Early Look

Friday, September 15, 2023

Stocks looking to add to their weekly advances, with US futures pointing to a higher open as volatility could be increased today with quadruple witching option expiration and as the S&P, Russell and Nasdaq’s US indexes will rebalance on the close Friday. Quadruple witching is the expiration of four derivative contracts: stock index futures, stock index options, single stock options, and single stock futures (happens only 4x a year – Dec 15th will be the last of 2023). Goldman Sachs said they “estimate that over $3.4 trillion of notional options exposure will expire this Friday including $555 billion notional of single stock options.” The big news overnight was that thousands of UAW members went on strike at plants owned by GM, Ford (F) and Stellantis (STLA) after the union and the car companies failed to reach a new labor deal for about 146,000 U.S. factory workers by the deadline. In Asian markets, The Nikkei Index jumped 364 points to 33,533, the Shanghai Index fell -8 points to 3,117, and the Hang Seng Index rose 134 points to 18,182. In Europe, the German DAX is up 152 points to 15,957, while the FTSE 100 rises 55 points to 7,727. A very busy day of economic data in the US today with manufacturing, import prices, industrial production, and confidence data expected. Treasury yields look higher (10-yr 4.32%) but the dollar edges lower and oil extends recent gains with WTI holding above $90 per barrel.

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 37.74 points, or 0.84%, to 4,505.18.

·     The Dow Jones Industrial Average rose 331.98 points, or 0.96%, to 34,907.51.

·     The Nasdaq Composite gained 112.47 points, or 0.81%, to 13,926.05.

·     The Russell 2000 Index advanced 25.79 points, or 1.40% to 1,866.63.

Economic Calendar for Today

·     8:30 AM ET                  Empire Manufacturing for September…est. (-10.0)

·     8:30 AM ET                  Import Prices M/M for August…est. +0.3%

·     8:30 AM ET                  Export Prices M/M for August…est. +0.4%

·     9:15 AM ET                  Industrial Production M/M for August…est. +0.1%

·     9:15 AM ET                  Capacity Utilization M/M for August…est. 79.3%

·     10:00 AM ET                University of Michigan Confidence, Sept-P…est. 69.1

·     10:00 AM ET                UoM 1-year and 5-year inflation expectations, Sept-P

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

Sector News Breakdown

Consumer

·     Thousands of UAW members went on strike at plants owned by GM, Ford (F) and Stellantis (STLA). The walkouts, the first to hit all three Detroit automakers simultaneously, affected factories in Michigan, Ohio, and Missouri. They came after the union and the car companies failed to reach a new labor deal for about 146,000 U.S. factory workers by the deadline. UAW President Shawn Fain said more sites could go down if talks with the automakers stall. Also watch auto suppliers ADNT, BWA, VC, AXL, LEA, MGA, among others on the strike headlines.

·     Lennar Corp. (LEN) Q3 EPS $3.91 vs. est. $3.51; Q3 revs $8.73B vs. est. $8.45B; said Q3 Deliveries increased 8% to 18,559 homes, new orders increased 37% to 19,666 homes, and had backlog of 21,321 homes with a dollar value of $9.9B; sees Q4 new orders 16,200-17,200 and sees Q4 deliveries 21,500-22,500; says ‘market conditions remained constructive for new homebuilders.

·     Instacart (CART) raised the proposed price range for its planned initial public offering on Friday to $28 to $30 from $26 to $28 previously. The move was expected after the Wall Street Journal reported it would do so in the wake of Arm Holdings’ successful IPO on Thursday, citing people familiar with the matter Instacart is planning to offer 22 million shares to raise $660 million at the top of that range at a valuation of $8.3B. https://tinyurl.com/yeyme2ww

·     Copart (CPRT) Q4 adj EPS $0.34 vs. est. $0.32; Q4 revs $997.6M vs. est. $962.91M; reported Q4 gross profit rose 19.9% to $457.6M and net income rose 31.9% to $347.8M.

·     DoorDash (DASH) downgraded to Market Perform from Outperform at MoffettNathanson.

Energy, Industrials and Materials

·     Northrop Grumman (NOC) and Lockheed Martin (LMT) had sanctions imposed on them by China for providing weapons to Taiwan, the Chinese foreign ministry said on Friday. The sanctions are being enacted under China’s Anti-Foreign Sanctions Law, ministry spokesperson Mao Ning said.

·     Nucor (NUE) sees Q3 EPS $4.10-$4.20 vs. est. $4.65; said expect earnings for the steel mills segment to decline in Q3 vs. Q2 primarily due to lower pricing, and to a lesser extent, volumes; said largest impact on earnings is expected to occur at sheet mills.

Financials

·     Capital One Financial (COF) Aug auto net charge-offs rate 1.82% vs 1.71% in July; domestic credit card net charge-offs rate 4.55 % vs 4.48% in July; 30+ day performing delinquencies rate for auto 5.80% at aug end vs 5.63% at July end; the 30+ day performing delinquencies rate for domestic credit card 4.09% at aug end vs 3.95% at July end.

·     JPMorgan Chase & co (JPM) credit card charge-off rate 1.68% in aug versus 1.55% in July; the credit card delinquency rate 0.90% at aug end versus 0.89% at July end.

·     KeyCorp (KEY) upgraded to Overweight from Neutral at Piper Sandler.

·     Stifel Financial (SF) files automatic mixed securities shelf.

·     Truist Financial (TFC) downgraded to Neutral from Overweight at Piper Sandler.

Healthcare

·     Iovance Biotherapeutics (IOVA) said the FDA agreed to expedite the remaining review of Iovance’s lifileucel drug despite the agency’s constrained resources.

·     Pfizer Inc.’s (PFE) $43 billion takeover of Seagen Inc. (SGEN) faces a European Union review after the companies formally notified the bloc’s merger watchdog. The European Commission set Oct. 19 as a deadline to complete its initial probe, according to a filing on its website on Friday.

·     PTC Therapeutics (PTCT) said the European Medicines Agency’s Committee for Medicinal Products for Human Use has recommended against converting the conditional marketing authorization of the co’s Translarna treatment for nonsense mutation DMD to full approval.

·     Staar Surgical (STAA) downgraded to Hold from Buy at Benchmark.

Technology, Media & Telecom

·     Adobe Systems (ADBE) Q3 EPS $4.09 vs. est. $3.98; Q3 revs $4.89B vs. est. $4.87B; sees Q4 revs $4.98B-$5.03B vs. est. $5.0B and EPS $4.10-$4.15 vs est. $4.06; achieves record Q3 net new Digital Media ARR of $464M; Digital Media segment revenue was up 11% y/y to $3.59B, Creative revenue grew 11% y/y to $2.91B and Document Cloud revenue rose 13% y/y to $685M.

·     Taiwan Semiconductor (TSM) has told its major suppliers to delay the delivery of high-end chipmaking equipment, as it grows increasingly nervous about customer demand, Reuters reported citing two sources familiar with the matter said. Shares of ASML lower overnight.

·     Disney (DIS) anticipates falling tens of millions of subscribers short of its last publicly provided 2024 outlook for its Disney+ streaming service, Bloomberg reported late Thursday.

·     eGain (EGAN) Q4 EPS $0.11 vs. est. $0.05; Q4 revs $24.64M vs. est. $23.71M; sees FY24 EPS $0.33-$0.35 vs. est. $0.31 and sees FY24 revenue $96M-$98M vs. est. $105.25M.