Early Look

Wednesday, August 14, 2024

After a massive rally on Tuesday left the S&P 500 and Nasdaq at the highs, U.S. futures are flattish across the board, trading in a very narrow range (5,463.75 high vs. 5,452 low for Spuz) ahead of the July Consumer Price Index (CPI) inflation report. U.S. markets have fully recovered the recent pullback that spooked investors last week, but for the party to continue, a “cooler” CPI report is likely needed to assure investors of an aggressive rate cut by the Fed at the September meeting, while a “hotter” reading could undo much of the recent rally. The S&P 500 rallied 1.7% on Tuesday and bonds gained with yields falling (10-yr morning lows at 3.835% currently) after the producer price index (PPI) inflation report climbed by less than forecast — pointing to cooler inflation that will allow the Fed to cut interest rates. The producer price index for final demand increased 0.1% from a month earlier, versus 0.2% expected. Swaps priced in nearly 40 basis points of Fed rate cuts for September and a total reduction of roughly 105 basis points for 2024. Estimates for the consumer price index (CPI) inflation reading at 8:30 AM today, is calling for headline M/M to rise +0.2% (vs. prior -0.1%) and Y/Y for July to rise +3.0% (prior +3.0%), while the core CPI reading or Ex: Food & Energy M/M for July est. +0.2% (prior +0.1%) and Y/Y for July est. +3.2% (prior +3.3%). In Asian markets, The Nikkei Index added to Tuesday’s rally, rising 209 points to settle at 36,442, the Shanghai Index fell -17 points to 2,850, and the Hang Seng Index slipped -60 points to 17,113. In Europe, the German DAX is up 77 points to 17,889, while the FTSE 100 rises 30 points to 8,266. The euro tops 1.10 against the dollar ahead of the CPI, its highest level of the year. After snapping its 5-day win streak Tuesday, WTI crude futures down -0.4%, slipping below $78 per barrel at the lows.

• The Dow Jones Industrial Average rose 408.63 points, or 1.04%, to 39,765.64.
• The Nasdaq Composite jumped 407.00 points, or 2.43%, to 17,187.61.
• The Russell 2000 Index advanced 33.11 points, or 1.61% to 2,095.19.

• 8:30 AM ET                  Consumer Price Index (CPI) headline M/M for July…est. +0.2% (prior -0.1%)
• 8:30 AM ET                  Consumer Price Index (CPI) headline Y/Y for July…est. +3.0% (prior +3.0%)
• 8:30 AM ET CPI Ex: Food & Energy (core) M/M for July…est. +0.2% (prior +0.1%)
• 8:30 AM ET CPI Ex: Food & Energy (core) Y/Y for July…est. +3.2% (prior +3.3%)
• 10:30 AM ET                Weekly DOE Inventory Data
• 11:00 AM ET                Cleveland Fed CPI for July

• Earnings After the Close: ARAY ARQT BEAT CSCO CYCC DFLT EAST GOEV LITE LVLU NGS NVGS REKR SPIR VUZI

• JP Morgan Futures of Financials Forum, 8/13-8/14 (virtual)
• Oppenheimer 27th Annual Technology, Internet & Communications Conference, 8/12-8/14
• Wedbush PacGrow Healthcare Conference, 8/13-8/14, in New York
• China Industrial output, Retail Sales for July

• Brinker (EAT) reports Q4 EPS $1.61 vs. consensus $1.72; Q4 revenue $1.21B tops consensus $1.16B; Q4 comparable restaurant sales increased 13.5% vs. est. 7.6%, with an increase in comparable restaurant sales of 14.8% for Chili’s and 2.5% for Maggiano’s; Q4 System-wide comparable sales +11.9% vs. +6.3% y/y, vs. est. +7.45%.
• Chipotle (CMG) upgraded to Outperform from Neutral at Wedbush and raised tgt to $58 from $54.
• Flutter (FLUT) Q2 adjusted EBITDA +17% to $738M, average monthly players (amp) +17%; raises FY group ex-US revs to $7.85B-$8.15B, from $7.65B-$8.05B; raises FY U.S. revenue guidance to $6.05B-$6.35B (above prior $5.8B-$6.2B) and adjusted EBITDA to $680M-$800M (from prior $635M-$785M) to reflect strong performance in Q2, positive sports results benefit and continued momentum into Q3; reported $50M gross impact from tax changes in Illinois in h2, expected initial mitigation of $10M resulting in net cost of approx $40M.
• Peloton (PTON) and Google’s (GOOGL) Fitbit announced Tuesday a multi-year, multi-country partnership to offer a wide portfolio of Peloton classes to Fitbit Premium users, starting in early September.
• Southwest Airlines (LUV) shares edge higher after Hedge fund Elliott, which currently has a 7% stake in the airline, launches a boardroom battle, seeking to replace CEO Robert Jordan and Executive Chair Gary Kelly and nominates 10 candidates, incl former Virgin America CEO David Cush and former Air Canada CEO Robert Milton.

• Hexcel (HXL) downgraded to Sector Perform from Outperform at RBC Capital.
• L3Harris Technologies (LHX) downgraded to Sector Perform from Outperform at RBC Capital citing the company’s slower 2024 revenue growth relative to its defense peers for the downgrade.
• Mercury Systems (MRCY) Q4 adj EPS $0.23 vs est. $0.01, adj EBITDA $31.2Mm vs est. $32.4Mm on revs $248.6Mm vs est. $230.7Mm.

• Nu Holdings (NU) Q2 adjusted net profit of $563M vs. est. $451.5M; Q2 revs rose 65% y/y to $2.8B vs. est. $2.92B; Q2 return on equity of 28%; added 5.2M clients; bank hit a total of 104.5 million clients at the end of the quarter, with the vast majority of those in Brazil.
• XP Inc. (XP) Q2 EPS R$2.03 vs R$1.83 last year; Q2 revenue R$4.22B, up 19% y/y; Q2 active clients grew 15% y/y and 1% q/q, totaling 4.6 million in 2Q24; Q2 Client Assets totaled R$1.2 trillion, up 14% y/y and 2% q/q; said year-over-year growth was driven by R$113 billion net inflows and R$30 billion of market appreciation.

• Cardinal Health (CAH) Q4 adj EPS $1.84 vs. est. $1.73; Q4 revs rose 12% y/y to $59.87B vs. est. $58.54B; reported Q2 Global Medical Products and Distribution revenue $3.11B; Q2 cash from operating activities $2.08B vs. $858M y/y; raised its FY25 EPS outlook to $7.55-$7.70 from the preliminary outlook of at least $7.50 previously
• Mineralys Therapeutics (MLYS) Q2 EPS ($0.83) vs est. ($0.70); says Considering the current pace of enrollment in the Advance-HTN trial, which is approximately 90 percent enrolled, we anticipate announcing topline data during the first quarter of 2025.
• Zevra Therapeutics (ZVRA) Q2 EPS ($0.48) vs est. ($0.43) on revs $4.449Mm vs est. $4.356Mm; says FDA Advisory Committee Voted Favorably Data Support Arimoclomol as Effective Treatment for Patients With NPC.

• ByteDance, Baidu (BIDU), and China Mobile have been testing Huawei’s latest AI processor, called Ascend 910C, in recent weeks. Huawei told potential clients that the new chip is comparable to Nvidia’s H100, WSJ reports https://tinyurl.com/4tbs78wc
• Intapp Inc. (INTA) Q4 adj EPS $0.15 vs est. $0.12, adj op Inc $13.5Mm vs est. $11Mm; sees FY25 adj op Inc $56.5-60.5Mm vs est. $52.33Mm and adj EPS $0.59-0.63 vs est. $0.58.
• Ouster Inc. (OUST) Q2 EPS loss (-$0.53) vs. est. loss (-$0.62); Q2 revs $26.99M vs. consensus $27.03M; posted Q2 GAAP gross margin increasing to 34%; sees Q3 revs $27M-$29M vs. est. $30.39M and expanding gross margins to 35-40% and maintaining operating expenses at or below third quarter 2023 levels.