Thursday, November 30, 2023

Daily Markets: Investors Digest Apple Earnings, Jobs and Economic Data

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Today’s Big Picture

Asia-Pacific equity markets finished the day higher following the U.S. market’s continued positive reaction to Wednesday’s Fed meeting results and comments. India’s SENSEX rose 0.44%, Taiwan’s TAIEX and China’s Shanghai Composite both gained about 0.70% and Australia’s ASX All Ordinaries and South Korea’s KOSPI both advanced approximately 1.10%. Hong Kong’s Hang Seng closed 2.52% higher on a strong rally led by Health Services names. Japan’s markets were closed today as the country celebrates Culture Day, a holiday to promote Japanese culture, the arts, and academic endeavors. European markets are mixed in midday trading, and U.S. equity futures point to a down market open as quarterly results from Apple (AAPL) and Fortinet (FTNT) weigh on the S&P 500 and Nasdaq Composite futures.
Following Fed’s Chair Powell’s less hawkish than expected comments mid-week, investors will pore over today’s October Employment out at 8:30 AM ET (see below for more), and then the back to back October Services PMI data shortly after stocks begin trading. Investors are looking for a Goldilocks scenario in the data – not so hot that it gives the Fed reasons to consider another rate hike, but not so cool that raises recession fears. What the combined data says about the vector and velocity of the economy, wage pressure, and inflation in the Service economy will influence how the market finishes the week. Potentially shaping how the market views that data are multiple appearances today for Fed Vice Chair for Supervision Michael Barr.

Data Download

International Economy
The Caixin China General Service PMI rose slightly to 50.4 in October from September’s 9-month low of 50.2. Overall, the October figure was the 10th straight month of growth in services activity as China continued its efforts to stabilize the economy. Foreign sales grew for the second consecutive month due to an easing of travel curbs that attracted more tourists from abroad while employment stabilized after growing in the prior 8 months. However, prices charged increased the most since May, as firms sought to pass on higher input costs to clients.
The S&P Global/CIPS UK Services PMI was revised slightly higher to 49.5 in October 2023 from the flash reading of 49.2 and inched up from 49.3 in September. Despite the sequential improvement, the October final figure remained below the expansion-contraction line at 50.0 for the third consecutive month.
Domestic Economy
The Labor Department showed that nonfarm payrolls increased by 150,000 for the month, against the consensus forecast for an increase of 170,000, sending the unemployment rate up to 3.9% when it was expected to hold at 3.8%. CNBC also reported that, “Average hourly earnings, a key measure for inflation, increased 0.2% for the month, less than the 0.3% forecast, while the 4.1% year over year again was 0.1 percentage point above expectations.”
S&P Global expects that the U.S. Services economy rebounded to a PMI reading of 50.9 in October from 50.1 in September, while the Institute for Supply Management (ISM) forecasts it slipping to 53.0 from 53.6 in September.

The House passed the $14 billion Israel aid bill which includes cuts to IRS funding, making it unlikely to pass either the Senate or be signed by the White House.
The Las Vegas Culinary Union set a strike deadline of Friday, November 10 at 5:00 AM for 35,000 hospitality workers in Las Vegas. The strike would be the largest hospitality worker strike in U.S. history.
China’s Commerce Minister Wang Wentao suggested that the country is open to Micron (MU) expanding its presence in the Chinese market, Reuters reported. President Joe Biden is slated to meet with China’s President Xi Jinping in the coming weeks at an economic summit in San Francisco.
Traders continued to bid up just about everything yesterday in an extended response to Wednesday’s Fed comments. Real Estate and Energy led the charge as both closed over 3% higher while Consumer Discretionary (2.61%), Financials (2.36%), and Industrials (2.06%) all ended the day with “a 2 handle.” All remaining sectors closed between 1.30% and 1.89%. Broad indexes reflected this price action as the Dow rose 1.70%, the Nasdaq Composite gained 1.78%, the S&P 500 advanced 1.89% and the Russell 2000 closed 2.67% higher.
Despite posting higher sales this past quarter Borg Warner (BWA) missed earnings estimates and lowered its outlook, prompting traders to sell shares 13.07% lower as the market continues to punish any sign of weakness.

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

  • Dow Jones Industrial Average: 2.09%
  • S&P 500: 12.46%
  • Nasdaq Composite: 27.02%
  • Russell 2000: -2.67%
  • Bitcoin (BTC-USD): 110.46%
  • Ether (ETH-USD): 50.33%

Stocks to Watch

Before U.S. equity markets begin trading today, AMC Networks (AMCX), American Axle (AXL), Cardinal Health (CAH), and Physicians Realty Trust (DOC) will report their latest quarterly results.
Shares of Fortinet are on track to open meaningfully lower this morning (more below) while Expedia Group (EXPE) and medical device manufacturer Insulet Corporation (PODD) are both up sharply in pre-market trading. S&P 500 index component pre-market activity is lighter this morning with 192 companies in active trading and the advance/decline line sitting at 116/76.
Shares of Apple are trading off in pre-market trading as investors focused on guidance being relatively flat for December’s quarterly revenue vs. year-ago levels, despite the September quarter revenue and EPS beat. Apple reported September quarter EPS of $1.46 vs. the $1.39 consensus as revenue for the period fell 0.7% YoY to $89.5 billion, modestly ahead of the $89.34 billion consensus. iPhone revenue for the quarter came in at $43.8 billion vs. the $43.4 billion consensus and $42.6 billion in the year ago quarter. Services revenue rose to $22.3 billion vs. $19.2 billion in the year ago quarter, besting the $21.6 billion consensus. For the current quarter, Apple expects iPhone revenue to grow year over year, Mac and iPad performance to accelerate sequentially, and strong double digit growth for its Services business.
Shares of Fortinet tumbled in aftermarket trading last night following September quarter results that missed consensus revenue expectations and the company guided revenue for the current quarter below consensus expectations. Revenue came in at $1.33 billion for the September quarter, up 15.7% YoY but below the $1.35 billion consensus. For the current quarter, Fortinet guided revenue to $1.38-$1.44 billion vs. the $1.5 billion consensus even though billings are expected to reach $1.56-$1.70 billion compared to $1.49 billion in the September quarter. Management expects growth will return to double digits by the second half of 2024.

Shares of small and medium business financial platform company (BILL) sunk in aftermarket trading as the market looked past better than expected September quarter results, focusing on the disappointing outlook for the current quarter and fiscal 2024. Bill guided current quarter revenue to $293-$303 million vs. the $318.76 million consensus and $304.99 million booked for the September quarter. For fiscal 2024, Bill guided revenue down to $1.205-$1.245 billion from $1.288-$1.306 billion and the $1.31 billion consensus.
DigitalOcean Holdings (DOCN) shares soared after the company reported a beat and raise September quarter. Revenue came in at $177.06 million, up 16.4% YoY in the September quarter vs. the $173.36 million consensus, and is expected to reach $178 million in the current quarter vs. the $175.16 million consensus. For 2023, DigitalOcean projects revenue to reach $690 million vs. the $683.46 million consensus with EPS between $1.52-$1.54 compared to the $1.42 consensus. Its management continues to target double-digit top-line growth in 2024 and targets sharing more details in February.
Shares of Block (SQ) jumped after posting September quarter results that bested top and bottom line expectations and guided 2024 earnings before interest, tax, amortization, and depreciation (EBITDA) to $2.40 billion vs. the $1.94 billion consensus and $1.5 billion in 2023. During the September quarter, Block processed $60.08 billion in gross purchasing volume, up 10% year over year, and transaction-based revenue was $1.66 billion, up 9% year over year. The company also unveiled a $1 billion stock buyback program. However, Block employees were warned the company’s headcount would shrink in the coming months by about 10%.
Amazon (AMZN) is shuttering its physical Amazon Style apparel stores as the company focuses its brick-and-mortar retail plans for its grocery business. Last year, Amazon closed all its brick-and-mortar bookstores, as well as Amazon 4-star and Amazon Pop Up shops in the U.S. and UK.
Bloomberg reports the conclusion for US Steel’s (X) strategic review to sell all or part of the company may be nearing.

Readers who want to dig deeper into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.
After Today’s Market Close
We’ve made it to the end of another week, and that means it is not only Friday, but no companies are expected to report their quarterly results after equities stop trading. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Monday, November 6

  • Eurozone: HCOB Services PMI – October
  • UK: New Car Sales – October

Tuesday, November 7

  • China: Exports and Imports – October
  • Eurozone: Producer Price Index – September
  • US: Consumer Credit – September

Wednesday, November 8

  • Japan: Leading Indicators – September
  • Germany: Inflation Rate – October
  • Eurozone: Retail Sales – September
  • US: Weekly MBA Mortgage Applications
  • US: Weekly EIA Crude Oil Inventories

Thursday, November 9

  • Japan: Eco Watchers Survey – October
  • China: Inflation Rate, Producer Price Index – October
  • China: Retail Sales – September
  • US: Weekly Initial & Continuing Jobless Claims
  • US: Wholesale Inventories – September
  • US: Weekly EIA Natural Gas Inventories

Friday, November 10

  • UK: GDP Growth – 3Q 2023
  • UK: GDP, Manufacturing and Industrial Production – September
  • China: Vehicle Sales – October
  • US: The University of Michigan Consumer Sentiment Index (Preliminary) – November (10:00 AM ET)

Thought for the Day

“Welcome sweet November, the season of senses and my favorite month of all.” — Gregory F. Lenz


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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