Early Look

Tuesday, February 21, 2023

Futures	Up/Down	%	Last
Dow	-265.00	0.78%	33,601
S&P 500	-32.25	0.80%	4,055
Nasdaq	-116.50	0.94%	12,274

 

 

U.S. stock futures decline following a week during which higher interest rates kept investor sentiment in check, as markets, which were closed Monday due to the Presidents Day, holiday remain volatile on rate fears and rising Treasury yields. The Dow fell 0.1% last week, marking its third straight weekly decline; the S&P 500 slid for a second consecutive week, losing 0.3% though the Nasdaq Composite bucked the trend, rising 0.6%. It seems every week is a big week these days for economic data after U.S. consumer/producer price and retail sales data this past week underscored persistent inflation and robust demand that risk prompting the Federal Reserve to raise interest rates even higher than previously expected. This week it’s the Fed’s favorite inflation gauge coming up on Friday (core PCE Price Index expected to rise +0.5% from the prior month), as well as 4q second estimate for GDP on Thursday and the FOMC Minutes from the February meeting on Wednesday. Expectations of a Fed pivot have all but evaporated as two Fed officials said last week, they supported a larger rate increase at the central bank’s February meeting than the quarter-percentage-point increase the Fed implemented. The 10-Year Treasury Yield rose 8.4 bps this week to 3.827%, now up four consecutive weeks and longest winning streak since the week ending Oct. 21, 2022, when the market rose for 12 straight weeks – Yield is up 45.3-bps from its 2023 closing low of 3.374% hit Wednesday, Jan. 18, 2023. In Asian markets, The Nikkei Index fell -58 points to 27,473, the Shanghai Index rose 16 points to 3,306, and the Hang Seng Index fell -357 points to 20,529. In Europe, the German DAX is lower by -95 points to 15,383, while the FTSE 100 is down about -20 points to 7,993. Few headlines this morning weighing on sentiment include Morgan Stanley strategist Mike Wilson out with another negative call (see details below) and Dow component Home Depot (HD) with lower guidance.

 

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -11.32 points, or 0.28%, to 4,079.09.

·     The Dow Jones Industrial Average rose 129.84 points, or 0.39%, to 33,826.69.

·     The Nasdaq Composite slipped -68.56 points, or 0.58%, to 11,787.27.

·     The Russell 2000 Index advanced 4.14 points, or 0.21% to 1,946.35.

 

Economic Calendar for Today

·     7:45 AM ET          ICSC Weekly Retail Sales

·     8:55 AM ET          Johnson/Redbook Weekly Sales

·     9:45 AM ET          S&P Global Manufacturing PMI, Flash-Feb…est. 47.1

·     9:45 AM ET          S&P Global Services PMI, Flash-Feb…est. 47.2

·     10:00 AM ET        Existing Home Sales M/M for Jan…est. 4.1M

·     1:00 PM ET           U.S. Treasury to sell $42B in 2-year notes.

·     4:30 PM ET           API Weekly Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: ARNC AVNS AWI BCRX CEQP DAN DFIN DRH ELAN ESPR ETRN EXPD FLR GLT HD HRMY HUN IR JBT JELD LECO LGIH LPX MIDD NPO NXRT TAP TCMD TPH TRN UFPI VAL WD WLK WLKP WMT

·     Earnings After the Close: AGR AHT AIV APLE BCC BKD BXC CHK COIN CSGP CVI CW CWH CZR ESI EXAS FANG FLS GMED HALO HCKT HVT IAA IOSP IVR JBGS KAR KEYS KW LAND LZB MATX MED MTDR NHI O PANW PEB PSA PUMP QTWO RIG SBAC SBRA SKT SPT STAA TOL TWNK UAN UNVR WK WSC WTTR XPER ZIP

 

Other Key Events:

·     Stephens West Coast Bank Trip, 2/21-2/23, in Denver

·     Truist Texas Bank Summit, 2/21-2/22, (virtual)

 

 

Macro	Up/Down	Last
Nymex	1.02	77.36
Brent	-0.08	83.99
Gold	-6.50	1,843.70
EUR/USD	-0.0025	1.0657
JPY/USD	0.29	134.52
10-Year Note	+0.053	3.881%

 

 

World News

·     Morgan Stanley strategist Mike Wilson said this weekend: the bear market rally that began in October from reasonable prices and low expectations has morphed into a speculative frenzy based on a Fed pause/pivot that isn’t coming. And, while the economic situation appears to have improved at the margin, this will not forestall the earnings recession that has a long way to go, based on our negative operating leverage scenario that is well under way.

·     US President Joe Biden made a surprise trip to Kyiv and met with his Ukrainian counterpart, Volodymyr Zelenskiy.

·     The RBA considered 25- and 50-basis-point moves its first interest-rate increase of 2023, but ultimately leaned toward a quarter-point, minutes of its February meeting showed.

 

Sector News Breakdown

Consumer

·     Home Depot (HD) Q4 EPS $3.30 vs. est. $3.28; Q4 revs $35.83B vs. est. $35.97B; Q4 comp sales decreased 0.3% vs. est. +0.55%; expects 2023 EPS to decline in the mid-single-digit percentage range, compared with estimates of a 0.4% increase to $16.72 and sees 2023 sales growth and comparable sales growth to be about flat compared with fiscal 2022 levels.

·     BorgWarner Inc (BWA) files mixed securities shelf.

·     Copart (CPRT) Q4 adj EPS $0.61 vs. est. $0.57; Q4 revs rose 10.3% to $956.72M above analysts expected $930.38M; Q2 EBIT $365.5M; Q2 operating expenses $591.2M.

·     PepsiCo Inc. (PEP), Coca-Cola Co. (KO) and Nestle SA (NSRGY) have pledged to use less plastic and more recycled materials or reusable systems, but virgin plastic production and waste only appear to be growing, Barron’s reported.

 

Energy, Industrials and Materials

·     Ingersoll Rand Inc. (IR) Q4 EPS $0.72 vs. est. $0.62; Q4 revs $1.2B vs. est. $1.54B; said it expects revenue to grow this year, boosted by strength in the first half of 2023 that is expected to fade as the year goes on; sees 2023 revs to grow 7%-9% or $6.33B-$6.45B vs. est. $6.24B.

·     Douglas Dynamics (PLOW) Q4 adj EPS $0.52 vs. est. $0.49; Q4 revs $159.8M vs. est. $164.6M; sees FY23 adj EPS $1.55-$2.45 vs. est. $2.25; sees FY 23 revenue $620M-$680M vs. est. $650.7M; sees FY23 adjusted EBITDA $85M-$115M.

·     Helix Energy (HLX) announces $200M share repurchase program; Q4 EPS $0.02 vs. est. $0.00; Q4 revs $287.82M vs. est. $253.54M.

·     Manitowoc (MTW) Q4 adj EPS $0.74 vs. est. $0.26; Q4 revs rose 24.9% y/y to $621.6M vs. est. $565.8M; sees FY23 $2B-$2.1B vs. est. $1.94B, FY23 adj EPS 35c-$1.15 vs. rest. $0.52 and FY23 adjusted EBITDA $130M-$160M.

·     Nordson Inc. (NDSN) Q1 adj EPS $1.95 vs. est. $1.97; Q1 revs rose 0.2% y/y to $610.48M vs. est. $623.8M; Q1 gross margin 53.9%; sees year revs up 0%-3% and EPS $8.75-$9.50 vs. est. $9.45.

·     Teck Resources (TECK) announced the reorganization of its business to separate Teck into two independent publicly listed companies: Teck Metals Corp. and Elk Valley Resources Ltd.

·     Williams Energy (WMB) Q4 adj EPS $0.55 vs. est. $0.49; Q1 revs fell -10% y/y to $2.93B vs. est. $2.97B; year adjusted EBITDA of $6.418B, up $783M or 14% y/y.

 

Financials

·     Coinbase Global Inc. (COIN): If regulators continue their coordinated crackdown on crypto, Coinbase and its peers could have much to lose, given there will be no crypto ecosystem left and “the whole thing falls apart like a house of cards,” Barron’s reports citing Mizuho analyst.

·     Next year, the number of bitcoins that can be mined per block will drop from 6.25 #bitcoin to 3.125, making it harder for miners to turn a profit. Unless, of course, $BTC price rises and/or network competition declines enough to compensate. – CoinDesk https://bit.ly/3YJrFYi

 

Healthcare

·     Abbott Laboratories (ABT) is facing another probe into its role in last year’s baby formula shortage that left millions of American families scrambling for vital nutrition products, Bloomberg reported late Friday.

·     Apellis Pharmaceuticals Inc. (APLS) shares rise 14% after late Friday, said the FDA approved syfovre to treat geographic atrophy secondary to age-related macular degeneration.

 

Technology, Media & Telecom

·     Meta Platforms Inc’s (META) said it was testing a subscription service, called Meta Verified, which will let users verify their Facebook and Instagram accounts using a government ID and secure a blue badge. The service, to be offered at $11.99/month if signed up through a web browser and $14.99/month for subscription through Apple’s iOS or Google’s Android.

·     WSJ reports Chinese internet giant Tencent Holdings (TCEHY) is in talks to sell Meta’s Quest 2 virtual reality headsets in China, days after Reuters exclusively reported that it was abandoning plans to create its own VR offerings https://on.wsj.com/3k9d5ud

·     JD.com Inc (JD) shares slide -8%; the company is launching a 10 bln yuan ($1.5 bln) subsidy campaign next month to compete against rival PDD Holdings Inc’s (PDD) budget shopping app Pinduoduo, South China Morning Post reports.

·     Microsoft (MSFT) signs pact to give Nintendo (NTDOY) access to Call of Duty for 10 years, seeking to allay concerns over its Activision takeover. – Bloomberg reports. https://bloom.bg/3xDyBdp