Closing Recap

Friday, May 05, 2023

Index	Up/Down	%	Last
DJ Industrials	546.57	1.65%	33,674
S&P 500	75.15	1.85%	4,136
Nasdaq	269.02	2.25%	12,235
Russell 2000	41.07	2.39%	1,759

 

 

 

 

 

 

 

 

 

One of the more relaxing days for bullish investors as stock markets opened to the upside and continued to extend gains throughout the trading day without any significant pullbacks. Better earnings from tech bellwether Apple (AAPL) and a relief rally in regional bank stocks (KRE) helped ease investor concerns, snapping a 4-day losing streak for the S&P 500 and Dow in the process. CNBC also reported on the debt ceiling, saying that the White House is weighing short-term extension of debt ceiling into the Fall seen as last resort option if both sides can’t come to a compromise by June. That coupled with a much stronger jobs report, all helped U.S. averages climb Friday, paring the weekly losses for major averages. Nonfarm payrolls for April stronger, rising +253K vs. est. 180K, though March was revised lower to 165K from 236K and February to 248K from 326K; private sector jobs rose +230K vs. est.+160K, manufacturing jobs rose +11K vs. est. -5K; the unemployment rate fell to 3.4% from 3.6% prior while wages jumped with average hourly earnings +4.4% y/y vs. est. 4.2% and average hourly earnings all private workers +0.5% m/m (cons +0.3%). The data didn’t spook stock markets which have been forecasting (bond markets/fed fund futures) rate cuts middle of this year through end of 2023, bring the rate down about 75-bps from current level (5%-5.25%). Treasury yields did jump higher, especially on the short end of the curve, but stocks pushed higher all day in another market disconnect.

 

Commodities, Treasuries & Currencies

·     Gold prices fell -$30.90 or 1.5% to settle at $2,024.80 an ounce, comes a day after surging to $2,072.19 on Thursday, just shy of a record high of $2,072.49, and finished the week with gains of roughly 1.6%. Renewed concerns about the US banking sector fueled bets that the Federal Reserve may have to cut rates sooner than anticipated. After today’s better jobs data, those odds went down slightly, but still a sharply lower terminal rate expected by year end. Oil prices rose $2.78 or 4.05% for WTI crude to settle at $71.34 per barrel, but down 7% on the week.

·     Treasury yields soared as the 1-month yield pares gains, now up 90 bps to 5.45% after rising over 100-bps prior to jobs data at record highs; the 2-yr yield jumps 16-bps to 3.89% and 10-year up 9-bps to 3.44% as jobs data pushes out hopes/chances of Fed rate cuts further into the year (as per Fed fund futures).

 

 

Macro	Up/Down	Last
WTI Crude	2.78	71.34
Brent	2.80	75.30
Gold	-30.90	2,024.80
EUR/USD	0.0005	1.1018
JPY/USD	0.50	134.77
10-Year Note	0.096	3.448%

 

 

Sector News Breakdown

Consumer

Retailer, Consumer Staples & Restaurants:

·     FIGS reported a 1Q beat on revenue +9.2% (Street +2%), GM% +10 bp to 71.3% (Street -350 bp), and EBITDA margin -930 bp to 13.4% (Street -1,340 bp).

·     FNKO jumps over 20% early after better Ebitda guidance for 2023, offsetting a lower sales outlook (follows Q1 EPS and sales beat).

·     MNST, BGS, POST, LOCO among other names active post earnings results.

·     QRTEA shares surge after Q1 beat (revs $2.64B topped $2.56B est., but down from $2.88B y/y).

·     VFC upgraded to Equal weight from Underweight at Wells Fargo saying they move to the sidelines as negative catalysts have played out, management changes have been made, and numbers next FY have been cut and going forward, Vans KPIs are most important to watch.

·     OTLY Downgraded to Underperform from Neutral at Exane BNP.

 

Leisure, Gaming & Lodging:

·     In autos: CVNA shares jumped after posting a narrower-than-expected quarterly loss and said it hopes to achieve positive adjusted EBITDA this quarter.

·     In casinos/gaming: DKNG shares rise as boosted revenue more than 80% from last year to $770M, crushing estimates of $705M, and now expect annual revenue to easily clear $3 billion for the first time and adjusted Ebitda.

·     In food/ride hailing delivery: LYFT shares tumbles as forecast falls short of estimates as sees Q2 revs $1.0B-$1.02B vs. est. $1.08B; DASH raises its guidance for the year, citing continued strong demand after posting a smaller Q1 loss and better revs on record revenue and orders.

·     In online travel: BKNG 1Q22 nights/bookings were 7%/8% above consensus forecasts on strong demand and expanding booking windows. EBITDA was 6% below consensus, due to BKNG’s spending more on paid marketing; EXPE reported solid 1Q23 results, headlined by a $1.1 billion gross bookings beat coupled with a recovery in international.

 

Energy, Industrials, Materials

·     In the E&P sector: EOG delivered a 1Q23 beat with production, EBITDA and FCF all exceeding consensus estimates. CTRA delivered a 1Q23 beat on EBITDA and FCF of $1,230mm and $555mm, respectively, ahead of consensus estimates of $1,176/$1,140mm and $525/ $483mm, respectively and FY23 production and capex guide remained unchanged.

·     In Metals: gold and silver prices tumble (GLD, GDX, SLV) on strong jobs report, lessening chances for Fed rates cuts in coming meetings as forecasted by fed fund futures yesterday.

·     In Transports: CAR was upgraded to EW from UW and raised tgt to $182 at Morgan Stanley saying Q1 results were strong with positive forward view on travel patterns and fleet discipline.

 

Financials

Banks, Brokers, Asset Managers:

·     Shares of U.S. regional lender rise early on Friday after a brutal week of losses that saw their peers FRC collapse and PACW exploring strategic options. Reuters on Thursday reported that U.S. officials at the federal and state level are assessing the possibility of "market manipulation" behind big moves in banking share prices in recent days. JPMorgan upgraded shares of ZION, CMA, WAL to Overweight from Underweight saying they appear substantially mispriced to them. Said with sentiment this negative, in their view it won’t take much to see a significant

·     In crypto & Fintech: COIN Q1 results beat, but company warns of lower subscription and services revenue – 1Q revs fell -34% y/y to $772.5M vs. est. $653.8M; SQ posts 1Q23 gross profit beat and modest guidance raise with strong Cash App growth (new actives +17% YoY, inflows per active +8% YoY, and improved monetization).

 

Healthcare

Biotech & Pharma:

·     APLS reported Q1 Syfovre sales of $18MM, well above consensus of $2.5MM and disclosed that >6k vials were shipped to physicians during the first 5 weeks of launch, implying approx. $11-12MM in demand according to TDCowen.

·     BIO was among worst in the S&P and qtrly miss ($3.34/$676.8M vs. est. $3.54/$689.8M and said sees FY23 currency neutral revenue growth of 4.5%.

·     FGEN shares fell after saying its drug roxadustat failed to meet main goal in a late-stage study testing it as a treatment of anemia in patients with a type of bone marrow cancer.

·     ITCI Q1 earnings saw solid Caplyta sales of $95M, above consensus and we believe growing Street expectations, driven by growing patient demand and better than expected G/N dynamics

·     LNTH 1Q results were $20mn/$0.18 ahead of Street expectations, driven by continued excellence in Pylarify (actual $196mn; Street $181mn)

·     TWST lowers fiscal year 2023 revenue guidance range and strategic restructuring plan.

 

Healthcare Services & MedTech movers:

·     CI raises 2023 profit forecast after strong growth and lower medical costs at its health insurance business helped it beat estimates in Q1.

·     PODD reported Q1 sales and EPS that easily exceeded expectations and raised 2023 guidance with margin expansion weighted to 2H

·     TRUP shares plunged as posted a wider first-quarter loss despite a surge in revenue as the costs of veterinary services rose sharply (up 15% vs. 3% assumptions).

·     GMED reported Q1’23 sales 9% above consensus and EPS $0.02 ahead of the Street, with the company reiterating its FY23 guidance.

·     TNDM tumbles after being downgraded to Underperform from Neutral at Bank America saying estimates look more at risk post the Q1 results after PODD took 70% of new pumper share in Q1.

 

Technology

Internet, Media & Telecom

·     In media: LYV shares jumped after reported a narrower quarterly loss citing incredible demand for live concerts as revs rose 73% y/y to $3.1B, far surpassing the $2.27B consensus. WBD posted an unexpected quarterly loss while revs of $10.7B was just shy of consensus.

·     In Internet: GDDY delivered in-line 1Q results with solid growth in Applications and Commerce (12% y/y) though softer results in Core Platform (0% y/y) due mostly to slower aftermarket sales.

 

Hardware & Software movers:

·     Apple (AAPL) shares jump; reported a top and bottom-line quarterly beat, raised its dividend, and announced a $90B share buyback, but revs fell for the 2nd straight quarter and guidance for next quarter implies revs falling a 3rd straight. Q2 iPhone sales rose 1.5% to $51.33B (better), Mac sales fell more than 30% to $7.17B (miss), and services business grew 5.5% to $20.9B.

·     Software earnings movers: BILL shares jump after earnings beat and higher outlook and better-than-feared core TPV growth; TEAM shares stumbled as reported solid F3Q revenue upside, driven mainly by strong Data Center activity but Cloud revenue growth decelerated to 34% Y/Y (vs. 41% in F2Q) due largely to lower installed base expansion rates and guided Q4 revenue $900M-$920M vs. est. $919.51M; FIVN reported beat/raise 1Q23, with an implied slight downtick in C2H23 top line as 1Q/2Q upside was not flowed through to 2023 top-line increased guide; FTNT reported total billings growth of 30% Y/Y nicely surpassed the Street’s ~25% forecast with product revenue growth of 35% Y/Y also showing healthy upside, with higher Q2 guidance.

·     IT Services & Consulting: NET upgraded to Neutral from Sell at Guggenheim as the shares have dropped 32% below their lowered price target of $40 since they reported disappointing 1Q23 earnings results recently.

·     Communications & Networking: MSI Q1 results featured upside to revenue, operating income and EPS metrics, and updated guidance; TEL upgraded to Outperform at Evercore/ISI and raised tgt to $150 as think FTM estimates should have room to move higher.

 

Semiconductors:

·     AAPL impact: stronger quarterly iPhone results from AAPL overnight help boost the semis.

·     MCHP slips as reported Q4 results and gave a cautious outlook citing concerns about inventories and demand as headwinds.

·     MPWR slumps after results as GM down 80bps Q/Q to 57.7% in 1Q and expected 50bps lower each in 2Q/3Q before stabilizing at ~56% in 4Q.

·     CRUS posted in line F4Q (March) results and guided F1Q (June) lower given weaker smartphone (iPhone) volumes and weaker general market demand.