Early Look

Thursday, January 25, 2024

Futures are flat after the S&P 500 index posted its fourth-straight record closing high on Wednesday (and up 5-straight days heading into today), topping the 4,900 level for the first time ever before fading late in the trading day on profit taking as Treasury yields moved to highs. Shares of large cap tech names META, GOOGL, and MSFT all touched record highs on Wednesday along with gains in Energy helping the S&P close higher. Shares of Consumer Staples, REITs, Utilities, and Materials posted losses of over 1% on the day. Attention turns to the ECB policy meeting later this morning (no rate change expected but if they sound hawkish could be a warning sign for markets ahead of the FOMC next week), and the Q4 GDP reading (expected at 2% down from 4.9% prior). In stock news, Tesla (TSLA) shares over -7% as their delivery guidance failed to soothe investor concerns about slowing demand. In managed care, HUM shares tumbled this morning on Q4 miss and sharply lower guidance. All eyes on the data coming up this morning as Treasury yields are little changed, as is the dollar and gold. In Asian markets, The Nikkei Index edged higher 9 points to 36,236, the Shanghai Index surged 85 points to 2,906, and the Hang Seng Index rose 312 points to 16,211. In Europe, the German DAX is down -67 points to 16,822, while the FTSE 100 is down -13 points to 7,513. Stock markets have risen in a straight line higher since the end of October as interest rate futures still expect double the amount of rate cuts as the Fed is guiding (150 vs. 75-bps), but if we are on track for a soft landing, then why would we need so many rate cuts remain the question? Another busy day of earnings again today and tomorrow before next week’s deluge.

• The Dow Jones Industrial Average fell -99.06 points, or 0.26%, to 37,806.39.
• The Nasdaq Composite gained 55.97 points, or 0.36%, to 15,481.92.
• The Russell 2000 Index declined -14.40 points, or 0.73% to 1,961.86.

• 8:30 AM ET                  Consumer Spending Advance for Q4…prior 3.1%
• 8:30 AM ET                  GDP Price Deflator for Q4…est. +2.3%
• 8:30 AM ET                  PCE Prices Advance for Q4…prior +2.6%
• 8:30 AM ET                  Core-PCE Prices Davance for Q4…est. +2.0%
• 8:30 AM ET                  Weekly Jobless Claims…est. 200K
• 8:30 AM ET                  Continuing Claims…est. 1.828M
• 8:30 AM ET                  Durable Goods Orders M/M for December…est. +1.1%
• 8:30 AM ET                  Advance Goods Trade Balance for December…
• 10:00 AM ET                New Home Sales M/M for December…est. 645K
• 10:30 AM ET                Weekly EIA Natural Gas Inventory Data
• 11:00 AM ET                Kansas City Fed manufacturing for January
• 1:00 PM ET                   US Treasury to sell $40B in 7-year notes.

• Earnings After the Close: ABCB AJG APPF ASB BY CUBI EBC FFBC FFIC FICO FISI GBCI HTH INTC KLAC LEVI LHX MSBI NOC OLN SBCF SSB TBBK USCB V WAL WDC WSFS WY

• JP Morgan 2nd Annual Hyper Growth Private Technology Conference 1/24-1/25, in San Francisco, CA
• TD Cowen Annual Global Mining Conference, 1/23-1/25, in Toronto, CA

• The Fed lifted the interest rate on new loans extended in the Fed’s Bank Term Funding Program (BTFP) from now through to the BFFP’s expiration on March 11th. It effectively prevents arbitrage of borrowing from the Fed at the BTFP interest rate and depositing the funds with the Fed in their reserve account.
• The bull-bear spread in the American Association of Individual Investors (AAII) weekly survey was 13.2 vs 13.6 last week. Bulls fall to 39.3% from 40.4%, Neutrals rise to 34.6% from 32.9%, Bears fall to 26.1% from 26.8%.

• Ford Motor (F) said it expects to record a pre-tax remeasurement loss of about $1.7 billion in its fourth-quarter results for fiscal 2023.
• Las Vegas Sands (LVS) Q4 EPS $0.50 vs est. $0.61 on revs $2.915B vs est. $2.903B, adj property EBITDA $1.2B, Macao adj property EBITDA $654Mm.
• Hertz (HTZ) downgraded to Neutral from Overweight at JPMorgan.

• CSX Corp. (CSX) Q4 EPS $0.45 vs est. $0.44 on revs $3.68B vs est. $3.629B; forecasts 2024 low to mid-single digit total vol. & rev growth; Q4 operating ratio 64.1%, vs. est. 62.9%.
• Dow Inc. (DOW) Q4 operating EPS $0.43 vs. est. $0.40; Q4 revs $10.62B vs. est. $10.37B (but below year ago $11.86B); reported a 10.4% drop in fourth-quarter sales as destocking trends persisted amid lower demand for its products across key markets.
• Hexcel Corp. (HXL) Q4 adj EPS $0.43 vs est. $0.49 on sales $457.5Mm vs est. $471.9Mm; guides FY24 sales $1.925-2.025B vs est. $2.024B, adj EPS $2.10-2.30 vs est. $2.47 and FCF > $200Mm.
• Knight-Swift (KNX) Q4 adj EPS $0.09 vs est. $0.44 on revs $1.9B vs est. $1.966B; guides Q1 adj EPS $0.37-0.41 vs est. $0.46 and Q2 adj EPS $0.53-0.57 vs est. $0.65.
• United Rentals (URI) announces a new $1.5B share repurchase program; Q4 adj EPS $11.26 vs est. $10.93 on revs $3.728B vs est. $3.624B; guides FY24 revs $14.65-15.15B vs est. $14.805B.
• The Federal Aviation Administration has paused Boeing’s (BA) planned expansion of its 737 MAX plane while paving the way for the plane maker’s MAX 9 jet to return to service nearly three weeks after a door plug blew out during an Alaska Airlines flight.
• The White House sent a letter to members of Congress urging approval of a $20 billion sale of Lockheed Martin (LMT) F-16 aircraft and modernization kits to Turkey, four sources familiar with the letter told Reuters.

• Raymond James (RJF) Q1 adj EPS $2.40 vs. est. $2.26; Q1 revs rose 8% y/y to $3.01B vs. est. $3.06B; Record client assets under administration of $1.37 trillion and record financial assets under management of $215 billion, up 17% and 16%, respectively; return on common equity of 19.1%.
• W. R. Berkley (WRB) Q4 EPS $1.47 vs. est. $1.38; Q4 revs $3.22B vs. est. $3.21B; net premiums written grew 12% from a year earlier to $2.72 billion. Net investment income surged 35.5% to hit a quarterly record of $313.3 million, driven by a 52.9% increase in its core portfolio.

• Humana (HUM) shares tumble as Q4 adjusted EPS loss (-$0.11) vs. est. loss (-0.05); Q4 revs $26.46B vs. est. $25.54B; forecasts 2024 adj EPS about $16.00, well below consensus est. $29.18; assumes higher Medicare advantage medical costs experienced in Q4 persist throughout 2024; no longer believes adj EPS target for 2025 is achievable.
• ResMed (RMD) Q2 EPS $1.88 vs. est. $1.79; Q2 revs rose 12% y/y to $1.2B vs. est. $1.15B; operating profit down 2%, non-GAAP operating profit up 20%; Gross margin contracted 50 bps to 55.6%.

• Lam Research (LRCX) Q4 non-GAAP EPS $7.52 vs. est. $7.10; Q4 revs $3.76B vs. est. $3.71B; sees Q3 revenue $3.7B plus/minus $300M.
• Seagate Technology (STX) Q2 EPS $0.12 vs. est. loss (-$0.06); Q2 revs $1.56B vs. est. $1.55B; sees Q3 EPS $0.05-$0.45 vs. est. $0.18 and revs $1.50B-$1.80B vs. est. $1.64B; reported Q2 operating margin 8% and gross margin 23.3%.
• ServiceNow Inc. (NOW) Q4 adj EPS $3.11 vs est. $2.79 on revs $2.437B vs est. $2.398B, adj FCF $1.344B; sees Q1 subscription revs $2.51-2.52B and FY subscription revs $10.56-10.58B up from prior view $10.4B; says generative AI is injecting new fuel into already high-performing engine.
• STMicroelectronics (STM) Q1 and FY revenue forecast missed estimates; Q1 revs fell -15.2% y/y to $3.6B vs. est. 44.1B and guides full-year revenue in a range of $15.9B-$16.9B vs. est. $17.2B.
• American Superconductor (AMSC) Q4 EPS loss (-$0.06) vs. est. loss (-0.06) and revs $39.4M vs. est. $34M; sees Q4 revs $36M-$40M.
• CACI International (CACI) Q2 adj EPS $4.36 vs est. $4.44 on revs $1.834B vs est. $1.842B; guides FY24 revs $7.3-7.5B vs prior $7.2-7.4B and est. $7.347B, adj EPS $19.91-20.58 vs prior $19.38-20.48 and est. $20.02.
• Crown Castle (CCI) FY23 AFFO/shr $7.55 vs est. $7.53; guides FY24 site rental revs $6.347-6.392B and AFFO/shr $6.85-6.97 vs est. $6.95.
• Concentrix (CNXC) Q4 EPS $3.36 vs. est. $3.08; Q4 revs $2.23B vs. est. $2.2B; sees Q1 EPS $2.51-$2.65 below consensus $3.24 and sees Q1 revenue $2.36B-$2.41B vs. est. $2.45; sees FY24 EPS $11.69-$12.50 vs. est. $12.98 and sees FY24 revenue $9.51B-$9.7B vs. est. $9.8B.
• Plexus (PLXS) Q1 EPS $1.04 vs est. $1.08 on revs $982.607Mm vs est. $987.64Mm; sees Q2 revs $930-970Mm vs est. $1.009B, adj op mgn 4.0-4.4% and adj EPS $0.80-0.95 vs est. $1.13.
• David Ellison has made a preliminary offer to buy National Amusements, the holding company of the Redstone family, as a way to gain control of Paramount Global (PARA), Bloomberg. http://tinyurl.com/47fwbkrk