Closing Recap

Wednesday, November 27, 2024

U.S. stocks slipped a day ahead of the Thanksgiving Day holiday, snapping winning streaks for major averages, but finished off the lows as markets were quiet. Coming into the day, the S&P 500 was up 7-straight days (at record highs), the Dow Jones Industrial Average up 5-straight days (also at record highs) and the Nasdaq Composite up 4-straight days as momentum continues to push higher into year-end…but today, all three finished lower behind weakness in technology after disappointing earnings/guidance from ADSK, CRWD, DELL, HPQ and WDAY, hitting software stocks hard. Data was plentiful with inflation, housing, jobs, manufacturing data all out. The October PCE reading at 10:00 AM, the Fed’s preferred inflation data point showed results slightly above the prior month, but in-line with consensus expectations. Treasury yields edged higher while the dollar remained weak as the October 12-month PCE price index rose 2.3%, compared to 2.1% in September and matching consensus. Core PCE was 2.8%, in line with forecasts, rising from September’s 2.7%. NYSE breadth favored advancers over decliners by 1.5:1 margin in a quiet afternoon.

• Personal Income for October rose +0.6% above consensus +0.3% and vs. September +0.3% while Oct. Personal Spending climbs 0.4% m/m vs. est. +0.4% (vs. +0.6% in September).
• U.S. Q3 GDP (second estimate) rose +2.8% Q/Q vs. advance estimate of +2.8% and +3.0% in Q2; Q3 Personal Consumption Expenditures rose +3.5% vs. prior estimate of +3.7% and +2.8% in prior quarter; prelim Q3 core PCE +2.1% vs. consensus +2.2%; Q3 GDP Price Index 1.9% vs. est. 1.8%.
• Weekly Jobless Claims fell to 213,000 from 215,000 in prior week and vs. consensus 216,000; the 4-week moving average fell to 217,000 from 218,250 prior week; continued claims climbed to 1.907M from 1.898M prior (downwardly revised from 1.908M) and US Insured Unemployment rate unchanged at 1.3%.
• Oct Durables ex-transportation orders +0.1% (cons +0.2%) vs Sept +0.4%; Oct Durables ex-defense orders +0.4% vs Sept -0.9% (prev -1.1%); Oct Gen Machinery orders +0.3%, electrical equipment +1.3%, defense aircraft/parts +16.6%; nondefense cap orders ex-aircraft -0.2%, (cons +0.1%) vs Sept +0.3% (prev +0.7%)
• Chicago PMI index at 40.2 below consensus 45.0 (lowest since May of 2024 when was below 40).
• Oct Pending Home sales index +2.0% (consensus -2.0%) to 77.4; U.S. Oct Pending Home sales +5.4% from Oct 2023
• October Advance goods trade deficit was (-$99.1B) vs. est. (-$102.7B).

• Bonds rallied and yields fell following a solid $44B 7-year Treasury note auction at high yield 4.183% vs. 4.197% when issued prior on strong bid-to-cover ratio 2.71 as primary dealers take 9.99% of U.S. 7-year notes sale, direct 25.94% and indirect 64.08%. The 10-year yield slid to lows of 4.23% after the results from 4.26% prior.
• U.S. WTI crude futures slipped -$0.05 to $68.72 per barrel while Brent crude rose $0.02 to $72.83 in an uneventful day for oil prices. On its first day as the front-month, gas futures for January delivery on the NYMEX fell 26.3c, or 7.6%, to settle at $3.204 per million British thermal units. Weekly energy inventory data showed U.S. crude oil stockpiles fell last week, while gasoline and distillate inventories rose, as per the Energy Information Administration (EIA). Crude inventories fell by 1.8 million barrels, compared with analysts’ expectations for a 605,000-barrel draw. Crude stocks at the Cushing, Oklahoma, delivery fell by 909,000 barrels. Gasoline stocks rose by 3.3 million barrels vs. expectations for a 46,000-barrel draw.

• GES lowered its FY25 sales view to between 7.1% and 8.1% growth from previously expected 9.5% and 11.0% after reporting downbeat Q3 results amid slow customer traffic into direct-to-consumer channels; also lowered annual adjusted EPS to $1.85 to $2.00 from between $2.42 and $2.70 previously.
• URBN shares rose as reported Q3 EPS of $1.10, beating $0.85 estimates on better gross margins while sales rose 6.3% to $1.36 billion, topping Wall Street’s estimates of $1.34 billion. Urban Outfitter sales and traffic improved in Oct. as the brand focuses on driving quality full priced sales through targeted investments (shares were upgraded to Buy from Neutral at Citigroup after results that showed strong execution across the URBN portfolio.

• In Building Products: MLM upgraded to Overweight at JP Morgan and raise tgt to $640 as sees this year’s EBITDA at -4% y/y (+1% vs prior) at $2.05B, roughly in line with the company’s midpoint of guidance ($2.015-2.115 bn) and is increasing its estimates by 4% and see EBITDA growing 14% y/y upon a 1.2pp margin expansion to 32.7%.

• In Autos: Chinese autonomous-driving company pony AI (PONY) priced its 20M ADR initial public offering at $13, the high end of the expected range. Pony AI oversees a fleet of more than 190 robo trucks and 250 robotaxis and has partnered with Toyota and GMTC to catalyze the mass production of self-driving vehicles as per Reuters.
• In Solar: SEDG said it will reduce its total workforce by about 12% and primarily affect workers in manufacturing positions in South Korea, that it is discontinuing its energy storage business and focusing on its core solar activities and expects to incur $81 million to $99 million in charges.
• In Industrials: SYM shares tumbled after saying the company was unable to file annual report on form 10-K for fiscal year ended Sept. 28 before the due date as it needs additional time to assess financial impacts of correcting error related to system revenue recognition and error in internal controls over financial reporting. The co also lowered its Q1 revenue forecast to $480M-$500M from the prior view $495M-$515M.
• In Shipping: The Baltic Exchange’s dry bulk sea freight index fell to a near three-week low, down 72 points to 1,509 points, its lowest level since Nov. 8. The Capesize index lost 210 points to 2,569 points, the lowest level in over two weeks. The Panamax index lost 12 points to 1,044 points, down for the ninth session in a row. The Supramax index edged 3 points higher to 988 points. GOGL shares fell after Q3 EPS of $0.28 missing the $0.32 estimate.
• In Transports: For rails (CSX, NSC, UNP), The Association of American Railroads (AAR) reported U.S. rail traffic for the week ending November 23, 2024. Total U.S. weekly rail traffic was 520,798 carloads and intermodal units, up 25.6% compared with the same week last year. Total carloads for the week ending November 23 were 230,036 carloads, up 17.6% compared with the same week in 2023, while U.S. weekly intermodal volume was 290,762 containers and trailers, up 32.8% compared to 2023.

• BGNE said that it has received European regulatory approval for its treatment of gastric and esophageal cancers. The European Commission approved Tevimbra, the commercial name for Tislelizumab, in combination with chemotherapy for the first-line treatment of esophageal squamous cell carcinoma.
• GRFS shares tumbled following a report overnight that Brookfield is preparing to drop its 6.45B-euro ($6.77B) bid to acquire Grifols after failing to reach an agreement with its board on price. https://tinyurl.com/2s4aahmj
• OTLK shares plunged after saying it will resubmit a biologics license application for its ophthalmic formulation of bevacizumab early next year after the second of two clinical trials missed a key target.

• HPQ Q4 EPS was in line with Street estimates while the outlook missed due to ongoing softness in the PC market and higher variable comp expenses in the Jan ’25 Q; FY25 EPS outlook midpoint was in line as F2H25 weighted PC growth and solid profitability in the Print business is driving ~MSD% EPS growth.
• DELL shares fell as revenue generated by its PC business declined 1% to $12.1B in Q3, falling short of estimates while guided revs/EPS for $24.5B/$2.50, compared to the Street’s $25.5B/$2.64 as the PC recovery continues to get pushed out while Blackwell delays pressure near-term revenues, though backlog/orders continue to grow.
• In Smartphones: Global smartphone sales rebounded strongly in 2024 after two successive years of decline, but AAPL barely managed growth, a study by IDC showed. Apple and its rivals will ship 6.2% more phones or an estimated 1.24B units in 2024, according to market tracker IDC. But iPhone volumes likely edged just 0.4% higher.
• In Security Software: CRWD reported Q3 results of $1.01B and $0.93, compared to company guidance which had called for revenues to $979.2M-$984.7M and EPS of $0.80-$0.81 and incurred approximately $33M in security incident costs in Q3; raised guidance for 4Q FY25 to $1.03B-$1.04B and EPS of $0.84-$0.86; Total Q3 ARR of $4.02B (+27% Y/Y) was solid and slightly exceeded the Street’s $4.01B forecast. F4Q revenue and EPS guidance was in line.
• In Cloud Software: WDAY delivered solid FQ3 results slightly exceeding both subscription revenue and backlog estimates. However, management lowered the FY25 subscription revenue growth guide to 16.6% Y/Y (from 16.8%) given some revenue slippage that won’t be realized until FY26.
• In Storage: NTNX reported a strong quarter, with healthy Revenue outperformance and significantly stronger Operating Margin. Despite stronger than expected results in 1QFY25 and Revenue guidance above projections in 2QFY25, management left its FY25 outlook unchanged; FY25 guidance was raised for operating margin and FCF.
• Multi Software: ADSK reported FQ3 revenue and OM that was modestly ahead of the Street’s and raised FY guidance by slightly more than the quarterly outperformance and announced former ESTC CFO and COO Janesh Moorjani as its new CFO starting December 16^th
• In 3D sector: DDD shares dropped after Q3 revs fell -9% y/y to $112.9M, missing ests $115.3M, impacted by sluggish capital investments by its customers for new production capacity while lowered 2024 rev forecast to $440-$450M from prior outlook of $450-$460M.
• In Semiconductors: AMBA Q3 beat, with revenue of $82.7mn (+29.7% q/q), +4.6% higher than consensus $79.0mn estimate while Auto revenue grew slightly q/q, with both Automotive and IoT segments growing q/q by approximately ~30% each. Non-GAAP EPS of $0.11 was +$0.07 higher and Q4 guidance $76-80M vs est. $69.08M.