Trading Tepidly Lower Ahead Of Key Earnings Reports

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Market activity continued to whittle away at monthly and year-to-date gains today, as it had on the previous trading day, Friday. Once again, aside from a -1.5% drop on the small-cap Russell 2000, we’re still fairly tepid in our selling as of late: the Dow slipped -97 points, -0.25%, while the Nasdaq dropped a more significant -141 points, -0.90%. The S&P 500 split the difference, -0.59%, for the session.

We’re now far enough out from the start of 2024 to see some longer trends emerging: while all four indices are higher over the past month — Dow +1.5%, S&P +2.6%, Nasdaq +1.76% and Russell +0.9% — the small-cap index is back down year to date by -0.62%. The Dow is +2.25% over that time period, while the S&P is +4.9% and the Nasdaq +5.86%. Thus, while it may appear as if there is tough sledding ahead on Wall Street, we’re actually doing just fine for the first nine weeks of a new year. Let’s not the stellar performances from 2023 spoil us.

After today’s closing bell, Palo Alto Networks (PANW) beat estimates on both top and bottom lines — posting earnings of $1.46 per share on $1.98 billion in sales, versus $1.30 per share on $1.97 billion expected, respectively — while offering lower guidance for next quarter and full fiscal year, on both earnings and revenues. While the company does not have any misses in its earnings history, it had been priced to near-perfection at +26.7% year to date and +120% from a year ago. Shares are down -13% in after-hours trading.

Luxury homebuilder Toll Brothers’ (TOL) shares are up +1.4% on its fiscal Q1 report this afternoon, with a big earnings beat to $2.25 per share from $1.77 anticipated on $1.93 billion in quarterly revenues, up from $1.87 billion in the Zacks consensus. Both deliveries and demand came in higher than expected for the quarter, no doubt taking advantage of dwindling mortgage rates in the January quarter. No mention in the press release about mortgage rates heading back over +7% so far this month; perhaps the conference call will address this.

Caesars Entertainment (CZR) shares fell on the news of its Q4 report out after today’s closing bell, on a bigger-than-expected quarterly loss — -$0.34 cents versus expectations of -$0.03 — and in-line revenues at $2.83 billion. The company’s Las Vegas business came in somewhat light of expectations, both in gross revenues and EBITDA. This is the first bottom-line miss for Caesars in the past six quarters, and shares sank -3.5% on the news in late trading today.

Tomorrow brings us another full day of earnings reports, not only with NVIDIA (NVDA) after the close but with fellow chip-maker ADI (ADI) before the open. We’ll also see results for Etsy (ETSY), Rivian (RIVN), restauranteurs Cheesecake Factory (CAKE) and Jack in the Box (JACK), as well as energy plays Marathon Oil (MRO) and Range Resources (RRC). Also, the early afternoon brings us the minutes from the latest Federal Open Market Committee (FOMC) meeting.

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