Mid-Morning Look

Wednesday, January 31, 2024

Index	Up/Down	%	Last
DJ Industrials	32.39	0.08%	38,500
S&P 500	-36.02	0.73%	4,889
Nasdaq	-210.19	1.36%	15,299
Russell 2000	-8.31	0.42%	1,987

 

 

U.S. stocks are down notably for the first time in several weeks amid several catalysts. 1) tech giants AMD, GOOGL, MSFT reported better quarterly results, but guidance, commentary, and high expectations lead to sell-off in tech space (though shares of all three defended by several analysts this morning); 2) the US Treasury increases its auction sizes in quarterly refunding (QRA); 3) ADP jobs data comes in weaker than expected ahead of nonfarm payrolls Friday; 4) positioning and profit taking in some big movers ahead of the FOMC meeting results/press conference at 2:00/2:30 respectively today. U.S. stocks have risen for 12 of the last 13-weeks based on expectations of a “soft-landing” for the U.S. economy and rising expectation of a dovish Fed and aggressive rates cuts starting as soon as March (over 125-bps cuts still baked into futures markets for 2024) – at what point do markets take a “breather” and allow investors time to digest the most recent move? Fed Chairman Powell press conference starts at 2:30 PM after the policy decision announced at 2:00 PM (no changes anticipated today). The 10-year Treasury yield drops to lows, falling below 3.95% down over 10-bps on weaker data (ADP/Chicago PMI/ECI).

 

US Treasury announces quarterly refunding of $121B, to raise new cash of $15.9B and says plans to gradually increase issuance sizes for nominal coupon floating rate note securities in February-April 2024 quarter. The US Treasury to sell $54B in three-year notes, $42B in 10-year notes, and $25B in 30-year bonds next week. For February through April, Treasury will increase its monthly 2-year and 5-year note auctions by $3B a month each. It is boosting sales of other maturities by smaller amounts. That includes a $2B bump to 10-year note sales, and a $1B increase in 30-year bonds.

• Q4 employment cost index +0.9% (vs. consensus +1.0%) vs Q3 +1.1% (prev +1.1%) and U.S. Q4 wages/salaries +0.9% vs Q3 +1.2% (prev +1.2%). U.S. Q4 benefit costs +0.7% vs Q3 +0.9% (prev +0.9%). WSJ’s Nick Timiraos noted “the employment-cost index is seen inside the Fed as the highest-quality measure of compensation growth. Q4 data shows the labor market continued to cool. Wages and salaries for private sector workers excluding incentive paid occupations slowed in Q4.
• Chicago PMI January index 46.0 (below consensus 48.0)

 

 

Macro	Up/Down	Last
WTI Crude	-1.48	76.34
Brent	-0.92	81.95
Gold	22.10	2,073.00
EUR/USD	0.0034	1.0873
JPY/USD	-1.05	146.55
10-Year Note	-0.096	3.962%

 

• Industrials: POWL surged after reported a rise in Q4 profit amid higher revenue and increased its dividend. ROK Q1 adj EPS $2.04 below $2.46 y/y, and consensus $2.66 as sales rose 3.6% y/y to $2.05B but below est. $2.1B as lowers FY EPS view to $11.24-$12.74 vs. forecast $11.49-$12.99 and raises capex to $67.9M vs. $24.2M y/y. ROP Q4 organic revs Cont ops +8%, vs. est. +5.91% but expects FY24 adj EPS of $17.85-$18.15 (below est. $18.37) with Q1 adjusted EPS of $4.30-$4.34 and expects full year total revenue growth of +11-12% and organic revenue growth of +5-6% (after Q4 revs topped consensus).
• In Chemicals: ASH guided sequential growth in sales in the upcoming quarter as sees Q2 revenue $565M-$585M, above consensus $561.06M and FY24 revenue $2.15B-$2.25B (vs. est. $2.15B); In Fertilizers, UBS downgraded shares of CF, LXU to Neutral from Buy, saying they lean a bit counter consensus, maintaining a modestly positive view of its Ag coverage (fertilizers, seeds/crop chems), but become increasingly selective. UBS’s preferred subsector picks are CTVA & NTR, both near trough valuations and with catalysts through the year that could improve sentiment.

 

• BSX +2%; Q4 sales rose 15% to $3.73B topping analyst estimate of $3.59B on better EPS; Sales growth topped 10% in all regions and issued upbeat guidance.
• NVO +6%; reported a 31% increase in sales for 2023 and issued better-than-expected guidance for 2024.
• PARA +8%; after Bloomberg reported Media mogul Byron Allen has made a $14.3 billion offer to buy all the outstanding shares of the company, offering $28.58 each for the voting shares of Paramount, a 50% premium to recent trading, and $21.53 for the non-voting shares http://tinyurl.com/mpenun8m
• SBUX +2%; Q1 top and bottom line missed ($0.90/$9.4B vs. est. $0.93/$9.6B) and same-store sales rose by 5%, below expectations for 7.1%; also trimmed its FY24 sales outlook to grow between 7% and 10% year-over-year.
• SYK +7%; as Q4 revenue and EPS significantly beat consensus and management provided 2024 revenue and EPS guidance that was above consensus.

 

• AMSC -15%; priced its underwritten public offering of 5.4M shares of common stock at $11.25 per share.
• EXTR -19%; shares slide as forecasts Q3 adj EPS loss (-$0.17-$0.22) vs. est. profit $0.28 and revs seen in in the range of $265<-$275M vs. est. $355.32M.
• GOOGL -5%; beat on top and bottom line for Q4 while Google Search and other advertising was up 13% y/y to $48.02B, a touch light of ests; said capex was $11B, up from $8B in the September quarter.
• NYCB -40%; cut its dividend to $0.05 from $0.17 and recorded a $552M provision for loan losses, up from $62M in Q3.
• ROK -14%; Q1 adj EPS $2.04 below $2.46 y/y, and consensus $2.66 as sales rose 3.6% y/y to $2.05B but below est. $2.1B as lowers FY EPS view to $11.24-$12.74 vs. forecast $11.49-$12.99 and raises capex to $67.9M vs. $24.2M y/y.
• TER -9%; fell on mixed Q4 and lower guidance; Q4 adj EPS $0.79 vs. est. $0.71; Q4 revs $671M vs. est. $674.66M; guided Q1 adj EPS $0.22-$0.38 on revs $540M-$590M, below consensus of $0.53/$625.13M.

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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.