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Technology Stocks : Semi Equipment Analysis
SOXX 397.58+0.3%9:36 AM EST

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To: Return to Sender who wrote (88772)8/2/2022 4:32:15 PM
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Market Snapshot

Dow 32398.05 -402.23 (-1.23%)
Nasdaq 12348.72 -20.22 (-0.16%)
SP 500 4091.26 -27.44 (-0.67%)
10-yr Note

NYSE Adv 1393 Dec 1685 Vol 894 mln
Nasdaq Adv 2248 Dec 2140 Vol 4.6 bln

Industry Watch
Strong: --

Weak: Real Estate, Financials, Industrials, Materials, Consumer Staples, Consumer Discretionary

Moving the Market
-- Speaker Pelosi touches down in Taiwan without incident

-- Reservations that July market rally is not sustainable given the deteriorating economic fundamentals

-- Mega cap leadership

Closing Summary
02-Aug-22 16:30 ET

Dow -402.23 at 32398.05, Nasdaq -20.22 at 12348.72, S&P -27.44 at 4091.26
[BRIEFING.COM] The stock market opened on a soft note amid some geopolitical concerns before finding upside momentum and trending higher through midday. The main indices slipped back from those levels, though, and closed with losses on the day. The Dow Jones Industrial Average was the top laggard, down 1.2%, after Caterpillar (CAT 183.51, -11.35, -5.8%) disappointed with its earnings report this morning and acknowledged ongoing supply chain pressures.

The upside moves were fueled by relief that Speaker Pelosi's arrival in Taiwan was not met with any retaliatory response of consequence by China. However, the market never had any abject fear about a major episode (it was a little bit nervous, but not truly fearful); therefore, the positive response was understandably modest when China did not respond with any act of consequence (although that potential threat is still out there).

There was some positive corporate news that helped the early buying effort. Pinterest (PINS 22.31, +2.32, +11.6%) and Uber (UBER 29.25, +4.65, +18.9%) made big upside moves today following their well-received earnings reports.

The eventual loss of buying momentum, though, was related in part to a normal pullback following the huge gains registered in July. Also in play was technical resistance at Friday's high (4140) and selling activity in response to what the stock market saw in the Treasury market, which itself heard several Fed officials talk down expectations for a relatively quick policy pivot.

The Treasury market saw an abrupt reversal after San Francisco Fed President Daly's remarks hit the wires in early action. Separately, Cleveland Fed President Mester and Chicago Fed President Evans also provided verbal cues that suggested the Fed is not on the cusp of a quick policy pivot. Those remarks added to a steady wave of selling pressure that drove yields markedly higher across the curve.

The 2-yr note yield, which hit 2.81% before Daly's remarks were published, settled at 3.07%. The 10-yr note yield, which touched 2.53%, settled at 2.74%.

The selling pressure that accompanied the rise in yields left all 11 S&P 500 sectors in negative territory with losses ranging from 0.2% (communication services) to 1.3% (real estate).

Today's economic data was limited to the June JOLTS Job Openings report, which came in at 10.698 million versus the prior revised count of 11.303 million (from 11.254 million).

Also, WTI crude oil futures settled with modest losses ahead of tomorrow's OPEC+ meeting, down 0.4% to $94.33/bbl. Unleaded gasoline rose 1.5% to $3.04/gal. Natural gas futures fell 6.6% to $7.71/mmbtu.

AmerisourceBergen (ABC), CVS Health (CVS), Exelon (EXC), Generac (GNRC), Moderna (MRNA), Scotts Miracle-Gro (SMG), Under Armour (UAA), Yum! Brands (YUM) headline the earnings reports ahead of Wednesday's open.

Market participants will receive the following economic data Wednesday:

  • 7:00 ET: Weekly MBA Mortgage Index (prior -1.8%)
  • 9:45 ET: Final July IHS Markit Services PMI (prior 47.0%)
  • 10:00 ET: June Factory Orders ( consensus 0.9%; prior 1.6%) and July ISM Non-Manufacturing Index ( consensus 53.8%; prior 55.3%)
  • 10:30 ET: Weekly crude oil inventories (prior -4.52 mln)
Dow Jones Industrial Average: -10.9% YTD
S&P 400: -12.5% YTD
S&P 500: -14.2% YTD
Russell 2000: -16.1% YTD
Nasdaq Composite: -21.1% YTD

Market move sideways into the close
02-Aug-22 15:30 ET

Dow -323.91 at 32476.37, Nasdaq +5.80 at 12374.74, S&P -17.00 at 4101.70
[BRIEFING.COM] The market is mostly moving sideways into the close.

After the close, Advanced Micro (AMD), Airbnb (ABNB), Chesapeake Energy (CHK), Cirrus Logic (CRUS), Electronic Arts (EA), Gilead Sciences (GILD), Match Group (MTCH), Microchip (MCHP), MicroStrategy (MSTR), Occidental Petro (OXY), Paycom Software (PAYC), PayPal (PYPL), RingCentral (RNG), SoFi Technologies (SOFI), Starbucks (SBUX) are all set to report earnings.

AmerisourceBergen (ABC), CVS Health (CVS), Exelon (EXC), Generac (GNRC), Moderna (MRNA), Scotts Miracle-Gro (SMG), Under Armour (UAA), Yum! Brands (YUM) headline the earnings reports ahead of Wednesday's open.

Market participants will receive the following economic data Wednesday:

  • 7:00 ET: Weekly MBA Mortgage Index (prior -1.8%)
  • 9:45 ET: Final July IHS Markit Services PMI (prior 47.0%)
  • 10:00 ET: June Factory Orders ( consensus 0.9%; prior 1.6%) and July ISM Non-Manufacturing Index ( consensus 53.8%; prior 55.3%)
  • 10:30 ET: Weekly crude oil inventories (prior -4.52 mln)

Market moving sideways
02-Aug-22 15:05 ET

Dow -275.07 at 32525.21, Nasdaq +24.63 at 12393.57, S&P -9.62 at 4109.08
[BRIEFING.COM] The stock market is moving sideways in recent action.

Ahead of tomorrow's OPEC+ meeting, the S&P 500 energy (+0.2%) trades higher. Only one other sector, utilities (+0.4%), shows gain currently.

Also, WTI crude oil futures settled down 0.4% $94.33/bbl. Unleaded gasoline rose 1.5% to $3.04/gal. Natural gas futures fell 6.6% to $7.71/mmbtu.

Separately, the 2-yr note yield is up 16 basis points to 3.07% while the 10-yr note yield is up 14 basis points to 2.74%.

Monolithic Power leads S&P 500 following earnings, guidance
02-Aug-22 14:30 ET

Dow -226.20 at 32574.08, Nasdaq +33.88 at 12402.82, S&P -4.38 at 4114.32
[BRIEFING.COM] The benchmark S&P 500 (-0.11%) is firmly in second place to this point on Tuesday.

S&P 500 constituents Molson Coors Brewing (TAP 53.93, -5.75, -9.63%), Sealed Air (SEE 56.53, -5.00, -8.13%), and Zebra Tech (ZBRA 332.43, -26.00, -7.25%) pepper the bottom of the index all following earnings.

Meanwhile, Monolithic Power (MPWR 507.53, +45.23, +9.78%) is today's top gain getter following last night's earnings beat/upbeat guidance.

Gold rises for fifth day in a row
02-Aug-22 14:00 ET

Dow -260.08 at 32540.20, Nasdaq -7.88 at 12361.06, S&P -13.58 at 4105.12
[BRIEFING.COM] With about two hours to go the major averages are now all modestly lower, the tech-heavy Nasdaq Composite (-0.06%) showing the shallowest declines.

Gold futures settled $2.00 higher (+0.1%) to $1,789.70/oz, aided in part by increased geopolitical tensions, and even as yields and the dollar showed solid gains.

Meanwhile, the U.S. Dollar Index is up about +0.7% to $106.20.

Caterpillar heads lower as ongoing supply chain constraints hindered sales growth in Q2 (CAT)
Updated: 02-Aug-22 13:26 ET

Heavy machinery manufacturer Caterpillar (CAT -4%) struggled with supply chain constraints in Q2, causing sales to continue to be left on the table, as component shortages resulted in production delays, a recurring issue throughout the past couple of years. With CAT missing out on potential revenue, it missed analyst expectations in the quarter, growing the figure just 10.5% yr/yr to $14.25 bln. However, outside of the sales miss, CAT's Q2 results were mostly positive.

  • For one, demand remained strong in Q2, echoing recent comments from companies operating in the industrial sector, like Nucor (NUE), Steel Dynamics (STLD), and AGCO (AGCO).
  • CAT may also be facing unabated inflationary pressures. However, the good news is that price realization in Q2 more than offset manufacturing cost spikes, which took place earlier than CAT initially expected. Still, operating margins weakened by 30 bps yr/yr to 13.6%, driven by lower-than-expected volume and unfavorable mix.
    • It is worth noting that despite the slight margin contraction in Q2, CAT is confident it will achieve its Investor Day target of 10-13% margins at a $39 bln sales level and 18-21% margins at a $66 bln sales level. Both targets represent a 300-600 bp improvement from past margins at each sales level.
  • Further good news is that despite falling margins, CAT still exceeded analysts' earnings estimates, extending its string of double-digit beats to nine straight quarters, growing adjusted EPS 22% yr/yr to $3.18. Orders also remained solid in the quarter, while CAT's backlog jumped by roughly $2.0 bln.
  • CAT's expectations for its key markets in FY22 were somewhat mixed. In Construction Industries, CAT's largest segment by revs, the company anticipates nonresidential construction to remain healthy but sees residential construction moderating. Meanwhile, as was the case last quarter, China continues to be a laggard. In fact, CAT estimates that the construction industry in China will be even lower in FY22 than its already bearish forecast detailed in Q1.
  • However, on the flip side, CAT's Resource Industries segment is expected to continue seeing robust demand as commodity prices remain supportive of investment despite recent moderation. Additionally, in CAT's second-largest segment, Energy & Transportation, momentum will likely improve throughout the year, with strong order rates in most applications.
Overall, CAT's Q2 results are a story of steady demand hindered by persistent supply chain hiccups. With similar supply chain woes from last quarter plaguing Q2, investors remain frustrated, sending shares lower, despite otherwise solid numbers and commentary.

Nevertheless, we believe today's pullback acts as a good entry point as the back half of the year is shaping up to be significantly better than the first half. CAT is optimistic that volume and price realization will improve over the next two quarters, leading to yr/yr and sequential sales growth as well as expanding operating margins. Lastly, CAT's numbers paint a good picture of what to expect from peers Terex (TEX) and Deere (DE), which report Q2 earnings on August 2 and 19, respectively.

Uber seeing some surge pricing with its share price following upside Q2 results (UBER)
Updated: 02-Aug-22 11:38 ET

Uber (UBER +16%) is seeing some surge pricing with its share price today. At first glance, Uber reporting a large GAAP loss should not warrant such a big move. However, that big loss is not comparable to consensus. A better metric for profitability is adjusted EBITDA and at $364 mln, that was well ahead of prior guidance of $240-270 mln. Plus, Uber guided to Q3 at $440-470 mln, which was much better than analyst expectations. Also, Uber reported strong upside revenue.

  • A big positive was that all three operating segments saw growth, led by its core Mobility (ride sharing) segment with revenue jumping a whopping 120% yr/yr to $3.55 bln. What's helping is a low bar last year. Even though the vaccine was being distributed in spring 2021, people still felt uncomfortable getting into an enclosed space not only with the driver but also with other passengers constantly having entered the vehicle and touching door handles etc.
  • Also boosting growth has been a shift in spending from retail to services. After being cooped up in the house, people are now more interested in experiences as opposed to things. Adding another boost was an increase in drivers. Uber says that inflation has caused more people to get behind the wheel to earn extra money to pay for gas, food etc. An additional boost in drivers should happen in September after kids go back to school, freeing up parents to drive more.
  • Its Delivery business was no slouch with revenue rising a robust 37% yr/yr to $2.69 bln. Upticks in COVID cases in parts of the word has helped. Also, Uber expects 2H22 to be strong.
  • It's interesting that the Mobility segment had always been the largest segment, but then Delivery took the helm during the pandemic. However, Mobility took the lead again in Q1 and again in Q2. Not that it was planned this way, but the good news is that the two businesses seem to be perfectly complementary in a pandemic.
  • Finally, its Freight segment also saw nice growth, partly fueled by its Transplace acquisition in November 2021.
Overall, this was a solid report from Uber with upside revenue and EBITDA with bullish guidance. It is clear that consumers are getting out more and Uber is benefiting from a shift in consumer preference to spend more on experiences as opposed to things. This report was just the jolt the stock needed as it has been trending lower for much of 2022. The good news is that the stock stabilized and consolidated from May to July and is now heading higher in August. Hopefully, this report can be the catalyst to get the stock back on the upswing. Finally, this report bodes well for Lyft's (LYFT) Q2 report on Thursday after the close.

Pinterest soars on better-than-feared Q2 results and comments from its recently named CEO (PINS)
Updated: 02-Aug-22 11:17 ET

While its peers Snap (SNAP) and Meta Platforms (META) sold off on weak advertising revs in Q2, Pinterest (PINS +10%) is looking as neat as a pin today despite missing earnings estimates and also facing a challenging digital advertising environment in Q2. With multiple red flags in the weeks leading up to PINS' report, the market had ample time to digest a slowdown in advertising spending. As such, the social media company is jumping on better-than-feared results.

Investors may also be excited about PINS' new CEO Bill Ready, the former President of Commerce, Payments, and Next Billion Users at Google (GOOG), who took the reigns just over a month ago. Mr. Ready provided a few details on his strategies for the company going forward, stating that he does not subscribe to a "growth at all costs" mentality. Instead, he is focused on long-term growth, believing that constraints breed creativity and lead to better product outcomes. Furthermore, the new CEO commented that PINS plans to return to meaningful margin expansion in FY23.

  • In Q2, adjusted earnings fell 56% yr/yr to $0.11 while revs climbed 9% to $666.0 mln. PINS noted that the digital advertising space has been and will remain a challenge. Although the company saw strength from retail and international advertisers, demand from its more vital base of consumer packaged goods, big box retailers, and mid-market advertisers softened.
  • However, even after advertising slowed down in Q2, PINS still topped revenue estimates, a positive standout when stacked against META, which missed Q2 sales targets by a wide margin, posting its first yr/yr quarterly revenue decline.
  • A 5% dip in monthly active users (MAUs) yr/yr was another problem for PINS in Q2. PINS attributed the decline to a few factors, including lower search traffic due to GOOG's algorithm change in November as well as lapping the final vestiges of the pandemic unwind. PINS also referenced increasing competitive pressures from video-centric platforms, but was unable to exactly measure the negative impact.
  • Still, on the bright side, MAUs were unchanged from the previous quarter, which is no worse than what we already saw from META, which saw MAUs go from 2.94 bln in Q1 to 2.93 bln in Q2.
  • Looking at Q3, PINS expects revenue growth in the mid-single-digits percentage yr/yr, meaningfully lower than consensus. Again, investors expected far worse, particularly after META's remarks last week regarding a continuation of weak advertising demand in Q3. Also, PINS anticipates MAUs to return to more typical seasonal engagement patterns in 2H22, which historically showed modest sequential growth.
  • However, PINS cautioned that these trends could be more muted due to current macroeconomic conditions. The company also warned that revenue growth could land toward low-single-digits if conditions deteriorate further.
Even considering PINS's cautiously optimistic outlook, shares are still soaring today as the company's Q2 numbers were largely more upbeat than investors expected. Along with excitement surrounding a new leader, involvement from activist Elliott Management could also be helping push the stock higher. Mr. Ready touched on Elliot Mgmt's involvement stating that the two companies have had collaborative and engaged dialogue and that Elliott is aligned with PINS' vision of what it can become. This signals that despite Elliott Mgmt typically buying into an organization to spur change, perhaps the company likes what it sees in PINS' potential.

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