Market Snapshot
| Dow | 42052.19 | +288.73 | (0.69%) | | Nasdaq | 18239.92 | +144.77 | (0.80%) | | SP 500 | 5728.80 | +23.35 | (0.41%) | | 10-yr Note | -6/32 | 4.36 |
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| | NYSE | Adv 1229 | Dec 1468 | Vol 880 mln | | Nasdaq | Adv 2309 | Dec 1948 | Vol 5.9 bln |
Industry Watch
| Strong: Consumer Discretionary, Health Care, Information Technology |
| | Weak: Utilities, Real Estate, Energy, Materials |
Moving the Market
-- Buying on weakness after yesterday's tech-led selloff and hope that Fed stays on rate-cut path
-- Gains in mega cap stocks and chipmakers having outsized impact on indices
-- Treasury yields higher after volatile response to the weak October jobs report
-- Digesting big batch of earnings news
| Closing Summary
01-Nov-24 16:25 ET
Dow +288.73 at 42052.19, Nasdaq +144.77 at 18239.92, S&P +23.35 at 5728.80
[BRIEFING.COM] The stock market closed with gains after yesterday's slide. The major indices closed off session highs, though, as buyer enthusiasm dissipated and some mega caps turned lower. Apple (AAPL 223.29, -2.62, -1.2%) was a standout in that respect, closing lower in response to earnings. Amazon.com (AMZN 197.93, +11.53, +6.2%) provided some offsetting support after its earnings results.
The upside bias stemmed from buy-the-dip interest and was in reaction to this morning's economic data, which supported the belief that the Fed will stay on a steady rate-cut path. The October jobs report was much weaker than expected, showing a huge miss relative to expectations even when accounting for the effects of the hurricanes and strikes.
Nonfarm payrolls increased by 12,000 and private nonfarm payrolls decreased by 28,000. Also, the ISM Manufacturing Index was weaker than expected in October.
Treasuries had a volatile response to the data, keeping buying efforts in check in the equity market. The 10-yr yield dropped as low as 4.23% in response to the data, but settled at 4.36%, which is eight basis points higher than yesterday.
The equal-weighted S&P 500 still eked out a 0.1% gain and five S&P 500 sectors closed higher. The consumer discretionary sector was a standout, jumping 2.4% thanks to the gain in AMZN. The information technology sector was the next best performer, settling 0.6% higher.
On the flip side, the rate-sensitive real estate (-1.1%) and utilities (-2.3%) sectors were the worst performers in response to rising rates.
- Nasdaq Composite: +21.5% YTD
- S&P 500: +20.1% YTD
- Dow Jones Industrial Average: +11.6% YTD
- S&P Midcap 400: +11.6% YTD
- Russell 2000: +9.0% YTD
Reviewing today's economic data:
- October Nonfarm Payrolls 12K (Briefing.com consensus 120K); Prior was revised to 223K from 254K, October Nonfarm Private Payrolls -28K (Briefing.com consensus 105K); Prior was revised to 192K from 223K, October Avg. Hourly Earnings 0.4% (Briefing.com consensus 0.3%); Prior was revised to 0.3% from 0.4%, October Unemployment Rate 4.1% (Briefing.com consensus 4.1%); Prior 4.1%, October Average Workweek 34.3 (Briefing.com consensus 34.2); Prior was revised to 34.3 from 34.2
- The key takeaway from the report is that it has reinvigorated the market's view that the Fed will stay on a steady rate-cut path that will include cutting the target range for the fed funds rate by 25 basis points at next week's FOMC meeting and again at the December FOMC meeting.
- October S&P Global US Manufacturing PMI - Final 48.5; Prior 47.8
- October Construction Spending 0.1% (Briefing.com consensus 0.0%); Prior was revised to 0.1% from -0.1%
- The key takeaway from the report is that private construction activity was subdued in September.
- October ISM Manufacturing Index 46.5% (Briefing.com consensus 47.6%); Prior 47.2%
- The key takeaway from the report is that it has reinforced the understanding that conditions in the U.S. manufacturing sector remain weak.
Looking ahead to Monday, market participants will receive the September Factory Orders report at 10:00 ET.
Treasuries settle lower after choppy session
01-Nov-24 15:40 ET
Dow +296.56 at 42060.02, Nasdaq +159.60 at 18254.75, S&P +30.03 at 5735.48
[BRIEFING.COM] The market moved slightly lower in recent action, but major indices trade above prior closing levels.
The 10-yr yield settled eight basis points higher today, and 13 basis points this week, to 4.36%. The 2-yr yield settled four basis points higher today, and ten basis points this week, to 4.20%.
Looking ahead to Monday, market participants will receive the September Factory Orders report at 10:00 ET.
Mega caps underperform for the week, but lead today
01-Nov-24 15:05 ET
Dow +351.26 at 42114.72, Nasdaq +157.39 at 18252.54, S&P +33.49 at 5738.94
[BRIEFING.COM] The S&P 500 is still 1.2% lower this week and the Nasdaq Composite is 1.4% lower on the week. The Dow Jones Industrial Average and Russell 2000 are little changed from last Friday.
Mega cap stocks are in a leadership role today, but lagged the broader market this week. The Invesco S&P 500 Equal Weight ETF (RSP) sports a 0.7% decline this week while many mega caps show sizable declines in response to earnings news. Tesla (TSLA 248.05, -1.80, -0.7%), which is 7.9% lower this week after reporting earnings, and Apple (AAPL 222.82, -3.09, -1.4%), which shows a 3.7% loss this week, are among the influential losers.
The Vanguard Mega Cap Growth ETF (MGK) is 1.7% lower this week.
Waters, Charter pop in S&P 500 after earnings
01-Nov-24 14:30 ET
Dow +323.09 at 42086.55, Nasdaq +153.81 at 18248.96, S&P +31.80 at 5737.25
[BRIEFING.COM] The S&P 500 (+0.56%) is in second place on Friday afternoon, having moved mostly sideways over the prior half hour.
Elsewhere, S&P 500 constituents Waters (WAT 379.67, +56.56, +17.50%), Charter Comm (CHTR 365.95, +38.34, +11.70%), and lululemon athletica (LULU 321.38, +23.48, +7.88%) pepper the top of the standings. WAT and CHTR move higher on earnings, while LULU finds four-month highs despite a dearth of corporate news.
Meanwhile, Virginia-based power generation firm AES (AES 14.82, -1.49, -9.18%) is today's top laggard following last night's mixed Q3 report.
Gold adds slightly to weekly losses on Friday
01-Nov-24 14:00 ET
Dow +289.94 at 42053.40, Nasdaq +147.55 at 18242.70, S&P +29.40 at 5734.85
[BRIEFING.COM] The tech-heavy Nasdaq Composite (+0.82%) is today's top-performing major average with about two hours to go in the session.
Gold futures settled less than $1 lower (flat) to $2,749.20/oz, ultimately down -0.2% on the week, as equities and bond yields perk up to close out the week.
Meanwhile, the U.S. Dollar Index is up about +0.3% to $104.29.
Atlassian gaps significantly higher on an impressive beat-and-raise in Q1 (TEAM)
Atlassian (TEAM +19%) is attracting many buyers to its team today as shares rocket to their best levels since April following an impressive beat-and-raise in Q1. The collaboration software developer was coming off a dismal quarter, headlined by weak Q1 (Sep) revenue guidance and disappointing FY25 (Jun) financial targets.
A main point of contention last quarter was that TEAM forecasted FY25 revenue growth of approximately +16%, several points below its longer-term +20% goal. Management commented on the gap, noting that macroeconomic challenges and unfavorable yr/yr comparisons would create some headwinds in the short term. However, TEAM remained confident in reaching at least +20% growth in the years following.
- TEAM overcame these short-term hurdles quickly, delivering decent-sized top and bottom-line beats in Q1. The company lifted its EPS by 18% yr/yr and revenue by 21% to $1.19 bln. AI played a pivotal role in the quarter, with TEAM's AI-powered product, Rovo, garnering meaningful customer interest. The company's focus on serving enterprises has also helped boost its quarterly performance, especially given the current economic environment, which creates disproportionate problems for smaller organizations.
- The outsized strength in Q1 numbers is shoring up TEAM's confidence in the year ahead. The company raised its FY25 revenue growth outlook to +16.5-17.0%.
- The macroeconomic environment remains an issue, though. TEAM acknowledged that companies, particularly small and medium-sized organizations, continue to scrutinize their budgets. However, AI is proving to be a considerable growth driver, increasing organizations' interest in adopting the technology.
TEAM's Q1 report was a major confidence boost for investors. Demand for AI is unrelenting, acting as rocket fuel for TEAM as it looks to regain lost ground from an all-time high posted in late 2021. Unless demand for AI wavers, TEAM remains positioned to continue clearing near-term macroeconomic hurdles and reaccelerate growth over the next few years.
Intel springs higher as its aggressive cost-reduction efforts begin to take shape in Q3 (INTC)
Intel (INTC +7%) springs higher today despite registering substantial net losses in Q3, falling well short of analyst expectations as margins plunge. The U.S.-based chip maker has had a rough year. As the AI race intensified, with Advanced Micro (AMD) and NVIDIA (NVDA) taking a commanding lead, INTC has struggled to make it far from the starting line. The gap has continuously widened as INTC struggles with a deteriorating PC landscape, ailing foundry growth, and skyrocketing costs.
Last quarter, massive changes were announced. INTC suspended its dividend and announced a cost reduction plan, including reducing its headcount by at least 15%. Since then, rumors have emerged, including Qualcomm (QCOM) expressing interest in acquiring INTC to the company divesting its foundry business. With so much swirling around INTC, it may not be surprising that the stock still trades in a relatively tight range despite today's pop.
- INTC's net loss of $0.46 per share in Q3, significantly below its $(0.03) prediction, stemmed primarily from a sizable impairment related to Intel 7 equipment, reflecting excess COVID-era spending that cannot migrate to more advanced nodes. For instance, INTC transitioned to EUV processing, an essential technology for manufacturing advanced chips, which boasts performance improvements over Intel 7.
- The net losses also branched from INTC's aggressive cost-reduction actions. During Q3, INTC completed most of its headcount reduction and is on track to its 15% target before year's end. Additionally, the company reduced its CapEx by over 20% relative to its plan at the start of the year. Also, INTC has begun simplifying and streamlining the components of its portfolio, including moving its edge business into its Client Computing Group (CCG) segment and refocusing its Network and Edge (NEX) portfolio on networking and telecommunications.
- INTC reiterated its forecasts driven by these actions. The company expects spending to be down by over $10.0 bln in 2025, resulting in net CapEx of $12-14 bln. INTC also still expects positive free cash flow in FY25. For Q4, the progress in cost reduction supported INTC's $0.12 adjusted EPS projection.
Still, plenty of work is needed to fully turn around INTC's struggling operations. The company's Data Center and AI (DCAI) segment must begin to make inroads competitively. During Q3, the segment delivered a 9% jump in revs yr/yr to $3.3 bln, far below the over 100% growth AMD posted. Meanwhile, Foundry revenue slid by 8% in Q3 while operating losses ballooned to $5.8 bln, primarily due to impairment charges. INTC anticipates losses to persist at around the same rate in Q4, excluding the impairment charge. Also, INTC's core CCG segment reversed course from last quarter, posting a 7% revenue decline to $7.3 bln, underpinning ongoing customer inventory adjustments.
It was an active quarter for INTC as it continues on an ambitious turnaround path. Costs are expected to decline, and technology improvements may bolster INTC's AI business. However, the road back to reasserting its dominance as a chip manufacturer remains filled with obstacles, especially as competitors continue to widen their lead.
Amazon has seen significant reacceleration of AWS growth in recent qtrs (AMZN)
Amazon (AMZN +7%) is making a strong move today after reporting a sizeable EPS beat for Q3 last night. This was its largest EPS upside quarter since 3Q23. Also, Q3 operating income jumped 56% yr/yr to $17.41 bln, well above the high end of prior guidance of $11.5-15.0 bln. Revenue rose a healthy 11% yr/yr to $158.88 bln, which also was above the high end of prior guidance of $154.00-158.50 bln.
- As we said in our preview, we had some concerns about the Q4 guidance because this will be a compressed holiday season with the fewest number of shipping days between Black Friday and Christmas Eve since 2019. However, AMZN guided total revenue in-line at $181.50-188.50 bln. It also guided to healthy Q4 operating income of $16-20 bln. AMZN says it's encouraged by the start of the holiday season.
- Let's start with the Stores segment. AMZN saw growth of 9% in North America and 12% in the international segment. At a time when consumers are being careful about how much they spend, AMZN says it continues to lower prices and ship even more quickly. AMZN sees this resonating with customers as its unit growth continues to be strong and even outpaces its revenue growth. Prime Day in July was its largest and most successful Prime Day.
- Turning to AWS, segment sales increased 19% yr/yr (+19% CC) to $27.5 bln. That matched the brisk pace we saw in Q2 and what stands out is that sales growth has been accelerating even as this segment gets larger: +19% CC in Q2, +17% CC in Q1, and +13% CC in Q4. AMZN said it has seen significant reacceleration of AWS growth over the last four quarters. AMZN sees more enterprises growing their footprint in the cloud, as evidenced by recent wins.
- AMZN says companies are focused on new efforts again, spending energy on modernizing their infrastructure from on-premises to the cloud. In the last 18 months, AWS has released nearly twice as many machine learning and GenAI features as the other leading cloud providers combined. Its AI business is now a multi-billion-dollar revenue run rate business that continues to grow at triple digits. It is growing more than 3x faster at this stage of its evolution than AWS itself grew.
- Turning to Advertising Services, segment revenue grew +19% CC to $14.33 bln. This was a bit lower than recent quarters: +20% CC in Q2, +24% CC in Q1, +26% in Q4, +25% CC in Q3, +22% CC in Q2. However, this segment's base is getting larger. Advertising remains an important contributor to profitability in the North America and International segments. AMZN sees many opportunities to further expand its ads offering.
Overall, investors like what they see in AMZN's Q3 report. There is really nothing to complain about, maybe some slight deceleration in its ads segment but that is nitpicking. Stores growth was solid and AWS was very impressive. AMZN also reported big upside with its EPS and operating income, so profitability metrics were very good in Q3. Also, AMZN put our concerns about a condensed holiday season to rest.
Apple down mildly following soft DecQ revenue growth guidance; more AI features forthcoming (AAPL)
Apple (AAPL -1.7%) takes a minor hit today after the iPhone maker's Q1 (Dec) revenue growth forecast comes up a tad lighter than expected. Apple projected a low to mid-single digit percentage lift in revs yr/yr for the holiday quarter. The high end of this outlook represents an uptick from the +2.1% growth delivered during the year-ago period. However, the lower bound would mean little improvement over last year's holiday quarter.
Given the buzz around AI, investors are left feeling letdown today by Apple's forecast. CEO Tim Cook did mention during the call that iOS 18.1 adoption, which includes some of the Apple Intelligence, i.e., AI, features unveiled earlier this year, is occurring at twice the rate of iOS 17.1 adoption, underpinning decent interest for Apple Intelligence, which is only available on the latest iPhone 16 lineup and iPhone 15 Pro models. However, without this interest manifesting in robust yr/yr growth during DecQ, unease over macroeconomic and competitive pressures may be creeping forward.
Concerns over sluggish iPhone demand started to brew shortly after the iPhone 16 unveiling in mid-September, when estimated preorders were relatively soft. The problem may not be demand but timing. Apple's decision to release its newest operating system before including all of the features unveiled on stage may be generating upgrade hesitation. This past week, Apple made the first set of AI features available in U.S. English for iPhone, iPad, and Mac users. More features will be released in December. The decision by Apple to ship an unfinished iOS could be eroding DecQ revenue guidance.
Outside of mild guidance, Apple put together another solid quarter, boasting growth across the board.
- iPhone sales reached another Q4 (Sep) record, expanding by 6% yr/yr to $46.2 bln, surpassing street estimates by $1.4 bln. Growth occurred across every geography. Apple continued to express excitement over India, where overall revenue set an all-time record.
- Mac sales crept 2% higher to $7.7 bln, sustaining a consistent low-single-digit improvement from last quarter. Apple released its M4 Macs earlier this week, touting meaningful performance improvements over the prior generation, preparing them for further AI-related enhancements.
- iPad revenue climbed by 8% to $7.0 bln. Given its technological advantage in the tablet market, the iPad remains a magnet that can pull consumers into the Apple ecosystem, generating interest in other Apple products.
- Wearables was a weak point, dropping by 3% to $9.0 bln. The Apple Watch installed base did reach a record high, with over half of customers being new to the product. Like the iPad, the Apple Watch can also act as a way to attract more users to the Apple ecosystem.
- Services was the standout segment in SepQ, setting an all-time revenue record of $25.0 bln, a 12% jump yr/yr. Paid subscriptions grew by double-digits in the quarter, with total subscriptions more than double where Apple was four years ago, reflecting substantial growth since the pandemic.
Bottom line, DecQ revenue guidance was disappointing. However, Apple's SepQ report showcased the steady demand for its expansive portfolio. With additional Apple Intelligence features rolling out over the next few months, iPhone demand may ultimately pick up meaningful steam heading into 2025.
Uber speeding in reverse as growth concerns return after missing Gross Bookings expectations (UBER)
At first glance, Uber's (UBER) Q3 earnings report looks quite solid as the rideshare and food delivery company drove past EPS and revenue expectations. However, the sizable GAAP EPS beat was partly due to a $1.70 bln benefit from net unrealized gains on equity investments, making the upside performance mostly irrelevant from an operational standpoint. Furthermore, while revenue of $11.19 bln came in slightly ahead of estimates, the key demand metric that most investors and analysts home in on -- Gross Bookings -- fell a bit short at $41.0 bln, putting demand and growth concerns back under the spotlight.
- For Q3, Gross Bookings grew by 20% on a constant currency (CC) basis, representing a modest downtick from last quarter's growth of 21%. The slight deceleration in growth seems trivial, and not worthy of sending the stock lower by 11%, but the issue is that the trend is pointing lower. UBER's Q4 Gross Bookings guidance of $42.75-$44.25 bln equates to yr/yr growth of 18% at the midpoint.
- The fact that it's the Mobility segment -- UBER's largest business at 51% of total Q3 Gross Bookings -- that's experiencing the slowdown is only adding to the concern. More specifically, Gross Bookings growth decelerated to 24% in CC from 27% last quarter, while Gross Bookings growth for Delivery remained steady at 17%. As such, it doesn't come as a surprise that rival Lyft (LYFT) is selling off in sympathy today ahead of its Q3 earnings report on November 6.
- By no means has business fallen off a cliff for UBER's rideshare business. In fact, trips per monthly active platform consumer (MAPC) were up 4% yr/yr, reaching an all-time high, and Gross Bookings grew across all use cases. Airport trips and weekday trips were particularly strong. What's hurting the stock, though, is the perception that conditions have softened as macroeconomic headwinds take a toll.
- Despite the nasty selloff, there are some notable positives, too. For instance, adjusted EBITDA margin expanded by one percentage point yr/yr to 4.1%, a new record for UBER, driven by strong growth in the high-margin advertising business (+80% yr/yr) and efficiency gains. For Q4, the mid-point of UBER's adjusted EBITDA and Gross Bookings guidance indicates that adjusted EBITDA margin will tick higher to 4.2%.
- UBER also believes it has plenty of runway for growth in Mobility. CEO Dara Khosrowshahi commented that about 45% of the U.S. population lives in places without reliable on-demand transportation service. Looking ahead, the company plans to expand into more suburban markets by focusing on better pricing strategies for longer distances.
The main takeaway is that growth expectations are getting reset a bit lower after UBER missed Gross Bookings expectations and guided for a further slowdown in Q4. Although UBER's rideshare business has displayed impressive resiliency, the Q3 earnings report showed that it's not completely immune to macroeconomic headwinds.
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