Early Look

Wednesday, March 15, 2023

Futures	Up/Down	%	Last
Dow	-481.00	1.48%	31,921
S&P 500	-61.25	1.56%	3,892
Nasdaq	-168.50	1.36%	12,168

 

 

After ending Tuesday on a high note, investors walk into Wednesday morning trading with futures at their lows, tracking weakness in European as banks tumble sharply, led by Credit Suisse shares (falling to new lows) as their top investor rules out further support, raising contagion fears if things worsen. The weakness is extending to other banks in Europe and rolling into US futures trading. In Europe, the German DAX is down about -350 points or 2.3% to 14,883, while the FTSE 100 is down -150 points or 2% to 7,485. In Asian markets, The Nikkei Index edged higher 7 points to 27,229, the Shanghai Index rose 18 points to 3,263, and the Hang Seng Index jumped 291 points to 19,539. Next up today in the U.S. is the February Producer Price Index (PPI) inflation report at 8:30 AM, as expectations call for monthly headline PPI to rise +0.3% m/m (after +0.7% in Jan) and y/y prices to rise +5.2% (vs. last month +5.4%). On a core basis, or excluding food & energy, PPI in expected to rise +0.4% (vs. +0.5% in Jan) and rise +5.2% y/y (vs. +5.4% in Jan). Treasury yields are falling while the dollar jumps +0.7%.

 

A strong start to Tuesday’s trading was led by bank stocks, met with a midday pullback after the S&P 500 failed at the 200-day moving average (3,939 for SPX), only to rip in the final 45-minutes of trading, pushing stocks sharply higher and closing out a volatile day of trading. Following in-line February consumer price inflation data, traders anticipated that recent financial-sector distress after two major bank failures in the last few days would allow the Fed to hold back on rate hikes when they convene next week. The S&P 500 rose 64.80 points, or 1.7%, to close at 3920.56. The Dow Jones Industrial Average added 336.26 points, or 1.1%, ending at 32155.40, and the tech-centric Nasdaq Composite climbed 239.31 points, or 2.1%, to 11428.15. Treasury markets have been even more volatile, especially on the short-end of the curve, with the 2-year yield recovering over 20-bps yesterday after plunging roughly 100-bps from high to low the 3-days prior.

 

Market Closing Prices Yesterday

·     The S&P 500 Index spiked 64.80 points, or 1.68%, to 3,920.56.

·     The Dow Jones Industrial Average rose 336.26 points, or 1.06%, to 32,155.40.

·     The Nasdaq Composite jumped 239.91 points, or 2.15%, to 11,428.15.

·     The Russell 2000 Index advanced 32.59 points, or 1.87% to 1,776.89.

 

Economic Calendar for Today

·     7:00 AM ET           MBA Mortgage Applications Data

·     8:30 AM ET           Producer Price Index (PPI) headline M/M for Feb…est. +0.3% (prior +0.7%)

·     8:30 AM ET           Producer Price Index (PPI) headline Y/Y for February…est. +5.4% (prior +6.0%)

·     8:30 AM ET           PPI Ex: Food & Energy (core) M/M for February…est. +0.4% (prior +0.5%)

·     8:30 AM ET           PPI Ex: Food & Energy (core) Y/Y for February…est. +5.2% (prior +5.4%)

·     8:30 AM ET           Empire Fed manufacturing for March…est. (-8.0)

·     8:30 AM ET           Retail Sales M/M for February…est. (-0.3%)

·     8:30 AM ET           Retail Sales Ex; Autos M/M for February…est. (-0.1%)

·     10:00 AM ET         Business Inventories M/M for January…est. 0.0%

·     10:00 AM ET         NAHB Housing Market Index for March…est. 40

·     10:30 AM ET         Weekly DOE Inventory Data

·     4:00 PM ET            Long-term TIC Flows for January

 

Earnings Calendar:

·     Earnings Before the Open: AUD BW CIR CLMT EVGO HOOK

·     Earnings After the Close: ADBE AMRS ARRY BOXL CPRX EVCM FIVE GRWG HLTH MGNX PATH PD SENS

 

Other Key Events:

·     Barclay’s Global Healthcare Conference, 3/14-3/16, in Miami, FL

·     JMP Securities Life Sciences Conference, 3/15-3/16, in New York

·     Oppenheimer Annual Healthcare Conference (virtual), 3/13-3/15

·     Wolfe FinTech Forum, 3/14 in New York

 

 

Macro	Up/Down	Last
Nymex	-0.18	71.15
Brent	0.35	77.80
Gold	2.80	1,913.70
EUR/USD	-0.0097	1.0635
JPY/USD	-0.68	133.54
10-Year Note	-0.097	3.539%

 

 

World News

·     Bank of Japan (BoJ) January meeting minutes says Board members expect Japan inflation to slow H2 FY 2023 ‘; Members agreed Japan’s economy expected to recover; Members agreed Japan’s inflation likely to slow toward latter half of next fiscal year; One member said there is good chance inflation will remain elevated; One member said corporate pass-on of costs will likely peak out in latter half of this year.

·     Fed looking at tougher capital and liquidity requirements for midsize banks as well as steps to beef up annual stress tests, new rules could target firms with between $100 billion to $250 billion in assets – WSJ.

·     China Jan-Feb Retail Sales rise 3.5% y/y as expected, while Industrial Output rises 2.4% y/y vs 2.6% consensus; Fixed investment rises 5.5% y/y vs 4.5% consensus.

 

Sector News Breakdown

Consumer

·     Freshpet (FRPT) announces $350M convertible senior notes offering.

·     Guess Inc. (GES) 4Q adj EPS $1.74 vs est. $1.30 on revs $817.8Mm vs est. $772Mm; sees 1Q revs -7% to -6% vs est. +3.8%, op mgn -1.2% to -0.5%, adj EPS ($0.31)-($0.25) vs est. $0.52; guides FY revs +1-3% vs est. +3.9%, op mgn 8-9% and adj EPS $2.45-2.80 vs est. $3.41.

·     Lennar Corp. (LEN) Q1 adj EPS $2.12 vs. est. $1.55; Q1 revs rose 4.6% y/y to $6.49B vs. est. $5.99B; Net new orders fell -9.9% y/y to 14,194 but above views; qtrly deliveries increased 9% to 13,659 homes; qtr-end backlog decreased 29% to 19,403 homes; sees q2 new orders 16,000 – 17,000; said had $4.1 bln of homebuilding cash and cash equivalents.

·     Lulu’s Fashion Lounge (LVLU) Q4 EPS loss (-$0.14) vs. est. loss (-$0.11); Q4 revs $91M vs. est. $82M; lowers 2023 revs to $410M-$430M from prior $425M-$440M.

·     Vacasa Inc. (VCSA) Q4 EPS loss (-$0.70) vs. est. loss (-$0.38); Q4 revs $218.2M vs. est. $206.2M; Q4 Gross Booking Value $416M, up 10% y/y and Gross Booking Value per Night Sold rose 5% y/y to $363; sees Q1 revs $230M-$240M vs. est. $266.1M.

·     American Public Education (APEI) 4Q EPS ($0.35) vs est. ($0.17) on revs $152.4Mm vs est. $152.6Mm, adj EBITDA $15.4Mm vs est. $14.9Mm; guides 1Q revs $155.1-157.1Mm vs est. $160.7Mm, adj EBITDA $2.4-4.1Mm vs est. $19.7Mm, EPS ($0.51)-($0.44) vs est. $0.09.

 

Energy, Industrials and Materials

·     Saudi Arabia’s energy minister Prince Abdulaziz bin Salman told Energy Intelligence in an interview on Tuesday the OPEC+ alliance will stick to its production cuts agreed in October until the end of the year.

·     Russian oil and gas production is expected to decline in 2023, Energy Minister Nikolai Shulginov said on Wednesday, as Moscow comes under pressure from Western restrictions and a lack of European buyers. Moscow said in February it would cut output by 500,000 barrels per day in response to the price cap.

·     Atlas Air Worldwide (AAWW) rose after hours after disclosing that all of the regulatory conditions for its planned sale to Apollo Global (APO) were satisfied.

·     Custom truck One Source (CTOS) 4Q EPS $0.13 vs est. $0.15 on revs $486.7Mm vs est. $429.9Mm, adj EBITDA $124.5Mm vs est. $117.7Mm; guides FY23 revs $1.61-1.73B vs est. $1.65B, adj EBITDA $415-435Mm vs est. $427.5Mm.

·     Weekly API data shows a build of 1.155 million crude oil inventories; Gasoline inventories fell by 4.587 million barrels; Distillates fell by 2.886 million barrels

 

Financials

·     Credit Suisse (CS) shares fall to a new record low, was the chairman of its top shareholder, Saudi National Bank, ruled out investing any more into the bank in a Bloomberg interview. On Tuesday, Credit Suisse said that it had material weaknesses in financial controls.

·     Wells Fargo (WFC) files $9.5B mixed securities shelf

·     Capital One Financial (COF) reported charge-offs for February of 4.16% vs. 2.19% y/y; February Delinquencies 3.72% vs. 2.51% y/y; a sharp spike from prior month.

·     Discover Financial Services (DFS) February net charge-offs (NCOs) 3.4% vs. 2.02% y/y, while delinquencies 2.74% vs. 1.79% y/y; Loans at end-February $89.6b vs $73.1b y/y

·     SVB Financial (SIVB) confirmed that Silicon Valley Bank sold a portfolio of securities with a book value of $23.97 billion to Goldman Sachs (GS) last week before the bank was shut down by the FDIC. The sale of the portfolio to Goldman resulted in a net loss for Silicon Valley Bank of about $1.8 billion, according to an 8-K filing on Tuesday. https://bit.ly/3mUgcXN

·     Signature Bank of New York (SBNY) was being investigated by the U.S. Justice Department for its work with crypto clients before it was seized by regulators over the weekend, according to a new report from Bloomberg overnight.

 

Healthcare

·     GeneDx Holding (WGS) 4Q adj loss from operations ($72.7)Mm vs est. ($60.1)Mm on revs $61.4Mm vs est. $71Mm, adj gr mgn 41%; guides FY revs $205-220Mm vs est. $217.8Mm, expand gr mgn in 2023 and beyond; sees profitability in 2025.

 

Technology, Media & Telecom

·     Casa Systems (CASA) 4Q adj EPS $0.05 vs est. ($0.06) on revs $84.4Mm vs est. $83.1Mm, adj EBITDA $5.2Mm vs est. ($2.9Mm); guides FY revs $300-325Mm vs est. $335.6Mm and adj EBITDA positive vs est. ($4.2Mm).

·     SentinelOne (S) Q4 adj EPS loss (-$0.13) vs. est. loss (-$0.16); Q4 revs rose 92% y/y to $126.1M vs. est. $124.66M; sees Q1 revenue $137M vs. est. $136.85M and Q1 adjusted operating margin (41%); sees FY24 revenue $631M-$640M vs. est. $648.66M; Q4 Annualized recurring revenue (ARR) increased 88% to $548.7M and total customer count grew about 50% to over 10,000.

·     Smartsheet Inc. (SMAR) Q4 adj EPS $0.07 vs. est. loss (-$0.01); Q4 revs rose 35% y/y to $212.3M vs. est. $206.1M; sees Q1 adj EPS $0.08-$0.09 vs. est. loss (-$0.06) on revs $213M-$215M vs est. $217.1M; guides year EPS higher and revs below views; Q4 customers with annualized contract values (“ACV”) of $100,000 or more grew to 1,484, an increase of 45% y/y.