Mid-Morning Look

Friday, April 19, 2024

A little resiliency for U.S. stocks, paring losses after geopolitical events pressured futures overnight. Markets are mixed with the Dow and Russell 2000 higher, but S&P and Nasdaq slumping. S&P futures were down over -1.5% overnight on reports Israel retaliated against Iran in an attack last night, but markets have fought back this morning as the S&P looks to snap a rare 5-day losing streak. The threat of an escalating cycle of conflict in the mid-East is dissipating, even after Israel struck Iran but caused little damage, while Iran is playing it down too (thus far), with no retaliation comments. U.S. markets are on track for their third weekly decline for the first time since October, as safe havens remain only sectors in the green w/ investors preparing for rates to remain higher for longer. Asian markets ended lower on geopolitical escalations despite Japan CPI coming in lighter than expected (core CPI rose 2.6% in March vs. prior 2.8%). Crude oil prices popped on initial attack reports (WTI crude highs $86.28), but now flattish around $82.70. The U.S. dollar up 0.2% at its peak overnight – now down 0.25% to 105.904 and near the week’s low from Monday (105.839). In corporate news, NFLX posted a quarterly beat on big subs, but news they would stop giving sub guidance next year did not go over well with investors thus far, while Dow component AXP rises on results and PG slips on a Q1 sales miss. The Nasdaq being dragged down on semi weakness (NVDA, SMCI, AMD) and NFLX ahead of big week of earnings (MSFT, GOOGL, META) next week. Overnight, Israel launched a “limited” attack on Iran which long-range missiles were launched at military targets in Western Iran. Iran has come out saying that the attack was ineffective, no nuclear sites were damaged, and has no plan for retaliation at this time. Explosions were heard in the Iranian city of Isfahan on Friday. Iran struck Israel with a barrage of drones and ballistic missiles on Saturday in retaliation for a presumed Israeli air strike on April 1 that destroyed a building in Iran’s embassy compound in Damascus and killed several top Iranian officers.

• In Bank Earnings: FITB Q1 EPS $0.75 tops $0.69 est. driven by beats on NII, fees, and expenses; NII of $1.39B was better than KBW estimate of $1.38B and said NIM came in at 2.86%, up 1bps Q/Q and compared to their 2.83% est.; PPNR outlook for 2Q24 is in line with the Street and 2024 is $0.06 better than the Street. HBAN Q1 EPS $0.28 vs $0.26 driven by lower expenses, partially offset by lower core fees; NII and provisions were in line while its 2024 outlook unchanged; sees NII down -2% to up 2% and core Fees expectation of up 5-7% while core expenses expectation of up approximately 4.5%.RF Q1 revenue $1.75B, in-line with consensus; Q2 NII expected to be flat to down 2% vs Q1 while sees 2024 NII $4.7B-$4.8B; sees 2024 average loan balances to be stable to down modestly compared to 2023; expect 2024 average deposits to be stable to down modestly compared to 2023. WAL Q1 beat on better fee income and to a lesser extent NII ($608.5mn vs $605.5mn est.), while credit remains benign (NCOs $9.5mn vs $15.5mn cons); NIM came in 3bps lower than street driven by increase in avg interest bearing deposits outpacing increase in avg earning assets.

• CNS +7%; will replace KAMN in the S&P Smallcap 600 effective prior to the opening of trading on Tuesday, April 23. Arcline Investment Management LP is acquiring Kaman in a deal expected to close on April 19.
• FITB +4%; Q1 EPS $0.75 tops $0.69 est. driven by beats on NII, fees, and expenses; NII of $1.39B was better than KBW estimate of $1.38B and said NIM came in at 2.86%, up 1bps Q/Q and compared to their 2.83% est.
• KBH +2%; announces a new $1B share buyback authorization & boosts quarterly dividend 25%.
• PARA +9%; shares rose after a report that SONY and APO are discussing making a joint bid for the company. The company and Apollo Global Management are discussing a joint effort, even as Paramount conducts exclusive merger negotiations with Skydance. https://tinyurl.com/2swrznny
• SHOP +2%; was upgraded to overweight from equal weight at Morgan Stanley and raised tgt to $85 saying share gains upmarket by Shopify support confidence in the durability of growth against tempered consumer spending expectations.

• MTN -3%; said despite improved conditions, visitation at some of its resorts still lagged in March and April; said it now expects to finish fiscal 2024, which ends in July, at or around the low end of its guidance for EBITDA.
• NFLX -6%; after results as better EPS/revs and blow out Q1 streaming paid net subs change +9.33M, above est. +4.84M was overshadowed by headlines that they expect paid net additions to be lower in Q2’24 vs. Q1’24 due to typical seasonality; said starting Q1, will stop reporting qtrly membership numbers.
• NOVA -5%; downgraded to Equal weight at Wells Fargo as rates May stay higher for longer while the firm upgraded FSLR to Overweight due to relative stability & several potential catalysts.
• PG -2%; Q3 EPS of $1,52 topped the $1.42 consensus while sales rose 1% y/y to $20.2B, which was shy of the $20.4B estimate and organic sales rose 3%, boosted by higher pricing; raised 2024 adj EPS growth view to 10%-11%, up from a prior growth forecast of 8% to 9%.
• SMCI -14%; after the company announced it will present a live audio webcast of a conference call to review its third quarter fiscal 2024 financial results on Tuesday, April 30 – appeared that markets were disappointed that the company did not raise guidance as they did prior quarter when announced release date.
• TSLA -1%; after recalling 3,878 Cybertruck pickups to rework or replace accelerator pedals that can dislodge and cause the vehicle to unintentionally accelerate.