Market Snapshot
| Dow | 42706.56 | -25.57 | (-0.06%) | | Nasdaq | 19864.97 | +243.30 | (1.24%) | | SP 500 | 5975.38 | +32.91 | (0.55%) | | 10-yr Note | -1/32 | 4.61 |
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| | NYSE | Adv 1153 | Dec 1561 | Vol 1.0 bln | | Nasdaq | Adv 2262 | Dec 2116 | Vol 9.6 bln |
Industry Watch
| Strong: Information Technology, Materials, Communication Services, Consumer Discretionary |
| | Weak: Utilities, Consumer Staples, Real Estate, Energy |
Moving the Market
-- Choppy action in Treasuries keeping buying in check
-- AI enthusiasm after Foxconn reported a 15% yr/yr increase in record Q4 revenues
-- Gains in the mega cap space and chipmakers
-- President-elect Trump saying in a Truth Social Post that it was wrong of the Washington Post to suggest his tariff policy would be pared back
-- Technicals in play with the S&P 500 above its 50-day moving average (5,948)
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Closing Summary
06-Jan-25 16:30 ET
Dow -25.57 at 42706.56, Nasdaq +243.30 at 19864.97, S&P +32.91 at 5975.38
[BRIEFING.COM] The stock market started the session in rally-mode, but buying faded by the close. The S&P 500 traded up as much as 1.3% at its session high before closing 0.6% higher than Friday. The Nasdaq Composite closed 1.2% higher while the Dow Jones Industrial Average (-0.1%) and Russell 2000 (-0.1%) closed with declines.
The S&P 500 and Nasdaq Composite benefitted from buying interest in the mega cap and chipmaker space, which also faded from initial levels. NVIDIA (NVDA 149.43, +4.96, +3.4%), which outperformed ahead of CEO Jensen Huang's keynote address at the Consumer Electronics Show (CES) tonight at 6:30 p.m. PST (9:30 p.m. ET), traded up as much as 5.3% at its high.
NVIDIA's outperformance was also linked to AI enthusiasm after Foxconn reported a 15% yr/yr increase in record Q4 revenues. This enthusiasm was a driving factor in the initial move higher for the broader equity market, along with some technical support after the S&P 500 opened above its 50-day moving average (5,948) and maintained a posture above that level through the entire session.
Buying interest dissipated due to choppy action in Treasuries, and after President-elect Trump said in a Truth Social Post that it was wrong of the Washington Post to suggest his tariff policy would be pared back. The 10-yr yield, which moved as low as 4.58% and as high as 4.64%, settled at 4.61%.
Seven S&P 500 sectors closed lower while four settled higher. The rate-sensitive utilities (-1.1%) and real estate (-1.4%) sectors logged the largest losses. The communication services (+2.1%) and information technology (+1.4%) sectors closed at the top of the leaderboard, reflecting leadership from mega cap and chipmaker components.
- Russell 2000: +1.6% YTD
- Nasdaq Composite: +2.9% YTD
- S&P 500: +1.6% YTD
- S&P Midcap 400: +1.1% YTD
- Dow Jones Industrial Average: +0.4% YTD
Reviewing today's economic data:
- Factory orders decreased 0.4% month-over-month in November (Briefing.com consensus -0.3%) following an upwardly revised 0.5% increase (from 0.2%) in October. Excluding transportation, factory orders rose 0.2% on the heels of a 0.2% increase in October. Shipments of manufactured goods edged 0.1% higher in November following a 0.2% decline in October.
- The key takeaway from the report is that the weakness in factory orders was concentrated in the volatile transportation equipment space; otherwise, there was a modest pickup in order activity.
- December S&P Global US Services PMI 56.8 (prior 58.5) versus final reading of 56.1 for November. The dividing line between expansion and contraction is 50.0, and although the final December reading was revised down from the preliminary reading of 58.5, the final reading for December was above the final reading for November, indicating that the pace of expansion accelerated versus the prior month.
Looking ahead to Tuesday, market participants receive the following data:
- 08:30 ET: November Trade Balance (Briefing.com consensus -$77.9B; prior -$73.8B)
- 10:00 ET: December ISM Services PMI (Briefing.com consensus 53.0%; prior 52.1%)
- 10:00 ET November JOLTS - Job Openings (prior 7.744M)
Small cap stocks underperform
06-Jan-25 15:35 ET
Dow -21.92 at 42710.21, Nasdaq +232.23 at 19853.90, S&P +31.81 at 5974.28
[BRIEFING.COM] Small cap stocks are underperforming their larger peers. The Russell 2000 trades fractionally lower while the S&P 500 (+0.6%) and the Nasdaq Composite (+1.2%) trade higher.
Market breadth is also mixed now, reflecting more selling interest than index performance might suggest. Decliners now lead advancers by a slim margin at the NYSE while advancers outpace decliners by a narrower 4-to-3 margin (versus 5-to-3 earlier) at the Nasdaq.
Looking ahead to Tuesday, market participants receive the following data:
- 08:30 ET: November Trade Balance (Briefing.com consensus -$77.9B; prior -$73.8B)
- 10:00 ET: December ISM Services PMI (Briefing.com consensus 53.0%; prior 52.1%)
- 10:00 ET November JOLTS - Job Openings (prior 7.744M)
Treasury market keeping buying in check in equities
06-Jan-25 15:00 ET
Dow -30.56 at 42701.57, Nasdaq +171.85 at 19793.52, S&P +24.07 at 5966.54
[BRIEFING.COM] The Dow Jones Industrial Average dipped below its prior close over the last half hour. The S&P 500 also moved lower, still showing a 0.4% gain and trading above its 50-day moving average (5,948).
Seven of the S&P 500 sectors are lower now led by the rate-sensitive real estate (-0.9%) and utilities (-0.8%) sectors.
The choppy action in Treasuries has contributed to recent downside moves. The 10-yr yield, which hit 4.58% this morning, jumped to 4.64% before pulling back to 4.61%.
S&P 500 rises as Micron and peers shine on AI demand; Palantir drops on downgrade
06-Jan-25 14:30 ET
Dow +51.83 at 42783.96, Nasdaq +223.57 at 19845.24, S&P +36.57 at 5979.04
[BRIEFING.COM] The S&P 500 (+0.62%) is in second place on Monday afternoon.
Briefly, S&P 500 constituents Micron (MU 99.51, +9.64, +10.73%), Steel Dynamics (STLD 119.28, +6.13, +5.42%), and Align Tech (ALGN 220.05, +11.79, +5.66%) pepper the top of the standings. MU and fellow semiconductor peers jump on Monday in reaction to Foxconn (HNHPF 11.34, +0.34, +3.14%) posting record Q4 revenue on surging AI server demand, STLD is decently higher after peer Commercial Metals' (CMC 51.19, +2.30, +4.70%) in-line results were capped by better-than feared commentary, while ALGN caught a premarket upgrade to Outperform at Leerink citing growth prospects.
Meanwhile, Palantir Technologies (PLTR 75.19, -4.70, -5.88%) slides to the bottom of the average after Morgan Stanley resumed coverage this morning at Underweight, tgt $60 (-24.9% from Friday's close).
Nasdaq leads gains; Gold slips as yields rise
06-Jan-25 14:00 ET
Dow +78.09 at 42810.22, Nasdaq +241.63 at 19863.30, S&P +42.39 at 5984.86
[BRIEFING.COM] The tech-heavy Nasdaq Composite (+1.23%) is atop the standings even though gains have moderated somewhat since the morning portion of the session.
Gold futures settled $7.30 lower (-0.3%) to $2,647.40/oz, slipping as rising Treasury yields are offsetting a weaker dollar; investors also hold their breath ahead of Wednesday's ADP employment data as well as the FOMC's minutes from its Dec. 17-18 policy meeting.
Currently, the U.S. Dollar Index is down about -0.6% to $108.31.
FuboTV scores huge win with new Disney agreement, transforming it into sports streaming force (FUBO)
Sports streaming company FuboTV (TV), which has been crushed under the weight of a fiercely competitive market that includes heavyweights such as Walt Disney's (DIS) ESPN and Fox Corporation (FOXA), is experiencing an unexpected revival today. After seeing its stock languish below the $2 mark for most of last year, FUBO is starting 2025 off with a bang as its shares skyrocket higher after entering into a definitive agreement with DIS that dramatically transforms the company from a "left for dead" name into a force in the sports streaming space.
Given FUBO's struggles and poor financial track record -- the company has never posted a profitable quarter in its history -- it may seem surprising that a bellwether company like DIS would get tangled up with FUBO. However, the underdog FUBO may have had an ace up its sleeve that forced DIS's hand, pushing the entertainment giant to take a 70% ownership stake in FUBO and agreeing to combine its Hulu + Live TV product with FUBO's sports offerings.
- Last February, FUBO filed an antitrust lawsuit against DIS, FOXA, and Warner Bros. Discovery (WBD), alleging that their new sports streaming service called Venu unfairly blocked FUBO out from offering some of its sports content on the new platform. Fast forwarding to this past August, FUBO scored a win after a judge granted a preliminary injunction to block Venu's launch as the lawsuit continued, adding that Venu would substantially lessen competition.
- Rather than taking a litigation risk that could potentially sink the Venu joint venture, DIS instead hammered out an agreement with FUBO in which FUBO will drop all outstanding litigation related to Venu Sports, thereby paving the way for DIS, FOXA, and WBD to launch their service. In exchange, those three companies have agreed to pay FUBO $220 mln, while DIS also committed to providing FUBO with a $145 mln term loan in 2026.
- That payment is just the cherry on top, though, for FUBO. By combining with Hulu + Live TV, the company's North American subscriber base is expected to soar to 6.2 mln and its revenue is projected to surge to over $6.0 bln. For some context, FUBO guided for FY24 paid subscribers of 1.665-1.705 bln and revenue of $1.58-$1.60 bln when it reported Q3 results on November 1.
- FUBO will also have access to ESPN and ABC, enabling it to create a new sports and broadcasting service with DIS's channels representing the centerpiece of that service. It's worth noting that DIS has plans to launch a new Direct-to-Consumer sports package later this year that could further benefit FUBO.
The main takeaway is that this agreement with DIS is truly a game changer for FUBO, reviving a beaten-down name into a real power in the sports streaming industry.
Uber and Lyft riding higher on share buyback program, easing robotaxi concerns (UBER)
With the turning of the calendar to 2025, Uber's (UBER) fortunes have improved materially after the rideshare and food delivery company saw its stock dive by 30% from the 2024 highs set in October through the end of the year. That steep decline drove the impetus for a $1.5 bln accelerated share repurchase program that UBER announced this morning, providing some more fuel for the stock's U-turn higher. With today's gains, UBER is now up by about 10% to start the year.
The bullish comments from CFO Prashanth Mahendra-Rajah are adding to the positive sentiment. Specifically, in this morning's press release, he stated that UBER is entering 2025 with "considerable momentum" and that the stock is "undervalued relative to the strength of our business." On that note, UBER is currently trading with a reasonable 1-year forward P/EBITDA of about 19.7x.
Concerns over robotaxis and how self-driving technology could put a serious dent in the rideshare industry have cut into UBER's and Lyft's (LYFT) market caps, but an encouraging article from the Wall Street Journal today is helping to calm investors' jitters.
- The article highlights the fact that while UBER and LYFT scrapped their plans to develop their own robotaxi fleets during the pandemic to cut back on costs, both companies are forging key partnerships that should position them to be major players in a robotaxi emergence. For instance, UBER inked a deal with Alphabet's (GOOG) Waymo that will bring autonomous rideshare vehicles to Atlanta later this year, while LYFT has signed partnerships with self-driving tech companies Mobileye (MBLY) and Nexar.
- Given that UBER and LYFT already have the platforms and technologies in place to operate huge rideshare businesses at scale, robotaxi companies like Waymo -- and possibly Tesla (TSLA), which expects to launch its cybertaxi before 2027 -- may find it more cost effective to enter into profit-sharing arrangements with UBER and LYFT, rather than create a new rideshare platform from scratch.
- Indeed, Waymo and TSLA have their hands full already and are sinking billions into their robotaxi ambitions. General Motors (GM) pulled the plug on its Cruise robotaxi program last month due to the substantial capital required to fund that unprofitable business. Furthermore, it could be years before robotaxis are commonplace across the U.S., although there are some early signs that the public is becoming a little more comfortable with driver-less vehicles. In California, Waymo had nearly 500,000 riders in August, up from less than 20,000 a year earlier.
The main takeaway is that concerns about market share losses at the hands of robotaxis may be a bit premature. In fact, UBER and LYFT may ultimately benefit as robotaxi manufacturers lean on their rideshare platforms to attract new riders.
Paychex turns lower while Paycor (PYCR) soars on reports of a potential merger (PAYX)
Paychex (PAYX -1%) investors start to check out today following a Bloomberg report noting that the payroll, human capital management (HCM), and HR services provider is discussing purchasing its smaller competitor Paycor (PYCR +23%). While no financial details have been leaked, shares of PYCR are bouncing to their best levels since October 2023, giving it a market cap of over $4.0 bln. Even though PAYX is slipping today on the news, if PYCR is acquired for around $4.0 bln, PAYX would be paying a reasonable 5.5x projected FY24 sales. The uncertainty surrounding the transaction details is likely producing modest profit-taking in PAYX today, especially following the stock's roughly +20% gain since July 2024 lows.
- While there is no confirmation of a takeover, the deal would be a good fit for both firms. PYCR is growing at around four times the rate of PAYX, which has been delivering mid-single-digit revenue growth over the past few years. Underpinning PYCR's healthy growth rate is its refreshing, alternative platform that helps lure customers away from legacy technology, such as that offered by PAYX, as well as other established giants in the industry, like Automatic Data (ADP).
- PYCR is focused on the mid-market, where roughly 50% of the total HCM market lies. By adding PYCR, PAYX takes a meaningful leap forward in one of its core long-term objectives: bolstering its middle-market HCM business. In fact, in Q2 (Nov), mid-market was a notable area of growth for PAYX as businesses in this section of the industry largely expressed optimism about 2025, with hiring intentions in November bouncing to the highest level since late 2023.
- PAYX mentioned last month that its M&A pipeline might be the largest it has seen in years as players in the industry return toward rational realizations about value, prompting companies to discuss more potential deals. PAYX added that it would be focused on opportunities that would add scale in new or existing markets, such as where it has been allocating capital, i.e., mid-market. PAYX also commented that it is looking for new growth platforms adjacent to its platform, making PYCR a perfect choice.
- Consolidation is becoming more likely as competitors begin to reach par with each other regarding capabilities across the HCM suite. Also, consolidating such a fragmented industry, where numerous companies offer HR and payroll services, can be beneficial to customers looking to avoid the hassle of constantly switching vendors to find a better price or more comprehensive tools. PAYX has touched on this in past earnings calls, noting that clients are increasingly interested in building long-term relationships with their HCM partners.
As a competing HR and payroll services provider, PYCR's business and clientele complement PAYX nicely. With U.S. employment remaining durable despite encountering numerous economic challenges over the past couple of years, setting up for a hiring rebound, PAYX could acquire PYCR at a ripe moment.
Commercial Metals higher despite in-line EPS as results/commentary was better than feared (CMC)
Commercial Metals (CMC +5%) is making a nice move today following Q1 (Nov) results this morning. We think investors are interpreting CMC's Q1 results for this steel producer as better-than-feared. Adjusted EPS was in-line, while revenue fell 4.7% yr/yr to $1.91 bln, but that was better than analyst expectations. The company said its results continue to be hindered by economic uncertainty that has weighed on new construction activity, pressuring steel pricing and margins.
- CMC does not provide specific guidance, but did say it expects Q2 (Feb) results to decline from Q1. However, longer term, management sounded more bullish. CMC is very encouraged by recent conversations with customers about the coming quarters. Outside of construction, measures of both big and small business confidence have improved significantly over the last two months. The palpable shift in sentiment gives CMC confidence that current softness is transient.
- In North America, demand in Q1 was strong, supported by late season construction activity as job sites worked to make up for days lost to weather disruptions earlier in calendar 2024. Shipments of finished steel products increased by 4.4% yr/yr. Looking ahead, the construction pipeline in North America remains healthy as indicated by CMC's downstream bidding activity. Despite good demand in North America, segment adjusted EBITDA margin fell sharply to 12.4% from 16.8% a year ago.
- Its European segment continues to struggle with market conditions similar to recent periods. Long-steel consumption remained substantially below historical levels. CMC explained that improving Polish demand has been largely offset by increased import flows from neighboring nations that have sought an outlet for product not consumed within their home markets.
- Finally, its Emerging Businesses Group saw a 4.4% sales decline and were negatively impacted by an increased sales mix of lower margin products and several large project delays within CMC's Tensar division, which are now expected to commence later in FY25. Additionally, a slowing truck and trailer market has hampered earnings within CMC's Impact Metals business.
Recent bearish guidance from Nucor (NUE) and Steel Dynamics (STLD) likely led to low expectations from investors heading into this report. Our sense is they are pleased that results were not worse. It sounds like Q2 will be another rough quarter, but it seems like investors are focusing on CMC's bullish comments for the quarters ahead of that. CMC is a bit different from other steel producers because it has a huge focus on steel rebar, which is used in construction and infrastructure projects like roads and bridges. Infrastructure spend is expected to pick up in calendar 2025.
Rivian Automotive floors it today following upbeat Q4 production and delivery numbers (RIVN)
Rivian Automotive (RIVN +22%) is flooring it today, moving to its best levels since July following uplifting Q4 production and delivery numbers. The electric truck and SUV maker produced 12,727 vehicles and delivered 14,183 during the quarter, ending FY24 with 49,476 vehicles produced and 51,579 delivered. The company's FY24 numbers were consistent with its guidance of 47,000-49,000 vehicles produced and 50,500-52,000 delivered.
- Why would meeting expectations evoke such an energetic response today? The market was forecasting weaker results. Street estimates pegged RIVN's Q4 deliveries at under 14,000, ending the year at around 50,900, well below RIVN's actual delivery figure. Production results also crushed estimates, which were similarly bearish due to supply shortages RIVN touched on in October.
- Following underwhelming Q3 production and deliveries, RIVN slashed its FY24 production target to 47,000-49,000 from 57,000. The supply shortages stemmed from RIVN's Gen 2 relaunch. Over half of the parts in these new models were changed, prompting RIVN to lean on different suppliers. Given this context, topping the high end of its lowered guidance by 476 units is encouraging enough to light a match under the stock today.
- At the same time, RIVN commented today that a component shortage impacting its ability to produce Enduro motors will no longer constrain its future production. In early November, RIVN mentioned that its team was focused on addressing this component shortage. Clearing this overhang so quickly is another underlying factor in today's upward momentum.
With a significant component shortage out of the way and RIVN demonstrating its ability to shift gears quickly and exceed its lowered FY24 production and delivery guidance, market participants are excited over RIVN's potential in 2025. RIVN has a massive opportunity ahead with its joint venture with Volkswagen AG (VWAGY). The up to $5.8 bln in proceeds RIVN expects to receive from the joint venture combined with its $6.7 bln in cash provide the company with ample funds to power its growth roadmap, including the ramp of R2, its midsize SUV starting at under $50,000, which is expected to be released in 2026.
Nevertheless, RIVN has run into many speedbumps in the past, which can lead to heightened uncertainty and performance variability each quarter. Furthermore, with the Federal Reserve signaling fewer-than-anticipated rate cuts in 2025, financing costs may remain an issue. RIVN's vehicles are typically priced above $70,000, prompting consumers to lean on financing options. Lastly, investors may want profitability to improve, especially with RIVN projecting a modest GAAP gross profit in Q4. Hiccups in improving its bottom line could disappoint investors.
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