2023 Oct 25, US Market
★Yen weakens to match the low for year, raising intervention risk.
☆A Japanese stock exchange plans to test system that lets international investors conduct trades in their home nation's currency - Nikkei.
☆Israeli PM: We are preparing for a ground invasion.
US 5-Year Note Auction
Bid-to-Cover ratio 2.36
High Yield 4.899% VS WI 4.880%
US sells $52 bln
Awards 48.22% of bids at high
Primary dealers take 19.41%
Direct 19.08%
Indirect 61.51%
A steep drop in shares of Alphabet, Amazon.com and other technology companies dragged the Nasdaq Composite into correction territory Wednesday.
The tech-heavy index slid 2.4% in a punishing session that pulled it down more than 10% from its recent high. Its losses accelerated in the afternoon, sending the gauge to one of its worst one-day declines of the year.
The S&P 500 fell 1.4%, closing at its lowest level since May. The Dow Jones Industrial Average shed 105 points, or 0.3%.
Shares of Google-parent Alphabet tumbled almost 10% after reporting quarterly results that showed disappointing growth in its cloud business. The company shed more than $166 billion in market value, its biggest one-day loss ever. Shares of Amazon.com and Nvidia also fell, lagging behind the broader market, while fintech company Affirm and payments company Block dropped sharply.
The technology rout Wednesday punctures a rally that had dominated for much of the year. Many investors have piled into a handful of big tech stocks in a wager that they will benefit from innovations tied to artificial intelligence and keep flourishing. Now, some of that excitement is fading during a packed week for third-quarter earnings results and one of the worst bond routs in recent memory.
The yield on the 10-year Treasury note rose to 4.952% on Wednesday and breached 5% on Monday for the first time in 16 years. Yields rise as bond prices fall.
To some analysts and investors, the recent volatility is a harbinger of more turmoil ahead and a wake-up call that the stock market’s stars—megacap tech stocks—are susceptible to sharp swings after their results. Meta Platforms and IBM report this week, and investors are bracing for more dramatic moves.
Texas Instruments also reported lackluster third-quarter earnings results, weighing on other semiconductor stocks. Shares of Texas Instruments shed 3.5%. Nvidia lost more than 4.3%, and AMD and Intel each dropped around 5%.
Though tech stocks were among the hardest hit, the losses were broad. Nine of 11 of the S&P 500’s sectors notched declines, including the healthcare and real-estate groups. The Russell 2000 index of small companies, which has been flashing a recession signal, dropped 1.7% and sank deeper into the red for the year.
Of course, it hasn’t been all bad; cloud results at Microsoft gave its shares a boost. The stock added 3.1%.
Investors remained focused on the government-bond market, which has been prone to wild daily swings. Some businesses are feeling the heat from the sharp rise in mortgage rates, which have ascended alongside Treasury yields.
☆Shares of TransUnion, one of the three major credit-reporting firms, fell 7.1% Wednesday after a 23% swoon in the prior session. The company, which provides credit scoring and related tools for lenders’ underwriting decisions, cut its expectations for this year and pulled its 2025 financial targets, after lower mortgage activity dented its business. Executives also flagged a broader slowdown in banks’ consumer lending.
Home Depot shares have slid for seven consecutive sessions, the longest losing streak since 2016, before a rush to buy homes and fix them up during the pandemic sent shares to records.
Many investors remain hungry for risk. Bitcoin prices have soared to some of their highest levels in more than a year lately, in part because of hopes that an exchange-traded fund tied to the cryptocurrency will be approved by regulators.
Wells Fargo upgraded Gap (GPS) to Overweight from Equal Weight with a price target of $16, up from $11. The setup for Gap "has become compelling" with right-sized inventory, improved cost controls and new management "set to inflect the narrative" and drive material upside to Street estimates, the firm tells investors in a research note.
UBS upgraded Chewy (CHWY) to Neutral from Sell with a price target of $20, down from $25. The firm believes the stock now largely reflects the company's potential near-term challenges.
Wells Fargo upgraded Veeva (VEEV) to Overweight from Equal Weight with a price target of $229, up from $211. The firm sees a path to double-digit revenue growth returning for Commercial Cloud and expects Veeva to fully defend its CRM turf with its top 25 pharma clients.
BMO Capital upgraded Progressive (PGR) to Outperform from Market Perform with a price target of $180, up from $155. The company's "pivot back to offensive growth" during a time when many of its peers continue to "heal" is highly likely in the coming months, aided by double-digit auto inflationary pressures decelerating off all-time highs, the firm tells investors in a research note.
Citi upgraded American Express (AXP) to Neutral from Sell with a price target of $154, up from $143. Shares pulled back recently, "putting less downside risk on the shares," the firm tells investors.
Monness Crespi downgraded Alphabet (GOOGL) to Neutral from Buy with no price target after the company reported "disappointing" Q3 operating profits and "hosted an opaque call."
Citi downgraded Etsy (ETSY) to Neutral from Buy with a price target of $67, down from $114. The firm believes there is limited visibility into the company's 2024 gross merchandise sales growth.
Evercore ISI downgraded TransUnion (TRU) to In Line from Outperform with a price target of $52, down from $95, citing what the firm sees as a "rapidly deteriorating earnings outlook," tied to a weakening U.S. and U.K. consumer credit backdrop.
TD Cowen downgraded EVgo (EVGO) to Market Perform from Outperform with a price target of $4, down from $6. The firm cites slower than expected DC fast charging installations, a softer commercial fleet throughput outlook as businesses rethink their capital projects, capital requirements, and intensified competition from Tesla (TSLA) for the downgrade.
Stephens downgraded BellRing Brands (BRBR) to Equal Weight from Overweight with a price target of $47, up from $45. BellRing has been one of the best performing names across the staples universe in 2023, but the firm believes the strong performance of shares year-to-date, coupled with current valuation, creates a balanced risk reward setup for shares.
Needham initiated coverage of Palo Alto Networks (PANW) with a Buy rating and $305 price target. The firm says Palo Alto has transformed itself into a stalwart in cybersecurity as the leader in network firewalls with greater than 25% and growing market share.
Needham initiated coverage of Fortinet (FTNT) with a Hold rating and no price target. While the company has executed "superbly" over the last few years, its Q2 results and the Q3 outlook disappointed, raising questions around growth durability, the firm tells investors in a research note.
Needham initiated coverage of Check Point (CHKP) with a Hold rating. The company's underinvestment in both product and go-to-market has hindered growth and led to share losses over the last decade, and while the firm commends its recent reinvestment efforts, Check Point is facing a hurdle for halting share loss and reaccelerating growth amid declining mind-share in channel checks and intensifying competition as it expands into adjacencies, the firm tells investors in a research note.
FBN Securities initiated coverage of Samsara (IOT) with an Outperform rating and $30 price target. Samsara, which FBN calls "the Internet of Things and Connected Cloud Leader," has several over 30% year-over-year growth segments, has posted "impressive" ARR growth with larger customers that account for half of total ARR and has shown "impressive" operating leverage.
Benchmark initiated coverage of Tower Semiconductor (TSEM) with a Buy rating and $35 price target. Tower is "a unique, undervalued, high-growth, high-cash-flow, lesser-known, specialty semiconductor outsource manufacturing story," says the firm, who highlights the company's participation in some of the fastest growing themes of the technology industry.
Microsoft (MSFT) reported better-than-expected Q1 earnings and revenue
Alphabet (GOOGL) reported upbeat Q3 results, though Barclays called the report "a classic mixed bag print," with Search and Youtube revenue beating market expectations, but Cloud having "whiffed badly"
Boeing (BA) reported mixed Q3 results and reiterated its FY23 operating cash flow guidance
Texas Instruments (TXN) reported upbeat Q3 earnings, but provided worse-than-expected guidance for Q4
Visa (V) reported better-than-expected Q4 results, with payments volume up 9%
UBS (UBS) plans to lay off all of Credit Suisse's (CS) investment bank employees in Spain, Bloomberg says
China's Semiconductor Manufacturing International Corp. used equipment from ASML (ASML) to manufacture an advanced processor for a Chinese smartphone, Bloomberg says
Apple (AAPL) is overhauling its AirPod lineup starting in 2024, Bloomberg reports
Shell (SHEL) told Reuters it will cut at least 15% of low-carbon solutions jobs
The United Auto Workers union looks to be edging closer to a tentative deal with Ford (F), AP reports
Stride (LRN) higher after reporting quarterly results and providing guidance for FY24
Deutsche Bank (DB) and New Oriental Education (EDU) gain in New York after reporting quarterly results
Option Care Health (OPCH) lower after reporting quarterly results
Vicor (VICR) falls after Needham downgraded the stock to Hold
Alphatec (ATEC) declines after announcing a 14.3M share offering
T-Mobile (TMUS) reported Q3 results and narrowed its FY23 outlook
Snap (SNAP) reported Q3 results and provided guidance for Q4, with Citi commenting the company remains in the early days of its turnaround
Amphenol (APH) reported Q3 results, provided guidance for Q4, and announced its outlook for FY23
Norfolk Southern (NSC) reported Q3 results, with CEO Alan Shaw commenting, "We are building the safe, reliable, and resilient railroad our customers and shareholders expect, and we have an incredibly bright future"
Xerox (XRX) reported Q3 EPS that was higher year-over-year
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