Closing Recap

Friday, July 26, 2024

After tumbling for 6 of the last 7 trading days, the S&P 500 and Nasdaq were able to get back on track Friday and close the week out on a high note, pushing higher to trim weekly losses. The Dow Jones Industrial Average jumped over 1.5% or 600 points to settle back above 40,500 (4^th straight weekly gain) led by gains in Dow component MMM, rising 22% for best day since 1987 after earnings results/guidance boosted shares. But the standout all week and month this far is the Russell 2000 Index, rising another 1.6% today to end the week up about 3.5% (vs. -2% decline for the Nasdaq) and is now up over 10% in July as hopes/anticipation of interest rate cuts by the Fed in September on decelerating inflation has boosted sentiment. Speaking of inflation, today’s data offered markets no surprises or significant changes, keeping those cut hopes intact as PCE price index for June showed a 2.5% increase Y/Y while May’s print is revised higher; core PCE (Fed’s favorite inflation gauge) rose 2.6% Y/Y, holding steady from May’s upwardly revised level. With today’s move, the S&P 500 (SPX) moved back above its 50dma technical level of 5,435, but the Nasdaq Comp remains below its 50dma of 17,540. A decent round of buying the last few days as @KobeissiLetter noted “The S&P 500 has added $850 BILLION of market cap over the last 24 hours as dip buyers step in. This comes after the Magnificent 7 posted its largest 10-day drawdown in history, losing $1.75 TRILLION of market cap. In percentage terms, the Magnificent 7 saw its biggest daily loss since October 2022 on Wednesday.” There were some big names reporting earnings this week – but more big guns next week with Apple, Microsoft and Amazon among those reporting.  For the week, the S&P 500 fell 0.83%, the Nasdaq declined 2.08%, and the Dow climbed 0.75%; the Russell 2000 rose 3.46%.

• The June PCE Price Index M/M for June rose +0.1%, in-line with ests and vs. prior +0.0% and the headline PCE Price Index Y/Y for June rose +2.5%, in-line with est. +2.5% (vs. prior +2.6%).
• The Core PCE Price Index M/M for June rose +0.2% vs. est. +0.1% (prior May +0.1%) and the Core PCE Price Index Y/Y for June reported at +2.5%, in line with consensus (vs. prior +2.6%).
• University of Michigan surveys of consumers sentiment final July 66.4 (consensus 66.0) vs preliminary July 66.0 and final June 68.2; current conditions index final July 62.7 vs prelim July 64.1 and final June 65.9; University of Michigan surveys of consumers expectations index final July 68.8 vs prelim July 67.2 and final June 69.6.
• Michigan surveys of consumers 1-year inflation outlook final July 2.9% vs prelim 2.9% and final June 3.0% and the University of Michigan surveys of consumers 5-year inflation outlook final July 3.0% vs prelim 2.9% and final June 3.0%.

• U.S. WTI crude oil futures settle at $77.16/bbl, down $1.12, or 1.43% (down about -1.88% on week) while Brent crude settled at $81.13/bbl, down $1.24, or 1.51%. Front month Nymex natural gas futures fell -5.73% on week to end at $2.006 per million British thermal units, down 4-straight sessions (and down -13.87% over last 2-weeks).
• The 10-yr Treasury yield ended lower on the day and week, falling 5.7% on Friday and -3.9% on week to 4.199%. The shorter-term 2-year yield fell a larger -11.9bps on the week to 4.388%.

• In Footwear Retail: DECK reaffirmed FY25 revenue (HOKA +20% y/y; UGG +MSD% y/y) and raised EPS outlook after F1Q results beat expectations, with EPS beating by $1.03; SKX posted noisy results for Q2, seeing strength in U.S. wholesale, Europe DTC and gross margins, resulting in raised FY sales/EPS guidance (and announced a new 3-year $1B buyback program), but on the negative side, U.S. DTC and China slowed meaningfully.
• In Apparel Retail: CRI shares slide on mixed Q2 results (EPS beat but revs miss) and guides Q3 and year weaker at Q3 adjusted EPS $1.10-$1.35, below consensus $1.88 on weaker revs $735M-$755M (est. $805.92M); sees FY24 EPS $4.60-$5.05 below consensus $6.20 and sees FY24 revenue $2.798B-$2.83B vs. est. $2.92B.
• In Restaurants: TXRH Q2 revenue in-line while EBITDA/EPS beat on lower-than-expected commodity inflation, and the company continues to see no demand impact from macro consumer spending pressures. Comps beat consensus for the quarter as traffic accelerated slightly and mix stabilized from Q1, while 3QTD is tracking ~80 bps ahead. BJRI was downgraded to Hold from Buy at Benchmark following earnings results, as shares declined.
• In Food & Beverages: SAM Q2 EPS of $4.39 missed consensus $5.01 as Q2 revenue fell -4% y/y to $614.22M but topped consensus est. $597.33M as RBC Capital said category pressures were too much to overcome in the near term and resulted in a more muted volume outlook for the year. CASY agreed to acquire Cefco Convenience Stores owner Fikes Wholesale in an all-cash deal worth about $1.15 billion.

• In Building Products: MHK was one of the best performers in the S&P 500 today, rising after results as Bank America double upgraded to Buy from Underperform with fresh $177 tgt noting Mohawk reported Q224 EPS of S3.00 vs BAML’s forecast of 52.73 and guided Q3 to 52.80-5290 (vs. consensus 52.71}. Bofa upgrade reflects an outlook for continued margin recovery, attractive valuation and improving capital allocation. In Construction Suppliers: FBIN Q2 EPS $1.16 above consensus $1.12; Q2 revenue $1.24B misses consensus $1.28B while they narrowed the FY EPS guide despite a lower top-line as margins more than offset.

• In RV Sector: Benchmark noted June results out today from the RVIA on RV shipments, which showed 25,308, +5% Y/Y. The largest driver came from travel trailers, +19% Y/Y. Towable RVs Benchmark is up 11.4% Y/Y. Motorhomes down -33% (names in RV Sector CWH, WGO, THO, LCII).

• In utilities: EIX reported 2Q results well ahead of consensus, highlighting a strong start to the first half of the year. The Company maintained its 2024 guidance and believes it is well positioned to deliver within the range. Longer term, EIX maintained its 2025 outlook of $5.50- $5.90 and the 5-7% through 2028.

• In FinTech: According to an article published by Fortune, SQ CEO Jack Dorsey announced a major overhaul of the group’s structure in a note to employees this week: “We’re going to reorganize our entire company by function and disband our business unit reporting structure,’ Dorsey said, adding that the move would take Block back ‘to how they started”.

• BMY shares outperform on results and guidance as forecasts FY adj EPS $0.60-$0.90 from prior view $0.40-$0.70 and now expects revenue at the upper end of its April projection for low single-digit percentage growth; said Q2 revs rose 9% to $12.2B as its biggest franchises, cancer drug Opdivo and blood-thinner Eliquis, both saw sales growth in the double-digit percentage worldwide.

• In Services & Managed Care: CNC better results as Q2 adj EPS $2.42 vs. consensus $2.07; Q2 revenue $39.84B topped consensus $36.46B; Raises FY24 revenue view to $155B-$157B from $147.5B-$150.5B (est. $149.64B) while affirms its FY24 EPS view; Q2 medical loss ratio was 87.6%, an increase from 87% reported last year and an estimate of 86.84%. hospital provider UHS rises a fifth straight day at record highs as noted, THC hit record highs the day prior and HCA up a 6th straight day at record highs as all three hospital providers reported beat and raise quarters this week.
• In MedTech: ZYXI shares tumbled following Q2 results and outlook that disappointed as lowers FY24 EPS view to ‘at least’ $0.20 from ‘at least’ $0.50 (est. $0.51) and lowered revs view to "at least" $200M from "at least" $227M.

• In Materials & Industrials: MMM 3M’s stock surges toward a 20-month high after earnings beat, raised outlook; Q2 EPS/revs beat ($1.93/$6.3B vs. est. $1.68/$5.88B) and raises lower end of FY adj EPS from continuing operations to $7.00-$7.30 from prior $6.80-$7.30 (est. $7.17); still sees FY adj organic sales 0% to +2%. Precious metals/gold miners rebounded with gold after tumbling the day prior. In copper, TECK shares spiked on a Bloomberg report midday saying the company is drawing attention from across the industry because of its attractive copper assets.

• IT Services & Consulting: Capgemini (CGEMY) forecast a surprise fall in annual revenue citing a downturn in the automotive and aerospace sectors; said now expects its organic 2024 sales to fall between 0.5%-1.5% vs. prior view for a 0-3% rise. Capgemini reported a -3.7% fall in North America revenue for Q2, slower than the -7.1% drop seen in Q1.
• In Software: APPF posted solid Q2 results, beating revenue and OI expectations by 6.8M and $7.6M, respectively, while raising its 2024 revenue growth outlook to ~25%, and more importantly, OM guidance is moving higher to ~24%.
•  In Semis: a rebound for the SOX, but still down on the week by -3.5% and over -7% on month; AMKR was downgraded to Neutral at UBS as business potential now looks fully priced, but raised tgt to $43 from $37 on fast-growing advanced packaging, it believes the business upside is well priced in.