Mid-Morning Look: August 24, 2022

Mid-Morning Look

Wednesday, August 24, 2022

Index

Up/Down

%

Last

 

DJ Industrials

45.06

0.14%

32,956

S&P 500

11.41

0.28%

4,140

Nasdaq

59.68

0.48%

12,440

Russell 2000

10.43

0.54%

1,929

 

 

U.S. stocks bounce between gains and losses before steadying higher, with more choppy action expected ahead of the high-profile Jackson Hole Fed event this Friday, where Chairman Powell is set to speak at 10:00 that morning. U.S. investors also digesting the latest hawkish noise from the Federal Reserve last night amid mounting signs of a global economic slowdown. With all the focus on rising interest rates and the Fed continuing its aggressive rate hike path to fight inflation (has had back-to-back 75 bps hikes in prior meetings and roughly 50% chance of another 75-bps hike in September meeting), markets still holding up well despite several warnings. Overnight, hawkish Fed member (but not voting member) Neil Kashkari said, “the big fear that I have in the back of my mind is, if we are wrong and markets are wrong and that this inflation is much more embedded at a much higher level than we appreciate or markets appreciate, then we are going to have to be more aggressive than I anticipate, probably for longer, to bring inflation back down.” In stock news, retailers continue their lousy month overall, with more disappointing results and/or guidance from JWN, CTRN, WOOF today while the housing industry continues to show cracks after lower new orders from TOL last night in its earnings results and lower Pending Home Sales data today. Tech focus turns to semis and software with a handful of key reports tonight (NVDA, CRM, SNOW, SPLK). The dollar extends gains vs. euro to 20-year highs, Treasury yields hit highest level in weeks (10-yr 3.1%) and oil prices rise.

 

Economic Data

·     July Durable Goods Orders were unchanged vs. +0.6% expected and +2.2% prior (revised from +1.9%). That follows four straight months of increases. Core durable goods rose +0.3% vs. +0.2% expected and +0.3% prior (unchanged) and Durable goods, excluding defense rose +1.2% vs. +0.7% in June (revised from +0.4%). Non-defense orders, excluding aircraft rise +0.4% vs. +0.3% expected and +0.9% prior (revised from +0.5%).

·     July Pending Home Sales fell -1.0% m/m to 89.8 (lowest since April 2020) vs. -4.0% consensus and -8.9% in June (revised from -8.6%). Pending home sales tumbled 19.9% in July on a y/y basis. In July, contracts fell in the Northeast, South and Midwest, but rose in the West. Contracts have declined in eight of the last nine months

 

 

Macro

Up/Down

Last

 

WTI Crude

0.62

94.36

Brent

0.36

100.58

Gold

1.50

1,762.70

EUR/USD

-0.0034

0.9932

JPY/USD

0.13

136.91

10-Year Note

0.046

3.10%

 

 

Sector Movers Today

·     Auto sector: TSLA, NIO suspend EV charging services as facilities in Chengdu, Chongqing have been taken offline; drought, heatwave gripping China has disrupted power supplies – Bloomberg reported; in auto retail, AAP Q2 results disappointed on the top line but was better than consensus on the bottom line, and it lowered its full-year outlook; Q2 comps of -0.6% were below consensus +2.2%; in EV, FREY and Hana Technology have closed an agreement to jointly develop equipment and automation solutions for FREYR’s customer qualification plant in Norway, as well as for FREYR’s planned gigafactories; ENVX tgt raised to $36 from $19 at Cowen noting the auto oppty looms large as it is still just getting started with early promising fast charge data; GPI said CEO will retire end of year and be replaced by current president of U.S. operations

·     Consumer Staples & Restaurants; EAT shares decline as Q4 comp sales growth of +3.1%, but operating income as a percentage of total revenues plunged to 4.4% from 10.0% y/y citing higher commodity costs, restaurant expenses, and increased restaurant labor costs and op margin dropped to 10.3% from 16.9% last year and adj Q4 EBITDA was $100.2M vs. $144.3M a year ago (guides FY below views); in food/beef space (HRL, TSN, PPC), Reuters reported with almost all of Texas in drought, ranchers are sending ever more cattle off to slaughter, a trend likely to increase beef prices over the long term due to dwindling supply; TTCF rises following news that the plant-based food company expanded its distribution agreement with WMT in the U.S.; BYND price tgt cut to $9 from $12 at Piper and maintains underweight

·     Financial Services; INTU delivered strong FQ4 results, driven by outperformance in QB, and provided FY23 guidance: SBSE guidance at 19-20% Y/Y ahead of consensus of 14% Y/Y and expects the Small Business segment to post 15-20% growth (up from 10-15%); PYCR reported significantly better than expected Q4, with non-GAAP EPS of $0.04 (consensus $0.02) on revenue of $111.0M (consensus $103.5M), up 26% y/y, the third quarter in a row of acceleration

 

Stock GAINERS

·     BBBY +30%; as co disclosed it had clinched a loan deal that would help shore up liquidity, according to people familiar with the matter. The Wall Street Journal previously reported that the retailer was seeking about $375 million to pad its cash levels and pay down existing debt.

·     CCJ +8%; after India’s largest power producer said it is looking to develop another massive nuclear project just weeks after announcing its entry into the sector. Overnight, Japan signaled its return to nuclear power to stabilize energy supply

·     FTCH +17%; to acquire a 47.5% stake in Richemont’s online fashion retailer YOOX Net-A-Porter

·     IIVI +2%; Q4 revenue rose 7% y/y to $887M topping the $858M estimate after earnings topped views and issues higher guidance for Q1 revs of $1.3B-$1.4B vs. est. $1.02B but softer EPS outlook

·     INTU +6%; delivered strong FQ4 results, driven by outperformance in QB, and provided FY23 guidance: SBSE guidance at 19-20% Y/Y ahead of consensus of 14% Y/Y and expects the Small Business segment to post 15-20% growth (up from 10-15%)

·     LZB +5%; a bright spot in retail after Q1 adj EPS $0.91 topped est. $0.67; Q1 sales rose 15% to $604M vs. est. $566.1M; Q1 retail segment sales increased 30% to $236M, all-time qtrly record

·     PTON +16%; announced the Peloton Bike, Guide, and select accessories and apparel are now available for purchase in Amazon’s U.S. stores

·     TOL +2%; Q3 earnings beat was driven by better-than-expected margins, land sales revenue, other income, a lower tax rate – but unit orders decreased -60% yoy vs consensus -22% and its cancellation rate more than quadrupled y/y to 13.0% vs 3.1% in 3Q21

·     TRQ +24%; after RIO raises its bid for the company to C$40 per share for approximately 49% of outstanding shares in deal valued around $3.1B (about an 18% premium to prior bid)

·     TTCF +8%; following news that the plant-based food company expanded its distribution agreement with WMT in the U.S.

 

Stock LAGGARDS

·     AAP -9%; Q2 results disappointed on the top line but was better than consensus on the bottom line, and it lowered its full-year outlook; Q2 comps of -0.6% were below consensus +2.2%

·     CTRN -16%; reported Q2 EPS loss (-$0.310 vs. profit of $1.36 y/y and total sales fell -22% to $185M and expects low single digit increase in second half total sales compared to first half total sales

·     EAT -2%; operating income as a percentage of total revenues plunged to 4.4% from 10.0% y/y; operating margin dropped to 10.3% from 16.9% last year and adj Q4 EBITDA was $100.2M vs. $144.3M a year ago (and guides FY below views)

·     JWN -13%; after slashing full year earnings guidance from $3-$3.50 to new guide of $2.30-$2.60 saying while quarterly results were consistent with previous outlook, customer traffic and demand decelerated significantly beginning in late June

·     URBN -2%; posted in-line quarterly revenue of $1.8B while earnings of $0.65 missed by 4c, while being down 50% y/y and inventories up 44% on only 2% sales growth

·     WOOF -5%; Q2 comp sales rose 3.8% below est. 4.1%, posted weaker-than-expected second-quarter earnings and offered guidance that lagged estimates seeing adj EPS $0.77-$0.81 on sales $5.975B-$6.05B below est. $0.89 and $6.107B

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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.