Closing Recap

Wednesday, November 08, 2023

Index	Up/Down	%	Last
DJ Industrials	-39.80	0.12%	34,112
S&P 500	4.43	0.10%	4,382
Nasdaq	10.56	0.08%	13,650
Russell 2000	-19.08	1.10%	1,714

 

 

 

 

 

 

 

 

 

U.S. stocks finished mixed in what was a choppy, quiet news day with no major economic data as markets await the next potential catalyst. Oil prices slid over 2% to fresh 3-month lows on demand worries, gold prices fell a 3^rd day as commodity prices slumped. Treasury yields fell for the 6^th time in 7-days, helping support broader risk assets and interest rate sensitive stocks. Still, NYSE breadth was negative with decliners having a slight edge over advancers with Energy, Utilities, and Communications falling the most. REITs, Technology, and Materials saw modest gains. With a late day push higher, the Nasdaq made it 9-straight winning days and the S&P 500 index 8-straight. The Russell 2000 Smallcap index underperformed again today, paring last weeks’ gains. Note the S&P 500 hasn’t declined by 2% or more for 180 consecutive trading days, the longest streak in almost 6 years (looks like Feb 21st last 2% down day). In Politics, Virginia Democrats secured majorities in the state’s 2 legislative chambers, while the party also had successes in Kentucky, Ohio, and Pennsylvania. With roughly 90% of the S&P 500 earnings out, we just await a few big TMT (DIS, NVDA, ORCL) and retailers (WMT, TGT, HD, LOW) in the next two weeks – Disney is tonight after the bell.

 

Economic Data

·     Sept wholesale sales +2.2% above consensus +0.8% and vs Aug +2.0%; Sept wholesale inventories revised to +0.2% (consensus unchanged) from unchanged; U.S. Sept stock/sales ratio 1.33 months’ worth vs Aug 1.36 months.

·     Weekly mortgage data from Mortgage Bankers Assoc (MBA) showed weekly home applications rose +2.5% in latest week, purchase index climbs 3.0%, refinance index climbs 1.6% as the 30-year mortgage rate falls 25 bps to 7.61% in Nov 3 week (lowest rate since end of July).

·     The Federal Reserve Bank of Cleveland said Wednesday it has begun to search for a replacement for its current president Loretta Mester. Mester, who has been in office since 2014, is scheduled to retire on June 30, 2024 due to Fed rules that limit officials service due to age/length of service.

 

Commodities

·     Brent crude fell below $80 per barrel for first time since July and WTI crude oil futures settle at $75.33/bbl, down -$2.04, 2.64% – lowest since July on concern over waning demand in the United States and China. The oil demand outlook in China, the world’s biggest importer, isn’t offering much inspiration to bulls as the end of the year approaches.

·     No inventory data today as the EIA noted it will delay its scheduled data releases November 8-10, 2023, to complete a planned systems upgrade. “We will continue collecting energy data from survey respondents and will resume our regular publishing schedule on November 13.”

·     Gold prices fall for a 3^rd session, down -$15.70 to settle at $1,957.80 an ounce back at 3-week lows after touching well above $2,000 at the end of October.

 

Currencies & Treasuries

·     The US dollar edged higher for a third day as the USD/JPY yen topped 151 after falling last week on lower rate hike expectations. The greenback, which hit a seven-week low at the start of the week in the wake of the Fed’s decision to hold its policy rate steady and on data pointing to a cooling U.S. labor market, has recovered partially this week.

·     The US Treasury sold $40B in 10-year notes at high yield of 4.519% vs. 4.511% when issued prior with bid-to-cover ratio 2.45, as primary dealers take 15.1% of U.S. 10-year notes sale, direct 15.17% (vs. 19% recent avg said CNBC) and indirect 69.73% (vs recent avg of 67%). Treasury yields remained lower after the auction with the 10-yr hitting lows of 4.5% before paring losses.

 

 

Macro	Up/Down	Last
WTI Crude	-2.04	75.33
Brent	-2.07	79.54
Gold	-15.70	1,957.80
EUR/USD	0.0008	1.0708
JPY/USD	0.68	151.02
10-Year Note	-0.049	4.522%

 

 

Sector News Breakdown

Consumer

Autos:

·     EVGO boosted its revenue guidance for the full year as forecasts FY rev. $148M to $158M, from prior forecast $120M to $150M.

·     FSR delays the release of Q3 earnings and conference call to Nov 13 from Nov 8 citing a delay in completion of financial statements and related disclosures on departure of former COO 10/27.

·     LCID downgraded from Buy to Neutral at Cantor and cut tgt to $6 from $10 after Lucid revised its FY23 annual production guidance to 8,000-8,500 (vs. prior guidance of >10,000) and said produced/delivered 7,180/4,369 vehicles, respectively, above guidance of 6,000-7,000 vehicles.

·     RIVN boosted its production guidance for the full year and ended an exclusivity agreement to sell battery-electric vans to AMZN.

 

Consumer Staples & Restaurants:

·     BROS reported comps, revenue, margin, and EBITDA exceeding expectations. Shop-level margin (excl. D&A and pre-opening) improved 460 bps to 32.8% during 3Q (vs. Street 29.7%)and had higher menu prices (8-9% in 3Q), labor efficiency improvements.

·     EL was downgraded from Outperform to Market Perform at TD Cowen as Mainland China could see continued softness due to a volatile Chinese consumer and Hainan & South Korea Travel Retail May worsen before getting better.

·     K – Kellanova reported mixed Q3 as profit beats but sales missed saying pricing and mix increased 11.3% while volume fell 7.4%; in North America; guided Q4 EPS $0.73-$0.76 on sales $3.1B which is below consensus of $0.79 and $3.16B.

Retailers:

·     PETQ results above estimates as sales and earnings were above plan as had broad-based growth, gross margin expansion, SG&A leverage, and generated record cash generation.

·     RL Q2 sales rose 3% to $1.63B, topping the $1.61B estimate in luxury retail and said still sees Q3 revenue to rise roughly 1%-2%, below analysts’ average estimate for a 3.8% rise – noted China business also recovered in Q2 with sales up 20%.

·     SHOO Q3 EPS $0.88 vs est. $0.86, revenue $552.7M vs est. $549.0M; guides FY EPS ~$2.40 vs prior $2.45 mid-point, revenue growth (7%) y/y vs prior (8%)-(6.5%).

·     SNBR shares tumble in mattress retailers after significantly lowered its 2023 EPS guidance, below consensus estimate and announced incremental cost reduction initiatives.

·     UAA 2Q EPS $0.24 vs cons $0.20 on in-line revs $1.57B; reaffirms FY EPS guide, cuts rev growth (3%) mid-point vs est. +0.4%.

·     XPOF Q3 results beat on revenue and in line with EBITDA; still sees strength across the franchise base with another quarter of record AUV and member growth reaching an all-time high.

 

Leisure, Gaming & Lodging:

·     In gaming: CRSR reported Q3 results that were in line/slightly better relative to market expectations, with most key metrics demonstrating y/y growth. CZR said the Culinary Union, which represents thousands of hospitality workers in Las Vegas, reached an agreement with Caesars Entertainment over a new labor contract covering about 10,000 employees.

·     In Lodging & Leisure: ABNB said it’s revamping its ratings and reviews with a redesigned page with new features aimed at helping guests fully understand the quality of each room in a home; TH shares jumped after Q3 beat as net income more than doubled and backed its Ebitda ($346M-$365M) and revenue ($500M-$580M) projections for the year.

 

Energy

·     In Solar: more weakness after earnings results as: 1) ARRY cut its revenue guidance for the full year – lowers FY revenue to $1.53B-$1.58B from $1.65B-$1.73B and lowers top end of year adj EBITDA to $280M-$290M from $280M-$295M; 2) FTCI CEO Steve Hunkler and CFO Phelps Morris to leave by December this year and reports larger Q3 EPS loss of (-$0.08) and revs $30.5M while sees Q4 revs down from the third quarter ($18M-$24M) with gross margin reflecting lower cost absorption and said Q3 expenses rose 44% to $13.22M from $9.15M y/y. Adds to long line of weak results this quarter for the industry (SEDG, RUN, ENPH). SHLS also dropped on earnings.

 

Financials

Banks, Brokers, Asset Managers:

·     HOOD shares slip early as Q3 revs $467M vs. est. $478.9M (up from $361M y/y); total operating expenses for full-year 2023 to be in the range of $2.399B-$2.439B; Q3 transaction-based rev decreased 11% y/y to $185M; monthly active users decreased 16% y/y to 10.3M.

·     RILY reported a Q3 net loss of $2.53 vs profit of $1.53 a year earlier, saying losses were driven by unrealized losses on its equity investments.

 

Bitcoin, FinTech, Payments:

·     Adyen (ADYEY) shares bounced after results saying net revenue was €413.6M in Q3, up 22% YoY on a constant currency basis, net revenue of €413.6M would have been 4% higher than reported; Q3 processed volume was €243.1B, up 21% YoY; shares of SQ, PYPL jumped in reaction.

·     Credit card debt has reached an all-time high of $1.08T as balances are up $154B YoY, the largest increase since 1999. Delinquencies are up as credit-card debt hits a record of $1.08 trillion. “The continued rise in credit card delinquency rates is broad-based across area income and region, but particularly pronounced among millennials and those with auto loans or student loans,” said Donghoon Lee, economic research advisor at the New York Fed.

 

In Financial Services:

·     LZ Q3 revenue growth accelerated to +8% Y/Y (vs. +3% Y/Y in 2Q) and revenue and EBITDA came in 4% and 16.5% above the high end of guidance, respectively. While 4Q23 guidance is mixed, with revenue slightly ahead of consensus and EBITDA slightly below at the midpoints.

·     MQ reported 3Q23 revenue well ahead of the Street (~14% upside) on a combo of better than anticipated TPV and revenue recognition dynamics related to Reg II and Cash App and announced further updates to the Company’s relationship with SQ.

·     UPWK reported a beat and raise quarter as Q3 revenue came in 3% above the high end of guidance, while EBITDA was $14M above the high end of guidance.

 

Healthcare

Biotech & Pharma:

·     @charliebilello tweeted “The average family health insurance premium in the US is up 249% since 2000. The biggest beneficiaries of this massive increase: health insurance companies. UnitedHealth (largest US insurer) was up 4,120% since 2000 vs. 340% gain for the S&P 500.”

·     BIIB trades 52-week lows after quarterly results and cuts year profit view.

·     GILD 3Q revenue of $7.1B vs. est. $6.8B and better EPS on higher than-expected Veklury sales and lower tax expense. HIV business revenue was $4.7bn inclusive of Biktarvy sales of $3.1bn and raised product sales revs for year, but shares fell.

·     LLY said it’s the FDA approved Zepbound injection for chronic weight management in adults with obesity or overweight with at least one weight-related condition (the drug was previously approved for diabetes).

·     TEVA boosted its sales forecast for the full year, topping consensus while saying production remains “largely unaffected” by the Israel-Hamas war.

 

Healthcare Services & MedTech movers:

·     CRL Q3 profit beat in the CRO sector as revs of $1.03B topped $1.0B est. and EPS handily topped views and narrowed year EPS view to $10.50-$10.70 from $10.30-$10.90 and lowered the top end of its year rev view to 2.5%-3.5% from 2.5%-4.5%.

·     GKOS upgraded to Overweight at Wells Fargo and raises tgt to $83 due to two recent positive reimbursement updates and the upcoming launch of iDose, a significant growth driver.

·     INSP missed the top-line ($147.5M vs $149.6M Street) in MedTech space on a temporary decrease in prior authorizations at the beginning of Q323 due to a pilot program that was later reversed resulting in stabilizing trends exiting the period.

·     MASI downgraded from Outperform to Market Perform at Raymond James in MedTech after results as reported Q323 revs of $479MM down 20% y/y, below cons $499MM, EPS missed and HC sales of $308MM -6%, compared to prior cons $347MM.

·     PGNY reported a top- and bottom-line beat in managed healthcare and raised its full-year guidance, helped by Fertility Benefit Services revenue, which topped consensus by ~6%.

 

Industrials & Materials

Aerospace & Industrials

·     AXON Q3 EPS of $1.02 tops consensus $0.76 on revenue of $414.0M, up 33% y/y (consensus $391.2M on an improved FY23 outlook, exceeded expectations on adj. EBITDA of $91.6M (consensus of $76.3M)

·     ENVX shares rose after reported a narrower Q3 EPS loss and upbeat rev guidance, prompting Cantor to raise its price tgt to $30.

·     PWR was upgraded from Neutral to Buy at Goldman Sachs given continued execution track record, greater exposure to more resilient customers, and an attractive risk/reward following recent pullback and downgraded MTZ to Neutral w/ $54 PT Neutral given ongoing challenges with IEA acquisition and its customer mix.

·     SPR shares slid after a public offering of $200 million of its Class A common stock.

 

Technology

Internet, Media & Telecom

·     In Internet: AKAM reported strong Q323 results, provided upside Q423 guidance & raised its 2023 guidance including raising its 2023 Security growth guide to 15% vs 12-14% prior. EBAY reported 3Q results largely in line with expectations on the top and bottom line but Q4 guidance came in below consensus citing macro-driven softness in consumer demand with softness more pronounced in Europe, leading the co to anticipate a more muted holiday. NRDY cut its full-year revenue view, while widening its outlook for an adjusted Ebitda loss.

·     In Media: TKO reported Q3 revenues at $685M and AEBITDA at $298M, exceeding forecasts. WBD reported a wider-than-expected Q3, while revs topped expectation; said Barbie was the highest grossing film in the history of Warner Bros (generating ~$1.5B in the global box office), but FXN revenue in the Studio unit rose only 3% while EBITDA in the division fell 6%; said DTC subscribers totaled 95.1 million, which was down 700,000 from the end of Q2. NXST and NYT also movers on earnings results in broadcasting and news respectively. NYT Q3 EPS $0.37 vs est. $0.29, revs $598.3M vs $589.5M, +9.4%. Sees Q4 subscription revenue +9.5% mid-point.

 

Hardware & Software movers:

·     MDB, SNOW, CFLT were upgraded to OW from EW at Capital one after DDOG earnings saying while the macro environment remains challenging, they are encouraged by the incremental improvement and cautiously positive commentary looking ahead, which is a positive read through for data management and the public cloud providers.

·     RBLX shares jump as Q3 net bookings of $839.5M top ests of $830.2M and said bookings growth strong in western Europe and East Asia; U.S. and Canada account for majority of bookings.

·     TOST shares tumble after narrowing FY rev view to $3.83B-$3.86B from $3.81B-$3.87B as midpoint slightly below estimates and guides Q4 rev mid-point below views despite Q3 re beat.

·     TTWO rises (ahead of earnings tonight), following a report its unit Rockstar Games plans to announce the next highly anticipated Grand Theft Auto (GTA) game as early as this week, Bloomberg News reports.

·     NTDOY announces planning and development of a Legend of Zelda live-action film; Nintendo to cover more than 50% of production costs; SONY responsible for distribution.

 

Semiconductors:

·     MCHP upgraded to Buy ($100 PT) at Citigroup and downgraded NXPI to Sell saying analysis of peak to trough sales (-20%) and GM (-6%) points to MCHP basically there and NXPI a long way to go. Notes NXPI also guided Q124 down mid to upper single-digit QoQ as the correction is starting to catch up to them and CITI expects more pushouts and cancellations soon, like peers.

·     POWI tumbles after Sep Q miss, with revenues of $125.5M, missing Street at $130.0M and sharply lowers Dec Q outlook, with revenue guidance mid-point at $90.0M, down -28.3% q/q, as POWI deals with an unusually lengthy industry correction.

·     TER to acquire 10% of Technoprobe for ~$516M (€482.4M), Technoprobe to acquire Teradyne’s Device Interface Solutions business for $85M (€79.5M).