Mid-Morning Look

Thursday, August 24, 2023

U.S. stocks opened at the highs, adding to yesterday’s strong market gains initially, but gains quickly faded with the Nasdaq falling more than 100-points off highs to turn negative in a “sell the news” moment after semiconductor Data Center, Gaming and AI chip giant NVIDIA (NVDA) traded up as high as $510 overnight after a blowout quarter and guidance, but has since pared gains. With the better earnings in the rear-view mirror attention now turns to the macro picture as markets await several Fed speakers today and tomorrow at its Jackson Hole annual event. Philadelphia Fed President Patrick Harker got things going this morning saying there clearly is a tightening of credit; is not concerned about rise in market yields; said low-income consumers are slowing down and right now, Fed has probably done enough with policy and lastly that he needs to see inflation falling before would be willing to cut rates. Fed Chairman Powell not set to speak until tomorrow morning at 10:15 AM. REITs (XLRE) among sector leaders for a 2nd day while Utilities (XLU) and Financials (XLF) round out best sectors early while consumer discretionary (XLY) the main drag in S&P early. Consumer Discretionary (XLY) is the top S&P sector decliner along with Technology (XLK) and Communication (XLC). Treasury yields steady around 4.2% for the 10-year, after pulling back from highs of 4.36% this week, the dollar rises, gold slips. In data, July durable goods orders contracted 5.2%, more than the 4.1% retraction forecast. On the other hand, weekly jobless claims declined to 230,000 from the previous week’s revised 240,000. Stocks are currently at lows with the S&P down -0.35% and the Nasdaq down over -0.6%.

Economic Data

·     Weekly Jobless Claims fell to 230K from 240K last week (240K also consensus est.) as the 4-week moving average rose to 236,750 from 234,500 prior; continued claims fell to 1.702M in latest week from 1.711M prior (est. 1.708M) and insured unemployment rate fell to 1.1% from 1.2%.

·     July Durables Goods Orders dropped -5.2%, more than the consensus (-4.0%) and vs June +4.4%; July Durables ex-transportation orders +0.5% vs. est. +0.2%; July Durables ex-defense orders -5.4% vs June +5.9% (prev +6.0%). U.S. July gen. Machinery orders +1.1%, electrical equipment +1.0%, defense aircraft/parts -10.9%.

Stock GAINERS

·     ADSK +2%; as Q2 results were solid with a beat and raise across the board as management noted outperformance was primarily driven by early expansions from EBAs; also sees FY revs +8-9% vs est. +8.17%, and adj EPS $7.30-7.49 vs est. $7.28.

·     GES +28%; after Q2 adj EPS $0.72/$665M easily tops $0.40/$640.5M and raises FY24 EPS view to $2.88-$3.08 from $2.60-$2.90 and narrows higher FY24 revenue growth view to 2.5%-4.0% from 2.0%-4.0%; Sales in Europe grew 9% and sales in Asia were up 19%.

·     NVDA +3%; reported better-than-expected Jul-Q results as Data Center rose an impressive 141% Q/Q crushing ests while Gaming increased 11% Q/Q. overall revs/EPS of $13.51B/$2.70 easily topped Street’s $11.2B/$2.08 and guided Q3 revs $16B vs. Street’s $12.6B.

·     PRU +2%; upgraded to Strong Buy from Market Perform at Raymond James with $125 tgt as expects will re-rate as it proves out its transformation strategy and reflects potential for increased share repurchases as a catalyst.

·     SPLK +13%; reported a solid quarter while raising their FY/24 outlook for all metrics; quarter was highlighted by profitable growth with ARR +16% y/y while operating expenses declined by 3% y/y and raises FY total ARR view and adj op mgn to 21.0-21.5% vs prior 18.0-18.5%.

·     WB +4%; following quarterly earnings results and guidance.

Stock LAGGARDS

·     BA -3%; shares fell as well as supplier SPR (which makes roughly 70% of Boeing narrowbody jet frames as per Reuters) after Being disclosed improperly drilled holes in a component that helps maintain cabin pressure within the 737 Max jet. SPR shares fell over -17% on news.

·     DLTR -10%; reports top/bottom line beat and better comps of 7.8% (7%-8% view), narrows year EPS view and boosts year sales view – but guides Q3 EPS $0.84-$1.04 below est. $1.28 and said Q2 gross margins declining -220bps y/y.

·     MDT -2%; said an FDA panel narrowly voted against recommending its blood pressure treatment device, saying risks tied to using it do not outweigh the benefits.

·     PLSE -7%; shares fell after a negative short call from White Diamond Research.

·     VZIO -8%; double downgraded from Buy to Underperform at Bank America and cut tgt to $6 from 11 saying the device (TV) side of the business will face challenges from a weaker consumer spending environment, as firm cut its device estimates to reflect lower TV unit sales.

·     WOOF -20%; lowers FY23 adjusted EPS view to $0.24-$0.30 from prior $0.40-$0.48 (est. $0.42) and backs FY23 revs as says sees shift in consumer spending, pressures on discretionary business.

·     ZUO -10%; reported EPS beat and in-line revs for Q2 while guided both Q3 and FY revs below consensus while profit outlook topped consensus.