Market Snapshot
| Dow | 43461.21 | +33.19 | (0.08%) | | Nasdaq | 19286.93 | -237.08 | (-1.21%) | | SP 500 | 5983.25 | -29.88 | (-0.50%) | | 10-yr Note | +2/32 | 4.403 |
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| | NYSE | Adv 1218 | Dec 1488 | Vol 1.1 bln | | Nasdaq | Adv 1535 | Dec 2840 | Vol 7.5 bln |
Industry Watch
| Strong: Health Care, Real Estate, Financials, Energy, Consumer Staples |
| | Weak: Technology, Consumer Discretionary, Communication Services, Utilities |
Moving the Market
-- Wait-and-see in front of busy week; earnings from notable retailers, several Treasury auctions, market-moving economic releases
-- Losses in the mega cap space
-- Responding to tariff talk
| Closing Summary
24-Feb-25 16:30 ET
Dow +33.19 at 43461.21, Nasdaq -237.08 at 19286.93, S&P -29.88 at 5983.25
[BRIEFING.COM] The stock market had a mixed showing. Early weakness invited a buy-the-dip response, especially in the mega cap space, which was not maintained into the close. The major indices ultimately settled near their lows of the day.
The S&P 500 was 0.5% lower and the Nasdaq Composite declined 1.2% while the Dow Jones Industrial Average settled 0.1% higher after trading up as much as 0.6%.
Selling pressure increased after President Trump said at press conference that tariffs on Mexico and Canada are going forward on schedule after the one-month delay. This acknowledgement, along with outsized declines in names like NVIDIA (NVDA 130.28, -4.15, -3.1%), which reports earnings Wednesday afternoon, Microsoft (MSFT 404.00, -4.21, -1.0%), and Amazon (AMZN 212.71, -3.87, -1.8%) drove the afternoon retreat.
Apple (AAPL 247.10, +1.55, +0.6%), meanwhile, was a winning standout today after revealing plans to invest over $500 billion domestically over the next four years. There was also speculation that the commitment could result in a tariff exemption for the company.
The losses in NVDA and MSFT offset the positive price action in APPL, leading the S&P 500 technology sector to close 1.4% lower. Losses in other mega caps led the consumer discretionary (-0.9%) and communication services (-0.6%) sectors to close lower.
Treasuries settled with gains in a continuation of safe-haven trading that began last week. The 10-yr yield dropped three basis points to 4.39% and the 2-yr yield dropped two basis points to 4.17%.
There was no US economic data of note today, but this week's lineup includes potentially market-moving releases like the Fed's preferred inflation gauge in the form of PCE Price Indexes on Friday.
Looking ahead, market participants receive the following economic data on Tuesday:
- 9:00 ET: December FHFA Housing Price Index (prior 0.3%) and December S&P Case-Shiller Home Price Index (Briefing.com consensus 4.4%; prior 4.3%)
- 10:00 ET: February Consumer Confidence (Briefing.com consensus 103.1; prior 104.1)
Stocks move lower after tariff talk
24-Feb-25 15:30 ET
Dow +137.01 at 43565.03, Nasdaq -127.56 at 19396.45, S&P -6.04 at 6007.09
[BRIEFING.COM] The stock market moved lower heading into the close.
Many stocks declined after President Trump at press conference said that tariffs on Mexico and Canada are going forward on schedule after the one-month delay.
Separately, Treasuries settled with gains. The 10-yr yield dropped three basis points to 4.39% and the 2-yr yield dropped two basis points to 4.17%.
Looking ahead, market participants receive the following economic data on Tuesday:
- 9:00 ET: December FHFA Housing Price Index (prior 0.3%) and December S&P Case-Shiller Home Price Index (Briefing.com consensus 4.4%; prior 4.3%)
- 10:00 ET: February Consumer Confidence (Briefing.com consensus 103.1; prior 104.1)
NVDA dropping, weighing down indices
24-Feb-25 15:00 ET
Dow +161.28 at 43589.30, Nasdaq -120.16 at 19403.85, S&P -4.65 at 6008.48
[BRIEFING.COM] The S&P 500 dropped below its prior close in recent trading.
Downside moves coincided with NVIDIA (NVDA 132.17, -2.28, -1.7%) and other mega caps extending losses.
The Vanguard Mega Cap Growth ETF (MGK) shows a 0.5% decline and the PHLX Semiconductor Index (SOX) trades 1.5% lower.
Earnings season continues with results from OKE, CLF, others
24-Feb-25 14:35 ET
Dow +223.50 at 43651.52, Nasdaq -78.28 at 19445.73, S&P +6.44 at 6019.57
[BRIEFING.COM] The major indices haven't moved much at the index level in recent trading.
The market-cap weighted S&P 500 trades 0.1% higher and the equal-weighted S&P 500 trades 0.4% higher.
Earnings season continues this week with results from ONEOK (OKE 98.76, +0.66, +0.7%), Cleveland-Cliffs (CLF 11.26, -0.08, -0.8%), Diamondback Energy (FANG 155.74, -0.38, -0.2%), KBR (KBR 49.12, -0.02, -0.04%), Coterra Energy (CTRA 28.03, -0.10, -0.4%), and others after the close.
Focus on the DJIA
24-Feb-25 14:00 ET
Dow +228.40 at 43656.42, Nasdaq -55.55 at 19468.45, S&P +9.49 at 6022.72
[BRIEFING.COM] There will be some extra interest in the Dow Jones Industrial Average this week, mainly because there will be earnings results shared by several components.
Home Depot (HD 384.21, -1.10, -0.3%) reports before Tuesday's open while NVIDIA (NVDA 134.21, -0.22, -0.2%) and Salesforce (CRM 310.01, +0.21, +0.1%) both report after Wednesday's close. These stocks are little changed at the moment, but have seen some decent intraday swings between their lows of the morning and their current levels. NVIDIA, for example, had been down 2.8%.
Currently, Nike (NKE 80.59, +4.09, +5.4%) is the biggest percentage gainer in the Dow today after being upgraded from Hold to Buy at Jefferies, which also issued a $115 price target.
Goldmans Sachs (GS 632.10, +6.50, +1.0%), which is the highest-priced Dow component, is lending an influential hand to the upside move by the Dow Jones Industrial Average today.
Microsoft slips on reports of canceled data center leases; spurs minor AI demand concerns (MSFT)
Microsoft (MSFT -1%) encounters selling pressure today, as shares tag six-month lows, a 10% drop from levels before its Q2 (Dec) earnings report last month, following a TD Cowen report that the tech giant canceled leases for U.S. data center capacity. The report is spurring modest concern among investors today as they question MSFT's move, speculating that it could be due to overcapacity within the AI computing space.
- Today's news is surprising, given MSFT's commentary during its Q2 earnings call last month. At the time, CFO Amy Hood stated that the company would likely be AI capacity constrained in Q3 (Mar) but would balance out to be roughly in line with near-term demand by the end of FY25 due to its sizeable capital investments.
- AI capacity constraints were a common theme among big tech during the current earnings season. Amazon (AMZN) mentioned that AWS could be growing faster if not for some capacity constraints, fueling its significant step-up in CapEx for this year. Meanwhile, Alphabet (GOOG) registered a slight deceleration in Cloud growth in Q4, partly due to capacity constraints. Management noted that it exited 2024 with more demand than it had available capacity, also leading to its increased investment in CapEx for 2025.
- If MSFT's canceled leases result from a reversal in the trend of limited supply, similar reports could begin to unfold across big tech.
- There is the other possibility that because of Microsoft-backed OpenAI's partnership with Oracle (ORCL) as part of the Trump administration's Stargate venture, where Softbank (SFTBY), OpenAI and ORCL are forming a $100 bln joint venture to fund AI infrastructure, OpenAI could be transitioning its workloads to ORCL.
- If this scenario is the underlying cause of MSFT's canceled leases, it would be a much less worrisome development. It also would align with the broader commentary from big tech surrounding an environment ripe with AI demand outstripping the current AI infrastructure.
While MSFT pulling back on converting Statements of Qualification into signed leases is stirring up some volatility today, it seems more likely that it has not so much to do with a sudden decrease in AI demand and is more consistent with OpenAI's partnership with ORCL and SFTBY, whereby OpenAI is moving some of its AI workloads to ORCL's servers. MSFT is still planning on pouring $80 bln into its many investments, including AI and cloud infrastructure, up dramatically from the $56 bln spent in FY24, making the cut to an estimated 200 megawatts of data center power not overly concerning. At the same time, AMZN, GOOG, and Meta Platforms (META) are committed to allocating a combined $240 bln to AI infrastructure. Additionally, Alibaba (BABA) disclosed today that it is investing roughly $53 bln in AI. These considerable sums highlight the unwavering demand for the technology in the U.S. and abroad.
Alibaba plunges on plans to significantly ramp up AI spending in 2025 (BABA)
After a rough four-year stretch, Alibaba (BABA) has been on fire in 2025, rocketing higher by nearly 60% on rising hopes that the China-based eCommerce and cloud computing company would see an AI-powered acceleration in growth. Today, however, shares are cooling off considerably after BABA disclosed on its own blog that it intends to invest at least RMB 380 bln in AI and cloud computing over the next three years. In the wake of Alphabet's (GOOG) mixed 4Q24 earnings report on February 4, shares of GOOG suffered a similar fate as the tech giant's whopping FY25 capex guidance of $75.0 bln created plenty of angst among investors.
- A heightened level of scrutiny regarding companies' exorbitant spending plans around AI has intensified during this current earnings season as investors question the potential return on investment. Those concerns were front and center on January 20 when DeepSeek-R1 was released to the public. The Chinese AI model and chatbot was reportedly developed for a fraction of the cost it took to develop OpenAI's ChatGPT, leaving many to wonder if pouring tens of billions into AI investments is a wise use of capital.
- For BABA, the company's investments are beginning to pay off, although the upswing in growth hasn't been too dramatic just yet. In Q3, total revenue growth accelerated to 7.6% from 5.2% in Q2, driven by a 13% increase for BABA's Cloud Intelligence Group. That marked the unit's fastest growth in three years.
- This acceleration in growth is being driven by AI-related products, which achieved triple-digit yr/yr growth for the sixth consecutive quarter. Among those products, BABA's Qwen-VL -- a large language model-based AI assistant -- is especially providing a boost. In the coming months, BABA is expected to launch a new AI model that's built on its Qwen 2.5 LLM.
- Although BABA didn't provide a specific capex number in its Q3 earnings report, the closely linked net cash used in investing activities metric showed a substantial yr/yr increase. Specifically, for the nine months ended December 31, 2024, net cash used in investing activities jumped by 247% yr/yr to RMB 145.9 bln.
The main takeaway is that BABA's ambitious spending plans for FY25 are creating some anxiety that the company's bottom-line will take a sizable hit this year, negating the momentum that it has garnered. Following the stock's huge run higher to start 2025, shares were also due for a pullback and this development is providing the impetus to take some profits off the table.
Domino's Pizza unable to deliver in Q4, impacted by pressured consumer spending (DPZ)
Domino's Pizza (DPZ -4%) is trading lower after wrapping up 2024 on a bit of down note. We cautioned in our earnings preview on Friday that we were nervous heading into this report following a rare miss from Wingstop (WING) last week and it played out that way. The pizza chain giant missed slightly on EPS. Revenue grew just 2.9% yr/yr to $1.44 bln, which also was a bit light. Same store comps were also weak. The silver lining was that DPZ announced a 15% increase to its dividend.
- US comps came in at just +0.4%, which was below prior guidance and it continues its downward trend: +3.0% in Q3, +4.8% in Q2. US comps were driven by carryout at +3.2% but delivery comps were down -1.4%. The delivery comp was impacted by continued macro and competitive pressures that put pressure on its low income customers. DPZ was able to benefit from 2.3% of pricing and Uber contributed 2.7% of sales in Q4. Results were impacted by a higher carryout mix, which carries a lower ticket than delivery. Traffic was flat for the quarter, partially driven by a slight headwind from a mid-week NYE.
- International comps were a bit of a bright spot at +2.7% CC, which was slightly ahead of internal expectations. DPZ saw improvements in Asia that were driven by strong comps in India and broadly across Europe. DPZ also said it continues to see strong paybacks in its two largest growth markets, which are China and India.
- DPZ does not provide specific guidance, but it provided some general color. DPZ believes the combination of pressured consumer spending and a value driven QSR marketplace will continue in 2025. DPZ expects its 2025 US comp to be in line with its +3% long-term guide as a result of traffic-driving catalysts, aggregators and loyalty. However, DPZ expects US comps will be lower in 1H25 as compared to 2H25. DPZ expects international comps in 2025 to be about +1-2%.
- On the positive side, strong economics continue to drive store growth, which was a tailwind to market share growth in 2024 orders. Also, DPZ is benefitting from a revamped Domino's Rewards program and its entrance into the aggregator channel with UberEats. In addition, DPZ continued to see significant same store comp growth in its carryout business, up over +6% in 2024.
Overall, this was a disappointing quarter for Domino's Pizza. The EPS and revenue miss were a letdown, but the declining US comp trend stood out to us as the biggest problem. Unfortunately, it sounds like the weakness in US comps will continue in 1H25 as a result of pressured consumer spending and a QSR market that is much more value-focused. When we saw that rare miss from WING last week, we worried about other fast food / delivery chains and DPZ in particular. Unfortunately, those concerns were justified.
Rivian in reverse after issuing disappointing FY25 deliveries guidance (RIVN)
Despite achieving its first positive gross profit margin and comfortably exceeding 4Q24 revenue expectations, Rivian Automotive (RIVN) is driving lower today over concerns that FY25 may shape up to be a disappointing year for the upstart EV maker. Those concerns are grounded in the company's tepid 2025 deliveries guidance of 46,000-51,000 vehicles, which fell well short of expectations and signaled a yr/yr decrease of nearly 7% at the midpoint. RIVN stated that "changes to government policies and regulations" could further impact a challenging demand environment. Those changes may include the elimination of the $7,500 EV tax credit that has helped to support the EV market.
- A solid quarter was also anticipated after RIVN reported better-than-expected Q4 deliveries of 14,183 vehicles in early January. That deliveries report eased investors' worries that the component shortages impacting the production of RIVN's Enduro motors would linger and constrain future production. On that note, the company commented in the Q4 Shareholder Letter that it does not expect the component shortage to impact operations in 2025.
- The good news didn't stop there as RIVN also reiterated that it remains on track to launch its mass-market R2 model in 1H26. Better yet, the midsize SUV is expected to cost far less to produce than the R1. More specifically, the R2 bill of materials is forecasted to be approximately half of the R1 bill of materials, enabling RIVN to make significant progress on its path to profitability.
- Indeed, the company is already making major strides in that regard. In Q4, RIVN generated positive automotive gross profit of $110 mln, compared to $(611) mln in the year-earlier period. Lower material costs driven by engineering design changes and commercial supplier negotiations provided a boost. On an adjusted EBITDA basis, RIVN is fast approaching the breakeven point with Q4 adjusted EBITDA coming in at $(277) mln, marking an improvement of $729 mln on a yr/yr basis.
- However, if demand begins to sour in 2025, due to macro and/or regulatory changes, RIVN's path to profitability could take a detour. Higher production, leading to greater manufacturing efficiencies, is the key to a stronger bottom-line for automakers. If the company is forced to slow production amid soft demand conditions, its timeline for profitability could be pushed out.
From a company-specific standpoint, RIVN is executing well and the fact that its R2 platform remains on track for 1H26 is a major positive. However, factors that are out of its control -- life tariffs, tax credits, and interest rates -- are creating an uncertain environment that's taking some of the charge of its stock.
Dropbox gets dropped as paying users contract in Q4 while revenue guidance falls short (DBX)
Dropbox (DBX -15%) is getting dropped today following its grim Q1 and FY25 revenue outlook, stemming largely from its decision to hold onto FormSwift, a document-generating application. The company had plenty of steam heading into Q4 results last night, climbing by over +50% since August lows and flirting with multi-year highs reached in February 2024.
Unfortunately, the cloud-based file storage and sharing platform's momentum was abruptly halted following another round of bearish guidance. During its past rally, investors were willing to shrug off a consistent string of downbeat quarterly revenue projections, focusing on AI potential and DBX's cost-cutting initiatives, including a 20% workforce reduction in October. However, this time around, there were too many glaring weak points for investors to overlook.
- A consistent theme throughout DBX's past three quarters was a sequential uptick in paying users, jumping by as much as 63,000 in Q2. However, in Q4, paying users contracted by 15,000 sequentially, marking the first sequential drop since 4Q23. DBX attributed the decline to pressure on down-sell, churn, and team expansion activity sparked by increased pricing sensitivity.
- Making matters worse, DBX anticipates paying users to decline by about 300,000 in 2025, half of which stems from a reduced investment in FormSwift. Following a lengthy strategic review, DBX announced it would hold onto FormSwift but eliminate marketing for the product, generating paying user headwinds.
- Its decision is dragging down Q1 and FY25 revenue growth projections by 80 bps and 150 bps, respectively. The company expects Q1 revs of $618-621 mln, a 2% dip yr/yr at the midpoint, marking DBX's first quarter of yr/yr net sales compression in over five years, and FY25 revenue of $2.465-2.480 bln, a 3% drop at the midpoint.
- Moving ahead, DBX is looking at a few areas in which to reaccelerate growth. For starters, the company plans to continue optimizing its Teams business, pulling on certain levers, such as pricing optimizations and churn improvements, to offset nagging headwinds. Furthermore, DBX is turning its core business into a launchpad for Dash, its AI-powered universal search function. Management sees the majority of its File Sync and Share (FSS) subscribers, which would translate to around 0.5 mln business accounts, as good prospects for Dash.
- However, dampening the enthusiasm for Dash is the fact that DBX does not anticipate a material contribution to revenue from the product this year. Meanwhile, competitors like Sharefile (PRGS) and Box (BOX) already offer similar functions.
DBX's Q4 report was decent, maintaining its impressive streak of bottom-line upside. However, gloomy revenue guidance branching from DBX's move to keep FormSwift but allocate resources toward Dash is deflating investor sentiment significantly today. Since DBX is still in the early innings with Dash, investors are booking profits today as the company's shift in attention is expected to noticeably dent growth this year.
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