Market Snapshot
briefing.com
| Dow | 33793.87 | +519.29 | (1.56%) | | Nasdaq | 13291.26 | +229.80 | (1.76%) | | SP 500 | 4315.67 | +77.81 | (1.84%) | | 10-yr Note |
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| | NYSE | Adv 2501 | Dec 360 | Vol 472 mln | | Nasdaq | Adv 3225 | Dec 1045 | Vol 3.6 bln |
Industry Watch
| Strong: Real Estate, Consumer Discretionary, Energy, Utilities, Financials, Industrials, Materials |
| | Weak: -- |
Moving the Market
-- Carryover positive momentum following gains this week and yesterday's afternoon rebound
-- Generally positive reactions to earnings news since yesterday's close
-- Treasury yields were already heading lower before buying increased in response to this morning's economic data
-- Digesting a better than expected Q3 productivity report that featured a nice uptick in productivity and a decline in unit labor costs
-- S&P 500 is back above its 200-day moving average (4,244)
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Stocks hang near highs ahead of the close
02-Nov-23 15:35 ET
Dow +519.29 at 33793.87, Nasdaq +229.80 at 13291.26, S&P +77.81 at 4315.67
[BRIEFING.COM] Things are little changed heading into the close.
The 2-yr note yield rose one basis point to 4.98% while the 10-yr note yield fell 12 basis points to 4.67%.
Friday's economic calendar features:
- 8:30 ET: October Nonfarm Payrolls (Briefing.com consensus 175K; prior 336K), Nonfarm Private Payrolls (Briefing.com consensus 143K; prior 263K), Average Hourly Earnings (Briefing.com consensus 0.3%; prior 0.2%), Unemployment Rate (Briefing.com consensus 3.8%; prior 3.8%), Average Workweek (Briefing.com consensus 34.3; prior 34.4)
- 9:45 ET: Final October S&P Global US Services PMI (prior 50.1)
- 10:00 ET: October ISM Non-Manufacturing Index (Briefing.com consensus 53.0%; prior 53.6%)
Energy complex futures settle mixed
02-Nov-23 14:55 ET
Dow +500.51 at 33775.09, Nasdaq +220.60 at 13282.06, S&P +73.92 at 4311.78
[BRIEFING.COM] The major indices remain near session highs.
WTI crude oil futures rose 2.4% today to $82.57/bbl and natural gas futures settled flat at $3.76/mmbtu. On a related note, the S&P 500 energy sector (+2.4%) trades near the top of the pack.
Elsewhere, the CBOE Volatility Index is down 6.0% to 15.86.
Teleflex, Parker-Hannifin outperform in S&P 500 after earnings
02-Nov-23 14:30 ET
Dow +498.30 at 33772.88, Nasdaq +222.47 at 13283.93, S&P +74.85 at 4312.71
[BRIEFING.COM] The S&P 500 (+1.77%) is today's top gainer, at least so far as the major averages are concerned, up now about 75 points.
S&P 500 constituents Teleflex (TFX 209.23, +21.72, +11.58%), V.F. Corp (VFC 14.43, +1.33, +10.15%), and Parker-Hannifin (PH 406.71, +36.24, +9.78%) dot the top of the standings. TFX and PH rally on earnings, while VFC recoups a bit of the recent earnings-related selloff which saw shares dip to a worst than 14-year low.
Meanwhile, Michigan-based automotive supplier BorgWarner (BWA 32.70, -4.41, -11.88%) is today's top laggard following earnings/guidance.
Gold modestly higher ahead of tomorrow's jobs report
02-Nov-23 14:00 ET
Dow +502.55 at 33777.13, Nasdaq +218.11 at 13279.57, S&P +75.40 at 4313.26
[BRIEFING.COM] With about two hours to go on Thursday the tech-heavy Nasdaq Composite (+1.67%) holds firm in second place, up now about 218 points.
Gold futures settled $6 higher (+0.3%) to $1,993.50/oz as investors turned their focus to tomorrow's jobs report.
Meanwhile, the U.S. Dollar Index is down about -0.7% to $106.10.
Nike, Walgreens outperforming in DJIA on Thursday
02-Nov-23 13:30 ET
Dow +447.32 at 33721.90, Nasdaq +197.26 at 13258.72, S&P +68.57 at 4306.43
[BRIEFING.COM] The Dow Jones Industrial Average (+1.34%) is just off HoDs in recent trading.
A look inside the DJIA shows that Nike (NKE 104.94, +4.06, +4.02%), Walgreens (WBA 21.35, +0.72, +3.49%), and Chevron (CVX 148.12, +4.14, +2.88%) are some of today's top performers.
Meanwhile, Travelers (TRV 167.58, -1.70, -1.00%) is underperforming.
The DJIA is now +4% week-to-date.
Page One
Last Updated: 02-Nov-23 09:01 ET | Archive
Looking better and feeling better as rates drop
Things look better today and they feel better. That's largely because there has been a notable pullback in market rates from yesterday's highs as the Treasury market took solace in the understanding that the October ISM Manufacturing Index was weaker than expected and in the notion, borne out of Fed Chair Powell's remarks at his press conference, that the Fed could possibly be done raising rates.
Fed Chair Powell, of course, would be quick to remind anyone that the Fed will raise rates again if the data warrant another rate hike. It is the market, however, that thinks that is empty lip service that won't ultimately translate into an actual rate-hike action.
Accordingly, the 2-yr note yield has dropped to 4.94% from yesterday's high of 5.08% and the 10-yr note yield has fallen to 4.63% from yesterday's high of 4.91%, aided presumably by some short-covering activity.
That drop in rates has catalyzed some missing buy-the-dip interest that is boosting many stocks, because most stocks have certainly "dipped" over the last three months. Collectively, the losses pulled the S&P 500 and Nasdaq Composite into correction territory (i.e., down 10%+ from a prior closing high), so the timing of this drop in rates is ideal. The S&P 500 stands ready to clear resistance at its 200-day moving average (4,244) at today's open.
Currently, the S&P 500 futures are up 41 points and are trading 0.9% above fair value, the Nasdaq 100 futures are up 203 points and are trading 1.4% above fair value, and the Dow Jones Industrial Average futures are up 232 points and are trading 0.7% above fair value.
The market was oversold and speculation was rising that it was due for a bounce from its oversold condition and, lo and behold, that is what is taking place against a large body of earnings results since yesterday's close that have been greeted more generally with a positive response. Investors will be hoping that Apple (AAPL) gets the same treatment when it reports after today's close.
The bounce is happening today, too, in the wake of some generally pleasing economic data.
Nonfarm business sector labor productivity increased 4.7% in the third quarter (Briefing.com consensus 3.6%) following an upwardly revised 3.6% increase (from 3.5%) in the second quarter. Unit labor costs decreased 0.8% (Briefing.com consensus) following an upwardly revised 3.2% increase (from 2.2%) in the second quarter. That was the highest rate of productivity since the third quarter of 2020.
The key takeaway from the report, other than the impressive uptick in productivity, is the decline in unit labor costs. It is a particularly timely piece of data, as it plays perfectly into the market's swelling expectation that moderating inflation pressures will keep the Fed from raising rates again.
Separately, initial jobless claims for the week ending October 28 increased by 5,000 to 217,000 (Briefing.com consensus 214,000). Continuing jobless claims for the week ending October 21 increased by 35,000 to 1.818 million.
The key takeaway from the report is much the same, which is to say the low level of initial claims isn't consistent with a material weakening in the labor market.
In other news, the Bank of England followed suit with the FOMC and voted to maintain the Bank Rate at 5.25%. This vote, however, wasn't unanimous. It was 6-3 in favor of no change. Three members wanted a 25 basis points rate hike. It is the Bank of England's expectation that "Monetary policy will need to be sufficiently restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term."
-- Patrick J. O'Hare, Briefing.com
PayPal mixed Q3 report receives a friendly reception as hopes of 2024 turnaround take hold (PYPL)
On the surface, it seems surprising that PayPal's (PYPL) mixed Q3 earnings report is sparking a rally in the stock. The company did exceed EPS expectations, but other key metrics -- such as total active accounts -- painted a far less rosy picture. Furthermore, the company also issued downside EPS and revenue guidance for Q4, making the stock's move higher seem all the more improbable.
- Those blemishes, though, are taking a back seat to the promising comments made by new CEO Alex Chriss, who took the reins from long-time CEO Dan Schulman on September 27. During the earnings call, Mr. Chriss pounded the table on his plan to drive profitable growth by managing the cost base, simplifying the business structure, and improving operating leverage.
- Therefore, market participants are looking beyond the Q3 results and weak Q4 outlook and are instead focusing on the possibility of stronger profits and growth in 2024.
- It doesn't hurt that the broader market is also rallying today on hopes that the Fed may be nearing the end of this rate-hiking cycle. Higher interest rates have been especially tough on fintech companies like PYPL, Affirm (AFRM), and Block (SQ) as consumers pull back on spending and loans.
Some relief on interest rates would certainly be welcomed for PYPL as Mr. Chriss attempts to execute a turnaround.
- In Q3, total active accounts declined by 2.8 mln to 428 mln, continuing a concerning downward trend that has put the competitive threat from big tech under the spotlight. However, the active account losses may not be quite as bad as they seem. That's because PYPL is flushing out lower quality active accounts, many of which are located in Latin America and Southeast Asia.
- Another issue that has plagued PYPL and its stock is the slowdown in growth for branded checkout volumes. Although growth accelerated to 8% in July, branded checkout volume moderated as the quarter progressed.
- The company ended the quarter with branded checkout volume growth of 6% compared to 7.5% growth in the year-earlier period.
- The silver lining, though, is that PYPL stated that trends have stabilized in Q4 and that it's tracking in line with the first half of 2023.
Overall, this wasn't an overly impressive performance for PYPL and the concerns over rising competition haven't dissipated. However, market participants are sensing that better days may be ahead under new CEO Alex Chriss. With the stock down by more than 70% since the beginning of 2022, that's a bet that many investors are willing to take right now.
Zillow heads lower despite Q3 upside; Q4 guidance and cautious comments impacting stock (ZG)
Zillow (ZG -5%) is heading lower after reporting Q3 results last night. Zillow reported large beats for EPS, revenue and adjusted EBITDA. Unfortunately, Q4 revenue guidance was below analyst expectations and there was some cautionary comments on the call. We think that's counterbalancing the effect of the Q3 beat in investors' minds.
- From a macro sense, Zillow remains cautious around housing affordability and the low inventory environment. It saw in Q3, and expects to continue to see in Q4, headwinds for buyers who are finding it increasingly difficult to purchase a home. On the other hand, Zillow says its relative outperformance in Q3 was primarily driven by things that it is doing to grow and less by relative macro factors. Its investments in top of funnel and mid-funnel experiences continue to drive lead volumes.
- Also, Rentals was an area of strength in Q3, with revs increasing 34% yr/yr to $99 mln, primarily driven by multifamily revenue. Zillow expects Rentals revenue to grow more than 30% yr/yr in Q4. Zillow remains the number one most visited rentals platform. Zillow also expects positive growth in Mortgages revenue in Q4 as it laps refinance activity of a year ago and begins to scale the internalization of its marketplace leads.
- On the M&A front, Zillow is pretty excited about its recently announced Follow Up Boss acquisition. FUB is a CRM system for real estate professionals. It has been a key integration partner of Zillow for a long time and Zillow says the product is beloved by the broader real estate industry. FUB revenue has grown 40+% on average annually over the last four years.
- In terms of how the Sitzer/Burnett realtor litigation affects Zillow, the company says it will likely be tied up in court for years and Zillow is not a party to this lawsuit. Also, buyer's agents just completely going away seems improbable because buying a home is a complex and often intimidating process. It's also the largest financial asset for most homeowners, so independent representation in real estate is important. However, even if buyer's agency were to go away, Zillow would be well positioned because the market likely would evolve into sort of a digital classified ads.
Overall, Zillow reported a nice beat for Q3, but the Q4 guidance and commentary on the call seem to be giving investors pause. Current homeowners just don't want to give up their low mortgages and that lower volume is impacting Zillow. The stock had pulled back 35% since early August as rates kept rising. We thought a lot of negativity was priced in, but investors remain cautious.
Starbucks' uplifting SepQ results and FY24 forecasts re-energizes shares today (SBUX)
Starbucks' (SBUX +10%) upbeat Q4 (Sep) performance and FY24 outlook provide the caffeine investors needed to push shares back above $100 for the first time since August. The global coffee chain is observing upward momentum domestically and abroad, including China, which remains a vital market for SBUX's long-term growth. As a result, although some financial targets were not as buoyant as previously outlined, several highlighted the brewing success SBUX is enjoying through its previously detailed Reinvention Plan.
- In Q4, adjusted EPS zoomed 30% higher yr/yr to $1.06, exceeding analyst estimates for the third consecutive quarter. The bottom-line growth was lifted by a healthy balance of margins, which expanded by 310 bps yr/yr, and revenue, which grew by 11.4% to $9.37 bln.
- Also worth highlighting was SBUX topping revenue estimates in the quarter, a nice reversal from its slight miss in Q3 (Jun).
- Global same-store sales growth increased by +8%, driven by a good mix of ticket and transaction growth at home and overseas. In the U.S., comps were +8%, with average weekly sales hitting record highs, boosted by seasonal and premium products. SBUX's rewards program added more members, up 4 mln from the year-ago period.
- With Starbucks Rewards contributing 30% of total sales, up 9 pts over the past year, retaining and expanding its membership base remains crucial to long-term growth.
- Internationally, revenue growth tracked 11% higher yr/yr, with double-digit growth enjoyed across most of SBUX's international regions. Comps of +5% did lag the total figure. However, this was likely anticipated, given the ongoing recovery in China.
- Speaking of China, revenue still grew by 8% yr/yr and 15%, excluding FX impacts on a +5% improvement in same-store sales, squarely in line with previous expectations. China's performance improved sequentially in Q4, with 2H23 revenue outpacing 1H23 by 20%, underpinning positive recovery momentum.
- Uplifting momentum carrying into subsequent quarters reinforced SBUX's FY24 guidance. The company did trim its global comp outlook to +5-7% from +7-9%. However, investors quickly shrugged this off since SBUX's updated comp range, new store performance, and overseas momentum drive a more durable growth narrative. SBUX reiterated its FY24 revenue growth projection of 10-12%, albeit at the low end of the range, reflecting a still-uncertain global business environment.
- As the company continues identifying areas to improve efficiency, SBUX's FY24 top-line targets will be supported by progressive margin expansion. As a result, SBUX reaffirmed its FY24 adjusted EPS growth prediction of +15-20% yr/yr.
SBUX capped off a volatile year on a high note, bringing that positive momentum into FY24. Consumers are flocking toward more premium beverages, boosting margins and average ticket sizes, a potentially surprising trend given the cumulative inflationary pressures. The shifting tastes toward pricier beverages are a good showcase of SBUX's quality and brand loyalty. Although, it will be interesting to see if this trend is sustained despite the resumption of student loans in Q1 (Dec).
Qualcomm feeling more chipper about the handset market, leading to brighter outlook (QCOM)
Although Qualcomm's (QCOM) core strategy revolves around diversifying its revenue streams and end markets, the chip company still derives about half of its revenue from the handset market, making it a focal point when it reports earnings. With that in mind, QCOM's more upbeat commentary regarding the handset market, including the assertion that the inventory glut is now mainly behind the company, is providing more firepower to its upside Q4 earnings report.
- Recall that during last quarter's earnings call, CFO Akash Palkhiwala warned that inventory drawdown dynamics in the handset market would likely persist through the end of the calendar year. Since then, though, conditions have improved with Mr. Palkhiwala commenting last night that he's seeing early signs of stabilization in demand for handsets, particularly for Android devices.
- As a result, QCOM lifted its CY23 handset outlook to down mid-to-high single digits from its prior forecast of down by at least high-single digits.
This brighter handset outlook and QCOM's cost-cutting efforts, which include nearly 1,300 recent job eliminations, enabled the company to provide upside Q1 EPS and revenue guidance. While QCOM's Q4 results and outlook were better-than-expected, business is still far from booming.
- Handset revenue tumbled by 27% to $5.46 bln, after plunging by 25% last quarter. In addition to the inventory situation, demand in China has been weak as the softening economy there has caused consumers to hold off on phone upgrades.
- That's a major problem for QCOM since China accounts for roughly 60% of its revenue.
- Furthermore, the IoT end market has yet to show any signs of recovery as revenue dove by 31% to $1.38 bln. Similar to the handset market, IoT is contending with high inventory levels at OEMs, especially on the industrial side.
- For the 12th consecutive quarter, the Automotive end market generated double-digit growth with revenue up by 15% to $535 mln. Growth has slowed, though, from earlier in QCOM's fiscal year.
- For instance, in Q1 and Q2, Automotive revenue jumped by 58% and 20%, respectively.
- From a longer-term perspective, QCOM remains bullish about its growth opportunities in Automotive as vehicles become increasingly connected and as advancements in ADAS are made. The company believes that its Snapdragon Digital Chassis will play a critical role as these trends continue to evolve.
QCOM also highlighted its opportunities in AI, commenting that it's establishing itself as a leader in on-device Gen AI for smartphones, laptops, and vehicles. The upcoming launch of on-device AI will create new use cases and change how users interact with their devices, which will be underpinned by more efficient and powerful chips -- such as QCOM's Snapdragon platform.
The main takeaway is that the handset market finally seems to be turning a corner after several quarters of declines. This gradual recovery, along with QCOM's cost containment measures, should help to turn its financial performance around, but a full recovery won't happen overnight as demand slowly improves.
DoorDash dashing nicely higher as it delivers a surprisingly good Q3 report (DASH)
DoorDash (DASH +16%) is dashing higher following its Q3 report. The food delivery service giant reported big upside results. DASH reported a GAAP loss that was much narrower than expected. We like the top line growth of 27% to $2.16 bln, which was better than expected. DASH saw good order acceleration in Q3, with total orders rising 24% yr/yr to 543 mln while Q3 Marketplace GOV rose 24% yr/yr to $16.75 bln vs $15.8-16.2 bln prior guidance.
- Since DASH does not provide adjusted EPS, we think it is important for investors to focus more on adjusted EBITDA as the better metric for profitability because it's a clean adjusted number and DASH provides guidance for it. And on the score, DASH did well, growing 295% yr/yr to $344 mln, well above the high end of $220-270 mln prior guidance. The guidance was a bright spot as well with DASH expecting Q4 adjusted EBITDA of $320-380 mln.
- The warmer months tend to be seasonally weaker for DASH since fewer people order from home. There has also been a reduction in restaurant traffic generally as consumers watch spend, according to reports this week from MCD, SYY. Also, the delivery industry has been weak generally, just ask Domino's (DPZ) which has repeatedly reported weak delivery comps in recent quarters, while carryout has been strong. As such, we think these results really surprised investors.
- In terms of why Q3 was so strong, DASH said on the call that every line of business accelerated. DASH cited product improvements made to its platform, including adding many new restaurants and non-restaurants, the latter of which has gone from zero nearly three years ago to a multibillion-dollar business.
- DASH also cited an improvement to its quality of service, whether it's speed or accuracy or customer service. Finally, DASH has also improved the affordability of its programs, both for non-DashPass members as well as for its DashPass cohorts. Improvements like this have allowed DASH to continue to grow at higher rates even at increased scale. Looking ahead, DASH sees a lot of runway ahead of it as it is in less than 10% of US restaurants.
- In terms of the macro view, DASH explained that food is a category that everyone needs. Granted, it does not need to be delivery, but DASH argues that it is also seeing a macro trend toward greater convenience which helps to push back on that. Also, there are just more opportunities as people tend to consume food 20-25 times per week. DASH is just not seeing the same headwinds that other categories in commerce are seeing.
- DASH was asked about the GLP-1 weight loss drug trend. The company is not seeing any immediate or noticeable impact. It is more focused on product velocity, product quality and execution. Also, DASH did not address DPZ's recent deal with Uber Eats. We thought the company might say something about that, but it was not a topic on the call.
Overall, this was an excellent report from DASH. We think sentiment was running pretty low heading into this report. The stock has been drifting lower since its $92.61 high in late July. It closed yesterday just under $76. There have been concerns about restaurant traffic slowing as consumers watch their spend. Plus, DPZ has been vocal about consumers shying away from paying delivery fees. As such, the strong upside took investors by surprise and makes the case that perhaps DASH is handling macro pressures better than most.
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