Early Look

Thursday, June 29, 2023

Futures	Up/Down	%	Last
Dow	98.00	0.29%	34,199
S&P 500	13.25	0.30%	4,430
Nasdaq	60.50	0.40%	15,190

 

 

U.S. futures looking a higher open, paced by gains in financials after all 23 banks passed the Fed’s stress tests that looked at how lenders would fare against a cumulative $541 billion of losses. Semiconductors look to bounce early as well after Micron (MU) earnings results were better-than-expected, lifting shares overnight. Thursday’s session will feature jobless claims and pending home sales data, alongside a revision to first-quarter GDP numbers in a heavy dose of economic data. U.S. stocks closed mostly lower on Wednesday after Federal Reserve Chairman Jerome Powell said he won’t rule out back-to-back rate hikes, in a meeting with other global central bankers. While powering gains for stocks in 2023, the S&P 500’s information technology segment took a breather Wednesday, ending flat. Earlier on Wednesday at the European Central Bank Forum in Portugal, Powell spoke of raising rates again. In Asian markets, The Nikkei Index rose 40 points to 33,234, the Shanghai Index fell -7 points to 3,182, and the Hang Seng Index tumbled -237 points to 18,934. In Europe, the German DAX is up 33 points to 15,982, while the FTSE 100 slips -16 points to 7,483.

 

Market Closing Prices Yesterday

·     The S&P 500 Index slipped -1.55 points, or 0.04%, to 4,376.86.

·     The Dow Jones Industrial Average fell -74.08 points, or 0.22%, to 33,852.66.

·     The Nasdaq Composite gained 36.08 points, or 0.27%, to 13,591.75.

·     The Russell 2000 Index advanced 8.78 points, or 0.47% to 1,858.71.

 

Economic Calendar for Today

·     6:00 AM ET            Fed’s Bostic Speaks on US Economic Outlook

·     8:30 AM ET            Weekly Jobless Claims…est. 265K

·     8:30 AM ET            Continuing Claims…est. 1.765M

·     8:30 AM ET            Gross Domestic Product (GDP) Q1-Final…est. +3.5%

·     8:30 AM ET            Consumer Spending for Q1-Final

·     8:30 AM ET           GDP Price Deflator for Q1-Final…est. +4.2%

·     8:30 AM ET            PCE Prices Final for Q1…est. +4.2%

·     8:30 AM ET            Core PCE Prices Q1-Final…est. +5.0%

·     10:00 AM ET          Pending Home Sales M/M for May…est. (-0.5%)

·     10:30 AM ET          Weekly EIA Natural Gas Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: AYI GBX LNN MKC MSM PAYX RAD SMPL

·     Earnings After the Close: ACCD CNVS NKE PRGS SGH

 

Other Key Events:

·     China NBS Manufacturing PMI for June

·     RBC Capital UK Mid-Cap Financials Investor Day, 6/29 in London

 

 

Macro	Up/Down	Last
Nymex	0.10	69.66
Brent	0.10	74.13
Gold	-5.70	1,916.50
EUR/USD	0.0009	1.092
JPY/USD	-0.21	144.25
10-Year Note	+0.039	3.751%

 

 

World News

·     The bull-bear spread in the American Association of Individual Investors (AAII) weekly survey was 14.4 vs 15.1 last week. Bulls fall to 41.9% from 42.9%, Neutrals rise to 30.6% from 29.4%, Bears fall to 27.5% from 27.8%.

·     Sweden’s central bank lifted its key policy rate to 3.75% from 3.50%, as expected, and signaled a further hike later in the year as it continues to fight stubbornly high inflation.

 

Sector News Breakdown

Consumer

·     American Outdoor Brands (AOUT) 4Q adj EPS $0.06 vs est. ($0.13) on revs $42.2Mm vs est. $39.28Mm, adj EBITDA $1.8Mm vs est. (-$0.598Mm); says believe FY24 net sales by as much as 3.5%.

·     Franklin Covey (FC) Q3 adj EPS $0.32 vs. est. $0.22; Q3 revs rose 8% to $71.4M vs. est. $69.6M; Q3 adj Ebitda $11.9M compared to $10.9M y/y; affirms FY23 adj EBITDA view of $47M-$49M.

·     McCormick (MKC) Q2 adj EPS $0.60 vs. est. $0.57; Q2 revs $1.66B vs. est. $1.67B; raises FY23 EPS view to $2.60-$2.65 from $2.56-$2.61, consensus $2.63 and backs FY23 revenue view up 5%-7%.

·     National Beverage (FIZZ) 4Q EPS $0.39 vs est. $0.39 on revs $287Mm vs est. $291.3Mm, gross margin 36%.

·     Overstock.com (OSTK) announced the consummation of its acquisition of certain intellectual property assets of the Bed Bath & Beyond banner from Bed Bath & Beyond, Inc. under a Bankruptcy Court supervised process.

·     Uber (UBER), Lyft (LYFT), DoorDash (DASH): The California Supreme Court agreed to hear the appeal of a state appeals court decision that let most of a state law on gig-worker classification stand. The March ruling upholding Proposition 22, a law that was passed by 58% of California voters in 2020, was a victory for Uber Technologies Inc.

 

Energy

·     Kodiak Gas Services (KGS) 16M share IPO priced at $16.00.

·     Berkshire Hathaway (BRKA) bought 2.1 million shares of Occidental Petroleum (OXY) in recent days, lifting its stake in the big energy company to just over 25%, according to a filing late Wednesday. Berkshire Hathaway now owns 224.1 million shares of Occidental Petroleum.

 

Financials

·     The Federal Reserve said all 23 banks that went through their “stress test” showed projected losses of $541 bln in stress test but maintain capital ratios well above required levels. Fed says banks saw capital decline 2.3% points in test to 10.1%, smaller decline than 2022 test. Fed says 2023 stress test shows large banks well positioned to continue lending in a severe recession.

·     Fed says banks showed over $100 bln in losses from commercial real estate and residential mortgages and $120 bln in credit card losses; both up from 2022 and Goldman Sachs showed the highest projected commercial real estate loan loss rate of 16% of average loan balances.

·     Fed says Citizens Financial Group Inc (CFG) faced lowest capital ratio of 6.4% in stress test, Charles Schwab Corp (SCHW) highest ratio of 22.8%. The Fed says banks showed $64.9 bln in projected losses from commercial real estate, an 8.8% decline of average balances.

·     Visa (V) said it has signed a definitive agreement to acquire Pismo, a cloud-native issuer processing and core banking platform with operations in Latin America, Asia Pacific, and Europe, for $1 billion in cash.

 

Healthcare

·     BioNTech (BNTX) and OncoC4 announced that the first patient with non-small cell lung cancer – NSCLC – has been treated in a pivotal Phase 3 trial evaluating the companies’ next-generation anti-CTLA-4 antibody candidate BNT316/ONC-392.

·     Black Diamond Therapeutics (BDTX) announced a $75M common stock offering.

·     BioXcel Therapeutics (BTAI) announces positive topline results from TRANQUILITY II Phase 3 trial of BXCL501 for acute treatment of Alzheimer’s disease-related agitation.

 

Industrials & Materials

·     Acuity Brands (AYI) Q3 adjusted EPS $3.75 vs. est. $3.71; Q3 revs slid -5.7% y/y to $1B vs. est. $1.05B; Revenue from its lighting and light-control business fell 6.7% to $940.7 million, while its smaller intelligent-space group grew its top line by 12.9% to $65.8 million.

·     Ashland (ASH) board approves a new $1B share repurchase authorization.

·     Greenbriar (GBX) Q3 adj EPS $1.02 vs. est. $0.60; Q3 revs rose 31% y/y to $1.04B vs. est. $899.2M; raises FY revenue to $3.8B-$3.9B from prior $3.4B-$3.7B and boosts delivery outlook to 25,000 to 26,000, saw 23,000 to 25,000; raises dividend by 11%.

·     HB Fuller (FUL) Q2 adj EPS $0.93 vs. est. $1.04; Q2 revs $898M vs. est. $969.6M; Q2 adj Ebitda $143M vs. est. $146M; guides FY adj EPS $3.80-$4.20 (down from prior view $4.10-$4.50) and vs. est. $4.15 and guides FY adj. EBITDA $580M to $610M, vs. est. $580M; guides FY organic revenue to -3% to -5%, vs. prior view -1% to +1%.

·     Joby Aviation (JOBY) adds to yesterday’s 40% advance after U.S. aviation regulator gave nod for flight testing of its electric air taxi, taking it step closer to securing approvals for commercial operations; this morning, welcomes $100M investment as it expands partnership w/SK Telecom.

·     MSC Industrial (MSM) Q3 EPS $1.74 vs. est. $1.75; Q3 revs $1.05B vs. est. $1.02B; said expect to achieve double-digit ads growth for FY; sees FY adj. Operating margin 12.7%, lower end of prior 12.7% to 13.3% range after Q3 GM’s of 40.7% vs. 41/6% est. (watch shares GWW, FAST).

·     Virgin Galactic Holdings Inc.’s (SPCE) historic first commercial spaceflight could lay the foundations for a time when “everyday people,” not just billionaires, can one day visit space, according to former NASA astronaut Eileen Collins. The private spaceflight company is targeting Thursday for its Galactic 01 mission.

·     Worthington Industries (WOR) Q4 adj EPS $2.74 vs. est. $1.90; Q4 revs fell -19% y/y to $1.23B vs. est. $1.24B; Q4 operating income +87% y/y to $122.6M; Gross margin increased $76.6M over the prior year quarter to $244.4M; Steel Processing’s net sales totaled $860.1M, down $259.7M y/y, driven by lower average direct selling prices and a slight decline in overall volume.

 

Technology, Media & Telecom

·     Micron Technologies (MU) 3Q adj EPS loss (-$1.43) vs est. (-$1.58) on adj revs $3.75B vs est. $3.646B; guides 4Q adj EPS (-$1.19) vs est. (-$1.07) and revs $3.9B vs est. $3.891B; expects margins to improve as industry supply/demand imbalance is gradually restored.

·     Blackberry (BB) Q1 adj EPS $0.06 vs. est. (-$0.05); Q1 revs $373M.

·     Disney (DIS) downgraded to Sector Weight from Overweight saying they have their doubts, as: 1) DIS Domestic Parks expectations appear high; 2) DIS DTC subscriber growth has stalled, and DIS has failed to differentiate its DTC churn vs. peers; 3) ESPN moving to streaming is materially harder than we initially thought, as our survey work shows low willingness to pay; 4) structural changes in content distribution have resulted in DIS content sales segment business that is unlikely to make money for the foreseeable future; and 5) we worry the 2024 financial setup feels a lot like 2023.

·     Concentrix Corp. (CNXC) 2Q adj EPS $2.69 vs est. $2.75 on revs $1.615B vs est. $1.656B, adj EBITDA 258.8Mm vs est. $264.44Mm, adj op mgn 13.7%; sees FY revs $6.575-6.64B vs est. $6.772B and adj op profit $920-945Mm vs est. $876.17Mm.

·     NEXTracker (NXT) 16.5M share Secondary priced at $36.50.

·     In the publishing space, the WSJ reported that several large news and magazine publishers are discussing the formation of a new coalition to address the impact of artificial intelligence on the industry. The possibility of such a group has been discussed among executives and lawyers at the New York Times; Wall Street Journal Parent News Corp; Vox Media; Condé Nast parent Advance; Politico and Insider owner Axel Springer; and Dotdash Meredith parent IAC, the people said.