Early Look

Thursday, October 20, 2022

Futures	Up/Down	%	Last
Dow	80.00	0.26%	30,540
S&P 500	1.25	0.03%	3,709
Nasdaq	-23.50	0.21%	11,130

 

 

U.S. stock futures are looking mixed, with Nasdaq futures underperforming behind weaker results and commentary from Tesla (TSLA) as shares are down over 5% overnight while S&P futures are back around the key 3,700 level. After jumping yesterday, Treasury yields remain elevated, with the 10-yr up 1 bps to 4.14% (off overnight highs of 4.18%) and the 2-year yield up 3 bps to 4.58%. The dollar strengthened initially but has now pulled back while the BOJ launches unscheduled bond buying after Japan’s benchmark yield tops 0.25% policy ceiling. Stocks halted a two-day rally on Wednesday, with Treasury yields climbing to multiyear highs; the two-year US yield jumped to the highest since 2007 as traders pushed expectations for a peak policy rate closer to 5%. President Neel Kashkari said late Wednesday that core inflation has not shown evidence it has peaked. Oil futures rose to session highs above $86 after a weekly decline in US crude stocks. In Asian markets, The Nikkei Index fell -250 points to 27,006, the Shanghai Index dipped -0.3% to 3,035, and the Hang Seng Index fell -231 points to 16,280. In Europe, the German DAX is down -67 points to 12, 673, while the FTSE 100 is flat at 6,925. Another heavy dose of corporate earnings on the calendar again today!

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -24.82 points, or 0.67%, to 3,695.16

·     The Dow Jones Industrial Average fell -99.99 points, or 0.33%, to 30,423.81

·     The Nasdaq Composite slipped -91.89 points, or 0.85%, to 10,680.51

·     The Russell 2000 Index declined -30.20 points, or 1.72% to 1,725.76

 

Economic Calendar for Today

·     8:30 AM ET            Weekly Jobless Claims…est. 230K

·     8:30 AM ET            Continuing Claims…est. 1.375M

·     8:30 AM ET            Philly Fed Business Survey for October…est. -5.0

·     10:00 AM ET          Existing Home Sales M/M for September…est. 4.7M

·     10:00 AM ET          Leading Index Change for September…est. (-0.3%)

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

 

Earnings Calendar:

·     Earnings Before the Open: AAL ALK AUB BANC BHLB BKU BX COLB DGX DHR DOV DOW EWBC FCX FITB GPC HOMB HRI IIIN IRDM KEY LNN MAN MMC MSM NURO PM POOL SASR SNA SNV STBA T TSCO WBS WSO UNP

·     Earnings After the Close: AMTB ASB BDN BJRI CSTR CSX CVLG FAT GBCI HTH INDB MSBI OZK PSTV SAM SIVB SNAP THC UFPI WAL WHR

 

 

Macro	Up/Down	Last
Nymex	1.43	86.98
Brent	1.32	93.73
Gold	4.20	1,638.40
EUR/USD	0.0011	0.9784
JPY/USD	-0.05	149.85
10-Year Note	+0.015	4.144%

 

 

World News

·     China’s central bank keeps the banks’ reference lending rates steady in October; 1-year LPR keeps at 3.65% unchanged; 5-year LPR keeps at 4.30% unchanged

·     UKs Truss’ government on the brink as Tory’s revolt for her to go; PM Truss govt is in disarray after Home Sec Braverman quit

·     Bank of Japan announced emergency bond buying ops; offered to buy 100b yen of 10-20Y JGBs to try and contain rising yields

·     The bull-bear spread in the American Association of Individual Investors (AAII) weekly survey was -33.6 vs -35.5 last week: Bulls rise to 22.6% from 20.4%, Neutrals fall to 21.2% from 23.7%, and Bears rise to 56.2% from 55.9%

·     Japan’s trade deficit extends to 14th month amid slide in yen

 

Sector News Breakdown

Consumer

·     Tesla Inc. (TSLA) Q3 EPS $1.05 vs. est. $0.99; Q3 revs $21.45B vs. est. $21.96B; still sees 50% avg annual growth in vehicle deliveries; sees initial phase of semi deliveries begin in Dec. 2022; Q3 free cash flow $3.30B vs. est. $2.89B; Musk said on c/c Tesla’s board has discussed a buyback in the range of $5 billion to $10 billion

·     Philip Morris International Inc. (PM) raised its takeover offer for Swedish Match AB in a deal that values the Swedish tobacco company at 176.4 billion Swedish kronor ($15.72 billion). PM offered SEK106 a share in May, though it has come back with an improved bid of SEK116

·     Las Vegas Sands (LVS) Q3 EPS loss (-$0.31) vs. est. loss (-$0.24); Q3 revs rose to $1.01B vs. est. $985.5M; qtrly consolidated adjusted property ebitda was $191M, up from $47M y/y; Q3 Macau operations revenue $258M vs. $616M; said travel restrictions and reduced visitation continue to impact financial results

·     Tractor Supply (TSCO) Q3 EPS $2.10 vs. est. $2.07; Q3 revs $3.27B in-line with ests; Q3 comparable store sales increased 5.7%; now sees fy22 comparable-store sales up 5.4%-5.8%; had seen up 5.2%-5.8%; raises FY22 EPS view to $9.55-$9.63 from $9.48-$9.60 (est. $9.59) and raises FY22 revenue view to $14.06B-$14.12B from $13.95B-$14.05B

 

Energy

·     Kinder Morgan (KMI) Q3 adj EPS $0.25 vs. est. $0.29; Q3 revs $5.18B vs. est. $4.62B; raises quarterly dividend 3% to 27.75c per share

·     The Federal government announced Tuesday a program that will provide $1.3 billion in debt relief for about 36,000 farmers who have fallen behind on loan payments or face foreclosure

·     Sunrun (RUN) downgraded to peer perform from outperform by Wolfe Research

 

Financials

·     Allstate (ALL) shares slide -8%; said it expects a loss of $675 million to $725 million for Q3, compared with last year’s net income attributable to the company of $538 million – estimates were expecting net income to fall to $112 million for the period

·     Ally Financial (ALLY) downgraded to equal-weight from overweight at Morgan Stanley following Wednesday’s third-quarter results

·     Banner Corp. (BANR) Q3 EPS $1.43 vs. est. $1.39; Q3 revs $162.03M vs. est. $137.18M

·     Equifax (EFX) Q3 EPS $1.34 vs. est. $1.63; Q3 revs $1.24B vs. est. $1.22B; guides Q4 adj EPS $1.45-$1.55 below consensus $1.65 and revs $1.165B-$1.185B vs. est. $1.2B; Strong non-mortgage constant dollar revenue growth of 20% offsetting mortgage market decline; cuts FY22 adjusted EPS view to $7.49-$7.59 from $7.55-$7.80

·     Everest Re (RE) estimates pre-tax net catastrophe losses of $730M for Q3; For Hurricane Ian, Everest’s loss estimate is based on insured industry losses of approximately $55B, driven in part by the significant social inflation in Florida

·     RenaissanceRe (RNR) announced it estimates that losses from certain 2022 catastrophe events will have a net negative impact of approximately $650 million on the Company’s Q3 results

·     PacWest Bancorp (PACW) Q3 EPS $1.02 vs. est. $1.07; Q3 net interest income (NII) increased by $11.3M to $335.2M compared to $323.9 M for Q2

·     SL Green Realty (SLG) Q3 FFO $1.66 vs. $1.78 y/y; Q3 revs rose 3.5% y/y to $212.5M vs est. $187.6M

·     Texas Capital Bancshares (TCBI) Q3 EPS $0.74 vs. est. $1.01; Q3 Net interest income was $239.1M compared to $205.5M for the second quarter of 2022; recorded a $12.0M provision for credit losses for Q3, compared to a $22.0M prior quarter

·     Umpqua Holdings (UMPQ) Q3 operating EPS $0.47 vs. est. $0.45; Operating net income of $103 million, or $0.47 per common share; loan balances increased $1.1 billion or 4.4%; deposit balances increased $685 million or 2.6%; net interest margin increased 47 bps to 3.88%

·     Western Union (WU) backs FY adjusted EPS view $1.75-$1.85 vs. est. $1.80 and reaffirms FY revenue down approximately 11%-13%, with adjusted revenue down in the mid-single digits; sees Q3 revenue down 15%

 

Industrials & Materials

·     Alcoa inc. (AA) Q3 EPS loss (-$0.33) vs. est. $0.19; Q3 sales fell -8.3% y/y to $2.85B vs. est. $2.97B; cut its alumina shipments forecast for the full year to 13.1M-13.3M metric tons, from prior view of 13.6M-13.8M tons; also lowered bauxite shipments for year

·     Dow Inc. (DOW) Q3 operating EPS $1.11 vs. est. $1.08; Q3 revs $14.12B vs. est. $13.1B; packaging & specialty plastics segment net sales in quarter were $7.3 bln, down 5% versus y/y; industrial intermediates & infrastructure segment net sales were $4.1 bln, down 9% versus y/y

·     Knight-Swift Transport (KNX) Q3 adj EPS $1.27 vs. est. $1.33; Q3 revs $1.9B vs. est. $1.89B; cut its adjusted year ESP to $5.17-$5.22 from prior $5.30-$5.45 (est. $5.40)

·     Landstar (LSTR) Q3 EPS $2.76, in-line with estimates and Q3 revs $1.82B vs. est. $1.8B; FY annual revenue expected to be more than $7.5B and EPS more than $11.75 (ests $7.48B and $11.72); says expect number of loads hauled via truck in Q4 to decrease y/y by 2%-4%

·     PPG Industries (PPG) Q3 adj EPS $1.66 vs. est. $1.65; Q3 revs $4.47B vs. est. $4.45B; sees Q4 EPS $1.05-$1.20 vs. est. $1.25 and sales volumes down a mid-single-digit percentage; said inflationary cost pressures persisted with raw material cost inflation of nearly 40% on two-year stack; energy costs continue to rise

·     Steel Dynamics (STLD) Q3 adj EPS $5.46 vs. est. $5.09; Q3 revs $5.7B vs. est. $5.44B; Record cash flow from operations of $1.5 billion; Record steel fabrication operating income of $677 million and record shipments of 218,000 tons; Record steel shipments of 3.2 million tons

·     WD-40 (WDFC) Q4 EPS $1.08 vs. est. $1.22; Q4 revs $130.2M vs. est. $131.1M; guides year EPS between $5.09-$5.24 vs. est. $5.05; current inflationary environment disrupted ability to achieve 55% gross margin target over near term

 

Technology, Media & Telecom

·     IBM Corp. (IBM) Q3 adj EPS $1.81 vs. est. $1.77; Q3 revs $14.1B vs. est. $13.51B; cloud revenue rose 11% to $5.2B in the quarter, and now expects its annual revenue to increase more than its previous estimate of mid-single-digit growth at constant currency; increased its full-year estimate for foreign exchange impact to 7% from 6%

·     AT&T (T) Q3 adjusted eps $0.68 vs. est. $0.60; Q3 revs $30.0B vs. est. $29.84B; adjusted ebitda $10.7B, mobility revenue $20.3B; wireless postpaid net adds +964,000 (vs. est. +913,399); adj EBITDA $10.7B (est. $10.39B); sees FY Adj EPS at least $2.50, from prior $2.42-$2.46

·     Lam Research (LRCX) Q1 EPS $10.42 vs. est. $9.53; Q1 revs $5.07B vs est. $4.91B; guides Q2 EPS $10.00 plus/minus $0.75 vs. est. $9.47 and sees Q2 revs $5.1B plus/minus $300M vs. est. $4.91B; sees Q2 gross margin 44.5% plus/minus 1%

·     Crown Castle (CCI) Q3 AFFO $1.85 vs. est. $1.83; Q3 revs $1.57B vs. est. $1.74B; raises quarterly dividend to $1.56 from $1.47; guides FY23 AFFO $7.58-$7.68 vs. est. $7.54 and revs $6.4B-$6.53B vs. est. over $7B

·     Oracle (ORCL) upgraded to Neutral from Underweight at Piper Sandler