Market Overview
The major indices closed either slightly above or slightly below yesterday's closing levels. The market-cap weighted S&P 500 closed about one point lower, and the equal-weighted S&P 500 logged a 0.2% decline. There was not a lot of conviction today following fresh all-time closing highs for the S&P 500 and Nasdaq Composite on Wednesday, and in front of Friday's release of the May Employment Report. The market continues to show nice resilience to selling efforts, which has acted as an upside driver in recent sessions.
Stock Highlights
Some stocks exhibited larger moves on specific catalysts:
- lululemon athletica (LULU) rose to 323.03, up 4.8%, on pleasing earnings and/or guidance.
- J.M. Smucker (SJM) increased to 115.37, up 4.6%, also on positive earnings and/or guidance.
LULU and SJM were among the top-performing S&P 500 components and contributed to the outperformance of their respective sectors. The consumer discretionary sector jumped 1.0%, and the consumer staples sector logged a 0.4% gain.
NVIDIA (NVDA, Financial) dropped to 1210.45, down 1.1%, under some profit-taking pressure after its record close yesterday. This loss, along with declines in Apple (AAPL) at 194.50, down 0.7%, and Broadcom (AVGO) at 1400.74, down 0.9%, contributed to the weakness in the information technology sector which fell by 0.5%.
Treasury Yields
Treasury yields settled little changed from yesterday following some volatile action in response to the first rate cut by the ECB since September 2019 and a mixed batch of economic data.
- The 10-yr note yield settled one basis point lower at 4.28%.
- The 2-yr note yield fell one basis point to 4.72%.
Year-to-Date Performance
- Nasdaq Composite: +14.4% YTD
- S&P 500: +12.2% YTD
- S&P Midcap 400: +5.8% YTD
- Dow Jones Industrial Average: +3.2% YTD
- Russell 2000: +1.1% YTD
Economic Data Review
Today's economic data included:
- Weekly Initial Claims: 229K (consensus 216K); Prior was revised to 221K from 219K
- Weekly Continuing Claims: 1.792 million; Prior was revised to 1.790 million from 1.791 million
The key takeaway from the report is the uptick in initial jobless claims, which will be seen as a sign of some loosening in the labor market.
Q1 Productivity-Rev.: 0.2% (consensus 0.3%); Prior 0.3%
Q1 Unit Labor Costs-Rev.: 4.0% (consensus 4.7%); Prior 4.7%
The key takeaway from the report is the downward revision to unit labor costs. Although a backward-looking report, that revision will take out some of the labor cost inflation sting seen in the advance report.
April Trade Balance: -$74.6 billion (consensus -$76.5 billion); Prior was revised to -$68.6 billion from -$69.4 billion
The key takeaway from the report is that there was an uptick in both exports and imports in April, which is a reflection of increased global trade activity. However, with imports exceeding exports, that will create a drag on Q2 GDP.
Looking Ahead
Friday's economic calendar features:
Guru Stock Picks
Brandes Investment Partners, LP has made the following transactions:
Today's News
DocuSign (DOCU, Financial) shares slipped 3% in extended-hours trading after the company reported fiscal first-quarter results that surpassed expectations. The company earned an adjusted $0.82 per share with revenue climbing 7% year-over-year to $709.6M. Despite the positive results, adjusted gross margin slipped slightly. Looking forward, DocuSign expects second-quarter revenue between $725M and $729M and full-year sales between $2.92B and $2.932B.
Samsara (IOT, Financial) reported a Q1 Non-GAAP EPS of $0.03, beating estimates by $0.02, and revenue of $280.73M, a 37.4% increase year-over-year. The company’s ending Annual Recurring Revenue (ARR) was $1.176 billion, representing a 37% year-over-year growth. Despite the strong results, shares fell 11.93% due to cautious guidance for Q2 and fiscal 2025.
CVS Health (CVS, Financial) recorded gains for the seventh consecutive session, rising 0.46% to close at $60.98. Despite underperforming the S&P index year-to-date, CVS has seen a positive reception from analysts, with a mix of Buy and Hold ratings. The stock received high marks for profitability and valuation.
GameStop (GME, Financial) will report its earnings next week with increased market cap and heightened Google search interest. Retail investor Keith Gill, known as Roaring Kitty, has shown renewed interest in the stock. GameStop is expected to report revenue between $872M and $892M, with EPS projected at -$0.09.
Emerson Electric (EMR, Financial) agreed to sell its remaining 40% stake in the Copeland joint venture to Blackstone for approximately $3.5B. The sale is part of Emerson's strategy to focus on high-growth automation markets. The Copeland business serves the global HVAC market.
Braze (BRZE, Financial) reported a Q1 Non-GAAP EPS of -$0.05, beating estimates by $0.05, with revenue of $135.5M, a 33.1% year-over-year increase. The company provided optimistic guidance for Q2 and fiscal 2025, projecting revenue between $577.0M and $581.0M.
Taiwan Semiconductor Manufacturing Company (TSM, Financial) is considering increasing its production fees for Nvidia (NVDA, Financial). Nvidia CEO Jensen Huang supported the potential price hike, citing TSMC's significant contribution to the tech industry. Nvidia accounts for 10% of TSMC's 2024 revenue.
Chinese companies like ByteDance are reportedly seeking ways to bypass U.S. sanctions by renting Nvidia's high-end AI chips from Oracle (ORCL, Financial). The move highlights ongoing efforts by Chinese firms to access advanced technology despite regulatory hurdles.
Vail Resorts (MTN, Financial) reported Q3 GAAP EPS of $9.54, missing estimates by $0.49, and revenue of $1.28B, a 3.2% year-over-year increase. The company continues to face challenges but shows potential for growth.
The $11B Golden Pass LNG project in Texas, a joint venture between Exxon Mobil (XOM, Financial) and QatarEnergy, has been delayed by at least six months due to construction issues. The project was expected to significantly expand U.S. LNG supplies.
ZIM Integrated Shipping (ZIM, Financial) saw a 15.4% drop in shares after Citi downgraded the stock to Sell, citing concerns over its exposure to spot freight rates. The company has a lower-than-average volume of contracts, increasing its vulnerability to rate fluctuations.
Global Medical REIT (GMRE) declared a quarterly dividend of $0.21 per share, maintaining a forward yield of 9.16%. The dividend is payable on July 9 for shareholders of record on June 21.
Bank of America reported that only 39% of actively managed funds outperformed the MSCI AC World Index in May. The firm noted that market cap-weighted benchmarks driven by a few large stocks have made it challenging for funds to outperform.
Cathie Wood of ARK Invest argued that her actively managed ETFs are well-positioned to capitalize on the AI wave, despite having sold Nvidia (NVDA, Financial) shares earlier. Wood believes other companies will benefit from Nvidia's growth.
Snowflake (SNOW) hosted its annual investor day, but concerns remain about long-term revenue growth from new products. KeyBanc Capital maintained its Overweight rating but lowered its price target to $168 from $200.
Planet Labs (PL) reported a Q1 Non-GAAP EPS of -$0.05, beating estimates by $0.01, with revenue of $60.44M, a 14.7% year-over-year increase. The company launched its Planet Insights Platform and reported a 14% increase in customer count year-over-year.
Eric Hippeau of Lerer Hippeau predicted a series of "mini bubbles" related to AI as the technology integrates into the economy. He cited Nvidia (NVDA, Financial) as an example of high demand for AI-related products.
The DOJ and FTC have launched an antitrust investigation into Nvidia (NVDA, Financial), Microsoft (MSFT), and OpenAI, focusing on their dominant roles in the AI industry. The probe adds to existing regulatory scrutiny of AI advancements.
Devon Energy (DVN) failed in attempts to acquire at least three oil and gas companies over the past year due to higher drilling costs and production issues. The company's stock has underperformed, making it less attractive to acquisition targets.
GuruFocus Stock Analysis
- Investors Overreacted to Expedia's Earnings by Parker Schwartz, CFA
- Lucid Group: Bearish Signals in an Unsustainable Business by Bernard Zambonin
- Alphabet: The Discreet AI Leader by Akim Guerreiro
- 2 Reasons to Own Amazon by Kenio Fontes
