Closing Recap

Wednesday, January 31, 2024

Index	Up/Down	%	Last
DJ Industrials	-317.01	0.82%	38,150
S&P 500	-79.34	1.61%	4,845
Nasdaq	-345.89	2.23%	15,164
Russell 2000	-48.90	2.45%	1,947

 

 

 

 

 

 

 

 

 

Stocks finish sharply lower in a “wild ride” for U.S. markets as the Fed meeting/Fed Chairman Powell press conference whipped stock markets around with extreme volatility. Stocks were lower most of the day after tech earnings, softer economic data, and Treasury refunding headlines, but only biding time until the afternoon headline FOMC meeting. Stocks dropped further after the 2:00 PM FOMC statement that leaned more hawkish then many expected, taking out overnight lows for the Nasdaq and S&P. Stocks rebounded sharply mid press conference from Chairman Powell as Wall Street heard what they wanted to hear (more aggressive cuts in 2024 – about 150-bps in cuts) then what Powell was actually saying (still calling for 75-bps in 2024). However, stocks dumped late afternoon after Powell downplayed the chance of a rate cut in March directly in a question (which fed futures are still forecasting). Powell said, "I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to [cut], but that’s to be seen." With this afternoon’s late pullback, the S&P 500 (SPX) dropped well below the 4,900 level and off recent all-time highs.

 

Prior to the Fed headlines/press conference, technology heavy Nasdaq Composite had traded lower behind weakness in AMD, GOOGL, and MSFT after earnings results were solid, but not enough to keep up the buying momentum. Economic data was also mixed as weaker ADP jobs, Chicago PMI and a softer ECI inflation reading sent bonds higher and yields lower. With the Fed behind us, more jobs data on Friday and big earnings results tomorrow from AAPL, AMZN, META on deck, still more for investors to chew on.

 

US Treasury announced quarterly refunding of $121B, to raise new cash of $15.9B and says plans to gradually increase issuance sizes for nominal coupon floating rate note securities in February-April 2024 quarter. The US Treasury to sell $54B in three-year notes, $42B in 10-year notes, and $25B in 30-year bonds next week. For February through April, Treasury will increase its monthly 2-year and 5-year note auctions by $3B a month each. It is boosting sales of other maturities by smaller amounts. That includes a $2B bump to 10-year note sales, and a $1B increase in 30-year bonds. The Treasury said expects to maintain bill auction sizes at current levels into late March due to fiscal forecasts.

 

Major averages closed January with gains (SPX, Dow, Nasdaq all about around +1% for the month, while the Russell 2000 down -3.5% for January), after today’s sell off – so what’s in store for February? @Barchart tweeted “February is the 2nd worst month for both the S&P 500 (-0.1% average return) and the Dow Jones (-0.3% average return) but it’s even worse during Presidential election years. In those years, the average return declines to 0.3% for the $SPX and -1.1% for the Dow Jones.”

• Q4 employment cost index +0.9% (vs. consensus +1.0%) vs Q3 +1.1% (prev +1.1%) and U.S. Q4 wages/salaries +0.9% vs Q3 +1.2% (prev +1.2%). U.S. Q4 benefit costs +0.7% vs Q3 +0.9% (prev +0.9%). WSJ’s Nick Timiraos noted “the employment-cost index is seen inside the Fed as the highest-quality measure of compensation growth. Q4 data shows the labor market continued to cool. Wages and salaries for private sector workers excluding incentive paid occupations slowed in Q4.
• Chicago PMI January index 46.0 (below consensus 48.0)

• Brent Crude futures settle at $81.71/bbl, down $1.16, 1.4% and WTI crude settle at $75.85/bbl, down $1.97, 2.53% as oil prices slipped following weaker China data overnight and a surprise build in U.S. crude inventories as producers ramped up output following frigid weather earlier this month. U.S. crude runs fell to their lowest level since January 2023, as refinery utilization rates dipped by 2.6 percentage points in the week to 82.9%, according to the EIA. The EIA said U.S. weekly crude stocks up 1.2M bbls to 421.91M, vs forecast of 0.2M bbl draw, weekly gasoline stocks up 1.2M bbls to 254.13M, vs forecast of 1.5M bbl build, and weekly distillate stocks off 2.5M bbls to 130.79M, vs forecast of 0.4M bbl draw. OPEC January oil output falls by 410,000 bpd from December to 26.33 million bpd on new cut pledges and Libya outage, citing a survey.
• Gold prices rose $16.50 to settle at $2,067.40 an ounce, supported by a weaker dollar and lower Treasury yields on expected dovish commentary from the Fed today (prices did settle prior to the Fed meeting).
• Natural gas futures for March delivery on the New York Mercantile Exchange rose 2.3 cents, or 1.1%, to settle at $2.100 per million British thermal units (mmBtu). On Tuesday, the contract dropped about 17% to close at its lowest since April 13, 2023.

 

Macro	Up/Down	Last
WTI Crude	-1.97	75.85
Brent	-1.16	81.71
Gold	16.50	2,067.40
EUR/USD	0.0008	1.0847
JPY/USD	-1.38	146.22
10-Year Note	-0.096	3.962%

 

• In Restaurants: SBUX Q1 top and bottom line missed ($0.90/$9.4B vs. est. $0.93/$9.6B) and same-store sales rose by 5%, below expectations for 7.1%; also trimmed its FY24 sales outlook to grow between 7% and 10% year-over-year, down from a previous range of 10% to 12% on lower comp sales view. EAT Q4 results mixed as revs rose to $1.06B but below est. $1.8B as comp sales increased 5.2% overall, with a 5% increase from the Chili’s chain and a 6.7% jump at its Maggiano’s restaurants; boosted both top and bottom end of FY profit outlook. CMG hits new record highs.
• In Food: MDLZ Q4 adj EPS topped consensus while sales rose 7.1% y/y to $9.3B, in-line with ests; said sales volume dropped, dragging the number down by 0.4% and in N.A., sales volume fell by 5.5% from the year ago period.

• In Solar: ENPH, FSLR, NOVA, RUN, SPWR all outperformed as the sector that tends to benefit in low rate env’t – yields declined ahead of FOMC later.

• In Payments: MA Q4 adj EPS $3.18/$6.55B revs top est. $3.08/$6.5B on in-line cross-border volumes +18%; Q4 operating expenses were $3.18B above est. $2.91B and forecasts Q1 net revenue low-end of low-double-digits.
• In Lending: LC Q4 results topped consensus but fell sharply y/y as Q4 net revenue of $185.6M was below the $262.7M year ago period as net income shrinks to $10.2M from $23.6M y/y.
• In Payroll Services: ADP Q2 adj EPS $2.13 beat the $2.10 est. on in-line revs $4.67B as Employer services revenue $3.13B, +8.1% y/y, and sees year EPS up +10% to +12%.
• In Exchanges: MKTX reported a better-than-expected Q4 profit as total credit average daily volumes on its platform rose 8.9% to $13.1B, as trading increased in Eurobonds, municipal bonds, emerging markets, and high-grade products and commissions rose 8.5% to $171.9 million, as it benefited from higher market volumes.
• In Insurance: CB reported EPS $8.30 (with $2.76 tax benefit) or $5.54 vs. est. $5.17 as lower than expected catastrophe losses, more than expected favorable reserve development, taxes and investment income drove most of the beat. CB reported a combined ratio of 85.5%, compared to 88.0% in Q422. RNR posts EPS beat helped by higher investment income, lower core loss ratio, lower cats, higher reserve releases and higher earnings from other ventures.

• BNTX receives FDA fast track designation for next-generation ADC candidate BNT325/DB-1305.
• CRBP priced offering of 4.3M shares of its common stock at $19.00 per share.
• GSX boosted its year sales forecast due to launch of its new RSV vaccine last year; said it now expects to generate more than �38B, or $48B, in sales by 2031, up from a previous forecast of �33B, or $41.8B.
• NVAX approved about 12% reduction of global workforce.
• NVO said it expects sales growth this year between 17% and 25% and operating profit to rise 19%-27% as demand soars for Wegovy and diabetes drug Ozempic.
• NVS Q4 sales miss expectations
• TEVA Q4 rev. $4.5B, vs. est. $4.01B; Q4 adj. EBITDA $1.66B, est. $1.37B; forecasts 2024 adj EPS $2.20-$2.50 and forecasts 2024 revs $15.7B to $16.3B, vs. est. $15.56B.

• In MedTech: SYK Q4 revenue and EPS significantly beat consensus and management provided 2024 revenue and EPS guidance that was above consensus. TMO Q4 revs $10.89B vs. est. $10.73B but guides FY24 adjusted EPS $20.95-$22.00, below consensus $22.04 and FY24 revenue $42.1B-$43.3B vs. est. $42.93B
• In Services: CAH hits all-time highs; agrees to acquire private tech company Specialty Networks for $1.2 bln in cash.
• In Equipment: BSX Q4 sales rose 15% to $3.73B topping analyst estimate of $3.59B on better EPS; Sales growth topped 10% in all regions and issued upbeat guidance.
• In Managed Care: CI sells Medicare unit to health care service for $3.3B

• POWL surged after reported a rise in Q4 profit amid higher revenue and increased its dividend.
• ROK Q1 adj EPS $2.04 below $2.46 y/y, and consensus $2.66 as sales rose 3.6% y/y to $2.05B but below est. $2.1B as lowers FY EPS view to $11.24-$12.74 vs. forecast $11.49-$12.99 and raises capex to $67.9M vs. $24.2M y/y.
• ROP Q4 organic revs Cont ops +8%, vs. est. +5.91% but expects FY24 adj EPS of $17.85-$18.15 (below est. $18.37) with Q1 adjusted EPS of $4.30-$4.34 and expects full year total revenue growth of +11-12% and organic revenue growth of +5-6% (after Q4 revs topped consensus).
• In Railroads: Deutsche Bank noted CP was the last rail to report last night, and the calendar saved the best for last as the company reported an OR of 58.7%, the best of the lot, followed by CNI (59.3%), UNP (60.9%), CSX (64.1%) and NSC (68.8%) noting there was exactly 1,000 basis points of margin separating the best ( CP) from the worst ( NSC).

• Social media stocks (META, SNAP) saw early weakness after GOOGL advertising revenue of $65.5B came in a few hundred million shy of Street estimates as its "Google Network" segment, where revenue of $8.3 billion was down about 2% from the year-ago quarter. MTCH FY24 revenue and adjusted operating income (AOI) guidance were largely in line with estimates (albeit with Tinder and Hinge both softer), while 1Q AOI guidance of $270M-$275M was materially below Street estimates of $303M driven by y/y increases in marketing expense.
• In Media: PARA shares jumped after Bloomberg reported Media mogul Byron Allen has made a $14.3 billion offer to buy all the outstanding shares of the company, offering $28.58 each for the voting shares of Paramount, a 50% premium to recent trading, and $21.53 for the non-voting shares http://tinyurl.com/mpenun8m
• In Telecom: VOD said it had rejected a sweetened offer from French telecom operator Iliad to merge their Italian businesses and was pursuing other deals in a market where it is losing revenue. In research, Barclays downgraded VZ to Equal Weight from Overweight with an unchanged price target of $44 saying upside to numbers and valuation may be more limited from present levels; the firm raised AT&T (T) tgt to $20 from $17.

• In Hardware & Equipment: AMSC priced its underwritten public offering of 5.4M shares of common stock at $11.25 per share; EXTR shares slide as forecasts Q3 adj EPS loss (-$0.17-$0.22) vs. est. profit $0.28 and revs seen in in the range of $265<-$275M vs. est. $355.32M.

• SWKS Q1 adj EPS $1.97 vs. est. $1.95; Q1 revs $1.202B vs. est. $1.2B; sees Q2 adj EPS $1.52, vs. consensus $1.54 and revs $1.02B-$1.07B vs. est. $1.04B.
• TER shares fell on mixed Q4 and lower guidance; Q4 adj EPS $0.79 vs. est. $0.71; Q4 revs $671M vs. est. $674.66M; guided Q1 adj EPS $0.22-$0.38 on revs $540M-$590M, below consensus of $0.53/$625.13M.

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Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.