Mid-Morning Look

Wednesday, December 04, 2024

More record highs for the Nasdaq and S&P 500 (now 55^th time this year) as technology stocks doing the bulk of the lifting again behind strong earnings results from CRM, MRVL, OKTA and PSTG overnight. The Nasdaq is rising again after closing higher 7 of the last 8 trading days with Mag 7 stocks, semis and now software with big bounces. Technology (XLK) rises over 1% for the top sector advancer in the S&P, rising for a 4th straight day and continues to boost up broader mkts while Communications (XLC) looks to make it a 7th straight day of gains. Energy (XLE) lagging for the 6th time in the last 7 days as investors look to high beta/growth sectors instead. ADP Private payrolls were reported mostly in-line with consensus, while the prior month was revised down, as the 10-yr yield hit highs of the week above 4.28% after ADP payroll report – but has since pulled back to 4.24%. Stock markets continue to rise on light volume with no one willing the sell given the upside momentum, as the SPY traded just 26.9M shares on 12/3, its lowest volume day since May 27, 2005 (excluding four holiday-shortened trading days 11/25/05, 12/24/19, 7/3/06 and 12/24/20). More Fed speakers all day after several (Daly, Kugler, Goolsbee) remain dovish on rates, with Powell speaking in a moderated discussion at NYT later today. Markets await more Fed speakers today, France government news and more earnings after the bell.

• U.S. Factory orders ex-transportation for October rose +0.1% vs Sept +0.1% (prev +0.1%); factory orders ex-defense +0.3% vs Sept -0.5%; Durables orders revised to +0.3% from +0.2%; Oct nondurables orders +0.1% vs Sept -0.1%; U.S. Oct inventories/shipments ratio 1.46 months’ worth vs Sept 1.46 months.
• The Institute for Supply Management (ISM) nonmanufacturing purchasing managers index (PMI) slipped to 52.1 last month after surging to 56.0 in October, which was the highest level since August 2022 (ests were for 55.5). The new orders measure fell to 53.7 from 57.4 in October; prices paid measure little changed at 58.2 and the services employment slipped to 51.5 from 53.0 in October.

• In Crypto: IREN announces $300M convertible senior notes offering due 2030; HUT enters sales agreement to offer up to $500M in stock; joins other Bitcoin miners such as MARA, CORZ in recent week to sell stock/notes raising cash following lead of MSTR which has been doing for months to buy Bitcoin. HOOD said its November assets under custody grew over 15% from October to $190 billion, crypto notional volumes rose 400% from October to over $30 billion in November and said it plans to release its full November operational data next week.
• In Truckers/Logistics: Barclay’s noted November LTL volumes came in soft at ODFL and SAIA, with XPO trending closer to in line with expectations; ODFL yield update indicates solid pricing environment despite continued demand challenges; GXO announced Malcolm Wilson to retire as CEO in 2025 while Bloomberg reported the co plans to remain an independent company, spurning acquisition offers announced in October as the supply-chain services provider prepares to replace its chief executive officer. ODFL reported LTL tons per day for November of -8%, LTL shipments per day -6.8% and LTL weight per shipment -1.2%. XPO reported LTL tonnage per day decreased -4.0%, as compared with November 2023, attributable to a y/y decrease of -4.2% in shipments per day.
• In Video game Software: UBSFY said it has decided to discontinue development on XDefiant, its free-to-play first-person shooter title, and will close its San Francisco and Osaka production studios and ramp down production in Sydney, leading to job losses. Bank America noted US mobile gaming IAP -2% YY in Oct + Nov, 4Q likely flattish QQ, deviating from past seasonality; see risk to Street 4CQ ests; said for TTWO, risk to 4CQ mobile as tracking below Guide, Match Factory stable; EA: 4CQ tracking inline, BofA F25 Mobile below guide and for both APP , gaming IAP thru Nov tracks slightly below Street.

• CMG +4%; said to boost prices to offset inflation, as Chipotle confirms an approximate 2% price boost nationwide.
• CRM +9%; mixed Q3 results as revs beat/EPS missed but consistent cRPO growth in the ~10% range topped ests of 9% and raised the low end of its FY25 rev outlook; market also optimistic on Agentforce, their complete AI system for enterprises built into the Salesforce Platform, which was unveiled in September.
• MRVL +20%; beat and raise quarterly results and even stronger guidance as robust AI demand again drove DC upside. During the quarter, custom ASIC/AI products ramped substantially coupled with continued momentum in electro-optics, which grew double-digit % Q/Q
• NNE +6%; signed a memorandum of understanding with the Department of Energy’s to test its prototype micro-reactors at the Idaho National Laboratory.
• OKTA +3%; as reported Q3 results of $665M and $0.67 above street expectations for $649.8M and $0.58 while its “remaining performance obligation” (RPO) grew to $3.7B, up 19% YoY; Okta raised 4Q FY25 guidance to revenues of $667-$669M (vs. est. $650M) and EPS of $0.73-$0.74 (vs. est. $0.66).
• PSTG +25%; Q3 results exceeded consensus, driven by FlashArray//E and FlashBlade//E while Q4 revenue guide of $867M came in above consensus of $856M though OM guide of 15.6% fell well short of the consensus of ~18%; announced its first design win with a Top 4 Hyperscaler in recent weeks, which stole the show from 3Q results.
• ROKU +9%; shares rallied, extending recent gains after Needham in a report today suggested that there are several categories of potential purchasers.

• BOX -6%; reported mixed Q3 results as revenue was in-line while billings growth was muted, FY25 revenue and operating margin guidance inched higher and NRR was stable QoQ.
• FL -12%; after Q3 results fell short of expectations citing higher promotions and soft spending from customers while cut its FY outlook. Q3 adj EPS $0.33 missed consensus est. $0.41 as sales fell to $1.96B from $1.99B y/y and below consensus $2.02B while comp sales 2.4% vs. est. 2.75%.
• GXO -13%; announced Malcolm Wilson to retire as CEO in 2025 while Bloomberg reported the co plans to remain an independent company, spurning acquisition offers announced in October as the supply-chain services provider prepares to replace its chief executive officer
• LUNR -12%; after prices upsized offering of 9.523M shares of common stock at $10.50 per share.
• RLMD -75%; after saying its depression treatment, REL-1017, is unlikely to meet the main goal of a late-stage trial, according to an independent data monitoring committee’s analysis.