Mid-Morning Look: April 20, 2023

Mid-Morning Look

Thursday, April 20, 2023

Index

Up/Down

%

Last

 

DJ Industrials

-133.76

0.39%

33,763

S&P 500

-19.17

0.46%

4,135

Nasdaq

-41.34

0.34%

12,115

Russell 2000

-9.97

0.55%

1,789

 

 

U.S. stocks showing similar trading action to yesterday, tumbling overnight on earnings, rate hike, and U.S. debt default concerns, but the opening print (so far) marking the low of the day like Wednesday, as the “buy the dip” theme continues into the 4th month of 2023. U.S. 10-year Treasury yields fall to 3.53% after weaker Philly Fed manufacturing data and two-year yields drop to 4.170%, showing signs of “all clear” for manufacturing not quite yet. Earnings season has been interesting so far, with TSLA lower margins weighing on autos this morning, while TSM beat and not cutting capex helping boost semi, specifically equipment names, while LRCX jumps despite lower outlook. The NYSE breadth 1.7:1 decliners leading advancers as all eleven S&P sectors in the red – though mkts still in rally mode from the open, currently at highs. Reminder option expiration tomorrow, so stocks continue to hold levels in potential jump in volumes. Energy is the biggest decliner early in S&P along with REITs, while financials down slightly after barrage of earnings in regional banks today (CMA, FITB, HBAN, KEY, TFC, ZION). Economic data was generally weaker this morning (jobs, housing, manufacturing).

 

Economic Data

·     Weekly Jobless Claims rose to 245K in latest week vs. est. 240K (prior week upped to 240K from 239K) as the 4-week moving average fell to 239,750 from 240,250 prior week; continued claims rose to 1.865M from 1.804M prior and the U.S. insured unemployment rose to 1.3% from 1.2%.

·     Philly Fed Business Index declined -31.3, worse than the forecast -19.3 and previous -23.2); now 8th straight month reported negative and 10 of last 11 with lowest level since May 2020; employment index -0.2 vs. -10.3; future capital expenditures index was -5.40 vs. prior -3.80 and the new orders index down -22.7 vs. prior -28.2.

·     Existing Home Sales for March fell (-2.4%) vs. Feb +13.8% with 4.44 mln unit rate vs. consensus 4.50 mln and below Feb 4.55 mln; inventory of homes for sale 980,000 units, 2.6 months’ worth and the national median home price for existing homes $375,700, -0.9 pct from March 2022.

 

 

Macro

Up/Down

Last

 

WTI Crude

-1.64

77.52

Brent

-1.49

81.63

Gold

12.20

2,019.50

EUR/USD

0.0025

1.0979

JPY/USD

-0.59

134.10

10-Year Note

-0.068

3.534%

 

 

Sector Movers Today

·     Autos: TSLA shares slide after reported an in-line MarQ Rev/EPS of $23.3B/$0.85 (est. $23.3B/$0.85); but auto margins excluding credits at 19.0%, below 20-22% consensus, down ~430bps q/q with 6 price cuts YTD and underutilization at Berlin/Austin factories and reiterated 2023E production of ~1.8M vehicles. Renault (RNLSY) reported its Q1’23 revenues as deliveries (reported a day earlier) came in 10% ahead of consensus while revenues of €11.5b beat consensus by 3.8% driven by price and mix, with ASPs beating consensus by 2.6%/guidance was unchanged (shares of F, GM, RIVN, NIO weak on TSLA results).

·     In metals: aluminum producer AA posts wider Q1 loss EPS ($0.23) vs est. ($0.11) on revs $2.67B; gold miners bounce (AEM, NEM) as weaker eco data boosts precious metal prices. In steel sector, STLD 1Q adj EPS $4.01 vs est. $3.52, adj EBITDA $950Mm vs est. $954.7Mm on revs $4.89B vs est. $5.0B; NUE Q1 EPS $4.45 tops estimate $3.85 while sales $8.71B misses $8.94B estimate and said average scrap and scrap substitute cost per gross ton $414, below estimate $455.38 and avg sales price per ton decreased 11%.

·     In solar: The House Ways and Means Committee favorably reported H.J. Res 39 to the full House yesterday, calling for the reversal of the Biden Administration’s June 2022 moratorium on new solar tariffs. The resolution should make it to the President’s desk, in our view, where it faces a likely veto. NOVA announces $3 billion U.S. Department of Energy conditional commitment to expand clean energy access and lay foundation for virtual power plant capabilities. JPMorgan said they maintain our near-term preference for utility-scale solar stocks under coverage, though we also believe that the pullback in residential solar stocks presents an opportunity for investors with a medium-term investment horizon – top picks remain ARRY, SHLS, and NXT.

·     REITs: Mizuho said they believe a select list of both SFRs, and Apartments is appropriate, with favored names including AMH and TCN in SFRs, along with AIRC, EQR and CPT in Apartments. CUBE downgraded to Market Perform with $52 target saying heading into earnings, channel checks suggest weaker storage demand. Given CUBE’s strong YTD performance (+14.5% vs RMZ +0.9%), they see risks. Wells Fargo initiates coverage with a preference for Managed Senior Housing over net-lease Senior Housing, Skilled Nursing & Medical Office. Overweight: WELL, VTR, OHI; Equal Weight: PEAK, HR, MPW, NHI, LTC, CTRE; Underweight: SBRA, DOC

 

Stock GAINERS

·     DHI 7%; Q2 EPS $2.73 vs est. $1.93; Q2 revs $7.97B vs. est. $6.47B; homes closed in quarter decreased 1% to 19,664 homes compared to 19,828 homes closed in same quarter of FY22.

·     IBM ; gave a forecast for annual revenue in line with analysts’ projections, delivering a cautiously optimistic signal about technology spending saying sales will increase from 3% to 5% in 2023, and affirmed a previous FCF forecast of $10.0B.

·     LRCX +7%; big miss on outlook ($3.10B/$5.00 vs Street $3.45B/$5.55) but said Q2 is the bottom for memory CAPEX; also, TSM did NOT cut CAPEX last night, keeping guidance unchanged at $32-36B, helping boost equipment stocks (AMAT, KLAC, ASML).

·     LVS +5%; after earnings beat as 1Q EPS $0.28 vs est. $0.20 on revs $2.12B vs est. $1.85B and up from $943M y/y; recorded casino revenue of $1.54B, up from $627M a year ago.

·     NOVA +5%; announces $3 billion U.S. Department of Energy conditional commitment to expand clean energy access and lay foundation for virtual power plant capabilities.

·     NUE +3%; Q1 EPS $4.45 tops estimate $3.85 while sales $8.71B misses $8.94B estimate and said average scrap and scrap substitute cost per gross ton $414, below estimate $455.38.

 

Stock LAGGARDS

·     AXP -3%; Q1 EPS miss at $2.40 vs. est. $2.65 on better revs $14.28B with higher provision and higher expenses but maintains full year rev guidance of 15-17% growth vs. est. 15% and EPS: $11.00-$11.40 range.

·     BBWI -2%; downgraded to Neutral at Piper and lower price target from $48 to $37 saying expectations have been elevated since the company issued what seemed to be rather conservative guidance.

·     FFIV -3%; cuts FY23 revenue growth view to low-single-digits from 9%-11% prior view and guides Q3 revs below ($690M-$710M vs. est. $747M) after slight Q2 beat.

·     NVAX-8%; downgraded to Market Perform at TDCowen and slash tgt to $10 from $55 due to uncertainties about the pending Gavi arbitration & commercial outlook for the COVID-19 vaccine.

·     PM -4%; cuts its full-year profit forecast, to $6.10-$6.22 from prior view $6.25-$6.37 amid rising tobacco leaf prices, energy, and labor costs, while Q1 revs of $8.02B missed $8.11B est.

·     T -8%; as weaker free cash flow of $1B for Q1 missed the $3B estimate, while EPS revs mostly in-line ($0.60/$30.14B vs. est. $0.58/$30.25B); said Q1 wireless postpaid net adds +542,000 (below est. +637,234).

·     TSLA -6%; Street focus on weak margins; reported an in-line MarQ Rev/EPS of $23.3B/$0.85 (est. $23.3B/$0.85); but auto margins excluding credits at 19.0%, below 20-22% consensus, down ~430bps q/q with 6 price cuts YTD.

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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.