Early Look

Tuesday, August 15, 2023

U.S. stock futures are pushing lower following weakness in Asia after softer economic data out of China and as Treasury yields extend their recent advance as investors await key economic data and Fed speakers. China Central bank unexpectedly cuts rates to support its sputtering economy (details below). Treasury yields surged as the 10-year real yield climbed to levels not seen since 2009. Today the 10-year yield was up 4 basis points to 4.22% and the 2-year yield (US2Y) was flat at 4.97%. The moves come ahead of key economic data with July Retail Sales, Empire Manufacturing and Import/Export prices. In stock news, Dow component Home Depot (HD) reported better Q2 results but reaffirmed its yearly outlooks. In quarterly 13F filings showed: Warren Buffett’s Berkshire builds stakes in homebuilders DHI, NVR, LEN; Ray Dalio’s Bridgewater sells NFLX, HD while added names like T and MU; Dan Loeb’s Third Point LLC built new positions in UBER, AMZN and NVDA in latest quarter; Icahn boosts stake in IEP, SWX and exits stake in LNG among handful of filings. In Asian markets, The Nikkei Index rose 178 points to 32,238, the Shanghai Index was little changed down -2 points to 3,176. While the Hang Seng Index fell for a 3^rd day. In Europe, the German DAX is down -188 points or 1.18% to 15,717, while the FTSE 100 drops -122 points or 1.63% to 7,386.

Economic Calendar for Today

• 7:45 AM ET                  ICSC Weekly Retail Sales
• 8:30 AM ET                  Empire Manufacturing for August
• 8:30 AM ET                  Import/Export Prices M/M for July
• 8:30 AM ET                  Retail Sales M/M for July
• 8:30 AM ET                  Retail Sales Ex: Autos M/M for July
• 8:55 AM ET                  Johnson/Redbook Weekly Sales
• 10:00 AM ET                Business Inventories M/M for June
• 10:00 AM ET                NAHB Housing Market Index for Aug
• 11:00 AM ET                Fed’s Kashkari Speaks at API Conference
• 4:00 PM ET                   Net Long-term TIC Flows for June
• 4:30 PM ET                   API Weekly Inventory Data

Earnings Calendar:

• Earnings Before the Open: CAH DPSI EIC HD MOND MSGE SYPR WWR
• Earnings After the Close: A BPTH CAVA COHR HRB JKHY KTCC LRN MRCY USIO WYY

Other Key Events:

• Deutsche Bank 2023 Transportation Conference, 8/15-8/16, in New York
• Needham Annual MedTech & Diagnostics Conference (virtual) 8/14-8/15
• Stifel Biotech Executive Summer Summit, 8/14-8/16, in Newport, RI

Market Closing Prices Yesterday

• The S&P 500 Index jumped 25.67 points, or 0.58%, to 4,489.72.
• The Dow Jones Industrial Average rose 26.23 points, or 0.07%, to 35,307.63
• The Nasdaq Composite spiked 143.48 points, or 1.05%, to 13,788.33.
• The Russell 2000 Index declined -4.62 points, or 0.24% to 1,920.49.

World News

• The Peoples Bank of China (PBoC) cuts the 1Y MLF rate to 2.5% from 2.65%; cuts 7day RR rate to 1.8% from 1.9%; Injects 401b via 1Y MLF at 2.5%, net 1b injection.
• China July Retail Sales rise 2.5% y/y vs. 4.5% consensus; China Jan-July Retail Sales rise 7.3% y/y vs. 7.6% consensus; China July Industrial Output rises 3.7% y/y vs. 4.4% consensus; China Jan-July Industrial Output rises 3.8% y/y vs. 3.8% consensus.
• Russia hikes rates at emergency meeting after Ruble’s Crash. Policymakers lifted their benchmark to 12% from 8.5%, the second straight increase and the sharpest since the immediate aftermath of Russia’s invasion of Ukraine almost 18 months ago.
• Japan 2Q Preliminary GDP above expected; +1.5% q/q vs +0.8% consensus and Japan 2Q GDP Deflator below expected; +3.4% vs +3.8% consensus.
• German ZEW Economic Sentiment Index in Germany increased to -12.30 points in August from -14.70 points in July of 2023.
• Former Dallas Federal Reserve President Kaplan said he expects the FOMC will leave rates unchanged at September meeting; thinks an estimate that by the middle of next year, they’ll feel that it’s appropriate to cut rates isn’t unreasonable.

Sector News Breakdown

Consumer

• Home Depot (HD) Q2 EPS $4.65 vs. est. $4.46; Q2 total sales fell -2% y/y to $42.92B vs, est. $42.13B; Q2 comp sales -2% vs. +5.8% y/y, and vs. est. -4.51% and US comp sales fell (-2.0%) vs. est. (-3.6%); still sees 202 comparable sales -2% to -5% (est. -3.85%), overall sales down-2% to -5% and still sees operating margin 14% to 14.3%, EST 14.2%; unveils $15B share buyback.
• Canoo Inc. (GOEV) Q2 adj EPS ($0.14) vs et ($0.19) with adj EBITDA $(62.3)Mm vs est. $(64.48)Mm; guides 2H adj EBITDA $120-140Mm and CAPEX $70-100Mm.
• LL Flooring Board (LL) late yesterday said its Board of directors announces exploration of strategic alternatives to maximize shareholder value, including sale.
• Tesla (TSLA) launched standard variants for its Model S and X vehicles that are $10K cheaper than the regular versions.

Energy, Industrials and Materials

• Suncor Energy (SU) Q2 Non-GAAP EPS of C$0.96; said delivered adjusted funds from operations of C$2.7 billion, including a C$275 million before-tax restructuring charge related to the company’s workforce reduction plans; Q2 total upstream production of 741,900 barrels of oil equivalent per day (boe/d).

Financials

• Berkshire Hathaway (BRK/B) 13F recap – Highlights: added to its holdings in Capital One Financial Corp. (COF), decreased its stake in Activision Blizzard Inc. (ATVI), Apple Inc. (AAPL) was the biggest holding, representing 51% of disclosed assets (AAPL). Three new buys/disclosures in homebuilders: D.R. Horton (DHI) 5.97M shares, representing 1.8% of shares outstanding; NVR Inc. (NVR) 11,112 valued at $70.6M and Lennar Corp. (LEN) 152,572 valued at $17.2M.
• Capitol One Financial (COF) net charge-off rate rose to 4.48% from 2.36% y/y and the delinquency rate rose to 3,95% from 2.56% y/y.
• Discover Financial (DFS) CEO Roger Hochschild resigned; said credit card delinquency rate increased to 3.00% in July from 2.86% in June and now stands at higher level than the pre-pandemic rate of 2.37% in July 2019. The net charge-off rate, though, edged down to 3.77% in July 2023 from 3.80% in June, but was also higher than the July 2019 level of 3.23%.
• XP Inc. (XP) XP Q2 EPS R$1.83 vs est. $1.86 on revs R$3.549B vs est. $3.527B, gr mgn 67.7%.

Healthcare

• Arcellx (ACLX) said the FDA lifted a clinical hold on a T-cell therapy treatment for multiple myeloma; Arcellx, which is partnered with Gilead Sciences’ (GILD) Kite unit on CART-ddBCMA, said it plans to release phase 1 data from a phase 1 study later this year, and preliminary data from the phase 2 iMMagine-1 study in H2 2024.
• Heron Therapeutics (HRTX) Q2 EPS ($0.35) vs est. ($0.23) n revs $31.76Mm vs est. $31.70Mm; guides FY oncology care franchise net product sales $99-103Mm.
• OptimizeRx (OPRX) Q2 adj EPS ($0.01) vs est. ($0.02) on revs $13.82Mm vs est. $14.81Mm; guides FY revs mid-$50Mm to low-$60Mm range vs est. $68.82Mm and gross margin 55-59%.
• Nano Labs (NA) files $100M mixed securities shelf.

Technology, Media & Telecom

• Agile Software (AGIL) Q2 adj EPS ($0.13) vs est. ($0.09) on revs $38.325Mm vs est. $41.26Mm, gr margin 32.1%.
• Akamai (AKAM) files to sell $1B in Convertible Senior Notes due 2029.
• Getty Images (GETY) Q2 EPS ($0.01) vs est. $0.05 on revs $225.7Mm vs est. $235.64Mm; guides FY revs $920-935Mm vs est. $953.17Mm and adj EBITDA $292-303Mm vs est. $310.5Mm
• Intel (INTC) and Synopsys (SNPS) signed an agreement to expand their partnership to develop a portfolio of intellectual property, or IP, on Intel 3 and Intel 18A for Intel’s foundry customers.
• Navitas Semi (NVTS) Q2 adj op loss $9.6Mm vs est. op loss 12.14Mm on revs $18.1Mm vs est. $16.5Mm; guides Q3 revs $21Mm +/-2% vs est. $20.08Mm with gr mgn approx flat sequentially.
• SomaLogic (SLGC) Q2 EPS ($0.13) vs est. ($0.15) on revs $16.597Mm vs est. $19.82Mm, adj EBITDA $(28.9)Mm vs est. $(26.18)Mm.