Market Snapshot
| Dow | 44424.31 | -140.82 | (-0.32%) | | Nasdaq | 20036.21 | -17.47 | (-0.09%) | | SP 500 | 6019.30 | -99.38 | (-1.62%) | | 10-yr Note |
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| | NYSE | Adv 1573 | Dec 1225 | Vol 945 mln | | Nasdaq | Adv 2277 | Dec 2120 | Vol 7.73 bln |
Industry Watch
| Strong: Utilities, Communication Services, Consumer Staples, Real Estate |
| | Weak: Industrials, Information Technology, Energy, Consumer Discretionary |
Moving the Market
--Meta Platforms (META) planning $60-65 bln in 2025 capex with focus on AI
--Texas Instruments (TXN) and Boeing (BA) disappoint with guidance
--Hesitation in front of big week next week that features mega-cap earnings results, FOMC meeting, Adv. Q4 GDP report, and PCE Price Index
--Deceleration in January S&P Global US Services PMI coupled with drop in consumer sentiment in January stirring some growth concerns
--Losses in mega-cap space
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Closing Stock Market Summary
24-Jan-25 16:20 ET
Dow -140.82 at 44424.31, Nasdaq -17.47 at 20036.21, S&P -99.38 at 6019.30
[BRIEFING.COM] You can't win 'em all -- or so the saying goes, and the stock market didn't win today. Following gains in each of the three prior sessions this week, which culminated in a record closing high for the S&P 500 on Thursday, the S&P 500 and the other indices fell prone to some selling interest in Friday's session.
The losses were modest in scope, relative to the gains registered recently, and they were paced by the mega-cap cohort, which will be the center of earnings reporting attention next week when Apple (AAPL 222.78, -0.91, -0.4%), Microsoft (MSFT 444.06, -4.39, -1.0%), Meta Platforms (META 647.49, +18.33, +2.9%), Amazon.com (AMZN 234.85, -2.90, -1.2%), and Tesla (TSLA 406.58, -3.58, -0.9%) share their quarterly results. The Vanguard Mega-Cap Growth ETF (MGK) was down 0.6%.
META outperformed the group today, however, after announcing a $60-65 billion capex plan for 2025 that will focus on its AI growth initiatives.
That was some palliative news in the early going that helped mitigate the guidance disappointments from Texas Instruments (TXN 185.52, -15.09, -7.5%) and Boeing (BA 176.03, -2.96, -1.7%), but ultimately it wasn't enough to keep the semiconductor group, or the broader market, healthy. The Philadelphia Semiconductor Index declined 1.9%.
There were some individual standouts like Twilio (TWLO 136.23, +22.83, +20.1%), which impressed with its guidance at its Investor Day, but today was largely a day of consolidation after a run that saw the S&P 500 and Nasdaq Composite gain 6.0% and 6.5%, respectively, from their lows on January 13.
The consolidation interest clipped Dow component American Express (AXP 321.37, -4.50, -1.4%), which posted better-than-expected results on robust customer spending activity, and was up 9.8% for the year coming into today's session. It also squelched some of the excitement surrounding the year's first big IPO, as natural gas exporter Venture Global (VG 24.00, -1.00, -4.0%) stumbled out of the gate.
Some of the market's growth vigor was tempered following the preliminary January S&P Global US Services PMI, which showed a notable deceleration to 52.8 from 56.8 in December, and a weaker-than-expected consumer sentiment reading for January that was pressured by unemployment and inflation concerns.
Those reports took precedence in the Treasury market over a better-than-expected Existing Home Sales Report for December and helped drive Treasury yields lower. The 2-yr note yield settled one basis point lower at 4.27% while the 10-yr note yield, which had climbed to 4.66% earlier in the day, settled one basis point lower at 4.63%.
The U.S. Dollar Index (-0.5% to 107.48) also went lower today, as the greenback lost ground against most major currency pairs. The yen (USD/JPY -0.1% to 155.89) was a focal point after the Bank of Japan raised its key policy rate by 25 basis points to 0.50% and communicated a bias to hike again if the economy evolves as expected. Still, it was the euro (EUR/USD +0.8% to 1.0495) that shined today.
Within the S&P 500, it was the utilities (+1.1%) and communication services (+1.1%) sectors that shined brightest and the information technology (-1.1%) and energy (-1.0%) sectors that lost their luster.
Overall, six sectors finished higher and five sectors ended the day lower.
- S&P Midcap 400: +4.9% YTD
- Dow Jones Industrial Average: +4.5% YTD
- S&P 500: +3.7% YTD
- Russell 2000: +3.5% YTD
- Nasdaq Composite: +3.3% YTD
Reviewing today's economic data:
- The preliminary January S&P Global US Manufacturing checked in at 50.1 (an expansion reading) versus the final reading of 49.4 for December. The preliminary January S&P Global US Services PMI decelerated to 52.8 from 56.8 in December.
- The final University of Michigan Index of Consumer Sentiment for January slipped to 71.1 (Briefing.com consensus 73.0) from the preliminary reading of 73.2. The final reading for December was 74.0. In the same period a year ago, the index stood at 79.0.
- The key takeaway from the report is that sentiment weakened as concerns about unemployment and inflation picked up.
- Existing home sales increased 2.2% month-over-month in December to a seasonally adjusted annual rate of 4.24 million (Briefing.com consensus 4.21 million) from an unrevised 4.15 million in November. Sales were up 9.3% from the same period a year ago, which was the largest increase since June 2021. On an annual basis, existing home sales in 2024 (4.06 million) dropped to their lowest level in nearly 30 years at the same time the median sales price reached a record high.
- The key takeaway from the report is that home sales picked up in December despite higher mortgage rates, marking the third straight month of year-over-year gains with more inventory on the market than the same period a year ago.
Indices bleed lower
24-Jan-25 15:30 ET
Dow -204.90 at 44360.23, Nasdaq -147.33 at 19906.35, S&P -28.05 at 6090.63
[BRIEFING.COM] The stock market continues to adhere to the trading trend, which is to say the indices continue to bleed lower in a deliberate manner.
While there isn't a lot of overt strength to be found today in groups across the market, value as a class is exhibiting relative strength versus growth. The latter seems to be taking some performance cues from an underperforming information technology sector (-1.3%) and semiconductor industry. The Philadelphia Semiconductor Index is down 2.0%.
The Russell 3000 Value Index is flat versus a 0.6% decline for the Russell 3000 Growth Index.
Looking ahead to Monday, the December New Home Sales Report (Briefing.com consensus 680K; prior 664K) is the lone economic release of note on the calendar. The earnings calendar, meanwhile, will feature reports from AT&T (T 22.62, +0.09, +0.4%) and SoFi Technologies (SOFI 17.94, -0.09, -0.5%) before the open.
Backsliding
24-Jan-25 15:00 ET
Dow -143.45 at 44421.68, Nasdaq -116.38 at 19937.30, S&P -23.21 at 6095.47
[BRIEFING.COM] The major indices have been backsliding for the better part of the past three hours, moving lower in an orderly fashion with a drawdown in the mega-cap stocks applying most of the pressure.
The Vanguard Mega-Cap Growth ETF (MGK) is down 0.8% after being up 0.4% earlier. That slide has come ahead of earnings reports next week from Microsoft (MSFT 442.32, -4.39, -1.0%), Apple (AAPL 222.73, -0.93, -0.4%), Meta Platforms (META 645.57, +9.12, +1.4%), Amazon.com (AMZN 233.40, -2.02, -0.9%), and Tesla (TSLA 408.86, -3.52, -0.9%).
Notably, breadth is positive at the NYSE and the Nasdaq, but it's worth pointing out that the Russell 2000 (-0.2%) and S&P Midcap 400 Index (-0.2%) have not been exempt from the retreat.
NextEra Energy shines amid S&P 500 dip; CF Industries, Microchip, and Airbnb lag
24-Jan-25 14:30 ET
Dow -148.72 at 44416.41, Nasdaq -121.85 at 19931.83, S&P -21.32 at 6097.36
[BRIEFING.COM] The S&P 500 (-0.35%) is in second place on Friday afternoon, down about 21 points.
Briefly, S&P 500 constituents CF Industries (CF 88.78, -6.46, -6.78%), Microchip (MCHP 56.00, -3.57, -5.99%), and Airbnb (ABNB 127.52, -5.72, -4.29%) pepper the bottom of the standings. CF caught two downgrades this morning, pushing the stock below the 50-day MA (88.88), while MCHP and ABNB slip despite a dearth of corporate news.
Meanwhile, NextEra Energy (NEE 72.95, +3.72, +5.37%) is atop the average following earnings/guidance.
Gold hits near-record high as Nasdaq falters; dollar weakens amid tariff and rate uncertainty
24-Jan-25 14:00 ET
Dow -142.72 at 44422.41, Nasdaq -128.08 at 19925.60, S&P -23.22 at 6095.46
[BRIEFING.COM] The Nasdaq Composite (-0.64%) is today's worst-performing major average, probing session lows in recent trading.
Gold futures settled $13.90 higher (+0.5%) to $2,778.90/oz, ultimately up about +1.1% on the week, near a record high amid President Trump’s push for lower rates and tariff uncertainty.
Currently, the U.S. Dollar Index is down -0.7% today to $107.39.
American Express maxed out after reaching record highs, casuing post-earnings report pullback (AXP)
After soaring by about 130% since late October, to trade at record highs yesterday, credit card company American Express (AXP) seems to have maxed out -- at least temporarily -- after reporting Q4 results before the open today. Although the company edged past EPS expectations, the degree of upside was far more modest compared to recent quarters, and its in-line FY25 EPS and revenue guidance failed to impress, resulting in a profit-taking pullback.
However, AXP's results were solid overall as the company continues to see resilient spending and benefit from its higher income customer base. Additionally, after exiting 2024 with increased momentum, AXP announced that it's raising its quarterly dividend by 17% to $0.82/share from the prior amount of $0.70/share.
- Buoyed by a strong holiday shopping season, spending grew by 8%, representing an uptick from the 6% range AXP has experienced over the past few quarters. Growth was broad based as both the Travel & Experiences (T&E) and Goods and Services (GNS) categories contributed to the jump in spending. Staying true to form, the millennial and Gen Z cohorts outpaced other age groups with spending up 16% yr/yr.
- A core tenet of AXP's growth strategy is to focus on this younger and more affluent demographic. This plan continues to pay dividends as the number of millennial and Gen Z customers with premium products is growing at the fastest rate across the industry.
- On the topic of premium products, AXP refreshed over 40 products globally in 2024, including the U.S. Consumer Gold Card, which has been quite successful with younger customers. In 2025, the company intends to keep its foot on gas, planning to refresh between 35 and 50 products with other enhancements to its membership model on the way.
- Another benefit of having a more affluent customer base is that its customers are more resilient to macroeconomic headwinds, resulting in lower delinquencies. AXP's net write-off rate was just 1.9% in Q4, down 10 bps from the year-earlier period, and consolidated provisions for credit losses decreased by $100 mln yr/yr to $1.3 bln.
- As noted above, the main issue that's holding the stock down is that AXP's FY25 EPS and revenue guidance of $15.00-$15.50 and $71.2-$72.5 bln was only in-line with expectations. Still, the company's outlook equates to solid EPS growth of 12-16% yr/yr and its aim of attaining mid-teens earnings growth in the long run remains in place.
There was plenty to like in regard to AXP's Q4 results, most notably including the 16% yr/yr EPS growth and the upswing in spending growth across its network. Thanks to its affluent customer base and consistent execution, AXP remains a best-in-class name in the credit card industry, despite today's pull-back in the stock, which we chalk up to some profit-taking after the stock's meteoric run to record highs.
Intuitive Surgical encounters a sell-the-news reaction to Q4 numbers (ISRG)
Intuitive Surgical (ISRG -3%) stitched together a decent performance in Q4, delivering sizeable beats on its top and bottom lines. The robotic surgery equipment manufacturer also delivered sound procedure growth during the quarter, with placements expanding at a similar rate. Meanwhile, ISRG reiterated its FY25 guidance, continuing to expect a +13-16% lift in procedures, building off a healthy +17% gain in FY24.
So why are shares down today? ISRG outlined its Q4 expectations two weeks ago, predicting Q4 revenue of $2.41 bln. Shares reached record highs on the guidance, surging by over +14% in just five trading days. It is worth mentioning that the stock was already at record highs before ISRG's Q4 guidance. As such, an impressive jump on top of record highs led the way to moderate profit-taking today.
- As we mentioned yesterday, there were not too many surprises in Q4. ISRG achieved its recently outlined projections, delivering revenue growth of 25.2% yr/yr to $2.41 bln on an approximately 18% improvement in worldwide da Vinci procedures. Meanwhile, ISRG placed 493 da Vinci systems, of which 174 were da Vinci 5, a 19% gain yr/yr.
- With Q4 numbers already priced in, investors place more emphasis on management commentary. A minor negative trend that continued in Q4 was a continuously modest drop in bariatric procedures due to the increasing popularity of GLP-1 medications, declining in the U.S. by a low to mid-single-digit percentage, similar to Q3.
- Conversely, an encouraging trend from the quarter was the uptick in placements, capping off 2H24 with an over 35% jump in U.S. placement growth. However, system utilization, a critical indicator of customer health as it is correlated to patient demand and hospital financial health, ticked up by only a few percentage points. The low utilization, despite substantial placement growth, could signal higher procedure growth going forward. ISRG commented that not every account will be a high-volume account. However, management believes that utilization has room to run.
- Looking at 2025, a slight nitpick is that ISRG expects non-GAAP gross margins to be a little lower compared to 2024, targeting 67-68% compared to 69.1% in the previous year. The range also did not include any potential tariff impacts, which ISRG cautioned could be material. Still, ISRG reiterated its confidence in returning to margins beyond 70% over the medium run as it works to improve margins in specific surgical systems.
With the market already pricing in impressive Q4 numbers, any small blemishes from ISRG were prone to magnification. However, even though a persistent decline in bariatric procedures and a slight dip in margins projected in FY25 were tiny rough patches, today's sell-the-news reaction likely stems more from recent appreciation and rich valuation multiples. While ISRG has plenty of wind at its back, its 72x forward earnings multiple makes it susceptible to quick profit-taking on any unforeseen setbacks, including tariffs.
CSX goes off-track this morning after delivering lackluster Q4 results (CSX)
Railroad operator CSX (CSX) is off-track this morning after reporting Q4 results that were merely in-line with expectations after competitor Union Pacific (UNP) beat Q4 EPS estimates yesterday on cost efficiencies and strength in its intermodal business. Accounting for about 15% of CSX's total revenue, the struggling intermodal business has weighed on the company's results, but there was some hope that Q4 would show some solid improvement after UNP's earnings report. Unfortunately, that wasn't the case as intermodal revenue fell by 5% following last quarter's 2% dip, reflecting the ongoing softness in domestic trucking prices.
This year isn't looking too much better, either, with CSX predicting international intermodal volume to moderate due to uncertainty regarding tariffs and trade policy under the Trump Administration. Overall, the company is forecasting volume growth in the low-to-mid single-digits for FY25 following modest growth of 2% in FY24. In Q4, CSX's volume edged higher by just 1%.
- Another major headwind for CSX and the railroad industry overall is the down cycle that's still occurring in the coal market. Competition from natural gas, which has become much more affordable after prices rocketed higher in 2022 following Russia's invasion of Ukraine in February 2022, is pressuring demand for coal. As such, coal volume decreased once again, falling by 7% with no reprieve on the near-term horizon. In FY25, CSX is forecasting coal volume to be down again due to planned facility shutdowns and coal producer issues.
- On the positive side, the agriculture/food, chemicals, and minerals categories are experiencing healthy demand. In Q4, minerals volume was up by 4%, making it the second strongest category, trailing only chemicals at 6% growth.
- Furthermore, CSX is keeping a tight lid on costs. Labor & Fringe expense was down by 3% to $788 mln driven by lower incentive compensation. Meanwhile, lower fuel costs also provided a significant boost. Overall, the company's expenses were down by 3% yr/yr to $2.4 bln.
- Still, Q4 adjusted operating margin slipped by 290 bps qtr/qtr to 34.3% and non-GAAP EPS fell by about 7% to $0.42 as the pedestrian volume growth and 3% drop in revenue more than offset the cost savings.
Overall, this was a rather lackluster earnings report from CSX and is viewed as a disappointment in light of UNP's better-than-expected results on Thursday. Business conditions remain mixed-at-best, but the company's cost control efforts will continue to be supportive to earnings until underlying trends in coal and intermodal improve.
Twilio surges to a new 52-week high following bullish Investor Day and guidance (TWLO)
Twilio (TWLO +23%) is making a huge move following a bullish Investor Day presentation last night. It offered slight upside guidance for Q4 revs, but more importantly, it offered some bullish longer term guidance on margins and free cash flow. TWLO develops APIs that are used by its customers to plug communication abilities (phone calls, text messaging via SMS, video etc.) into their apps. When you are communicating with you Uber driver, you are using Twilio.
- Twilio explained that it was founded back in 2008 and the original kernel was Voice API. It took a voice capability and democratized it for every single developer to be able to use software, to be able to place a call. However, Twilio has grown a lot since then and has made many innovations. TWLO said its innovation velocity has really sped up in recent years. In the last year alone, it has launched 251 unique SKUs, and expects to do even better in 2025.
- The basic point is that the Twilio flywheel is spinning, both for developers as well as for enterprises. And it's starting to include increasingly higher margin software products that are additive to its communication stack and that will ultimately be used to fulfill on this vision of communications, plus contextual data, plus AI.
- Twilio has been struggling a bit in recent years, which caused some activist investors to push management to refocus priorities and operate more efficiently. A few years ago, TWLO was posting huge yr/yr revenue growth, but that slowed to low-to-mid single digits in recent quarters. TWLO got back to near double-digit growth in Q3 after stabilizing the revenue line over a few quarters after it had fallen for a few quarters. For Q4, TWLO guided to +11% growth last night, so that was good to see.
- TWLO talked a lot on the call about providing more AI-driven capabilities like traffic intelligence on top of its trusted, simple and smart platform. TWLO is using AI to make every customer engagement better and to help customers be more productive. TWLO has AI helpers for developers to help them write code and implement the APIs faster.
- In terms of guidance, what stood out was TWLO saying it expects non-GAAP operating margin in the 21-22% range over the next few years. In Q3, it was 16.1%, so that is a sizable move higher and will flow nicely to the EPS line. TWLO also said it expects $3+ bln plus of cumulative free cash flow between now and 2027. It has guided to FY24 FCF of $650-675 mln, so that is a big jump in the 2025-27 range.
Overall, it was a bullish Investor Day presentation for Twilio. After some struggles in recent years, the company seems to be turning a corner. Management offered some pretty substantial guidance both in terms of margins and FCF for the next few years. That was music to investors' ears following some struggles in recent years. And finally, with its communications base, we see AI as a natural fit to expand its capabilities and TWLO sounds like it's full steam ahead in that regard.
Texas Instruments slips on soft Q1 guidance; industrial market still carving out a bottom (TXN)
Texas Instruments (TXN -6%) ended FY24 on a disappointing note, prompting modest selling pressure today. The analog and embedded chip maker may have exceeded Q4 earnings and revenue forecasts by a decent margin. However, Q1 earnings guidance came up a tad lighter than analysts projected. The underlying cause remains the same as what eroded TXN's quarterly outlook last quarter. The industrial end market, which comprises around 40% of annual revenue, remains stuck in decline, with revenue slipping by low-single-digits sequentially for the third straight quarter. TXN's industrial business has not seen sequential growth since early 2022.
- Ongoing weakness on the industrial side manifested in another quarter of yr/yr earnings and sales contraction. TXN delivered EPS of $1.28, a 12.3% drop, and revs of $4.01 bln, a 1.7% decline. Sequentially, revenue inched 3.4% lower, dragged down by the industrial and automotive markets, which, combined, make up 70% of TXN's annual revenue.
- The automotive market was down roughly 5% sequentially in Q4, following a +7-8% improvement in Q3. China remained an area of relative strength, underpinned by healthy EV adoption. However, similar to Q3, regions outside of China encountered demand softness, including Europe, the U.S., and Japan. The key difference in Q4 was that growth in China was moderately less pronounced than in Q3.
- Even while China's economy wobbles, TXN's business in the region is performing well. The company noted that overall, China revs grew by a mid-teens percentage sequentially, supported by automotive strength as well as solid demand in personal electronics. Unfortunately, on the industrial side, TXN has yet to see the start of cyclical growth in China.
- Conversely, personal electronics and communication equipment maintained a piece of their positive momentum from last quarter, delivering a mid-single-digit and high-single-digit sequential revenue improvement. Despite Q1 typically being a quiet quarter for personal electronics, the market still posted growth, building on a 30% sequential jump in Q3. Likewise, communication equipment continued to trend higher even after recording a 25% pop in Q3.
- Nevertheless, due to stubborn headwinds in industrial and automotive, TXN projected underwhelming Q1 numbers, expecting EPS of $0.94-1.16 and revs of $3.74-4.06, representing another 2-3% sequential drop at the midpoint. Management reiterated that most industrial sectors are hovering at the bottom or already found the bottom. However, there are still some showing larger declines, particularly in industrial automation and energy infrastructure, both of which have yet to reach the trough.
TXN's Q4 report painted much the same picture as last quarter. That is, end markets aside from industrial are performing decently. While automotive did flip negative in Q4, TXN warned of this last quarter, noting that outside of China, the rest of the globe is encountering lingering weaknesses. However, unlike the upbeat response last quarter despite soft guidance, investors are beginning to grow more cautious over a potentially longer-than-expected recovery in TXN's largest end market, producing minor unease today.
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