Closing Recap

Wednesday, February 21, 2024

Index	Up/Down	%	Last
DJ Industrials	48.38	0.13%	38,612
S&P 500	6.30	0.13%	4,981
Nasdaq	-49.91	0.32%	15,580
Russell 2000	-9.46	0.47%	1,994

 

 

 

 

 

 

 

 

 

US equity futures saw modest overnight declines as investors continue to attempt to forecast Fed moves but have been getting a bit more cautious on rate cut expectations with May now seeing just a 35% probability of a cut and the December implied rate back up to 4.4% into today’s Fed minutes release. Early breadth tilted slightly negative with decliners outpacing advancers by just 1.2:1 overall. Nasdaq breadth was a little more negative at about 1.7:1 decliners, mirroring the relative performance of the QQQ vs SPY. Further on relative performance, small caps were mixed early as IWM held a small outperformance versus QQQ and similar underperformance vs SPY (each about 20bps). Sector-wise, XLE, XLU, XLY, XLRE, XLP and XLI were all outperforming and in the green, while XLK was the primary laggard at about -1.05%. Looking ahead, all eyes will be on NVDA earnings and guidance tonight.

 

In data of interest, WSJ reminds us individual investors have added a net $1.2B into NVDA this year. Something to remember into earnings. On earnings, @DataTrekMB notes with 79% of S&P 500 companies having reported, the season is looking, “distinctly average.” They also note layoffs are growing because earnings are lagging revenue growth. Separately from @DataTrekMB, they comment the Fed is on the right track (a rare view) given their read of inflation expectations in TIPS prices, which historically has been a solid indicator of where policy "should" be. As is often the case, we get a more cautionary comment from @KobeissiLetter, noting the top 10% of stocks in the US currently reflect 75% of the entire market, the most concentrated since the 1931 Great Depression. The historic average is 64%. 

 

Heading into the final hour of trading, markets were just off their lows after fading on more hawkish Fed meeting minutes before a late rip in the final 30-minutes back near intraday highs took the S&P positive (almost a 40-point spike in last 30minutes). Breadth had expanded to just over 2:1 still favoring decliners. Sector performance was still paced to the upside by Energy (XLE, +1.5%), Utilities (XLU, +1.2%) and Real Estate (XLRE, +0.6%). Leading the decliners were Technology (XLK, -1%) and Communication Services (XLC, -0.35%). Small caps lost some ground and were trading about in-line with QQQ but underperforming by about 65bps versus SPY. From a growth vs. value perspective, growth lagged as one may expect with the XLK weakness today. The Russell 1000 Value gained about 0.1%, while its Growth counterpart lost 0.9%. 

 

China’s Shanghai and the Hang Seng gained overnight, boosted after China banned major institutional investors from reducing equity holdings at the open and close of each trading day, Bloomberg News reported as the order from China’s securities watchdog was delivered to major asset managers and the proprietary trading desks of brokerages. Note the CSI 300 index has risen for seven consecutive sessions straddling the Lunar New year holiday period and is up 12% from five-year lows it hit early this month, amid hopes of more forceful measures to revive the market.

• April WTI crude futures erased an early decline to settle higher by $0.87/bbl, or +1.13%, at $77.91. Brent also gained $0.69/bbl, or +0.84%, to settle at $83.03. Ongoing geopolitical issues in the Middle East continue to raise supply concerns and support prices. With no signs of a ceasefire agreement and ongoing attacks against commercial tankers in the Red Sea, there is little to comfort investors. On the demand side, Fed minutes were a bit more hawkish, but perhaps better macro results recently offset the rate concerns by reducing perceived recession risk.

 

Macro	Up/Down	Last
WTI Crude	0.87	77.91
Brent	0.69	83.03
Gold	-5.50	2,034.30
EUR/USD	0.001	1.0812
JPY/USD	0.21	150.21
10-Year Note	0.046	4.321%

 

• In Food Sector: KHC forecasts long-term organic net sales growth of 2% to 3% at CAGNY conference and forecasts long-term adjusted EPS growth of 6% to 8% and said realigned its portfolio around three new platform roles – accelerate, protect, and balance.
• In Restaurants: WING beat Q4 sales and profit estimates driven by increased traffic resulting in 18.3% growth in domestic same-store sales but guides mid-single digit growth in FY24 domestic same-store sales vs. 18.3% growth reported in FY23 and sees higher SG&A expenses vs. FY23 ($108M vs. $96.9M). WEN downgraded from Overweight to Neutral at JP Morgan and trim tgt to $19 after recent Q4 results.
• In Casino/Gaming: CZR reported revenue/EBITDAR at the midpoints of its previous guidance ranges. Several headwinds impacted the quarter, including a tough hold comp in its brick-and-mortar casinos and negative sporting outcomes within its digital business.

• In Weekly Data: US MBA weekly mortgage data showed applications index fell -10.6% in latest week, the purchase index fell -10.1%, the refinance index falls -11.4% as the avg 30-year mortgage rate climbs 19 bps to 7.06%.

• In Solar: another weak earnings report as SEDG Q4 adj EPS loss (-$0.92) vs. est. loss (-$1.33); Q4 revs fell -65% y/y to $316.04M vs. est. $323.3M and guided Q1 revs $175M-$215M well below the $373.44M consensus; said H1 23 included record installations and expectations for continued growth, with a shift in H2 23 to a weaker market due to higher interest rates & lower power prices (shares of ENPH, ARRY, FSLR, SPWR, NOVA, RUN were active).
• In Utilities: NI Q4 revs fell to $1.42B, missing last year/and est. of $1.7B and lower gas distribution operating income as expenses rose 38% y/y, but raised its FY EPS outlook to $1.70-$1.74, from $1.68-$1.72 prior. EXC reported Q4 adj EPS $0.60 above the $0.58 estimate and revs rose to $5.37B vs. est. $3.87B and guided 2024 adj EPS of $2.40-$2.50 vs. est. $2.41 while the company plans to invest $35 billion into its system over the next four years.

• In REIT/mortgage Sector: CSGP forecast full-year 2024 revenue below market expectations, $2.75B-$2.77B vs. est. $2.78B and Q1 revs below views at $645M-$650M vs. est. $652.9M. O posted inline 4Q23 AFFO of $1.01 (+1% YoY) and issued its FY24e AFFO guidance, which captured consensus and reflects 4.3% of AFFO growth at midpoint. SUI reported 4Q23 Core FFO above consensus estimates due to better-than-expected NOI growth and issued in-line 2024 core FFO guidance with 5.4% SS NOI growth.
• In Lending: President Joe Biden’s administration announced that more than 150,000 borrowers will receive $1.2B in student loan forgiveness under a program unveiled in January seeking to provide relief for Americans who had been making payments for at least a decade. The move – which benefits those enrolled in the government’s Saving on a Valuable Education plan – wipes out loans for those who borrowed less than $12,000 for their higher education.

• EBS said they appointed Joseph Papa as its new CEO, effective Feb. 21 as Haywood Miller will step down from his role as interim CEO (Papa recently was CEO and Chairman at Bausch + Lomb).
• HALO announced Q423 results and provided a business update, reporting strong top-line and bottom-line results and the company reiterated guidance provided on its recent long-term strategic update.
• IONS reported a Q4 rev beat of $325M vs. est. $175M helped by increased R&D revs, but guidance below consensus.
• IOVA surged over 30% to new highs after SEC filings showed several insider Buys reported last night following yesterday’s 23M share secondary.
• REGN won FDA priority review for its application seeking approval of linvoseltamab for certain patients with blood cancer multiple myeloma; said the application covers linvoseltamab for adults with relapsed/refractory multiple myeloma that has progressed after at least three prior therapies.

• In Hospital Providers: CYH shares tumbled as reports Q4 adj EPS loss (-$0.41) vs. est. $0.06 on better revs while saying the loss was due to higher costs as it paid more for physicians’ salaries and benefits and guided 2024 EPS loss (65c)-(5c) vs. est. $0.07 and revs $12.3B-$12.7B vs. est. $12.7B.
• In Medical Equipment: BLCO reported 4Q revenue of $1.17B (vs. $1.11B est.) and EBITDA of $231M (vs. $227M est.) FY24 rev guidance was ahead of street, with $4.6B to $4.7B vs. $4.525B est., while EBITDA of $840M to $890M topped consensus of $870M.

• In Transports: UBER to replace JBLU in the Dow Jones Transportation Average effective 2/26; NSC upgraded to OW from EW at Barclays and raise tgt to $305 saying potential for board and management change are likely to accelerate operational improvements at Norfolk Southern and sees significant long-term upside potential in shares.

• In Metals & Mining: aluminum producers rise early after CSTM results; ESI reported Q4 EBITDA/EPS of $120M/$0.32 that were below consensus of $124M/$0.33 while organic sales declined 3%, driven primarily by weaker industrial markets (Industrial/Specialty segment (-7%) and Electronics (-1%). RIO reported a 12% fall in annual underlying earnings on Wednesday, in line with forecasts, but paid a better-than-expected final dividend and said realized iron ore prices dropped 22%; copper, 19%; and for aluminum. Gold miners tumbled.

• In Data center equipment: VRT shares stumble as Q4 EPS beat estimates while revs missed and guided Q1 EPS/revs below consensus and sees FY24 adj EPS $2.20-$2.26 vs. est. $2.24 and revs $7.52B-$7.66B vs. est. $7.54B.
• In Hardware: GRMN advanced on Q4 beat (ESP $1.72 vs. $1.40 est.) and guidance as sees FY sales about $5.75B, above analysts’ estimates of $5.56B, as it expects strong growth in its auto and fitness businesses.

• ADI Q1 results topped views but marked its third straight quarter of declining sales and earnings; guided Q2 adjusted EPS $1.26 plus/minus 10c below consensus $1.57 and Q2 revs $2.1B +/- $100M vs. consensus $2.36B

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Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.