Early Look

Friday, March 10, 2023

Futures	Up/Down	%	Last
Dow	-69.00	0.21%	32,190
S&P 500	-2.25	0.06%	3,917
Nasdaq	31.50	0.26%	12,039

 

 

U.S. stock index are mixed on Friday as the selloff in SVB Financial (SIVB) shares, which was the 16^th biggest bank in the U.S. coming into the week, extended into premarket trading, down 45% at $53 after falling 60% on Thursday as several prominent venture capitalists overnight recommend companies withdraw their money from the lender. Meanwhile, investors await the monthly nonfarm payroll report at 8:30 AM for more clues on the Federal Reserve’s monetary policy path. All three major U.S. indexes are headed towards weekly losses after hawkish messages from Fed Chair Jerome Powell stoked fears that the central bank would shift back to a large rate hike at its March meeting. Today’s jobs report and next Tuesday’s consumer price (CPI) inflation report will set the tone for the rate hikes. S&P futures are now flattish around 3,917, well off the overnight lows of 3,884, while Nasdaq futures bounce green.

 

A big day ahead of U.S. markets, hoping to recover from yesterday’s financial/bank led decline that saw the S&P 500 and Dow Jones Industrial Average fall under their respective 200-day moving average supports, while investors eagerly await today’s monthly jobs report. Investors fled the banking sector after tech-industry lender SVB Financial Group (SIVB) launched a share sale to shore up its balance sheet due to declining deposits from startups struggling for funding, sending shares lower by 60% and weighed on investor confidence in other regional banks (KRE fell to lowest in 2-years). Treasuries rose on Thursday as yields tumbled with the 2-year Treasury falling 20 bps to 4.87%, falling 5-bps further overnight (and down about 30-bps since Wednesday’s close) while the yield on the 10-year fell 7-bps to 3.85% after yesterday’s slide. Will stronger February payrolls data at 8:30 AM ET (ests. 205K, unemployment 3.4% and wages to rise +0.3%) exacerbate concerns about upcoming interest rate hikes, or can a softer reading lower the chances of more aggressive rate hikes by the Fed?

 

In Asian markets, Japan’s Nikkei slumped the most in almost three months on Friday, snapping a five-day winning streak, as financials tumbled after the central bank’s decision to maintain stimulus settings hurt their profit outlook. The Nikkei Index closed 1.67% lower at 28,143.97 after touching a more-than-six-month high of 28,734.79 in the previous session (rose +0.78% on the week). The Shanghai Index fell -1.4% or 46 points to 3,230, and the Hang Seng Index tumbled 3% or 605 points to 19,319. In Europe, the German DAX is down about -200 points to 15,433, while the FTSE 100 dropped -130 points to 7,750. Bitcoin is down over 3% at $19,600.

 

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -73.69 points, or 1.85%, to 3,918.32.

·     The Dow Jones Industrial Average sunk -543.54 points, or 1.66%, to 32,254.86.

·     The Nasdaq Composite tumbled -237.65 points, or 2.05%, to 11,338.35.

·     The Russell 2000 Index declined -52.89 points, or 2.81% to 1,826.59.

 

Economic Calendar for Today

·     8:30 AM ET          Nonfarm Payrolls for February…est. 205K

·     8:30 AM ET          Private Payrolls for February…est. 210K

·     8:30 AM ET          Manufacturing Payrolls for February…est. 12K

·     8:30 AM ET          Unemployment Rate for February…est. 3.4%

·     8:30 AM ET          Average Hourly Earnings for February…est. +0.3%

·     8:30 AM ET          Average weekly hours for February…est. 34.6 hours

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

·     2:00 PM ET          Federal Budget for February…est. (-$256b)

 

 

Macro	Up/Down	Last
Nymex	-0.54	75.18
Brent	-0.64	80.95
Gold	4.30	1,838.90
EUR/USD	0.0011	1.0591
JPY/USD	0.64	136.78
10-Year Note	-0.074	3.849%

 

 

Sector News Breakdown

Consumer

·     Gap Stores (GPS) 4Q EPS ($0.75) vs est. ($0.46) on revs $4.2B vs est. $4.36B, gr mgn 33.6% vs est. 34.5%, comps -5%, ending inventory -21% y/y; guides 1Q net sales -mid-single digit vs est. +0.85%, gr mgn expansion, y/y; sees FY sales -low-mid-single digit vs est. +1.6% with extra week adding $150Mm; eliminating role of chief growth officer.

·     Ulta Beauty (ULTA) 4Q EPS $6.68 vs est. $5.68 on sales $3.23B vs est. $3.03B, comps +15.6%; guides FY23 comps +4-5%, net sales $10.95-11.05B vs est. $10.75B, EPS $24.70-25.40 vs est. $24.24.

·     Allbirds Inc. (BIRD) 4Q EPS ($0.17) vs est. ($0.12) on revs $84.2Mm vs est. $96.8Mm, adj EBITDA ($12.5)Mm vs est. ($4.8)Mm; guides 1Q net revs $45-50Mm vs est. $67.5Mm, adj EBITDA ($29)Mm-($26)Mm vs est. ($9.6)Mm.

·     American Outdoor Brands (AOUT) Q3 adj EPS $0.13 vs. est. $0.23; Q3 revs fell -27.4% to $50.9M vs. est. $59.28M; sees FY23 revenue above pre-pandemic levels by up to 13%; Quarterly gross margin was 47.1%, an increase of 130 basis points y/y.

·     El Pollo Loco (LOCO) 4Q adj EPS $0.16 vs est. $0.14 on revs $115.9Mm vs est. $115.4Mm, system-wide comps +4.7%, adj EBITDA $13.3Mm vs est. $11.4Mm; guides FY23 +4-6 new company-owned restaurants, +12 franchised restaurants, CAPEX $27-31Mm.

·     Tesla (TSLA) is recruiting Chinese and Korean materials suppliers to help lower the cost and boost the energy of its newest battery cells, even as the company struggles with battery-related performance and production issues that have helped delay the launch of its futuristic Cybertruck, according to people familiar with the plans.

·     Tilly’s (TLYS) 4Q EPS $0.01 vs est. ($0.03) on revs $180.4Mm vs est. $179Mm; guides 1Q net sales $122-133Mm vs est. $150.2Mm, comps thru March 7 including both stores and e-comm -19.9% (-21% fiscal Feb, -17.3% thus far fiscal March), sees 1Q EPS ($0.41)-($0.27) vs est. ($0.02).

·     Vail Resorts (MTN) Q2 EPS $5.16 vs. est. $6.05; Q2 revs $1.1B vs. est. $1.07B; increased company’s authorization for share repurchases by 2.5M shares to approximately 3.5M shares and raised dividend by 8%; sees year Ebitda between $831M-$859M.

·     Zumiez (ZUMZ) 4Q EPS $0.59 vs est. $0.49 on revs $280.1Mm vs est. $267.8Mm; guides 1Q net sales $178-184Mm vs est. $222Mm and EPS ($0.95)-($0.85) vs est. $0.03.

 

Energy, Industrials and Materials

·     Caterpillar (CAT) downgraded to sell from neutral at UBS, saying its growth momentum is not good enough to justify its valuation.

·     Gevo Inc. (GEVO) 4Q adj EPS ($0.11) vs est. ($0.06) on revs $0.55Mm vs est. $1.93Mm, adj EBITDA ($18.9)Mm vs est. ($10.4)Mm.

·     Quanex (NX) Q1 adj EPS $0.18 vs. est. $0.23; Q1 revs $261.92M vs. est. $261.89M; sees FY23 revenue $1.12B-$1.16B vs. est. $1.2B.

·     A Norfolk Southern (NSC) freight train derailed Thursday in Alabama, hours before the company’s CEO faced angry US senators at a hearing over a Ohio derailment.

 

Financials

·     SVB Financial (SIVB) shares tumble 45%, adding to yesterday’s -60% slide after Bloomberg reported Founders Fund, the venture capital fund that entrepreneur and investor Peter Thiel helped found, is advising corporate companies to get their money out of Silicon Valley Bank,” amid concerns about its financial stability. Other prominent VC’s said the same.

·     AllianceBernstein L.P. (AB) preliminary assets under management decreased to $665 billion during February 2023 from $680 billion at the end of January. Firmwide net inflows were offset by market depreciation, resulting in a 2% decline in AUM.

·     Artisan Partners Asset Management Inc. (APAM) preliminary assets under management as of February 28, 2023, totaled $134.8 billion.

·     Franklin Resources, Inc. (BEN) preliminary month-end assets under management (AUM) of $1,416.5 billion at February 28, 2023, compared to $1,451.9 billion at January 31, 2023.

·     Invesco Ltd. (IVZ) preliminary month-end assets under management (AUM) of $1,458.0 billion, a decrease of 1.7% versus previous month-end. The firm experienced net long-term inflows of $2.6 billion in the month.

·     Lazard (LAZ) reported assets under management of $224.16 billion vs. $251.57 billion y/y.

 

Healthcare

·     Bionano Genomics (BNGO) 4Q revs $8.2Mm vs est. $8.0Mm, gr mgn 22%, GAAP op exp $39.3Mm; guides FY23 revs $35-38Mm vs est. $39.6Mm.

·     Zimmer Biomet (ZBH) upgraded to Overweight from Neutral at Piper Sandler.

 

Technology, Media & Telecom

·     DocuSign (DOCU) Q4 EPS $0.65 vs. est. $0.52; Q4 revs $659.6M vs. est. $632.15M; Cynthia Gaylor has informed the company that she intends to step down from her position as Chief Financial Officer in the coming months; guides Q1 revs $639M-$643M vs. est. $639.7M; Q4 adj gross margin was 83% vs. 81% y/y.

·     Oracle Corp. (ORCL) Q3 adj EPS $1.22 vs. est. $1.20; Q3 revs rose 18% y/y to $12.4B vs. est. $12.41B; Q4 operating margin 42% vs. est. 41.2%; qtrly cloud services and license support revenues $8.923B vs. $7.6B reported last year; Q4 cloud license and on-premises license revenues $1.288Bn vs $1.289B as reported last year; sees Q4 EPS $1.56-$1.60 vs. est. $1.46 and sees Q4 revenue up17%-19% including Cerner.

·     Nano Dimension (NNDM) announced that it has made a formal, non-binding offer to acquire Stratasys (SSYS) for $18.00 per share in cash (watch other 3D stocks in possible sympathy DDD, DM, VJET, MTLS, MKFG).

·     Comtel (CMTL) Q2 EPS loss (-$0.23) vs. est. loss (-$0.09); Q2 revs $133.7M vs. est. $133.3M; sees Q3 revenue up 1% to 3% from Q2 or $135.0M-$137.7M vs. est. $132.7M.

·     HashiCorp (HCP) Q4 EPS loss (-$0.07) vs. est. loss (-$0.22); Q4 revs $135.79M vs. est. $124.22M; sees FY24 EPS (40c)-(38c) vs. est. (66c); sees FY24 revenue $591M-$595M vs. est. $593.25M.

·     Roblox (RBLX) upgraded to buy from hold at Jefferies, saying it expects continued growth through near-term macro and competitive pressures.