Early Look

Thursday, July 18, 2024

A much better picture for U.S. stock futures after yesterday’s drubbing, with Nasdaq futures looking slightly higher after semi-chip making giant TSM raised its outlook for the year after quarterly results topped expectations. Yesterday, the S&P 500 index posted its biggest one-day decline in 2-months while the Nasdaq tanked over 500 points or -2.77% to settle just below the 18,000 level, led by a -6.8% tumble in the semiconductor index (SOX) in the face of potential escalation of U.S. trade conflicts with China amid comments by the White House, while remarks from Republican presidential nominee Donald Trump saying key production hub Taiwan should pay the U.S. for its defense deepened selling in chip stocks. Attention turns to central banks as the European Central Bank (ECB) is expected to meet this morning with markets widely expecting no chance to cut interest rates but look for and hints over a September possible cut. In Asian markets, The Nikkei Index tumbled -971 points or 2.36% to settle at 40,126, the Shanghai Index gained 14 points to 2,977, and the Hang Seng Index gained 39 points to 17,778. In Europe, the German DAX is up 30 points to 18,467, while the FTSE 100 is up 53 points to 8,240. Oil prices are little changed after WTI crude jumped Wednesday, snapping its 3-day losing streak; Bitcoin holding weekly gains around $64,600; gold prices edge higher a day after hitting fresh all-time highs before pulling back. Another busy day of earnings with Netflix (NFLX) after the bell. Will investors buy the dip following the aggressive stock market action on Wednesday remains the question. A few key economic data and points and Fed speakers on the calendar today (see below).

• The Dow Jones Industrial Average rose 243.60 points, or 0.59%, to 41,198.08.
• The Nasdaq Composite tumbled -512.42 points, or 2.77%, to 17,996.93.
• The Russell 2000 Index declined -24.00 points, or 1.06% to 2,239.67.

• 8:30 AM ET                  Weekly Jobless Claims…est. 230K
• 8:30 AM ET                  Continuing Claims…est. 1.855M
• 8:30 AM ET                  Philly Fed Index M/M for June…est. 2.9 (prior 1.3)
• 10:00 AM ET                Leading Index Change M/M for June…est. (-0.3%)
• 10:30 AM ET                Weekly EIA Natural Gas Inventory Data
• 1:45 PM ET                   Fed’s Logan Gives Opening Remarks
• 4:00 PM ET                   Net Long-term TIC Flows
• 6:05 PM ET                   Fed’s Daly Participates in Fireside Chat
• 7:15 PM ET                   Fed’s Bowman Gives Keynote Address

• Earnings After the Close: AIR GBCI INDB ISRG MCB NFLX OCFC PINE PPG RGP SCHL WAL

• Donald Trump will cap the four-day Republican National Convention in Milwaukee with his first public address since he survived an assassination attempt in Pennsylvania on Saturday, in which a bullet hit his ear.
• The bull-bear spread in the American Association of Individual Investors (AAII) weekly survey was 29.3 vs 27.5 last week. Bulls rise to 52.7% from 49.2%, Neutrals fall to 23.8% from 29.1%, Bears rise to 23.4% from 21.7%.

• Domino’s Pizza (DPZ) Q2 EPS $4.03 vs. est. $3.65 and revs $1.1B, in-line with consensus $1.1B; Q2 U.S. same-store sales growth of 4.8% in the quarter fell just short of expectations of growth of 4.91%; advertising revenue and franchise royalties and fees also helped second-quarter gross margin rise to 39.8% from 39.5% a year ago; maintained its long-term outlook of more than 7% annual global retail sales growth.
• D.R. Horton (DHI) Q3 EPS $4.10 vs. est. $3.77; Q3 revs $10B vs. est. $9.77B; announced new $4B stock repurchase program; Homes closed increased 5% to 24,155 homes and 6% in value to $9.2B; net sales orders increased 1% to 23,001 homes and were flat in value at $8.7B; guides year revs $36.8B-$37.2B vs. est. $36.97B.
• Leslie’s Inc. (LESL) guides prelim Q3 adj EPS $0.32-$0.33 below consensus $0.42 on revs $570M vs. consensus $615.41M; cuts FY24 adjusted EPS view to $0.03-$0.09 from $0.25-$0.33 (est. $0.28) and cuts FY24 revenue view to $1.32B-$1.35B from $1.41B-$1.47B and FY adjusted EBITDA view to $117M-$131M from $170M-$190M (watch POOL, SWIM, HAYW).
• Beyond Meat (BYND) has joined up with bondholders to initiate talks about a balance-sheet restructuring, The Wall Street Journal reported citing people familiar with the matter. Lawyers for the company are beginning debt discussions with bondholders owed $1.1B, according to the report https://tinyurl.com/5dvp4ydt

• Energy Transfer LP (ET) files for offering of up to 5.8M common units by the selling unitholders.
• Kinder Morgan (KMI) Q2 EPS $0.26 in-line with consensus; Q2 revenue came in at $3.57B below analysts’ estimate of $4.13B; project backlog at the end of the second quarter was $5.2 billion, up from $3.3 billion in the first quarter of 2024; budgeted 2024 DCF of $5 billion ($2.26 per share), and Adjusted EBITDA of $8.16 billion, both up 8% versus 2023.
• Steel Dynamics (STLD) Q2 EPS $2.72 vs. consensus $2.67; Q2 revenue $4.6B vs. consensus $4.43B; Q2 operating income for the company’s steel operations was $442M, lower than sequential results; Q2 average external product selling price for the company’s steel operations decreased $63 per ton sequentially; expect steel pricing to firm in 2H’24.
• Textron (TXT) Q2 adj EPS $1.54 vs. est. $1.49; Q2 revs $3.53B vs. est. $3.56B; the increase in revenue was driven by Textron’s Aviation segment, as revenues rose to $1.5B from $113M.
• United Airlines (UAL) Q2 adj EPS $4.14 vs. est. $3.93; Q2 revs $15B vs. est. $15.06B; Q2 capacity up 8.3% y/y, Q2 TRASM down 2.4%; CASM down 4.8%, and CASM-ex up 2.1%; guides Q3 adjusted EPS $2.75-$3.25 vs. consensus $3.44, while backs FY24 adjusted EPS view $9.00-$11.00 vs. est. $10.04; said it expects the industry’s pricing power to improve in mid-August as U.S. carriers are estimated to reduce their capacity by 300 basis points from a year ago.

• Bank OZK (OZK) Q2 EPS $1.52, in-line with consensus; Q2 deposits at end-period $29.94B; Provision for credit losses was $49.0M vs. $41.8M y/y while net charge-offs were only $11.8M and $8.7M, respectively, for those quarters; Book value per common share was $44.67 at June 30, 2024, a $5.16 increase y/y; net interest income FTE $391.0M and NIM 4.68%.
• Discover Financial (DFS) Q2 EPS $6.06 vs. consensus $3.07, revs $4.54B vs. est. $4.18B; Q2 Total loans ended the quarter at $127.6 billion, up 8% y/y; Q2 Net interest income (NII) rose 11% y/y to $347M driven by higher average receivables and net interest margin expansion; Q2 net interest margin (NIM) was 11.17%, up 11 bps y/y; Q2 credit loss provision $739M vs. $1.3B while net charge-off rate was 4.83%, up 161 basis points y/y.
• Equifax (EFX) Q2 adj EPS $1.82 vs. est. $1.73; Q2 revs $1.43B vs. est. $1.42B; guides Q3 adj EPS $1.75-$1.85 vs. consensus $2.01 and sees Q3 revenue $1.425B-$1.445B vs. consensus $1.45B; backs year EPS and revenue outlook.
• FNB Corp. (FNB) Q2 EPS $0.34 vs. est. $0.35; 2Q provision for credit losses $20.2m, up from prior qtr; Q2 total deposits increased $1.2 billion, or 3.5%; Net interest income (NII) totaled $315.9M, a decrease of $3.1M; Net interest margin (NIM) decreased 9 basis points to 3.09% from the prior quarter.
• Principal Financial Group Inc (PFG) said as of June 30, 2024, assets under management were $699.2B
• SL Green Realty (SLG) Q2 FFO per share $2.05 vs. est. $1.61; Q2 revs rose +0.8% y/y to $222.8M vs. est. $183.4M; Q2 net operating income $73.6M, down -24% y/y; forecasts FY FFO/shr $7.45 to $7.75, vs. prior forecast $7.35 to $7.65.
• Wintrust Financial (WTFC) Q2 EPS $2.32 vs. est. $2.42; Q2 revs $591.76M vs. est. $587.33M; Q2 tangible book value per share $72.01; Q2 CET1 capital ratio 9.5%; Q2 net charge-offs .28%.
• PayPal (PYPL) downgraded to Market Perform from Outperform at William Blair.
• Block (SQ) upgraded to Outperform from Market Perform at William Blair.

• Novartis (NVS) Q2 core EPS $1.97 tops consensus $1.89 and revs $12.51B above ests $12.37B; sales beat was driven by multiple sclerosis drug Kesimpta, spinal muscular atrophy drug Zolgensma, psoriasis treatment Cosentyx and blood-cancer drug Tasigna, said FY core operating income is expected to grow mid- to high teens in constant currency, up from a prior view of low double-digit to mid-teens, but maintains net sales view.

• Crown Castle (CCI) Q2 AFFO $1.62 vs. est. $1.65; Q2 revenue $1.63B vs. est. $1.62B; said remain on track to deliver our full year outlook for organic revenue growth of 4.5% in towers, 2% in fiber solutions, and double digits in small cells; backs FY24 AFFO view $6.91-$7.02 (est. $6.94) and backs FY24 site rental revenue view of $6.32B-$6.36B.
• Infosys (INFY) raises fy25 revenue growth guidance to 3%-4% after Q1 net income 63.7B rupees, est. 62.48B rupees.
• Nokia (NOK) reported a 32% drop in Q2 operating profit, citing weak demand for 5G telecom equipment, but said sales should recover towards the end of 2024 helped by North America orders; Q2 profit fell to 423 million euros ($462.38 million), from 619 million euros in the same quarter a year earlier; net sales fell 18% year-on-year.
• Taiwan Semiconductor (TSM) raised its full-year revenue forecast to growth of slight to above the mid-20% range in U.S. dollar terms, versus a previous prediction of an increase in the low to mid-20% range, citing surging demand for chips used in artificial intelligence, and rejected the idea of a joint venture factory in the United States.
• Warner Bros. Discovery (WBD) is discussing plans to split up, including splitting its digital streaming and studio businesses from its legacy television networks, Financial Times reported.