Early Look

Thursday, October 19, 2023

Futures	Up/Down	%	Last
Dow	14.00	0.04%	33,820
S&P 500	4.25	0.10%	4,346
Nasdaq	39.50	0.26%	15,064

 

 

U.S. futures are looking flat to up slightly, with S&P futures up about 25-points off the overnight lows of 4,320.75, as soaring Treasury yields continue to wreak havoc on sentiment. The 10-year yield hit highs around 4.985% overnight (highest since 2007) while the 2-yr rises to 5.24% and the 30-yr 5.04%, raising fears of rates moving higher and impacting consumer spending. Long-term bond yields hit a fresh 16-year high Wednesday, weighing on stocks already pressured by the conflict in Gaza and corporate earnings results. Concerns about the Israel-Hamas war potentially expanding in the Middle East pushed oil prices higher. In Asian markets, The Nikkei Index tumbled -611 points to 31,430, the Shanghai Index dropped -53 points or 1.75% to 3,005, and the Hang Seng Index plunged -436 points or 2.46% to 17,295. In Europe, the German DAX is down about -15 points to 15,078, while the FTSE 100 slides -55 points to 7,531. In corporate news, Netflix (NFLX) shares jump over 13% following a quarterly beat and subscriber numbers that crushed consensus estimates. Taiwan Semi (TSM) rises following its beat in the semi chip sector and upbeat 2024 commentary, helping a beaten-up group this week. Tesla (TSLA) shares are down -5% after a miss on the top and bottom line and after Chief Executive Elon Musk tempered expectations for the company’s new Cybertruck. Musk said it would take immense work to reach volume production and be cash-flow positive at an affordable price. Markets brace for another full Fed speaker schedule, as well as more earnings before the flood gates open the next 3-weeks.

 

Economic Calendar for Today

·     8:30 AM ET                  Weekly Jobless Claims…est. 212K

·     8:30 AM ET                  Continuing Claims…est. 1.71M

·     8:30 AM ET                  Philly Fed Business Outlook for October…est. (-6.6)

·     10:00 AM ET                Existing Home Sales M/M for September…est. 3.89M

·     10:00 AM ET                Leading Index M/M for September…est. (-0.4%)

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

·     12:00 PM ET                Fed’s Powell Speaks at the Economic Club of New York

·     1:20 PM ET                   Fed’s Goolsbee Participates in Moderated Q&A

·     4:00 PM ET                   Fed’s Bostic Speaks at the New School

·     5:30 PM ET                   Fed’s Harker Speaks on Economic Outlook

·     7:00 PM ET                   Fed’s Logan Speaks in New York

 

Earnings Calendar:

·     Earnings Before the Open: AAL ALK AUB BKU BMI BX CBSH DCOM EWBC FCX FITB GPC HOMB IIIN IRDM KEY LNN MAN MMC PM POOL SNA SNV STBA T TCBI TFC UNP WBS WSO

·     Earnings After the Close: AMTB ASB CSX GBCI INDB ISRG KNX OCFC OZK SRCE TFIN WDFC

 

Market Closing Prices Yesterday

·     The S&P 500 Index tumbled -58.60 points, or 1.34%, to 4,314.60.

·     The Dow Jones Industrial Average fell -332.57 points, or 0.98%, to 33,665.08.

·     The Nasdaq Composite dropped -219.45 points, or 1.62%, to 13,314,30.

·     The Russell 2000 Index declined -37.24 points, or 2.11% to 1,728.81.

 

 

Macro	Up/Down	Last
Nymex	-1.11	87.21
Brent	-1.46	90.04
Gold	-5.80	1,962.50
EUR/USD	0.0013	1.0549
JPY/USD	-0.13	149.78
10-Year Note	+0.058	4.96%

 

 

World News

·     The bull-bear spread in the American Association of Individual Investors (AAII) weekly survey was -0.5 vs 3.5 last week. Bulls fall to 34.1% from 40%, Neutrals rise to 31.3% from 23.5%, Bears fall to 34.6% from 36.5%.

·     In September, China’s New Home Prices fell in 70 larger cities by 0.30% MoM (-0.29% in August). The number of cities that saw price falling rose from 54 from 52 in August.

·     Japan’s adjusted trade balance improved more than forecast, the adjusted deficit narrowing to JPY -434.1bn (est. JPY -553.7bn, prev. JY 555.7bn), on an unadjusted basis the trade balance rose to a small surplus of JPY 62.4bn (rev. JPY -930bn), the second time in surplus since early 2021.

·     US Treasury issuing 6-month license authorizing transactions in Venezuela’s oil and gas sectors; amended 2 licenses to remove secondary trading ban on certain Venezuelan sovereign bonds and PDVSA debt and equity (news pulling oil prices lower overnight).

 

Sector News Breakdown

Consumer

·     Tesla (TSLA) Q3 adj EPS $0.66 vs. est. $0.72; Q3 revs rose 9% y/y to $23.4B vs. est. $24.06B; Q3 gross margin 17.9%, compared with 25.1% a year earlier, when it had not yet begun the price cuts and vs. est. 18%; still sees FY production 1.8M vehicles, vs. est. 1.82M; said Cybertruck deliveries scheduled to begin on Nov. 30

·     Best Buy (BBY) upgraded to Buy from Neutral at Goldman Sachs.

·     Foot Locker (FL) downgraded to Sell from Neutral at Goldman Sachs.

·     Costco (COST) named Ron Vachris, its current president and chief operating officer, as its next CEO effective Jan. 1, replacing Craig Jelinek, who has served in the role since 2012.

·     Las Vegas Sands (LVS) Q3 adj EPS $0.55 in-line with ests and revs $2.8B vs est. $2.73B; authorize $2B share buyback plan; reports Q2 Macau Adjusted Property EBITDA of $631M and Marina Bay Sands Adjusted Property EBITDA of $491M.

·     Monarch Casino (MCRI) Q3 EPS $1.23 vs. est. $1.44; Q3 revs $132.97M vs. est. $134.8M; Q3 Adjusted EBITDA $49.2M and adjusted EBITDA margin of 37.0%.

 

Energy, Industrials and Materials

·     Alcoa Inc. (AA) Q3 EPS loss (-$1.14) vs. est. loss (-$1.02); Q3 revs $2.6B vs. est. $2.59B; continued to pursue cost reduction measures as initiated productivity programs across its operations in Australia to mitigate financial impacts of lower bauxite grade; expects 2023 total alumina shipments to remain between 12.7M-12.9M metric tons and aluminum shipments unchanged.

·     Alaska Airlines (ALK) Q3 EPS $1.83 vs. est. $1.86; Q3 revs $2.84B vs. est. $2.87B; cuts FY23 EPS view to $4.25-$4.75 from $5.50-$7.50 (est. $5.16) but boosted its FY23 revenue view to up 7%-8% from 8%-10%; sees FY23 CASM down 1%-2%; moderating capacity growth into q4 & q1, more in line with pre- pandemic seasonal capacity patterns while legacy & LCCs are accelerating.

·     Devon Energy (DVN) is considering major acquisition targets to gain scale in U.S. shale and has recently held talks with Marathon Oil (MRO) about a potential combination, according to a Bloomberg report overnight. https://tinyurl.com/ykp6chmy

·     Kinder Morgan (KMI) Q3 EPS $0.25 vs. est. $0.26; Q3 revs $3.91B vs. est. $4.71B; said expect to finish 2023 slightly below our plan on a full-year basis, due to lower-than-expected commodity prices, delayed RNG (renewable natural gas) projects and higher pipeline integrity expense.

·     Liberty Energy (LBRT) Q3 EPS $0.85 vs. est. $0.75; Q3 revs $1.22B vs. est. $1.12B; said expect Adjusted EBITDA will be at the high end of our guidance range of 30% to 40% growth over 2022.

·     PPG Industries (PPG) Q3 adj EPS $2.07 vs est. $1.94 on revs $4.644B vs est. $4.636B; sees Q4 total organic sales +/- LSD vs est. +2.25% and adj EPS $1.44-1.50 vs est. $1.48; says demand in Europe and China are at or near trough levels and will likely present growth opportunities in 2024, anticipate soft global macro conditions will persist in Q4.

·     Rollins’ (ROL) shares slide pre mkt after British peer Rentokil Initial’s shares drop after warning of weakness in its biggest market North America, citing “near-term market uncertainty”. RTO forecasts annual adj. operating margin of 18.5%-19% for North America vs previous guidance of about 19.5%; notes the region accounted for nearly half of its revenue in 2022.

·     Steel Dynamics (STLD) Q3 adj EPS $3.47 vs. est. $3.43; Q3 sales $4.59B vs. est. $4.51B; Strong cash flow from operations of $1.1 billion and record liquidity of $3.7 billion; said sequential decline in earnings was the result of lower realized flat rolled steel and steel fabrication pricing.

 

Financials

·     Discover Financial (DFS) Q3 EPS $2.59 vs. est. $3.19; Q3 total deposits rose 5.1% q/q to $104.02B, loans up 4.1% q/q to $122.7B; Q3 net interest margin (NIM) 11% vs. 11.1% q/q and net interest income (NII) +17% y/y to $3.32B; provision for credit losses $1.70B vs. $773M y/y.

·     Equifax (EFX) Q3 adj EPS $1.76 vs est. $1.77 on revs $1.319B vs est. $1.327B; expects weaker US mortgage market at current high interest rates to continue in Q4, expects FY mortgage credit inquiries to decline about 34%; reducing FY revs guide at midpoint to $5.256B vs est. $5.294B and adj EPS $6.67 vs est. $6.90.

·     Rexford Industrial (REXR) Q3 core FFO/shr $0.56 vs est. $0.56, consolidated NOI $156.1Mm +27%, 97.8% same-property portfolio occupancy.

·     SL Green Realty (SLG) Q3 FFO $1.27 vs. est. $1.28; Q3 revs $173.22M vs. est. $143.82M; Q3 same-store cash net operating income increased by 10.4%; Manhattan same-store office occupancy increased to 89.9% inclusive of leases signed but not yet commenced.

·     Synovus (SNV) Q3 adj EPS $0.84 vs. est. $0.86; Q3 revs $550.3M vs. est. $538.43M; Q3 provision for credit losses of $72.6M increased $33.7M sequentially and rose $47.0M vs. last year.

·     Zion Bancshares (ZION) Q3 EPS $1.13 vs est. $1.15, says while loan demand weakened in Q3, pleased with growth in customer deposits which increased 5% sequentially.

·     SoFi Technologies (SOFI) upgraded to Market Perform from Underperform at Keefe Bruyette.

 

Healthcare

·     Roche (RHHBY) shares slip after Q3 sales were in-line but said a slump in COVID-19 product sales and a strong Swiss franc overshadowed the launch of a drug against blindness; revenues from new drug Vabysmo came in better-than-expected at 656 million francs.

·     Ultragenyx (RARE) 8.33M share Secondary priced at $30.00.

 

Technology, Media & Telecom

·     Netflix (NFLX) Q3 EPS $3.73 vs est. $3.49 on revs $8.54B vs est. $8.536B, global streaming net paid adds 8.76 vs est. 6.139; sees Q4 paid net adds like Q3, sees Q4 global avg revs per membership roughly flat y/y, sees Q4 EPS $2.15 vs est. $2.15, sees Q4 revs $8.692 vs est. $8.77; plans to immediately raise prices for its basic plan in the U.S., which is no longer available to new customers, to $11.99 from $9.99 and up the cost of its premium plan to $22.99 from $19.99.

·     Taiwan Semi (TSM) Q3 EPS $1.29 vs. est. $1.17; Q3 revs $17.28B vs. est. $17.07B; sees Q4 revenue $18.8B-$19.6B vs. est. $18.65B; says gross profit margin is expected to be between 51.5% and 53.5% while operating profit margin is expected to be between 39.5% and 41.5%.

·     Crown Castle (CCI) Q3 adj FFO/shr $1.77 vs est. $1.80 on adj EBITDA $1.047B vs est. $1.064B; sees FY adj FFO/shr $7.54 vs est. $7.53, adj EBITDA $4.422B vs est. $4.413B and site rental revs $6.511B vs est. $7.011B.

·     Lam Research (LRCX) Q3 adj EPS $6.85 vs est. $6.12 on revs $3.48B vs est. $3.414B, adj gr mgn 47.9%; guides Q4 adj EPS $6.25-7.75 vs est. $6.79 and revs $3.4-4.0B vs est. $3.651B.

·     SAP AG (SAP) Q3 adj EPS EU1.45 and Ebit EU2.27N vs. est. EU2.159B; continues to expect FY EU 14.0-14.2B cloud revenue at constant currencies, up 23% to 24% at constant currencies; EU 27.0- -27.4B cloud and software revenue at constant currencies, up 6% to 8% at constant currencies.

·     VMWare (VMW) shares drop after a report that Beijing is weighing holding up U.S. chipmaker Broadcom’s (AVGO) $69 bln purchase of the cloud computing company. The Financial Times reported China’s State Administration of Market Regulation has not signed off on the deal and is likely to delay approving it after the Biden administration unveiled tougher chip controls. https://tinyurl.com/27pn2pee