Closing Recap

Monday, April 24, 2023

Index	Up/Down	%	Last
DJ Industrials	66.96	0.20%	33,875
S&P 500	3.61	0.09%	4,137
Nasdaq	-35.25	0.29%	12,037
Russell 2000	-2.63	0.15%	1,789

 

 

Monday marked another lackluster trading day for U.S. stocks, with technology, communications, and REITs lagging, while energy and defensive sectors (healthcare, staples, utilities) outperforming ahead of a massive week of earnings (about 35% of the S&P 500 to report this week). Some of the biggest companies in the world are expected to report the next 4-days (AMZN, AMGN, BA, CAT, CMCSA, CVX, GOOGL, META, MSFT, MCD, MRK, VZ, XOM among them), along with GDP and inflation data later this week (Thursday and Friday) and the FOMC policy meeting next week with the Fed is in their “blackout” period heading into the meeting. In a lackluster day of earnings, data, and macro headlines, the media sector was very active as Tucker Carlson leaves Fox News in wake of Dominion defamation settlement, Don Lemon said he has been fired from CNN, and NBCUniversal Chief Executive Jeff Shell is departing after an investigation into a complaint of inappropriate conduct.

 

Commodities, Currencies & Treasuries

·     Oil prices advanced on Monday, with WTI crude +$0.89 or 1.14% to settle at $78.76 per barrel and Brent crude rises $1.07 or 1.31% to settle at $82.73 per barrel. Gold prices rose $9.30 or 0.5% to settle at $1,999.80 an ounce as Yields and the dollar slip. No Fed speakers this week to move markets. Treasury yields dropped (01-yr down 5 bps to 3.51) and broad weakness in the U.S. dollar today following soft Dallas Fed Manufacturing data earlier, with the dollar index (DXY) down -0.45% around 101.38 as the euro climbs and hold above 110.

 

 

Macro	Up/Down	Last
WTI Crude	0.89	78.76
Brent	1.07	82.73
Gold	9.30	1,999.80
EUR/USD	0.0055	1.1042
JPY/USD	0.18	134.33
10-Year Note	-0.057	3.515%

 

 

Sector News Breakdown

Consumer

Retail, Consumer Staples & Restaurants:

·     In beverages: Dow component KO reports top and bottom-line beat with EPS $0.68 vs. est. $0.65 on sales $11.0B vs. est. $10.8B and organic revs +12% vs. est. +9.62%; sees FY adj. organic revs +7% to +8%, vs. est. +7.84% and Q2 EPS growth to include a 2% to 3% currency headwind. BUD put two executives on leave after uproar over transgender influencer, according to a company spokeswoman, the WSJ reported. Bank America noted, citing Beer Business Daily: For the week ending 4/15/23 Bud Light sales down -17% YoY. Coors Light and Miller Lite up +17.6% and +17.6%, respectively.

·     On home furnishing sector: BBBY filed for bankruptcy this weekend and said it plans to wind down the business and close all stores, ex a sale of remaining assets. Bank America noted the bankruptcy could be a modest tailwind to Wayfair/Overstock (W) revenues. Said Over the past five years US home furnishings market share has consolidated to the largest brands including AMZN, TGT, WMT .

·     In retail: LVMH’s market value surpassed $500 billion, becoming the first European company to reach that milestone, thanks to booming sales of luxury goods in China and a strengthening euro. The achievement comes less than two weeks after LVMH joined the ranks of the world’s 10 biggest companies, powered by a surge in first-quarter sales.

·     TD Cowen said they prefer EL set up vs. GOOS & SKIN in Specialty Retail as like EL’s setup as the rebound in Chinese domestic tourism seems better than expected. Mixed view on SKIN’s setup is based on 1Q23 limited upside and potential for management to reiterate FY23 guide. Our caution on GOOS’s setup is based on likely conservative FY24 guide, though optimistic on China.

 

Autos, Leisure, Gaming & Lodging:

·     In online travel: EXPE mentioned positively in Barron’s noting the travel booking company trades at roughly $14.4B value, but one analysis puts its Vrbo home rental business at $16B. TD Cowen previews quarter saying ABNB (PT $145) BKNG (PT $3000 from $2850) EXPE (PT $115) are online travel rankings in order and all out potential EXPE opportunity post-qtr. given 60%+ P/E discount vs. BKNG – said positive: Solid travel trends; strong ADR’s + FX help; revenue timing for 23E.

·     Cruise Lines (CCL, NCLH, RCL): Wells Fargo said their takeaways from CLIA’s Cruise360 Conference was that cruise demand remains strong, and pricing remains strong across the board, a theme they expect will be echoed in upcoming 1Q23 reports from NCLH/RCL.

·     In auto sector: TSLA has begun producing in Shanghai a version of the Model Y to be sold in Canada this year, the first time it will ship cars to North America from China, Reuters reported. Separately, TSLA raised its capital expenditure forecast for 2023 to $7B-$9B from prior $6B-$8B. RIVN shares slumped as Barron’s noted stock is making new lows, but notes analysts say sell shares anyway https://bit.ly/41U4sDP . Daimler Truck, the commercial truck company, issued an upside preannouncement for Q1, including total EBIT of EU1.162B (vs. the Street’s EU876MM).

·     Truist noted March U.S. Golf Equipment Retail Sales Resilient (MODG, GOLF), slipping 3% YoY but remained 30% above comparable 2019 levels. Said data was in-line with the prior month’s YoY rate of decline and came amid unfavorable weather in certain key golfing markets.

 

Energy, Industrials and Materials

·     In E&P sector: CHK initiated at Buy and $100 tgt at Truist as expect CHK to re-rate to a higher multiple closer to its large-cap peers through improving gas prices and investor sentiment, accretive acquisitions using the company’s pristine balance sheet. HPK was initiated with a Sell rating and $10 tgt at Truist driven largely due to lack of FCF given forecasted continued high CAPEX largely outweighing notable future production growth.

·     In solar: FSLR was downgraded to Sell from Neutral at Citigroup saying solar module supply-demand fundamentals indicate a challenging long-term outlook. ENPH ests adjusted at Guggenheim to reflect belief the company should see strong Q1 results and a solid Q2 outlook but believe consensus expectations for 2H 2023 are too high.

·     In pipelines & utilities: BMO Capital previews the sector as several bellwethers report earnings this week including NEE, NEP, CNP, CMS, DTE, SO and XEL. Said the combination of extreme mild weather, storms and significantly higher interest rates have hit companies disproportionally. RBC Capital said overall, their quarterly EPS estimates are down 4.1% compared to last year, though they remain 0.8% above consensus. TELL driftwood natural gas transmission pipeline project receives FERC certificate.

·     In Metals, Mining, Industrials: Thyssenkrupp shares down over -13% after CEO Merz is leaving – personnel committee of its supervisory board had entered talks with Merz at her request to terminate her contract by mutual agreement. CARR among the worst S&P performers after the WSJ reported the co is nearing a deal to acquire German industrial manufacturer Viessmann for more than $10 billion including debt. https://on.wsj.com/3mRQ68k

·     In Paper & Forest Products: RBC Capital upgraded CLW to Outperform on expectation of significantly lower pulp input costs over the next year in Paper/Forest space and ahead of quarter they like IFP, CFP, CAS & DBM and in the U.S., they like LPX, CLW, SLVM, PCH & WY.

·     In lithium: SQM rebounds after falling -18% Friday after Chile’s President said he would nationalize the country’s lithium industry; ALB, LTHM shares also rebound; spot prices for lithium carbonate in China have collapsed by two-thirds since hitting record highs in November of last year (ALB, LAC, LTHM, SQM among lithium related names)

·     In Aerospace & Defense: CRS tgt raised to $60 from $54 at TD Cowen saying investor awareness of CRS’s stock will grow as EBIT inflects over the next 3 Qs & the investor day (5/16) showcases the portfolio/earnings power. CRS, like ATI, HWM , is an upstream aero OE supplier in a demand upturn.

·     In Transports & Tankers: Baltic Dry Index Rises 0.86% to 1,517 in London, up for a Fourth Day. Other dry cargo indexes, expressed in USD/day: Capesize +1.57% to $16,526; Panamax -0.28% to $13,850; Supramax 58k tons +0.95% to $13,336.

 

Financials

Banks, Brokers, Asset Managers:

·     In Banks: FRC earnings tonight after the close with close eye on deposit withdrawals following the aftermath of the Silicon Valley and Signature Bank failures last month; PACW active as Bloomberg reported late Friday the bank was exploring the sale of its Lender Finance unit. Credit Suisse said that 61 billion Swiss francs ($68 billion) in assets left the bank in Q1 and that outflows were continuing, underscoring the challenge faced by UBS in rescuing them. WASH tumbles on earnings miss; ACGL new all-time highs in specialty P&C insurance sector highs.

·     Moody Investors Service downgraded 11 regional Banks on Friday saying strains in the way banks are managing their assets and liabilities are becoming “increasingly evident,” and are pressuring profitability – downgraded 11 regional banks, including USB, ZION, WAL, BOH, others.

·     In Analyst Research changes: SNV was upgraded to Buy at Janney Montgomery with $38 tgt; RF was downgraded to Hold from Buy at Truist to reflect lower fee income, higher expenses and provisioning; JPM & Citi added to Signature picks at Wells Fargo and remove USB & PNC downgraded to MP from OP at KNW Inc as margin is turning over more than we had anticipated and believe a material re-rate may be challenging near term.

 

Bitcoin, FinTech, Payments:

·     In payments/processors (V, MA, FIS, FISV, GPN), KeyBanc with earnings preview as raise Vis (V) tgt to $260 from $250, MA to $430 from $425 and GPN to $125 from $115 saying heading into earnings season, they see TPV trends as generally mixed. On the positive side, expect 1Q23 prints to track ahead of expectations supported by recent bank processor TPV % y/y growth that accelerated ~50 bps sequentially to ~10% and Key First Look Data from credit/debit cards.

·     In consumer finance: ALLY was upgraded to Neutral from Underperform at Bank America with a price target of $28, up from $24 saying net interest margin pressures are starting to show signs of abating, even before the Fed signals a change in policy.

 

REITs:

·     In Real Estate Services: OPAD both downgraded to Neutral from OP and lowering tgt prices to $0.50 and $1.70 respectively saying despite the current mkt is characterized by a dearth of existing home inventories, tightening credit standards for corporations, and consumer mortgage credit availability has plummeted.

·     Commercial Real Estate: ABR downgraded to Neutral from Overweight at JPMorgan following the recent default on a large multi-family development and believe the company may begin to build reserves more aggressively, weighing on BV over the next 12 to 24 months.

 

Healthcare

Biotech & Pharma:

·     BLUE submits FDA application for sickle cell disease gene therapy.

·     Weight-loss drugmakers NVO, LLY are lobbying Congress to grant them access to a monster payday for their blockbuster treatments: Medicare coverage – WSJ reported.

·     FHTX shares slide as the company is pausing enrollment of its FHD-609 study in synovial sarcoma and SMARCB1-delete tumors due to a grade 4 QTc prolongation event in a synovial sarcoma patient at the second highest dose.

·     JNJ is poised to begin a roadshow to pitch shares of its consumer healthcare business, the producer of household names such as Tylenol, in a test for an IPO market that has been in the doldrums for the past year – WSJ https://on.wsj.com/3AoRceE 

·     IDYA shares jumped after the company said its Phase II its study evaluating the combo of darovasertib and PFE’s cancer drug Xalkori in metastatic uveal melanoma showed a confirmed overall response rate of 45% and median progression-free survival of about 7-mo in patients (shares were upgraded from Hold to Buy at Stifel following data).

·     UBX announces positive results from long-term follow-up on mid-stage trial of UBX1325, a drug that treats diabetic macular edema.

·     FDA PDUFA Calendar target dates as well as Advisory meetings (ADCOMM). PDUFA target dates are dates by which the FDA aims to deliver their decision regarding an NDA or BLA filing. According to @BiopharmIQ: PDUFA dates for BIIB on 4/25, MCRB on 4/26, AZN, VRTX on 4/28, ASND, EBS on 4/30 to round out the month.

 

Healthcare Services & MedTech movers:

·     In Medical Devices: PHG shares rise as Q1 adj EPS EU0.22 vs. EU0.15 y/y on better sales EU4.17B and said it had set aside $631M related to lawsuits over its recall of respiratory devices. In the Diabetes sector: MDT upgraded to Overweight from Equal Weight at Wells Fargo saying they think MDT will benefit from an improvement in the underlying MedTech markets; the pipeline is improving; and valuation appears attractive. TNDM was downgraded to Market Perform from Outperform at Raymond James saying they believe MDT’s 780G approval (slightly earlier than expected) adds more risk to estimates.

 

Technology

Internet, Media & Telecom

·     In online services: GETY shares rallied after Trillium Capital proposed to acquire Getty Images Holding for $10 per share in cash. https://bit.ly/3HwToF9 . In Digital Advertising and Dating: TRMR both downgraded to Hold from buy at Stifel but say they expect upside to ests for most of our group, with top Buys into the print TTD, GOOGL, CRTO, and META. Said given top-down view remains unchanged, made only minor adjustments to PINS, CRTO, and DV models.

·     In media: FOXA and Tucker Carlson have agreed to part ways, the media company said in a statement, less than a week after Fox News and parent company Fox Corp settled a defamation lawsuit by Dominion Voting Systems for $787.5 million. Carlson’s last program was April 21, the company said in a statement. Meanwhile CNN anchor Don Lemon was fired from the network. CNBC International anchor Hadley Gamble accused former CMCSA’s NBCUniversal Chief Executive Jeff Shell of sexual harassment and sex discrimination in a complaint to the company, a lawyer for Ms. Gamble said Monday, the WSJ reported. DIS reiterated Overweight, raise tgt to $147 at Wells Fargo calling it their best oppty in media as think DIS will use D+, Hulu and ESPN DTC to reach >$100bn in revs and >$7 in EPS by FY25E.

 

Hardware & Software movers:

·     In the Artificial Intelligence (AI) space: AI was downgraded to Underperform from Peer Perform at Wolfe Research as points to company’s transition to a consumption model as a drag, and forecasts FY24 revenue growth of 11% (vs. est. around +20%). Wedbush said for AI space (MSFT they estimate this is an $800 billion market opportunity over the next decade as this AI Game of Thrones plays out across the enterprise and consumer tech space.

·     In software: ZM shares advanced midday after the Financial Times reported MSFT will stop forcing customers of its popular Office software to also have its Teams video conferencing and messaging app automatically installed on their devices, in a move designed to prevent an official antitrust probe by EU regulators; AYX was upgraded to Buy at Loop Capital based on recent positive checks that give US greater confidence that the company’s recent solid sales momentum over the past several quarters can be sustained.

 

Semiconductors:

·     In Memory: MU, Samsung, and Hynix shares slipped initially after the London’s Financial Times reported that U.S. officials have asked their counterparts in South Korea to urge chipmakers such as Samsung and SKY Hynix not to fill orders from China-based companies should a formal decision on Micron be handed down over the coming month.

·     Guidance: SMCI guides Q3 revs about $1.28B, below the Q3 mid-point of guidance of $1.47B due to key new component shortages for Supermicro’s transition to new generation product lines which have mostly been resolved.