Market Snapshot
| Dow | 39446.49 | +683.04 | (1.76%) | | Nasdaq | 16660.03 | +464.22 | (2.87%) | | SP 500 | 5319.31 | +119.81 | (2.30%) | | 10-yr Note | -32/32 | 4.00 |
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| | NYSE | Adv 2195 | Dec 557 | Vol 979 mln | | Nasdaq | Adv 3086 | Dec 1159 | Vol 5.7 bln |
Industry Watch
| Strong: Health Care, Energy, Industrials, Financials, Materials, Communication Services |
| | Weak: -- |
Moving the Market
-- Buying in mega caps and chipmakers boosting index performance; LLY +8% after earnings
-- Reacting to weekly initial jobless claims, which decreased from last week, helping calm worries about a US recession
-- Rising market rates, reflecting worries about recession dissipating somewhat
| Closing Summary
08-Aug-24 16:30 ET
Dow +683.04 at 39446.49, Nasdaq +464.22 at 16660.03, S&P +119.81 at 5319.31
[BRIEFING.COM] Stocks rallied today, leaving the major indices with sizable gains. The S&P 500 climbed 2.3%, the Russell 2000 registered a 2.4% gain, the Nasdaq Composite settled 2.9% higher, and the Dow Jones Industrial Average logged a 1.8% gain.
The upside bias followed a pleasing weekly jobless claims report at 8:30 ET. The level of initial claims decreased by 17,000 to 233,000, supporting the notion that concerns about a recession were overblown. This thinking was among the factors driving Tuesday's rebound action.
Market rates jumped after the data in another reflection of moderating recession worries. The 10-yr note yield, which was at 3.93% before 8:30 ET, settled three basis points higher than yesterday at 4.00%. The 2-yr note yield, which was at 3.95% ahead of the data, settled four basis points higher than yesterday at 4.04%.
On a related note, the U.S. Treasury completed this week's sloppy note and bond auction slate with an ugly 30-yr bond auction, which drew the biggest tail in nearly a year.
Gains in mega caps, growth stocks, and semiconductor shares had an outsized impact on index performance. Eli Lilly (LLY 845.31, +73.17, +9.5%) was a standout in that respect after its blowout earnings report and much better-than-expected FY24 guidance. The Vanguard Mega Cap Growth ETF (MGK) rose 2.9%, the Russell 3000 Growth Index settled 3.0% higher, and the PHLX Semiconductor Index (SOX) jumped 6.9%.
Still, many stocks benefitted from broad buying activity. All 11 S&P 500 sectors closed higher and 29 of the 30 Dow components closed with gains.
- S&P 500: +11.5% YTD
- Nasdaq Composite:+11.0% YTD
- S&P Midcap 400: +5.6% YTD
- Dow Jones Industrial Average: +4.7% YTD
- Russell 2000: +2.8% YTD
Reviewing today's economic data:
- Weekly Continuing Claims 1.875 mln; Prior was revised to 1.869 mln from 1.877 mln; Weekly Initial Claims 233K (Briefing.com consensus 242K); Prior was revised to 250K from 249K
- The key takeaway from the report is that the downturn in initial jobless claims -- a leading indicator -- is helping to quell recession concerns.
- June Wholesale Inventories 0.2% (Briefing.com consensus 0.2%); Prior was revised to 0.5% from 0.6%
Looking ahead, there is no notable economic data on Friday.
Stocks move mostly sideways ahead of the close
08-Aug-24 15:35 ET
Dow +581.56 at 39345.01, Nasdaq +382.56 at 16578.37, S&P +100.12 at 5299.62
[BRIEFING.COM] The market is little changed at the index level in recent trading.
The 10-yr note yield settled three basis points higher at 4.00% and the 2-yr note yield settled four basis points higher at 4.04%. On a related note, today's 30-yr bond auction met weak demand.
Paramount Global (PARA), Gilead Sciences (GILD), Expedia Group (EXPE), DXC Technology (DXC), Akamai Tech (AKAM), Unity Software (U), e.l.f Beauty (ELF), The Trade Desk (TTD), Capri Holdings (CPRI), Take-Two (TTWO), and others report earnings after today's close.
Growth stocks, mega caps, semiconductor shares lead market
08-Aug-24 15:00 ET
Dow +665.56 at 39429.01, Nasdaq +435.06 at 16630.87, S&P +115.56 at 5315.06
[BRIEFING.COM] Stocks continue to flow sideways at session highs. The S&P 500 shows a 2.3% gain and the Nasdaq Composite trades 2.8% higher.
Growth stocks have a slight performance edge over value stocks today. The Russell 3000 Growth Index is 2.8% higher and the Russell 3000 Value Index shows a 1.6% gain.
Mega caps and semiconductor stocks have also maintained a performance edge over the broader market today. The Vanguard Mega Cap Growth ETF (MGK) trades 2.7% higher and the PHLX Semiconductor Index sports a 6.0% gain. This price action has contributed to the gain in the info tech sector (+3.0%).
Parker-Hannifin, CF Industries among S&P 500 top gainers post earnings
08-Aug-24 14:30 ET
Dow +720.70 at 39484.15, Nasdaq +496.33 at 16692.14, S&P +127.73 at 5327.23
[BRIEFING.COM] The S&P 500 (+2.46%) is in second place on Thursday afternoon, up about 128 points.
Elsewhere, S&P 500 constituents Parker-Hannifin (PH 566.46, +53.96, +10.53%), Monolithic Power (MPWR 831.24, +74.20, +9.80%), and CF Industries (CF 79.22, +5.92, +8.08%) pepper the top of today's standings. PH and CF are higher following earnings, while MPWR is benefiting from the technology rebound rally.
Meanwhile, Paramount Global (PARA 10.22, -0.24, -2.29%) is lower ahead of earnings tonight.
Haven demand props up gold on Thursday
08-Aug-24 14:00 ET
Dow +655.72 at 39419.17, Nasdaq +463.00 at 16658.81, S&P +117.48 at 5316.98
[BRIEFING.COM] With about two hours to go on Thursday the tech-heavy Nasdaq Composite (+2.86%) holds a decent lead atop the major averages.
Gold futures settled $30.90 higher (+1.3%) to $2,463.30/oz, propelled by growing prospects of a Fed rate cut and safe-haven demand from investors.
Meanwhile, the U.S. Dollar Index is up about +0.1% to $103.26.
Eli Lilly delivers spectacular beat-and-raise report on booming sales of Mounjaro (LLY)
Pharmaceutical giant Eli Lilly (LLY) is doing its best NVIDIA (NVDA) impression, crushing Q2 EPS and revenue estimates and significantly raising its FY24 guidance. While huge beat-and-raise performances are not foreign to the tech sector, they are, however, very rare for well-established companies in the healthcare sector, making LLY's blowout results and guidance look all the more impressive. Unsurprisingly, robust demand for LLY's GLP-1 diabetes and weight loss drugs, Mounjaro and Zepbound, were the primary catalysts.
- Heading into LLY's Q2 earnings report, there was some concern that supply constraints for those two blockbuster drugs would prevent the company from meeting investors' heightened expectations. Those concerns were ratcheted higher after competitor Novo Nordisk (NVO) posted disappointing Q2 results yesterday as sales of its GLP-1 diabetes and weight loss drugs, Ozempic and Wegovy, came up short of estimates.
- Wegovy sales still jumped by 55% to $1.7 bln and Ozempic sales increased by 26% to $4.2 bln, but sales would have been ever stronger if not for supply shortages.
- During a CNBC interview earlier this morning, LLY CEO David Ricks stated that, unlike NVO, it is not constrained by supply. That certainly showed in the Q2 results with sales of Mounjaro soaring by 214% to $3.09 bln and sales of Zepbound hitting $1.2 bln -- both of which topped analysts' estimates.
- The one clear blemish for LLY was the 31% drop in Trulicity revenue to $1.25 bln. Rising competition, including from its own Mounjaro diabetes drug, is hurting demand for Trulicity. However, that's a price that LLY is willing to pay as the breakout success of Mounjaro gives the company its strongest growth catalyst in years, if not decades.
- Looking ahead, there doesn't appear to be any slowdown in sight based on LLY's updated FY24 guidance. After raising its EPS and revenue outlook when it reported Q1 results on April 30, LLY again lifted its guidance -- this time by an even greater amount. Specifically, the company is now forecasting EPS of $16.10-$16.60, up from its prior guidance of $13.50-$14.00, and revenue of $45.4-$46.6 bln, up from $42.4-$43.6 bln.
The main takeaway is that concerns surrounding supply constraints or worries that the GLP-1 bubble has burst, were wiped away with LLY's spectacular Q2 earnings report. Additionally, LLY demonstrated stronger execution than competitor NVO, likely leading to more capital flowing into LLY shares from NVO.
Datadog's beat-and-raise in Q2 triggers a decent jump; cost-conscious environment persists (DDOG)
Data observability platform provider Datadog (DDOG +6%) is seeing its initial gains triggered by another solid beat-and-raise in Q2 becoming slightly more tame as today's session progresses. Upon further inspection, DDOG's overall performance shows a few dings. For instance, the size of DDOG's earnings beat was slimmer than last quarter. Meanwhile, the company's raised FY24 guidance was close to its margin of upside delivered in Q2. Most importantly, DDOG commented that the overall business environment was roughly unchanged from last quarter, meaning that the company continues to face a cost-conscious consumer.
- An unchanged environment was illuminated by similar headline numbers from the past few quarters. Adjusted EPS was $0.43, a penny difference from the past two quarters. Meanwhile, revenue grew by 26.7% yr/yr to $645.28 mln, mirroring the growth rate from the past four quarters.
- Still, DDOG continued to chug along, adding 10% more customers yr/yr to 28,700, with a 13% bump in customers generating annualized recurring revenue (ARR) of $100K+. Platform adoption also continued trending higher, with a 1 pt lift in customers using two or more products and a 4 pt jump in customers using eight or more products.
- Customer usage growth was broadly in-line with DDOG's expectations and consistent with the overall improved trend it experienced over the past several quarters. Enterprises remain the highlight, boasting accelerating yr/yr usage growth. Additionally, small and medium-sized businesses (SMBs) are displaying steadier yr/yr growth trends. This is a critical development, given DDOG's exposure to this cohort. Churn also remains low, while gross revenue retention stayed stable in the mid-to-high 90s.
- AI remains a hot topic. DDOG's platform is integrated with prominent cloud platforms, including Microsoft (MSFT) Azure and Amazon (AMZN) AWS. DDOG collects and unifies all data streaming from cloud environments, making AI a perfect fit. DDOG expanded many of its AI tools, announcing the general availability of LLM observability and expanding its built-in AI copilot Bits AI.
- Looking ahead, DDOG hiked its FY24 guidance, projecting adjusted EPS of $1.62-1.66, up from $1.51-1.57, and revs of $2.62-2.63 bln, up from $2.59-2.61 bln. Like last quarter, DDOG remains prudent in its guidance, given the lingering uncertainty in the market.
DDOG's Q2 report was sufficient to spark decent buying interest today. However, an unchanged environment is not exactly good news, although it is not overly concerning either. There were a few uplifting trends, including stability in the SMB space as well as sustained usage growth in enterprises. As long as these trends persist, DDOG may mount a more meaningful recovery, possibly returning to July highs. However, a cost-conscious spending environment could linger for an extended period, keeping growth rates relatively subdued.
Warner Bros. Discovery slides after goodwill impairment drives sizeable net losses in Q2 (WBD)
Warner Bros. Discovery (WBD -10%) uncovers new multi-year lows today after missing Q2 revenue estimates and reporting a sizeable GAAP net loss due largely to a $9.1 bln goodwill impairment charge from its Networks segment. As was previously announced, WBD lost the rights to the NBA to Amazon (AMZN), which inked a new 11-year agreement alongside Disney (DIS) and NBCUniversal (CMCSA). This development is what WBD referred to as a triggering event, prompting it to enact a full reevaluation of the total amount of goodwill on its books. CEO David Zaslav noted that market valuations for legacy media companies were vastly different just two years ago compared to today; the impairment acknowledges this.
The loss of the NBA stings. Without it, the future of WBD's Networks EBITDA is uncertain. During its conference call yesterday, WBD stated that it is well aware of its responsibility to view whatever strategic options are out there surrounding its Networks segment. The company added that it should not be surprising to see active engagement in any M&A processes or partnerships.
Still, while the impairment charge is grabbing all the attention today, WBD's DTC business, i.e., its streaming service, delivered a relatively strong performance in Q2.
- DTC added 3.6 mln subs sequentially in Q2, an acceleration from the 2.0 mln sequential adds in Q1. WBD's timing regarding the launch of streaming across Europe ahead of the Olympics provided the boost. Management believes that even as the games end, positive momentum will persist, anticipating even greater subscriber growth in Q3.
- WBD is excited about the substantial upside Max -- its primary streaming platform -- has across international markets. Currently, the platform is not present in many sizeable streaming markets, including Australia, Japan, the U.K., Germany, and Italy, regions WBD's competitors, like DIS, have been in for years. WBD intends to roll out Max to these markets over the next 18 to 24 months.
- DTC remained a meaningful driver for advertising, with ad sales boasting its best streaming quarter in Q2. The trend contributed to a reduction in total company advertising declines to (3%) from (7%) last quarter. The ad revenue is encouraging and reaffirms WBD's confidence in achieving positive EBITDA during the second half of the year, placing it on track to reach over $1.0 bln in EBITDA in 2025.
The juxtaposition of WBD's Networks and DTC businesses mirrors what many legacy media giants are facing in today's current climate as cord-cutting continues to drive declining pay-TV subscribers. WBD's goodwill impairment is significant. However, even if WBD re-signed the NBA, the declining distribution and ad revs in its Network business may have eventually led to a write-down.
WBD still commands an attractive suite of other sports, including the MLB and College Football. Nevertheless, the NBA was a core feature of its streaming offering and may slow the upward momentum it is enjoying in DTC. As such, with many moving parts at WBD, it may be best to sit on the sidelines until the future of its Networks segment and how the loss of the NBA will affect its DTC business becomes clearer.
Zillow investors are SOLD! on Q2 results, led by Rentals growth; Zillow also named new CEO (ZG)
Zillow (ZG +19%) is heading sharply higher after reporting Q2 results last night. Zillow reported its largest EPS beat since 2Q23. Revenue rose 13% yr/yr to $572 mln, nicely above prior guidance of $525-540 mln. Adjusted EBITDA jumped 21% yr/yr to $134 mln, also well above $85-100 mln prior guidance. Zillow also guided Q3 revs in-line. Besides earnings, the other big news was Zillow promoting COO Jeremy Wacksman to be its new CEO.
- Let's start with earnings. Residential segment revenue grew 8% yr/yr to $409 mln, nicely above $375-385 mln prior guidance. Zillow said its Premier Agent revenue benefited from investments in top- and mid-funnel experiences that drove improvements in overall connection rates. Zillow also saw better-than-expected conversion rates.
- Zillow has been integrating its touring technology into its buyer flow process and it has been a hit with customers. Zillow says touring is meaningfully improving its ability to identify high-intent customers and connect them with Premier Agent partners. Zillow has seen touring connections convert at 3x the rate of other actions on Zillow. Last month, Zillow nearly doubled the number of markets with Real Time Touring.
- While Residential is by far Zillow's largest segment, ZG has leaned hard into adjacent areas like rentals and mortgages. Zillow is focused on building up its Rentals segment, which now represents 20% of total revenue and is growing rapidly. In Q2, Rentals revenue grew 29% yr/yr to $117 mln, primarily driven by multifamily revenue, which grew 44% yr/yr. Total active Rentals listings rose 16% yr/yr to an industry-leading 1.9 mln listings in June.
- Mortgages revenue growth accelerated in Q2, up 42% yr/yr to $34 mln. Purchase mortgage origination volume jumped 125% yr/yr. These successes come despite a persistently challenging mortgage-rate environment.
- Finally on the new CEO, Jeremy Wacksman has been promoted from COO to CEO, succeeding co-founder Rich Barton, who becomes co-executive chair alongside co-founder Lloyd Frink. Wacksman was recruited from Microsoft in 2009 when Zillow was very small. His responsibilities have steadily grown in scope, spanning product, marketing and operations. His tenure as COO the past three years meant all product, engineering, design, marketing reported to him.
Overall, Zillow performed well with a healthy EPS and revenue beat with solid guidance. The company is best known for home sales, but branching into Rentals and Mortgages has been a smart move. Rentals growth was particularly impressive in Q2, and now makes up 20% of revs. Doing sales and rentals makes sense, because with higher rates, home sale volume has declined. However, that has boosted rental demand. As rates fall, we expect the opposite, so the two areas complement each other.
Finally, we think investors are excited about the new CEO. We think the company will benefit from fresh leadership and from someone well-versed with all facets of Zillow's operations. More generally, we think founders are great but they have a different skill set and perspective. We like to see them hand over the reins when a company gets large.
Monster Beverage dragging today as slowing discretionary spending weighs on growth (MNST)
As many consumers continue to tighten their belts and cut back on spending, removing that extra energy drink or two during the week has become a relatively painless way to trim costs. For Monster Beverage (MNST), though, this trend has been anything but painless, as illustrated by its disappointing Q2 results that included its slowest sales growth since sales fell by 0.9% in the pandemic-impacted quarter of 2Q20.
- With sales of its namesake Monster Energy drinks sinking by 3%, the company's overall sales grew by just 2.4% to $1.9 bln, missing analysts' expectations for the fourth time in the past five quarters. MNST believes the weakness is an industry-wide problem, stating that retailers reported a decrease in convenience store foot traffic and that it has seen a shift in retail towards more dollar store channels.
- Indeed, MNST is not alone in its struggles. Coffee giant Starbucks (SBUX) has been stuck in a rut, reporting downside Q3 revenue and a global comp decline of 3% on July 30, as it has seen a slowdown in store traffic, especially from the more occasional customer
- Competitive pressures, though, also appear to be cutting into MNST's sales. MNST reported that its market share of the energy drink category in the convenience and gas channel decreased to 34.7% from 35.7%, according to Nielsen. Up-and-coming competitor Celsius (CELH), which is viewed as a "better-for-you" energy drink option, reported a top-and-bottom line beat on August 6 with revenue up 23.4%. Its market share came in at 7.9%.
There are some positives, though.
- Most notably, MNST's margins continue to trend higher as aluminum can and freight costs come down, and as pricing actions kick in. For Q2, gross margin expanded by 110 bps yr/yr to 53.6%. With MNST planning to increase prices again on November 1, this time by 5% for its core brands and packages in the U.S., the upward trend in margins looks poised to continue. The company also said that its reviewing opportunities for price increases in its international markets.
- Additionally, MNST is rolling out less expensive energy drinks, including Predator and Fury. The company is pleased with the initial rollout of those drinks and its looking to expand its affordable energy drink portfolio.
Overall, it was another disappointing quarter for MNST as cost-conscious consumers rein in spending in discretionary categories, such as energy drinks. Longer-term, MNST's strong market positioning and brand power should continue to work in its favor as household penetration grows in the energy drink category.
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