Early Look

Friday, November 17, 2023

Futures	Up/Down	%	Last
Dow	78.00	0.22%	35,097
S&P 500	7.25	0.17%	4,530
Nasdaq	-11.50	0.07%	15,886

 

 

Stock futures are looking higher following another sharp decline in Treasury yields overnight, as the 10-year drops below 4.4% and S&P futures (Spuz) +0.2% at 4,531 (moving above yesterday’s high of 4,529.50). Stocks finished mixed on Thursday as the Dow Jones industrial Average snapped its 4-day win streak behind weakness in CSCO and WMT following earnings, but the S&P 500 made it a 12^th gain in last 14 as strength in mega tech continue to keep broader markets higher (AAPL, GOOGL, MSFT, NVDA). Oil prices are rebounding after falling nearly 5% yesterday, headed for a fourth weekly loss after sinking into a bear market, in part as supply exceeds expectations. A light economic calendar upcoming for Friday with Housing Starts/Building Permits at 8:30 AM after a plethora on Thursday showed mixed to weaker results about the economy (included rising jobless claims, weaker-than-expected industrial output and slackening capacity utilization). So far this week, investors have interpreted weak economic data as bolstering their growing belief that the Fed has completed its rate tightening cycle and attention has turned to rate cuts in 2024. Friday will offer a breather at the end of an eventful week, with no earnings of note. In Asian markets, The Nikkei Index advanced 160 points to 33,585, the Shanghai Index rose 3 points to 3,054, and the Hang Seng Index fell -378 points to 17,454. In Europe, the German DAX is higher by 125 points to 15,910, while the FTSE 100 rises 60 points to 7,470.

 

Market Closing Prices Yesterday

·     The S&P 500 Index climbed 5.38 points, or 0.12%, to 4,508.26.

·     The Dow Jones Industrial Average fell -45.28 points, or 0.13%, to 34,945.93.

·     The Nasdaq Composite gained 9.84 points, or 0.07%, to 14,113.67.

·     The Russell 2000 Index declined -27.46 points, or 1.52% to 1,773.76.

 

Economic Calendar for Today

·     8:30 AM ET                  Housing Starts M/M for October…est. 1.35M

·     8:30 AM ET                  Building Permits M/M for October…est. 1.45M

·     8:45 AM ET                  Fed’s Collins Delivers Welcoming Remarks

·     9:45 AM ET                  Fed’s Goolsbee Speaks on Economy

·     10:00 AM ET                Fed’s Daly Speaks in Frankfurt

·     1:00 PM ET                   Baker Hughes Weekly rig count data

 

Earnings Calendar:

·     Earnings Before the Open: ATKR BJ BKE DXLG SPB TWST

 

Other Key Events:

·     Deutsche Bank Gaming, Lodging, Leisure Conference, 11/16-11/17, in Miami, FL

·     Oppenheimer Internet Bus Tour (virtual), 11/16-11/20

 

 

Macro	Up/Down	Last
Nymex	1.00	73.90
Brent	0.96	78.38
Gold	5.00	1,992.30
EUR/USD	0.0014	1.0866
JPY/USD	-1.23	149.47
10-Year Note	-0.047	4.399%

 

 

World News

·     U.S. Treasury capital flows (TIC) report showed a net -$67.4B in outflows in September after foreigners bought $131B (was $134.4B) in August. That was the first drop since the -$165.9BB plunge in May. Most of the weakness was registered in private holdings which were down -$62.1B, while the official account declined -$5.3B. There was a net -$1.7B decline in long-term assets in September after the $62.2B (was $63.5B) prior increase. China’s U.S. Treasury securities holdings $778B in Sept vs 805B in August.

·     Eurozone consumer inflation in the 20 countries using the euro decelerated to 2.9% year-on-year in October from 4.3% in September after prices rose 0.1% month-on-month.

·     Money-market fund assets rose to an all-time high for the second-straight week as interest rates north of 5% and volatility in fixed-income markets drove investors to havens.

 

Sector News Breakdown

Consumer

·     Gap Stores (GPS) Q3 adj EPS $0.59 vs. est. $0.19; Q3 revs $3.8B vs. est. $3.6B; Q3 comp store sales fell (-2%); Q3 Online sales decreased 8% y/y; sees Q4 net sales to be flat to slightly negative vs last year and backs FY23 revenue view down mid-single digit range; now expects to open net total of 15 to 20 Old Navy & Athleta stores in fiscal 2023.

·     Beazer Homes (BZH) Q4 EPS $1.80 vs est. $1.39, adj EBITDA $90.0Mm vs est. $72.92Mm, homebuilding revs $641.8Mm vs est. $627.29Mm, homebuilding gross margin 21.2%, net new orders 1,003.

·     ChargePoint (CHPT) named Rick Wilmer as its new President and CEO, effective November 16, 2023, and has joined the Board of Directors and CFO departs; targets positive adjusted EBITDA in Q4’24; slashes Q3 revenue view to $108M-$113M from $150M-$160M and below consensus $157.3M; expects to take a non-cash impairment charge of $42M during 3rd quarter.

·     Copart (CPRT) Q1 EPS $0.345 vs est. $0.33 on revs $1.02B vs est. $990.66Mm.

·     O Reilly Automotive (ORLY) announces share buyback program increased by $2.0B.

·     Ross Stores (ROST) Q3 EPS $1.33 vs est. $1.22 on revs $4.9B vs est. $4.836B, comps +5%; guides Q4comps +1-2%, EPS $1.56-1.62 vs est. $1.62; sees FY EPS $5.30-5.36 vs est. $5.25.

·     The Duckhorn Portfolio, Inc. (NAPA) said it entered into a definitive agreement to acquire Sonoma-Cutrer Vineyards, one of the largest luxury Chardonnay wineries in the U.S., from Brown-Forman Corp. (BFB) for approximately $400M.

 

Energy, Industrials and Materials

·     Compass Minerals (CMP) Q4 adj EPS ($0.06) vs est. ($0.04) on revs $233.6Mm vs est. $231.26Mm, adj EBITDA $33Mm vs est. $45.82Mm; guides FY24 salt volumes +3-5% on avg winter despite lower committed volumes.

·     ESCO Technologies (ESE) Q4 adj EPS $1.25 vs est. $1.22 on sales $273Mm vs est. $266.27Mm; guides Q1 adj EPS $0.64-0.70 vs est. $0.73, sees adj EPS grow sequentially through the year; sees FY24 net sales $1.02-1.04B vs est. $1.012B, adj EBITDA +10-12%, adj EBITDA mgn 19.4-19.8%, adj EPS $4.10-4.03 vs est. $4.21.

·     Haynes International (HAYN) Q4 EPS $1.02 vs est. $1.03 on revs $160.6Mm vs est. $161.59Mm, gr mgn 18.5%; guides FY24 for continued volume and revs growth, incremental improvement in gross margin and positive operating cash flow; sees Q1 revs and EPS up y/y but down q/q.

·     Woodward (WWD) Q4 adj EPS $1.33 vs. est. $1.31; Q4 sales rose 21% y/y to $777.1M, above est. $765.3M; Q4 adj Ebitda rose 49% y/y to $138.9M vs. est. $142.7M; sees FY EPS $4.70-$5.15 vs. est. $4.88 and FY sales $3.1B-$3.25B.

·     Solar stocks could be in for volatile day after California PUC votes 5-0 on policy change at meeting as they cut rooftop solar credits for rentals, schools (watch FSLR, SEDG, SPWR, ENPH, RUN).

 

Financials

·     Bitcoin dipped 5% below $36K on Thursday after running into a wall near its 18-month high price of $38K on Wednesday. The SEC delaying a decision about spot BTC ETFs could leave the market without a catalyst until early January.

 

Healthcare

·     Agilent (A) downgraded to Neutral from Buy at UBS and cut tgt to $125 from $163.

·     AstraZeneca’s (AZN) Truqap in combination with Faslodex has been approved in the US for the treatment of adult patients with hormone receptor-positive, HER2-negative locally advanced or metastatic breast cancer with one or more biomarker alterations.

 

Technology, Media & Telecom

·     Applied Materials (AMAT) Q4 adj EPS $2.12 vs est. $2.00 on sales $6.723B vs est. $6.516B, adj gr mgn 47.3%; guides Q1 sales $6.07-6.87B vs est. $6.374B and adj EPS $1.72-2.08 vs est. $1.84; late Thursday Reuters reported the company was under U.S. criminal investigation for potentially evading export curbs on China’s SMIC.

·     American Software (AMSWA) Q2 adj EPS $0.08 vs. est. $0.09; Q2 revs $25.7M vs. est. $28.27M; Q2 Subscription fees rose 8% y/y to $13.4M; cuts FY24 adjusted EBITDA view to $14.5M-$16M from $19M-$21M but boosted its FY24 revenue view to $100M-$104M from $85M-$88M.

·     Dolby Labs (DLB) Q4 adj EPS $0.65 vs est. $0.53 on revs $290.6Mm vs est. $290.2Mm, adj FCF $85Mm; sees Q1 revs $300-330Mm vs est. $353.67Mm, gr mgn 89-90%, adj op exp $180-190Mm, adj EPS $0.80-0.95 vs est. $1.08; sees FY revs $1.3B vs est. $1.361B, gr mgn approx 89%, adj op exp $740-750Mm, adj EPS $3.60-3.75 vs est. $3.77.

·     Globant (GLOB) Q3 adj EPS $1.48 vs. est. $1.17; Q3 revs $545.3M vs. est. $545.21M; guides both Q4 and FY23 earnings and revs mostly in-line with consensus.

·     Motorola Solutions (MSI) raised its quarterly dividend 11%, boosted stock buyback by $2B.

·     Roblox (RBLX) upgraded to Peer Perform from Underperform at Wolfe Research.