Early Look

Thursday, January 26, 2023

Futures	Up/Down	%	Last
Dow	-14.00	0.04%	33,809
S&P 500	7.75	0.19%	4,039
Nasdaq	70.25	0.59%	11,943

 

 

After another astounding rebound to the upside for U.S. stocks on Wednesday, futures are looking higher yet again, led by gains in the Nasdaq as investors pile into shares of Tesla (TSLA) following earnings and guidance and showing no concern ahead of key economic data later this morning. Stocks reversed big time off key technical levels on Wednesday (S&P bounced above its 200-day moving average support) as the Dow and Russell 2000 turned positive late day and stocks trimmed losses (Nasdaq more than 2% pop off lows) as investors bought the dip again, continuing the theme in 2023 which is off to a rip-roaring start for major averages. Perhaps investors bought ahead of today’s GDP and PCE inflation data reports, on hopes of further deceleration heading into next week’s FOMC policy meeting (January consumer price index data up on Friday). The Fed keeps saying they won’t cut rates this year. The market disagrees and is doubling down on rate cuts by September. At the end of last year, traders were pricing a year-end fed funds rate of 4.6%. Today they’re pricing in 4.4% by December. https://gyazo.com/6619de7d744bdc2c114ed904fc427505 . In Asian markets, The Nikkei Index fell -32 points to 27,362, the Shanghai Index remains closed for Lunar Holiday, and the Hang Seng Index reopens from its holiday, jumping over 500-points or 2.37% to 22,566. In Europe, the German DAX is up 13 points to 15,095, while the FTSE 100 rises about 10 points to 7,754.

 

Earnings, commodities, the economy, fear index (VIX) – nothing seems to matter except the trajectory of interest rates and the Fed with the stock and bond market still telling a whole different story than what the Fed has been feeding us. Current market expectations for path of the Fed Funds Rate: As per Charlie Bilello, “Feb 1, 2023: 25 bps hike to 4.50%-4.75%. Mar 22, 2023: 25 bps hike to 4.75%-5.00%. Pause. Rate cuts start in Nov 2023 and continue throughout 2024 with Fed Funds Rate moving back below 3%.” The Fed however has expressed more caution. If inflation begins to rise, or anything from that scenario changes, markets are not positioned at the current time.

 

Market Closing Prices Yesterday

·     The S&P 500 Index slipped -0.73 points, or 0.02%, to 4,016.22.

·     The Dow Jones Industrial Average rose 9.88 points, or 0.03%, to 33,743.84.

·     The Nasdaq Composite dipped -20.92 points, or 0.18%, to 11,313.36.

·     The Russell 2000 Index advanced 4.71 points, or 0.25% to 1,890.32.

 

Economic Calendar for Today

·     8:30 AM ET           Weekly Jobless Claims…est. 205K

·     8:30 AM ET           Continuing Claims…est. 1.659M

·     8:30 AM ET           Gross Domestic Product (GDP) Q4 Advance…est. +2.6% (prior +3.2%)

·     8:30 AM ET           GDP Price Deflator for Q4-A…est. +3.3% (prior +4.4%)

·     8:30 AM ET           Consumer Spending for Q4-A… (prior +2.3%)

·     8:30 AM ET           PCE Prices Advance for Q4… (prior +4.3%)

·     8:30 AM ET           Core PCE Prices, Q4-A…est. +4.0% (prior +4.7%)

·     8:30 AM ET           Advance Goods Trade Balance for December…prior (-$82.93B)

·     8:30 AM ET           Durable Goods Orders for December…est. +2.5%

·     10:00 AM ET         New Home Sales M/M for December…est. 617K

·     10:30 AM ET         Weekly EIA Natural Gas Inventory Data

·     11:00 AM ET         Kansas City Fed Manufacturing for January…prior (-13)

·     1:00 PM ET            US Treasury to sell $35B in 7-year notes.

 

Earnings Calendar:

·     Earnings Before the Open: AAL ADM AIT ALK AMAL BHLB BX CFR CMCSA CNX CRS DOW EWBC EXP FCNCA FFWM FRME IBCP JBLU KRNY LUV MA MKC MMC MUR NOC NTCT NUE ORI OSIS PPBI ROK SASR SHW STBA TROW TSCO VIRT VLO VLY WBS XEL

·     Earnings After the Close: ABCB AJG APPF ASB AX BY CBAN EMN FFBC FFIC FIBK GBCI HTH INTC KLAC LHX MATW MSBI OLN PACW RMD SBCF SSB TBBK TCBX USCB V WRB WSFS WY

 

 

Macro	Up/Down	Last
Nymex	0.52	80.67
Brent	0.62	86.74
Gold	-8.60	1,934.00
EUR/USD	-0.0014	1.090
JPY/USD	0.26	129.85
10-Year Note	+0.025	3.487%

 

 

World News

·     The bull-bear spread in the American Association of Individual Investors (AAII) weekly survey was -8.3 vs -2.1 last week. Bulls fall to 28.4% from 31%; Neutrals fall to 35% from 36%; Bears rise to 36.7% from 33.1%

·     @GuyDealership tweets: 1.84% of auto loans are now severely delinquent. The highest rate since February 2009.

·     @Charliebilello tweets: 1-Month Treasury bill yield of 4.67% is now 1.05% higher than the 30-year Treasury bond yield (3.62%). That’s the widest spread on record (note: 1-month issuance started in 2001).

 

Sector News Breakdown

Consumer

·     Tesla Inc. (TSLA) 4Q adj EPS $1.19 vs est. $1.13 on revs rose 37% y/y to $24.32B vs est. $24.16B; adj EBITDA $5.4B vs est. $5.39B; FCF $1.42B (vs. est. $3.13B); expects to remain ahead of L-T 50% CAGR on production; said was producing 3,000 Model Y compact SUVs a week at Austin plant; Q4 Total Production of 439,701, up 44% y/y; Q4 total deliveries 405,278, up 31% y/y; says Cybertruck on track to begin production later this year.

·     Las Vegas Sands (LVS) 4Q EPS ($0.22) vs est. ($0.09) on revs $1.12B vs est. $1.18B; said that the company remains confident that travel will continue to recover this year, though travel restrictions and reduced visitation weighed on results in the recent period.

·     Levi Strauss (LEVI) Q4 adj EPS $0.34 vs. est. $0.29; Q4 revs $1.6B vs. est. $1.57B; expect to bring inventory back to normal levels by the end of Q2; sees 2023 EPS $1.30-$1.40 vs. est. $1.35 and revs $6.3B-$6.4B vs. est. $9.27B; 2023 net rev guidance inclusive of 200 bps of headwinds split evenly from FX, suspension of business ops in Russia

·     Boot Barn (BOOT) 3Q EPS $1.74 vs est. $1.75 on revs $514.6Mm vs est. $514.1Mm, comps -3.6%; guides 4Q total sales $438-448Mm vs est. $433Mm and EPS $1.42-1.51 vs est. $1.62

·     Ethan Allen (ETD) 2Q adj EPS $1.10 vs est. $0.89 on sales $203.2Mm vs est. $206.3Mm, gross margin 61%.

·     LCI Industries (LCII) guides sees Q4 EPS loss ($0.62-$0.73) vs. est. $0.87; sees Q4 revenue $890M-$900M vs. est. $924.67M; said for Q4, RV OEMs made larger-than-anticipated adjustments to production levels by taking a collective month of production down to normalize inventories as retail demand slowed, which had an adverse impact on our results.

·     Toyota President (TM) and CEO Akio Toyoda to step down, become Chairman.

 

Energy

·     Chevron (CVX) increases quarterly dividend; announces $75B stock repurchase program.

·     Murphy Oil (MUR) Q4 adj EPS $1.10 vs. est. $1.17; Q4 revs $975.2M vs. est. $862.4M; Q4 production averaged 173.6 MBOEPD and consisted of 56% oil volumes, or 97.0 MBOPD.

·     Plug Power (PLUG) lowers FY22 revenue growth view to 45%-50% from over 80%; said Q4 revenue impacted by new product launch delays.

 

Financials

·     Ameriprise (AMP) Q4 adj operating EPS $6.94 vs. est. $6.48; Q4 revs $3.62B vs. est. $3.47B; Advice & Wealth Management total client flows were $12.4 billion in the quarter, reaching a record high of $42.5 billion for the year.

·     AXIS Capital (AXS) Q4 operating EPS $1.95 vs. est. $1.76; Q4 revs $1.45B vs. est. $1.04B; Q4 combined ratio 94.1%, adj combined ratio 90%, expense ratio 13.9%; book value per diluted common share of $46.95, an increase of $3.45, or 7.9%.

·     Lending Club (LC) 4Q EPS $0.22 vs est. $0.20 on revs $262.7Mm vs est. $258.5Mm; says implemented significant cost reduction plan in FY22 to align company’s expense base more closely with anticipated loan volumes in 2023.

·     Raymond James Financial (RJF) Q1 adj EPS $2.29 vs. est. $2.28; Q1 revs $2.79B vs. est. $2.845B; Client assets under administration of $1.17 trillion and financial assets under management of $185.9 billion; NII and fees of $723 million during the quarter, up 253% y/y.

·     SLG Realty (SLG) 4Q FFO/shr $1.46 vs est. $1.48 on revs $224.87Mm vs est. $199.9Mm

 

Healthcare

·     Pfizer (PFE) downgraded to Neutral from Buy at UBS with a price target of $47, down from $55 saying COVID estimates still need to come down and the company’s pipeline upside is minimal in the near- to mid-term.

·     Lannett (LCI) announces 1-for-4 reverse stock split effective Feb 7^th

 

Industrials & Materials

·     Axalta Coating (AXTA) Q4 adj EPS $0.38 vs. est. $0.35; Q4 revs $1.24B vs. est. $1.22B; Volumes grew 2.4% year-over-year amid market recovery in Mobility Coatings; 11.7% price-mix growth year-over-year; 3.2% sequential price-mix growth.

·     Covenant Logistics (CVLG) 4Q adj EPS $1.37 vs est. $1.42 on revs $296.1Mm vs est. $294.7Mm; says for 2023 anticipate a very difficult freight environment at least for first half of the year which could compress rates and margins vs 2022.

·     CSX Corp. (CSX) 4Q EPS $0.49 vs est. $0.46 on revs $3.73B vs est. $3.72B; sees 2023 Capex about $2.3B (vs. est. $2.08B)

·     Dow Inc. (DOW) Q4 operating EPS $0.46 vs. est. $0.58; Q4 revenue $11.86B was below consensus $12.01B; said Q4 volume decreased 8% versus the year-ago period.

·     Hexcel (HXL) Q4 EPS $0.40 vs. est. $0.32; Q4 revs $429M vs. est. $403.4M; sees 2023 adj EPS $1.70-$1.90 vs. est. $1.82 and sales $1.725B-$1.825B vs. est. $1.76B; sees 2023 FCF above $140M.

·     Northrop Grumman (NOC) Q4 revs $10.0B vs. est. $9.65B; Q4 EPS $7.50 vs. est. $6.57; sees 2023 sales $38B-$38.4B vs. est. $37.95B

·     Steel Dynamics (STLD) Q4 adj EPS $4.37 vs. est. $3.79; Q4 revs $4.8B vs. est. $4.73B; achieving record net sales of $22.3B, operating income of $5.1B, and adjusted EBITDA of $5.5B; record steel and steel fabrication shipments of 12.2 million tons and 856,000 tons, respectively.

·     United Rentals (URI) Q4 EPS $9.15 vs. est. $10.37; Q4 revs $3.30B vs. est. $3.29B; sees FY23 revenue $13.7B-$14.2B vs. est. $13.46B; sees FY23 adjusted EBITDA $6.6B-$6.85B vs. $5.62B y/y; initiates quarterly dividend of $1.48 with $1B share buyback.

 

Technology, Media & Telecom

·     IBM Corp. (IBM) 4Q EPS $3.13 vs est. $3.60 on revs $16.7B vs est. $16.4B; sees FY23 constant currency rev growth consistent with mid-single-digit model vs est. +1% (reported); at current FX rates currency expected to be neutral to one-point tailwind to FY23 revs growth.

·     Aspen Technology (AZPN) 2Q adj EPS $0.35 vs est. $1.32 on revs $242.8Mm vs est. $273.5Mm; guides FY revs $1.14-1.2B vs est. $1.17B and adj EPS $6.83-7.43 vs est. $6.87.

·     CACI Int’l (CACI) 2Q adj EPS $4.28 vs est. $4.39 on revs $1.6B vs est. $1.6B, total backlog $26.5B; sees FY23 revs $6.475-6.675B vs est. $6.594B and adj EPS $17.65-18.49 vs est. $18.10.

·     Calix Inc. (CALX) Q4 EPS $0.34 vs. est. $0.25; Q4 revs $244.5M vs. est. $241.2M; guides Q1 EPS $0.24-$0.30 vs. est. $0.26 and Q1 revs $242M-$248M vs. est. $240.7M

·     Crown Castle (CCI) 4Q EPS $0.95 vs est. $0.98, adj FFO/shr $1.85 vs est. $1.84 on net revs $1.76B vs est. $1.74B; sees FY23 adj EBITDA $4.472B vs est. $4.475B and adj FFO/shr $7.63 vs est. $7.64.

·     Flex (FLEX) Q3 adj EPS $0.62 vs. est. $0.55; Q3 revs $7.8B vs. est. $6.89B; raises FY23 adjusted EPS view to $2.27-$2.33 from $2.20-$2.35 (est. $2.12) and boosts FY23 revenue view to $29.9B-$30.3 from $29.1B-$30.1B (est. $27.2B)

·     Lam Research (LRCX) Q2 EPS $10.71 vs. est. $9.96; Q2 revs $5.28B vs. est. $5.08B; sees Q3 adj EPS $6.50 plus/minus $0.75c vs. est. $7.88 and revs $3.8B plus/minus $300M vs. est. $4.38B; announces restructuring, 7% workforce reduction.

·     Qualtrics Int’l (XM) 4Q adj EPS $0.03 vs est. $0.02 on revs $389.1Mm vs est. $381.1Mm; guides 1Q revs $392-394Mm vs est. $391.6Mm and adj EPS $0.01-0.02 vs est. $0.01; guides FY23 revs $1.661-1.669B vs est. $1.688B and adj EPS $0.20-0.24 vs est. $0.10; sees FY23 subscription revs $1.406-1.414B

·     ServiceNow Inc. (NOW) 4Q adj EPS $2.28 vs est. $2.02 on revs $1.94B vs est. $1.94B, subscription revs $1.86B +22%; guides 1Q subscription revs $1.99-2.0B (+22.0-22.5% GAAP); sees FY23 subscription revs $8.44-8.5B (+22.5-23.5% GAAP)

·     Seagate Technologies (STX) Q2 adj EPS $0.16 vs. est. $0.12; Q2 revs fell -39% y/y to $1.89B vs. est. $1.83B; Q2 adjusted gross margin 21.4% vs. 30.7% y/y; sees Q3 revs $2.0B plus/minus $150M and EPS $0.25 plus/minus $0.20 vs. est. $0.29.

·     TD SYNNEX (SNX) 4.5M share Spot Secondary priced at $97.00.

·     Teradyne Inc. (TER) Q4 EPS $0.92 vs est. $0.75; sales $731.84M vs est. $711.58M; announces board authorization of $2b share repurchase program; sees Q1 EPS $0.28-$0.52 vs est. $0.58 and sees Q1 revs of $550M-630M Vs est. $644.6M

·     Wolfspeed (WOLF) Q2 EPS loss (-$0.11) vs. est. loss (-$0.12); Q2 revs $216.1M vs. est. $229.1M; sees Q3 revs $210M-$230M and Q3 EPS loss ($0.16-$0.12) vs. est. $252M and loss (-$0.06)