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To: Return to Sender who wrote (90393)

7/10/2023 9:44:38 PM

From: Return to Sender

2 Recommendations

Recommended By
kckip
Sr K

Respond to of 95383

Market Snapshot

briefing.com

Dow	33911.35	+176.56	(0.52%)
Nasdaq	13675.85	+14.76	(0.11%)
SP 500	4406.23	+6.01	(0.14%)
10-yr Note	+4/32	4.01

NYSE	Adv 1995	Dec 887	Vol 819 mln
Nasdaq	Adv 2906	Dec 1493	Vol 5.2 bln

Industry Watch

Strong: Industrials, Health Care, Financials, Energy, Consumer Staples

Weak: Communication Services, Information Technology, Utilities, Consumer Discretionary

Moving the Market

-- Wait-and-see ahead of June Consumer Price Index and the start of earnings season later this week

-- Relative weakness in mega cap stocks ahead of the Special Rebalance of the Nasdaq 100, effective prior to the open on July 24

-- Buying on weakness in other areas aside from mega cap stocks

-- Drop in market rates

Closing Summary
10-Jul-23 16:30 ET

Dow +209.52 at 33944.31, Nasdaq +24.77 at 13685.86, S&P +10.58 at 4410.80
[BRIEFING.COM] The stock market had a fairly strong showing today. Index performance was more modest, however. The market-cap weighted S&P 500 rose only 0.2% while the Invesco S&P 500 Equal Weight ETF (RSP) rose 0.9%. Advancers led decliners by a roughly 2-to-1 margin at the NYSE and the Nasdaq.

Gains for the three major indices were smaller, largely because of the relative weakness seen among the mega cap stocks. The Vanguard Mega Cap Growth ETF (MGK) fell 0.2% with Apple (AAPL 188.61, -2.07, -1.1%), Alphabet (GOOG 116.87, -3.27, -2.7%), and Microsoft (MSFT 331.83, -5.39, -1.6%) registering some of the largest declines from the space. Those losses followed the news from Nasdaq that there will be a Special Rebalance of the Nasdaq 100 to reduce overconcentration in the index by redistributing weights, effective prior to the open on July 24. The new weightings will be determined on Friday, July 14.

Even with lagging mega caps, the broader market held up well today. Small caps, banks, energy and semiconductor stocks all outperformed due to a more positive economic vibe in today's trade. The PHLX Semiconductor Index rose 2.1%, the Russell 2000 rose 1.6%, and the SPDR S&P Regional Banking ETF (KRE) rose 0.8%.

The economically-sensitive S&P 500 industrials (+1.4%) and energy (+0.8%) sectors were among the top performers along with health care (+0.8%) and financials (+0.4%). Meanwhile, the communication services (-0.9%) and utilities (-0.4%) sectors fell to the bottom of the pack.

A pullback in Treasury yields was supportive of equities today. The 2-yr note yield fell nine basis points to 4.85% and the 10-yr note yield fell four basis points to 4.01%.

The improvement in Treasury yields happened ahead of Wednesday's release of the June Consumer Price Index, which promises to be a market-moving catalyst.

Nasdaq Composite: +30.8% YTD
S&P 500: +14.9% YTD
S&P Midcap 400: +8.5% YTD
Russell 2000: +7.6% YTD
Dow Jones Industrial Average: +2.4% YTD

Reviewing today's economic data:

May Wholesale Inventories 0.0% (Briefing.com consensus -0.1%); Prior was revised to -0.3% from -0.1%

Economic data on Tuesday is limited to the NFIB Small Business Optimism Survey for June (prior 89.4) at 6:00 a.m. ET.

Treasuries settle with gains; Key takeaway from Consumer Credit
10-Jul-23 15:35 ET

Dow +168.02 at 33902.81, Nasdaq +3.05 at 13664.14, S&P +3.45 at 4403.67
[BRIEFING.COM] The major indices are little changed heading into the close.

Treasuries settled with gains. The 2-yr note yield fell nine basis points to 4.85% and the 10-yr note yield fell four basis points to 4.01%.

Consumer credit increased by $7.3 bln in May (Briefing.com consensus $21.0 bln) following a downwardly revised $20.3 bln (from $23.0 bln) in April.

The key takeaway from the report is that the pace of credit expansion in May was the slowest since November 2020, having been subdued by a decrease in nonrevolving credit that will raise concerns about a tightening in lending standards and weaker demand for credit in the face of higher financing rates.

Consumer Credit report; energy complex settlement levels
10-Jul-23 15:05 ET

Dow +176.56 at 33911.35, Nasdaq +14.76 at 13675.85, S&P +6.01 at 4406.23
[BRIEFING.COM] The major indices have moved mostly sideways in recent action.

Energy complex futures settled the session in mixed fashion. WTI crude oil futures fell 1.1% to $73.01/bbl and natural gas futures rose 2.4% to $2.63/mmbtu.

Consumer credit increased by $7.3 billion in May (Briefing.com consensus $21.0 billion) following a downwardly revised $20.3 billion in April (from $23.0 billion).

FMC & agricultural product peers fall on disappointing guidance
10-Jul-23 14:30 ET

Dow +186.03 at 33920.82, Nasdaq +19.65 at 13680.74, S&P +7.68 at 4407.90
[BRIEFING.COM] The S&P 500 (+0.17%) is in second place to this point on Monday afternoon, down now about -1% month-to-date.

S&P 500 constituents Ralph Lauren (RL 128.39, +5.84, +4.77%), Wynn Resorts (WYNN 106.30, +4.98, +4.92%), and Moderna (MRNA 123.33, +4.46, +3.75%) pepper the top of the S&P. Specialty retail stocks, including RL, are stronger today, while WYNN and fellow casino companies continue Friday's bounce off lows.

Meanwhile, Pennsylvania-based agricultural product firm FMC Corp (FMC 93.55, -10.70, -10.26%) is today's top laggard following guidance.

Gold modestly lower ahead of this week's inflation data
10-Jul-23 14:00 ET

Dow +185.86 at 33920.65, Nasdaq -7.32 at 13653.77, S&P +4.62 at 4404.84
[BRIEFING.COM] With about two hours to go on Monday the tech-heavy Nasdaq Composite (-0.05%) is modestly lower.

Gold futures settled $1.50 lower (-0.1%) to $1,931.00/oz ahead of this week's CPI inflation report.

Meanwhile, the U.S. Dollar Index is down about -0.3% to $102.01.

Market's eye on inflation data and earnings news
Friday's weak finish for the mega-cap stocks (and the broader market) created some added uncertainty about where this week might go. One thing we know for certain is that more market participants should be back at their desks with the July 4th holiday week in the rearview mirror.

At the moment, the broader market isn't heading anywhere fast.

The S&P 500 futures are down three points and are trading roughly in-line with fair value, the Nasdaq 100 futures are down 27 points and are trading 0.2% below fair value, and the Dow Jones Industrial Average futures are up seven points and are trading roughly in-line with fair value.

The lack of conviction stems in part from a desire to see how the mega-cap stocks will trade after Friday's weak finish. On a related note, CNBC reported that Citigroup downgraded its U.S. market view to Neutral from Overweight, citing an expectation that the mega-cap stocks are due for a pullback.

A different call comes from Fundstrat's Tom Lee, who said in a CNBC interview that he thinks the S&P 500 could rally 100 points after the June CPI report on Wednesday. If he is right, any such move would likely include the mega-cap stocks.

Mr. Lee's call is very much a tactical call, yet he feels that core CPI could come in at 0.2% month-over-month, or lower, and trigger a relief rally at the front of the yield curve that fuels a rally in stocks. The Briefing.com consensus estimate for core CPI is 0.3%.

That CPI report will be a focal point this week and for good reason. Today, one of the focal points is that China's June CPI was flat year-over-year (expected +0.2%) while June PPI was down 5.4% year-over-year (expected -5.0%), falling at its fastest pace in seven years.

Those inflation reports, and worries about deflation, have fueled speculation that China will soon announce additional policy stimulus measures.

Beyond this week's inflation data (June PPI is out Thursday), market participants will be anxiously awaiting the earnings reports from Delta Air Lines (DAL), PepsiCo (PEP), Fastenal (FAST), Citigroup (C), JPMorgan Chase (JPM), Wells Fargo (WFC), and UnitedHealth (UNH) later in the week.

This string of reports on Thursday and Friday will kick off the start of the June quarter earnings reporting period. According to FactSet, the second quarter blended earnings growth estimate is -7.5%. That would be the largest decline in earnings since the second quarter of 2020; nonetheless, we made the case in The Big Picture column published on Friday that the bar of expectations has gotten higher ahead of this reporting period.

-- Patrick J. O'Hare, Briefing.com

MercadoLibre gaps lower on a BofA Securities downgrade to "Neutral" from "Buy" (MELI)

MercadoLibre (MELI -6%), the dominant e-commerce site in Latin America, gapped down today after being downgraded to "Neutral" from "Buy" at BofA Securities. Shares are below their 200-day moving average (1085.44), although closing above this indicator today may indicate potential support.

Briefing.com notes that MELI has not seen too many analyst changes per our coverage over the past year. However, the two ratings it received in 2023, including today's, were downgrades, underscoring potentially troubling waters ahead. Still, we think today's sell-off is a slight overreaction, especially for long-term investors.

At over twice the size of the United States, MELI has to cover plenty of square miles, serving 18 countries. Its three largest markets are Brazil, Mexico, and Argentina, which accounted for over 95% of total revenue in FY22. Although most of the countries MELI serves are enduring some form of economic strife, namely inflation, Argentina is currently experiencing some of the worst inflationary pressures ever, with the local currency soaring by nearly 95% yr/yr in 2022, weighing heavily on the end consumer.
Nevertheless, MELI registered 43% Gross Merchandise Volume (GMV) growth, excluding currency fluctuations, yr/yr in Q1 (Mar), with its primary markets enjoying accelerated GMV growth sequentially. Although much of Argentina's exceptional 107% GMV growth was due to inflation, MELI noted that it saw a reversal of last year's weakening trend in items sold growth, which expanded by 3% in the quarter.
- Meanwhile, encouraging trends were seen across other regions, like Chile (the largest market in MELI's Other segment), where GMV growth returned to positive territory.
A significant factor driving MELI's relatively resilient numbers during its most recent quarter has been the company's focus on more consumable goods, like groceries, as well as bolstering first-party sales, which registered GMV growth of 28% in Q1.
At the same time, Mercado Pago, MELI's financial services business, boasted nearly 25% user growth yr/yr in Q1 to 44 mln. By moving into consumers' and merchants' wallets by offering loans and payment processing, MELI is carving out an economic moat, as clearing regulatory hurdles across multiple countries creates a fairly high barrier to entry that should only move to strengthen its brand over time.

Often compared to Amazon (AMZN), MELI's business is prone to risks, however. For one, AMZN operates in Latin America, commanding the number two spot right behind MELI. Given AMZN's proven dominance in the United States, it could ultimately kick MELI from its top position in many of its markets. For two, Latin America is an emerging market, which could lead to ongoing geopolitical and macroeconomic concerns. Thirdly, cross-border selling and maintenance can be costly and create considerable volatility and swings in financial performance.

Still, MELI has a strong history across many Latin American markets, giving it a leg up on outside competitors like AMZN. The company has also endured its fair share of geopolitical and macroeconomic headwinds, giving it the experience to overcome potential challenges. Meanwhile, MELI has been improving its distribution network and scale to better serve numerous countries.

FMC Corp lower on guidance; makes us nervous for fertilizer stocks heading into earnings season(FMC)

FMC Corp. (FMC -15%) is under pressure today after lowering guidance pretty significantly. FMC is a major supplier of insecticides, herbicides, fungicides and crop nutrition that farmers rely on to protect their crops from disease and pests.

What struck us was the size of the guidance cut. FMC now expects Q2 revenue of just $1.00-1.03 bln vs. $1.42-1.48 bln prior guidance. FMC did not guide for EPS, but adjusted EBITDA guidance was slashed to $185-190 mln from $350-370 mln. FMC also lowered full year guidance, but the big drop was in Q2. Recall that on May 1, when FMC reported Q1 results, it had already guided Q2 EPS and revs below analyst expectations. So another round of downside guidance was troubling.
So, what happened? FMC cited substantially lower-than-expected volumes due to an abrupt and significant reduction in inventory by channel partners. FMC says this only became evident towards the end of May and continued through the remainder of the quarter in three out of its four operating regions (North America, Latin America and EMEA).
The silver lining was FMC also saying that, even as it manages through this market contraction and significant inventory reduction by channel partners, on-the-ground consumption of its products remains strong and at similar levels to last year. So it does not appear to be a demand issue or a competitive loss situation. It's strikes us as more as a decision by channel partners to de-risk by carrying less inventory.
One thing we have learned about fertilizer stocks over the years is that their earnings can be pretty volatile. That's because the prices they pay for chemical inputs vary quarter-to-quarter, plus it's not always clear how easily they can pass these higher prices on to end customers. Also, end demand can vary quite a bit as weather/droughts play a role as well.
With that said, we are glad that FMC provides guidance. It would be easier for them to just not guide at all, but we like that they do guide. We think investors understand that FMC's earnings can be volatile.

Overall, this was some rough guidance and makes us nervous about other crop fertilizer/nutrient stocks as we head into earnings season in the coming weeks. We would be wary about names like CTVA, MOS, NTR, CF, IPI, BG, SMG. These stocks are actually holding up pretty well today, which surprises us. However, we would use caution because FMC's guidance seems more industry-based than company-specific.

Helen of Troy charges above February highs on upbeat MayQ results; caution still warranted (HELE)

Helen of Troy (HELE +16%), a houseware and beauty product manufacturer, is charging ahead after delivering its widest earnings beat in a year on improving sales in Q1 (May). Today's upbeat results underscored healthy progress related to restructuring efforts, dubbed "Project Pegasus," HELE, which owns various familiar brands like OXO, Hydro, and Vicks, announced to start the year. Alongside segment consolidation, management shifts, and minor operational tweaks, HELE began an approximately 10% workforce reduction to better contend with macroeconomic headwinds, which drove soft consumption trends across some categories.

Relatively weak demand still existed during MayQ, evidenced by total revenue slipping by 6.6% yr/yr to $474.7 mln. However, several of HELE's Leadership Brands, i.e., OXO, Hydro, Vicks, etc., outperformed the broader market, gaining market share within the U.S. HELE's Home & Outdoor segment was the leader in MayQ, registering 21.0% growth yr/yr. Conversely, Beauty & Wellness sales tumbled by 21.2%. Internationally, sales remained relatively steady, climbing 3.4% yr/yr.
Meanwhile, cost reduction initiatives helped drive a 380 bp expansion in gross margins yr/yr to 45.4% and a respectable 30 bp improvement in adjusted operating margins, fueling HELE's sizeable earnings beat in the quarter. Adjusted EPS still contracted 19.5% yr/yr to $1.94, but it was nicely above analyst expectations.
Also worth noting was HELE's progress in reducing excessive inventory to $433.91 mln, a 29.3% drop yr/yr and a 4.7% decline sequentially. Management remarked that it is operating with more normalized inventory levels and is increasingly aligning orders to consumer demand.
With Project Pegasus remaining on track toward lowering costs by $20 mln this year, HELE stayed confident in achieving its FY24 (Feb) financial goals, including EPS of $8.50-9.00 and revs of $1.96-2.02 bln, a 3.9% dip yr/yr at the midpoint. Management cautioned that its FY24 outlook continued to incorporate heightened uncertainty in spending patterns, particularly on the discretionary side, and a generally slower economy. HELE already noticed some reduction of trade inventory compared to Q4 (Feb) as many retailers reduce their inventory on hand.

HELE's MayQ report was encouraging, especially after the company announced restructuring to start the year, sparking worries surrounding consumer spending. We commented in January that the initial progress regarding Project Pegasus was promising, as it paved the way for margin and market share growth.

Still, caution remains the key theme as HELE heads into the back half of 2023. Many of HELE's competitors have acknowledged that the economy is challenging recently, such as KitchenAid parent Whirlpool (WHR), which anticipates U.S. sales to be down 4-6% yr/yr in FY23, and Newell Brands (NWL), which expects inflation to continue constraining discretionary spending for the next 12-18 months. Even though HELE's FY24 outlook is relatively conservative, baking in a slowing economy, maintaining a healthy dose of caution over the near term is still warranted. We should have more clarity after many of its peers report earnings over the next several weeks.

Costco's comp growth dips again in June, but sales for non-discretionary items remain healthy (COST)

Sluggish demand for big-ticket discretionary items continued to weigh on Costco's (COST) comparable sales growth in June, which slipped to +3.0% when excluding the impacts from changes in gas prices and foreign exchange. That's down slightly from May and April, when the company generated comp growth of +3.3% and +4.3% respectively.

Similar to recent months, the primary culprit that slowed COST's growth in June was a decline in average ticket size of 5.4%, reflecting the pullback in spending for pricier product categories such as electronics, appliances, jewelry, and home furnishings. For some context, average ticket size decreased by 4.2% in Q1.

While COST's comp growth in June is a far cry from the double-digit performances seen a year ago, its results still indicate that business is healthy overall.

For instance, it's worth pointing out that COST is lapping a very challenging year-ago number when total company comps jumped by 13.0% and e-commerce comps were up by 8.3%. The e-commerce channel, which has substantial exposure to big-ticket product categories (~60% of total e-commerce sales), only declined by 0.4% yr/yr in June.
- That also marks a meaningful improvement from May, when e-commerce sales fell by 7.0%.
Furthermore, customer traffic remained strong, increasing by 3.6% in the U.S., indicating that consumers are still looking to save money by purchasing food and everyday items in bulk. Staying true to recent form, COST's strongest product categories in June included food, sundries, and health and beauty.
COST's consistent traffic growth is also a function of membership increases and its very high renewal rates. In Q1, household members increased by about 7% to 69.1 mln, while renewal rates remained at record highs of 92.6% for the U.S. and Canada.

Despite these positives, shares are sliding lower today. However, with the stock up by about 10% since COST reported Q3 results on May 26, some profit-taking is likely in play. Overall, we have a positive view of COST's sales results for June as they likely reflect continued share gains in the food and everyday item categories, while demand for big-ticket items has at least steadied.

To: Return to Sender who wrote (90393)

7/11/2023 4:47:53 PM

From: Return to Sender

2 Recommendations

Recommended By
kckip
Sr K

Read Replies (1) | Respond to of 95383

Market Snapshot

briefing.com

Dow	34190.91	+246.60	(0.73%)
Nasdaq	13719.35	+33.49	(0.24%)
SP 500	4428.46	+17.66	(0.40%)
10-yr Note	+23/32	3.98

NYSE	Adv 2213	Dec 688	Vol 795 mln
Nasdaq	Adv 2815	Dec 1589	Vol 4.8 bln

Industry Watch

Strong: Materials, Energy, Consumer Discretionary, Industrials, Financials

Weak: --

Moving the Market

-- Carryover upside momentum from yesterday's broad rally

-- Some mega caps recovered from early losses, offering added support to the broader market

-- Wait-and-see mode ahead of the June Consumer Price Index tomorrow at 8:30 a.m. ET

Closing Summary
11-Jul-23 16:25 ET

Dow +317.02 at 34261.33, Nasdaq +75.22 at 13761.08, S&P +29.73 at 4440.53
[BRIEFING.COM] The market had a good showing today. Things started out looking similar to yesterday's tape with mega caps lagging while the broader market displayed some strength. By mid-morning, though, some mega caps had recovered from their losses, offering added support to the broader market.

The major indices ultimately closed near their best levels of the session. The market-cap weighted S&P 500 rose 0.7% while the Invesco S&P 500 Equal Weight ETF (RSP) closed with a 1.1% gain. The Vanguard Mega Cap Growth ETF (MGK), down 0.4% at its lows for the day, ended with a modest 0.4% gain.

Market internals reflected a relatively strong positive bias behind today's price action, although trading volume was on the light side. Advancers led decliners by a better than 3-to-1 margin at the NYSE and by a nearly 2-to-1 margin at the Nasdaq.

Ten of the 11 S&P 500 sectors registered gains. The health care sector was the worst performer, closing flat, while the fellow defensive-oriented consumer staples sector (+0.1%) saw the slimmest gain. The countercyclical energy (+2.2%), industrials (+1.2%), and financials (+1.2%) sectors were some of the top performers.

The industrials sector was boosted by a nice gain in 3M (MMM 101.92, +4.73, +4.9%) after it was upgraded to Neutral from Underperform at BofA Securities.

In the financials sector, JPMorgan (JPM 147.42, +2.27, +1.6%) was a top performer after it was upgraded to Buy from Hold at Jefferies and American Express (AXP 174.64, +2.93, +1.7%) was another notable winner after BofA Securities named it a top pick and reiterated its Buy rating. Other bank stocks outperformed, too, driving a 1.4% gain in the SPDR S&P Bank ETF (KBE).

The positive economic vibe in the market led small caps to outperform large caps and value stocks to outperform growth stocks. The Russell 3000 Value Index rose 1.1% versus a 0.5% gain in the Russell 3000 Growth Index.

Longer dated Treasuries settled with gains following a solid 3-yr note auction and ahead of tomorrow's release of the June Consumer Price Index at 8:30 a.m. ET. The 10-yr note yield fell three basis points to 3.98%. The 2-yr note yield, meanwhile, rose four basis points to 4.89%.

Nasdaq Composite: +31.5% YTD
S&P 500: +15.6% YTD
S&P Midcap 400: +9.7% YTD
Russell 2000: +8.6% YTD
Dow Jones Industrial Average: +3.4% YTD

Economic data today was limited to the NFIB Small Business Optimism Survey for June, which rose to 91.0 from 89.4 in May.

Market participants will be keenly focused on the release of the CPI (Briefing.com consensus 0.3%; prior 0.1%) and core-CPI (Briefing.com consensus 0.3%; prior 0.4%) reports for June at 8:30 a.m. ET. Other economic data tomorrow includes:

7:00 a.m. ET: Weekly MBA Mortgage Applications Index (prior -4.4%)
10:30 a.m. ET: Weekly EIA Crude Oil Inventories (prior -1.51 million barrels)
2:00 p.m. ET: Fed's Beige Book for July

Econ data tomorrow; Treasuries mostly settle with gains
11-Jul-23 15:30 ET

Dow +240.41 at 34184.72, Nasdaq +37.61 at 13723.47, S&P +18.54 at 4429.34
[BRIEFING.COM] Things are little changed at the index level over the last half hour.

Treasuries of most tenors settled with gains. The 2-yr note yield, meanwhile, rose four basis points to 4.89%. The 10-yr note yield fell three basis points to 3.98%.

Market participants will be keenly focused on the release of the CPI (Briefing.com consensus 0.3%; prior 0.1%) and core-CPI (Briefing.com consensus 0.3%; prior 0.4%) reports for June at 8:30 a.m. ET. Other economic data tomorrow includes:

7:00 a.m. ET: Weekly MBA Mortgage Applications Index (prior -4.4%)
10:30 a.m. ET: Weekly EIA Crude Oil Inventories (prior -1.51 million barrels)
2:00 p.m. ET: Fed's Beige Book for July

Market climbs; energy complex settles higher
11-Jul-23 15:05 ET

Dow +246.60 at 34190.91, Nasdaq +33.49 at 13719.35, S&P +17.66 at 4428.46
[BRIEFING.COM] The market has been climbing recently. The major indices all trade near their best levels of the day again.

Even with the index level dip recently, the Invesco S&P 500 Equal Weight ETF (RSP) remained near its high of the day, up 0.9%.

Energy complex futures settled higher. WTI crude oil futures rose 2.6% to $74.90/bbl and natural gas futures rose 2.6% to $2.70/mmbtu. The S&P 500 energy sector (+2.2%) remains atop the leaderboard by a wide margin.

Newell catches Canaccord "Buy" recommendation, Baird downgrades VeriSign with stock at bottom of S&P
11-Jul-23 14:30 ET

Dow +179.48 at 34123.79, Nasdaq -6.85 at 13679.01, S&P +7.45 at 4418.25
[BRIEFING.COM] The S&P 500 (+0.17%) is now in second place after a modest dip took the Nasdaq (-0.05%) into the red.

S&P 500 constituents Newell Brands (NWL 9.79, +0.90, +10.18%), Etsy (ETSY 92.98, +7.15, +8.33%), and APA Corp. (APA 37.21, +2.13, +6.07%) pepper the top of today's standings. NWL caught a Canaccord initiation this morning, some on the Street are calling out ETSY options as the catalyst behind today's move, while APA enjoys a nice move higher alongside gains in crude oil futures.

Meanwhile, VeriSign (VRSN 213.01, -12.08, -5.36%) is today's top laggard following a Robert W. Baird downgrade to Neutral.

Gold modestly higher as yields, dollar fall
11-Jul-23 14:00 ET

Dow +208.64 at 34152.95, Nasdaq +15.98 at 13701.84, S&P +11.84 at 4422.64
[BRIEFING.COM] With about two hours to go on Tuesday the tech-heavy Nasdaq Composite (+0.12%) sits at the bottom of the major averages, now about the middle of today's range.

Gold futures settled $6.10 higher (+0.3%) to $1,937.10/oz, aided in part by weakness in treasury yields and the greenback.

Meanwhile, the U.S. Dollar Index is down about -0.3% to $101.68.

Price action for broader market improves
Notwithstanding some weakness in the mega-cap stocks, the broader stock market had a good day on Monday. There is hope for a repeat performance today and that hope has helped put a bid in the equity futures market this morning.

It is not a strong bid, but it is a bid that has kept the indices on track for a modestly higher open.

Currently, the S&P 500 futures are up 11 points and are trading 0.3% above fair value, the Nasdaq 100 futures are up 35 points and are trading 0.3% above fair value, and the Dow Jones Industrial Average futures are up 116 points and are trading 0.4% above fair value.

There is some rebound action in the mega-cap stocks that is helping things along. Amazon.com (AMZN), which started its two-day Prime Day sale today, is among the stocks trading higher in pre-market action.

A dip in market rates, which has included the 10-yr note yield moving back below 4.00%, has been looked at as another support factor along with brokerage upgrades of Dow components JPMorgan Chase (JPM; Jefferies upgraded to Buy from Hold) and 3M (MMM; BofA Securities upgraded to Neutral from Underperform).

In general, there isn't much market-moving news. Participants remain fixed on the release of the June Consumer Price Index on Wednesday, so it's really more about price action at this juncture.

Yesterday's price action was encouraging since it featured the outperformance of non-tech cyclical stocks and gains for the major indices despite losses among the mega-cap stocks, suggesting that there was a rotation of money within the stock market as opposed to a rotation away from the stock market. That is what one typically sees in a bull market.

For some context, the Invesco S&P 500 Equal-Weight ETF (RSP) gained 0.9% on Monday, outperforming the market-cap weighted S&P 500, which gained 0.2%.

-- Patrick J. O'Hare, Briefing.com

Roku streams to multi-month highs after announcing partnership with Shopify (ROKU)

Following yesterday's surge, Roku (ROKU) is streaming sharply higher again today after announcing a new partnership with e-commerce company Shopify (SHOP) that has the potential to provide a much-needed boost to its sagging platform revenue. The development is helping to brighten sentiment on a stock that has plummeted by more than 80% from the all-time highs seen two years ago. Momentum has been building, though, with shares jumping by about 20% so far this week, reaching their highest levels since August 2022.

The rebound, which commenced at the beginning of the year, is mainly a function of ROKU's improved financial results versus expectations -- the company has exceeded EPS and revenue estimates for three straight quarters -- and the accompanying belief that CTV ad demand has bottomed out.
Additionally, ROKU launched its first in-house manufactured TVs in March, lessening its dependence on third party OEMs, and has expanded its partnerships to drive more revenue towards its platform.
After announcing a partnership with food delivery company Instacart in April, ROKU is now adding SHOP to its growing list of partners. The arrangement will give ROKU viewers the capability to purchase products from SHOP merchants directly from their TV through Roku Action Ads. Using Roku Pay, viewers can finalize the purchase and check out before returning to their streaming content
The company describes Roku Action Ads as "any advertisement on Roku streaming devices that provide a down funnel action, such as sending users a text, scanning a QR code, or making a purchase." This new ad format looks poised to provide ROKU's sluggish ad revenue, which accounts for 80-90% of its total platform revenue, with a meaningful lift. For some context, total platform revenue decreased by 1% in Q1 to $634.6 mln.
However, it may take some time before this catalyst fully materializes. Currently, there are only three partners from SHOP's platform that have signed on: men's apparel brand True Classic, connected rower maker Ergatta, and wellness brand Olly.
We believe what investors are anticipating, though, is that not only should ROKU's top-line growth rate improve, but so too should its margins. Roku Actions Ads likely carry high margin revenue and as they become a larger portion of the overall revenue mix, the company's margins should expand.
At the same time, gross margin on the device side of the business finally turned positive in Q1, coming in at 3.4% (+17.9 pts yr/yr) following a string of negative numbers that extend into FY21. A combination of supply chain disruptions, softening consumer spending for discretionary products such as TVs, and high TV inventory levels at major retailers crushed margins for the device business.

The bottom line is that ROKU reiterated its intention to deliver positive adjusted EBITDA in FY24 and partnerships such as the one with SHOP will help the company to attain that goal.

Travel + Leisure Co is amid tailwinds and has an attractive dividend and reasonable valuation (TNL)

Travel + Leisure Co (TNL) was a recent addition to our Yield Leader Rankings, boasting an attractive 7x forward earnings multiple while paying a solid dividend yield of 4.0%. TNL is a recent spin-off from Wyndham (WH), focused on vacation ownership, i.e., timeshares. Although alternative accommodations, such as those offered by Airbnb (ABNB), have provided unique travel experiences at, in many cases, a lower cost than a timeshare, vacation ownership is still a massive industry, with TNL commanding over 800,000 owners of vacation ownership interests (VOIs) and generating $3.15 bln in revenue last year.

With TNL set to report Q2 (Jun) earnings on July 26 before the open, we wanted to dive deeper into why TNL is positioned to weather the current economic climate.

Experiences have triumphed over goods lately as consumers place their budgets under intense scrutiny due to stubborn inflationary pressures. As a result, companies focused on providing customers with enjoyable experiences or offering attractive destinations have demonstrated relative resilience, generating a nice tailwind for TNL, which already noted that April trends resembled the upbeat demand seen at the end of 2022 after a somewhat challenging start to the year.
- For example, Dave & Buster's (PLAY) recently saw its shares explode following its widest earnings beat in a year in Q1 (Apr).
- Meanwhile, Delta Air Lines (DAL) has been on a tear this year, ascending over 40% as travel demand remains robust. Management also remarked last month that spending on services has yet to catch up to spending on goods, underscoring plenty of runway remaining.
- Albeit decelerating, Expedia Group's (EXPE) double-digit gross bookings growth for the past two years highlights continuous travel demand since the pandemic.
A long-term strategy of TNL has been targeting a younger demographic. Timeshares are largely associated with an older crowd, and companies like ABNB threatened the entire industry, especially as younger generations gravitated toward alternative accommodations. Although TNL's sales to millennials steadily climbed from just 7-8% of total revs six years ago, it still comprises only around 20-25%. With student loans resuming this year, eating into discretionary income, TNL's relatively low exposure to the younger generation could end up being a net positive for the company.
With macro uncertainty lingering in the background, it is important to point out TNL's impressive margins. Adjusted EBITDA margins consistently hover around 20%. TNL does not expect this to change meaningfully throughout the year. To maintain its margins, TNL started targeting consumers with higher credit scores during the pandemic, emphasizing margins over volumes. This strategy has not only paid off in the current environment, but it should also position TNL for solid growth over the long term.

With macroeconomic headwinds, namely inflation, remaining top of mind amongst consumers, organizations providing value and memorable experiences have been operating relatively well. We think this trend will continue generating a solid tailwind for TNL, especially since 89% of its FY22 revs stemmed from the relatively-resilient U.S. As always, a 15-20% stop-loss is recommended.

WD-40 returns to double-digit sales growth in Q3 as disruptions from recent price hikes abate (WDFC)

WD-40's (WDFC +18%) wide EPS beat and return to double-digit sales growth in Q3 (May) is greasing the wheels of a spike in shares to 52-week highs today. The household and multi-use product manufacturer also approved a new $50 mln repurchase plan. WDFC was coming off a downbeat quarter, when volumes were severely hurt by price hikes implemented over the preceding nine months, keeping sales growth flat and leading to management's trimmed FY23 (Aug) forecast.

Even though WDFC continued facing some disruptions related to its price increases during Q3, CEO Steven Brass commented that the impact is starting to abate, evidenced by decent volume-related sales growth in the quarter.

Total revs jumped 14.6% yr/yr to $141.72 mln on broad-based strength across all geographic regions. The standout in Q3 was Asia-Pacific, where sales surged by 42% to $18.06 mln. The tremendous growth was mostly related to less challenging comps, as most of the markets in this area, including China, no longer dealt with COVID-related headwinds. The exception was Australia, where sales slipped by 14% due to weakening economic conditions.
WDFC's primary market, the Americas (U.S., Canada, and Latin America), which comprised half of its total revenue in Q3, remained relatively resilient, registering 16% sales growth to $71.13 mln, consistent with the 15% growth last quarter. Maintenance products, WDFC's core offerings, grew by double-digits in the U.S. and Latin America, albeit on soft volumes, reflecting the lingering impacts of higher prices. Canada was the weak spot in the region, with maintenance product sales tumbling by 23% yr/yr.
EMEA lagged, delivering mild sales growth of 6% yr/yr to $52.52 mln. However, after a rocky start to the year, with sales down 22% during the first six months of FY23, the rebound to positive growth was ultimately a bright spot in Q3. Management also added that it saw a strong recovery in EMEA. Further, if not for currency fluctuations, EMEA sales would have been 13% higher, ahead of WDFC's long-term expectations of +8-11%.
For FY23, WDFC reiterated its outlook of $4.80-5.00 in earnings and $535-560 mln in revenue.

With eight years since WDFC outlined its 2025 revenue targets, projecting $650-700 mln, management revisited its growth aspirations. The company detailed three reasons why it would not establish a new FY25 sales target today: a significant chunk of revenue lost due to exiting Russia, considerable FX headwinds, and potentially further deemphasizing its homecare and cleaning brands. Instead, WDFC committed to a compound annual growth rate for maintenance product revenue in the mid-to-high-single-digits on a constant currency basis. WDFC expects most of the growth to stem from its WD-40 multi-use product, geographic expansion, premiumization, and ongoing e-commerce investments.

Overall, Q3 results increased the likelihood that WDFC's volumes already bottomed after a fierce initial backlash to the company's rapid price hikes. Management is excited about the growth potential for its multi-use products and is encouraged by resilience in the U.S. and mighty recovery efforts in key markets like China and EMEA.

PriceSmart looks like a good deal after beating EPS estimates, announcing share buyback (PSMT)

PriceSmart (PSMT), a Costco (COST) style warehouse club owner and operator in Colombia, Central America, and the Caribbean, issued mixed 3Q23 results that initially failed to spark much enthusiasm. After a knee-jerk reaction lower, though, shares have reversed higher, reaching new 52-week highs.

Heading into PSMT's earnings report, the stock had been rallying, gaining 4.5% since the end of June. Looking further back, shares have moved higher by about 27% on a year-to-date basis. This strength raised the bar for PSMT to hurdle in Q3 and set the stage for that initial profit-taking move to the downside.
With revenue falling short of expectations and growing at its slowest rate since 2Q21 at 6.4%, there was reason for investors to be disappointed. Furthermore, comparable net merchandise sales growth slowed to 5.8% from 8.5% last quarter.
Like its U.S.-based counterpart COST, which reported disappointing June comp growth of 3.0% last week, PSMT is seeing strength in the food category, but demand for discretionary products has withered under inflationary pressures.
- Last quarter, food grew by approximately 11% yr/yr, while the non-food category remained flat. The company will likely provide category-specific growth rates for Q3 during the earnings call at 12:00 p.m. E.T.
Although PSMT's top-line growth decelerated, adjusted EPS jumped by 52% yr/yr to $0.94, exceeding expectations for the fourth consecutive quarter. Managing expenses and investing in efficiencies through improved processes and technology are key components of PSMT's strategy.
- On that note, General and Administrative expenses were up by a manageable 11%, while operating margin improved by 70 bps yr/yr to 3.9%.
Also providing a spark is the company's announcement of a new $75 mln share repurchase program. Along with PSMT's expense management efforts, share buybacks should provide an earnings boost moving forward.

Overall, the broader story for PSMT is similar to that of COST.

While macroeconomic headwinds are impacting demand for discretionary products, membership growth and renewal rates are strong as consumers look to save money by purchasing food and everyday items in bulk. Last quarter, membership accounts grew by 3.2% to 1.77 mln while the 12-month renewal rate came in at 88%.
With a much smaller footprint of just 51 warehouse clubs compared to 855 warehouses for COST, real estate expansion figures to play a much larger role in PSMT's growth strategy. As of the end of Q2, PSMT had four warehouse clubs under construction or in preparation for opening, including its third club in El Salvador.

The main takeaway is that PSMT remains well-positioned to benefit from the ongoing strength in the warehouse club category as it expands its presence across Central America and drives improved efficiencies in its operations.

MercadoLibre gaps lower on a BofA Securities downgrade to "Neutral" from "Buy" (MELI)

MercadoLibre (MELI -6%), the dominant e-commerce site in Latin America, gapped down today after being downgraded to "Neutral" from "Buy" at BofA Securities. Shares are below their 200-day moving average (1085.44), although closing above this indicator today may indicate potential support.

Briefing.com notes that MELI has not seen too many analyst changes per our coverage over the past year. However, the two ratings it received in 2023, including today's, were downgrades, underscoring potentially troubling waters ahead. Still, we think today's sell-off is a slight overreaction, especially for long-term investors.

At over twice the size of the United States, MELI has to cover plenty of square miles, serving 18 countries. Its three largest markets are Brazil, Mexico, and Argentina, which accounted for over 95% of total revenue in FY22. Although most of the countries MELI serves are enduring some form of economic strife, namely inflation, Argentina is currently experiencing some of the worst inflationary pressures ever, with the local currency soaring by nearly 95% yr/yr in 2022, weighing heavily on the end consumer.
Nevertheless, MELI registered 43% Gross Merchandise Volume (GMV) growth, excluding currency fluctuations, yr/yr in Q1 (Mar), with its primary markets enjoying accelerated GMV growth sequentially. Although much of Argentina's exceptional 107% GMV growth was due to inflation, MELI noted that it saw a reversal of last year's weakening trend in items sold growth, which expanded by 3% in the quarter.
- Meanwhile, encouraging trends were seen across other regions, like Chile (the largest market in MELI's Other segment), where GMV growth returned to positive territory.
A significant factor driving MELI's relatively resilient numbers during its most recent quarter has been the company's focus on more consumable goods, like groceries, as well as bolstering first-party sales, which registered GMV growth of 28% in Q1.
At the same time, Mercado Pago, MELI's financial services business, boasted nearly 25% user growth yr/yr in Q1 to 44 mln. By moving into consumers' and merchants' wallets by offering loans and payment processing, MELI is carving out an economic moat, as clearing regulatory hurdles across multiple countries creates a fairly high barrier to entry that should only move to strengthen its brand over time.