Early Look

Friday, January 27, 2023

Futures	Up/Down	%	Last
Dow	9.00	0.03%	34,032
S&P 500	-7.25	0.18%	4,068
Nasdaq	-53.00	0.04%	12,053

 

 

After another explosive day to the upside for U.S. stocks on Thursday, futures are flat to down slightly as all eyes turn to the January consumer price index (CPI) at 8:30 for the latest look at inflation ahead of the FOMC policy meeting next week. A weak quarter and lower guidance from Intel (INTC) are dragging down semiconductors and technology overall. Expectations for the Jan CPI are for PCE Price Index M/M for Dec est. +0.1% (prior +0.1%) and Y/Y to rise +5.0% (prior +5.5%). The Core PCE Price Index M/M for Dec to rise +0.3% (prior month +0.2%) and Y/Y +4.4% (prior month +4.7%). We also get Personal income and saving at 8:30 and the University of Michigan Sentiment at 10:00 with its own inflation expectation data. Economic data has become the focus late week and its implications on the Fed and interest rates going forward. Yesterday saw Q4 GDP come in above consensus views (2.9% vs. 2.6%), along with a strong Durable Goods print and a further decline in weekly jobless claims, all signs the economy remains strong. At the same time PCE inflation declined again from prior month. A busy week of earnings behind us, but even a bigger week coming up with both the FOMC and ECB Meeting (rate hike of 25 bps and 50-bps expected respectively), the monthly jobs report Friday and earnings from AAPL, AMZN, GOOGL. Heading into the CPI data this morning all three indexes are positive for the week and month. The Dow and the S&P 500 have gained 1.7% and 2.2% this week, respectively. The Nasdaq is up 3.3% on the week and is set to notch its best monthly performance since July. Oil is higher adding to gains, dollar flat. In Asian markets, The Nikkei Index rises 19 points to 27,392, the Shanghai Index remained closed for Lunar Holiday week, and the Hang Seng Index gained 122 points to 22,688. In Europe, the German DAX is higher by 30 points to 15,165, while the FTSE 100 is up 15 points to 7,775.

 

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 44.21 points, or 1.10%, to 4,060.43.

·     The Dow Jones Industrial Average rose 205.57 points, or 0.61%, to 33,949.41.

·     The Nasdaq Composite gained 199.06 points, or 1.76%, to 11,512.41.

·     The Russell 2000 Index advanced 12.75 points, or 0.67% to 1,903.06.

 

Economic Calendar for Today

·     8:30 AM ET            Personal Income M/M for December…est. +0.2%

·     8:30 AM ET            Personal Spending M/M for December…est. (-0.1%)

·     8:30 AM ET            PCE Price Index M/M for Dec…est. +0.1% (prior +0.1%)

·     8:30 AM ET             PCE Price Index Y/Y for Dec…est. +5.0% (prior +5.5%)

·     8:30 AM ET             Core PCE Price Index M/M for Dec…est. +0.3% (prior month +0.2%)

·     8:30 AM ET             Core PCE Price Index Y/Y for Dec…est. +4.4% (prior month +4.7%)

·     10:00 AM ET           University of Michigan Confidence, Jan-F…est. 64.6

·     10:00 AM ET           University of Michigan Inflation Expectations (1 and 5-yr)

·     10:00 AM ET           Pending Home Sales M/M for December…est. (-0.9%)

·     1:00 PM ET              Baker Hughes Weekly rig count data

 

Earnings Calendar:

·     Earnings Before the Open: AXP BAH BMI CHTR CL CVX DCOM FHB GNTX HCA PFS ROP SBSI STEL

 

 

Macro	Up/Down	Last
Nymex	1.36	82.37
Brent	1.47	88.94
Gold	0.80	1,930.80
EUR/USD	-0.0009	1.0881
JPY/USD	-0.30	129.92
10-Year Note	+0.07	3.561%

 

 

World News

·     US, Dutch and Japanese officials are set to conclude talks as soon as Friday US time on a new set of limits to what can be supplied to Chinese companies; Negotiations were ongoing as of late Thursday in Washington; Netherlands will enhance restrictions on AMSL; Japan to set similar limits on Nikon; There is no plan for a public announcement of restrictions that will likely be just implemented, the people said. – Bloomberg

·     House Republican leaders are thinking about proposing a short-term extension of the federal debt ceiling to delay the risk of a default until Sept. 30; the strategy is merely an option under consideration, and it isn’t clear whether the Democratic-controlled Senate or White House would agree to briefly putting off a reckoning on the debt ceiling, said the person. – Yahoo

·     @GunjanJS tweets “The five largest US cos, Apple, Microsoft, Alphabet, Amazon and Berkshire Hathaway, account for 18.9% of the S&P 500– well above the historical average of about 15%”

 

Sector News Breakdown

Consumer

·     Hasbro (HAS) shares fall -5%; announces organizational changes; to eliminate approximately 1,000 global full-time positions in 2023 and implement leadership and other organizational changes; issues prelim Q4 EPS of $1.29-$1.31 vs. est. $1.48 and revs of $1.68B (est. $1.92B).

·     Robert Half (RHI) Q4 EPS $1.37 vs. est. $1.36; Q4 revs $1.73B vs. est. $1.74B; said for 2022, grew full-year revenues and earnings per share — both by more than 12% — and achieved new record levels for each.

·     Autoliv (ALV) Q4 adjusted EPS $1.83 vs. est. $1.76; Q4 revs $2.34B vs. est. $2.44B; sees Q1 adjusted operating margin at around 5%; expect an increase in overall product launches in 2023; we remain confident in our ability to reach our medium term adjusted operating margin target of around 12%

·     General Mills (GIS) upgraded to Buy from Neutral at UBS

 

Energy, Industrials and Materials

·     Chevron (CVX) Q4 adjusted EPS $4.09 vs. $4.27 est.; upstream earnings $5.49B, +6.4% y/y, and US Upstream earnings $2.62B, -12% y/y; International Upstream earnings $2.87B, +31% y/y; Downstream earnings $1.77B

·     Hess Corp. (HES) downgraded to Neutral from Buy at Goldman Sachs

·     Eastman Chemical (EMN) Q4 adj EPS $0.89 vs. est. $1.26; Q4 sales $2.37B vs. est. $2.43B; said expect to grow adjusted 2023 EPS by between 5 and 15 percent, excluding the approximately $0.75 pension headwind.”

·     Knight-Swift (KNX) Q4 adj EPS $1.00vs. est. $1.12; Q4 revs $1.74B below consensus of $1.79B; Sees adjusted EPS $4.05 to $4.25, vs. estimate $4.17 and sees effective tax rate 25%.

·     L3 Harris Technologies (LHX) 4Q adj EPS $3.27 vs est. $3.26 on revs $4.6B vs est. $4.34B; sees FY23 revs $17.4-17.8B vs est. $17.56B, adj EPS $12.00-12.50 vs est. $12.49, adj FCF $2.0B

·     Matthews Int’l (MATW) 1Q adj EPS $0.53 vs est. $0.54, adj EBITDA 49.3Mm vs est. $45.9Mm on revs $449.2Mm vs est. $431.6Mm; maintains prior FY guide adj EBITDA $215-235Mm vs est. $220.5Mm

·     Olin Corp. (OLN) Q4 EPS $1.43 vs. est. $1.39; Q4 revs $1.977B vs. est. $2.09B; Quarterly adjusted EBITDA of $441.8Mm; expect FY23 adjusted EBITDA to be in the $1.5 to $2.0 billion range.

 

Financials

·     Visa Inc. (V) Q1 EPS $2.18 vs. est. $2.00; Q1 revs rise 12% y/y to $7.9B vs. est. $7.69B; total cross-border volume growth, on a constant dollar basis increased 22% in Q1; qtrly payments volume increased 7% y/y on a constant-dollar basis; total processed transactions for the three months ended December 31, 2022, were 52.5 billion, a 10% increase y/y; said Ryan McInerney will become CEO of Visa and Alfred F. Kelly, Jr. will assume the role of Executive Chairman.

·     Arthur Gallagher (AJG) Q4 adj EPS $1.54 vs. est. $1.49; Q4 revs $2.03B vs. est. $1.95B; for Q4 said core brokerage and risk management segments combined to post 16% growth in revenue, of which 11.7% was organic revenue growth.

·     America Bancorp (ABCB) 4Q adj EPS $1.17 vs est. $1.34 on NII $225.1Mm vs est. $219.6Mm

·     Fair Isaac (FICO) 1Q adj EPS $4.26 vs es.t $4.18 on revs $344.9Mm vs est. $344.3Mm; sees FY23 revs $1.463B vs est. $1.482B, adj EPS $19.42 vs est. $19.56.

·     PacWest Bancorp (PACW) Q4 EPS $0.33 vs. est. $0.97; NII decreased by $12.2M to $322.9M for Q4 vs. $335.2M in Q3; provision for credit losses was $10.0N vs. $3M in Q3.

·     WR Berkley (WRB) 4Q adj EPS $1.16 vs est. $1.10, premiums written $2.91B vs est. $3.0B, ROE 23%

·     Axos Financial (AX) 2Q adj EPS $1.38 vs est. $1.23 on NII 199.9Mm vs est. $188.5Mm, revs $228.2Mm vs est. $217.4Mm; ROAE 18.71%, BV $29.79.

 

Healthcare

·     ResMed (RMD) Q2 EPS $1.66 vs. est. $1.62; Q2 revs rose 16% y/y to $1.03B vs. est. $1B; Q2 adj gross margin contracted 30 bps to 56.1%; non-GAAP gross margin contracted 80 bps to 56.8%

 

Technology, Media & Telecom

·     Intel Inc. (INTC) 4Q adj EPS $0.10 vs est. $0.20 on adj revs $14B vs est. $14.5B, adj gr mgn 43.8%, adj op mgn 4.3%; sees 1Q adj revs $10.5-11.5B vs est. $13.9B and adj EPS ($0.15) vs est. $0.24.

·     KLA-Tencor (KLAC) 2Q adj EPS $7.38 vs est. $7.10 on revs $2.98B vs est. $2.82B; sees 3Q revs $2.2-2.5B vs est. $2.55B, adj gr mgn 60.5-62.5%, adj EPS $4.52-5.92 vs est. $5.89.

·     AppFolio Inc. (APPF) 4Q adj EPS ($0.05) vs est. ($0.13) on revs $124.1Mm vs est. $117.7Mm; guides FY23 revs $565-575M vs est. $567.4M, adj op mgn approx breakeven, adj FCF mgn 2-3%.