Market Snapshot
briefing.com
| Dow | 35390.15 | +117.12 | (0.33%) | | Nasdaq | 14250.86 | -15.00 | (-0.11%) | | SP 500 | 4559.34 | +2.72 | (0.06%) | | 10-yr Note | -5/32 | 4.47 |
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| | NYSE | Adv 2037 | Dec 732 | Vol 376 mln | | Nasdaq | Adv 2840 | Dec 1239 | Vol 2.53 bln |
Industry Watch
| Strong: energy, materials, health care, consumer staples, industrials, financials, real estate, utilities |
| | Weak: communication services, information technology |
Moving the Market
--Lack of conviction on Friday after Thanksgiving
--NVIDIA slips on report it is going to delay its China AI chip
--Relative weakness in mega-cap space
--Early close at 1:00 p.m. ET |
Closing Stock Market Summary
24-Nov-23 13:25 ET
Dow +117.12 at 35390.15, Nasdaq -15.00 at 14250.86, S&P +2.72 at 4559.34
[BRIEFING.COM] If you wanted some excitement today, the stock market was not the place to be. It traded in a relatively listless fashion on very light volume, lacking the interest, the vigor, and the slate of news catalysts that are often seen during a normal trading session.
This wasn't a normal session by virtue of the fact that the stock market closed at 1:00 p.m. ET, although if you were trading the SPDR S&P 500 ETF (SPY), you might have been questioning most of the session if the market had opened at all.
The market-cap weighted S&P 500 traded effectively in a seven-point range during today's session, harnessed by the relative weakness of the mega-cap stocks that offset the gains seen in other names. To wit: the S&P 500 Equal-Weight ETF (RSP) finished the day 0.3% higher while the Vanguard Mega-Cap Growth ETF (MGK) finished the day 0.3% lower. The market-cap weighted S&P 500 ended the session up fractionally.
NVIDIA (NVDA 477.76, -9.40, -1.9%) was in the spotlight throughout the abbreviated session, coming under some pressure after Reuters reported the company is delaying its China AI chip. Apple (AAPL 189.97, -1.34, -0.7%) also felt the sting of a Reuters report that suggested it saw a year-over-year decline in smartphone sales during China's Singles Day while competitors Huawei and Xiaomi enjoyed strong, double-digit growth.
Those losses contributed to the underperformance of the Nasdaq along with the losses seen in Alphabet (GOOG 138.22, -1.80, -1.3%), Meta Platforms (META 338.23, -3.26, -0.9%), and Microsoft (MSFT 377.43, -0.42, -0.1%).
Other stocks in the spotlight today included the retail stocks, not so much for their performance, but because today is Black Friday -- the official start to the holiday shopping season. The SDPR S&P Retail ETF (XRT) closed with a 0.6% gain.
S&P 500 sector performance was mostly positive. Nine sectors closed with gains ranging from 0.1% to 0.5%. The two losing sectors were communication services (-0.7%) and information technology (-0.3%).
Advancers outpaced decliners by a better than 2-to-1 margin at the NYSE and the Nasdaq.
- Nasdaq Composite: +36.2% YTD
- S&P 500: +18.7% YTD
- Dow Jones Industrial Average: +6.7% YTD
- S&P Midcap 400: +5.3% YTD
- Russell 2000: +2.6% YTD
Reviewing today's economic data:
- The preliminary November S&P Global US Manufacturing PMI checked in at 49.4 versus the final reading of 50.0 for October.
- The preliminary November S&P Global US Services PMI checked in at 50.8 versus the final reading of 50.6 for October.
Monday's economic calendar features:
- 10:00 ET: October New Home Sales (Briefing.com consensus 720,000; Prior 759,000)
A look at next week
24-Nov-23 12:30 ET
Dow +82.39 at 35355.42, Nasdaq -20.42 at 14245.44, S&P -1.03 at 4555.59
[BRIEFING.COM] The market, as defined by the market-cap weighted S&P 500, hasn't moved much today. That shouldn't bother anyone knowing that it has moved a lot since late October. Entering today, the S&P 500 was up 11.0% from its October 27 low.
Today's lack of movement can be ascribed to a general lack of trading interest befitting the day after Thanksgiving.
Looking at next week, the earnings calendar will feature some high-profile earnings reporters, namely Zscaler (ZS), CrowdStrike (CRWD), Hewlett Packard Enterprise (HPE), Intuit (INTU), NetApp (NTAP), Workday (WDAY), Dollar Tree (DLTR), Foot Locker (FL), Five Below (FIVE), Okta (OKTA), PVH (PVH), Salesforce (CRM), and Snowflake (SNOW).
The economic calendar, meanwhile, will feature releases that include October New Home Sales, November Consumer Confidence, the second estimate for Q3 GDP, October Personal Income and Spending, which will include the PCE Price Indexes, Initial Jobless Claims, and the November ISM Manufacturing Index.
A Dow dip
24-Nov-23 12:00 ET
Dow +65.22 at 35338.25, Nasdaq -18.80 at 14247.06, S&P -0.33 at 4556.29
[BRIEFING.COM] The Dow Jones Industrial Average has seen about half of its earlier gains taken away without any news catalyst to account for the pullback. The retreat has been a function of some of the higher-priced stocks in the price-weighted average fading away from higher levels.
Some standouts in that respect include Goldman Sachs (GS 338.23, -0.42, -0.1%) and Boeing (BA 219.14, -0.77, -0.4%).
Overall, the broader market is little changed -- both from the last update and for the entire session.
Retailers in the spotlight
24-Nov-23 11:30 ET
Dow +95.82 at 35368.85, Nasdaq -31.67 at 14234.19, S&P -0.51 at 4556.11
[BRIEFING.COM] The major indices are respecting some tight trading ranges so far, but with volume as light as it is, one still needs to respect the possibility of quick swings in either direction.
With today being Black Friday, the business media is naturally pre-occupied with reports about the holiday shopping season. Those reports tend to emphasize that consumers will be increasingly price-conscious this year, which is code for hoping to see big discounts and promotions to whet their buying appetite.
How that ends up impacting retailers' profits remains to be seen, but that mystery will come to light in the February-March timeframe when retailers report their quarterly results. For today, the retail stocks are sporting a modestly positive disposition, evidenced by a 0.3% gain in the SPDR S&P Retail ETF (XRT).
Meek mega caps
24-Nov-23 11:00 ET
Dow +116.33 at 35389.36, Nasdaq -29.51 at 14236.35, S&P +1.07 at 4557.69
[BRIEFING.COM] The stock market continues with its mixed disposition at the index level; however, things beneath the surface appear to be a bit more one-sided in a favorable way.
Advancers lead decliners by a better than 2-to-1 margin at the NYSE and the Nasdaq.
That skew is reflected nicely in the Invesco S&P 500 Equal-Weight ETF (RSP) being up 0.4%. Nonetheless, the broader buying efforts haven't translated as well for the market-cap weighted S&P 500, which is coping with some relative weakness in the mega-cap stocks today. The Vanguard Mega-Cap Growth ETF (MGK) is down 0.4%.
Key laggards on that front include Alphabet (GOOG 137.55, -2.47, -1.8%), NVIDIA (NVDA 481.14, -6.02, -1.2%), Meta Platforms (META 337.45, -4.04, -1.2%), Apple (AAPL 189.45, -1.86, -1.0%), Amazon.com (AMZN 145.77, -0.94, -0.6%), and Microsoft (MSFT 375.64, -2.21, -0.6%).
Page One
Last Updated: 24-Nov-23 08:54 ET | Archive
Conviction lacking on the Friday after Thanksgiving
Today is Friday -- the Friday after Thanksgiving. That means participation will be limited and trading volume should be extremely light. It also means the stock market will close early at 1:00 p.m. ET.
Of course, the Friday after Thanksgiving also means it is Black Friday, which is why the business media are going to be paying a lot of attention to the retail industry.
The market has already paid its fair share of attention to the retail stocks, many of which have reported quarterly results and have provided guidance in recent weeks. Accordingly, it is a bit of a mystery in terms of how the retail stocks will fare today with the news spotlight cast on them.
What we know at the moment is that the equity futures market is looking like the Friday after Thanksgiving, which is to say that it is not being governed with a great deal of conviction.
Currently, the S&P 500 futures are up two points and are trading fractionally above fair value, the Nasdaq 100 futures are flat and are trading in-line with fair value, and the Dow Jones Industrial Average futures are up 45 points and are trading 0.1% above fair value.
NVIDIA (NVDA), which was a focal point in Wednesday's trading following its earnings report, is a focal point again today with Reuters reporting the company is going to delay its China AI chip. Shares of NVDA are down 0.5% in pre-market action.
That weakness is weighing on the broader market, but it hasn't been a market mover per se.
There is little conviction this morning, which runs counter to the conviction shown at dining tables across the country yesterday and what should be seen today in shopping locales across the country.
Elsewhere, Israel and Hamas are expected to begin a four-day pause in fighting today as part of a hostage/prisoner release deal, Japan reported a 3.3% year-over-year increase in CPI for October, up from 3.0% in September, and Turkey's central bank raised its policy rate 500 basis points to 40.0%.
The economic releases on this Friday after Thanksgiving will be limited to the preliminary November S&P Global US Manufacturing PMI and S&P Global US Services PMI reports at 9:45 a.m. ET.
The 2-yr note yield is up four basis points to 4.94% and the 10-yr note yield is up six basis points to 4.48% in another market that will be thinly traded on this Friday after Thanksgiving.
-- Patrick J. O'Hare, Briefing.com
Tesla keeping its charge today despite expanding worker strikes in Sweden (TSLA)
Between Elon Musk's controversial comments on his social media platform, X, and now worker strikes in Sweden, it's been a bumpy ride for Tesla (TSLA) this week.
- Due to Musk's hardline stance against allowing his workers to unionize, TSLA has avoided the UAW strikes that have afflicted Ford Motor (F) and General Motors (GM). However, he won't be able to avoid the fight that is brewing in Sweden.
- After refusing to sign a collective bargaining agreement with IF Metall -- a union with more than 300,000 workers -- the union decided to go on strike.
- So far, investors are taking the news in stride, but as the strike continues to spread across car dealerships and mechanics, TSLA could begin to feel a financial impact.
- From a financial standpoint, what's most concerning is that the EV maker's margins, which are already strained from price cuts, could take another hit if its forced to ramp wages significantly higher.
- For some context, TSLA's gross margin sank by 719 bps yr/yr in Q3 to 17.9%, causing EPS to decline by 37% to $0.66.
- Compounding the issue is that demand is also waning, including in China, TSLA's second largest market. Specifically, sales dipped by 2.6% in October in China.
All in all, news of the worker strike in Sweden adds another wrench to TSLA's story. Perhaps the biggest fear is that the strikes will spread to other countries, including Germany, where TSLA recently opened a new plant. While the stock is holding up today, it's worth noting that volume is very light today, making TSLA a stock to watch next week when more traders are active
NVIDIA slips after Reuters reports it is delaying launching U.S.-compliant AI chips to China (NVDA)
Despite delivering another exceptional earnings report earlier this week, NVIDIA (NVDA -1%) shares have been encountering minor turbulence. While the stock briefly traded above its flatline on Wednesday following upbeat Q3 (Oct) numbers, it finished the day roughly -2.5% lower. This downward momentum is carrying into one of the lightest trading volume days of the year following a Reuters report that NVDA is delaying launching its China-focused AI chips until 1Q24. Recall recent U.S. export restrictions forced NVDA to design new export-compliant chips, some of which required licenses and others that fell below computing requirements and could be shipped without a license. The H20 chip the Reuters report refers to does not appear to require a license.
Today's report comes as a bit of a surprise as NVDA just held its Q3 conference call on Tuesday after the close and did not bring up this possible delay. Instead, management mentioned that its products focused on circumventing U.S. restrictions would become available in the coming months. Although, NVDA stated that these products would likely not contribute a material percentage of Q4 (Jan) revs.
While today's reported delay is minimal, there are a couple of reasons why it could represent a more significant concern.
- China, alongside a few outlying Middle Eastern countries and Vietnam, is an important market for NVDA, representing around 20-25% of its Data Center revenue, translating to approximately 16-20% of the company's overall revenue. While NVDA's Q4 revenue growth guidance of +230% yr/yr marked an acceleration from the +205% delivered in Q3, management mentioned that it could have been even higher if not for U.S. export restrictions. We noted on Wednesday that this setback may have been adding to the sell-the-news reaction.
- Delays could allow China-domiciled tech giant Huawei to make further inroads from a competitive standpoint. Huawei has been developing AI chips for nearly five years, recently unveiling a chip designed for AI purposes touting numbers ahead of NVDA's. However, NVDA still dominates the market, with Huawei still struggling to steal share despite its impressive AI chips. An underlying factor has been NVDA's first-mover advantage, boasting a software ecosystem used widely among developers. Still, this competitive landscape could begin tilting in Huawei's favor, especially if further NVDA delays continue or the U.S. tightens restrictions.
NVDA's modest move lower today likely branched from the surprise of a delay in U.S.-compliant chips shipping to China rather than the delay itself, especially since management could have brought this up during its conference call on Tuesday. NVDA's Q4 guidance still illustrated that sustained explosive AI demand would more than offset the damage from U.S. export curbs. Whether this can continue if delays become more common is where uncertainty lies. However, with Reuters reporting that NVDA is still expected to ship its China-designed chips by March of next year, today's news is likely a minor hiccup on NVDA's journey to dominate the global generative AI market.
HP Inc. computes some nice gains as it reports its first upside revenue result in four quarters(HPQ)
HP Inc. (HPQ +3%) is computing some nice gains following its Q4 (Oct) earnings report last night. The headline numbers were decent but not great with in-line EPS and the mid-point of Q1 EPS guidance being below expectations. Revenue fell 6.5% yr/yr but grew 5% sequentially to $13.82 bln. This was slightly better than analyst expectations. We think investors are focusing on the top line number, even if it was small upside, because it breaks a streak of three consecutive revenue misses.
- HPQ says its markets largely behaved as expected in Q4. And its baseline scenario of market stabilization across FY24 has not changed. Its Consumer segment showed a more typical seasonal uptick. Commercial customers remain cautious, but HPQ saw some signs of stabilization, especially in Personal Systems. HPQ continues to see demand weakness in China due to challenging economic conditions.
- On the Personal Systems (PS) side, revenue fell 8% yr/yr (-7% CC) to $9.4 bln with 6.7% operating margin. PS revenue rose 5% sequentially, reflecting seasonal strength ahead of the holiday season. Total units were flat on a net basis, with Commercial down 6% and Consumer up 9%. Commercial revenue declines on a yr/yr basis stabilized sequentially, even as Commercial customers remain cautious. Consumer revenue was down 1%, and Commercial was down 11%. Competitive pricing pressures eased somewhat in Q4, resulting in increased ASPs. Its channel inventory is back to normalized levels.
- On the Print side, revenue fell 3% yr/yr (-2% CC) to $4.4 bln with 18.9% operating margin. Print revenue grew 4% sequentially, while units were flat. HPQ remains focused on regaining profitable Print share and improving its performance in office, and HPQ said it's starting to see the impact of these efforts, with solid share recovery in Americas, parts of Europe, and China quarter-over-quarter.
- Looking ahead to FY24, HPQ continues to assume the market will stabilize. And in Q1, HPQ expects the economic and demand environment to remain challenging but stable. As it continues to manage costs aggressively, HPQ expects operating margins for both PS and Print to be toward the high end of the respective target ranges for the quarter.
Overall, this was a solid quarter for HPQ. The numbers were not great and the Q1 guidance was a bit tepid. However, we think investors are focusing on HPQ's first top line beat in four quarters. Also, the company reaffirmed FY24 EPS guidance and, more importantly, reaffirmed its view that its markets should stabilize in FY24. Also, what struck us is that HPQ generally sounded a little more positive on this call than it had on its prior two calls. Basically, we think today's move in the stock is being driven by a better-than-feared sentiment. We think this report bodes well for Dell's (DELL) report next week.
Autodesk's designs on updated business model creating near-term headwinds (ADSK)
Computer-aided software provider Autodesk (ADSK) benefitted from larger-than-expected expansions of enterprise business agreements (EBAs) in Q3, fueling a top and bottom-line beat, but tepid guidance for Q1 and FY25 is weighing on the stock.
- Despite the high interest rate environment, ADSK saw growing momentum in its construction end market, especially among its larger customers. In fact, ADSK secured its largest ever EBA during the quarter and received record contributions from its construction and water verticals.
- However, when excluding the impact of that record-setting EBA, ADSK's underlying results don't look as strong. While remaining performance obligations (RPO) were up by 12% yr/yr, to $3.5 bln, RPO actually slightly decelerated from last quarter if that EBA is excluded.
- The qtr/qtr decrease is mainly due to a lower mix of multi-year contracts in FY24 compared to FY23 -- a trend that has been slowly building over the past couple of quarters.
- Relatedly, ADSK is in the process of transitioning from upfront to annual billings for multi-year contracts, thereby eliminating the upfront discount that it previously offered. This shift is negatively affecting ADSK's RPO and billings growth rates, as well as its free cash flow.
- Specifically, billings decreased by 11% to $1.2 bln, following a decline of 8% last quarter, while free cash flow plunged to $13 mln from $128 mln last quarter.
- Although this transition is creating a significant short-term headwind, ADSK believes that in the long run it will create more predictable and sustainable recurring revenue and cash flow.
- As this transition plays out, ADSK is also implementing a new transaction model for its indirect business across all of its major markets. In this new model, ADSK's partners will now provide a quote to customers, while the actual transaction still occurs directly between ADSK and the customer.
- This shift will add another layer to the near-term headwinds that are impacting ADSK's financials, but the optimization created by this transition is expected to boost revenue, operating income, and free cash flow over time.
- Beyond these business model shifts, macroeconomic headwinds are another factor behind ADSK's downside Q4 EPS guidance and tepid FY25 revenue growth forecast of about 9%+. In particular, demand from medium-sized customers is softening, while momentum in the media and entertainment vertical has also deteriorated.
Overall, there are many moving parts to consider, making for a complex story that market participants are trying to digest. The bottom line is that these changes to ADSK's business model will have a significant impact on its financials in the near-term, while at the same time, macroeconomic pressures are taking a toll on its smaller and medium-sized customers.
NVIDIA trades lower despite another huge beat-and-raise; seeing sell-the-news reaction (NVDA)
Nvidia (NVDA -3%) reported another monster quarter with huge EPS upside for Q3 (Oct). It also guided Q4 (Jan) revenue well above analyst expectations. All eyes were on its Data Center segment and NVDA did not disappoint.
- DC segment revenue jumped 279% yr/yr and 41% sequentially to a record $14.51 bln. The continued ramp of the NVIDIA HGX platform along with InfiniBand networking drove results. The company noted that some of the most exciting generative AI applications are built and run on NVIDIA, including Adobe Firefly, ChatGPT, Microsoft 365 co-pilot, CoAssist now assist with ServiceNow, and Zoom AI Companion.
- NVDA says that most major consumer Internet companies are racing to ramp-up generative AI deployment. Consumer Internet companies and enterprises were big growth drivers in Q3, comprising roughly half of Data Center revenue. Of note, NVDA says the enterprise wave of AI adoption is now beginning. Enterprise software companies, like Adobe, Databricks, Snowflake and ServiceNow are adding AI co-pilot and assistants to their platforms. Cloud service providers drove roughly the other half of Data Center revenue in OctQ as demand was strong from all hyperscale CSPs.
- An area to watch in Q4 will be China. The US govt recently announced a new set of export control regulations for China. NVDA's sales of some products to China and other affected countries are now subject to licensing requirements. This represents about 20-25% of DC segment revenue. NVDA expects sales to these destinations will decline significantly in Q4, but also expects sales will be more than offset by strong growth in other regions.
- Its next biggest segment is Gaming, which grew a robust 81% yr/yr and 15% sequentially to $2.86 bln, helped by strong demand during the back-to-school season. NVDA notes that Gaming has doubled relative to pre-COVID levels, even against the backdrop of lackluster PC demand. The number of games supporting NVDA's technologies has exploded, driving upgrade demand and attracting new buyers. In Q4, Gaming will likely decline sequentially as it's now more aligned with notebook seasonality.
- Finally, its Professional Visualization segment saw revs more than double yr/yr to $416 mln as it sees RTX being the workstation platform of choice for professional design, engineering and simulation. AI is emerging as a powerful demand driver. Automotive segment revenue rose just 4% yr/yr to $261 mln, primarily driven by continued growth in self-driving platforms.
Overall, this was another great quarter for NVDA. The company says the era of generative AI is taking off and that has been apparent in recent quarters. However, we are seeing a muted reaction in the shares following the report. We think a good report was likely priced in already. The stock has run about $100 thus far in November. Also, the expected big drop in China sales from the US export restrictions may be weighing on NVDA as well today.
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