Mid-Morning Look

Friday, February 02, 2024

Index	Up/Down	%	Last
DJ Industrials	-70.14	0.18%	38,450
S&P 500	24.28	0.48%	4,930
Nasdaq	153.19	1.01%	15,518
Russell 2000	-24.37	1.23%	1,950

 

 

U.S. stocks are mixed as the S&P and Nasdaq rally sharply behind big earnings results from META and AMZN, boosting the Communications (XLC) sector over 3% and continuing the outperformance in those averages while the Dow slips after Apple (AAPL) results were slightly better, but revs weighed on shares and the Smallcap Russell 2000 declines sharply amid a spike in Treasury yields after the monthly Nonfarm payroll data was hugely positive. The Nasdaq bounced more than 130 points on the open but NYSE breadth more than 4:1 decliners leading advancers REITs (XLRE), Utilities (XLU) each down over 2% and Materials (XLB) down -1%. Gold and bond prices dumped, and the dollar index (DXY) rises to 7-week highs nearing 104 on reduced rate cut hopes after the better jobs data. The market remains in a period of “goldilocks” as bad data continues to raise the hope of aggressive rate cuts by the Fed this year, but strong data has been boosting markets on narrative of a “soft landing” for the economy. Explains why stock markets are on track to rise for the 13^th time in 14 weeks. The 10-year yield is up 16-bps at 4.02% after the data, taking an early toll on interest rate sensitive sectors.

 

The good news today: The January jobs report was a whopper of a beat, nearly doubling the estimates of economists (353K vs. 180k est.), with big revision higher for prior months, and unemployment stayed steady while wages surged, showing the economy remains very strong. But on the flip side, for stock market purposes, the data also lowers expectations that the Fed can get more aggressive on interest rate cuts in 2024 as chances of a March rate cut becomes much less. Prior to the data, fed futures were still calling for a 50% chance of March rate cut (despite Powell downplaying the probability earlier this week) and roughly 150-bps of cuts in 2024 overall (vs. Fed forecast of 75-bps). Today’s report

 

• The January unemployment rate steady at 3.7% vs. expectations to rise 3.8%. U.S. January average hourly earnings jumped +4.5% from year earlier vs. est. +4.1% and on a M/m basis, rose +0.6% vs. est. +0.3%. U.S. January average hourly earnings all private workers +0.6% from prior month (cons +0.3%).
• University of Michigan surveys of consumers sentiment final Jan 79.0, in-line with consensus and vs preliminary Jan 78.8 and final Dec 69.7; current conditions index final Jan 81.9 vs prelim Jan 83.3 and final Dec 73.3.
• University of Michigan surveys of consumers 1-year inflation outlook final January 2.9% vs prelim 2.9% and final December 3.1% and University of Michigan surveys of consumers 5-year inflation outlook final january2.9% vs prelim 2.8% and final December 2.9%.
• Factory orders for December rose +0.2%, in-line with consensus and vs Nov +2.6%; factory orders ex-transportation +0.4% vs Nov +0.2% (prev +0.1%) and factory orders ex-defense +0.4% vs Nov +3.2%. Dec Durables orders unrevised at unchanged and nondurables orders +0.4% vs Nov unchanged.

 

 

Macro	Up/Down	Last
WTI Crude	-1.27	72.55
Brent	-0.94	77.78
Gold	-23.40	2,047.70
EUR/USD	-0.0087	1.0784
JPY/USD	1.88	148.30
10-Year Note	0.172	4.035%

 

• In PE/Investment Sector: for BX, Barclay’s noted January redemption requests increased ~18% m/m, with investors seeking to redeem $1.3B/~2% of NAV. BREIT fulfilled 88% of repurchase requests, which marks the highest payout % since proration began, and requests are down ~80% since the January ’23 peak (firm says thinks this bodes well for the backlog to likely be cleared in Feb.). JHG upgraded from Underweight to Neutral at JP Morgan after reported Q4 EPS beat primarily due to performance fees, below the line gains and a lower tax rate. LPLA reported Q4 EPS $3.51, ahead of consensus of $3.38 as outperformance was revenue, driven primarily by stronger Attachment revenues. PIPR rises to record highs after Q4 adj EPS $4.03, tops est. $2.60 as revs rose 21% y/y to $471.9M and Q4 advisory business revenue jumped 29% to $284.3M helped by higher average fee and more completed transactions.
• Pharma earnings: ABBV boosted its forecast for 2027 for sales of its immunology drugs Skyrizi and Rinvoq to $27B, up $6B from its previous prediction; BMY shares hit fresh 52-week lows despite Q4 beating EPS $1.70/$11.5B vs. est. $1.53/$11.19B saying expects total sales to increase "low single digits" from $45B in 2023 vs. est. growing sales 2%. REGN beat Q4 revenue estimates at $3.43B vs. est. $3.29B, helped by sales of its eye drug Eylea ($1.46B, in line with the co’s previously laid out targets in January) and posted EPS beat.
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• CI +5%; Q4 adj EPS $6.79 vs. est. $6.37; Q4 revs $51.15B vs. est. $48.89B; raised its quarterly dividend to $1.40 a share from $1.23 a share; Q4 medical care ratio of 82.2% vs 83.8% and ended the year with its pharmacy customer count +5% and its medical customer tally up 10%.
• CLX +5%; lifted its annual sales and profit forecasts after Q2 beat, helped by a faster pace of replenishment in inventories after a cyberattack; sees FY net sales to be down low single digits, compared with prior outlook of down mid-to-high-single digits.
• DECK +9%; on earnings and guide beat; quarterly sales +16% y/ y on strength in both UGG (+15% y/y) and HOKA (+20% y/y)/ Q3 incremental EBIT margin of 58%; raised FY24 revenue guidance to +14% (vs. +11% prior) and EPS to $26.25-$26.50 (vs. $22.90-$23.25 prior).
• META +21%; as announces its first-ever dividend of $0.50 per share and a $50B stock buyback while Q4 revs of $40.11B top consensus $39.18B saying daily active users (DAUs) stood at 3.19B on average in Q4, up 8% y/y and guided Q1 revs $34.5B-$37B vs. est. $33.83B.
• TWST +8%; after earnings and guidance results.

 

• BZH -8%; declined as Q1 adj EBITDA $38Mm vs est. $41.19Mm, adj homebuilding gross margin 19.9%, homebuilding revs $380.9Mm. Recall late January DHI weakened the sector after warning that volatile mortgage rates and higher incentives on new home sales are eating into margins.
• CHTR -12%; after posted Q4 internet broadband customer numbers fell by -61,000 vs. consensus for an increase of roughly 17,000 noting the competitive pressure from larger players in an otherwise crowded market (reported mostly in-line revs of $13.7B).
• COLM -4%; as warned of falling sales and cautious retailers in 2024, guiding FY24 EPS $3.45-$3.85, below consensus $4.51 and revs $3.35B-$3.42B vs. est. $3.51B (after sales fell -9% in Q4).
• INTC -3%; shares slipped following reports overnight that the chipmaker is delaying the construction timeline for its $20B Ohio fab (from 2025 to 2026) amid market challenges and slow rollout of US grant money.
• SKX -10%; as issued FY24 sales and EPS guidance below elevated expectations; said several retailers continued to conservatively manage their inventory levels – guides FY24 EPS $3.65-$3.85 vs. est. $4.18.
• TEAM -13%; after quarterly results featured upside to total revenue and margins, but Cloud results/expectations fell short of estimates; For FY24 cloud guide, TEAM trimmed the high end of expectations by roughly 1 point, net of Loom.

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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.