Early Look

Monday, October 30, 2023

U.S. futures rise across the board, looking to recover from last week’s declines where the Dow Jones Industrial Average was down -2.1%, the S&P 500 declined -2.5%, the Nasdaq dropped -2.6% and the Russell 2000 fell -2.77% (brings its monthly decline to -8.45%). The S&P 500 is now down 8 of the last 9 trading days. In the process of its recent market downturn, last week both the S&P 500 and Nasdaq fell 10% from their 2023 highs, defined as correction territory while the Russell 2000 has now dropped more than -20% from its highs, defined as “bear market territory.” Stocks sagged on Friday with US data and geopolitical tensions weighing on risk. In economic news, the Fed’s preferred measure of underlying inflation accelerated to a four-month high in September while consumer spending picked up, while the final October reading from the University of Michigan showed US near-term inflation expectations rose in October to a five-month high. The data comes ahead of the FOMC interest rate policy decision mid-week though no changes are expected but are likely to remain on the “hawkish” side. Earnings season is also about half-way through with some more behemoths this week including Apple (AAPL). More than two-thirds of stocks for companies in the S&P 500 index are trading below their 200-day moving averages, according to an analysis by Bloomberg Intelligence. Nearly 30% of the S&P 500 is expected to report this week overall, with Dow component McDonalds (MCD) later this morning. In Asian markets, The Nikkei Index fell -294 points to 30,696, the Shanghai Index edged higher 3 points to 3,021 and the Hang Seng Index gained 7 points to 17,406. In Europe, the German DAX is up 70 points to 14,760, while the FTSE 100 is up 50 points to 7,345. Gold surged above $2,000 an ounce for the first time since May as concern about the Gaza Strip outweighs the impact of a recent jump in bond yields.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -19.86 points, or 0.48%, to 4,117.37.

·     The Dow Jones Industrial Average fell -366.71 points, or 1.12%, to 32,417.59.

·     The Nasdaq Composite gained 47.41 points, or 0.38%, to 12,643.01.

·     The Russell 2000 Index declined -20.07 points, or 1.21% to 1,636.94.

Economic Calendar for Today

·     10:30 AM ET                Dallas Fed Manufacturing Index for October

Earnings Calendar:

·     Earnings Before the Open: ALX BGC CNA L MCD ON SJW SOFI WDC XPO

·     Earnings After the Close: ADUS AESI AGNC AKR AMKR ANET ARI AXNX BSM CACC CHGG CLW CRK CSR CVI CWK DENN FMC FWRD GAIA HLIT HMST HTLF INST KFRC KMPR KRG LEG LSCC LUNG MATX MDXG MPWR OGS PCH PEAK PETS PINS PLOW PSA PSMT RIG RMBS SPG THC TREX TTI TWO VFC VNO VRNS WELL WOLF ZI

Other Key Events:

·     Apple (AAPL) announces Oct. 30th product event dubbed “scary fast.”

·     China NBS Manufacturing PMI for October

World News

·     The German economy contracted a little less than expected in the third quarter of 2023, driven by lower household consumption, and revisions to previous quarters meant the economy avoided a recession previously reported last winter. Germany’s gross domestic product shrank 0.1% from July to September compared with the previous quarter.

·     Eurozone economic sentiment worsened again in October, marking six months of continual decline, as an aggregate measure of business and consumer confidence, fell to 93.3 in October from an upwardly revised 93.4 a month earlier, data from the European Commission showed.

Sector News Breakdown

Consumer

·     The United Auto Workers union has widened its strike against General Motors (GM) at its Spring Hill, Tenn., plant, the lone holdout among the three Detroit automakers, after reaching a tentative contract agreement with Jeep maker Stellantis (STLA). Its nearly 4,000 workers join about 18,000 already striking at GM factories in Texas, Michigan and Missouri and Tennessee.

·     China’s BYD Co Ltd posted record Q3 earnings, its highest ever for any quarter; Q3 net profit reached 10.41 billion yuan ($1.42 billion), am 82.2% increase y/y on a 38.5% rise in revenue to 162.2 billion yuan – was a smaller increase than Q2 when profit was up 145%.

·     Krispy Kreme (DNUT) downgraded to Hold from Buy at Truist.

Energy, Industrials, and materials

·     Chevron (CVX) upgraded to Buy from Neutral and tgt raised to $200 at Bank America.

·     Mueller Water Products Inc. (MWA) said it recently identified a cybersecurity incident that’s causing business operation delays and may adversely impact its financial results.

·     XPO, Inc (XPO) Q3 adj EPS $0.88 vs. est. $0.63; Q3 revs $1.98B vs. est. $1.93B; the uptick y/y was driven by higher tonnage per day and yield, excluding fuel, in the North American less-than-truckload business, which more than offset lower fuel surcharge revenue.

Financials

·     Realty Income Corporation (O), and Spirit Realty Capital, Inc. (SRC) have entered into a definitive merger agreement by which Realty Income will acquire Spirit in an all-stock transaction valued at an enterprise value of approximately $9.3 billion. Spirit shareholders will receive 0.762 newly issued Realty Income common shares for each Spirit common share they own.

·     Loews (L) Q3 EPS $1.12 on revs $3.93B vs. (9c)/$3.46B last year and book value per share, excluding AOCI, increased to $79.92; Revenue at the company’s Boardwalk pipeline business rose to $363M from $339M while the hotels unit posted revenue of $196M, up from $180M last year.

Healthcare

·     Coherus BioSciences (CHRS) shares rose 15% pre mkt after the FDA late Friday approved its combination therapy as a first line treatment for adults with a certain type of cancer called NPC. The approval was based on data from a mid- to late-stage study which showed significant improvement in duration of time where symptoms do not worsen vs. chemotherapy alone.

·     Miromatrix Medical Inc.’s (MIRO) agreed to be acquired by United Therapeutics Corp. (UTHR) for $3.25 per share in cash, or about $91 million which includes a potential milestone payment of $1.75 per share in cash https://tinyurl.com/mryt6vkv

Technology, Media & Telecom

·     Check Point (CHKP) Q3 adj EPS $2.07 vs. est. $2.02; Q3 revs rose 3.2% y/y to $596M vs. est. $591.51M; Products and licenses and security subscriptions revenue rose 4.2% to $362.5M and software updates and maintenance revenue was up 1.8% at $233.8M.

·     Comcast (CMCSA) subsidiary Universal’s “Five Nights at Freddy’s” opened to a record $78M, winning the weekend at the domestic box office despite debuting simultaneously on streaming service Peacock. This was the third-biggest horror opening of all time, behind New Line’s two “It” movies, and the biggest horror opening of the year to date.

·     Omnicom Group (OMC) agreed to acquire Flywheel Digital for about $835 million in cash, as the marketing communications company looks to expand its presence in the e-commerce and retail media segments.