Market Snapshot
briefing.com
| Dow | 39069.11 | +456.87 | (1.18%) | | Nasdaq | 16041.62 | +460.75 | (2.96%) | | SP 500 | 5087.03 | +105.23 | (2.11%) | | 10-yr Note | 0/32 | 4.33 |
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| | NYSE | Adv 1695 | Dec 1047 | Vol 964 mln | | Nasdaq | Adv 2265 | Dec 1965 | Vol 5.6 bln |
Industry Watch
| Strong: Information Technology, Consumer Discretionary, Financials, Industrials, Real Estate |
| | Weak: Utilities |
Moving the Market
-- Shares of NVIDIA (NVDA) surging after blowout quarterly results
-- Speculative AI buzz after NVDA report driving buying activity in related stocks
-- Market drawing added support from pleasing Fed commentary, indicating the Fed may begin cutting rates this year
| Closing Summary
22-Feb-24 16:25 ET
Dow +456.87 at 39069.11, Nasdaq +460.75 at 16041.62, S&P +105.23 at 5087.03
[BRIEFING.COM] The stock market had a strong showing thanks to NVIDIA's (NVDA 785.38, +110.66, +16.4%) much better than expected earnings results. The S&P 500 (+2.1%) and Dow Jones Industrials Average (+1.2%) set new record closing highs while the Nasdaq Composite logged a 3.0% gain.
NVIDIA's report renewed the market's enthusiasm for AI-related stocks, other growth stocks, and semiconductor shares. The PHLX Semiconductor Index (SOX) jumped 5.0% today and the S&P 500 information technology sector saw a 4.4% increase.
The market drew added support from some pleasing commentary from Fed Vice Chair Jefferson, who said this morning that it will likely be appropriate to begin cutting rates later this year, adding that he is cautiously optimistic about the way inflation is evolving. Also, Philadelphia Fed President Harker (not an FOMC voter) said he believes the Fed may be in a position to see the fed funds rate decrease this year, but cautions anyone looking for it right now and right away.
Some stocks were left out of today's rally due to downside catalysts. Etsy (ESTY 70.62, -6.51, -8.4%) saw the largest decline in the S&P 500 today after disappointing quarterly results. EV makers Rivian Automotive (RIVN 11.45, -3.94, -25.6%) and Lucid Group (LCID 3.08, -0.62, -16.8%) plunged after their disappointing results.
Still, most names closed higher, driving a 1.0% gain in the equal-weighted S&P 500. Ten of the 11 S&P 500 sectors closed with gains, led by info tech, followed by the consumer discretionary (+2.2%) and communication services (+1.6%) sectors. Meanwhile, the utilities sector (-0.8%) was alone in negative territory at the close.
The 2-yr note yield climbed five basis points to 4.72% and the 10-yr note yield settled unchanged at 4.33%, not reacting much to this morning's release of another low initial jobless claims reading (201,000).
- Nasdaq Composite: +6.9% YTD
- S&P 500: +6.7% YTD
- Dow Jones Industrial Average: +3.7% YTD
- S&P Midcap 400: +2.6% YTD
- Russell 2000: -0.7% YTD
Reviewing today's economic data:
- Weekly Initial Claims 201K (Briefing.com consensus 216K); Prior was revised to 213K from 212K; Weekly Continuing Claims 1.826 mln; Prior was revised to 1.889 mln from 1.895 mln
- The key takeaway from the report is that this report covers the period in which the survey for the February employment report was conducted, so the low level of initial claims -- the lowest since early January -- will drive expectations for another solid increase in nonfarm payrolls.
- February S&P Global US Manufacturing PMI - Prelim 51.5; Prior was revised to 50.7 from
- February S&P Global Services PMI - Prelim 51.3; Prior 52.5
- January Existing Home Sales 4.00 mln (Briefing.com consensus 3.99 mln); Prior was revised to 3.88 mln from 3.78 mln
- The key takeaway from the report is that high mortgage rates, tight inventory, and elevated prices continue to put a crimp in existing home sales.
Looking ahead, there is no economic data on tomorrow's calendar.
Stocks sit near highs ahead of close
22-Feb-24 15:35 ET
Dow +445.65 at 39057.89, Nasdaq +468.56 at 16049.43, S&P +106.56 at 5088.36
[BRIEFING.COM] The three major indices are near the highs of the day heading into the close.
A short time ago, Philadelphia Fed President Harker (not an FOMC voter) said he believes the Fed may be in a position to see the fed funds rate decrease this year, but cautions anyone looking for it right now and right away.
The 2-yr note yield climbed five basis points to 4.72% and the 10-yr note yield settled unchanged at 4.33%.
Looking ahead, there is no economic data on tomorrow's calendar.
Market hangs out near highs
22-Feb-24 15:05 ET
Dow +425.56 at 39037.80, Nasdaq +449.56 at 16030.43, S&P +101.56 at 5083.36
[BRIEFING.COM] The S&P 500 (+2.0%) and Nasdaq Composite (+2.9%) trade off session highs.
Mega cap gains are having an outsized influence, but many stocks have build on upside moves. The Invesco S&P 500 Equal Weight ETF (RSP) is up 1.0%.
The only S&P 500 sector trading down is utilities (-0.7%) while the remaining ten sectors show gains ranging from 0.2% to 4.2%.
Moderna, Quanta Services ride earnings to top of the S&P 500 on Thursday
22-Feb-24 14:30 ET
Dow +522.09 at 39134.33, Nasdaq +474.21 at 16055.08, S&P +110.75 at 5092.55
[BRIEFING.COM] The S&P 500 (+2.22%) is up more than 110 points now, taking month-to-date gains to +5.1%.
Elsewhere, S&P 500 constituents Moderna (MRNA 101.34, +13.75, +15.70%), Quanta Services (PWR 231.60, +20.38, +9.65%), and Mosaic (MOS 32.21, +1.98, +6.55%) dot the top of today's standings all following earnings reports.
Meanwhile, Newmont Goldcorp (NEM 31.07, -2.36, -7.06%) is underperforming after reporting a Q4 miss.
Gold modestly lower, yield showing slight gains
22-Feb-24 14:00 ET
Dow +411.29 at 39023.53, Nasdaq +446.44 at 16027.31, S&P +100.26 at 5082.06
[BRIEFING.COM] With about two hours remaining on Thursday the tech-heavy Nasdaq Composite (+2.87%) has once again eclipsed the 16K level.
Gold futures settled $3.60 lower (-0.2%) to $2,030.70/oz, soften even as we see a split move in the dollar (slightly lower) and treasury yields (slightly higher).
Meanwhile, the U.S. Dollar Index is down about -0.1% to $103.94.
Rivian Automotive stalls out, hits all-time lows following bleak FY24 guidance (RIVN)
Rivian Automotive (RIVN -26%) stalls out today following dismal FY24 guidance. The electric vehicle maker's headline numbers in Q4 were decent, barely missing bottom-line estimates while edging past analysts' revenue forecasts. However, RIVN projected flat production growth in FY24 alongside a low single-digit uptick in deliveries, well below street estimates. Furthermore, RIVN is encountering a major speed bump to start FY24, forecasting a 10-15% sequential drop in deliveries in Q1. To round out the disappointment, RIVN announced a 10% reduction in its workforce and plans to shut down production during Q2 in conjunction with operating efficiency initiatives.
- With entry-level prices hovering around $70,000, RIVN's vehicles are by no means cheap. While tax credits and other incentives can bring the costs down, big OEMs like General Motors (GM) and Ford Motor (F) are beginning to flood the EV market with lower-priced alternatives, so RIVN may be finding it increasingly challenging to compete. At the same time, hybrids remain a viable alternative to EVs, particularly in the U.S., where individuals tend to have extended commutes.
- Coinciding with intensifying competition is a lackluster economic backdrop. RIVN acknowledged that its business is not immune to economic and geopolitical uncertainties, including high-interest rates, which have curbed discretionary spending. As a result, RIVN is finding it challenging to convert orders to sales.
- Still, deliveries shot up over 70% yr/yr in Q4 to just under 14,000. Additionally, RIVN exceeded its FY23 production target of 54,000 handily, registering over 57,000 vehicles produced. As a result, RIVN's total revenue growth of 98.3% to $1.31 bln topped analyst estimates. Meanwhile, RIVN improved its gross profit per vehicle to approximately negative $43,000, around $81,000 better than the year-ago period. Although, it should be noted that it was still a ~$13,000 drop sequentially.
- However, compared to Q3, deliveries fell by roughly 10%, RIVN's first sequential drop since 1Q23. Given RIVN's bearish Q1 delivery target, it will not be the last sequential drop either. Furthermore, with production set to halt in Q2, production will likely tail off after four consecutive quarters of growth. RIVN anticipated producing 57,000 vehicles in FY24.
- RIVN's primary focus this year is achieving its 2024 delivery goal. Its other focus is to reach modest gross profit by 4Q24, which it plans to accomplish by reducing variable costs per unit through material cost reductions, driving greater efficiency through its production facility, and scaling non-vehicle revenue.
After an encouraging earnings report last quarter, RIVN shocked investors with its bleak FY24 outlook yesterday after the bell. Making 2024 even grimmer is that RIVN plans to increase its expenses by over 70% yr/yr. While we like RIVN's confidence in achieving its previously set gross profit goal, it may be best to wait on the sidelines until economic conditions turn.
Etsy not looking is "besty" as cautious guidance weighs on stock; discretionary a tough space (ETSY)
Etsy (ETSY -9%) is heading lower following Q4 results/guidance last night. This was an important quarter because the Q4 holiday period is typically Etsy's largest revenue quarter of the year by a good amount. GAAP EPS was light, but revenue had some decent upside to analyst expectations. GMS declined 0.7% yr/yr to $4.01 bln, which was better than prior guidance of a low single-digit decline.
- The Etsy marketplace performed well during the holiday season. However, Etsy said that headwinds continued for its GMS metric, including pressure on consumer discretionary product spending, softness in the Home & Living category and a highly competitive retail environment focused on deep discounting. The silver lining was that its Etsy marketplace GMS trendline improved in November and December following a challenging October. Etsy says consumers are feeling stretched with low confidence in the economy and less money to spend on discretionary items. However, the company also believes this is a moment that will pass.
- In terms of Q1 consolidated GMS, Etsy currently expects a low single-digit decline yr/yr. This reflects a slow start to the quarter with consumer sentiment remaining low. However, Etsy expects that GMS for the core Etsy marketplace will improve as it moves through the rest of the quarter as a result of planned product and marketing investments.
- Etsy says it's starting 2024 as a much more meaningful company than it was just a few years ago. It has doubled its buyer base, which has now grown yr/yr in four consecutive quarters. Also, buyers on average, are still shopping more frequently and spending much more on Etsy now than they were before the pandemic. Etsy estimates that the TAM in its core geographies and categories is $500 bln with a 2% market share, so still a long runway for growth.
- Etsy also explains that most other online players are competing head-to-head to sell the same merchandise focused on selling it $0.02 cheaper or shipping it two hours faster. This has resulted in the commoditization of the entire experience. Etsy sees itself as offering something different in a sea of sameness. As such, highlighting its best stuff remains a top focus. Etsy is confident that it can get back to growing faster and taking share more broadly.
Overall, Etsy's Q4 was decent in light of a challenging macro environment. However, the cautious guidance for Q1 and FY24 seems to be weighing on the stock today. Etsy is in a tough spot. Inflation and higher rates are weighing on consumer sentiment, especially for discretionary items, which is Etsy's bread and butter. However, as rates and inflation ease up later this year, that should be good for Etsy.
Wayfair is faring quite well as it cuts costs and takes share amid a depressed furniture market (W)
Despite contending with a category correction that rivals the great financial crisis, according to Wayfair (W) CFO Kate Gulliver, the online furniture retailer beat Q4 EPS expectations and generated positive adjusted EBITDA and free cash flow for the third consecutive quarter. The company's cost-cutting actions, including the elimination of approximately 3,400 jobs over the past year, have been highly publicized and are a well-known driver behind its improving profitability.
- However, massive layoffs aren't the only factor. In a down market, the highest quality companies often take share from inferior competitors and that is holding true for Wayfair.
- Even as demand for furniture and home furnishings continues to languish, Wayfair's active customers ticked higher by 1.4% yr/yr to 22.4 mln. Furthermore, orders per customer remained steady at 1.84 compared to 1.83 in Q3, while average order value came in higher than Wayfair expected at $276, down only 2.5% yr/yr.
- Impressively, total revenue was essentially flat yr/yr at $3.11 bln, which is significantly better than the category overall. Ms. Gulliver stated that the category has declined on a yr/yr basis for nine consecutive quarters now, with the last six quarters being down by double-digits.
- Competitors such as RH (RH) and Williams-Sonoma (WSM) have seen their sales fall by similar double-digit rates, with RH and WSM posting sales declines of 14% and 16%, respectively, in Q3.
- Wayfair credits improved availability, speed and pricing, and a best-in-class customer service experience for its market share gains.
- These market share gains, coupled with the cost-cutting initiatives, pushed Q4 adjusted EBITDA to $92 mln from $(71) mln in the year-earlier period. Wayfair believes that there's plenty of room for further improvement, too -- especially when demand turns a corner.
- Even if demand doesn't improve in FY24, the company still expects to grow adjusted EBITDA by more than 50% this year off of a FY23 base of $306 mln.
- At this point, it doesn't appear that demand is improving at all, based on Wayfair's guidance. Specifically, the company stated that Q1 revenue is trending down mid-single digits and that it expects the full quarter to end in a similar place, which is worse than expectations. Similar to the 3% achieved in Q4, adjusted EBITDA margin is forecasted to be in the low-single digit area.
- The good news, though, is that Wayfair expects Q1 to be a low point for adjusted EBITDA, both in terms of dollars and margin.
The main takeaway is that while the business climate remains brutal for Wayfair, the company has distanced itself from the pack, illustrated by a steady top-line and substantial profitability improvements. Once the demand picture finally brightens, Wayfair's margins and profits will be primed for even more dramatic growth.
NVIDIA surges to all-time highs on superb JanQ results supported by sustained AI demand (NVDA)
NVIDIA's (NVDA +15%) pullback ahead of its Q4 (Jan) report proved short-lived as investors quickly piled back into shares of the AI GPU designer following another round of impressive quarterly results. Some whipsawing action unfolded immediately after NVDA's report before a firm upward trend was established. Potential cracks igniting initial profit-taking may have included a projected slowdown in revenue growth in Q1 (Apr), uncertainty surrounding sales to China, and a forecasted leveling off of non-GAAP gross margins.
However, even though shares of NVDA surged by +40% this year (on top of a +239% run in 2023), these blemishes were still too minuscule to overtake another quarter of excellent numbers, underpinned by sustained demand for AI across multiple industry verticals. CEO Jensen Huang remarked that accelerated computing and generative AI have hit the tipping point.
- NVDA's top line continued to skyrocket in Q4, spiking by 265.3% yr/yr to $22.1 bln, well ahead of consensus and the company's $19.6-20.4 bln prediction. For the past three quarters, NVDA has topped the high end of its quarterly revenue forecasts by roughly $2.0 bln. Meanwhile, adjusted EPS popped by 486.4% yr/yr to $5.16 as non-GAAP gross margins moved nearly 11 pts higher yr/yr to 76.7%.
- Data Center led the charge in Q4, expanding revenue by 409% yr/yr and 27% sequentially to $18.4 bln. Reflecting Mr. Huang's tipping point comment, NVDA is observing the $1 trillion installed data center infrastructure base rapidly transitioning to accelerated computing. NVDA's Hopper GPU supply, the architecture for high-performance computing (HPC) and AI, improved during the quarter to meet robust demand. NVDA anticipates its next-gen products will be supply-constrained, given outsized initial demand.
- Growth was broad-based outside China, where U.S. export restrictions hindered sales. NVDA noted that its China revenue declined significantly in Q4, representing a mid-single-digit percentage of total Data Center revenue, down considerably from a historical allocation of around 20-25%. Nevertheless, management remarked that countries everywhere are investing in AI infrastructure, which more than offset the adverse effects of export curbs.
- NVDA's other segments performed sufficiently in Q4. Gaming revenue jumped 56% yr/yr but stayed flat compared to Q3 (Oct) at $2.9 bln. Meanwhile, Professional Visualization revs more than doubled yr/yr and climbed 11% sequentially. A normalization of channel inventories supported both segments' yr/yr growth. Finally, Automotive revenue was stale, declining 4% yr/yr but rising 8% sequentially. NVDA did cross $1.0 bln in revenue in Automotive for the first time in FY23, underscoring the ongoing adoption of AI-backed NVIDIA DRIVE.
- Looking ahead, NVDA predicted revenue of $23.52-24.48 bln in Q1, implying approximately +233% growth yr/yr at the midpoint, with sequential growth in Data Center and ProViz, partially offset by seasonal softness in Gaming. After Q1, NVDA will be lapping its first quarter of AI-fueled growth, so yr/yr rates may begin to slow. The company also projected non-GAAP gross margins of 76.5-77.5%, assisted by favorable component costs. Following Q1, NVDA expects margins to rest around the mid-70s range.
Even with much of the weight of the broader markets on NVDA's shoulders, the company did not falter in Q4. As the current front-runner in the AI landscape, NVDA is poised to continue delivering exceptional quarterly results as long as companies and countries globally remain steadfast in their AI adoption plans.
La-Z-Boy declines as an ongoing slowdown in the furniture market clips JanQ performance (LZB)
An ongoing slowdown in the furniture and home furnishing industry made La-Z-Boy (LZB -5%) uncomfortable in Q3 (Jan), driving its top and bottom-line misses in the quarter. Coinciding with a depressed furniture market was a severe winter storm in January, hindering LZB's ability to produce and deliver products.
LZB's woes are not disappearing soon, either. The company projected revenue of $505-535 mln in Q4, translating to roughly flat sequential growth and a 7% yr/yr decline. CFO Robert Lucian remarked that nine months into the company's FY24 (Apr), the demand environment became much more challenging than initially expected.
However, despite the tumultuous economic backdrop, LZB noted that it outperformed the industry. While the overall furniture market was down around 7% YTD in FY24, LZB's written same-store sales growth inched just 1% lower, a testament to its brand quality and ability to navigate short-term headwinds.
- This uplifting development was not the only silver lining from Q3. While overall revenue fell 12.6% yr/yr to $500.4 mln, this represented a decent improvement from the -16.3% drop in Q2 (Oct) and -20.3% in Q1 (Jul).
- Meanwhile, although LZB posted its first earnings miss since 3Q22 (Jan), this was primarily due to the lower revenue as the company still expanded its non-GAAP gross margins by 140 bps yr/yr. The improvement stemmed from lower input costs, including better sourcing and lower commodity prices.
- Additionally, while non-GAAP operating margins declined in Q3, LZB anticipates a sequential improvement in Q4, targeting 7-8%. LZB mentioned that its guidance was prudent given the unfavorable furniture industry, leading to the possibility of meaningful upside if conditions begin to reverse over the near term.
LZB's Q3 results fell short. However, promising underlying developments are keeping shares well above intraday lows of over -8%. Also, it should be noted that the stock has run over +20% higher since November, when the market started pricing in potential interest rate cuts, which could spur a demand resurgence in the highly discretionary furniture market. LZB remains a company worth keeping on the radar as its ties to the housing market make it a compelling play on declining interest rates. In the meantime, a formidable furniture market may keep volatility elevated. Lastly, LZB's performance makes us nervous ahead of Wayfair's (W) DecQ report tomorrow before the open.
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