RSP) was up 1.7% at its high, but trades up 0.9% now.
Energy complex futures settled the session mixed. WTI crude oil futures fell 0.1% to $81.57/bbl and natural gas futures
Western Digital gains on talk rumors, CZR advances after upbeat guidance
23-Jan-23 14:25 ET
Dow +307.21 at 33682.65, Nasdaq +234.14 at 11374.57, S&P +54.07 at 4026.68
[BRIEFING.COM] The S&P 500 (+1.36%) is firmly ensconced on second place to this point on Monday.
S&P 500 constituents Western Digital (WDC 41.61, +3.15, +8.19%), NVIDIA (NVDA 192.15, +13.76, +7.71%), and Caesars Entertainment (CZR 50.70, +3.18, +6.69%) pepper the top of today's action. WDC advances after rumors of the company being in "advanced talks" with Kioxia as well as an upgrade to Neutral at Exane BNP Paribas, while NVDA also caught some positive sell side commentary, and CZR gave upbeat Q4 revs guidance before the open.
Meanwhile, Xylem (XYL 100.16, -10.02, -9.09%) slides to the bottom of the standings, weaker after announcing the acquisition of Evoqua Water (AQUA 46.93, +5.90, +14.38%) for $7.5 bln in an all-stock deal.
Gold narrowly higher on Monday; broader market peaks, Nasdaq up +2.2%
23-Jan-23 14:00 ET
Dow +363.23 at 33738.67, Nasdaq +246.38 at 11386.81, S&P +60.79 at 4033.40
[BRIEFING.COM] In the last half hour the broader market peaked, the tech-heavy Nasdaq Composite (+2.21%) holding a firm lead over its counterparts.
Gold futures settled less than $1 higher (flat) to $1,928.60/oz, recovering from overnight losses, but pressured slightly by strength in yields and the dollar.
Meanwhile, the U.S. Dollar Index is close to flat at $102.03.
Page One
Last Updated: 23-Jan-23 09:02 ET | Archive
Earnings-reporting winds set to swirl
There was ample movement in stock prices last week, which produced the first losing week for the Dow Jones Industrial Average and S&P 500 this year. The Nasdaq Composite, however, kept its winning streak alive thanks to Friday's Netflix-powered surge.
This week should also produce its fair share of movement, as it is a week that will be littered with earnings reports from nearly 100 S&P 500 companies and a slate of key economic data that includes the Advance Q4 GDP Report (Thursday), the December New Home Sales Report (Thursday), and the December Personal Income and Spending Report (Friday), which includes the Fed's preferred inflation gauge in the form of the core-PCE Price Index.
There are 11 Dow components that will post results this week: 3M (MMM), Johnson & Johnson (JNJ), Travelers (TRV), Verizon (VZ), Microsoft (MSFT), Boeing (BA), IBM (IBM), Dow, Inc. (DOW), Intel (INTC), American Express (AXP), and Chevron (CVX).
These stocks will command added attention along with other luminaries that include General Electric (GE), Halliburton (HAL), Union Pacific (UNP), Lockheed Martin (LMT), Capital One (COF), Comcast (CMCSA), Freeport-McMoRan (FCX), Lam Research (LRCX), Mastercard (MA), AT&T (T), Blackstone (BX), and Colgate-Palmolive (CL).
Currently, there isn't a lot of conviction in the futures trade, but what conviction there is favors the bulls.
The S&P 500 futures are up four points and are trading 0.1% above fair value, the Nasdaq 100 futures are up nine points and are trading fractionally above fair value, and the Dow Jones Industrial Average futures are up 67 points and are trading 0.2% above fair value.
Dow component and tech heavyweight Salesforce, Inc. (CRM) is helping the bulls plod along. It is up 4.3% following a Wall Street Journal report that Elliott Management has taken a multi-billion dollar stake in the company.
Other components of support so to speak include a report from Reuters that the latest NABE survey of businesses indicated there is a 56% possibility that the U.S. economy is already in, or will be in, a recession in 2023 versus a nearly two-thirds possibility at the time of the last survey, and a Wall Street Journal article by Nick Timiraos that is highlighting the likelihood of the Fed raising rates by 25 basis points at next week's FOMC meeting and possibly starting to debate when to pause its rate hikes.
Both reports fit the groove of a market that has shown more hope about the possibility of the economy achieving a soft landing and the Fed ending its rate hikes soon.
There has been some hope, too, that further downward revisions to 2023 earnings estimates won't be as bad as feared. More light will be shed on that front this week, although the latest earnings summary from FactSet indicates that the blended Q4 earnings decline for the S&P 500 has dropped to -4.6% from -3.2% on December 31 with 11% of S&P 500 companies reporting actual results.
For calendar 2023, the earnings growth rate has faded to 4.2% from 4.6% in the prior week. The important thing here is that we are still talking about growth, but even so, valuation headwinds are still blowing with the S&P 500 trading at 17.5x forward twelve-month earnings versus a 10-year average of 17.2x, according to FactSet.
That is partly why companies reporting their results this week can't blow it with their guidance.
-- Patrick J. O'Hare, Briefing.com
Salesforce rallies as Elliott Management's investment sparks hopes of a turnaround (CRM)
Cloud software giant and Dow component Salesforce (CRM) is trading higher and is providing the stock market with a lift after the Wall Street Journal reported that Elliott Management, one of the nation's largest activist investors, has made a multibillion-dollar investment in the company. For Elliott, CRM really fits the mold for the type of opportunity that it's looking for: namely, a prominent tech company that's fallen on hard times, has seen its stock plummet, and could use a shake-up in the boardroom.
Few would argue that the past few months haven't been a tumultuous time for CRM.
- When the company reported Q3 earnings on November 30, it also announced the abrupt departure of co-CEO Bret Taylor, who is leaving to "return to his entrepreneurial roots." The resignation caught investors off guard, while amplifying concerns that the recent upheaval in leadership positions would become disruptive and create execution issues.
- In addition to Taylor, CRM has announced the departures of Stewart Butterfield (CEO of Slack unit), Jonathan Price (SVP, Marketing/Communications for Slack), and Gavin Patterson (Chief Strategy Office, Salesforce), among others.
As these top-level changes play out, the company is also implementing a major restructuring initiative that includes a 10% workforce reduction.
- Like many tech companies, including Microsoft (MSFT), Google (GOOG), and Meta Platforms (META), CRM became overzealous with its hiring plans when the pandemic faded into the background. An aggressive M&A approach that included the recent acquisitions of Slack, Tableau Software, and MuleSoft also greatly expanded CRM's workforce.
- Now, with rising interest rates and inflation threatening to throw the economy into a recession, CRM is scrambling to right size the company in order to drive costs lower and improve margins.
- On that note, CRM's Q3 non-GAAP operating margin did expand by 290 bps yr/yr to 22.7%.
With Elliott establishing a substantial stake in the company, investors are betting that the activist investor will influence additional changes within the company.
- Although Elliott hasn't divulged a detailed plan of action yet, its history suggests that it will attempt to gain a seat on CRM's board, perhaps paving the way for an even wider leadership shakeup.
- A fresh perspective could help reinvigorate CRM's go-to-market strategy and its topline growth, which tapered off to 14% in Q3 from the low-to-mid 20% range it achieved in 2021 and 1H22.
- Additional margin-enhancing actions, such as the streamlining of operations, or the divestiture of underperforming assets, are a couple other options that may be pursued.
The main takeaway is that CRM is still a premier cloud software company, but it has lost its way recently, as illustrated by the exodus of several high-profile executives. Elliott's track record of instigating change within tech companies is providing some hope that CRM can return to the form that made it a darling among growth investors for most of its existence.
Western Digital is flashing some nice gains on report of possible merger with Kioxia (WDC)
Western Digital (WDC +6%) is making a nice move today on a Bloomberg report that the data storage giant and Japan-based Kioxia Holdings are progressing in merger talks. According to the article, one of the possibilities being discussed is Western Digital spinning off its flash business and merging it with Kioxia, creating a publicly traded company in the US.
- Recall that in June 2022, Western Digital announced it was reviewing strategic alternatives and specifically mentioned potentially separating its Flash and hard disk drives (HDD) segments. So this is not an entire surprise. Kioxia focuses on flash technology, so combining that with WDC's flash segment would create a powerhouse on that side of the business.
- At the time, Briefing.com said that we applaud the review process because we think separating the two segments makes a lot of sense. Flash is based more on chip technology while HDD is based on rotating magnetic technology. They have different markets and different supply dynamics. It would be better to have separate management focusing on each segment. Also, the flash growth opportunity in cloud is quite attractive.
- Stepping back a bit, Western Digital is going through a downcycle these days and management described it as a particularly sharp one at an investor conference last month. Consumer was the first market to soften in early 2022 although it has stabilized. The PC market has seen a very sharp correction. In SepQ, WDC saw customers taking product way below true demand levels. Also, data centers, especially US hyperscalers have moved into inventory correction mode, especially on the HDD side. China's recent COVID lockdowns are also adding to the general malaise.
Overall, we view this possible merger as a positive for WDC. We think separating the flash and HDD segments is long overdue and we want to see them trade independently. We are not sure that doing it during a downturn is the best timing, however, a potential deal would likely take months or quarters to close. Perhaps the market will be back on the upswing by then and the new flash business would be a powerhouse hitting the ground at just the right time.
Regardless, this is sure to be a topic of conversation on WDC's Q2 (Dec) earnings call next week (Jan 31) although we suspect management will say it cannot comment. Or perhaps a deal gets announced before its earnings report or at the same time.
Wayfair springs higher on several analyst upgrades as demand dynamics appear to be improving (W)
After springing over 40% higher to start the new year, Wayfair (W +24%) is being draped with additional gains today following a double upgrade at BofA Securities and JPMorgan to "Buy" and "Outperform," respectively, as well as another upgrade at Wedbush. A couple of reasons for the upbeat analyst sentiment have been the e-commerce furniture and home goods retailer trimming expenses and an improving economic backdrop.
Briefing.com notes that shares having a relatively high short interest of over 30% also provides positive energy for the tremendous appreciation this year.
A healthy amount of fear has also been priced into the stock. After Wayfair topped Q3 estimates in early November, some competing firms warned of concerning demand dynamics ahead. For example, Williams-Sonoma (WSM) withdrew its FY24 (Jan) outlook, citing increasing economic uncertainty, mainly how consumers would respond to climbing interest rates. Following WSM's discouraging OctQ report, La-Z-Boy (LZB) remarked that near-term headwinds continued to weigh on its written sales momentum.
Therefore, a string of uplifting announcements has propelled Wayfair shares nicely higher.
- An initial catalyst that kicked off Wayfair's robust momentum was its strong Black Friday and Cyber Monday sales numbers. The company registered low-single-digit sales growth during the five days spanning Thanksgiving and Cyber Monday.
- Although the market sell-off toward the end of 2022 engulfed Wayfair, the stock quickly snapped back, seeing excellent strength heading into its cost-efficiency plan announced last week. The biggest item from Wayfair's savings plan was its move to cut its workforce by roughly 10%, saving an estimated $750 mln in annualized costs.
- Meanwhile, Wayfair discussed promising gross revenue trends month/month in December, adding that it was encouraged by recent sales performance and order momentum.
- As a result of its pronounced savings and accelerating demand, Wayfair expected to achieve its adjusted EBITDA breakeven target earlier in 2023 than initially anticipated, a major step toward its positive free cash flow goal.
If the market continues to recover, we would not be surprised to see further upgrades for Wayfair. The stock gapped meaningfully above its 200-day moving average (currently at $51.14), the first time shares traded above its 200-day moving average since November 2021. Although short-squeeze dynamics remain favorable, today's move could lead to profit-taking. Nevertheless, Wayfair is proving many doubters wrong lately. If it stays on track to reach its financial goals and market conditions do not worsen, Wayfair could continue to force shorts to cover, adding more fuel to its red-hot stock. |
