Mid-Morning Look

Thursday, July 25, 2024

U.S. stocks open mixed, with the S&P 500 Index down for the 6^th time in the last 7 trading days and coming off its first -2% decline day in 356 trading days, but no bounce thus far. The Nasdaq Composite is also down for the 6^th time in 7 days, down as much as -1.5% before paring losses following its -3.6% drop on Wednesday, as weakness in mega cap tech and semiconductors leading to the downward spiral. While earnings season results and guidance has certainly disappointed so far (very early start of season) with lots of big tech weighing (TSLA, GOOGL, TER, STM, NXPI, MXL, many others) media pundits focusing on the currency mkt as to a reason for the recent pullback in stock markets, particularly the Yen/dollar move for the recent market unwind. The USD/JPY seeing recovery in the US dollar vs. yen back to 154 level (off earlier low of 152.18), but now edging lower again. The yen has surged over 4% this month amid unwinding of crowded carry trades ahead of next week’s BOJ meeting. Media noting lots of people had borrowed in yen and bought assets/stocks – and now with the yen appreciation over the last 2-weeks (from monthly highs around 162) is causing a big unwind of risk assets. After the worst day in 2024 on Wednesday, zero lift thus far in any markets outside of Smallcap Russell 2000 (note Small Caps are up 7% over the last 10 trading days while US Large Caps are down 4%). Economic data today a total mixed bag as jobless claims weak (but was in-line), Durable Goods Orders tumbled -6.6% on the month missing ests, GDP showed a rise from prior estimate and quarter, while GDP PCE saw an increase in prices – all ahead of monthly PCE inflation data tomorrow. The 10-yr yield tumbled -7bps to around 4.2% and 2-yr -5.3bps to 4.363% ahead of GDP data. Bitcoin falls -3% to one-week low around $63,500. Precious metals tumble with gold -2%.

• Weekly Jobless Claims 4-wk avg climbed to 235,500 Jul 20 week from 235,250 prior week (previous 234,750); the 4-week moving average fell to 235,000 from 245,000 prior week; continued claims fell to 1.851M Jul 13 week (con. 1.860M) from 1.860M the prior week (prev 1.867M); U.S. Insured Unemployment Rate unchanged at 1.2%.
• June Durables orders dropped -6.6% vs. consensus +0.3% and vs May +0.1%; June Durables ex-transportation orders +0.5% (cons +0.2%), June Durables ex-defense orders -7.0% vs May unchanged (prev -0.2%), June gen. Machinery orders +1.6%, electrical equipment +1.3%, defense aircraft/parts -10.0%.

• In Autos: Ford (F) shares sunk on mixed Q2 results as revs of $47.8B topped consensus but EPS of $0.47 was well below the consensus $0.68 saying higher costs related to warranty work to fix customers’ older models weighed on profits; also left its full-year profit outlook unchanged (after GM raised guidance the other day). STLA another auto tumbling on earnings as posted a steep first-half drop in earnings that fell below forecasts noting Net profit fell 48% to 5.65 billion euros ($6.13 billion) on year, trailing forecasts and revs fell -14% to EUR85.02 billion, below consensus of EUR86.50 billion and adj operating income plunged 40% to EUR8.46 billion. In Auto suppliers & Retailers: LEA mixed Q2 with EPS beat, and slight rev miss while lowers FY24 revenue view. In auto retailers: ORLY reported Q2 EPS of $10.55 (vs. $11.00 Consensus) and comp growth of 2.3% (vs. 3.1% Consensus).
• In Media: UMG shares tumbled after Q2 revenue from subscriptions and streaming grew just 4.1%, well below analysts’ forecasts of more than 10%; reported revenue of EU2.93B for the three months to the end of June, up 9.6% on year vs. est. EU2.89B; streaming revenue contracted 3.9% at constant currency to EUR343 million. SIRI was downgraded to Sell from Neutral at Citigroup. WBD is suing the National Basketball Association after it rejected the media giant’s matching bid for broadcasting rights, CNBC reported. The NBA on Wednesday rejected an offer from Warner’s TNT sports division — ending their four-decade long partnership — and announced new rights agreements with DIS ESPN, CMCSA-owned NBCUniversal and AMZN in an 11-year deal valued at $77 billion.
• In Aerospace & Defense: Bombardier Q2 revenue rose 32%, helped by higher plane deliveries and stronger sales in the Canadian business jet maker’s services business; said delivered 39 aircraft in the quarter, up 10 from a year earlier and reported a 5% higher backlog of $14.9 billion; NOC raised its forecast for full-year revenue and profit, amid increased global defense spending and a strong backlog; now sees year sales up to $41.4B from prior $40.8B-$41.2B and higher profit view; RTX raised its full-year profit forecast driven by a rebound in the broader commercial aviation sector; sees FY adj EPS $5.35-$5.45 vs. prior view $5.25-$5.40 per share.

• IBM +3%; 2Q total revs $15.77B top consensus $15.61B on better margins 57.8% with Pre-tax margin of 17.7%; Q2 software revs beat at $6.74B (+8% y/y cc) vs est. $6.51B.
• HOG +8%; reported Q2 earnings that beat expectations by a wide margin, as lower pricing helped fuel an increase in shipments; Motorcycle shipments increased 15.9% to 49,700, revenue fell 8% due to less third-party distributor volumes, now expects Harley-Davidson Motor Company revenue to be down 5% to 9%, vs. prior down -5%.
• MOH +17%; reported a +6.5% adjusted EPS beat vs. Street against a consolidated MLR of 88.6% (in line with Street) and adjusted SG&A ratio of ~6.9% (-20-bps vs. Street). Operating revenues came in +1.3% above Street.
• NOW +12%; after reported Q2 cRPO growth of ~22.5% cc, above guide of 20.5% and guided Q3 cRPO 22% ccm which was above Street at ~21.5% & FY24 rev guide was modestly raised.
• RTX +8%; raised its full-year profit forecast driven by a rebound in the broader commercial aviation sector; sees FY adj EPS $5.35-$5.45 vs. prior view $5.25-$5.40 per share.
• UHS +7%; marks the third hospital provider to top consensus this week, following footsteps of HCA and THC.
• VKTX +30%; after saying it plans to move its injectable obesity treatment into a Phase 3 study faster than expected, bringing the biotech closer to joining the highly competitive GLP-1 drug market.

• DOW -2%; Q2 operating EPS $0.68 missed consensus $0.71 on revs $10.92B below consensus $11.01B; said sees an uptick in sales in Q3 at $11.1B, but still lower than estimates of $11.35B.
• EW -24%; downgraded by Wall Street analysts after the company missed for two quarters in a row and last night lowered its 2024 TAVR growth guidance to 5%-7% from 8%-10%, as well as a lower ’24-’25 rev growth & EPS outlook.
• F -16%; shares sunk on mixed Q2 results as revs of $47.8B topped consensus but EPS of $0.47 was well below the consensus $0.68 saying higher costs related to warranty work to fix customers’ older models weighed on profits; also left its full-year profit outlook unchanged.
• HON -5%; shares drop on results and guidance as Q2 topped consensus, but guidance was mixed as raised full-year sales to range from $39.1B-$39.7B, up from prior guidance of $38.5B-$39.3B but cut FY adj EPS to a range of $10.05-$10.25, down from prior guidance of $10.15-$10.45.
• LULU -6%; Citigroup downgraded to Neutral from Buy and cut tgt to $300 from $415 saying following years of benefitting from outsized growth in active apparel, trends in the category have slowed in fiscal 2024 with Citi’s credit card data in yoga and active apparel pointing to a further deceleration in Q2 versus Q1
• MXL -26%; shares tumbled as Q2 adj EPS ($0.25)/$91.99Mm revs missed and guided Q3 revs $70-90Mm vs est. $111.08Mm; guided revenue below the Street for the 7th straight quarter noted Needham.
• NYCB -6%; cuts its 2025 profit forecast to be up to $0.05, down from its prior view of up $0.35-$0.40 and posts Q2 loss of $333M or -$1.14 per share vs. a profit of $405M or +$1.66 per share y/y; said its unit Flagstar Bank is selling its residential mortgage servicing business to non-bank mortgage platform to COOP for nearly $1.4 billion
• STM -12%; cut its full-year revenue and margins guidance for a second time on weak industrial orders and lower demand for automotive chips, sending its shares sharply lower.
• TER -13%; shares slumped after reported Q2 EPS and revs that topped consensus but guidance for Q3 fell short with EPS $0.66-$0.86 below consensus $0.86 and revs $680M-$740M midpoint missing est. $717.7M.
• WBD -6%; is suing the National Basketball Association after it rejected the media giant’s matching bid for broadcasting rights, CNBC reported. The NBA on Wednesday rejected an offer from Warner’s TNT sports division.
• WST -14%; shares fell after Q2 profit and revs miss consensus; lowers 2024 profit forecast to $6.35-$6.65 from prior $7.63-$7.88 view and consensus $7.74; cuts year sales view to $2.87B-$2.90B from $3B-$3.03B prior.