Early Look

Wednesday, September 4, 2024

U.S. futures are looking lower, adding to the sharp declines on Tuesday where the Nasdaq 100 declined -3.1% for its biggest drop since July, led by a 7.75% decline in the Philadelphia Semiconductor index (SOX). The risk-off mood was exacerbated by data that showed manufacturing activity remained in contractionary territory, nearly a month after signs of softening labor demand sparked a global market rout. Markets now eagerly await a slew of jobs data starting with ADP Private payrolls this morning along with JOLTs job openings, jobless claims on Thursday and the Nonfarm payroll report on Friday. WTI crude prices spiking over 1% to $71.09, off lows $69.19 earlier – Reuters reports OPEC+ discussing a delay planned oil output hike in October.

In Asian markets, The Nikkei Index tumbled -1,638 points or 4.24% to 37,047, the Shanghai Index fell -18 points to 2,784, and the Hang Seng Index dropped -194 points to 17,457. In Europe, the German DAX is down -135 points to 18,611, while the FTSE 100 is down -50 points to 8,247. Bitcoin prices -2.85% to $56,500 and Ethereum -2.75% below $2,400. The US Dollar Spot Index halts a five-day rally with most currency majors tightly rangebound. In Stock news, NVDA shares add to yesterday’s decline after reports the U.S. Department of Justice sent a subpoena to the AI chip firm as it deepens its probe into the company’s antitrust practices. Discount/dollar stores under pressure again as DLTR reports quarterly results and guidance that fell short of Wall Street expectations (like DG did last week). Food stocks are weak as HRL misses quarterly revs/cut its sales guidance for FY24.

Looking at the S&P 500, we have been in the same trading range since early August up until yesterday, with every move to the upside or downside “noise” thus far awaiting the next potential trend move. Note the SPY had been topping around $564 and yesterday first day in over 2-weeks under $554.50 – sign of things to come? Or another buying opportunity? Note always bullish FundStrat strategist Tom Lee said Tuesday on CNBC that a 7-10% down move coming in the next 8 weeks (though he remains bullish, moreso on Smallcaps). Lots of concern yesterday as the CBOE Volatility index (VIX) ended the day up 33.25% to $20.72, highest level since August 12^th.

After falling over 2% to start the month of September, RyanDetrick tweets: “The past 13 times the first day of the month was down 2% or more saw the rest of the month higher. Of course, the two worst rest of month returns ever were in September (1974 down 9.9% and 2002 down 7.1%). So, we pretty much have something for everyone here.” Also, @bespokeinvest highlighted yesterday September performance noting the DJIA has averaged -0.37% over the past 20 years, -0.92% over the past 50 years and -1.21% over the past 100 years, with the best % positive of the three being 50% for the last 20 years.

• The Dow Jones Industrial Average fell -626.15 points, or 1.51%, to 40,936.93.
• The Nasdaq Composite tanked -577.33 points, or 3.26%, to 17,136.30.
• The Russell 2000 Index tumbled -68.42 points, or 3.09% to 2,149.21.

• 8:30 AM ET                  International Trade Deficit for July
• 10:00 AM ET                Durable Goods Orders M/M for July
• 10:00 AM ET                Factory Orders M/M for July
• 10:00 AM ET                JOLTs Job Openings for July
• 10:30 AM ET                Weekly DOE Inventory Data
• 2:00 PM ET                   Federal Reserve Releases Beige Book

• Earnings After the Close: AI AVAV BASE BBCP CASY CHPT CPRT CRDO CXM LAKE PHR PNST VRNT YEXT

• Deutsche Bank European TMT Conference, 9/4-9/5, in London
• Goldman Sachs European MedTech & Healthcare Services Conference, 9/4-9/5 in London
• Goldman Sachs 31st Annual Global Retailing Conference, 9/4-9/5, in New York

• China is considering cutting interest rates on as much as $5.3 trillion of mortgages in two steps to lower borrowing costs for millions of families while mitigating the profit squeeze on its banking system. Financial regulators have proposed reducing rates on outstanding mortgages nationwide by a total of about 80 basis points, part of a package that includes an accelerated timeline for when mortgages become eligible for refinancing – Bloomberg.

• DraftKings (DKNG) and White Hat Gaming were fined a total of $22,500 by the state of Connecticut for operating an online slot machine game that failed to pay any winners on more than 20,600 spins over one week in August 2023. – CNBC
• Hormel Foods Corp. (HRL) shares slipped after Q3 sales fell to $2.898B vs. est. $2.95B and last year $2.963B, while EPS of $0.37 was a penny ahead of the $0.36 consensus; narrowed its 2024 EPS view to $1.57-$1.63 from prior guidance of $1.55-$1.65 and lowered FY24 sales view to $11.8B-$12.1B from prior $12.2B-$12.5B.
• Sportsman Warehouse (SPWH) Q2 EPS ($0.16) vs est. ($0.09), adj EBITDA $7.4Mm vs est. $10Mm on revs $288.734Mm vs est. $285.03MM; guides FY sales $1.13-1.17B vs est. $1.178B, adj EBITDA $20-35Mm vs est. $45.21Mm.
• Starwood Property Trust (STWD) 17.5M share Spot Secondary priced at $19.72.
• Autohome (ATHM) announces $200M Share Buyback.

• Boeing Co. (BA) delivered the most 737 Max jets to China in almost six years, offering a glimmer of progress to new Chief Executive Officer Kelly Ortberg as he works to clear a stockpile of completed aircraft and bolster cash at the embattled planemaker – Bloomberg.
• China’s commerce ministry on Tuesday said Canada had “significantly” increased exports of canola and was “suspected of dumping”, adding that domestic manufacturers had incurred losses as a result – Financial Times reported.
• Graphic Packaging Holding Co (GPK) said it expects FY24 adj EPS to fall below midpoint of previously announced $2.65 to $2.85 guidance range (est. $2.70) saying weather led to modestly reduced production.
• Rayonier Advanced Materials (RYAM) to increase prices for cellulose specialties products by up to 10%, depending on product grade, as contracts allow.
• Transocean (RIG) announced that Reliance Industries Limited awarded a binding Letter of Award for the Dhirubhai Deepwater KG1 for six wells offshore India. The estimated 300-day program is expected to commence in the Q2 of 2026 and is estimated to contribute approximately $123M in backlog.
• U.S. Steel (X) would close mills and likely move its headquarters out of Pittsburgh if the $14.9 billion buyout by Nippon Steel collapses, the Wall Street Journal reported on Wednesday citing an interview with the company’s CEO.

• Nasdaq (NDAQ) was double upgraded to Buy from underperform at Banc America and raised tgt to $90 from $53.

• Edwards Lifesciences Corp. (EW) announces $1B share repurchase program.
• HealthEquity (HQY) Q2 adj EPS $0.86 vs est. $0.70, adj EBITDA $128.3Mm vs est. $110.3Mm o revs $299.928Mm vs est. $284.87Mm; sees FY revs $1.165-1.185B vs est. $1.171B, adj EBITDA $458-478Mm vs est. $463.25Mm and adj EPS $2.98-3.14 vs est. $3.01; announces $300M stock repurchase program.

• Supermicro (SMCI) downgraded to Equal Weight from Overweight at Barclays and cut tgt to $438 from $693 citing the company’s “poor” gross margin in the June quarter and the annual filing delay that evidenced several fundamental risks.
• Asana Inc. (ASAN) Q2 EPS loss (-$0.05) vs. est. loss (-$0.08); Q2 revs $179.2M vs. consensus $177.7M; said seeing momentum in key areas, including 17% growth in customers spending over $100,000; announced the appointment of Sonalee Parekh as CFO, effective September 11, 2024, replacing Tim Wan, who has served in the role since 2017; guides Q3 revenue $180M-$181M vs. consensus $182.3M.
• Gitlab Inc. (GTLB) Q2 adj EPS $0.15 vs est. $0.10 on revs $182.6Mm vs est. $176.9Mm, adj gr mgn 91%; guides Q3 revs $187-188Mm vs. est. $187.04Mm, adj op Inc $19-20Mm vs. est. $11.24Mm and adj EPS $0.15-0.16 vs est. $0.11; sees FY revs $742-744Mm vs est. $736.61Mm, adj op Inc $55-58Mm vs est. $36.67Mm and adj EPS $0.45-0.47 vs est. $0.36.
• PagerDuty (PD) shares tumbled after hours; Q2 adj EPS $0.21 tops $0.17 est. and revs $115.9M miss consensus $116.48M; sees Q3 adjusted EPS $0.16-$0.17 vs. est. $0.18 and revs $115.5M-$117.5M below consensus $120.25M; raises FY25 adjusted EPS view to $0.67-$0.72 from $0.66-$0.71 but cuts Fy25 revs to $463M-$467M from $471M-$477M.
• Zscaler (ZS) Q4 adj EPS $0.88 vs est. $0.69 on revs $592.868Mm vs est. $567.93; guides Q1 revs $604-606Mm vs est. $602.77Mm, adj op Inc $114-116Mm vs est. $113.55Mm and adj EPS $0.62-0.63 vs est. $0.73; sees FY revs $2.6-2.62B vs est. $2.625B, adj op Inc $530-540Mm vs est. $ 518.69Mm and adj EPS $2.81-2.87 vs est. $3.33