Early Look

Wednesday, January 17, 2024

U.S. futures are pointing to a lower open following weakness in Europe and Asia after economic data raised fears. In the UK, consumer price inflation (CPI) sped up for the first time in 10 months in December, rising to 4.0% from November’s more-than-two-year low of 3.9% and denting market expectations for an early Bank of England rate cut. In Asia, markets tumbled after China GDP, retail sales miss and China’s December 1st-tier cities’ new home prices fell (-0.4%) m/m and (-0.3% y/y), showing a deepening property crisis and mounting deflationary risks. Still, given the broad weakness overseas, S&P futures (Spuz) are down only a modest -0.4% at 4,780, a level that has been key support the last 6-trading days. In Asian markets, The Nikkei Index fell -141 points to 35,477, the Shanghai Index dropped over -2% or -60 points to 2,833, and the Hang Seng Index plunged -589 point or 3.71% to 15,276. In Europe, the German DAX is down over -1% or 177 points to 16,294, while the FTSE 100 declines -129 points or 1.7% to 7,428. A busy day of economic data in the U.S. later this morning and some Fed speakers will be closely watched for more rate cut hints.

U.S. stocks and bonds fell Tuesday after Fed Governor Christopher Waller said the U.S. is "within striking distance" of the Federal Reserve’s 2% inflation goal, but the central bank should not rush towards cuts in its benchmark interest rate until it is clear lower inflation will be sustained. While the comments lifted Treasury yields/US dollar and sunk stocks, they fell only slightly showing ongoing resiliency for major averages with only modest losses despite declining breadth. Technology was the only sector higher on Tuesday (remains the haven trade for investors) as Energy fell the most (and lags most YTD).

Warnings signals continue to be shown, yet the broader stock market continues to shrug it off time and time again with the S&P 500 still just shy of its all-time highs. Note @jasongoepfert tweeted “On the NYSE, more than 85% of volume flowed into declining issues. Yet the S&P 500 was down less than -0.5%. Going back to 1962, I can find only one other time the S&P held up so well despite overwhelming downside volume. That was November 27, 2007.”

• The Dow Jones Industrial Average fell -231.86 points, or 0.62%, to 37,361.12.
• The Nasdaq Composite slipped -28.41 points, or 0.19%, to 14,944.35.
• The Russell 2000 Index declined -23.66 points, or 1.21% to 1,927.30.

• 8:30 AM ET                  Import Prices for December…est. (-0.5%)
• 8:30 AM ET                  Export Prices for December…est. (-0.6%)
• 8:30 AM ET                  Retail Sales M/M for December…est. +0.4%
• 8:30 AM ET                  Retail Sales – Less Autos M/M for December…est. +0.2%
• 8:55 AM ET                  Johnson/Redbook Weekly Sales
• 9:15 AM ET                  Industrial Production M/M for December…est. 0.0%
• 9:15 AM ET                  Capacity Utilization for December…est. 78.7%
• 10:00 AM ET                Business Inventory M/M for November…est. (-0.1%)
• 10:00 AM ET                NAHB Housing Market Index for January…est. 39 (prior 37)
• 1:00 PM ET                   US Treasury to Auction $13B in 20-year notes.
• 2:00 PM ET                   Federal Reserve Releases Beige Book
• 3:00 PM ET                   Fed’s Williams Speaks at NY Fed Event
• 4:30 PM ET                   API Weekly Inventory Data

• Earnings After the Close: AA DFS FUL KMI NVEC SNV WTFC

• China’s home prices fell the most in almost nine years. China’s December 1st-tier cities’ new home prices fell (-0.4%) m/m and (-0.3% y/y), 2nd-tier down (-0.4%) m/m and +0.1% y/y. There are 62 cities out of 70 with m/m decreases in sales prices of new homes and 70 decrease in 2nd-hand, compared to 59 and 69 in November respectively.
• US spending bill to avert shutdown clears first Senate hurdle. Congress has four days to act as the Senate plans first vote on deal to avert shutdown Tuesday. Transportation, housing, energy, and other federal programs are at risk if Congress doesn’t pass a stopgap budget before midnight Friday. Congress is facing fast-approaching deadlines on Friday and on Feb. 2.
• UK consumer price inflation (CPI) sped up for the first time in 10 months in December, rising to 4.0% from November’s more-than-two-year low of 3.9% and denting market expectations for an early Bank of England rate cut.
• ECB’s Simkus is “far less optimistic” than markets on rate cuts ‘ “If we don’t see any surprises that would change the data and the thinking, I’m positive about rate cuts this year,” Simkus said Tuesday in Vienna. “But I’m far less optimistic than markets about rate cuts in March or April.” – Bloomberg.
• ECBs Muller said “market expectations for 2024 ECB rate cuts are aggressive; Wage growth is not in line with the inflation target.

• Camping World (CWH) announces review of potential strategic alternatives for Good Sam Business; said no decision has been made whether to proceed with any particular alternative; has not set a deadline for strategic alternatives review process.
• Instacart (CART) upgraded to Outperform from Peer Perform at Wolfe Research.
• Mattel (MAT) downgraded to Equal Weight from Overweight at Morgan Stanley.
• Rivian Automotive (RIVN) downgraded to Hold from Buy at Deutsche Bank.

• SunPower (SPWR) adopts restructuring plan to reduce costs saying sees restructuring charges of about $12.8M, including about $8.2Mm in severance benefits16; said reducing costs due to slower sales driven, in part, by higher interest rates.

• Fulton Financial (FULT) Q4 operating EPS $0.42 vs. est. $0.40; sees FY24 NII $790M-$820M, noninterest income $235M-$250M; FY24 provision for credit losses $45M-$65M, with noninterest expense $670M-$690M.
• Hancock Whitney (HWC) Q4 adj EPS $1.26 vs est. $1.19 on NII $272.3Mm vs est. $271.31Mm, credit loss allowance -336.8Mm, CET1 capital ratio $12.39%.
• Interactive Brokers (IBKR) Q4 adj EPS $1.52 vs. est. $1.55; Q4 revs $1.15B vs. est. $1.14B; Q4 Total DARTs up 2% at 1.93M; Q4 customer accounts increased 23% to 2.56M, customer equity increased 39% to $426.0B, customer credits increased 10% to $104.5B and customer margin loans increased 14% to $44.4B.

• Merit Medical (MMSI) announced the successful enrollment of the first patient in its multicenter, prospective, randomized, controlled trial comparing genicular artery embolization, or GAE.
• Teladoc (TDOC) downgraded to Neutral from Buy at DA Davidson and cut tgt to $22 from $33.

• Plexus (PLXS) said that it will not meet its Q1 revenue guidance of $990M-$1.03B, GAAP operating margin of 4.8% to 5.3% and GAAP EPS of $1.15-$1.33 – now expects to announce fiscal first quarter revenue of $980M-$985M, GAAP operating margin of about 4.6% and GAAP diluted EPS of $1.02 to $1.06; approves new $50M share buyback.
• Progress Software (PRGS) Q4 adj EPS $1.02 above est. $0.91; Q4 revs $177m vs. est. $174M; Q4 operating margin 35% vs. 39% y/y, est. 34.6%; guides Q1 revs $180M-$184M vs. est. $178.8M and guides FY revenue $722M-$732M vs. est. $727.3M and adj EPS $4.58-$4.68 vs. est. $4.64.
• Viewership for Monday’s Emmy awards honoring the best of television fell to a record low 4.3 million on the Fox (FOXA) broadcast network, according to preliminary estimates from the network.
• GoPro (GPRO) said it agreed to buy Forcite Helmet Systems, which makes technology-infused helmets for motorcyclists, and said it plans to roll out its own GoPro-branded line of helmets (terms not disclosed).