Morning Preview: April 20, 2023

Early Look

Thursday, April 20, 2023

Futures

Up/Down

%

Last

Dow

-156.00

0.46%

33,877

S&P 500

-30.25

0.74%

4,147

Nasdaq

-134.50

1.02%

13,048

 

 

Much like yesterday, U.S. futures are pointing to a sharply lower open following mixed earnings, U.S. default concerns, and rate hike fears; the question is, will the sell-off stick? Or will investors buy the dip like Wednesday as markets remain incredibly resilient and complacent. Yesterday’s opening marked the session low as investors time and time again have bought any market pullback and have been rewarded for doing so. Wednesday was no different with major averages finishing flat on the session; at what point do markets break out of their recent tight trading range? Technology stocks are looking lower, with Nasdaq futures down about 1% after Tesla (TSLA) earnings results last night weigh on sentiment and chip maker Taiwan Semi (TSM) forecasts sharply lower Q2 sales. TSLA net income fell, and EV price cuts squeeze margins, with shares falling 6% overnight. Overnight a top Federal Reserve official said the central bank had more work ahead to bring down inflation, suggesting another interest-rate increase would be warranted at the Fed’s meeting in two weeks. “Inflation is still too high, and we will use our monetary policy tools to restore price stability,” said New York Fed President John Williams in a speech Wednesday night to a group of financial industry professionals. In Washington DC, reports indicate the GOP will propose lifting the debt limit by $1.5 trillion or until March 31, 2024 – but reports also indicate the offer was rejected by Democrats. During yesterday’s session, the CBOE Volatility index (VIX) also known as Wall Street’s fear gauge, fell to its lowest since November 2021. In Asian markets, The Nikkei Index rose 50 points to 28,657, the Shanghai Index dipped -3 points to 3,367, and the Hang Seng Index climbed 29 points to 20,396. In Europe, European stocks are on course for their largest fall in almost four weeks amid tepid earnings and the prospect of additional monetary tightening as the German DAX is down -138 points to 15,756, while the FTSE 100 is down -20 points to 7,878.

 

Market Closing Prices Yesterday

·     The S&P 500 Index dipped -0.35 points, or 0.35%, to 4,154.52.

·     The Dow Jones Industrial Average slid -79.62 points, or 0.23%, to 33,897.01.

·     The Nasdaq Composite gained 3.81 points, or 0.03%, to 12,157.23.

·     The Russell 2000 Index edged higher 3.89 points, or 0.22% to 1,799.44.

 

Economic Calendar for Today

·     8:30 AM ET            Weekly Jobless Claims…est. 240K

·     8:30 AM ET            Continuing Claims…est. 1.82M

·     8:30 AM ET            Philly Fed Survey for April…est. (-19.2)

·     8:45 AM ET            Fed’s Waller Speaks at Global Interdependence Center Event

·     10:00 AM ET          Existing Home Sales M/M for March…est. 4.5M

·     10:00 AM ET          Leading Index M/M for March…est. (-0.6%)

·     10:30 AM ET          Weekly EIA Natural Gas Inventory Data

·     12:20 PM ET          Fed’s Mester Discusses the Economic and Policy Outlook

·     5:00 PM ET            Fed’s Bostic Discusses Economic Conditions

 

Earnings Calendar:

·     Earnings Before the Open: ALK AN AXP BANC BHLB BMI BX CMA DHI EWBC FITB FOR GPC HBAN HOMB HIR IIIN KEY MAN MMC NUE PM POOL RAD SNA SNV STBA T TCBI TFC UNP VIRT WBS WSO

·     Earnings After the Close: AMTB ASB CATY CSTR CSX FFBC GBCI HTH INDB KNX OZK PPG PSTV SBFG SEIC SIVBQ STX VMI WRB

 

Other Key Events:

·     Needham 22nd Annual Healthcare Conference (virtual), 4/17-4/20

 

 

Macro

Up/Down

Last

Nymex

-1.26

77.90

Brent

-1.26

81.86

Gold

7.30

2,014.60

EUR/USD

0.0014

1.0968

JPY/USD

-0.10

134.58

10-Year Note

-0.046

3.557%

 

 

World News

·     After meeting with around 1,000 attendees and 1,600 virtual participants at the IMF/World Bank spring meetings, JPMorgan analysts say “outlier” views are as high as 35% that the U.S. will default on Treasury obligations. It said speakers at its events assigned a 10% to 15% probability of a default – Marketwatch.com.

·     The bull-bear spread in the American Association of Individual Investors (AAII) weekly survey was -7.9 vs -8.4 last week. Bulls rise to 27.2% from 26.1%, Neutrals fall to 37.7% from 39.5%, and Bears rise to 35.1% from 34.5%.

·     European lawmakers on Thursday gave their final blessing to an ambitious law that will give the European Union its first rules to govern the crypto industry. The approval of the EU’s Markets in Crypto assets, or MiCA, regulation is the first time that governments have tried to supervise the upstart industry on such a scale – Bloomberg

·     Largest Tech Layoffs Since November 2022: Amazon: 27,000 employees, Meta: 21,000 employees, Google: 12,000 employees, Microsoft: 10,000 employees, Salesforce 8,000 employees, Dell: 6,700 employees, Twitter: 80% of employees, Uber: 30% of employees, Coinbase: 25% of employees, Robinhood 23% of employees, Snapchat: 20% of employees, Opendoor: 22% of employees, Intel: 20% of employees, Glassdoor: 15% of employees, Zoom: 15% of employees.

·      

 

Sector News Breakdown

Consumer

·     Tesla Inc. (TSLA) Q1 EPS $0.85 vs. est. $0.84; Q1 revs $23.3B vs. est. $23.5B; net income and earnings drop more than 20% from last year; to remain ahead of l-t 50% CAGR on production with around 1.8 million cars for the year; still sees FY production 1.80M vehicles, vs. est. 1.84M; Cybertruck on track to begin production later this year; Bitcoin holdings unchanged in Q1 2023; Q1 GAAP Gross margin 19.3% v 29.1% y/y and operating margin 11.4% v 19.2% y/y.

·     D.R. Horton (DHI) Q2 EPS $2.73 vs est. $1.93; Q2 revs $7.97B vs. est. $6.47B; homes closed in quarter decreased 1% to 19,664 homes compared to 19,828 homes closed in same quarter of FY22; qtrly net sales orders of 23,142 homes, with an order value of $8.6 bln.

·     Inter Parfums, Inc. (IPAR) raises FY23 EPS view to $4.25 from $4.00 (est. $4.01) and boosts FY23 revenue view to $1.25B from $1.20B (est. $1.2B).

·     Las Vegas Sands (LVS) 1Q EPS $0.28 vs est. $0.20 on revs $2.12B vs est. $1.85B and up from $943M y/y; recorded casino revenue of $1.54B, up from $627M a year ago.

·     Monarch Casino (MCRI) 1Q EPS $0.90 vs est. $0.99 on revs $116.64Mm vs est. $114.17Mm, adj EBITDA $36.48Mm vs est. $37.37Mm.

·     Bath & Body Works (BBWI) downgraded to neutral from Overweight at Piper saying consensus estimates for the personal care products maker seen as simply just too high.

 

Energy

·     Kinder Morgan (KMI) 1Q adj EPS $0.30 vs est. $0.29 on revs $3.89B vs est. $4.77B; leaving 2023 budget guidance in place.

·     In the solar/alternative energy sector, House Republican leaders are proposing repealing hundreds of billions of dollars in clean-energy subsidies/tax credits in exchange for lifting the federal debt limit.

 

Financials

·     Banner Corp. (BANR) 1Q EPS $1.61 vs est. $1.58 on NII $153.31Mm vs est. $154.91Mm, adj revs $170.4Mm vs est. $155.0Mm, tangible common equity per share +7% to $33.52.

·     Brandywine (BDN) 1Q FFO/shr $0.29 vs est. $0.29 on revs $129.2mm vs est. $127.3Mm; guides FY23 FFO/shr $1.12-1.20 vs est. $1.15.

·     Discover Financial (DFS) Q1 EPS $3.58 vs. est. $3.91; Board has approved a new $2.7 billion share repurchase program spanning 5-qtrs; ended Q1 with total loans of $112.7B, Q1 payment services volume $85.1B, Q1 net interest income $3.13B, Q1 non-interest income $621M and Q1 total net charge-off rate 2.72%; Provision for credit losses $1.1 billion vs. est. $968M.

·     Eagle Bancorp (EGBN) Q1 EPS $0.78 vs. est. $1.13; Q1 provision for credit losses on loans was $6.2M compared to a reversal of $0.5 mln for the prior quarter; Q1 net interest income $75M.

·     Equifax (EFX) 1Q adj EPS $1.43 vs est. $1.37 on revs $1.3B vs est. $1.28B; sees 2Q reported revs $1.31-1.33B vs est. $1.34B and adj EPS $1.60-1.70 vs est. $1.81; sees FY revs $5.275-5.375B vs est. $5.322B and adj EPS $7.05-7.35 vs est. $7.16.

·     FNB Corp. (FNB) Q1 EPS $0.40 vs. est. $0.39; Q1 net interest income totaled $336.7M, an increase of 43.8% vs. est. $339M; Q1 credit loss provision $14M; Total average deposits grew $1.2B, or 3.7%, led by increases in average time deposits of $1.2B, or 42.1%, average non-interest-bearing deposits of $154.6M.

·     SL Green Realty (SLG) 1Q FFO/shr $1.53 vs est. $1.41 on revs $223.58Mm vs est. $203.42Mm, same-store cash NOI +5.3%; Manhattan same-store office occupancy 90.2%, slightly ahead of expectations.

·     Synovus (SNV) Q1 EPS $1.32 vs. est. $1.22; Q1 revs $613.9M vs. est. $594.2M; Q1 provision for credit loss $32.2M vs. $11.4M last year; Q1 net interest margin 3.43% vs. 3.01% last year; total deposits increased $1.08B sequentially, or 2%.

·     Texas Capital (TCBI) Q1 EPS $0.70 misses the $0.87 consensus; Q1 provision for credit losses was $28.0M vs. $34.0M for 4Q22 and Q1 net charge-offs were $19.9M vs. $15.0M during 4Q22.

·     Truist Financial (TFC) Q1 EPS $1.05 misses the consensus of $1.14; qtrly provision for credit losses was $502 mln compared to $467 mln for q4 of 2022; sees FY adj revs up 5%-7% and Q2 revs relatively stable; reports Q1 CET1 capital ratio 19.1% and Q1 ROCE 10.1%.

·     Zion Bancshares (ZION) Q1 EPS $1.33 vs. est. $1.53; Q1 provision for credit losses -$45M; Q1 net interest income $679M; net interest margin 3.33% vs. est. 3.37%; total deposits $69.21B.

·     Western Union (WU) upgraded to Peer Perform from Underperform at Wolfe Research.

 

Industrials & Materials

·     Alcoa Inc. (AA) 1Q adj EPS ($0.23) vs est. ($0.11) on revs $2.67B; sees 2023 total alumina shipments to remain unchanged between 12.7-12.9Mm metric tons, sees 2023 total aluminum shipments to remain unchanged between 2.5-2.6Mm metric tons.

·     Steel Dynamics (STLD) 1Q adj EPS $4.01 vs est. $3.52, adj EBITDA $950Mm vs est. $954.7Mm on revs $4.89B vs est. $5.0B, says metal spread compression was amplified by estimated $50Mm in 1Q due to higher raw material costs; comments remain confident that market conditions are in place for domestic steel consumption to be solid.

 

Technology, Media & Telecom

·     Taiwan Semi (TSM) forecast a decline of as much as 16% in Q2 sales amid a weakening global economy and as they struggle to clear inventory; forecast revenue of $15.2 billion to $16 billion in the quarter ending June 30, down from $18.16 billion a year prior.

·     IBM Corp. (IBM) Q1 adj EPS $1.36 vs. est. $1.26; Q1 revs $14.25B vs. est. $14.35B; expects constant currency revenue growth of 3%-5%; at current foreign exchange rates, currency is expected to be neutral to revenue growth; continues to expect about $10.5b in free cash flow for FY23; Q1 gross margins 52.7%.

·     F5 Networks (FFIV) Q2 adj EPS $2.53 vs. est. $2.42; Q2 revs rose 11% y/y to $703.2M vs. est. $699.1M; guides Q3 revs $690M-$710M vs. est. $747M and EPS $2.78-$2.90 below est. $3.05; reducing its global headcount by approximately 9% of its total workforce resulting in $130M in savings; cuts FY23 revenue growth view to low-single-digits from 9%-11% prior view.

·     Lam Research (LRCX) Q3 EPS $6.99 vs. est. $6.54; Q3 revs $3.87B vs. est. $3.83B; Adjusted gross margin 44% vs. 44.7% y/y and adjusted operating margin 28.3%; guides Q4 revs $3.1B plus/minus $300M and EPS $5.00 plus/minus $0.75 vs. est. $3.47B and $5.63.

·     Calix Corp. (CALX) 1Q adj EPS $0.31 vs est. $0.28 on revs $250Mm vs est. $245.6Mm; sees 2Q adj revs $255-261Mm vs est. $249.3Mm and adj EPS $0.07-0.13 vs est. $0.29.

·     Crown Castle (CCI) 1Q AFFO/shr $1.91 vs est. $1.86 on site rental revs $1.62B vs est. $1.76B, adj EBITDA $1.10B vs est. $1.09B; sees FY adj EBITDA $4.472B vs est. $4.468B, AFFO/shr $7.63 vs est. $7.63.

·     Google (GOOGL) plans to introduce generative artificial intelligence into its advertising business over the coming months, as big tech groups rush to incorporate groundbreaking technology into their products, the Financial Times reported.

·     Seagate Technology Holdings (STX) has agreed to pay a $300 million penalty in a settlement with U.S. authorities for shipping over $1.1 billion worth of hard disk drives to China’s Huawei in violation of U.S. export control laws, the U.S. Department of Commerce said – Reuters.

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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.