Today’s Big Picture
Asia-Pacific equity markets finished the day with relatively light volumes as Chinese, Korean, and Taiwanese equity markets were closed, marking the New Year’s holiday. Hong Kong’s markets were open, but only for an abbreviated trading session which saw the Hang Seng close 0.83% lower in a broad decline led by Transportation names. Japan’s Nikkei came close to flat, up a mere 0.09%, Australia’s ASX All Ordinaries did slightly better, rising 0.12% and India’s SENSEX led the region with a 0.23% gain. European markets are mixed in midday trading and U.S. equity futures are pointing to a higher open although Dow futures are looking flat.
With the S&P 500 continuing to flirt with the 5,000 level, the market will be comparing several earnings reports out this morning with those from Cloudflare (NET), Affirm (AFRM), and Pinterest (PINS) last night - see Stocks to Watch for more on those. So far this earnings season, almost 81% of the companies that have reported in the S&P 500 have delivered better than expected results, significantly higher than the average beat rate of 67% since 1994.
That helps to explain the extended move higher in recent weeks even though Fed Chair Powell and recent economic data have taken a March rate cut off the table. Ahead of next week’s January Consumer Price Index report, the Bureau of Labor Statistics will publish revised CPI index figures as seasonal adjustment factors are recalculated to reflect price movements from the just-completed calendar year. Following last year’s significantly higher revision to CPI data, the market will review the data and what it could mean for Fed policy. If those revisions put the pace of inflation improvement at a slower pace, the market will be very interested in what Dallas Fed President Lorie Logan says at 1:30 PM ET today.
Data Download
International Economy
Japan's trade ministry plans to spend up to 45 billion yen (around $301 million) to back a research group, including domestic chip company Rapidus, to advance semiconductor technology. Taiwan Semiconductor (TSM) will build a second chip fabrication facility in Japan with help from Sony (SONY), Denso, Toyota (TM), and the Japanese government.
Domestic Economy
Fifteen U.S. lawmakers asked the Commerce Department to add ByteDance (BDNCE) to a government export control list to curb the company's access to American software. The request comes after efforts have hit a roadblock in Congress to ban TikTok or give the U.S. government new powers to curb the app, which is used by over 170 million people in the U.S.
Markets
Jobs numbers coupled with the S&P 500’s quest to close above 5,000 helped buoy markets. In an increasingly rare occurrence, small caps led the way as the Russell 2000 closed 1.50% higher. The S&P 500 saw resistance at 5,000 resulting in a 0.06% gain for the day while the Dow rose 0.13% and the Nasdaq Composite added 0.24%. Energy was the lone standout, up 1.03% while, aside from Utilities falling 0.71%, sectors were subdued and mixed ranging between -0.38% (Financials) to 0.55% (Real Estate).
Following the company posting a beat and raise quarter, shares of Ralph Lauren (RL) had a runway moment of sorts, gaining 16.79% following their earnings release, which prompted price estimate increases from various analyst firms. Here’s how the major market indicators stack up year-to-date:
- Dow Jones Industrial Average: 2.75%
- S&P 500: 4.78%
- Nasdaq Composite: 5.21%
- Russell 2000: -2.34%
- Bitcoin (BTC-USD): 8.02%
- Ether (ETH-USD): 5.47%
Stocks to Watch
AMC Networks (AMCX) Construction Partners (ROAD), PepsiCo (PEP), and Sensient (SXT) are expected to release quarterly earnings before equities begin trading later this morning.
Pre-market breadth is lighter today as 220 names in the S&P 500 have traded hands so far this morning with 143 gainers and 77 decliners. Shares of Expedia Group (EXPE) seem to be in for a rough day as they are poised to open approximately15% lower than yesterday’s close while Take-Two Interactive (TTWO) is also coming under significant pressure tracking to open over 8% lower (more below on both names). Names catching a bid this morning include United Airlines (UAL), Constellation Energy (CEG), and Arista Networks (ANET).
Affirm reported a smaller than expected bottom line loss for its December quarter as revenue for the period climbed almost 48% YoY to $591.1 million, crushing the $520.85 consensus forecast. The company guided current quarter revenue to $530-$550 million, meaningfully higher than the $487.70 million market forecast. For its fiscal 2024, the Buy Now, Pay Later financing company guided its gross merchandise value to more than $25.25 billion, up from its previous forecast of $24.5 billion and the market consensus of $24.8 billion. Weighing on the shares, however, was the lower outlook for operating margins.
Shares on Pinterest were under pressure following mixed quarterly results with revenue that rose 11.9% YoY to $981.3 million, missing the $991.3 million consensus. Global Month Active Users rose 11% compared to the year-ago quarter, reaching 498 million. For the current quarter, Pinterest sees revenue in the range of $690-$705 million, bookending the $702.5 million consensus. During the earnings call, management shared that the outlook “includes an emerging contribution from third-party ad demand.”
Shares of Expedia also tumbled in aftermarket trading last night despite delivering quarterly results that surpassed consensus estimates. Overshadowing those results and favorable guidance was the announcement that the current president of Expedia for Business Ariane Gorin will be its new CEO effective May 13, with current CEO Peter Kern to serve as Vice Chair of the company's board. On the earnings call, management shared it saw some softness in gross bookings, driven primarily by air travel, which in turn was largely driven by a reduction in average ticket prices. It also expects travel demand to remain relatively healthy, but growth rates across the world to decelerate, especially early in the year as the industry lapsed due to post-Omicron tailwinds last year.
While Take-Two reported a smaller than expected bottom line loss for its December quarter, the company issued downside guidance of ($1.00) - ($0.90) compared to the ($0.54) consensus. Management guided revenue for the March quarter to $1.27-1.32 billion, well below the market forecast of $1.51 billion, due to softness in mobile advertising and sales for NBA 2K24 and increased marketing for Zynga's new mobile game, Match Factory!.
Cloudflare shares surged over 24% after the content delivery network and cloud security platform topped December quarter expectations and issued higher-than-expected annual profit guidance. The company anticipates current quarter EPS of $0.13, $0.01 ahead of the market consensus. For 2024, Cloudflare guided EPS to $0.58-$0.59 vs. the $0.56 consensus with revenue of $1.648-$1.652 billion compared to the market forecast of $1.65 billion.
The Children’s Place (PLCE) cut its January quarter revenue to $454-$456 million from its prior forecast of $460-$465 million. That revised figure is below the market forecast of $462.21 million.
Sam Altman, CEO of artificial intelligence pioneer OpenAI, is in talks with investors to raise as much as $5-$7 trillion for a major project that would boost the world's chip-making capacity and its ability to power AI (yes, trillion, you read that right).
Barclays (BCS) has agreed to acquire Tesco's (TSCDY) retail banking arm for around £600 million (~$757 million).
IPOs
Readers who want to dig deeper into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.
After Today’s Market Close
No companies are expected to report quarterly results after equities stop trading today. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar.
On the Horizon
Monday, February 12
- US: Treasury Budget – January
Tuesday, February 13
- Japan: Producer Price Index, Machine Tool Orders - January
- Eurozone: ZEW Economic Sentiment Index - February
- US: NFIB Small Business Optimism Index – January
- US: Consumer Price Index – January
Wednesday, February 14
- UK: Inflation Rate - January
- Eurozone: GDP (2nd estimate) – 4Q 2023
- Eurozone: Industrial Production - January
- US: Weekly MBA Mortgage Applications
- US: Weekly EIA Crude Oil Inventories
Thursday, February 15
- Japan: GDP – 4Q 2023
- UK: GDP – 4Q 2023
- US: Weekly Initial & Continuing Jobless Claims
- US: Import/Export Prices – January
- US: Retail Sales – January
- US: Industrial Production & Capacity Utilization – January
- US: NAHB Housing Market Index – February
- US: Weekly EIA Natural Gas Inventories
Friday, February 16
- UK: Retail Sales - January
- US: Producer Price Index – January
- US: Housing Starts & Building Permits – January
- US: University of Michigan Consumer Sentiment Index (Preliminary)
Thought for the Day
“Expectations are the greatest impediment to living. In anticipation of tomorrow, we lose today.” ~ Seneca
Disclosures
- Cloudflare (NET) is a constituent of the Foxberry Tematica Research Cybersecurity & Data Privacy Index
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Chris Versace
Christopher (Chris) Versace is the Chief Investment Officer and thematic strategist at Tematica Research. The proprietary thematic investing framework that he’s developed over the last decade leverages changing economic, demographic, psychographic and technology landscapes to identify pronounced, multi-year structural changes. This framework sits at the heart of Tematica’s investment themes and indices and builds on his more than 25 years analyzing industries, companies and their business models as well as financial statements. Versace is the co-author of “Cocktail Investing: Distilling Everyday Noise into Clear Investing Signals” and hosts the Thematic Signals podcast. He is also an Assistant Professor at NJCU School of Business, where he developed the NJCU New Jersey 50 Index.
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Mark Abssy
Mark Abssy is Head of Indexing at Tematica Research focused on index and Exchange Traded Product development. He has product development and management experience with Indexes, ETFs, ETNs, Mutual Funds and listed derivatives. In his 25 year career he has held product development and management positions at NYSE|ICE, ISE ETF Ventures, Morgan Stanley, Fidelity Investments and Loomis Sayles. He received a BSBA from Northeastern University with a focus in Finance and International Business.
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