Market Snapshot
| Dow | 39411.21 | +260.88 | (0.67%) | | Nasdaq | 17496.82 | -192.54 | (-1.09%) | | SP 500 | 5447.87 | -16.75 | (-0.31%) | | 10-yr Note | 0/32 | 4.25 |
|
| | NYSE | Adv 1876 | Dec 863 | Vol 992 mln | | Nasdaq | Adv 2448 | Dec 1916 | Vol 5.5 bln |
Industry Watch
| Strong: Energy, Financials, Materials, Industrials, Utilities, Communication Services |
| | Weak: Information Technology, Consumer Discretionary |
Moving the Market
-- Wait-and-see in front of busy week
-- Losses in mega cap stocks; NVDA down sharply due to profit-taking after big run
-- Buying interest in areas of the market that were left out of the recent run
|
Closing Summary
24-Jun-24 16:30 ET
Dow +260.88 at 39411.21, Nasdaq -192.54 at 17496.82, S&P -16.75 at 5447.87
[BRIEFING.COM] The stock market had a solid showing today despite index-level performance. The S&P 500 (-0.3%) and the Nasdaq Composite (-1.1%) closed at their lows of the session, weighed down by a solid loss in NVIDIA (NVDA 118.11, -8.46, -6.7%) and declines in other mega cap stocks due to profit-taking activity.
Amazon.com (AMZN 185.57, -3.51, -1.9%), Microsoft (MSFT 447.67, -2.11, -0.5%), and Broadcom (AVGO 1592.21, -61.17, -3.7%) were standouts in that respect. Other semiconductor stocks like Super Micro Computer (SMCI 826.98, -78.28, -8.7%) and Qualcomm (QCOM 200.84, -11.69, -5.5%) were also among the influential laggards today. The PHLX Semiconductor Index (SOX) declined 3.0% today.
Still, buying activity was fairly robust in the "rest" of the market. The Dow Jones Industrial Average logged a 0.7% gain and the Russell 2000 closed 0.4% higher. The equal-weighted S&P 500 settled 0.5% higher.
Energy-related names and bank stocks were among the top performers today. This price action boosted the S&P 500 energy (+2.7%) and financial (+1.0%) sectors.
Energy shares outperformed amid rising commodity prices. WTI crude oil futures settled 1.2% higher at $81.63/bbl and natural gas futures settled 3.7% higher at $2.81/mmbtu. Bank stocks outperformed in front of the Fed's stress test results on Wednesday at 4:30pm ET. The SPDR S&P Bank ETF (KBE) rose 1.9%.
There was no influential economic data today, but Tuesday's calendar includes the June Consumer Confidence (Briefing.com consensus 100.0; prior 102.0) report at 10:00 a.m. ET. Also, the U.S. Treasury will hold a $69 billion 2-yr Treasury note offering tomorrow with results at 1:00 p.m. ET.
The 10-yr note yield settled one basis points lower at 4.25% and the 2-yr note yield settled unchanged at 4.73%.
Market holding steady in front of the close
24-Jun-24 15:35 ET
Dow +287.56 at 39437.89, Nasdaq -110.82 at 17578.54, S&P -0.56 at 5464.06
[BRIEFING.COM] The major indices traded in narrow ranges over the last half hour.
Looking ahead to Tuesday, TD Synnex (SNX) reports earnings ahead of the open, Carnival (CCL) reports earnings during market hours, and FedEx (FDX) is among the names reporting earnings after the close.
Tuesday's calendar also features a $69 billion 2-yr Treasury note auction with results at 1:00 p.m. ET.
Major indices remain near lows despite broad buying activity
24-Jun-24 15:05 ET
Dow +276.14 at 39426.47, Nasdaq -99.87 at 17589.49, S&P +1.11 at 5465.73
[BRIEFING.COM] The S&P 500 (flat) and Nasdaq Composite (-0.6%) trade near session lows. Meanwhile, the equal-weighted S&P 500 shows a 0.8% gain.
Nine of the S&P 500 sectors remain in positive territory thanks to broad buying under the index surface. The energy sector sports the largest gain by a decent margin, up 2.7%, followed by the utilities (+1.3%) and financial (+1.2%) sectors.
Elsewhere, Treasury yields moved lower. The 10-yr note yield is down one basis point to 4.25%.
Devon Energy, Carrier Global among top S&P 500 gainers on Monday
24-Jun-24 14:30 ET
Dow +259.07 at 39409.40, Nasdaq -160.59 at 17528.77, S&P -7.36 at 5457.26
[BRIEFING.COM] The S&P 500 (-0.13%) is in second place on Monday afternoon, then about 7 points.
Elsewhere, S&P 500 constituents Devon Energy (DVN 47.89, +2.07, +4.52%), Packaging Corp (PKG 190.06, +6.73, +3.67%), and Carrier Global (CARR 64.66, +1.78, +2.83%) pepper the top of today's standings. DVN gains alongside the broader energy sector, while CARR gains after an upgrade at Citigroup this morning.
Meanwhile, Super Micro Computer (SMCI 240.62, -4.44, -1.81%) falls as investors peel away from the recent AI/semiconductor frenzy.
Gold higher amid dollar weakness
24-Jun-24 14:00 ET
Dow +254.30 at 39404.63, Nasdaq -116.27 at 17573.09, S&P +0.17 at 5464.79
[BRIEFING.COM] The tech-heavy Nasdaq Composite (-0.66%) is near lows of the day with about two hours to go on Monday.
Gold futures settled $13.20 higher (+0.6%) to $2,344.40/oz, helped along by modest weakness in the greenback.
Meanwhile, the U.S. Dollar Index is down about -0.2% to $105.57.
Alnylam Pharma's positive trial results for rare heart disorder drug sends shares soaring (ALNY)
Alnylam Pharmaceuticals (ALNY) is soaring to its highest levels since mid-February after reporting encouraging results from its Phase 3 study of Vutrisiran, an RNAi treatment for ATTR amyloidosis with cardiomyopathy (ATTR-CM). With shares down by about 18% on a year-to-date basis prior to today's surge, ALNY was in need of a spark and this development is lighting a fire under the stock as it has the potential to be a game-changer for the company.
- Marketed under the Amvuttra brand name, Vutrisiran is already an FDA approved and commercially available product for a related disease called hereditary transthyretin-mediated amyloidosis (hATTR). In Q4, Amvuttra generated global revenue of $175 mln, making it the company's top-selling drug, but its total addressable market may be set to expand significantly if it receives regulatory approval for ATTR-CM.
- While ATTR-CM, a debilitating and fatal disease caused by misfolded transthyretin (TTR) proteins, is still considered to be a rare condition, an increasing number of people are being diagnosed with the disorder due to advancements in medical technology and improved testing and screening. According to ALNY, approximately 250,000-350,000 people are affected by the two different kinds of ATTR.
The results from this Phase 3 trial suggest that Vutrisiran has the potential to become the standard of care for ATTR-CM.
- In the study, a cohort of the 655 adults took Vutrisiran, while another cohort took the placebo subcutaneously once every three months for up to 36 months. Additionally, a portion of the study population was also already taking a Pfizer (PFE) approved drug for this condition, called Vyndamax, while another subset was not.
- ALNY's goal was to see if the drug reduced death and hospitalizations in both the Pfizer and non-Pfizer populations and the results were quite positive. Specifically, Vutrisiran achieved a 28% and 33% reduction in death and heart-related hospitalizations in those groups, respectively, meeting the study's primary endpoint.
- Furthermore, the study also showed statistically significant improvements across all secondary endpoints in both populations, while the drug demonstrated a safety and tolerability profile that was consistent with its established profile.
- Looking ahead, the next step for ALNY will be to file a New Drug Applications (NDA) with the FDA, which should happen later this year. If the FDA votes to approve Vutrisiran, then ALNY could potentially begin manufacturing the drug in mid-2025.
From a financial standpoint, an approval would represent a major turning point for the company. Currently, analysts are expecting ALNY to generate a little less than $2.0 bln in revenue this year. For some context, PFE's Vyndamax is expected to achieve revenue of at least $4.0 bln this year. ALNY is far from being profitable right now, but that could change quickly if it receives a favorable FDA decision in the coming months.
Broadcom's fast growing AI business to receive another boost with reported ByteDance deal (AVGO)
The explosion of AI-powered data centers and technologies has provided Broadcom (AVGO) with a potent growth catalyst, as illustrated by its beat-and-raise Q2 earnings report on June 12, and that momentum is showing no signs of slowing. According to Reuters, the semiconductor and infrastructure software company is developing new advanced AI chips for China's ByteDance, the parent company of TikTok, as the social media company looks to bolster its supply of chips to support its AI expansion aspirations.
- Previously, ByteDance had sourced most of its chips from NVIDIA (NVDA), but due to the U.S. government's recently placed restrictions on sales of advanced NVDA chips into the Chinese market, ByteDance had to find another supplier.
- Given that ByteDance is already a significant customer of AVGO's, mainly purchasing networking and server components from the company, AVGO is a natural fit to fill that void. Furthermore, the new 5 nm chip being designed by AVGO, and potentially manufactured by Taiwan Semi Manufacturing (TSM), would not be subject to current U.S. restrictions and sanctions.
- At this point, it doesn't appear that a deal has been officially hammered out and that actual manufacturing of the chip hasn't commenced yet. In fact, that might not happen until next year, although AVGO could begin securing orders (bookings) well ahead of the manufacturing timeline.
A new win with ByteDance would add even more fuel to the fire for an AI business that's already red-hot for AVGO.
- In Q2, AVGO's networking end market generated robust revenue growth of 44%, driven by increasing investments from hyperscaler customers as they stockpile AI accelerators. The rapid growth is also evidenced by the fact that AI products accounted for approximately 25% of AVGO's total sales, up from 19% in Q1. All told, revenue from AI products reached a record of $3.1 bln during the quarter.
- This surge in AI demand, coupled with strength in AVGO's Infrastructure Software segment, which continues to benefit from last year's acquisition of VMware, is offsetting weakness in other areas of the business -- namely, in wireless, server storage connectivity, and broadband. In other words, the company's revenue diversification strategy is paying dividends as it becomes less reliant on the very seasonal and highly competitive handset market.
The main takeaway is that this potential design win with ByteDance could translate into the next meaningful growth catalyst for AVGO's burgeoning AI business.
Colgate-Palmolive has investors smiling as it trades to another new all-time high (CL)
Mega cap tech stocks have been dominating the headlines in recent months. Today, we wanted to focus on a consumer products company that is also making new all-time highs: Colgate-Palmolive (CL). The company does a lot more than toothpaste. It operates segments focused on Oral Care, Personal Care, Home Care and Pet Nutrition. Brands include Colgate, Palmolive, Irish Spring, Protex, Sanex, Softsoap, Speed Stick, Ajax, Fabuloso, Hill's Science Diet and many others.
- A few years ago, the company was struggling with declining or roughly flat sales. However, in recent years, it has refocused on growth. Even back then, it had strong core businesses and household penetration around the world. CL explained that, in terms of its big franchises, it needed to expand into adjacencies and adjust its portfolio strategy for channel expansion around the world.
- CL explained that everyone was focused on market share, but CL reoriented around brand penetration. Specifically, CL picked categories and country combinations that were going to be much more oriented towards growth. And it put investment behind this strategy. It also restructured the company around organizational design to boost growth opportunities. And the results are paying off as CL has reported 19 consecutive quarters of yr/yr growth.
- In late April, CL reported a healthy Q1 beat on EPS and revenue. Revenue grew 6.2% yr/yr to $5.07 bln, with organic sales growth in all four categories, all six divisions, and volume and pricing growth on a total company basis. This allowed CL to post 6.2% total growth, which is quite good for a consumer products company. CL was also lapping healthy 6.5% growth in the year ago period.
- CL explained that the focus on balance between pricing and volume growth allowed it to deliver solid volume growth in Q1 even with the continued volume softness in China and the expected headwind from lower private label growth as it transferred more Hill's volume into its Pet Nutrition manufacturing network. Increased advertising spending also helped drive growth across a greater percentage of its portfolio in Q1 as CL wants to keep its biggest brands relevant and vibrant in consumers' minds.
- What stood out to us in Q1 was the company raising its FY24 organic sales growth guidance to +5-7% from +3-5% prior guidance. That is a fairly large jump for a consumer products company. Also, they did that after just one quarter. Oftentimes, companies will wait until later in the year to increase full year guidance, because maybe Q1 was just an outlier and they would rather wait to see how Q2 pans out. To raise this early, we view this as a sign of confidence for how 2024 will play out.
Overall, we concede that Colgate-Palmolive is not as exciting as the AI tech craze. However, the stock has quietly and steadily moved higher since early October, which makes it worth a look. Also, we have heard from many retailers that consumers are focusing more on need than on discretionary items. And CL is much more on the everyday need side (toothpaste, soap, deodorant, pet food etc.), so that is a good trend for them. CL will report Q2 results in late July.
Asana's new share buyback program an expression of confidence in its AI growth prospects (ASAN)
Asana (ASAN), a developer of a work management platform, is jumping sharply higher after announcing a new $150 mln stock repurchase program with CEO Dustin Moskovitz commenting that he believes shares are "undervalued given our immense long-term potential." On a year-to-date basis, the stock had plunged by about 40% prior to today's gains, prompting the company to take advantage of the steep selloff. What's more, ASAN also reaffirmed its Q2 and FY25 revenue guidance, indicating that business remains firm amid an IT spending environment that's characterized by elongated sales cycles and more measured investments.
- While many enterprise software companies are experiencing sluggish demand -- think Salesforce (CRM), Palo Alto Networks (PANW), and MongoDB (MDB) -- sales have held up relatively well for ASAN and its counterparts.
- On May 30, ASAN posted upside Q1 results, as did primary competitors Monday.com (MNDY) on May 15 and Smartsheet (SMAR) on June 5, indicating that IT departments are prioritizing spending on applications that can improve efficiency and drive cost savings, such as work management platforms.
- However, a clear knock against ASAN is that the company is not yet profitable, which hasn't helped its stock. On that note, when the company issued Q1 results, it also forecasted a larger-than-expected Q2 net loss of ($0.09)-($0.08) per share. The company is ramping up its own investments in AI, as reflected in the $83 mln (+8.5% yr/yr) in R&D expenses in Q1, putting pressure on its bottom line.
- ASAN is quite confident that those AI investments are beginning to pay off and will translate into an even more substantial growth driver down the road given that AI is enhancing the overall value of its platform.
- For instance, in the resource planning category, the company's AI assistant can identify workflow bottlenecks and key staffing risks, and in goal management, it can assist in writing goals based on best practices and help to identify which team is best to take on specific projects.
- Furthermore, the company plans to launch license-based AI add-ons and it currently has some specific ones in development.
The main takeaway is that not only does ASAN's new share buyback program provide it with an EPS lever, but it also represents a strong vote of confidence in its growth potential as it ramps up its AI capabilities. ASAN's lack of profitability has been a hindrance for the stock, but the company still expects to be free cash flow positive for the year, which would mark a significant step in its progress.
CarMax drives higher after EPS beat, but business remains challenged amid affordability issues (KMX)
After missing earnings expectations last quarter, CarMax (KMX) bounced back with an EPS beat in Q1 as the used car dealership owner effectively managed expenses and bought back $100 mln in shares of common stock amid a difficult business climate. Those challenging business conditions, which include affordability issues due to high interest rates and tightened lending standards, once again weighed on demand, as reflected in a 3.8% decline in comparable store used unit sales.
- In regard to affordability issues, used car prices have indeed come down from the sky-high levels seen in the wake of the pandemic. According to CarGurus.com, the average used car price is down by more than 12% since June 2022, mainly thanks to a recovery in the supply of used cars.
- However, while KMX has lowered its prices a bit, it has chosen to avoid a deeper price war with its competitors in order to preserve margins. In Q1, KMX's average retail selling prices were down $700/unit, or 2.7%, which wasn't enough to jump start sales.
- Meanwhile, the company continues to have some struggles sourcing newer used vehicles. In particular, KMX is buying far fewer cars from consumers, who are more interested in new cars now that prices have cooled off. Therefore, consumers are increasingly trading in their cars to new car dealerships, leading to a 13.7% drop in vehicle purchases from consumers. This trend has caused KMX to turn to dealers, where the company accelerated its purchases by 70.8%. All told, though, KMX still purchased 8.6% fewer vehicles on a yr/yr basis.
- Based on the 3.7% decrease in retail used vehicle gross profit, it appears that finding used vehicles at attractive price points is even more challenging for KMX. Combined with the 7.5% sales decline, the margin contraction pushed EPS lower by 33% to $0.97.
- A clear bright spot was CarMax Auto Finance (CAF), which saw income grow by 7% yr/yr to $147.0 mln due to growth in average managed receivables and higher net interest margin. This side of the business benefits from higher interest rates, but KMX would gladly trade a little slower growth in CAF for a pullback in interest rates.
Overall, it was another difficult quarter for KMX, which finds itself between a rock and a hard place. If the company cuts prices further to become more competitive, its margins will take an even greater hit. However, if KMX keeps prices relatively higher, volumes will continue to sag, and it risks losing more market share.
|
