Early Look

Wednesday, March 22, 2023

Futures	Up/Down	%	Last
Dow	-4.00	0.01%	32,770
S&P 500	-2.25	0.06%	4,033
Nasdaq	-21.50	0.17%	12,846

 

 

U.S. futures are looking flat after two days of massive advances for stocks heading into the FOMC policy meeting later this afternoon. Fed Day is finally there with fed futures anticipating a 25-bps hike as the most likely scenario from them, though roughly 20% are expecting a “pause” in rates. Stocks were mixed in Europe following a faster-than-expected reading for U.K. inflation, which jumped to 10.4% over the month of February and accelerated bets on a harsher policy response from the Bank of England when they meet tomorrow. Recall last week the European Central Bank hiked by 50-bps despite the Credit Suisse situation ongoing at the time. In stock news, Dow component and retailing giant Nike (NKE) reported strong quarterly results, but cautious guidance weighed slightly on shares. As for yesterday, the S&P 500 posted its highest close (back above 4,000) since the collapse of Silicon Valley Bank earlier this month, which sent shockwaves through financial markets and raised concerns about the stability of the U.S. banking system. The Dow Jones Industrial Average rose 1% Tuesday, while the Nasdaq Composite Index swept to a 1.6% gain. Banks and companies with heavy exposure to rate-sensitive assets, including property loans, have been under pressure since Silicon Valley Bank’s implosion. In Asian markets, The Nikkei Index surged 520 points or 1.93% to 27,466, the Shanghai Index rose 10 points to 3,265, and the Hang Seng Index advanced 332 points to 19,591. In Europe, the German DAX is up 78 points to 15,274, while the FTSE 100 is down about -10 points to 7,525. Treasury yields are little changed, with the 10-yr at 3.60% and 2-yr 4.175%, but that is likely to change after the Fed meeting. Interesting stat from bespoke investment: The current 6-day streak of 30+ bps intraday moves (for the 2-yr) is now longer than the 5-day streak in September 2008 after the Lehman bankruptcy.

 

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 51.30 points, or 1.30%, to 4,002.87.

·     The Dow Jones Industrial Average rose 316.02 points, or 0.98%, to 32,560.60.

·     The Nasdaq Composite spiked 184.57 points, or 1.58%, to 11,860.11.

·     The Russell 2000 Index advanced 32.75 points, or 1.88% to 1,777.74.

 

Economic Calendar for Today

·     7:00 AM ET             MBA Mortgage Applications Data

·     10:30 AM ET           Weekly DOE Inventory Data

·     2:00 PM ET              FOMC Policy meeting – 2:30 Powell press conference

 

Earnings Calendar:

·     Earnings Before the Open: ATXS IMBI LASE OLLI SCVL WGO WOOF WVE

·     Earnings After the Close: AWH CHWY FTHM KBH LFMD MBRX PHR SCS SCPH WOR

 

Other Key Events:

·     FOMC Policy meeting at 2:00 and Fed Chairman Powell press conference 2:30

·     Piper Annual Energy Conference, 3/20-3/22, in Las Vegas

·     Sidoti Small-Cap Conference (virtual), 3/22-3/23

·     Stifel Annual LNG Bus Tour, 3/22-3/23, in Houston, TX

 

 

Macro	Up/Down	Last
Nymex	-0.35	69.32
Brent	-0.26	75.06
Gold	3.70	1,944.80
EUR/USD	0.0017	1.0785
JPY/USD	0.31	132.80
10-Year Note	-0.004	3.602%

 

 

World News

·     British CPI inflation unexpectedly rose to 10.4% in February, topping estimates of 9.9% (and above Jan’s 10.1%) pushed up by higher food prices and pricier drinks, official data showed a day before the Bank of England announces its latest interest rate decision. The BoE is due to announce on Thursday whether it has raised interest rates for an 11th meeting in a row.

 

Sector News Breakdown

Consumer

·     Nike Inc. (NKE) Q3 EPS $0.79 vs. est. $0.55; Q3 revs rose 14% y/y to $12.39B vs. est. $11.52B; Q3 gross margin 43.3% vs. estimate 43.7% and down from 46.6% y/y; North America total revenue $4.9B vs. $3.882B y/y; Q3 Europe, Middle East & Africa total revenue $3,2B vs. $2.7B y/y; Q3 Greater China total revs $1.9B vs. $2.16B y/y; end inventories were $8.9B, up 16% y/y and said qtrly gross margin decreased primarily due to higher markdowns to liquidate inventory. Shares reversed lower on guidance as sees 4q flat to low single-digit revenue growth and said sees FY23 gross margin low end of prior forecast range.

·     GameStop (GME) shares jump over 40% after 4Q adj EPS $0.16 vs est. ($0.13) on revs $2.23B vs est. $2.18B, inventory $682.9Mm vs year ago $915Mm; Q4 inventory was $682.9M, compared to $915.0M at the close of prior year’s 4q, and said cash, cash equivalents and marketable securities were $1.391B

·     Shoe Carnival (SCVL) Q4 EPS $0.79 vs. est. $0.80; Q4 revs $290.78M vs. est. $309.59M; sees FY23 EPS $3.96-$4.20 vs. est. $4.29; sees FY23 revenue $1.26B-$1.32B vs. est. $1.36B; sees FY23 Cash flows from operations $170M-$210M; capital expenditures $60M-$70M.

 

Energy, Industrials and Materials

·     AAR Corp. (AIR) Q3 EPS $0.75 vs. est. $0.70; Q4 sales rose 15% y/y to $521M vs. est. $487.3M; Ad adj Ebitda $50.2M; 3Q cash flow provided by operating activities from continuing ops of $17M.

·     Array Technologies (ARRY) 4Q adj EPS $0.10 vs est. $0.08 on revs $402.1Mm vs est. $366.8Mm, gr mgn 20%, adj EBITDA $51.7Mm vs est. $44.9Mm; guides FY revs $1.8-1.95B vs est. $1.89B, adj EBITDA $240-265Mm vs est. $248.8Mm, adj EPS $0.75-0.85 vs est. $0.78.

·     Boeing Co. (BA) has secured a deal worth at least $2.5 billion at list prices to sell 21 of its 737 MAX jets to Japan Airlines Co, industry sources said, according to Reuters.

·     Sonoco (SON) raises Q1 adj EPS view to $1.30-$1.40, above prior view of $1.15-$1.25 and said anticipates results to be better than previously expected due to improving productivity, lower than expected input costs, higher demand than forecasted in certain products and end markets.

·     Greenbrier (GBX) Q2 prelim revs seen about $1.1B vs. est. $782.4M and guides prelim Q2 EPS to $0.95-$1.00 vs. est. $0.37.

·     Knight-Swift (KNX) upgraded to Outperform on deal accretion at Wolfe Research.

·     The American Petroleum Institute said weekly Crude oil inventories saw a 3.262 million barrel build compared to estimates of a 1.448 million barrel draw; Gasoline inventories fell by 1.09 million barrels; Distillates fell by 1.84 million barrels.

 

Financials

·     First Republic Bank (FRC) is examining how it can sell parts of its business, including some of its loan book, as it attempts to raise new cash and cut costs.

·     Diebold Nixdorf (DBD) announced an amendment to its asset-based credit facility, or ABL, to add a new $55M first-in-last-out term loan tranche.

·     PaySign Inc. (PAYS) 4Q EPS $0.01 vs est. $0.01, adj EBITDA $1.7Mm vs est. $1.81Mm on revs $10.6Mm vs est. $10.8Mm; guides 1Q revs $10.2-10.3Mm vs est. $10.47Mm, gr mgn 52.5-53.5%, op exp $6.2-6.4Mm, adj EBITDA $0.7-0.8Mm vs est. $1.27Mm; sees FY revs $44-46Mm vs est. $44.96Mm, gr mgn 52.5-55%, op exp $23-25Mm, adj EBITDA $%6.0-7.5Mm vs est. $7.4Mm and adj EPS $0.11-0.14 vs est. $0.04.

 

Healthcare

·     U.S. Senator Elizabeth Warren has urged the U.S. Federal Trade Commission to review CVS Health Corp’s (CVS) $9.5-billion acquisition of Oak Street Health Inc (OSH), Bloomberg reported.

·     HealthEquity (HQY) 4Q adj EPS $0.37 vs est. $0.35 on revs $233.8Mm vs est. $230.7Mm, adj EBITDA $73.6Mm vs est. $69.8Mm; guides FY revs $960-975Mm vs est. $960.9Mm, adj EPS $1.74-1.87 vs est. $1.76 and adj EBITDA $320-335Mm vs est. $323.4Mm.

·     Karuna Therapeutics (KRTX) 2.48M share Secondary priced at $161.33.

·     Altimmune (ALT) downgraded to Neutral from Buy at Goldman Sachs and cut its price target to $6 from $20 after 24-week interim data from the Phase 2 MOMENTUM study of pemvidutide in obese patients.

·     Roche (RHHBY) announces collaboration with Lilly (LLY) to enhance early diagnosis of Alzheimer’s disease Roche and Lilly will collaborate on the development of Roche Diagnostics’ Elecsys Amyloid Plasma Panel

 

Technology, Media & Telecom

·     Calamp Corp (CAMP) files for mixed shelf of up to $150M.

·     Marvell Technology (MRVL) is slashing about 320 jobs, or 4% of its workforce, in what it said was a response to an industry slowdown – Bloomberg.

·     Spotify (SPOT) upgraded to Buy from Neutral at Guggenheim.

·     Warner Music (WMG) upgraded to Buy from Neutral at Guggenheim.