Market Snapshot
| Dow | 38460.92 | -42.77 | (-0.11%) | | Nasdaq | 15712.75 | +16.11 | (0.10%) | | SP 500 | 5071.63 | +1.08 | (0.02%) | | 10-yr Note | -25/32 | 4.65 |
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| | NYSE | Adv 1185 | Dec 1554 | Vol 931 mln | | Nasdaq | Adv 1811 | Dec 2328 | Vol 4.7 bln |
Industry Watch
| Strong: Consumer Staples, Real Estate, Utilities, Consumer Discretionary |
| | Weak: Industrials, Health Care, Financials, Communication Services |
Moving the Market
-- Positive responses to earnings news from influential names like Tesla (TSLA), Visa (V), and Texas Instruments (TXN) fueled initial buying activity
-- Early buying dissipating with no specific catalyst, but stocks rebounded off lows
-- Jump in market rates
-- Gains in some mega caps and chipmakers
| Closing Summary
24-Apr-24 16:35 ET
Dow -42.77 at 38460.92, Nasdaq +16.11 at 15712.75, S&P +1.08 at 5071.63
[BRIEFING.COM] The stock market exhibited mixed action today. The major indices traded above and below their prior closing levels and market breadth was mostly negative through the session. Decliners had a 3-to-2 lead at the NYSE and by a 4-to-3 lead at the Nasdaq. The S&P 500 nearly unchanged from yesterday and the Nasdaq Composite gained 0.1%. The Dow Jones Industrial Average (-0.1%) and Russell 2000 (-0.4%) settled with declines.
An early drive higher was fueled by positive responses to some earnings news like Tesla (TSLA 162.13, +17.45, +12.1%), which jumped 12% following the acknowledgment that production of affordable models will begin in early 2025, if not late 2024, despite missing earnings and revenue estimates.
Texas Instruments (TXN 174.81, +9.34, +5.6%) was another standout winner after suggesting some industrial customers are nearing the end of an inventory correction cycle. This price action contributed to upside moves in the PHLX Semiconductor Index (SOX), which closed 1.1% higher.
Meanwhile, Boeing (BA 164.33, -4.85, -2.9%) and Humana (HUM 315.98, -12.00, -3.7%) received negative responses to their quarterly results.
Seven of the S&P 500 sectors closed with a gain led by consumer staples (+0.9%). The industrial sector saw the largest decline, down 0.8%.
Elsewhere, Treasuries settled with losses, contributing to the negative bias in the stock market. The 10-yr note yield settled five basis points higher at 4.65% and the 2-yr note yield rose two basis points to 4.94%. This price action followed the release of a Durable Orders report for March, which beat expectations, and a record-sized $70 bln 5-yr note offering, which met weaker demand than yesterday's 2-yr note sale.
- S&P 500:+6.3% YTD
- Nasdaq Composite: +4.7% YTD
- S&P Midcap 400: +4.3% YTD
- Dow Jones Industrial Average: +2.1% YTD
- Russell 2000: -1.5% YTD
Reviewing today's economic data:
- Weekly MBA Mortgage Applications Index -2.7%; Prior 3.3%
- March Durable Orders 2.6% (Briefing.com consensus 1.8%); Prior was revised to 0.7% from 1.4%; March Durable Goods -ex transportation 0.2% (Briefing.com consensus 0.3%); Prior was revised to 0.1% from 0.5%
- The key takeaway from the report is that it matched the framework of a soft landing for the economy, with nondefense capital goods orders excluding aircraft -- a proxy for business spending -- increasing 0.2% on the heels of a 0.4% increase in February.
- Weekly EIA Crude Oil Inventories showed a draw of 6.37 million barrels following last week's build of 2.74 million barrels
Thursday's economic calendar features:
- 8:30 ET: Advance Q1 GDP (Briefing.com consensus 2.4%; prior 3.4%), advance Q1 GDP Deflator (Briefing.com consensus 2.9%; prior 1.6%), weekly Initial Claims (Briefing.com consensus 215,000; prior 212,000), Continuing Claims (prior 1.812 mln), advance March goods trade balance (prior -$91.8 bln), advance March Retail Inventories (prior 0.5%), and advance March Wholesale Inventories (prior 0.5%)
- 10:00 ET: March Pending Home Sales (Briefing.com consensus 1.0%; prior 1.6%)
- 10:30 ET: Weekly natural gas inventories (prior +50 bcf)
Treasuries settle with losses; many stocks move higher
24-Apr-24 15:35 ET
Dow -25.48 at 38478.21, Nasdaq +16.65 at 15713.29, S&P +1.59 at 5072.14
[BRIEFING.COM] The major indices have traded close to their prior closing levels through the afternoon trade. The S&P 500 (+0.1%) and Nasdaq Composite (+0.1%) are back in positive territory.
Market breadth is still negative. Decliners lead advancers by a 3-to-2 margin at the NYSE and by a 4-to-3 margin at the Nasdaq.
Separately, the 10-yr note yield settled five basis points higher at 4.65% and the 2-yr note yield rose two basis points to 4.94%.
Stocks move lower, Nasdaq turns negative
24-Apr-24 15:05 ET
Dow -96.77 at 38406.92, Nasdaq -25.53 at 15671.11, S&P -9.46 at 5061.09
[BRIEFING.COM] The market moved lower in recent trading, leading the Nasdaq Composite (-0.2%) to trade below its prior closing level. With today's modest move lower, the major indices are still higher on the week.
The Nasdaq Composite shows a 2.5% and the S&P 500 is up 1.9% this week. All of the S&P 500 sectors are higher on the week except health care (-1.1%). The information technology sector is the top performing sector so far, up 2.8%.
Ford (F), Meta Platforms (META), IBM (IBM), Molina Healthcare (MOH), and others headline the earnings news after today's close.
Drifting lower once more; Wabtec & CoStar among top post-earnings gainers in S&P
24-Apr-24 14:30 ET
Dow -34.94 at 38468.75, Nasdaq +11.10 at 15707.74, S&P -1.84 at 5068.71
[BRIEFING.COM] We've trickled lower in the last half hour, the S&P 500 (-0.04%) now narrowly below yesterday's close.
Elsewhere, S&P 500 constituents Wabtec (WAB 163.88, +15.40, +10.37%), CoStar Group (CSGP 91.29, +6.67, +7.88%), and Boston Scientific (BSX 73.27, +4.28, +6.20%) pepper the top of the standings, all following earnings reports.
Meanwhile, Old Dominion (ODFL 196.30, -22.98, -10.48%) is today's top laggard following this morning's Q1 print.
Gold drifts lower ahead of econ data out later this week
24-Apr-24 14:00 ET
Dow +28.86 at 38532.55, Nasdaq +49.13 at 15745.77, S&P +8.03 at 5078.58
[BRIEFING.COM] With about two hours to go on Wednesday the tech-heavy Nasdaq Composite (+0.31%) is holding atop the standings, up about 50 points.
Gold futures settled $3.70 lower (-0.2%) to $2,338.40/oz, narrowly lower as investors shift their focus to Thursday's GDP report and Friday's PCE readings.
Meanwhile, the U.S. Dollar Index is up about +0.2% to $105.84.
Hasbro's previous restructuring initiatives produce huge results in Q1; triggers today's pop (HAS)
Hasbro (HAS +11%) is monopolizing the market today, boasting the top spot within the S&P 500 after crushing earnings estimates in Q1. The company was not toying around when it announced broad restructuring plans in December, cutting around 20% of its workforce amid dismal holiday toy sales and gutting excess inventories.
Management expected the fruit of its more streamlined organization to be gross annual run-rate cost savings of $350-400 mln and resurging growth. While the move sparked a gradual increase in shares of Hasbro, climbing around 20% as of yesterday's close, the market was not anticipating tangible benefits appearing so quickly.
- Hasbro went from posting its widest earnings miss in nearly five years last quarter to its widest beat in 11 quarters in Q1, delivering adjusted EPS of $0.61. Revenue still fell, dropping by 24.3% yr/yr to $757.3 mln. However, this was much better than analysts feared, reversing the company's string of misses.
- Hasbro started the quarter with toy inventories at multi-year lows, down by over half compared to the year-ago period. This hurt Hasbro's Consumer Products segment revenue growth, which fell by 21% and dragged down overall growth. However, it resulted in a significant reduction in closeout volume, leading to a margin benefit, which Hasbro anticipates will continue as it moves through Q2.
- Meanwhile, a more asset-light model entertainment model following the divestiture of eOne Film and TV in December is already paying dividends. Hasbro's Entertainment segment posted soaring revenue growth of 65% yr/yr when removing eOne. Management is enthusiastic about what this segment has in store for the future, including film and FV projects for Clue and a live-action Monopoly movie.
- Looking to FY24, while Hasbro remains excited about its more streamlined business model, it conveyed a cautiously optimistic tone in light of a volatile economic background. Also, the first quarter of the year tends to represent a minor portion of Hasbro's full-year sell-through for toys (Q4 being its most important). Therefore, Hasbro reaffirmed its FY24 guidance, including Consumer Products revenue falling by 7-12% yr/yr and Wizards of the Coast revs down by 3-5%.
- Management also affirmed that it remains firmly on track toward its gross cost savings by FY25, following the 200-250 mln savings projected for FY24.
Hasbro's Q1 results proved that its quick pivot in December after observing its current strategy failing to produce meaningful results was the correct action. While there are still bumps in the road ahead, finding such outsized success so rapidly reassures investors that management can steer through even the most disastrous climates.
Boeing seeing a pretty muted reaction despite EPS beat; has slowed down 737 production (BA)
Boeing (BA -1.4%) is trading modestly higher today following its Q1 report this morning. The aerospace giant reported a loss as expected, but it was much narrower than expected. Boeing has now reported back-to-back EPS beats following many misses over the last few years, so that was nice to see. Boeing also posted revenue upside although revenue fell 7.5% yr/yr to $16.57 bln.
- Boeing historically has provided full year operating cash flow and free cash flow guidance, but it did not provide guidance for the second quarter in a row. We were hoping that guidance would resume with this report, but it sounds like management wants to wait before offering official guidance. In light of the 737-9 grounding, Boeing said this was not the time for guidance. It wants to work with regulators to get the door issue fixed. This was probably the right call by Boeing.
- The main culprit for Boeing's first revenue decline in six quarters was its Commercial Airplanes segment where revenue fell 31% yr/yr to $4.65 bln. This reflects immediate actions taken to slow down 737 production to drive improvements in quality. As has been widely reported, Boeing has had some safety issues, including the door incident with Alaskan Airlines. The company has been focusing on improving safety / quality and outlined many steps taken on the call this morning. Production has been taken below 38/mo but will resume at 38 in 2H24.
- In terms of the 787 program, Boeing is also slowing near term production but plans to return to 5/mo later this year. It expects to achieve rate increases including 10/mo by 2026. In terms of the 777X program, Boeing continues to expect first delivery in 2025 as it continues to work with the FAA to begin certification flight testing.
Overall, we are not seeing a big reaction in the stock today. It was nice to see the EPS upside and Boeing said demand across the portfolio remains incredibly strong. However, the continued lack of guidance was a bit of a letdown. Cutting production on the 737 and 787 were probably the right moves. The company needs to improve it production processes to improve safety. For now, sentiment remains quite bearish on Boeing. We also think investors are in a bit of a holding pattern until Boeing names its next CEO. We think an outsider would be a better choice to hopefully add a new perspective.
Seagate seeing its markets turn the corner; cloud continues to lead the demand recovery (STX)
Seagate (STX -3%) is trading lower after reporting Q3 (Mar) results. STX beat on EPS, although it was less robust upside than in Q2 (Dec). Revenues fell 11.0% yr/yr to $1.66 bln, which generally in-line. The outlook for Q4 (Jun) was pretty solid with the mid-point of EPS guidance above analyst expectations. In addition earnings, STX also announced that Broadcom (AVGO) acquired its ASIC assets, including development, engineering and related IP, for $600 mln.
- After three consecutive losses, STX has now posted back-to-back profitable quarters. However, STX has also reported eight consecutive quarters of yr/yr revenue declines, although the -11% result this time was the smallest decline during that timeframe.
- STX says nearline cloud demand trends are increasingly positive across both US and China customers, and it also saw a sequential improvement in its enterprise OEM markets. In terms of near-term end market dynamics, STX says cloud continues to lead the demand recovery. For a second consecutive quarter, STX realized strong double-digit revenue growth from sales to cloud customers. What stood out to us was STX saying that it believes the long-running cloud customer inventory correction is mostly complete and their end demand is also improving. Furthermore, STX expects healthy nearline demand growth to continue through the rest of calendar 2024.
- Within the enterprise OEM markets, demand stabilized in the second half of calendar 2023, and STX saw incremental improvement in MarQ. STX expects enterprise OEM revs to improve as server growth resumes. In its VIA markets, revenue was seasonally lower in MarQ but STX expects demand to trend higher through the calendar year.
- STX also touched on its AI opportunity. Over the next several years, the volume of AI-generated content is expected to increase and also shift towards more imagery and videos, which can be up to 1,000x larger than text. STX believes these trends bode well for HDD demand over the long-term as HDDs remain the most cost-effective means to store mass-capacity data.
Overall, this was a good quarter for Seagate. We suspect investors were pleased to hear that the long-running cloud customer inventory correction is now mostly complete. Also, demand in its enterprise OEM markets has stabilized with incremental improvement in MarQ. It sounds like Seagate's markets are finally recovering. We think this report bodes well for Western Digital (WDC), which reports tomorrow after the close.
Texas Instruments in tune today as Q2 guidance signals potential bottom (TXN)
Texas Instruments (TXN +6%) is finally in tune today, projecting Q2 earnings and revs consistent with analyst forecasts following two straight periods of bearish guidance. The analog chip and embedded processor maker had steadily endured deteriorating end-market demand, particularly in industrial, which comprises roughly 40% of its total revs. Management warned of the unfavorable situation seeping into Q1, making the sequential revenue declines across the board once again in the quarter unsurprising.
However, by issuing Q2 earnings and revenue targets pointing to sequential improvement, TXN is receiving a heap of praise today as investors speculate that the bottom is finally in.
- TXN anticipates Q2 adjusted earnings of $1.05-1.25, translating to a decent bump from the $1.10 delivered in Q1 at the midpoint. Still, on a yr/yr basis, TXN is a long road from its EPS of $1.87 in 2Q23 and $2.45 in 2Q22. Nevertheless, after an 820 bp drop in gross margins yr/yr in Q1, branching from lower revs and higher manufacturing costs, the market is ready for TXN to, at the least, start back on the road to recovery.
- Similarly, TXN's Q2 revenue outlook of $3.65-3.95 bln signaled a marked jump from the $3.66 bln delivered in Q1, possibly snapping an extensive streak of sequential declines. However, on a yr/yr basis, TXN continues expecting compression despite lapping a double-digit percentage drop.
- The expected yr/yr declines underpin persistent end-market softness. In Q1, TXN's two largest markets (75% of total revs), industrial and automotive, fell by upper-single and mid-single digits qtr/qtr, respectively. While automotive started to show weakness last quarter following several quarters of growth, industrial has not seen meaningful sequential gains since 2Q22, highlighting the prolonged inventory rebalancing across TXN's customer base.
- Meanwhile, personal electronics fell by a mid-teens percentage sequentially, communications equipment was down by around 25%, and enterprise systems was down by mid-teens. Unlike last quarter, when enterprise systems was the sole gainer, TXN had no strengths to point to in Q1.
- Nevertheless, even though Q2 tends to be a seasonally stronger quarter for TXN, partly explaining the estimated improvements from Q1, management is noticing slowing declines across a few sectors, with some even enjoying positive sequential growth. Investors have been waiting for a bottom to form for TXN for some time. It appears as though the unwavering industry inventory correction may have reached a turning point; TXN was cautiously optimistic.
Guidance was going to be the focus surrounding TXN's Q1 report. The stock had traded sideways for most of the year as investors awaited whether the industry inventory rebalancing was in its final stages or if it would take a few more quarters before entering the final stages. With TXN's Q2 outlook building in sequential growth, the market feels more comfortable that the former of the two scenarios is unfolding. This development is a good sign ahead of upcoming quarterly results from Analog Devices (ADI), Microchip (MCHP), and STMicroelectronics (STM).
Tesla puts bleak Q1 results in rearview mirror by accelerating timeline for affordable EVs (TSLA)
For the third consecutive quarter, Tesla (TSLA) fell short of EPS estimates while revenue in Q1 declined by 8.7% yr/yr to $21.3 bln, also missing expectations and representing the EV maker's first sales decrease since 2Q20. Yet, TSLA shares are charging higher today, registering some much-needed gains after the stock's 43% year-to-date plunge.
- The rebound is partly attributable to the muted expectations surrounding this earnings report and the simple fact that this weak quarter is now in the rearview mirror. After TSLA reported disappointing Q1 deliveries on April 2, followed by news of steep shipment declines at its Shanghai facility and a fresh round of price cuts in the U.S., a dismal quarterly report was essentially a given. Now that it's in the books, investors can set their sights on more positive developments.
- On that note, TSLA disclosed in its Q1 shareholder letter that it has "updated our future vehicle line-up to accelerate the launch of new models ahead of our previously communicated start of production in the second half of 2025." This future vehicle line-up will include the highly anticipated affordable "Model 2", which is expected to have a price tag under $30,000.
- The update comes as a pleasant surprise because back on April 5, Reuters reported that TSLA was looking to scrap plans to build its mass-market car mainly due to rising competition in China. Indeed, in the weeks leading up to last night's Q1 earnings report, it appeared as if Elon Musk had shifted gears as he focuses on launching a robotaxi in the 2025/2026 timeframe. On April 8, Musk looked to spark some excitement for the robotaxi, announcing that it will be unveiled on August 8.
- However, investors weren't taking the bait as the prospects of TSLA cancelling plans to launch Model 2 forced analysts to rethink their EPS and revenue expectations for FY26 and beyond. Now, TSLA hasn't just put Model 2 back on the table, but it has also sped up the timeline, aiming to begin production ahead of its previously communicated start in 2H25. Of course, given Musk's propensity of being overly optimistic regarding new product launches, this should be taken with a grain of salt.
- Nevertheless, TSLA confirming that Model 2 is still in the works comes as a relief and helps change the bearish narrative that has enveloped TSLA this year. With a legitimate growth catalyst on the horizon, that TSLA believes will enable more than 50% growth over 2023 production, the focus turns away from a Q1 that was quite dismal.
- Driven by eroding ASPs, gross margin decreased again, slipping by 20 bps qtr/qtr and by 199 bps yr/yr to 17.4%. Meanwhile, operating expenses continue to climb higher, increasing by 37% yr/yr to $2.53 bln as TSLA ramps up its investments in AI infrastructure to enhance its FSD technology.
The main takeaway is that TSLA's Q1 results were weak across the board, but that was widely anticipated and largely baked into the stock. By disclosing its plans to accelerate the launch of more affordable vehicles, TSLA has swung the narrative back to a more bullish manner as the next significant growth catalyst is back on the table.
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