Early Look

Wednesday, March 8, 2023

Futures	Up/Down	%	Last
Dow	45.00	0.14%	32,909
S&P 500	6.25	0.16%	3,996
Nasdaq	30.50	0.25%	12,199

 

 

U.S. futures are looking slightly higher as Treasury yields pullback slightly ahead of day two of testimony by the Fed Chairman on Capitol Hill and as investors await some jobs data later this morning (ADP, JOLTs). Stocks slumped on Tuesday after Fed Chairman Powell told Congress in his semi-annual testimony on monetary policy that the FOMC will likely need to raise interest rates more than expected in response to recent strong data and is prepared to move in larger steps if the “totality” of incoming information suggests tougher measures are needed to control inflation. Stocks fell instantly following the statement and never recovered, while Treasury yields (especially shorter-term) spiked, and the dollar jumped to two-month highs. Ten of the eleven S&P sector lost 1% as financials fell the most (-2.5%). The S&P moved back to its 50-day MA just under 4,000 as traders will now look for the 100- and 200-DMAs, which will converge around 3,940 on Wednesday to now attempt to act as support. Powell is scheduled to repeat his Congressional testimony on Wednesday at 10:00 AM ET again, this time in front of the House Banking committee. February ADP national employment is also due at 8:15 AM EST Wednesday, with estimates of 200k vs a prior print of 106k. In response to Powell, the 2-year yield topped 5% for the first time since 2007 and the 2s10s curve reached the most inverted level since 1981. In Asian markets, The Nikkei Index rose 135 points to 28,444, the Shanghai Index slipped -1 point to 3,283, and the Hang Seng Index tumbled -483 points or 2.35% to settle at 20,051. In Europe, the German DAX is up 58 points to 15,617, while the FTSE 100 is flat at 7,920. In currencies, the yen leads declines among the majors ahead of the Bank of Japan meeting tomorrow night, Kuroda’s last meeting as investors watch for any move away from yield curve control.

 

Economic Calendar for Today

·     7:00 AM ET          MBA Mortgage Applications Data

·     8:15 AM ET          ADP Employment Change for Feb…est. 200K

·     8:30 AM ET          International Trade for January…est. (-$68.9B)

·     10:00 AM ET        Fed Chairman Powell to testify on the Fed’s semiannual monetary policy.

·     10:00 AM ET        JOLTs Job Openings for January…est.10.5M

·     10:30 AM ET        Weekly DOE Inventory Data

·     1:00 PM ET           U.S. Treasury to sell $35B in 10-year notes.

 

Earnings Calendar:

·     Earnings Before the Open: ABM BF/B CPB IMXI KFY LTH MNTX NERV NINE PMTS REVG UNFI VERX VRA

·     Earnings After the Close: ASAN CDXC EOLS FOSL IDT KRMD LMB MBD NAPA NDLS SALM SMRT SONX SOVO TACT TCON VSEC VTOL

 

Other Key Events:

·     Fed Chairman Powell to testify on the Fed’s semiannual monetary policy report to the House Financial Services Committee

·     BMO Capital Miami Property Tour, 3/8-3/9, in Miami, FL

·     Cowen Healthcare Conference, 3/6-3/8, in Boston, MA

·     JPMorgan Global Emerging Markets Corporate Conference, 3/6-3/8, in Miami, FL

·     JPMorgan Global High Yield and Leveraged Finance Conference, 3/6-3/8, in Miami, FL

·     Optical Fiber Communications Conference, 3/7-3/9, in San Diego, CA

·     Truist Technology, Internet & Services Conference, 3/7-3/8, in New York

·     China CPI, PPI data for February

 

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -62.05 points, or 1.53%, to 3,986.37.

·     The Dow Jones Industrial Average slid -574.98 points, or 1.72%, to 32,856.46.

·     The Nasdaq Composite sunk -145.40 points, or 1.25%, to 11,530.33.

·     The Russell 2000 Index declined -21.03 points, or 1.11% to 1,878.72.

 

 

Macro	Up/Down	Last
Nymex	-0.12	77.46
Brent	0.17	83.46
Gold	0.40	1,820.40
EUR/USD	-0.0012	1.0535
JPY/USD	0.19	137.33
10-Year Note	-0.003	3.972%

 

 

World News

·     Jerome Powell said Fed is prepared to speed up interest-rate rises by WSJ Nick Timiraos: “The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Mr. Powell told the Senate Banking Committee. “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”

·     UK Chancellor Hunt will set out a new capital allowance regime for firms in next week’s Budget to offset the sharp rise in corporate tax and the end of tax breaks for investments.

·     Final Eurozone GDP growth was revised lower to flat QoQ in Q4 from the preliminary estimate for a 0.1% rise.

 

Sector News Breakdown

Consumer

·     CarParts.com (PRTS) Q4 EPS loss (-$0.11), in-line with consensus on revs rose 12% y/y to $154.5M vs. est. $151.18M; said expects to deliver profitable growth in FY23; Q4 Adjusted EBITDA increased to $26.1M vs. $16.8M.

·     Casey’s General (CASY) Q3 revenue $3.33B vs. est. $3.34B; same-store sales increased 5.6% compared to prior year.

·     Stitch Fix (SFIX) Q2 EPS loss (-$0.58) vs. est. loss (-$0.34); Q2 revs $412.1M vs. est. $413.62M; sees FY23 revenue $1.63B-$1.65B vs. est. $1.65B; says CFO Dan Jedda to step down, and SVP of Finance David Aufderhaar to succeed; sees Q3 revenue $385M-$395M vs. est. $394.75M and sees Q3 adjusted EBITDA ($5M)-$5M.

·     China’s passenger vehicle sales fell 20% in the first two months of this year, industry data showed on Wednesday, underscoring weak demand in the world’s biggest auto market even as some car manufacturers offer reduced prices to revive demand – Reuters.

 

Energy, Industrials and Materials

·     Oil prices tumbled Tuesday for the first time in six days, with WTI down from almost $81 to almost a $76 handle intraday, hit by weaker-than-expected import data from China and a more hawkish-than-expected Fed Chair raising demand concerns, and boosting the buck.

·     United Parcel Service (UPS) backed its prior guidance in a new SEC filing saying it still sees full-year revenue of $97.0B-$99.4B vs. est. $98.3M and guided for a full-year adjusted operating margin of 12.8% to 13.6% vs. 13.3% consensus.

·     Berkshire Hathaway (BRK/A) bought almost 6 million shares of Occidental Petroleum (OXY) in recent days, bringing its stake in the big energy company to 200.2 million shares worth $12.2 billion, according to a filing late Tuesday.

·     AerCap (AER) files to sell 111.5M ordinary shares for holders.

·     Maxeon Solar (MAXN) Q4 EPS loss (-$1.84) vs. est. loss (-$1.27); Q4 revs $323.50M vs. est. $315.7M; said its unit Maxeon Americas, Inc., Solar Partners Xi, LLC to amend solar module supply agreement dated May 18, 2021; guides Q1 revs above views but sees F23 revenue $1.350B-$1.550B vs. est. $1.57B; sees FY23 capex $100M-$120M.

·     Shoals Technologies (SHLS) 24.5M share Spot Secondary priced at $24.70.

·     The American Petroleum Institute said crude stocks drew down -3.835mm barrels last week – the first draw in 11 weeks, while Cushing saw a small build of 24K barrels. Gasoline (+1.84mm) and Distillates (+1.927mm) both with big weekly builds.

 

Financials

·     Banc of California (BANC) files automatic mixed securities shelf.

·     Silvergate (SI) is in talks with FDIC Officials on Ways to Salvage Bank, Bloomberg reported. The FDIC in talks with management on ways to avoid a shutdown. One possible option involves lining up crypto-industry investors to help Silvergate shore up its liquidity, said one of the people.

·     PayPal Holdings (PYPL) says Blake Jorgensen stepping down as CFO.

·     WeWork (WE) is in discussions with investors to restructure its outstanding debt of over $3B and raise additional cash, the New York Times reported last night.

 

Healthcare

·     Agiliti (AGTI) Q4 adj EPS $0.18 vs. est. $0.17; Q4 revs $282M vs. est. $272.74M; Q4 Adjusted EBITDA of $71Mn, compared to $85M y/y; sees FY23 adj EPS $0.65-$0.70 vs. est. $0.90; sees FY23 revenue $1.16B-$1.19B vs. est. $1.17B.

·     Rigel Pharmaceuticals (RIGL) Q4 EPS $0.01 vs. est. loss (-$0.11); Q4 revs $51.3M vs. est. $27.97M; said as of December 31, 2022, had cash, cash equivalents and short-term investments of $58.2M.

·     Sage therapeutics (SAGE) and Biogen (BIIB) share update on FDA advisory committee for zuranolone; FDA has assigned a prescription drug user fee act (PDUFA) action date of August 5, 2023.

 

Technology, Media & Telecom

·     CrowdStrike (CRWD) Q4 adj EPS $0.47 vs. est. $0.43; Q4 revs $637.4M vs. est. $624.92M; Q4 annual recurring revenue (ARR) increased 48% y/y to $2.56B as of January 31, 2023; added 1,873 net new subscription customers in Q4 for a total of 23,019 subscription customers; said it expects fiscal year 2024 revenue between $2.96B-$3.02B vs. estimates of $2.96B.

·     Arlo Technologies (ARLO) Q4 adj EPS loss (-$0.04) vs. est. loss (-$0.10); Q4 revs fell -17% y/y to $118.5M vs. est. $107.44M; sees Q1 adj EPS (7c)-(1c) vs. est. loss (-$0.07); sees Q1 revenue $100M-$110M vs. est. $94.71M.

·     Couchbase Inc. (BASE) Q4 EPS loss (-$0.37) vs. est. loss (-$0.34); Q4 revs $41.6M vs. est. $38.77M; said total ARR as of January 31 was $163.7M, an increase of 23% y/y; sees FY23 revs $171.7M-$174.7M vs. est. $176.59M and FY23 ARR $190.0M-$194.0M.

·     Yext Inc. (YEXT) Q4 adj EPS $0.05 vs. est. $0.02; Q4 revs rose 1% y/y to $101.9M vs. est. $100.52M; guides mixed Q1 EPS (higher) and revs (lower) and sees FY24 adj EPS $0.22-$0.23 vs. est. $0.13 and revs $402M-$406M vs. consensus $416.47M.