Early Look

Friday, April 14, 2023

Futures	Up/Down	%	Last
Dow	-20.00	0.05%	34,172
S&P 500	-5.25	0.13%	4,167
Nasdaq	-76.50	0.58%	13,133

 

 

After a massive surge higher on Thursday for U.S. stock markets following another “cooling” inflation report (PPI after CPI Wednesday), U.S. futures pointing to a mild pullback (tech weak) ahead of another round of key economic data and earnings results from some of the biggest banks in the world this morning. So far, the big banks are coming in with earnings beats for JPM, WFC, PNC, BLK early. Meanwhile Atlanta Fed President Raphael Bostic said this morning that one more 25-bps interest rate hike can allow the Fed to end its tightening cycle with some confidence inflation will steadily return to the U.S. central bank’s 2% target. Recent inflation data, including this week’s reports of slowing consumer price increases and falling producer price inflation, “are consistent with us moving one more time,” Bostic told Reuters. “We’ve got a lot of momentum suggesting that we’re on the path to 2%.” Still no fear in equity markets as the CBOE Volatility index (VIX) closed at 17.8, lowest since January 2022 (up slightly this morning). Yesterday the Dow popped 1.14% (rose for the 9^th time in last 11-days), while the S&P 500 gained 1.33% and the Nasdaq surged 1.99%, up roughly 16% YTD. In another sign the concerns in the banking sector are abating after two major bank failures a few weeks ago (SBNY, SIVB), the Fed’s Emergency Loans to banks fall for fourth straight week. In Asian markets, The Nikkei Index jumped 336 points to 28,493, the Shanghai Index gains 19 points to 3,338, and the Hang Seng Index rose 94 points to 20,438. In Europe, the German DAX is up 33 points to 15,762, while the FTSE 100 rises 25 points to 7,869. The Stoxx 600 is up 0.4% and on course for a fifth consecutive gain with real estate, healthcare, and food & beverages the strongest performing sectors. The Bloomberg Dollar Spot Index is down 0.1% after touching its lowest level since early February.

 

Economic Calendar for Today

·     8:30 AM ET            Import Prices M/M for March…est. (-0.1%)

·     8:30 AM ET            Export Prices M/M for March…est. (-0.1%)

·     8:30 AM ET            Retail Sales M/M for March…est. (-0.4%)

·     8:30 AM ET            Retail Sales Ex: Autos M/M for March…est. (-0.3%)

·     9:15 AM ET            Industrial Production M/M for March…est. +0.2%

·     9:15 AM ET            Capacity Utilization for March…est. 79.0%

·     10:00 AM ET          Business Inventories M.M for February…est. +0.3%

·     10:00 AM ET          University of Michigan Confidence, Apr-P…est. 62.0

·     10:00 AM ET          University of Michigan (UoM) 1 and 5-yr inflation expectations

·     1:00 PM ET             Baker Hughes Weekly rig count data

 

Earnings Calendar:

·     Earnings Before the Open: BLK BYRN C JPM PNC UNH WFC

 

Market Closing Prices Yesterday

·     The S&P 500 Index gained 54.37 points, or 1.33%, to 4,146.22.

·     The Dow Jones Industrial Average rose 383.19 points, or 1.14%, to 34,029.69.

·     The Nasdaq Composite surged 236.94 points, or 1.99%, to 12,166.27.

·     The Russell 2000 Index advanced 22.98 points, or 1.30% to 1,796.68.

 

 

Macro	Up/Down	Last
Nymex	0.36	82.52
Brent	0.31	86.40
Gold	-1.60	2,053.70
EUR/USD	0.0012	1.1056
JPY/USD	-0.05	132.51
10-Year Note	-0.006	3.445%

 

 

World News

·     Investors have moved $538 billion into cash funds over the past eight weeks as they pulled money out of bank deposits after the collapse of Silicon Valley Bank, according to Bank of America figures released on Friday. Bank America, citing EPFR data, said investors put $51.6 billion into money market funds in the week to Wednesday as the outsized flows continued.

 

Sector News Breakdown

Consumer

·     Lucid Group (LCID) produced 2,314 vehicles, delivered 1,406 vehicles during Q1 vs. est. 1,835.

·     Express (EXPR) and global brand management firm WHP Global announced a definitive agreement to acquire menswear brand Bonobos, Inc. from Walmart (WMT) for $75M, six years after buying it for $310M.

·     Rivian Automotive (RIVN) downgraded to neutral from overweight at Piper saying the company’s capital-intensive model may discourage investors in the current macro environment.

·     Tesla (TSLA) slashed prices for its electric vehicles in Europe, Israel, and Singapore, expanding a global discount drive it began in China in January while raising concerns about its industry-leading profit margin, Reuters reported.

·     Best Buy Co Inc (BBY) on April 12 entered into a new $1.25 billion five-year senior unsecured revolving credit facility agreement.

·     VF Corp. (VFC) upgraded to Buy from Sell at Goldman Sachs.

 

Energy, Industrials and Materials

·     Boeing (BA) shares fell over 4% overnight after reports the co is pausing deliveries of some 737 Max jets due to tail fittings flaw; the problem will likely impact a significant number of undelivered aircraft as well as those stored at Boeing; shares of supplier SPR fell overnight.

·     The International Energy Agency (IEA) warned that OPEC+ cuts are likely to drive oil prices higher and inflict more pain on consumers.

 

Financials

·     JPMorgan (JPM) Q1 EPS $4.10 vs. est. $3.41; Q1 revs $38.3B vs. est. $36.23B; Q1 net interest income (NII) was $20.8 billion, up 49%; Q1 provision for credit losses $2.3B, Q1 non-interest expense rose 5%; Q1 credit costs of $2.3B included a $1.1B net reserve build and $1.1B of net charge-offs.

·     Wells Fargo (WFC) Q1 EPS $1.23 vs. est. $1.13; Q1 revs $20.7B vs. est. $20.0B; Q1 net interest margin on a taxable-equivalent basis was 3.20% vs 2.16% reported last year; Q1 CET1 capital ratio 10.8%; Q1 ROE 11.7%; Q1 net charge offs $564M.

·     Blackrock (BLK) Q1 adj EPS $7.93 vs. est. $7.73 as profit dropped 18%; Q1 revs $4.24B vs. est. $4.25B; Q1 AUM $9.09T, down 5% y/y; today’s crisis of confidence in the regional banking sector will further accelerate capital markets growth; Q1 had $110B of quarterly total net inflows.

·     PNC Financial (PNC) Q1 EPS $3.98 vs. est. $3.67; Q1 revs $5.60B vs. est. $5.61B; Q1 provision for credit losses of $235M; Q1 average loans $325.5B vs $290.7B y/y; Q1 average deposits of $436.2B, increased $1.3B, or 0.3%. vs Q4; said remains well positioned to deliver for all stakeholders through current environment and beyond; guides FY23 revs up 4%-5%, down from prior view of up 6%-8% and average loans up 5%-7%.

·     Wells Fargo (WFC) is facing U.S. regulatory scrutiny following the meltdowns of Silicon Valley Bank and Signature Bank, the New York Post reported. On Friday, Wells Fargo representatives are set to meet with officials from the U.S. Office of the Comptroller of the Currency, the author says, citing a federal official.

·     Hartford Financial (HIG) guides Q1 EPS $1.68 vs. est. $1.99; expects results in the first quarter of 2023 to include: Property & Casualty current accident year catastrophe losses of $185 million before tax ($146 million after tax). Of the total CAY CAT losses, $138 million are estimated in Commercial Lines and $47 million in Personal Lines.

·     Charles Schwab (SCHW) investor GQG Partners sold entire stake amid banking turmoil, the Financial Times reported.

·     Fed emergency lending falls to $139.5b from $148.7b the prior week – Fed discount-window loans $67.6b in week ended April 12 after $69.7b – Fed bank term funding loans $71.8b in week ended April 12 after $79.0b.

·     Manhattan rents have hit an all-time high, with a median monthly rate at $4,175 in March, per Bloomberg.

 

Healthcare

·     UnitedHealth (UNH) Q1 adj EPS $6.26 vs. est. $6.13; Q1 revs $91.93B vs. est. $89.77B; raises FY23 adjusted EPS view to $24.50-$25.00 from $24.40-$24.90 (est. $24.94); Q1 2023 medical care ratio at 82.2% compared to 82% last year.

·     Eli Lilly and Company (LLY) said the FDA has issued a complete response letter for the mirikizumab biologic license application (BLA) for the treatment of ulcerative colitis (UC). In the letter, the FDA cited issues related to the proposed manufacturing of mirikizumab, with no concerns about the clinical data package, safety, or label for the medicine.

·     QuidelOrtho (QDEL) sees Q1 revenue $840M-$850M above consensus $746.8M; said respiratory product revenue is expected to be in the range of $262M-$267M, including COVID-19 product revenue of $212M-$217M and non-respiratory product revenue $578M-$583M.

·     Teva Pharmaceutical (TEVA) announced that the FDA has issued a complete response letter to its partner Alvotech (ALVO) for the Biologics License Application for AVT02.

·     ViewRay (VRAY) downgraded to Neutral from Buy at BTIG.