Closing Recap

Wednesday, April 26, 2023

Index	Up/Down	%	Last
DJ Industrials	-229.16	0.68%	33,301
S&P 500	-15.69	0.39%	4,054
Nasdaq	55.19	0.47%	11,854
Russell 2000	-18.92	1.08%	1,727

 

 

 

 

 

 

 

 

 

U.S. stocks finish mixed as technology outperformed all day behind strength in software (MSFT earnings boosted cloud stocks) and pockets of strength in semiconductors, but the other ten S&P sectors finished the day in negative territory with biggest declines in Utilities, Healthcare, Industrials, Energy, Financials, and Materials all down more than 1%, as markets bounce off lows in final minutes. Rising recession fears and renewed bank turmoil concerns amid plunging bank deposits (FRC tumbles again) has pushed stocks lower this week. Dow Transports down around 7% the last two days after UPS warning on Tuesday, followed by several weak trucking results this quarter so far (JBHT, KNX, ODFL).

 

The earnings parade continued today, with roughly 1/3 of S&P companies reporting this week (about 90 tomorrow), have been generally upbeat with mixed guidance but to say inflation is slowing seems premature when several consumer products related companies noted big price hikes in Q1, helping them beat results. In the last few days, CMG said it increased prices and store traffic also increased (pushed shares to all-time highs today rising over 13%), PEP products were 16% pricier last quarter, but it sold only 2% less of them, resulting in a 10.2% sales bump while KO raised prices 11%. In Consumer products, KMB and PG each raised prices 10% last quarter, bringing in more revenue. Higher sticker prices helped GM add almost $1,800 to its per-car profit in North America and grow its revenue.

 

Tonight, we get earnings from META, KLAC, ROKU, NOW, WOLF in tech, CHRW in truckers, MAT, ORLY in consumer, and PXD, EQT, HP in Energy. Investors also await a slew of data tomorrow with GDP, jobless claims, and Core PCE inflation (and then income, spending, and PCE Friday). Treasury yields rose while oil prices tumbled 3% to finish at lows. Market stats: Yesterday marked the first 1% plus drop in 22 trading days for the S&P 500, longest such streak since the 37 days ending Nov ’21. The sell in May period is right around the corner. Did you know that stocks have gained in May nine of the past 10 years? @charliebilello tweets “the US Money Supply has fallen 4% over the last 12 months, the largest year-over-year decline on record” (note: M2 data goes back to 1959).

 

Economic Data

·     Durables Goods Orders for March rose +3.2% above consensus +0.7% and vs Feb (-1.2%) while Durables ex-transportation orders +0.3% vs. est. (-0.2%) and vs Feb (-0.3%); March Durables ex-defense orders +3.5% vs Feb (-0.8%). Machinery orders +0.1%, electrical equipment +0.8%, defense aircraft/parts +10.4% and Durables shipments +1.1% vs Feb -0.8%.

·     Lots of key economic data tomorrow at 8:30 AM ET, with 1Q actual GDP estimate at +2%, personal consumption est. +4.1% (prior was +1%), with inflation data points: GDP Price Deflator est. +3.7% (vs. prior 3.95) and Core PCE prices to rise +4.7% (up from prior +4.4%). Also Weekly Jobless Claims est. at 248K.

 

Commodities, Currencies & Treasuries

·     Oil prices tumble as WTI crude falls -$2.77 or 3.59% to settle at $74.30 per barrel (near lows of the day) giving back all the gains made from the previous session, falling from a high of $79.07 the prior day. Prices fell on a stronger dollar and weaker economic data. Prices moved lower despite strong API and EIA weekly inventory data, which showed larger drawdowns.

·     U.S. inventories of crude oil, gasoline and diesel fuel all declined last week while crude production retreated slightly, according to weekly EIA data. Crude-oil stockpiles dropped by -5.1Mm barrels last week, more than the -700K draw expected despite a 1-million-barrel transfer of crude oil last week from the SPR to the commercial side. Cushing stockpiles increased by 319,000 barrels, gasoline stockpiles fell by -2.4Mm barrels, and Distillate stocks, which are mostly diesel fuel, fell by -577K barrels, and are now about 12% below the five-year average. Nymex Natural Gas Fell 8.24% to Settle at $2.1170.

·     Gold prices fell -$8.50 to settle at $1,996 an ounce despite a drop in the dollar. The U.S. dollar weakened today as the Euro hit a 52-week high above 1.108 as the Buck now reversed all its gains from the recent Fed tightening cycle. The dollar index fell -0.4% to 101.45. The Fed is expected to raise rates 25-bps next week for calls to pause in the following meeting.

·     Treasury yields move higher with the 2-yr up 10-bps back to around 4% and the 10-yr benchmark up around 3.45%. GDP and jobless claims data tomorrow and PCE inflation data tomorrow and Friday as well. The U.S. Treasury sold $43 bln 5-year notes at high yield 3.500%, below the 3.506% when issued prior as bid-to-cover ratio 2.54 (vs. 2.48 last auction) and primary dealers take 13.64% of U.S. 5-year notes sale, direct 17.29% and indirect 69.07%.

 

 

Macro	Up/Down	Last
WTI Crude	-2.77	74.30
Brent	-3.08	77.69
Gold	-8.50	1,996.00
EUR/USD	0.0061	1.1033
JPY/USD	0.05	133.76
10-Year Note	0.044	3.442%

 

 

Sector News Breakdown

Consumer

Autos:

·     In auto dealers: GPI Q1 top and bottom-line beat as EPS $10.93/$4.13B vs es.t $9.88/$3.92B on in-line margins 17.6% as NV units sold 39,649, +7.9% y/y and NV GP per retail unit $4,710, (14.0%) y/y – same store $4,659, (15.2%) y/y; PAG Q1 EPS $4.31 vs est. $4.09 and revs $7.34B vs consensus $7.02B; EBITDA $461.6M vs est. $388.3M; GM 17.1% vs consensus 16.6%.

·     In EV sector: FSR said it has received clearance from regulators in Europe to start selling its Ocean SUV; expects deliveries of the Fisker Ocean One launch edition to begin May 5 in Europe. TSLA was downgraded to Hold from Buy at Jefferies with $185 tgt saying a strategy of growth over margin has its logic and resets expectations. STLA said to offer buyouts to hourly, salaried workers, the WSJ reported.

 

Retail, Consumer Staples & Restaurants:

·     In restaurants: CMG Q1 earnings and sales topped views while Q1 comp sales jumped 11% beating the 8.6% estimate and guided Q2 and full-year comparable restaurant sales growth in the mid to high-single digit range. MCD tgt raised to $330 from $315 at Wedbush saying market share gains are accelerating as they reiterate OP rating.

 

Leisure, Gaming & Lodging:

·     In casinos & gaming: BYD beat EBITDAR expectations by 7% as combined casino segments put top- and bottom-line growth, exceeding Street estimates in the quarter as visitation was nearly back to pre-pandemic levels in Las Vegas during 1Q23. CHDN announces 2 for 1 stock split.

·     In lodging: HLT Q1 results topped estimates and boosted its full-year adj profit forecast to $5.68-$5.88 vs prior forecast of $5.42-$5.68 and raises its annual revenue per available room (RevPAR) forecast to 8%-11% vs prior forecast of 4%-8%.

·     In leisure & services: William Blair reducing estimates for HAYW and LESL following POOL’s 1Q results that were impacted by poor weather out west and from lower customer early-buy activity (2% impact).

 

Energy

·     In solar: ENPH shares slid as weaker Q2 revenue guidance ($700M-$750M vs. est. $773M) overshadowed a Q1 top and bottom-line beat (was downgraded to Underperform at Bank America following results).

·     In E&P sector: HES reported Q1 EPS beat at $1.30 vs. est. $1.06 and raises production outlook to 365K-375K Boepd from prior view of 355K-365K and announces a new oil discovery at the Lancetfish-1 well in the Stabroek block offshore Guyana; MTDR reported across-the-board beats as beat on capex and price realizations as well/reported adj EPS/EBITDA $1.50/$365m compared to consensus of $1.29/$353m; In services, WFRD 1Q23 EBITDA Beats Street by 20%, Raises EBITDA and FCF Outlook

 

Financials

Banks, Brokers, Asset Managers:

·     In banks: after a tumultuous Tuesday after deposits plunged for FRC sending shares down about -49%, PACW overnight posted Q1 EPS beat saying total deposits +$1.1B to $28.2B at 3/31 vs co’s most recent update of $27.1B on 3/20/23 and said expect total assets will be closer to $35B w/in next few months. HMST downgraded to neutral as funding pressures intensify at Wedbush noting the bank reported a challenging quarter driven by lower-than-expected NII, down -11%; in earnings: PB 1Q23 EPS and PPNR came roughly in line with expectations.

 

Bitcoin, FinTech, Payments:

·     In payments: Dow component Visa (V) earnings top expectations as payment volume rises 10% on travel rebound, while cross-border volume excluding Europe increased 32% and said it saw 12% growth in processed transactions.

·     Bitcoin prices jumped as high as 7% to around $30K after spending time around $27,500 the day prior and Ethereum up over $1,900, lifting share prices early for likes of crypto exchange COIN crypto miners RIOT, MARA, HUT, and Bitcoin investor MSTR.

 

Insurance & Services:

·     In Real Estate Services: CSGP Q1 non-GAAP EPS of $0.29 (consensus $0.25), adj. EBITDA of $122.9M (consensus $115.1M), total revenue of $584.4M, up 13% y/y (consensus $579.5M), and company-wide net sales bookings of ~$80M, up 17% y/y

·     In Insurance: CB reported operating EPS of $4.41, falling slightly shy of consensus of $4.46.

·     In employment services: ADP Q1 EPS of $2.52 beats by 7c on in-line revs of $4.9B and guides FY Adj EPS +16% To +17% and sees FY revs +8% To +9%

·     In exchanges/operators: CME Q1 beat on higher net revenues and higher equity income partially offset by higher operating expenses; MKTX beat on higher revs, partially offset by higher non-operating expenses.

·     In professional services: TRU upgraded from Hold to Buy at Needham after 1Q results came in above their expectations, as solid core performance and additional debt prepayment helped offset pockets of weakness in areas such as unsecured consumer lending.

 

Healthcare

Healthcare Services & MedTech movers:

·     In Medical Devices: BSX Q1 EPS and sales beat and Organic Growth +14% vs. 7% consensus, with breadth of strength across categories while sees Q2 and FY23 earnings in line with analysts’ expectations; TMO reported 1Q results with revs of $10.71B and EPS of $5.03 (mostly in-line w ests while at the segment level, focus on the Life Science Solutions division which missed. MDT confirmed the FDA had lifted the warning letter its Northridge facility had previously received, with feedback suggesting this was likely given recent 780G approval; DHR downgraded at Bofa.

·     In Services & Hospital operators: UHS with better Q1 results (following THC beat yesterday), as 1Q EBITDA of $421M beat Street by $23M or 5.7%, driven by both Acute Care and Behavioral. EHTH, SLQT, GOCO tumbled a second day amid share declines in healthcare insurance; GDRX shares fell as announced a new interim CEO as part of a larger shuffle of top leadership.

·     In managed care: HUM Q1 EPS above expectations, driven by a much better benefit ratio of 85.5% vs 86.7% est. and raises FY23 adj EPS to at least $28.25 vs at least $28.00 previously. Q1 EPS $9.38 vs $9.27 est. Q1 Revenue $26.74B vs $26.43B est. Affirms strong 2023 individual Medicare Advantage membership growth of “at least 775,000”.

 

Industrials & Materials

·     In industrials: CARR to buy Viessmann Group’s unit that makes heating boilers and heat pumps in a $13.17 bln cash-and-stock deal; WAB Q1 driven by stronger topline and strength in both segments with outlook reiterated; OTIS Q1 beat driven by stronger service segment performance with guide raised at low end but still brackets consensus; DOV slight operating beat with outlook largely reiterated; ALLE beat and raise driven by Americas segment; WNC raises 2023 EPS view to $4.00-$4.50 from $2.70-$3.00 after Q1 beat while sales rose vs. year ago, but missed ests.

·     In Transports: a day after the Dow Jones Transports Index fell -3.6%, worst day since September after lower guide and miss by package delivery giant UPS, group rebounds slightly; in rails, NSC posts Q1 EPS beat of $3.32 vs. est. $3.15 on in-line revs. Ryder (R) Q1 EPS of $2.81 missed the $2.96 estimate while revs rose 3% y/y to $2.952B missing the $2.985B estimate. In trucking, ODFL Q1 EPS and revs missed estimates and lowers year capex to $700M from $800M. TFII also tumbles on earnings and revenue miss for Q1. North American freight-railroad traffic falls 3% for the week ended Saturday, dragged down by another double-digit drop in intermodal shipments. Carloads rise 5% on 12 reporting US, Canadian and Mexican railroads, but the volume of intermodal units slides 10.3%, data from the Association of American Railroads said.

·     In Aerospace & Defense: Dow component BA reports wider-than-expected Q1 EPS loss (-$1.27) vs est. loss (-$0.98) as revs rose 28% y/y to $17.9B top consensus of $17.4B and backs 737 production and FY23 cash flow outlook; Q1 FCF was negative -$786M, vs. est. -$1.9B and said to ramp up 737 production; reported Q1 commercial airplanes operating loss -$615M; in defense, GD Q1 EPS $2.64 tops $2.59 estimate as revs rise 5.2% y/y to $9.88B vs. est. $9.34B as backlog rises 3% y/y; FCF fell -29% y/y to $1.3B but above ests $780.1M; AVAV awarded $64.6 million contract by U.S. Army for switchblade 300 loitering missile systems.

 

Materials, Metals & Mining

·     In containers & Packaging: OI shares rally as reports Q1 EPS $1.29 vs. est. $0.85; Q1 revs rose to $1.8B vs. est. $1.77B; sees Q2 EPS $0.80-$0.85 vs. est. $0.76; Increased FY23 Guidance for adj EPS, free cash flow, adj free cash flow. SLGN shares slid as Q1 revs of $1.41B missed the $1.45B estimate and were down from the prior year period.

·     In chemicals: SMG downgraded from Overweight to Equal Weight at Barclay’s and cut tgt to $70 from $105 saying Nielsen data for US consumer is very weak and below what SMG has assumed in guidance.

·     In Metals & Mining: TECK said it has withdrawn its proposed restructuring plan of a shareholder vote on the proposal.

 

Technology

Internet, Media & Telecom

·     In Internet: GOOGL Q1 EPS and revs topped estimates ($1.17/$69.79B vs. $1.07/$68.9B) as demand rose for cloud services and ad sales held up better than expected, while announced a $70B stock buyback while advertising revs disappoint at $54.54B vs. $54.6B y/y, while Cloud revenue grew 28% y/y, in-line with street estimates. Earnings tonight from META, PINS. GETY rebuffed a takeover bid of almost $4 billion from Trillium, saying the activist investor hasn’t provided any evidence that its proposal.

 

Hardware & Software movers:

·     In software: Dow component MSFT Q3 profit and sales surpassed projections with 4Q guidance ahead of consensus; Q3 More Personal Computing provides most of the upside while 4Q revenue guidance implies 6-8% Y/Y vs. 5% consensus; on a constant currency basis, guidance calls for 8-10% growth in 4Q/ June; Azure grew 31% in constant currency in 3Q, in line with consensus. The better cloud results from MSFT, GOOGL helped boost MDB, DDOG, SNOW on day.

·     In video games: ATVI shares tumbled as the Competition and Markets Authority (CMA) has prevented MSFT’s $70B proposed purchase of Activision over concerns the deal would alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come https://bit.ly/3L8TIuH 

·     In Communications & Networking: JNPR shares slide Q1 results beat but warned that ongoing parts shortages and supply-chain "challenges" continued to hit its business; guided Q2 EPS $0.49-$0.59 vs. est. $0.53 and revs $1.36B-$1.46B vs. est. $1.4B; sees Q2 gross margin 57%-59%. In Equipment, APH shares fall to 6-month lows following softer outlook and TEL shares declined following its Q3 profit outlook.

 

Semiconductors:

·     NVDA shares rose initially after MSFT detailed increased spending on equipment needed to offer artificial-intelligence-powered features to corporate customers – said that capex would be $7.8B in Q3, above the ests of around $6.5B

·     TXN reported a slight beat and modest guidance miss.

·     In Silicon Carbide (SiC) space (WOLF, ON, STM), sector nice bounce after Robert Bosch CEO said demand for silicon carbide chips was “exploding”.

·     In memory: MU and WDC shares rise follows comments from SK Hynix overnight saying production cuts by memory chip makers will improve market conditions from the second half of 2023, after it reported a record operating loss for the first quarter.

·     In research: INTC reiterate Sell with $17 tgt at Rosenblatt saying the setup after 1Q23 ~$11 billion sales guide (down ~21% q/q, down ~40% y/y) is for an in-line print on the basic notion that the kitchen sink was thrown at this early 2023 quarter (reports Thursday).