Market Snapshot
briefing.com
| Dow | 38001.81 | +138.01 | (0.36%) | | Nasdaq | 15360.29 | +49.32 | (0.32%) | | SP 500 | 4850.43 | +10.62 | (0.22%) | | 10-yr Note | +25/32 | 4.09 |
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| | NYSE | Adv 2123 | Dec 676 | Vol 1.0 bln | | Nasdaq | Adv 2961 | Dec 1317 | Vol 5.4 bln |
Industry Watch
| Strong: Real Estate, Financials, Industrials, Information Technology, Health Care, Materials |
| | Weak: Consumer Staples, Consumer Discretionary, Utilities |
Moving the Market
-- Broadening out of gains
-- Upside momentum after record close for S&P 500
-- Drop in market rates
-- Waiting on key events this week, including a pick up in earnings reporting and potentially market-moving economic data like the December Personal Income and Spending report
| Closing Summary
22-Jan-24 16:30 ET
Dow +138.01 at 38001.81, Nasdaq +49.32 at 15360.29, S&P +10.62 at 4850.43
[BRIEFING.COM] The stock market closed with gains, which leaves the S&P 500 at a fresh all-time high. Carryover upward momentum following last week's pleasing finish acted as support for the market today, along with a drop in Treasury yields.
The 2-yr note yield declined three basis points today to 4.38% and the 10-yr note yield fell five basis points to 4.09%.
Market participants were also waiting on key events this week, including a pick up in earnings reporting and some potentially market-moving economic data. The first reading of Q4 GDP will be released on Thursday, and the December Personal Income and Spending report will be released on Friday, which features the Fed's preferred inflation measure in the form of the PCE Price Indexes.
Today's gains were more broad-based compared to last week, which featured the outperformance of tech stocks. Advancers had a 7-to-2 lead over decliners at the NYSE and a better than 2-to-1 lead at the Nasdaq. The Invesco S&P 500 Equal Weight ETF (RSP) gained 0.5% versus a 0.2% gain in the market-cap weighted S&P 500.
Meanwhile, losses in Meta Platforms (META 381.78, -1.67, -0.4%), Amazon.com (AMZN 154.78, -0.56, -0.4%), Microsoft (MSFT 396.51, -2.16, -0.5%), and Alphabet (GOOG 147.71, -0.26, -0.2%), likely tied to profit-taking activity after a strong start to the year, limited index performance somewhat. Tesla (TSLA 208.80, -3.39, -1.6%) was another influential laggard, but shares are down 16.0% for year.
Gains in Apple (AAPL 193.89, +2.33, +1.2%) and NVIDIA (NVDA 596.54, +1.63, +0.3%) provided some offsetting support to the broader market, and propelled the S&P 500 information technology sector (+0.4%) toward the top of the leaderboard today.
Other top performing sectors included industrials (+0.7%), real estate (+0.4%), and financials (+0.4%). The consumer discretionary sector (-0.5%) saw the steepest decline due to losses in AMZN and TSLA.
Separately, shares of Archer-Daniels (ADM 51.69, -16.50, -24.2%) plunged today after news that its Nutrition segment accounting practices are being reviewed, and its CFO was placed on leave.
- S&P 500: +1.7%
- Nasdaq Composite: +2.3%
- Dow Jones Industrial Average: +0.8%
- S&P Midcap 400: -0.4%
- Russell 2000: -2.2%
Reviewing today's economic data:
- December Leading Economic Index -0.1% (Briefing.com consensus -0.3%); Prior -0.5%
Looking ahead, there is no US economic data of note on Tuesday.
Treasuries settle with gains
22-Jan-24 15:35 ET
Dow +146.13 at 38009.93, Nasdaq +69.33 at 15380.30, S&P +16.65 at 4856.46
[BRIEFING.COM] The market is moving slightly higher heading into the close with no specific catalyst to account for the move.
The 2-yr note yield declined three basis points today to 4.38% and the 10-yr note yield fell five basis points to 4.09%.
Separately, WTI crude oil futures jumped 2.2% today to $74.81/bbl.
UAL rolled over ahead of earnings after the close; Some notable names reporting earnings tomorrow
22-Jan-24 15:00 ET
Dow +105.75 at 37969.55, Nasdaq +45.14 at 15356.11, S&P +10.60 at 4850.41
[BRIEFING.COM] The three major indices traded in narrow ranges in recent action.
United Airlines (UAL 38.32, -0.49, -1.3%) was trading up earlier, but has rolled over ahead of its earnings report after today's close. Looking ahead, the earnings reporting calendar picks up tomorrow with Verizon (VZ), Procter & Gamble (PG), Johnson & Johnson (JNJ), RTX (RTX), Lockheed Martin (LMT), General Electric (GE), PACCAR (PCAR), 3M (MMM), D.R. Horton (DHI), Halliburton (HAL), and others reporting quarterly results ahead of the open.
Separately, the 10-yr note yield has moved lower in recent action. It was at 4.11% a short time ago, but sits at 4.09% now, which is six basis points lower than Friday.
Western Digital rides Morgan Stanley "Top Pick" call to solid gains, Gilead dips on trial NSCLC miss
22-Jan-24 14:30 ET
Dow +106.66 at 37970.46, Nasdaq +42.38 at 15353.35, S&P +11.55 at 4851.36
[BRIEFING.COM] The S&P 500 (+0.24%) is in last place with both the Nasdaq and DJIA tied with gains of +0.28% apiece.
Elsewhere, S&P 500 constituents Western Digital (WDC 57.41, +2.64, +4.82%), Synopsys (SNPS 538.18, +20.87, +4.03%), and V.F. Corp (VFC 16.16, +0.45, +2.86%) pepper the top of today's standings. WDC moves higher after a analyst comments out of Morgan Stanley that they had replaced NVDA with WDC as their Top Pick in semis, while VFC continues its recent rally off two-month lows despite news out Friday morning of a cyber incident.
Meanwhile, Gilead Sciences (GILD 78.19, -9.10, -10.43%) sees notable losses on Monday, underperforming after announcing its PHASE 3 EVOKE-01 study in NSCLC did not meet its primary endpoint.
Gold pressured by equities to begin the week
22-Jan-24 14:00 ET
Dow +121.94 at 37985.74, Nasdaq +64.98 at 15375.95, S&P +15.37 at 4855.18
[BRIEFING.COM] With about two hours to go on Monday the tech-heavy Nasdaq Composite (+0.42%) is leading the gains among the major averages.
Gold futures settled $7.10 lower (-0.3%) to $2,022.20/oz, pressured by a continued rise in equities.
Meanwhile, the U.S. Dollar Index is up less than +0.1% to $103.31.
Page One
Last Updated: 22-Jan-24 09:05 ET | Archive
Gains continue after record high close
The S&P 500 futures are up 15 points and are trading 0.3% above fair value, the Nasdaq 100 futures are up 85 points and are trading 0.5% above fair value, and the Dow Jones Industrial Average futures are up 107 points and are trading 0.3% above fair value.
Pre-open action has the market set to keep climbing after the record close on Friday for the S&P 500. Ongoing strength in tech stocks has supported the positive bias this morning in front of a busy week of earnings news and economic data.
United Airlines (UAL), Verizon (VZ), Procter & Gamble (PG), Netflix (NFLX), Tesla (TSLA), Intel (INTC), and Caterpillar (CAT) are among the notable names reporting earnings this week.
On the economic calendar, the first reading of Q4 GDP will be released on Thursday, followed by the December Personal Income and Spending report on Friday, which features the Fed's preferred inflation measure in the form of the PCE Price Indexes. Today's economic data is limited to the December Leading Economic Index at 10:00 ET.
A drop in market rates has also acted as support for equities this morning. The 10-yr note yield is down six basis points to 4.09% and the 2-yr note yield is down three basis points to 4.38%.
In other news, Houthi rebels are seeking more weapons from Iran, according to Politico, but this morning's price action does not indicate that the market is too worried about a larger issue in the Middle East. WTI crude oil futures are up only 0.3% to $73.48/bbl.
Separately, the People's Bank of China made no changes to its one-year and five-year loan prime rates, but there was ongoing speculation that some easing will be announced.
Celsius is reenergized on plans to officially branch out to additional overseas markets (CELH)
Energy drink maker Celsius (CELH +3%) is reenergized today after announcing its international expansion through its previously established PepsiCo (PEP) partnership. CELH is penetrating new markets across Canada, the U.K., and Ireland (partnering with Suntory Beverage & Food for the U.K. and Ireland rollout). Shares just endured an over -12% correction last Friday following an analyst downgrade. However, when zooming out, CELH is still up over +50% in the past 52 weeks, underscoring sustained excitement over accelerating growth, overseas expansion plans, and a sturdy position within the fitness energy drink category.
- After proving its dominance within the U.S., the international scene was CELH's clear trajectory to maintain such impressive growth. For perspective, CELH has only posted three quarters of growth below 100% yr/yr over the past two years, its lightest period registering "just" 70.7%. Most recently, in Q3, CELH doubled its top line yr/yr, assisted by unwavering growth across all channels, particularly within the club retail channel.
- CELH already has international exposure but is tiny compared to its U.S. business, comprising just 4% of Q3 revs. Still, it grew nicely, up approximately 56% yr/yr in Q3, fueled by innovation launches and better brand awareness. CELH did this without PEP, which is why its partnership with the beverage and snack food behemoth is so alluring.
- During its Q3 conference call, management commented that the first international market it would target under the PEP umbrella was Canada, branching out to a handful of additional countries throughout this year only to build upon that momentum over the next several years.
CELH's ambitious overseas plans may come with their share of hiccups, however. In the U.S., CELH's competition is intense, with the energy drink category filled with brands from Monster Beverage (MNST) to names under the Coca-Cola (KO) and PEP banners. While CELH has done a stellar job taking its slice of the energy drink pie in the U.S., each international market boasts its own portfolio of energy drink names, some of which, such as in the case of MNST, are well-established brands that could be difficult to displace. Also, cultural tastes could force CELH to pour additional capital into developing specific flavors for each market.
Still, having PEP's distribution expertise at its side makes a more aggressive overseas expansion less daunting for CELH. We have mentioned how international markets present the next meaningful opportunity for CELH over the past year. Now that it is finally here, this year will be the ultimate test to see whether CELH can genuinely make that leap that has proven challenging for many beverage makers over the years.
Archer-Daniels under pressure as its Nutrition segment accounting practices are being reviewed (ADM)
ADM (ADM -22%) is under pressure today after the food giant placed CFO Vikram Luthar on administrative leave, effective immediately. It also lowered its FY23 EPS outlook to "above $6.90" from "above $7.00" prior guidance. ADM also said it will delay its Q4 earnings report and conference call as it deals with this matter. ADM typically reports Q4 results in late January, but that will not be the case this year. Also, several sell side firms have downgraded ADM this morning.
- ADM is among the world's largest producers of food ingredients, from staple foods, such as flour, oils, and sweeteners, to innovative alternatives like plant-based meat and dairy. ADM is also a major player in animal nutrition, offering a range of ingredients and flavors.
- The company provided some but not a lot of details on why its CFO was placed on leave. ADM says there is an ongoing investigation being conducted by outside counsel for ADM and the Board's Audit Committee regarding certain accounting practices and procedures with respect to ADM's Nutrition reporting segment, including as related to certain intersegment transactions.
- This looks to be an issue with its Nutrition segment only. ADM expects Q4 results for its AS&O and Carbohydrate Solutions segments to be in-line with prior guidance, but due to the ongoing investigation, ADM has withdrawn all of its forward-looking outlook for the Nutrition segment.
- ADM's investigation was initiated in response to its receipt of a voluntary document request by the SEC. ADM is cooperating with the SEC. The Board said it takes these matters very seriously and will work with ADM's advisors to identify the best path forward. Ismael Roig has been named interim CFO. He most recently served both as President of EMEA at ADM and as President of Animal Nutrition.
Overall, it's clear investors have concerns. While not a lot of detail is provided, whenever a company is reviewing accounting practices, that is worrisome. Couple that with the fact that the SEC is involved and management felt the need put the CFO on leave, that is a recipe for concern.
The stock had already been under pressure in recent months as commodity prices fell in 2023 and ADM posted three consecutive top line misses in Q1-Q3. These situations are always difficult because they are hard to predict what will happen. But investors are clearly concerned by today's news.
Macy's tells investor group it is not for sale; shares climb on the news (M)
Macy's (M +1%) tells Arkhouse Management and its partner that it is not for sale, rejecting the organization's $5.8 bln bid to take the department store retailer private. Early last month, WSJ broke the news that an investor group of Arkhouse Management and Brigade Capital Management offered $5.8 bln to gobble up Macy's, an approximately 21% premium to the previous trading day's closing share price. The news shot shares of Macy's nearly +20% higher. However, the stock never returned to those levels as doubt over the deal actually closing started creeping in, particularly given Macy's history with takeover offers eventually breaking down.
Arkhouse is a real estate-focused firm seeking undervalued or distressed property. Macy's certainly fits into the latter category, as discretionary spending remains suppressed during the current inflationary-ridden environment. Management has repeatedly expressed unease over the softening consumer demand landscape. Other department stores, such as Kohl's (KSS), have shared similar sentiments in recent quarters.
However, despite the premium bid, Macy's is uninterested, commenting today that the information provided by the investor group failed to address the board's concerns regarding their ability to finance the proposed transaction. While additional reports surfaced after Arkhouse's original bid tossed out other possible bidders for Macy's, such as Sycamore Partners, it is unconfirmed that other unsolicited bidders remain. Macy's did add in its letter to the investor group that it would still be open to opportunities should it have anything new to share.
What is next for Macy's?
- Although rejected for now, Arkhouse and Brigade Capital could up the ante. When the group's original bid was first announced, we commented that part of why shares of Macy's were trading so close to the offer price could stem from speculation that the investor group would have to increase their bid if they truly wanted to ink a deal with Macy's.
- Outside of Arkhouse's bid, Macy's could still entertain other future candidates. Although the retail environment faces adversity, Macy's still commands a lucrative real estate portfolio, owning 316 of its 783 total locations as of last year.
- Macy's can shift focus to improving the components of its business that have been showing success despite the challenging landscape. For instance, Backstage, Macy's off-price division, similar to Nordstrom's (JWN) Nordstrom Rack banner, has been crushing it lately, exceeding full-line stores by 720 bps last quarter. Macy's may also focus on a key growth vector: its small format stores, roughly a fifth the size of its full-line stores.
Even though Macy's rejected Arkhouse and its partner's bid, it would not be surprising to see the company eventually agree to a buyout with Arkhouse or from a different investment firm. Department stores are struggling right now -- Macy's is reportedly amid further restructuring, eliminating around 3.5% of its workforce -- and their future is not exactly filled with sunny skies as e-commerce continues to create turbulence for the physical retail environment.
iRobot plummets after reports suggesting the EU Commission will block its merger with AMZN (IRBT)
iRobot (IRBT -27%) hit a snag yesterday after the close following a WSJ article reporting that the European Commission intends to block Amazon's (AMZN) previously announced $1.7 bln takeover of the Roomba vacuum maker. Shares of IRBT are sinking on the news, hitting decade lows.
WSJ mentioned that Commission officials told AMZN executives that the deal would likely be rejected, harking back to concerns the regulatory body expressed late last year regarding competition restriction among other robot vacuum cleaner manufacturers. Specifically, AMZN could simply not allow iRobot rivals to list their products on its marketplace, thus blocking consumers' access to compare products on one platform.
Objections to the European Commission's reasoning for blocking the merger aside, AMZN may have already grown cold toward its proposed acquisition, first announced in August 2022, given the amount of red tape associated with the transaction. For example, it was reported that AMZN skipped a settlement offer with the European Commission earlier this month.
While the possibility of the EU's anti-trust arm blocking the AMZN/IRBT merger is having a negligible impact on AMZN shares, likely due to the relatively small size of the deal, investors are viewing it as a death knell for IRBT.
- When AMZN announced its agreement to acquire IRBT, the robot vacuum maker was struggling, registering sharp quarterly revenue drawdowns as pandemic-induced tailwinds dwindled. Since the announcement, growth has continued to fall, recently declining over 33% yr/yr to $186.18 mln, markedly below pre-pandemic levels of around $250.00 mln.
- Without the AMZN lifeline, IRBT's future is now highly uncertain. Exacerbating the company's woes is a tumultuous economic environment rife with inflation weighing heavily on the end consumer, leading to a meaningful pullback in discretionary spending.
With how many internet-of-things (IoT) devices are under AMZN's control, from its Echo assistant device to the Ring doorbell, acquiring a robotically controlled vacuum fit nicely. However, AMZN was likely aware of the regulatory backlash given the abundance of products acquiring data on households it already amassed. The U.K. did clear the deal last year, while the U.S. FTC is still investigating the merger, but it was clear from around March of last year, given their comments, that the EU would pose a high hurdle. The European Commission has until February 14 to reject or approve the merger officially. We anticipate a volatile backdrop for IRBT until that time.
Wayfair furnishing some strong gains after announcing another major workforce reduction plan (W)
Online furniture and home decor company Wayfair (W) has been no stranger to cost-cutting and workforce reduction initiatives over the past couple of years and the company announced another major restructuring move this morning. After eliminating 1,750 positions one year ago, Wayfair is now laying off approximately 1,650 more employees, or 13% of its workforce, amid a sluggish sales environment for home furnishings.
- The stock is reacting positively to the news since the workforce reduction will deliver annualized cost savings of more than $280 mln. In turn, Wayfair's profitability outlook for 2024 has just improved, even if revenue growth remains subdued.
- In fact, CEO Niraj Shah commented that in a hypothetical flat revenue environment, the company would now be positioned to generate over $600 mln in adjusted EBITDA in 2024, well above expectations. For some context, Wayfair generated adjusted EBITDA of $214 mln for the nine months ended September 30, 2023, which is a vast improvement over the ($345) mln in the year-earlier period.
- Restructuring actions have played a key role in Wayfair's profitability turnaround as operating expenses declined by 11% in Q3, enabling adjusted EBITDA to swing to a positive $100 mln from ($124) mln in the year-earlier period. However, greater efficiencies within its supply chain and a more favorable merchandise mix have also helped to improve margins. Last quarter, gross margin expanded by 210 bps yr/yr to 31.1%.
- The story hasn't been as upbeat in regard to demand, and we presume that conditions haven't materially improved since the end of Q3. During Q3, average order value (AOV) slid by nearly 9% to $297 as customers reined in spending on home decor and home improvement projects. The company forecasted that AOV would experience further compression in Q4, while guiding for revenue to be flat to up low-single digits for Q4, further disappointing investors.
The main takeaway is that this next round of restructuring has further enhanced Wayfair's profitability outlook, insulating the company's bottom-line from a prolonged slump in category demand.
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