Early Look

Monday, July 10, 2023

US equity futures are looking lower, pointing to a fourth day of declines for major averages as investors braced for key inflation data this week and as deflation concerns out of China weighed on risk appetite. For the past week, the S&P 500 fell 1.2%, the Dow fell 2.0% and the Nasdaq fell 0.9%. Oil prices dip after rising late Friday to settle +$2.06 or 2.87% to settle at $73.86 a barrel, posting its second straight weekly gain (+4.6%). Quiet news weekend but busy on the horizon this week, as inflation in the US likely continued to soften in June but a key measure of underlying price pressures is still running at an uncomfortable pace that keeps the Fed toward resuming interest-rate hikes this month. The consumer price index (CPI) report Wednesday is forecast to show the consumer price index climbed 3.1% from a year ago. Earnings season unofficially gets underway this week as well, with DAL and PEP earnings late week and big bank JPM, C, WFC on Friday morning. In Asian markets, The Nikkei Index fell -198 points to 32,189, the Shanghai Index rose 7 points to 3,203, and the Hang Seng Index gained 114 points to 18,479. In Europe, the German DAX is up 41 points to 15,645, while the FTSE 100 rises 7 points to 7,264. In geopolitical news, Russia’s invasion of Ukraine hits the 500-day mark on Saturday.

Market Closing Prices Yesterday

·     The S&P 500 Index slipped -12.64 points, or 0.29%, to 4,398.95.

·     The Dow Jones Industrial Average fell -187.38 points, or 0.55%, to 33,734.88.

·     The Nasdaq Composite dipped -18.33 points, or 0.13%, to 13,660.72.

·     The Russell 2000 Index advanced 22.43 points, or 1.22% to 1,864.66

Economic Calendar for Today

·     10:00 AM ET          Employment Trends for June

·     10:00 AM ET          Wholesale Inventory M/M for May

·     10:00 AM ET          Fed’s Barr Speaks on Bank Supervision and Capital Rules

·     11:00 AM ET          Fed’s Daly to Discuss Inflation, Banking

·     11:00 AM ET          Fed’s Mester Speaks on Economic and Policy Outlook

·     12:00 PM ET          Fed’s Bostic Speaks on US, Atlanta Economies

·     3:00 PM ET             Consumer Credit for May

Earnings Calendar:

·     Earnings Before the Open: HELE

·     Earnings After the Close: CAMP ETWO PSMT SAR VOXX WDFC

World News

·     Goldman Sachs noted: 2Q 2023 earnings season will begin next week and consensus expects a 9% year/year decline in S&P 500 EPS driven by flat sales growth and margin compression. We expect companies will be able to meet the low bar set by consensus. Negative EPS revisions for 2023 and 2024 appear to have bottomed out and revision sentiment has improved.

·     Goldman Sachs notes: Key areas of interest this quarter include: (1) ability of firms to maintain margins as inflation recedes, (2) impact of bank stress on credit and lending, (3) potential uses of AI, (4) status of the US consumer.

·     Citigroup is wary on how much more Wall Street stocks have to give, especially after a blockbuster first half. Those analysts have downgraded U.S. equities to neutral from overweight last quarter. “Our U.S. strategy team thinks mega cap growth is set for a pullback, while U.S. recession risks could still bite,” U.S. equity strategist Scott Chronert said Monday.

Sector News Breakdown

Consumer

·     Cruise-line (CCL, NCLH, RCL) and hotel stocks (H) could be set to grow amid a specific focus on international travel, according to Barron’s. Hyatt Hotels Corp. (H) is Truist favorite hotel stock, noting around 30% of its earnings come from packaged travel provider Apple Leisure Group. Royal Caribbean (RCL) can climb another 17%, to $120, according to Stifel analyst and airfares from the US to Europe are the highest in over five years, averaging $1,200 per round trip.

·     Amazon’s (AMZN) Prime Day starts July 11-12 – JPMorgan recently said the event will drive incremental revs of ~$5B, up +13% Y/Y from the ~$4.4B of incremental revs they disclosed for Prime day last year.

·     Fisker (FSR) announces $340 million convertible notes offering, potential to increase to $680 million; offering is expected to close on July 11, 2023.

·     Helen of Troy (HELE) Q1 adj EPS $1.94 vs est. $1.60; Q1 revs $474.7M vs. est. $465.36M; backs FY24 adjusted EPS view $8.50-$9.00 (est. $8.49) and revs $1.965B-$2.015B (est. $2B).

Energy, Industrials and Materials

·     ArcBest Corp. (ARCB) said a five-year agreement with the Teamsters will be implemented July 16, following ratification this week of the two remaining supplemental agreements.

·     AZZ Inc. (AZZ) Q1 EPS $1.14 vs. est. $1.16; Q1 revs $390.9M vs. est. $396.7M; reaffirms Y24 EPS view of $3.85-$4.35 (est. $3.96), FY24 revs $1.40B-$1.55B (est. $1.52B) and FY24 adjusted EBITDA at $300M-$325M.

·     Icahn Enterprises shares (IEP) shares rise as the Wall Street Journal reported that Carl Icahn and banks finalized amended loan agreements Sunday that untie his personal loans from the trading price of his company’s shares.

·     Steel Dynamics (STLD) said unplanned outage of hot mill at Sinton Texas flat roll steel mill, with expectations for restart within 2-4 weeks, or before July 30; plans to continue to operate cold mill and downstream value-added flat rolled steel coating lines during hot mill outage.

Financials

·     Balances at the Federal Reserve’s overnight reverse repurchase agreement facility have declined more than the Treasury’s coffers have grown, an indication that some of that cash may be shifting back to bank reserves. On Friday, some 101 counterparties parked $1.822 trillion at the RRP, the lowest since May 2022, and down from $1.854 trillion the prior day.

·     China’s Ant Group told its shareholders it will buy back up to $6 billion in stock. The financial-technology giant said that it intends to repurchase up to 7.6% of its existing shares at a price that represents a company valuation of around $78.48 billion.

Healthcare

·     Apogee Therapeutics (APGE) set terms for its initial public offering (IPO), looking to raise up to $265.6 million; said it is offering 15.625 million shares in the IPO, which is expected to price between $15-$17 a share.

·     Nanobiotix (NBTX) shares rose after saying it signed a licensing, co-development, and commercialization agreement potentially worth billions of dollars with a unit of drug giant Johnson & Johnson (JNJ).

·     Novo (NVO) weight-loss medications are being investigated by the European Union’s drugs regulator after several reports of suicidal risks were referred to the watchdog – Bloomberg.

Technology, Media & Telecom

·     Alibaba (BABA) said it’s not decided whether to participate in Ant Group’s buying up to 8% of its equity back at a price valuing the financial services firm at 567.1 billion yuan, or $78.5 billion.

·     Bumble (BMBL) shares have broken hearts, but the business looks like a winner, said Barron’s noting the stock is down almost 40% since Barron’s recommended it last November. Bumble, the company which operates the dating apps Bumble and Badoo, is doing just fine, however.

·     Personal data of thousands of clients of three of the country’s biggest law firms may be compromised following a massive global data theft. Kirkland & Ellis, K&L Gates and Proskauer Rose were targeted, along with 50 other multinational corporations last month, according to the ransomware group Clop, which took responsibility for the hack – NY Post.

·     3D Systems Corp (DDD) files for mixed shelf; size not disclosed.

·     iMedia Brands Inc. (IMBI) said it has entered into an asset and equity purchase agreement to sell substantially all its assets to an affiliate of RNN National Media Group for about $50 million.