Market Overview
The major indices closed with losses: S&P 500 decreased by 0.5%, Nasdaq Composite fell by 0.7%, and Dow Jones Industrial Average dropped by 0.5%. The Russell 2000 underperformed, declining by 1.3%. The market showed a downside bias, with decliners outnumbering advancers by a 3-to-1 margin at the NYSE and a 5-to-2 margin at the Nasdaq.
Factors Influencing the Market
- Profit-taking amid concerns about valuations and the market being overbought.
- Disappointing FY25 guidance from Adobe (ADBE), which fell by 13.7% to $474.63.
- Weaker-than-expected economic data, leading to higher Treasury yields.
Economic Data
Recent reports indicate a softening labor market and rising inflation at the producer level. Weekly initial jobless claims rose to 242,000 from 225,000, and continuing claims increased to 1.886 million from 1.871 million. The November Producer Price Index (PPI) showed a year-over-year increase of 3.0%, up from 2.6% in October. Excluding food and energy, the index rose 3.4% year-over-year.
Federal Reserve and Interest Rates
The softening labor data supports expectations that the Federal Reserve will continue cutting rates. The probability of a 25 basis points rate cut at the upcoming FOMC meeting is 94.7%, slightly down from 97.5% yesterday but up from 71.0% a week ago, according to the CME FedWatch tool.
Treasury Yields
The 10-year Treasury note yield increased by five basis points to 4.32%, while the 2-year yield rose by three basis points to 4.19%.
European Central Bank
The European Central Bank cut its key policy rates by 25 basis points, as anticipated.
Year-to-Date Performance
- Nasdaq Composite: +32.6%
- S&P 500: +26.9%
- S&P Midcap 400: +18.4%
- Russell 2000: +16.5%
- Dow Jones Industrial Average: +16.5%
Reviewing Today’s Economic Data
- Weekly Initial Claims: 242K (consensus 220K); prior revised to 225K from 224K.
- Weekly Continuing Claims: 1.886 million; prior 1.871 million.
- November PPI: 0.4% (consensus 0.3%); prior revised to 0.3% from 0.2%.
- November Core PPI: 0.2% (consensus 0.2%); prior 0.3%.
The key takeaway is that initial jobless claims are the highest since mid-October, suggesting a softening labor market, which the Fed aims to manage by easing policy restraint. Meanwhile, producer-level inflation is rising, particularly in goods like food, indicating potential consumer price pressures.
Today’s News
Broadcom (AVGO, Financial) surged in post-market trading after announcing its fourth quarter fiscal 2024 results, which highlighted record full-year revenue. The semiconductor giant reported adjusted earnings per share of $1.42, slightly surpassing expectations, and recorded revenue of $14.05 billion. CEO Hock Tan attributed the growth to a significant increase in AI revenue, which jumped 220% year-over-year to $12.2 billion. Despite the impressive figures, Broadcom’s forecast for the current quarter aligns closely with market expectations.
In a related move, Broadcom (AVGO, Financial) declared an 11.3% increase in its quarterly dividend to $0.59 per share, reflecting its confidence in ongoing cash flow growth. The dividend is payable on December 31, with a forward yield of 1.31%. This decision comes amidst Broadcom’s strategic shifts, including its integration with VMware and advancements in AI technology.
Apple (AAPL, Financial) plans to replace Broadcom (AVGO, Financial) components with its proprietary chips for Bluetooth and Wi-Fi functions starting in 2025. The new chip, developed under the code name Proxima, will be produced by Taiwan Semiconductor Manufacturing Co. (TSM, Financial). This strategic shift aims to enhance energy efficiency and integrate Apple’s wireless technology more closely with its ecosystem, although Broadcom will continue supplying radio frequency filters for modems.
ServiceTitan (TTAN, Financial) saw its shares soar by 42% on its first day of trading, following an impressive IPO that raised $624.8 million. The cloud service software company, serving home and commercial contractors, reported significant revenue growth of 31.3% for fiscal 2024. This successful market debut underscores the robust demand for cloud solutions in the trades industry.
Tesla (TSLA, Financial) ended a six-day winning streak, closing 1.65% lower on Thursday. Despite this dip, the electric vehicle maker’s stock has risen 71% year-to-date, far outpacing the S&P 500’s gains. Analysts remain divided on Tesla’s stock, with a mixed outlook on its valuation and growth prospects.
Costco (COST, Financial) reported a strong Q1 performance with non-GAAP EPS of $3.82, slightly beating expectations. The retail giant’s revenue grew by 7.5% year-over-year, reaching $62.15 billion. However, Costco faces challenges with the Teamsters union, which has filed unfair labor practice charges amidst ongoing contract negotiations.
Ciena (CIEN, Financial) shares climbed after the company provided a positive outlook despite mixed quarterly results. The networking equipment provider anticipates accelerated growth driven by cloud and AI demand, with expected revenue growth of 8% to 11% over the next three years.
RH (RH, Financial) reported a 13% increase in demand for Q3, driven by strong performance in its RH brand. Revenue rose by 8.1% year-over-year, positioning the company for significant market share gains in the luxury home furnishings sector.
Boeing (BA, Financial) announced a $1 billion investment to expand its Dreamliner 787 production facilities in South Carolina, aiming to boost production and create over 500 jobs. This expansion reflects Boeing’s commitment to meeting future demand for its aircraft.
