Early Look

Thursday, March 23, 2023

Futures	Up/Down	%	Last
Dow	-10.00	0.03%	32,248
S&P 500	9.25	0.25%	3,980
Nasdaq	95.50	0.75%	12,802

 

 

U.S. futures are looking modestly higher, with the tech heavy Nasdaq up the most after a rough day on Wall Street Wednesday as the FOMC raised rates by 25 bps in line with most market expectations. However, it was conflicting reports about banks that seem to have shook investor confidence late day. Powell, in an afternoon press conference, said “all depositor savings” at U.S. banks are safe. That conflicted with what Treasury Secretary Janet Yellen told a Senate panel earlier. Yellen was asked about reports of officials studying ways to expand FDIC coverage to all deposits, beyond the standard $250,000 threshold. “This not something we have looked at, it’s not something that we’re considering,” she said. Those comments pushed banks lower as the KRE Regional bank ETF finished on the lows down -5.69% and the BKX -4.7% also at lows. Accompanying shifts in the policy statement by Fed Chairman Powell and economic projections erred to the dovish side as the Fed shifted its forward guidance to suggest that ‘some’ further tightening would be warranted vs the previous suggestion that ‘ongoing’ rate rises were in store. Second, there was no increase in the median ‘dot’ on 2023 rate projections which stayed steady at 5.1%. However December implied rate moved lower again to 4.25% from 4.43% this morning despite Powell’s comments that rate cuts this year are not in the baseline expectations. Times are confusing on Wall Street to say the least as stocks slipped yesterday in a bout of profit taking and uncertainty after a strong rally in recent days. The U.S. dollar falls for its 6^th straight session, on track for its longest losing streak in 2-1/2 years after the Federal Reserve sounded close to calling time on interest rate hikes at yesterday’s meeting (euro hit 7-week high of 1.093 before fading). In overnight stock news, Coinbase (COIN) shares tumbled after the crypto exchange disclosed a warning from regulators that it may have broken securities laws. Coinbase said it received a Wells notice from the Securities and Exchange Commission, which could lead to formal charges.

 

In Asian markets, The Nikkei Index fell -47 points to 27,419, the Shanghai Index gained 20 points to 3,286, and the Hang Seng Index jumped 458 points to 20,049. In Europe, the German DAX is down -120 points to 15,095, while the FTSE 100 is down -1.1% or 85 points to 7,481. The Bank of England may be under pressure to convince the market they have inflation under control after yesterday’s U.K. February CPI inflation rose more than expected and lifted annual inflation to 10.4% from 10.1% in January. A rate hike of 25 bps to 4.25% is expected this morning.

 

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -65.90 points, or 1.65%, to 3,936.97.

·     The Dow Jones Industrial Average slid -530.49 points, or 1.63%, to 32,030.11.

·     The Nasdaq Composite slumped -190.15 points, or 1.60%, to 11,669.96.

·     The Russell 2000 Index declined -50.38 points, or 2.83% to 1,727.36.

 

Economic Calendar for Today

·     8:30 AM ET          Weekly Jobless Claims…est. 197K

·     8:30 AM ET          Continuing Claims…est. 1.684M

·     8:30 AM ET          Current Account Balance for Q4…est. (-$213.2B)

·     10:00 AM ET         New Home Sales M/M for February…est. 650K

·     10:30 AM ET         Weekly EIA Natural Gas Inventory Data

·     11:00 AM ET         Kansas City Fed Manufacturing for March

 

Earnings Calendar:

·     Earnings Before the Open: ALOT AYRO CMC DRI FDS GIS NBY SCWX

·     Earnings After the Close: ALPN AMPX DRCT GOVX HROW HRTX JOAN OUST PHUN QRHC VTYX

 

Other Key Events:

·     Bank of England rate meeting this morning.

·     Sidoti Small-Cap Conference (virtual), 3/22-3/23

·     Stifel Annual LNG Bus Tour, 3/22-3/23, in Houston, TX

 

 

Macro	Up/Down	Last
Nymex	-0.85	70.05
Brent	-0.75	75.94
Gold	33.10	1,982.70
EUR/USD	0.0015	1.0869
JPY/USD	-0.21	131.24
10-Year Note	-0.029	3.472%

 

 

World News

·     Speaking at a Senate hearing yesterday, Treasury Sec Yellen said she had not considered or discussed anything to do with blanket insurance or guarantees of deposits; she did say that in the longer-term, there could be a reasoned discussion on whether the $250k limit could be lifted as part of systemic reforms; US bank shares sold off after the comments.

·     Bitcoin sank below $27K Wednesday after the US central bank raised interest rates a quarter point. FOMC remains “strongly committed” to return inflation to 2%, Fed Chair Powell said. Prices have stabilized, moving higher this morning.

·     Brazil’s central bank maintained its Selic benchmark interest rate at 13.75%; “The Committee emphasizes that it will persist until the disinflationary process consolidates and inflation expectations anchor around its targets, which have shown additional deterioration, especially at longer horizons.”

 

Sector News Breakdown

Consumer

·     Chewy Inc. (CHWY) 4Q adj EPS $0.16 vs est. ($0.11) on sales $2.71B vs est. $2.64B, adj EBITDA $92Mm vs est. $25.8Mm; sees 2024 net sales $11.1B-$11.3B vs. est. $11.14B.

·     KB Homes (KBH) authorizes $500M buyback; 1Q EPS $1.45 vs est. $1.15 on revs $1.38B vs est. $1.27B, housing adj gr mgn 21.8%, homes delivered -3%, avg selling price +2%; guides FY housing revs $5.2-5.9B, avg selling price $480-490K, housing gr mgn 20.5-21.5%, SG&A 10.0-11.0%, homebuilding op mgn 10.0-11.0%.

·     MillerKnoll Inc. (MLKN) 3Q adj EPS $0.54 vs est. $0.42 on sales $984.7Mm vs est. $997.4Mm; guides 4Q net sales $930-970Mm vs est. $1.03B and adj EPS $0.37-0.43 vs est. $0.59.

·     Steelcase (SCS) 4Q adj EPS $0.19 vs est. $0.11 on sales $801.7Mm vs est. $751.4Mm, adj EBIT $38.6Mm vs est. $33.3Mm; guides 1Q revs $710-735Mm vs est. $693.8Mm, gr mgn approx 29.5%, adj EPS ($0.05) vs est. $0.00; sees FY gr mgn 30.5-31.5%, increases op exp, adj EPS $0.55-0.75 vs est. $0.59.

 

Financials

·     Coinbase (COIN) said, in part, “Today, the SEC gave Coinbase a ‘Wells notice’ regarding an undefined portion of our listed digital assets, our staking service Coinbase Earn, Coinbase Prime, and Coinbase Wallet after a cursory investigation. We are prepared for this disappointing outcome. We are confident in the legality of our assets and services, and if needed, we welcome a legal process to provide the clarity we have been advocating for and to demonstrate that the SEC simply has not been fair or reasonable when it comes to its engagement on digital assets.

·     Pac West (PACW) said yesterday that customers had withdrawn 20% of their deposits since the start of the year; it had raised $1.4 billion in cash from a facility provided by the investment firm Atlas SP Partners; Borrows about $15 billion from various federal programs.

·     Raymond James (RJF) reported assets under administration of $1.20 trillion vs. $1.24 trillion y/y, or down -2.7%. Financial assets under management $190.6 billion, -0.5% y/y.

·     Carlyle Group (CG) files mixed securities shelf.

 

Healthcare

·     Biogen Inc. (BIIB) received a setback as an FDA advisory committee said the biotech drug maker’s proposed amyotrophic lateral sclerosis, or ALS, treatment did not show it was effective. The FDA’s Peripheral and Central Nervous System Drugs Advisory Committee voted 5-3 with one abstention that the study did not “provide convincing evidence of the effectiveness of tofersen” (also watch shares of IONS that partners with BIIB on tofersen).

·     Regeneron Pharmaceuticals Inc’s (REGN) and partner Sanofi (SNY) shares rise after saying their asthma drug Dupixent led to a 30% reduction in acute exacerbations of chronic obstructive pulmonary disease (COPD) in a late-stage study.

·     89bio (ETNB) announces $200M common stock offering.

·     Phreesia (PHR) Q4 EPS loss (-$0.72) vs. est. loss (-$0.51); Q4 revs $76.6M vs. est. $74.5M; sees FY24 revenue $353M-$356M vs. est. $357.8M and guides FY24 adj EBITDA between ($65M)-($60M) vs. ($92.5M) in FY23; names Balaji Gandhi as new CFO.

·     Veradigm Inc (MDRX) cut its 2023 revenue forecast to $615M-$635M from prior $625M-$640M and reaffirms adjusted EPS $0.80-$0.90; receives Nasdaq notice regarding delayed form 10-K.

·     LifeMD (LFMD) 4Q adj EPS $0.02 vs est. ($0.18) on revs $28.1Mm vs est. $33.6Mm; guides 1Q revs $31-32Mm vs est. $36.1Mm, adj EBITDA $1.0-1.5Mm vs est. $1.08Mm; sees FY revs $140-150Mm vs est. $157.1Mm and adj EBITDA $12-18Mm vs est. $8.9Mm.

 

Industrials & Materials

·     Worthington Industries (WOR) Q3 adj EPS $1.04 vs. est. $0.72; Q4 sales fell -20% y/y to $1.1B vs. et. $979.5M; Gross margin increased $0.7M from the prior year quarter to $143.8M; Operating income for Q3 was $30.1M, a decrease of $7.5M from the prior year quarter.

·     CSX (CSX) announced that it has reached an agreement with the International Brotherhood of Electrical Workers (IBEW) to provide paid sick leave to employees.

·     ArcelorMittal (MT) upgraded to Buy from Neutral at Bank America.

 

Technology, Media & Telecom

·     Apple Inc. (AAPL) is considering bidding for the streaming rights to a range of English football games, according to people familiar with the situation, a move that would step up its sports ambitions and increase competition with Amazon.com Inc.’s Prime Video – Bloomberg

·     Accenture (ACN) Q2 adjusted EPS $2.69 vs. est. $2.50; Q2 revs $15.8B vs. est. $15.59B; sees revenue +8% to +10%, vs. prior view +8% to +11%; Sees operating cash flow $8.7 billion to $9.2 billion, vs. prior $8.5B to $9.0B; raises FY23 EPS view to $11.41-$11.63 from $11.20-$11.52.