Market Snapshot
| Dow | 40829.59 | +484.18 | (1.20%) | | Nasdaq | 16884.58 | +193.77 | (1.16%) | | SP 500 | 5471.05 | +62.63 | (1.16%) | | 10-yr Note | 0/32 | 3.70 |
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| | NYSE | Adv 1789 | Dec 934 | Vol 944 mln | | Nasdaq | Adv 2547 | Dec 1654 | Vol 5.1 bln |
Industry Watch
| Strong: Consumer Discretionary, Industrials, Information Technology, Materials, Financials |
| | Weak: -- |
Moving the Market
-- Rebound after sharp declines last week
-- Mega caps and semiconductor shares boosting index performance
-- Market rates holding mostly steady
| Closing Summary
09-Sep-24 16:20 ET
Dow +484.18 at 40829.59, Nasdaq +193.77 at 16884.58, S&P +62.63 at 5471.05
[BRIEFING.COM] The stock market had a solid showing following last week's broad retreat. The major indices exhibited some up and down action, but maintained gains through the entire session, ultimately selling near session highs.
The Dow Jones Industrial Average (+1.2%) bounced nearly 500 points, the Nasdaq Composite (+1.2%) logged a roughly 200 point gain, and the S&P 500 (+1.2%) jumped more than 60 points. Many stocks participated in upside moves, driven by buy-the-dip interest, but mega caps and semiconductor shares had an outsized impact on index performance.
The Vanguard Mega Cap Growth ETF (MGK) settled 1.2% higher and the PHLX Semiconductor Index (SOX) jumped 2.2%.
Alphabet (GOOG 149.54, -2.39, -1.6%) went against the upside grain, dropping after the start of Google's antitrust trial. Apple (AAPL 220.91, +0.09, +0.04%), which unveiled new iPhones and other products at today's "It's Glowtime" event, had been down as much as 1.8% earlier before settling the session slightly higher.
All 11 S&P 500 sectors logged a gain and seven of them were higher by 1.0% or more. The communication services sector registered the slimmest gain due to the price action in Alphabet while the consumer discretionary (+1.6%) and information technology (+1.4%) sectors closed near the top of the leaderboard.
Treasuries settled mixed after last week's big gains, which acted as fuel for selling in the stock market. The 10-yr note yield settled one basis point lower at 3.70% and the 2-yr note yield settled two basis points higher at 3.67%.
- S&P 500: +14.7% YTD
- Nasdaq Composite: +12.5% YTD
- Dow Jones Industrial Average: +8.3% YTD
- S&P Midcap 400: +6.2% YTD
- Russell 2000: +3.5% YTD
Reviewing today's economic data:
- July Wholesale Inventories 0.2% (Briefing.com consensus 0.3%); Prior 0.2%
- Consumer credit increased by $25.5 billion in July (Briefing.com consensus $11.5 billion) after increasing a downwardly revised $5.2 billion (from $8.9 billion) in June.
- The key takeaway from the report is that consumer credit was flowing in July for both revolving and nonrevolving credit, aided by falling interest rates.
Looking ahead, Tuesday's economic lineup features the August NFIB Small Business Optimism Survey at 6:00 ET.
Treasuries settle mixed
09-Sep-24 15:35 ET
Dow +465.56 at 40810.97, Nasdaq +152.56 at 16843.37, S&P +55.63 at 5464.05
[BRIEFING.COM] The major indices continue to flow sideways ahead of the close.
The 10-yr note yield settled one basis point lower at 3.70% and the 2-yr note yield settled two basis points higher at 3.67%.
Looking ahead, Tuesday's economic lineup features the August NFIB Small Business Optimism Survey at 6:00 ET.
Consumer credit increased in July
09-Sep-24 15:10 ET
Dow +436.56 at 40781.97, Nasdaq +116.78 at 16807.59, S&P +49.91 at 5458.33
[BRIEFING.COM] There hasn't been much up or down action over the last half hour. The S&P 500 trades about 50 points higher, the Nasdaq Composite trades about 100 points higher, and the Dow Jones Industrial Average trades about 450 points higher.
Consumer credit increased by $25.5 billion in July (Briefing.com consensus $11.5 billion) after increasing a downwardly revised $5.2 billion (from $8.9 billion) in June.
The key takeaway from the report is that consumer credit was flowing in July for both revolving and nonrevolving credit, aided by falling interest rates.
Separately, the CBOE Volatility Index (VIX) is down 2.57 points, or 11.5%, to 19.84 as investors unwind hedges against further downside action.
Paycom, United Airlines among top S&P 500 gain getters on Monday
09-Sep-24 14:30 ET
Dow +457.95 at 40803.36, Nasdaq +121.33 at 16812.14, S&P +50.49 at 5458.91
[BRIEFING.COM] The S&P 500 (+0.93%) has bled lower alongside its counterparts over the last half hour, the average now holding gains near 50 points vs. 75 points at today's highs.
Elsewhere, S&P 500 constituents Paycom Software (PAYC 164.36, +9.45, +6.10%), United Airlines (UAL 48.79, +2.78, +6.04%), and Super Micro Computer (SMCI 408.16, +21.70, +5.62%) pepper the top of the standings. UAL rising to six-week highs despite a dearth of corporate news, while SMCI gains after GlassHouse Research announced it was long SMCI.
Meanwhile, Humana (HUM 343.86, -14.00, -3.91%) is today's worst performer, lagging the market after a Leerink Partners note pointed to a challenging Medicare Advantage environment in 2025.
Gold higher to begin the week
09-Sep-24 14:00 ET
Dow +495.72 at 40841.13, Nasdaq +170.30 at 16861.11, S&P +61.00 at 5469.42
[BRIEFING.COM] With about two hours to go on Monday the tech-heavy Nasdaq Composite (+1.02%) is the weakest major average in an up market, sporting gains north of 170 points.
Gold futures settled $8.20 higher (+0.3%) to $2,532.70/oz, ahead of key inflation data later on this week; the market also gauges prospects for an all-but certain interest rate cut next week.
Meanwhile, the U.S. Dollar Index is up about +0.3% to $101.48.
Palantir Technologies hits best levels since early 2021 following inclusion in S&P 500 (PLTR)
Shares of Palantir Technologies (PLTR +13%) are on a blistering pace higher today, reaching levels not seen since early 2021 before the expiration of the company's IPO lockup period ignited a wave of selling. Inclusion in the S&P 500 announced on Friday after the close is setting the stock ablaze. Murmurings that the AI software developer could be on the S&P started after it delivered its second consecutive quarter of GAAP profitability in 1Q23 and remarked that profitability should persist over the next several quarters.
We have liked PLTR since late last year after it exhibited exceptional turnaround momentum by capitalizing on the AI buzz. However, with shares now at multi-year highs after more than doubling YTD, PLTR's valuation has swelled to frothy levels, trading at a 27x FY24 sales multiple, considerably higher than some of its peers, including Snowflake (SNOW) at 11x and IBM (IBM) at 3x.
- PLTR has steadily demonstrated its technological advantages in the field of AI, recently delivering another solid beat-and-raise in Q2. Government and commercial revenue maintained upward momentum, with commercial customers climbing by 41% yr/yr to 593. The commercial side of PLTR tends to be the major focus each quarter, given how the company already commands a dominant presence within the U.S. Government.
- PLTR has grown profitably, recently expanding its adjusted operating margins by 12 pts yr/yr to 37%, marking its seventh straight quarter of margin expansion. As a software-focused firm, PLTR has ample room to maintain its profitability.
- Europe has been a constant obstacle, weighing on international commercial growth, which comprised a relatively small 22% of total revs in Q2. Earlier this year, PLTR warned that headwinds in Europe may persist given that the region was heading toward 0% GDP growth over the next couple of years. However, to offset this challenge, PLTR has been moving swiftly into Asia and the Middle East, helping keep its international commercial revenue growth trending positively in Q2 at 15% yr/yr.
Overall, PLTR remains a solid long-term AI play. The company's software is differentiated from other AI-powered data analytic tools and has already penetrated global enterprises, including ExxonMobil (XOM) and United Airlines (UAL), not to mention the numerous government agencies, including the U.S. Federal Government. However, at current levels, we urge caution over the near term since any minor cracks can open PLTR up to a flood of selling. Following massive inflows of capital into the AI industry, customers will need to see a healthy return on investment soon. Even if PLTR continues to showcase its competitive edge, if the overall AI picture begins to deteriorate, PLTR will likely be swept up in the selling pressure, especially given its current valuation.
Pembina Pipeline inks another compelling deal to bolster its natural gas infrastructure assets (PBA)
Pembina Pipeline (PBA), a Canadian energy pipeline, transportation and midstream services company, has been active in the M&A market and the company is making another significant move as it looks to bolster its natural gas infrastructure assets and capacity. The company's gas processing unit, Pembina Gas Infrastructure, which is jointly owned with private equity firm KKR & Co (KKR), has entered into an agreement with Veren Inc. to acquire four batteries from Veren in the Gold Creek and Karr areas of Alberta, Canada.
- PBA's purchase of these assets comes only a couple months after it announced a purchase and sale agreement with Whitecap Resources in which it acquired a 50% working interest in Whitecap's Kaybob Complex for $420 mln. While Whitecap retained operatorship of the assets, PBA will benefit from the 165 mln cubic feet per day of natural gas processing capacity at the Kaybob Complex due to the take-or-pay agreement it entered into with Whitecap for its portion of the capacity.
- Similarly, PBA's $400 mln transaction with Veren includes a 15-year take-or-pay arrangement and area of dedication agreements with Veren, which will retain operatorship responsibilities. In total, the four batteries that PBA acquired include natural gas handling capacity of 320 mln cubic feet per day and liquids handling capacity of 53,000 barrels per day.
- These deals will only bolster a Facilities segment for PBA that has already been producing strong results. In Q2, adjusted EBITDA in Facilities increased by 25% yr/yr to $340 mln, driven by momentum across the Canadian energy industry. Along with a 31% adjusted EBITDA increase in the Pipelines business, the healthy growth in Facilities enabled PBA to raise its FY24 adjusted EBITDA guidance to C$4.20-C$4.35 bln from C$4.05-C$4.30 bln.
- Upon the closing of this transaction, PBA estimates that the addition of these assets will contribute C$50 mln in annual adjusted EBITDA, while further capital deployment to the assets will generate incremental EBITDA due to corresponding fees and increased plant utilization.
- The only clear negative is that PBA intends to fund the acquisition with an existing credit facility, so it will be taking on more debt. However, there isn't too much concern here given that its balance sheet is in relatively good shape with a debt-to-adjusted EBITDA ratio of 3.6x -- at the low end of its targeted range.
The main takeaway is that this looks like another solid, lower-risk deal for PBA that will enable it to further capitalize on rising natural gas production in North America.
Progress Software heads lower following deal to acquire ShareFile (PRGS)
Progress Software (PRGS -2%) is heading lower after announcing a big acquisition. This supplier of enterprise software for creating and deploying business applications said it will acquire ShareFile, a business unit of Cloud Software Group. The price tag is $875 mln, which is quite sizeable for a company with a $2.5 bln market cap. Progress will use a combination of cash and its existing revolving credit facility. The deal is expected to close within Progress' fiscal year, which end November 30.In addition to the ShareFile deal, Progress also provided some upbeat guidance. It said it expects Q3 (Aug) adjusted EPS and revenue to both be within or above high end of prior guidance.
- Perhaps a slight negative was Progress also saying it plans to suspend its dividend as of the closing of the ShareFile acquisition. Instead it would rather use that money to pay down debt and increase liquidity for future M&A and for share repurchases. Progress intends to de-lever quickly as it has with previous acquisitions.
- ShareFile provides a collaboration and workflow platform, which allows for document-centric collaboration with automated workflows, client portal, secure sharing and linking of files and integrated eSignature. It uses Gen AI to provide a simple guided self-service user experience. It also uses Gen AI to automatically summarize documents as well as create Q&A related to those documents.
- Primary competitors of ShareFile are Box (BOX) and Dropbox (DBX). However, Progress believes ShareFile offers a much richer workflow and collaboration capabilities as well as client portal and Gen AI capabilities. These features make it much more competitive in the market and gives it an edge when competing, especially for companies that are focused on compliance as a big issue.
- Progress says the deal will significantly expand its digital experience portfolio. Also, ShareFile serves a wide range of industries, including business services such as legal and accounting, financial services, healthcare, construction and real estate. It also has a large and loyal customer base. When the deal closes, ShareFile is expected to add more than $240 mln in annual revenue and bring Progress ARR to well over $800 mln and annual revs to nearly $1 bln.
- Progress sees an opportunity to leverage its existing sales support and operating platform, which it believes provides a clear path to bringing operating margins up to its 40% target. Progress also believes the deal is highly attractive in terms of its acquisition multiple (3.6x sales) and given the cash tax advantage of an asset purchase transaction.
Investors do not seem overly enthusiastic about the deal. We suspect investors are maybe not excited about a file sharing addition even if it's at an attractive multiple and even is ShareFile offers enhanced features. There are also integration risks given how large this deal is relative to Progress' current market cap. Also, that the company chose to suspend its dividend is another sign of how large this deal is and that carries some risk. Progress reports earnings on September 24, so we should get more color then.
Apple slides ahead of its iPhone 16 unveiling today; AI to be at the forefront (AAPL)
Apple (AAPL -1%) is slipping today ahead of its "It's Glowtime" event slated for 1:00 p.m. ET. The tech titan is expected to unveil its iPhone 16 lineup alongside Apple Watches, AirPods, and new AI features. The iPhone 16 revealing follows AAPL's Worldwide Developers Conference in June when the iPhone maker showed off its newest iOS 18 operating system containing many AI-powered features. Only the latest iPhone 15 Pro and Pro Max supported all of the AI, which AAPL calls "Apple Intelligence." As such, today's iPhone 16 unveiling could be one of AAPL's more significant announcements, as plenty of older iPhone users may be itching to upgrade to the newest model to take advantage of everything iOS 18 showcased.
- No surprises are expected surrounding the design of the latest iPhone. While a modest 1% yr/yr dip in iPhone revenue in JunQ illustrated stable demand for AAPL's design, it may be growing stale in a sea of Android-powered (GOOG) handsets featuring folding screens. For instance, Huawei's tri-fold phone has received over 3.0 mln pre-orders, according to its website, since opening the reservation window on Friday. Meanwhile, Samsung (SSNLF) expects its assortment of foldable devices to sustain its upward momentum through 2H24.
- Huawei's impressive pre-order number underscores a lingering threat to AAPL's growth in China. Reuters reported that iPhone shipments in China contracted by nearly 7% in JunQ while Huawei shipped 41% more of its smartphones during that period. In fact, overall smartphone shipments in the region climbed by 10% in JunQ, pointing to potential cracks in AAPL's armor as the diversified designs of Android devices resonate with consumers.
- Over the weekend, FT.com reported that AAPL's newest iPhone will feature Arm Holdings' (ARM) newest AI-focused V9 architecture, which commands twice the royalty revenue over the previous V8 architecture. AAPL's barrage of AI features unveiled in June helped lift its stock to record highs, reflecting outsized buzz over the potential demand the technology could trigger. As a result, shares of ARM are jumping today as the company stands to gain meaningfully on a resurgence in iPhone demand.
- Apple Watch and AirPods will take a backseat to the iPhone. However, these products, housed in AAPL's Wearables segment, comprised a decent 9% chunk of AAPL's JunQ revs. Also, if a customer is searching for a smartwatch or pair of headphones, the Apple Watch and AirPods offer a compelling entry into the Apple ecosystem, giving them greater importance. Last quarter, AAPL noted that nearly two-thirds of new customers purchased an Apple Watch, bringing its installed base to all-time highs.
AAPL's major events often accompany a sell-the-news reaction, only to reverse course over subsequent trading days. Also, AAPL's suppliers, including AVGO, CRUS, TSM, QCOM, SWKS, and QRVO, can move on certain announcements. AI will likely be the focus today as AAPL begins its foray into the AI space, potentially providing a massive boost to demand this year. Last week, Broadcom (AVGO), a prominent AAPL supplier, projected a 20% revenue bump in its wireless division sequentially in OctQ, illuminating an anticipated surge in demand for AAPL's upcoming iPhones.
Braze plunging lower as slowing growth and steadfast spending plans spark selloff (BRZE)
Despite topping Q2 EPS and revenue expectations and achieving its first profitable quarter on a non-GAAP net income basis in its history, customer engagement and marketing platform provider Braze (BRZE) is crashing lower. Similar to competitor Sprinklr (CXM), which released its Q2 earnings report on Tuesday, BRZE issued underwhelming Q3 and FY25 guidance, amplifying concerns that the same macro-related headwinds that are afflicting CXM and other peers, like Salesforce (CRM) and HubSpot (HUBS), are taking a greater toll on the company.
- The root issue that's sending BRZE spiraling lower revolves around slowing growth and the company's plan to keep its foot on the gas in terms of investing in its brand and business. In Q2, revenue growth slowed to 26.4% from the low-30% level that BRZE had generated over the past five quarters. Further, the midpoint of its Q3 revenue guidance of $147.5-$148.5 mln indicates that growth will slow further, dipping just below the 20% mark.
- Amid this downtrend in its growth rate, BRZE has no intention of scaling back its operations and playing defense. To the contrary, CEO Bill Magnuson commented during the earnings call that out of difficult environments arise opportunities to create competitive moats and long-term differentiation from its competitors. Accordingly, the company will continue to invest in its global teams and products, while improving its system performance.
- With growth concerns in general mounting, BRZE's more ambitious spending plans are likely spooking investors. While the company did lift its FY25 EPS guidance higher to $0.06-$0.07 from its prior outlook of $(0.10)-$(0.06), most of that increase simply incorporates the EPS upside that BRZE posted in Q2.
- By no means, though, is BRZE's business falling off a cliff, as the stock's plunge today might suggest. In particular, the company is having success on the enterprise side, as its $500,000+ ARR customers increased by 28% yr/yr to 222. A significant factor driving the large customer increase is the strong upsell activity as customers adopt more channels, deploy more use cases, and add new business segments and geographies to the mix.
- From a broader perspective, BRZE is well-positioned to continue capitalizing on an ongoing vendor replacement cycle and the consolidation of customer management tools among enterprises. As new AI advancements emerge, the company believes that corporations will place even greater emphasis on customer engagement tools as they look to capitalize on those AI technologies.
The main takeaway is that BRZE delivered solid Q2 results, but with investors shifting to a "sell first, ask questions later" mindset, the company's underwhelming guidance and slowing growth has sparked a nasty selloff.
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