Mid-Morning Look

Friday, August 02, 2024

Very ugly picture on Wall Street as U.S. stocks are tumbling, extending Thursday’s sharp declines as risk assets sell off on slowing economic growth fears after July nonfarm/private jobs data disappoints a day after ISM manufacturing data came in at 8-month lows while inflation edged higher. Consumer Staples, Utilities and REITs rallied early, but all other sectors saw weakness including a -4% drop in technology. Better results from AAPL failing to lift tech as AMZN guidance weighs on shares/retailers, and more weakness in semiconductors with INTC plunging on results/suspension of dividend, along with weakness in MCHP, NVDA as the SOX index down another 5.5% after tumbling over 7% yesterday. The love for Smallcap stocks eased quickly, as the IWM falls 7% in 2-days after rising 10% in July. Haven assets seeing big inflows today as gold prices hit fresh all-time highs and Treasury prices soar, sending yields to lowest levels in more than a year on fears the economy is slowing down at a much faster pace than expected, and that the Fed is behind the curve, having not lowered rates unlike some major counterparts (Bank of England yesterday cut to 5%, which recently followed Switzerland cutting in March, Canada cut to 4.5% in June, Sweden cut rates in May and the ECB kept rates unchanged last week, but followed a cut in June to 3.75%). The CBOE Volatility index (VIX) surges over 34% topping 25, highest since Oct 24 highs of 23.08 on stock market pullback. Swaps now show a 50% chance that one of Fed’s 2024 cuts is 50-bps (up from 27% late yesterday for September).

Selling accelerated overnight as Japanese markets entered correction territory with the Nikkei Index plunging 2,216 points or 5.81% to settle at 35,909, the Shanghai Index fell -27 points to 2,905 (down -4.67% on week), and the Hang Seng Index tumbled -359 points or over 2% to 16,495. Much has been talked about the unwind in the Japanese yen “carry trade”, (where investors borrow in low-interest-rate currencies and invest in higher-yielding currencies), rallying for 2 weeks now off highs just shy of 162 around July 10^th to below 147 figure this morning, as the yen strengthens after the Bank of Japan raised rates and the Fed held steady. The 10-yr yield fell below 3.8% after closing at 4.19% last week (down more than 15 bps today).

• U.S. June factory orders fell -3.3% vs. consensus -2.9% and vs May -0.5% while U.S. June factory orders ex-transportation +0.1% vs May -0.7% (prev -0.7%) and factory orders ex-defense -3.4% vs May -0.6%. June Durables orders revised to -6.7% from -6.6%, nondurables orders -0.1% vs May -1.0%.

• DASH +7%; shares jump on results as Q2 revenue of $2.63B tops est. of $2.54B; Total orders jumped 19% to 635M in Q2 y/y; said consumer demand on the platform is stronger than it’s ever been; expects gross order value to be between $19.4B-$19.8B vs. $16.75B y/y.
• GDDY +4%; reported an in-line revenue/guide though beat by 2% on key applications & commerce (A&C) segment and 6% on NEBTIDA and Airo GenAI suite launched late 1Q in English-speaking counties.
• MPWR +2%; shares jumped as reported strong 2Q results and provided 3Q guidance, which were both above expectations attributed to: 1) strong AI server demand; 2) a broad-based recovery except for Auto that extended beyond Enterprise Data; 3) the ramp of new-design wins. Enterprise Data led the growth, increasing 290% y/y.
• NET +2%; delivered consensus beating results, highlighted by 30% rev growth and improved 2024 guidance. Close rates and sales cycles improved y/y and q/q. Sales organization efficiencies powered a double-digit improvement in sales productivity, and ARR reached $1.6B.
• TNDM +20%; reported Q2 results which handily beat sales and adjusted EBITDA targets and management raised full year guidance by more than the amount of the beat in Q2, given the positive momentum of Mobi seen in Q2.

• CE -5%; Q2 results missed and lowered guidance as Q2 adj EPS $2.38 vs. consensus $2.71; Q2 revs fell -5.1% y/y to $2.65B vs. consensus $2.75B; sees FY24 adjusted EPS $10.25-$10.75 below consensus $11.11.
• FOXF -15%; offered an inline 2Q print, but a reduction on FY24 guidance.
• INTC -26%; Q2 adj EPS $0.02/$12.83B miss est. $0.02/ $12.944B while sees Q3 revs $12.5-13.5B below est. $14.353B and EPS loss; says suspending dividend starting Q4, implementing more than 15% headcount reduction with majority completed by end 2024; sees $1Bin saving in von-variable cost of sales in 2025.
• NVDA -5%; after The U.S. Department of Justice has launched an investigation into Nvidia after complaints from competitors that it May have abused its market dominance in selling chips that power artificial intelligence, The Information reported last night.
• SNAP -21%; 2Q results were weaker than expected, as N. America revenue was lighter than expected and brand advertising declined y/y; Q2 revs $1.24B vs. est. $1.25B while guides Q3 revs $1.335B-$1.375B vs. est. $1.36B and sees Q3 adjusted EBITDA between $70M-$100M below expectations of $110.8M.
• TEAM -14%; Q4 Cloud revenue of $738M (31% y/y) modestly decelerated q/q, coming in a point below guidance and 1Q guide calls for 27% cloud growth (street at 29%) and 35% Data Center growth (street at 33%). Op. margin guide of 19.0% was two points below the street.
• XPOF -17%; shares tumbled after cutting its full-year revenue forecast, noting a cut to expectations for gross new studio openings and a shortfall in the second quarter; sees FY revs $310-320Mm vs est. $346.62Mm, adj EBITDA $120.124Mm vs est. $137.23Mm.