Market Snapshot
| Dow | 42762.87 | +443.13 | (1.05%) | | Nasdaq | 19529.93 | +231.50 | (1.20%) | | SP 500 | 6000.36 | +61.06 | (1.03%) | | 10-yr Note |
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| | NYSE | Adv 1909 | Dec 860 | Vol 938 mln | | Nasdaq | Adv 3189 | Dec 1287 | Vol 7.33 bln |
Industry Watch
| Strong: Energy, Communication Services, Consumer Discretionary, Financials |
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Moving the Market
-- Nonfarm payroll growth beats May expectations (139,000; Briefing.com consensus 130,000)
-- Tesla (TSLA) rebounds from Thursday plunge
-- Treasury yields rise after employment report, which raises some doubts about timing of next rate cut
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Closing Stock Market Summary
06-Jun-25 16:30 ET
Dow +443.13 at 42762.87, Nasdaq +231.50 at 19529.93, S&P +61.06 at 6000.36
[BRIEFING.COM] The stock market started today's session on a high note, comforted by a May employment report that was better than feared and also, frankly, good enough to lend confidence to the idea that the U.S. economy has enough labor market footing to remain on a growth trajectory.
The Treasury market sensed as much, too. Treasury yields shot higher following the report's release and never regrouped. Yields settled at their highs for the day (4.04% for the 2-yr, up 14 basis points, and 4.51% for the 10-yr, up 12 basis points), having also digested the implication that the relatively good employment data, which also featured a larger-than-expected 0.4% increase in average hourly earnings, will likely leave the Fed reluctant to cut rates.
That view was corroborated by the fed funds futures market. The probability of a 25 basis point cut at the July FOMC meeting was reduced to 16.5% from 31.4% yesterday, while the probability of a 25 basis point cut at the September FOMC meeting was tapered to 60.6% from 73.9% yesterday.
The dollar reacted in kind to the relatively good data and the rise in rates, evidenced by a 0.5% gain in the U.S. Dollar Index to 99.20.
Stocks, for their part, were treated kindly for most of the day, with the exception of some individual issues like lululemon athletica (LULU 265.27, -65.51, -19.8%) and DocuSign (DOCU 75.28, -17.62, -19.0%), which got clobbered after their earnings reports and guidance.
Tesla (TSLA 295.58, +10.88, +3.8%) was among the winning stocks, rebounding from Thursday's drubbing after reports indicated White House aides were looking to hold a call with Elon Musk to defuse his escalating feud with the president. It was later reported that the president is not interested at this time in having a call with Elon Musk.
The president was attending to other matters. In particular, he continued to make his case for passing the "one, big beautiful bill," he took to Truth Social to say the Fed should cut rates by a full point, and he again took to Truth Social to announce that his top trade representatives, who include Treasury Secretary Bessent, Commerce Secretary Lutnick, and U.S. Trade Representative Greer, will meet Monday in London with representatives from China in reference to the trade deal.
The market took the latter news in stride and actually finished a bit lower from when the announcement was made, but it didn't finish below the 6,000 level. In fact, it closed today's session right on top of that mark (6,000.36) after hitting 6,016.87 at its high for the day shortly after the open.
The mega-cap stocks provided leadership for that move, much like they did all week, but they had plenty of company as all 11 S&P 500 sectors finished the day in positive territory. The biggest gainers were the energy (+2.0%), communication services (+1.9%), consumer discretionary (+1.6%), and financial (+1.2%) sectors.
While large-cap stocks did well, micro-cap and small-cap stocks did even better in today's risk-on action that saw advancers outpace decliners by a better than 2-to-1 margin at the NYSE and Nasdaq. Total volume, though, was lower than average at both the NYSE and Nasdaq.
- S&P 500: +2.0% YTD
- Nasdaq: +1.1% YTD
- DJIA: +0.5% YTD
- S&P 400: -2.2% YTD
- Russell 2000: -4.4% YTD
Reviewing today's economic data:
- The May Employment Situation Report easily surpassed the market's worst fears, as nonfarm payrolls came in slightly ahead of expectations, the unemployment rate held steady at 4.2%, and average hourly earnings rose 0.4%, which translated into a decent 3.9% yr/yr growth rate.
- This is an important body of hard economic data that, overall, suggests the economy is still on solid footing despite the volatility of the stock market and the tariff uncertainty. The most important takeaway is that the combination of the low unemployment rate and higher-than-expected average hourly earnings growth, which follows a robust 0.8% increase in personal income in April, will keep consumers on a spending path and the economy on a growth trajectory. Notwithstanding the fact that this report should also keep any rate cut by the Fed on hold, this is a report that the stock market should be cheering because it is a good economic report that is good for earnings prospects.
- Consumer credit increased by $17.9 billion in April (Briefing.com consensus: $10.3 billion) following a downwardly revised $3.4 billion decline (from $10.2 billion) in March.
- Revolving credit increased by $7.7 billion, while nonrevolving credit increased by $10.2 billion
Solid gains intact heading into close
06-Jun-25 15:30 ET
Dow +451.89 at 42771.63, Nasdaq +245.37 at 19543.80, S&P +64.87 at 6004.17
[BRIEFING.COM] Solid gains remain intact for the major indices, which are on track for a winning week that has been accented by a broadening of the recovery run.
While mega-cap stocks did well this week, micro-cap stocks and small-cap stocks did even better. Of course, with micro-cap stocks leading, there is increased speculative interest in the air that threatens to give way to a consolidation trade.
Not the case today, however, as the May employment report cheered the stock market with indications of continued job growth, a low unemployment rate, and inflation-adjusted average hourly earnings growth.
What remains to be seen is if today's session, which has occurred on lower-than-average volume, gets settled with the S&P 500 above the 6,000 level or below it.
U.S.-China meeting June 9
06-Jun-25 15:05 ET
Dow +447.20 at 42766.94, Nasdaq +271.81 at 19570.24, S&P +68.38 at 6007.68
[BRIEFING.COM] The last half hour featured a Truth Social Post from President Trump, who noted that 'Secretary of the Treasury Scott Bessent, Secretary of Commerce Howard Lutnick, and United States Trade Representative, Ambassador Jamieson Greer, will be meeting in London on Monday, June 9, 2025, with Representatives of China, with reference to the Trade Deal.'
The market, strikingly, did not react much to this news, perhaps because it is more interested in hearing about what the outcome of that meeting is than it is in knowing a meeting is happening on June 9. Moreover, it was learned yesterday that President Trump and President Xi had agreed to have their respective teams meet again soon.
This is good news, though, in the sense that it is better to have the two sides talking than not talking at all when so many important items need to be resolved.
190-yr note yield hits 4.50% (again)
06-Jun-25 14:30 ET
Dow +433.33 at 42753.07, Nasdaq +275.98 at 19574.41, S&P +67.99 at 6007.29
[BRIEFING.COM] The 10-yr note yield has risen to 4.50% (again), while the S&P 500 has risen to 6,000 (again). So far, stocks have not been deterred by the higher rates and might even be catching a tailwind from some rebalancing out of bonds and into stocks.
Something else also worth pointing out is that, at 4.50%, the 10-yr note yield is down seven basis points from where it started the year despite a lot of chatter about debt and deficit issues and some vocal assumptions by leading economists that tariffs will drive up inflation.
In other developments, the CBOE Volatility Index (16.66, -1.82, -9.9%) is trading at its lowest level since February, as market participants are backing off pursuits to use options to hedge against downside risk after today's pleasing employment report and the S&P 500's move above 6,000 that puts its all-time high of 6,147.43 in relatively close reach.
Small caps taking the lead
06-Jun-25 13:55 ET
Dow +360.93 at 42680.67, Nasdaq +249.44 at 19547.87, S&P +58.93 at 5998.23
[BRIEFING.COM] Market internals reflect today's bullish bias, which took deeper root after the release of the May Employment Situation Report. Advancers lead decliners by a 2-to-1 margin at the NYSE and by a 5-to-2 margin at the Nasdaq.
With investors feeling better after the employment report (or less worse, depending on the vantage point), small-cap stocks are running with the bulls. The Russell 2000 is up 1.3%, which leaves it up 2.8% for the week and the biggest weekly gainer among the major indices.
Today's session also includes the outperformance of micro-cap stocks and the high-beta factor.
Notably, after trading down to 5,978, the S&P 500 is back challenging the 6,000 level, which is looking like the make-or-break point in today's trade.
DocuSign under heavy pressure on rare billings miss
DocuSign (DOCU -19%) is under heavy pressure following its Q1 (Apr) report last night. The e-signature/document creation giant reported a solid EPS beat. Revenue rose 7.6% yr/yr to $763.7 mln, which was much better than analyst expectations. DOCU also guided Q2 (Jul) revs above expectations and raised FY26 revs guidance. That was a lot better than its last report when it guided lower. DOCU also increased its share buyback authorization by $1 bln, but that's not having much impact.
- Revenue growth outpaced internal expectations, which DOCU attributed to additional IAM customers and self-serve digital revenue contribution. The DocuSign IAM platform is a significant departure from its past approach of only offering standalone products. This platform combines current products (eSignature, CLM) with new platform services. IAM sales continued to show strong momentum, with both IAM deal volume and revenue slightly outpacing internal expectations this quarter.
- So what went wrong? It seems the billings metric is the main culprit. In terms of key operating metrics, billings is a closely watched number. Billings in Q1 rose just 4% yr/yr to $739.6 mln, which was below the $741-751 bln prior guidance. It was also a dropoff from +11% growth in Q4 and +9% in Q3. And it's not just Q2, DOCU also lowered full year billings guidance slightly to $3.285-3.339 bln from $3.300-3.354 bln.
- DOCU explained that billings ended slightly below its guidance range due to lower than expected early renewals. Billings would have finished near the high end of guidance when excluding both the negative impact from early renewals and the positive billings FX impact. Billings renewal timing was impacted by changes, including rolling out new customer-size segments, territories, and performance-based compensation.
- Its prior full year guidance anticipated that these changes would lead to lower early renewal billings in FY26 after Q1. Instead, the impact happened sooner than anticipated, resulting in lower Q1 early renewals. As a result, billings growth ended slightly below prior guidance. DOCU stressed this was a timing issue, not a demand issue.
We have followed DOCU for a long time and it rarely misses on billings. In fact, DOCU tends to be conservative with billings guidance, so this was a surprise. The good news is that DOCU stressed it was more of a timing issue than a demand issue. However, DOCU did build in some additional conservatism into its FY26 billings guidance, given the uncertain economic environment. We think the combination of the rare billings miss and FY26 guidance is spooking investors a bit.
ServiceTitan serves up another strong quarterly report, but rich valuation creates a headwind (TTAN)
ServiceTitan (TTAN) reported upside 1Q26 results after the close yesterday, marking its third quarterly report since going public on December 12, 2024, with results continuing its pattern of strong performance. The provider of cloud software for trades businesses also provided upside revenue guidance for Q2 at $228–$230 mln and raised its FY26 revenue outlook to $910–$920 mln from its prior forecast of $895-$905 mln, with operating income projected at $54–$59 mln.
Despite this robust beat-and-raise report, the stock is trading sharply lower, perhaps stemming from its lofty valuation. Trading at a P/S ratio north of 13x, TTAN’s valuation is significantly higher than the median for software peers, raising concerns about the sustainability of the stock's post-IPO gains (+50% vs. the IPO price), especially in light of rising macroeconomic headwinds. Additionally, seasonal variability in Q2 usage revenue, driven by weather patterns, introduces uncertainty, as management noted last year’s unusually hot weather may not repeat, potentially tempering expectations. As such, TTAN stated that there's a little more variance in its Q2 guidance.
- TTAN's gross transaction volume (GTV), a critical demand metric, grew 22% yr/yr to $17.7 bln driven by strong adoption across both residential and commercial trades customers, including HVAC, plumbing, and electrical services. Key growth drivers include the company’s expanding customer base and increased platform usage, supported by a net dollar retention rate exceeding 110%, indicating that existing customers are significantly increasing their spend on the platform.
- This retention strength is fueled by TTAN’s ability to deliver measurable ROI through its software suite, which streamlines job management, payments, and field operations, as well as recent integrations like EagleView, enhancing its value proposition. The company’s focus on a $650 bln addressable market within the $1.5 trillion trades industry further underscores its growth potential.
- Profitability metrics also showed notable improvement, with non-GAAP operating income rising to $16.2 mln in Q1 from $3.3 mln in the year-earlier period, reflecting a non-GAAP operating margin expansion to 7.5% from 1.9%. This progress was driven by a 200-basis-point increase in platform gross margins due to a reclassification of customer success costs to sales and marketing, alongside efficiencies in sales, marketing, and R&D expenses as a percentage of revenue.
TTAN’s selloff, despite a strong Q performance and upbeat revenue guidance, reflects investor caution around its high valuation and ongoing GAAP losses, which totaled $(49.5) mln this quarter, in a volatile market. With that said, the company’s robust 27% revenue growth, 22% GTV increase, and improving margins underscore its strong fundamentals and market position.
lululemon athletica bends to tariff-related headwinds, which cut into FY26 earnings forecast (LULU)
lululemon athletica's (LULU) 1Q26 earnings report is triggering a steep selloff in the stock, driven by disappointing 1% comparable sales growth and intensifying concerns over tariff-related earnings pressure. The company reported Q1 EPS of $2.60, edging past analysts' expectations, continuing its long-standing trend of beating EPS expectations, though the magnitude of this beat was notably smaller than historical norms. However, the primary catalyst for the stock’s decline was LULU’s Q2 EPS guidance of $2.85–$2.90, well below the consensus estimate, and a trimmed FY26 EPS outlook of $14.58–$14.78.
Despite the earnings pressure, LULU’s gross margin remained a bright spot, expanding by 60 basis points in 1Q26 to 58.3%, driven by improved product margins and operational efficiencies. This strength is being offset by significant headwinds, including increased tariffs on imports from China and Mexico, which are expected to raise costs and compress margins in FY26. Foreign exchange headwinds and deleverage from fixed costs amid slower sales growth further exacerbate the earnings challenge, while macroeconomic uncertainty and cautious consumer spending are dampening demand, particularly in the U.S., where traffic declines have persisted.
- The Americas region, LULU’s largest market accounting for roughly 75% of revenue, continued to struggle, with comparable sales declining 2% (or 1% on a constant dollar basis), following flat comps in 4Q25. This marks a continuation of weakness driven by a combination of company-specific missteps, such as prior inventory shortages and a lack of newness in women’s product offerings, and broader macro headwinds, including reduced discretionary spending.
- To address these challenges, LULU has restructured its product team to enable faster decision-making within merchandising and has focused on refreshing product lines with new colors, prints, and patterns, as evidenced by the strong initial reception of its Daydrift product line. While these efforts have shown some early signs of traction, U.S. traffic remains soft, suggesting a prolonged recovery timeline.
- LULU's International business, a key growth driver, saw comparable sales growth slow to 6% (7% on a constant dollar basis), a significant deceleration from 22% in 4Q25. In China Mainland, comp growth dropped to 7% from 27% in constant currency in the prior quarter. While China remains a high-potential market with only 151 stores at the end of FY24, management has acknowledged macro uncertainties, including weakening consumer sentiment, as contributing factors to the slowdown there. Still, LULU has ambitious plans for further expansion in China, aiming to make it their second-largest market globally by 2026.
- The company's Q2 revenue guidance of $2.535-$2.560 bln was largely in-line with expectations, and it also reaffirmed its FY26 revenue outlook of $11.15–$11.3 bln, reflecting 7–8% growth (excluding the 53rd week). However, the Q2 EPS miss, and FY26 EPS guidance cut is the focal point today. Key drivers of the weakened earnings outlook include incremental tariff costs, which management expects to partially offset with modest price increases on select products, alongside FX pressures and deleverage from fixed costs due to slower U.S. sales.
LULU’s selloff reflects disappointment with its lackluster guidance, driven by tariff-driven cost pressures and a challenging retail environment where consumers are increasingly trading down or avoiding discretionary purchases. While the company’s brand strength and international expansion plans provide a foundation for long-term growth, near-term headwinds, particularly in the U.S., pose significant risks to earnings.
Broadcom seeing some profit taking following Q2 report, not quite as strong as NVDA last week
Broadcom (AVGO -3%) is heading lower following its Q2 (Apr) report last night. The semiconductor giant with an increasing focus on AI had a slight beat on EPS. Revenue grew a healthy 20% yr/yr to $15.0 bln, slightly above prior guidance of $14.9 bln. It also guided Q3 (Jul) revs in-line, maybe you could call it slight upside. It was a decent report, but not nearly as impressive as Q1 (Jan) and a bit of a letdown relative to NVIDIA's (NVDA) report last week.
- Semiconductor revenue in Q2 grew +17% yr/yr to $8.4 bln, an acceleration from +11% growth in Q1. As usual, the biggest growth driver was AI semiconductor revenue, which grew 46% yr/yr to $4.4 bln. This was in-line with prior guidance of $4.4 bln, which maybe was a disappointment following good upside in Q1. Broadcom's Q3 guidance was this metric was solid at $5.1 bln (+60% yr/yr) as its hyperscale partners continue to invest.
- Within this, custom AI accelerators grew double digits yr/yr, while AI networking soared over 170%. AI networking was robust and represented 40% of AI revenue. Broadcom cited its networking portfolio of Tomahawk switches, Jericho routers and NICs as what's driving its success within AI clusters in hyperscale. Of note, Tomahawk 6 enables clusters of more than 100,000 AI accelerators to be deployed in just two tiers instead of three. Broadcom says this flattening of the AI cluster is a huge deal because it enables much better performance through lower latency, higher bandwidth and lower power.
- Turning to XPUs or custom accelerators, Broadcom continues to expect at least three customers to each deploy 1 mln AI-accelerated clusters in 2027, largely for training their frontier models. These partners are still unwavering in their plan to invest, despite the uncertain economic environment. In fact, Broadcom has seen recently that they are doubling down on inference in order to monetize their platforms. Broadcom expects this may lead to an acceleration of XPU demand into the back half of 2026. As such, Broadcom expects its FY25 growth rate of AI semi revenue to sustain into FY26.
- Non-AI semiconductor revs declined 4% yr/yr in Q2 to $4 bln. However, Broadcom sees this as being close to the bottom. It has been relatively slow to recover but there were bright spots. In Q2, broadband, enterprise networking and service storage revenues were up sequentially. However, industrial was down, and as expected, wireless was also down due to seasonality.
- And finally, Q2 infrastructure software revenue rose 25% yr/yr to $6.6 bln, slightly above its prior guidance of $6.5 bln. AVGO is having success converting its enterprise customers from perpetual vSphere to the full VCF software stack subscription.
So, why is the stock lower? We think the small Q2 beat was a little disappointing after bigger upside in Q1. A bigger factor likely was that AI semi revenue was just in-line after a beat in Q1. AI guidance for Q3 was pretty good though. Another factor was that non-AI semis were not great, although saying this was close to a bottom was good to hear. We also think sentiment was running high given the huge move in the stock and given NVIDIA's strong report last week. We think AVGO did not quite measure up to NVDA and investors are locking in some profits.
Ciena EPS miss is spurring investors to lock in some recent gains
Ciena (CIEN -14%) is pulling back sharply after the telecom/networking equipment giant missed pretty badly on Q2 (Apr) EPS. However, revenue grew nicely, up 23.6% yr/yr to $1.13 bln, at the upper end of prior guidance of $1.05-1.13 bln. Revenue guidance for Q3 (Jul) was quite good at $1.13-$1.21 bln, which is above analyst expectations.
- Ciena continues to see strong demand across all customer segments, geographic regions and its diversified portfolio. Notably, revenue from cloud providers stood out as a key driver in Q2. Ciena achieved record direct Cloud Provider revenue in Q2 (38% of total revs), grew 85% yr/yr to more than $400 mln. This was the first time Ciena reached this level in a single quarter.
- The company said its strength in its direct Cloud Provider segment really demonstrates the accelerating investments in AI infrastructure and Ciena's leadership in addressing this demand. Of note, three of its top five customers in Q2 were cloud providers, underscoring their sustained investments in AI infrastructure and network expansion. And that was evident in the fact that Q2 orders were again significantly greater than revenue. Ciena says it's on track for cloud provider orders to double in FY25.
- Regarding tariffs, Ciena navigated a new and, in the early days, a rapidly changing US tariff environment. It responded in real time with mitigation strategies to minimize the impact. However, as a result of the dynamic conditions, as well as the need to adjust billing systems and customers' systems, Ciena absorbed a net impact to its bottom line in Q2. However, it expects that the net tariff effect to its bottom line in future quarters will be immaterial.
Clearly, investors are focusing on the tariff hit to profitability in Q2. However, the company sounded generally pretty optimistic on the call with respect to both demand and its ability to mitigate tariff impacts in the future. Another factor is that we may be seeing a bit of a sell-the-news impact. The stock had run about 67% since early April, so the EPS miss provided an opportunity to lock in some profits.
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