Market Snapshot
Stock Market Update | Latest Stock Market News and Updates | Briefing.com
| Dow | 38109.43 | +60.30 | (0.16%) | | Nasdaq | 15455.37 | -55.13 | (-0.36%) | | SP 500 | 4890.97 | -3.19 | (-0.07%) | | 10-yr Note | -25/32 | 4.16 |
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| | NYSE | Adv 1588 | Dec 1163 | Vol 758 mln | | Nasdaq | Adv 2175 | Dec 2034 | Vol 4.5 bln |
Industry Watch
| Strong: Energy, Health Care, Consumer Discretionary, Communication Services, Consumer Staples, Utilities |
| | Weak: Information Technology, Real Estate, Industrials, Materials |
Moving the Market
-- Reacting to the December PCE Price Indexes, which validated the market's soft landing view
-- Treasury yields moving slightly higher in response to the data
-- Weakness in semiconductor stocks following disappointing guidance from Intel (INTC) and KLA Corporation (KLAC)
-- Broad, yet modest, buying activity elsewhere
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Closing Summary
26-Jan-24 16:25 ET
Dow +60.30 at 38109.43, Nasdaq -55.13 at 15455.37, S&P -3.19 at 4890.97
[BRIEFING.COM] The market saw mixed action at the index level on the final session of the week on below-average volume at the NYSE. Weakness in the semiconductor space and losses in some mega cap stocks weighed on the S&P 500 (-0.1%) and Nasdaq Composite (-0.4%) while the Dow Jones Industrial Average (+0.2%) and Russell 2000 (+0.1%) closed with slim gains.
The soft showing from semiconductor-related names followed disappointing guidance from Intel (INTC 43.65, -5.90, -11.9%) and KLA Corporation (KLAC 599.37, -42.32, -6.6%). The PHLX Semiconductor Index (SOX) dropped 2.9% today.
Also, the three weightiest S&P 500 constituents -- Microsoft (MSFT 403.93, -0.94, -0.2%), Apple (AAPL 192.19, -1.98, -1.0%), and NVIDIA (NVDA 610.31, -5.86, -1.0%) -- closed with declines and weighed over the broader market.
The S&P 500 also ran into resistance above the 4,900 level, again, which coincided with the major indices pulling back from session highs.
The overall vibe, though, was more positive as investors digested some pleasing data in terms of ongoing strength in the economy and cooling inflation. Advancers had a 4-to-3 lead over decliners at the NYSE and an 11-to-10 lead at the Nasdaq.
Namely, the December Personal Income and Spending report showed strong consumer spending while inflation moved closer to the Fed's 2.0% target. Pending home sales were also much stronger than expected in December.
A big earnings-related gain in American Express (AXP 201.43, +13.36, +7.1%) also supported an underlying positive bias today. This price action also contributed to the gain the S&P 500 financial sector (+0.3%). Other sectors that outperformed the index include the energy (+0.8%), health care (+0.6%), and consumer discretionary (+0.6%) sectors.
Meanwhile, the heavily-weighted information technology sector was the worst performer by a wide margin, dropping 1.1%.
Treasuries settled with losses in response to this morning's data. The 10-yr note yield rose three basis points to 4.16% and the 2-yr note yield rose four basis points to 4.36%.
- Nasdaq Composite: +3.0%
- S&P 500: +2.5%
- Dow Jones Industrial Average: +1.1%
- S&P Midcap 400: -0.6%
- Russell 2000: -2.4%
Reviewing today's economic data:
- Personal income increased 0.3% month-over-month in December, as expected, but personal spending increased a much stronger-than-expected 0.7% (Briefing.com consensus 0.4%). The inflation gauges were spot-on with expectations. The PCE Price Index was up 0.2% month-over-month and so was the core-PCE Price Index, which excludes food and energy. With the December changes, the PCE Price Index was up 2.6% year-over-year, unchanged from November, and the core PCE Price Index was up 2.9% -- the lowest since March 2021 -- versus 3.2% in November.
- The key takeaway from the report should be more Goldilocks than anything else: consumer spending is strong and core inflation, which the Fed is targeting, is moving toward the 2.0% target.
- Pending home sales jumped 8.3% in December (Briefing.com consensus 2.3%) following a revised 0.3% decline in November (from 0.0%).
Looking ahead, there is no US economic data of note on Monday.
Treasuries settle little changed from last Friday
26-Jan-24 15:35 ET
Dow +37.45 at 38086.58, Nasdaq -60.81 at 15449.69, S&P -5.02 at 4889.14
[BRIEFING.COM] The S&P 500 and Dow Jones Industrial Average are little changed from yesterday while the Nasdaq Composite sports a 0.4% decline.
The 10-yr note yield settled little changed from last week at 4.16%, which is one basis point higher than last week. The 2-yr note yield, meanwhile, dropped five basis points this week to 4.36%.
Looking ahead, there is no US economic data of note on Monday.
WTI crude oil futures settle higher
26-Jan-24 15:05 ET
Dow +76.74 at 38125.87, Nasdaq -35.38 at 15475.12, S&P +0.89 at 4895.05
[BRIEFING.COM] The market is trying to move higher with one hour left of trading this week. There is no specific catalyst to account for the recent improvement.
Looking ahead to next week, Alphabet (GOOG) and Microsoft (MSFT) report earnings after Tuesday's close, and Amazon.com (AMZN), Apple (AAPL), and Meta Platforms (META) report earnings after Wednesday's close.
Separately, WTI crude oil futures gained 0.9% today, settling at $78.04/bbl. On a related note, the S&P 500 energy sector (+0.5%) recovered from an earlier loss.
FICO, Teradyne underperforming in S&P 500 to close out the week
26-Jan-24 14:30 ET
Dow +21.01 at 38070.14, Nasdaq -60.05 at 15450.45, S&P -7.63 at 4886.53
[BRIEFING.COM] The S&P 500 (-0.16%) has moved mostly sideways over the prior half hour, still in second place among the major averages.
Elsewhere, S&P 500 constituents Fair Isaac (FICO 1215.55, -68.72, -5.35%), Teradyne (TER 105.57, -4.38, -3.98%), and Carnival (CCL 16.04, -0.43, -2.61%) show decent losses. FICO reported earnings, CCL warned of the impact to operations related to the ongoing conflict in the Red Sea.
Meanwhile, Bio-Rad Labs (BIO 331.42, +15.12, +4.78%) is near the top of the standings, probing three-month highs despite a dearth of corporate news.
Gold adds narrow session losses to modest weekly losses
26-Jan-24 14:00 ET
Dow +4.77 at 38053.90, Nasdaq -64.42 at 15446.08, S&P -8.67 at 4885.49
[BRIEFING.COM] The tech-heavy Nasdaq Composite (-0.42%) is near session lows with about two hours remaining on Friday.
Gold futures settled $less than $1 lower (down less than -0.1%) to $2,017.30/oz, ultimately ending down -0.6% this week as the market turned focus to next week's FOMC policy decision.
Meanwhile, the U.S. Dollar Index is down about -0.1% to $103.44.
American Express charges to record highs as resiliency of business shines through in Q4 report (AXP)
American Express' (AXP) resilience is on display today after the credit card company reported Q4 results that featured healthy spending metrics among its customer base and strong guidance for FY24, including an EPS outlook that handily exceeded expectations. The solid earnings report, which stands in contrast to Discover Financial Services' (DFS) disappointing results and guidance from last week, along with a 17% increase in the quarterly dividend, is pushing AXP shares to all-time highs.
- A key differentiating factor between AXP and DFS resides in the company's customer base. AXP tends to cater to a more affluent customer, as well as to corporate customers, helping to mitigate the impact of macroeconomic headwinds such as high interest rates and inflation.
- This is illustrated in AXP's healthy spending patterns, particularly within the travel and entertainment category. In Q4, spending on travel and entertainment increased by 9% yr/yr, outpacing a 6% increase in overall spending.
- Additionally, net write-offs and delinquency rates remain low for AXP, remaining below pre-pandemic levels. For DFS, the 30+ day delinquency rate across its portfolio increased again in Q4, rising by 115 bps yr/yr and 39 bps sequentially to 3.45%.
- AXP did fall a bit short of EPS and revenue estimates for Q4, making the stock's spike higher look a bit surprising at first glance. However, the cause for the shortfall was completely attributable to Argentina's currency devaluation, rather than from slower demand or poor execution.
- In fact, without the currency devaluation, CEO Stephen Squeri stated that AXP would have exceeded the quarterly expectations.
- One complaint that market participants have expressed about AXP in the past is that the company has ramped up marketing expenses in order to keep its cardholder growth rate steady. In turn, this has led to some recent earnings disappointments, including EPS misses in 1Q23 and 4Q22. This time around, though, AXP cut back on marketing expenses and consolidated expenses only increased by 5%, down a bit from 7% in both Q3 and Q2.
The main takeaway is that AXP's more affluent customer base continues to provide the company with a formidable competitive advantage, largely insulating it from the macroeconomic headwinds that are impacting its credit card competitors.
Western Digital pulls back a bit despite healthy beat-and-raise (WDC)
Western Digital (WDC -3%) is trading a bit lower following its Q2 (Dec) earnings report last night. At first blush, it looks great. The data storage giant reported a much narrower than expected loss. It also guided Q3 (Mar) EPS and revenue well ahead of analyst expectations. The problem seems to be that a good quarter was likely priced in already given the recent huge move in the stock. Also, peer Seagate (STX) was quite bullish on its call this week. We suspect we are seeing a sell-the-news reaction.
- The industry has been in a downturn. However, WDC was pretty positive at an investor conference last month. Its general point was that it felt the bottom is behind it in NAND and the recovery is on. WDC was also positive on last night's call, although maybe slightly less enthusiastic. However, we may just be nitpicking there.
- Flash revenue rose 7% sequentially to $1.67 bln as flash ASPs increased 10% on a blended basis. WDC said this was stronger than anticipated entering the quarter. Bit shipments decreased 2% after record shipments in the prior quarter. HDD revenue rose 14% sequentially to $1.37 bln as total exabyte shipments increased 14% and average price per unit increased 9% to $122.
- By market segment, Cloud (35% of revs) rose 23% sequentially to $1.07 bln due to higher nearline shipments to data center customers and better nearline pricing. HDD Cloud revenue increased yr/yr for the first time in six quarters. Client (37% of revs) revenue came in at $1.12 bln, down 2% sequentially as an increase in flash ASP was more than offset by a decline in flash bit shipments. Consumer (28%) rose 15% sequentially to $839 mln primarily due to seasonal strength in flash bit shipments.
- WDC said it is seeing a recovery in both flash and HDD markets. Generative AI has emerged as another growth driver and transformative technology. WDC believes the second wave of generative AI-driven storage deployments will spark a client and consumer device refresh cycle and reaccelerate content growth in PC, smartphone, gaming, and consumer in the coming years. WDC believes its Flash portfolio is extremely well-positioned to benefit from this emerging secular tailwind.
Overall, this was a great quarter for Western Digital. We do not interpret the downside today as disappointment over the results in light of the big beat-and-raise. The one area we think may have been a slight disappointment was maybe management not being quite as definitive as investors would have liked in terms of where it is in the industry cycle. STX said on its call that SepQ marked the bottom of the cycle. But WDC was still quite positive on the call. The other thing is that the stock has made a big run in recent weeks, so a lot of good news was likely priced in already.
Colgate-Palmolive's top and bottom-line beats in Q4 lead to plenty of grinning investors today (CL)
Investors are grinning over Colgate-Palmolive's (CL +2%) earnings and sales beats in Q4, as well as its relatively uplifting guidance, pushing shares to one-year highs today. The personal care product manufacturer famous for its Colgate dental care products has recently been on an excellent run, climbing by over +20% following today's move since mid-October lows. CL is known to experience big runs followed by quick profit-taking, a theme it has witnessed throughout the past three years, making us mildly cautious at current levels. However, there were several reasons to view CL's current rally as only the beginning of a more extensive run.
- CL's Q4 performance was sound, delivering a 13.0% improvement in EPS yr/yr to $0.87 on a 400 bp jump in gross margins to 59.6%. CL has taken the appropriate measures to enhance global productivity, which has continued to benefit its margins. At the same time, the company has been passing higher costs onto the consumer without experiencing a significant contraction in volumes.
- On that note, volumes in Q4 were flat yr/yr, while pricing edged 7 pts higher, becoming the sole contributor to CL's 6.9% reported and organic revenue growth to $4.95 bln. While overall sales growth was entirely pricing-based, a trend exhibited by many consumer staples firms lately, there is something to be said about volumes holding even as pricing creeps higher. Regarding personal care, price elasticity tends to be lower as consumers are less willing to forgo the brands they have grown accustomed to despite an inflationary environment.
- Procter & Gamble (PG) has touched on this repeatedly in the past, commenting how there are certain product categories where consumers do not want to risk failure, i.e., do not want to risk a deterioration in personal or family health to save a few cents.
- Sales growth in the quarter was broad-based geographically, as just CL's Africa/Eurasia business endured a net sales decline (on an organic basis, no geographies declined). Two regions stood out positively: Latin America and Europe, which registered +18% and +10% net sales improvements yr/yr, respectively. Latin America posted its third straight quarter of volume growth, climbing by 8% in Q4, underscoring CL's ability to lead in pricing and overall market share. A similar story played out in Europe.
- Unlike this time last year, when management predicted flat earnings and net sales growth yr/yr, CL was confident that the current upward momentum would propel it toward solid growth in FY24. The company projected net sales growth of +1-4%, organic sales growth of +3-5%, within its long-term range, and a mid to high single-digit percent expansion in adjusted EPS (double digits on a GAAP basis).
CL's Q4 performance signals a dramatically improved macroeconomic landscape compared to this time last year. Management did warn that hurdles remain in 2024, many similar to last year's, such as geopolitical unrest, FX headwinds, economic strife in China, and a challenged consumer. However, it is optimistic that it will overcome these obstacles following such a strong exit to FY23.
Intel powering down as bleak guidance puts spotlight on a more limited AI growth opportunity (INTC)
For the third consecutive quarter, Intel (INTC) topped analysts' EPS and revenue estimates as the top-line showed growth for the first time since 4Q21, but the chip maker's dismal guidance indicates that its turnaround is coming to an abrupt halt in 1Q24.
- Unlike FY22 and 1H23, the main problem isn't tied to an inventory glut within the PC end market that's crushing demand for semiconductors. In fact, the recovery there accelerated in Q4, as illustrated by a 33% surge in revenue for INTC's Client Computing Group (CCG).
- Rather, a lack of progress in the Data Center and AI (DCAI) segment, which saw revenue dip by 10% in Q4, combined with weakness in INTC's non-core businesses are the key factors weighing on its outlook.
- Of those two items, the ongoing struggles in the DCAI segment is by far the more troubling issue. It's no secret that demand for INTC's data center processors has diminished at the hands of NVIDIA (NVDA), and to a lesser extent, Advanced Micro Devices (AMD).
- INTC's bleak outlook only reinforces the belief that it has fallen too far behind NVDA and that it's missing out on the powerful AI-fueled growth catalyst.
- INTC CEO Pat Gelsinger has acknowledged NVDA's rampant success in deploying its GPUs throughout this initial buildout phase of AI servers and systems. While that ship has sailed, Mr. Gelsinger is now focused on positioning INTC to win the next round of this AI-based cycle.
- More specifically, he believes that INTC's chips will play a critical role in running the actual programs that live in the new data centers and will power new PC and smartphone models that feature AI applications. That may indeed be the case, but after falling so far behind NVDA and AMD in this AI race, investors are not willing to give INTC the benefit of the doubt.
- Meanwhile, the company is still dealing with an inventory correction, only this time, it's occurring at Mobileye (MBLY). Recall that in October 2022, INTC spun off MBLY in an IPO, raising nearly $1.5 bln in gross proceeds. However, INTC maintained a majority ownership stake in the maker of semiconductors for autonomous driving technology.
- That is working against INTC as MBLY contends with a painful inventory correction among its automaker OEM customers, causing the company to guide FY24 revenue far below expectations earlier this month. MBLY's weak guidance filtered through to INTC's disappointing Q1 outlook.
During the earnings call, Mr. Gelsinger tried to alleviate the concerns regarding INTC's guidance, stating that the downturn is temporary and that he expects revenue and EPS to grow sequentially and yr/yr for each quarter in FY24. Based on the stock's steep sell-off, it's apparent that his remarks didn't have the desired effect as doubts about INTC's ability to capitalize on the emergence of AI technology and its strategy of building out semiconductor fabs returns to the spotlight.
KLA Corporation amid profit-taking as Q3 guidance falls short; sees muted demand in 2024 (KLAC)
KLA Corp (KLAC -4%) is under selling pressure today, even after exceeding top and bottom-line estimates in Q2 (Dec). The culprit today flows from mild guidance. The midpoint of KLAC's Q3 (Mar) earnings forecast fell short of analyst estimates, while its sales outlook missed estimates entirely. With shares carving out new record highs yesterday in anticipation of a similarly strong report as its peers, including ASML (ASML) and Lam Research (LRCX), KLAC was prone to profit-taking on even the slightest blemishes in Q2.
- Adjusted EPS of $6.16, topping analyst expectations by double-digits, was a bright spot. Adjusted gross margins of 62.6%, clearing the high end of KLAC's 60.5-62.5% outlook, aided in the sizeable earnings beat in the quarter. However, since KLAC has not missed on its bottom line in over five years, the market has come to expect decent earnings upside every quarter.
- Less stimulating was KLAC's 16.7% drop in revenue yr/yr to $2.49 bln, a deterioration from the -12.0% decline in Q1 (Sep). Still, like its semiconductor equipment counterparts, KLAC registered a modest sequential improvement of 3.8%.
- Mirroring the remarks from LRCX and ASML, KLAC also anticipates a muted demand environment throughout 2023. It called for a bottom in Q3 (Mar), with business levels improving thereafter. Nevertheless, wafer fab equipment (WFE) spending, the lifeblood of KLAC, will remain suppressed in CY24, experiencing a faint uptick yr/yr, similar to LRCX's forecast.
- KLAC was optimistic about more robust demand in 2025, echoing the sentiment of its peers. However, there are still challenges it will need to traverse first in 2024. The company touched on the uncertainty surrounding the timing of a sustainable resumption in WFE growth, noticing that customers' profitability and cash flow generation will remain under pressure over the near term.
- Diving deeper, KLAC stated that the NAND and DRAM markets have yet to return to growth levels needed to bring factory utilization back to elevated levels seen in recent years, putting a lid on new WFE spending. This week, Texas Instruments (TXN) and STMicroelectronics (STM) discussed a similar trend.
- KLAC's Q3 guidance reflected this near-term uncertainty. The company projected adjusted EPS of $4.66-5.86 and revs of $2.175-2.425 bln, the midpoint of both translating to sequential declines, further evidence of a potential bottom next quarter.
Light Q3 revenue guidance notwithstanding, KLAC's Q2 report did not differ meaningfully from its peers' DecQ reports this week. However, we noted in our preview that downside risk appeared to outweigh upside potential given how much excitement investors were already factoring into KLAC's share price, which had risen by over +35% since November. Therefore, a pullback today may be more indicative of an overextended share price rather than cracks in KLAC's fundamentals.
Page One
Last Updated: 26-Jan-24 09:03 ET | Archive
No true surprises in December PCE inflation data
The S&P 500, Nasdaq 100, and Dow Jones Industrial Average enter today with some record closing-high momentum. There was good reason in yesterday's Q4 GDP report, too, to retain that momentum. Growth was not only better than expected, it was also above potential at the same time the GDP price deflator was lower than expected and below the Fed's 2.0% inflation target.
Granted the Fed hasn't pinned its inflation target to the GDP price deflator, but there was no mistaking in yesterday's report that inflation moved in the right direction in the fourth quarter.
It was a nice lead in to today's Personal Income and Spending Report for December, which does contain the inflation gauge the Fed is targeting with its monetary policy.
Given that understanding, it was reasonable to see the S&P 500 futures and 2-yr note yield little changed in front of the report. A wait-and-see stance was in play for the broader market.
There was some added movement in the Nasdaq 100 and Dow Jones Industrial Average futures, however, stemming largely from the negative price action in Intel (INTC) and Visa (V), which disappointed with some guidance metrics after reporting their December quarter results. A positive move in American Express (AXP), after its FY24 EPS outlook exceeded the consensus estimate, provided a bit of an offset for the Dow futures.
The equity futures market took a dip in the immediate wake of the aforementioned economic release, presumably because it played into the idea that the Fed may not be as quick to cut rates as the market would like. Ironically, that's not so much because of the inflation gauges as it was because of the spending gauge.
Personal income increased 0.3% month-over-month in December, as expected, but personal spending increased a much stronger-than-expected 0.7% (Briefing.com consensus 0.4%). The inflation gauges were spot-on with expectations. The PCE Price Index was up 0.2% month-over-month and so was the core-PCE Price Index, which excludes food and energy.
With the December changes, the PCE Price Index was up 2.6% year-over-year, unchanged from November, and the core PCE Price Index was up 2.9% -- the lowest since March 2021 -- versus 3.2% in November.
The key takeaway from the report should be more Goldilocks than anything else: consumer spending is strong and core inflation, which the Fed is targeting, is moving toward the 2.0% target.
If one wanted to split hairs, there could be some dismay that inflation didn't improve more than it did, suggesting there is some stickiness to it; however, keep in mind that the market, which has been running to record highs in front of the report, knew exactly what the consensus estimates were and both the PCE Price Index and core PCE Price Index fell right in-line with the consensus estimates.
In other words, there were no negative inflation surprises in this report; therefore, it would be a stretch to assign the knee-jerk selling immediately after the release to any stickiness as it relates to inflation.
If anything, the market may have wanted "more," so when the inflation gauges were only in-line with expectations, there was some selling on the news following the spirited move in the market this week.
Currently, the S&P 500 futures are up four points and are trading 0.1% above fair value, the Nasdaq 100 futures are down 32 points and are trading 0.2% below fair value, and the Dow Jones Industrial Average futures are up five points and are trading fractionally above fair value.
The message here is that the equity futures market bounced back from the knee-jerk selling, just as the Treasury market did, which one could cite as a support for the turn in the equity futures market. The 2-yr note yield went from 4.32% to 4.35% and is at 4.33% now. The 10-yr note yield went from 4.11% to 4.15% and is at 4.12% now.
As it stands now, then, the broader market is poised for a mixed and flattish open, which isn't bad knowing that the Fed's key inflation gauge wasn't bad in December.
-- Patrick J. O'Hare, Briefing.com
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