Daily Markets: JOLTs Data and the Start of Big Tech Earnings

Today’s Big Picture

Asia-Pacific equity markets finished the day lower except for Japan’s Nikkei and Australia’s ASX All Ordinaries, which gained 0.11% and 0.34%, respectively. South Korea’s KOSPI closed close to flat, down a mere 0.07%, Taiwan’s TAIEX declined 0.47%, and India’s SENSEX closed 1.11% lower. Confidence in China’s ability to settle its equity markets wobbled as China’s Shanghai Composite fell 1.83% and Hong Kong’s Hang Seng shed 2.32% in a broad decline led by Producer Manufacturing names. European markets are mixed in midday trading and U.S. equity futures are pointing to a modestly lower open although, at least at the time of writing, Cboe Volatility Index (VIX) futures are breaking character and are also lower.

As the market gets ready for the start of Big Tech earnings after today’s market close and the Fed’s next policy decision tomorrow afternoon, investors are sifting through a mixed batch of earnings reports. Those include better than expected results from cybersecurity company F5 (FFIV), Sanmina (SANM), and General Motors (GM), but weaker than expected guidance from Whirlpool (WHR), UPS (UPS), Calix Networks (CALX), and Harmonic (HLIT). Once again, it isn’t enough for a company to deliver a solid quarter, with the stock market being priced to perfection, a vibrant outlook is also necessary to send a company’s shares higher.

Over the next few days, the pace of earnings reports will skyrocket, including not only Big Tech companies but approximately 20% of the S&P 500 basket as well. As the dust settles on these reports, investors will have a clearer sense of which companies are thriving and poised to deliver outsized earnings growth in the coming quarters. Readers should be mindful of not only top-line estimates but also spending forecasts that could lead to softer than expected margins and bottom line performance.

Data Download

International Economy

Consumer credit in the United Kingdom grew by £1.197 billion in December, following a £2.06 billion rise in the prior month and compared with market estimates of £1.35 billion. It was the smallest increase in consumer credit in seven months, driven by lower borrowing through credit cards, which fell from £1.0 billion in November to £0.3 billion in December.

A preliminary reading showed the Euro Area economy expanded 0.1% YoY in 4Q 2023 following a flat reading in the previous quarter and beating forecasts of no growth. The economic sentiment indicator in the Euro Area edged down to 96.2 in January, matching market expectations and down from December's seven-month high of 96.3. Sentiment witnessed a downturn among consumers (-16.1 vs -15.1 in December), retailers (-5.6 vs -5.4), and constructors (-4.3 vs -3.4), while it continued to improve among manufacturers (-9.4 vs -9.6) and service providers (8.8 vs 8.4).

Domestic Economy

As the Federal Reserve begins its two-day policy meeting at. 9 AM ET the market will get the back-to-back reads on November housing prices courtesy of the latest FHFA Housing Price Index and S&P Case-Shiller Home Price Index.

At 10 AM ET, the December JOLTS Job Openings Report will add another dimension to views of the domestic labor market. Also being published at 10 AM ET is the January Consumer Confidence Index, which is expected to dip to a reading of 113.0 from 115.0 in December.

Markets

Small caps finally found a gear as the Russell 2000 had a strong day, posting a 1.67% gain. Consumer Discretionary (1.46%), Technology (0.92%), and Communication Services (0.84%) led markets higher as all members of last year’s “Magnificent Seven” except for Apple (AAPL) sat on the top of their respective sectors’ leader boards. The Dow gained 0.59%, the S&P 500 added 0.76% and the Nasdaq Composite closed 1.12% higher. In individual names, shares of Archer-Daniels Midland (ADM) were bid 5.55% higher after the company announced an 11% increase in their quarterly dividend, from $0.45 to $0.50.

Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: 1.71%
• S&P 500: 3.31%
• Nasdaq Composite: 4.11%
• Russell 2000: -0.77%
• Bitcoin (BTC-USD): 3.10%
• Ether (ETH-USD): 0.87%

Stocks to Watch

Corning (GLW), Danaher (DHR), Diageo (DEO), General Motors (GM), HCA (HCA), JetBlue (JBLU), Pfizer (PFE), and UPS (UPS) are among the companies expected to release quarterly earnings before equities begin trading later this morning.

Pre-market breadth is holding steady today as 222 names in the S&P 500 have traded hands so far this morning with 92 gainers and 130 decliners. F5 Networks (more below) is this morning's standout, on track to open over 10% higher than yesterday’s close. Names under pressure include NetApp (NTAP), Hubbell Incorporated (HUBB), United Parcel Service, and Whirlpool Corporation (more below).

Sanmina shares gained serious ground after the company blew away expectations, lifting its 2024 revenue to $1.82-$1.925 billion with EPS of $1.20-$1.30 compared to the consensus forecast of $1.80 billion and $1.09, respectively. Management shared its industrial, medical, defense, and aerospace markets are “pretty stable” but the company is benefitting from cloud infrastructure upgrades.

Shares of Super Micro Computer (SMCI) popped in aftermarket trading after the company reported December quarter results that crushed the consensus forecast and guided current quarter EPS to $5.20-$6.01 compared to the $4.61 consensus. According to the management team, “While we continue to win new partners, our current end customers continue to demand more of Supermicro’s optimized AI computer platforms and rack-scale Total IT Solutions." Super Micro also boosted its full year revenue forecast to $14.3-$14.7 billion, up from $10-$11 billion.

F5 Networks also posted far better than expected December quarter results and lifted its outlook for the current quarter to revenue of $675-$695 million vs. the $673.50 million consensus. During the company’s earnings call, its management shared that AI is driving demand for a comprehensive API security solution, inclusive of DDoS protection, bot detection and data masking and leak protection.

While Whirlpool bested market expectations for its December quarter, the company’s downside guidance for 2024 overshadowed those results. Whirlpool sees 2024 EPS coming in between $13-$15, below the $15.37 consensus.

Silicon Labs (SLAB) announced a one-week delay to its scheduled earnings conference call for the quarter ended on December 30, 2023. The company has determined that a material weakness in internal control related to the operation and documentation of certain inventory controls existed as of December 30, 2023.

Reports indicate Apple has sold upwards of 200,000 Vision Pro headsets ahead of media reviews for the product going live later today.

Boeing (BA) has withdrawn a request for a safety exemption for a new version of its 737 Max jet that would have expedited its approval, raising questions over when the plane will enter service.

American Airlines (AAL) announced it will lay off 656 workers who help passengers with lost luggage and other travel problems as their jobs are consolidated into other teams.

Southern California Bancorp (BCAL), the holding company for Bank of Southern California, and California BanCorp (CALB), the holding company for California Bank of Commerce, announced a definitive merger agreement, under which the companies will combine in an all-stock merger valued at approximately $233.6 million, or $26.54 per share of California BanCorp.

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

Advanced Micro Devices (AMD), Alphabet (GOOGL), Electronic Arts (EA), Juniper Networks (JNPR), Lending Club (LC), Match Group (MTCH), Microsoft (MSFT), Mondelez International (MDLZ), Robert Half (RHI), Skyworks (SWKS), and Starbucks (SBUX), 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

Wednesday, January 31

• Japan: Industrial Production, Retail Sales, Housing Starts – December
• Japan: Consumer Confidence - January
• China: NBS Manufacturing and Non-Manufacturing PMI - January
• US: Weekly MBA Mortgage Applications
• US: ADP Employment Change Report
• US: Weekly EIA Crude Oil Inventories
• US: FOMC Rate Decision

Thursday, February 1

• Japan: Jibun Bank Manufacturing PMI (Final) - January
• China: Caixin Manufacturing PMI – January
• Eurozone: HCOB Manufacturing PMI (Final), Flash Inflation Rate - January
• UK: S&P Global Manufacturing PMI (Final) – January
• US: Weekly Initial & Continuing Jobless Claims
• US: Productivity & Unit Labor Cost – 4Q 2023
• US: S&P Global Final Manufacturing PMI – January
• USL ISM Manufacturing Index – January
• US: Construction Spending – December
• US: Weekly EIA Natural Gas Inventories

Friday, February 2

• Eurozone: ECB Survey of Professional Forecasters
• US: Employment Report – January
• US: Factory Orders – December
• US: The University of Michigan Consumer Sentiment Index (Final) – January

Thought for the Day

“Behind all the smoke and noise on the market's surface, it's important to remember that companies -- small, medium, and large -- make up the market's backbone. And corporate earnings drive stock prices.” ~ Peter Lynch

Disclosures

• F5 Networks (FFIV) is a constituent of the Foxberry Tematica Research Cybersecurity & Data Privacy Index
• Advanced Micro Devices (AMD), Juniper Networks (JNPR), Skyworks (SWKS) are constituents of the Tematica BITA Digital Infrastructure & Connectivity Index
• Apple (AAPL), Microsoft (MSFT) are constituents of the Tematica Research Thematic Dividend All-Stars Index

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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