Early Look

Wednesday, May 31, 2023

Futures	Up/Down	%	Last
Dow	-47.00	0.14%	33,042
S&P 500	-9.25	0.22%	4,205
Nasdaq	-27.50	0.19%	14,369

 

 

U.S. futures are down modestly, as S&P futures (Spuz) still holding the 4,200 level after in Washington DC, the House Rules Committee on Tuesday voted 7-6 in favor of advancing the crucial debt-ceiling bill. The bill is expected to go to the House floor on Wednesday for debate and a final vote. If approved, it will advance to the Senate. The U.S. dollar rose to a more than two-month high against the euro after data showed European inflation is cooling quicker than expected and China’s recovery is sputtering. The euro fell -0.65% to 1.066, the lowest since March 20. Tuesday marked yet another day of negative NYSE breadth and big cap AI strength (NVDA) but stocks still managed to finish higher led by large caps. In Asian markets, Chinese equities drop, and the yuan weakens after factory PMI miss indicates a worsening slowdown. The Nikkei Index declined -440 points to 30,887, the Shanghai Index slipped -19 points to 3,204, and the Hang Seng Index tumbled -361 points or 1.94% to 18,234. In Europe, the German DAX is down -83 points to 15,825, while the FTSE 100 slips -15 points to 7,506. Earnings and guidance results weighing on a handful of stocks this morning with AAP -20% after slashing forecasts following a big miss in auto retail while AMBA, HPE decline in technology. The commodity crunch which started with Russia’s invasion vs. Ukraine over a year ago has since reversed hard, with energy, agricultural chemicals (MOS, CF, NTR), and industrial metals (AA, CLF) falling hard.

 

Market Closing Prices Yesterday

·     The S&P 500 Index finished little changed, or 0.00%, to 4,205.52.

·     The Dow Jones Industrial Average fell -50.56 points, or 0.15%, to 33,042.78.

·     The Nasdaq Composite gained 41.74 points, or 0.32%, to 13,017.43.

·     The Russell 2000 Index declined -5.73 points, or 0.32% to 1,767.29.

 

Economic Calendar for Today

·     7:00 AM ET               MBA Mortgage Applications Data

·     8:50 AM ET               Fed’s Collins, Bowman Give Opening Remarks at Fed Listens Event

·     8:55 AM ET               Johnson/Redbook Weekly Sales

·     9:45 AM ET               Chicago PMI for May…est. 47.0 (prior 48.6)

·     10:00 AM ET             JOLTs Job Openings for April…est. 9.375M (prior 9.59M)

·     12:30 PM ET             Fed’s Harker Speaks on Macroeconomic, Monetary Conditions

·     2:00 PM ET               Federal Reserve Releases Beige Book

·     4:30 PM ET               API Weekly Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: AAP DCI HOV

·     Earnings After the Close: AI CHWY CRDO CRM CRWD JWN NCNO NGL NTAP OKTA PHR PSTG PVH SOL VEEV VSCO

 

Other Key Events:

·     Craig Hallum 20th Annual Institutional Investor Conference, 5/31 in MN

·     Deutsche Bank 13th Annual Global Financial Services Conference, 5/31-6/1, in New York

·     Goldman Sachs Global Semiconductor Conference 5/31, in New York

·     Jefferies Software Conference, 5/30-6/1, in CA

·     KeyBanc Industrials & Basic Materials Conference, 5/30-6/1, in Boston, MA

·     Mizuho 5^th Annual Auto technology Conference, 5/30-6/1

·     TD Cowen Oncology Innovation Summit (virtual), 5/30-5/31

·     TD Cowen Technology, Media & Telecom Conference, 5/31-6/1, in New York

·     China Caixin Manufacturing PMI, May-F

 

 

Macro	Up/Down	Last
Nymex	-2.05	67.41
Brent	-1.72	71.82
Gold	-0.90	1,976.20
EUR/USD	-0.0059	1.0674
JPY/USD	0.06	139.85
10-Year Note	-0.048	3.648%

 

 

World News

·     China’s official manufacturing purchasing managers’ index (PMI) fell to 48.8 in May, from 49.2 in April, the National Bureau of Statistics said, and was below the 49.7 consensus estimate. It also marked the second month in a row that the reading fell below the 50 mark, which separates activity expansion from contraction.

·     The China NBS non-manufacturing PMI moderated to 54.5 in May from 56.4 in April, showing ongoing recovery in both the construction and services sectors but at a slower pace.

·     French CPI decelerated faster than expected to 5.1% YoY in May from 5.9% YoY in Apr. The MoM rate fell 0.1% from 0.6% previously. Italy’s CPI also decelerated, but not as fast as envisaged to 8.1% YoY from 8.7% YoY.

·     Japan retail sales fell to 5.0% YoY in April vs 7.1% expected. MoM declined 1.2% vs 0.5% expected, and 0.3% prior. Industrial production data MoM for April fell 0.4% vs 1.4% expected, and 1.1% prior. YoY fell 0.3% vs 2.0% expected, and -0.6% prior.

 

Sector News Breakdown

Consumer

·     Advance Auto Parts (AAP) Q1 EPS $0.72 well below the est. $2.57 and Q1 revs $3.42B vs. consensus $3.43B; Q1 comp sales fell (-0.4%); Q1 gross margins 43%; slashes FY23 EPS view to $6.00-$6.50 from $10.20-$11.20 (est. $10.64) and cuts FY23 revenue view to $11.2B-$11.3B from $11.4B-$11.6B (est. $11.43B); lowers FY23 comp sales growth view to (1%)-0% from 1%-3%; cuts FY operating income margin view to 5%-5.3% from 7.8%-8.2%.

·     Capri Holdings (CPRI) Q4 adj EPS $0.97 vs. est. $0.94; Q1 revs $1.335B vs. est. $1.28B; sees Q1 revs about $1.2B vs. est. $1.31B, operating margin about 8.5% and maintains 2024 op margin about 16.5%; sees 1q Michael Kors revs about $775M vs. est. $860.2M.

·     LL Flooring Holding (LL) confirmed late yesterday that it has received an unsolicited, non-binding proposal from Cabinets To Go, LLC., a subsidiary of F9 Brands, Inc., to acquire all of the outstanding shares of the Company for $5.76 per share in cash.

·     Sportsman Warehouse (SPWH) 1Q adj EPS ($0.39) vs est. ($0.29) on revs $267.5Mm vs est. $274.71Mm, comps -17.8%, adj EBITDA $(5.6)Mm vs est. $(6.05)Mm; guides 2Q net sales $310-340Mm vs est. $344.79Mm, comps -17% to -9%, adj EPS $0.02-0.15 vs est. $0.20.

 

Energy, Industrials and Materials

·     Berkshire Hathaway (BRKA) increased its stake in Occidental Petroleum Corp. (OXY) to about 25% over the past week as an SEC filing showed the company bought 4.66 million shares of OXY between May 25-30, at prices ranging from $58.30-$58.85 a share, roughly $275M in all.

·     Donaldson (DCI) Q3 EPS $0.76 vs. est. $0.74; Q3 revs $875.7M vs. est. $868.42M; narrows FY23 adjusted EPS view to $3.00-$3.06 from $2.99-$3.07 (est. $3.04) and narrows FY23 revenue growth view to 3%-5% from 2%-6% (est. $3.45B).

 

Financials

·     Horizon Technology (HRZN) 3.25M share Spot Secondary priced at $12.50.

 

Healthcare

·     AbbVie (ABBV) said Phase 2 Study of Upadacitinib (RINVOQ®) alone or as a combination therapy meets primary and key secondary endpoints in patients with systemic Lupus Erythematosus.

·     IRhythm Technologies Inc (IRTC) said on May 25, received warning letter from FDA which resulted from inspection of Co’s facility located in Cypress alleging non-conformities to regulations for medical devices, relating to Co’s Zio at system; said intends to respond within specified period and work diligently to address FDA concerns.

·     Seres Therapeutics (MCRB) said it has received a $125 million milestone payment from Nestle Health Science related to the U.S. FDA approval of VOWST.

 

Technology, Media & Telecom

·     Ambarella Inc. (AMBA) Q1 EPS loss (-$0.15) vs. est. loss (-$0.21); Q1 revs $62.14M vs. est. $62M; guides Q3 revs $60M-$64M vs. est. $67.2M; sees Q2 gross margin 62.5%-64.5%; sees Q2 operating expenses $48M-$50M.

·     Box Inc. (BOX) 1Q adj EPS $0.32 vs est. $0.27 on revs $251.9Mm vs est. $249.25Mm; guides 2Q revs $260-262Mm vs est. $260.3Mm and adj EPS $0.34-0.35 vs est. $0.33; sees FY revs $1.045-1.055B vs est. $1.056B and adj EPS $1.44-1.50 vs est. $1.44.

·     Hewlett Packard (HPQ) 2Q adj EPS $0.80 vs est. $0.76 on revs $12.9B vs est. $13.07B, FCF $500Mm, adj op mgn 8.7%; guides 3Q adj EPS $0.81-0.91 vs est. $0.85; narrows FY23 EPS view to $3.30-$3.50 from $3.20-$3.60 (est. $3.34).

·     Hewlett Packard Enterprises (HPE) Q2 adj EPS $0.52 vs. est. $0.48; Q2 revs rose 3.9% y/y to $6.97B vs. est. $7.31B; sees Q3 revs $6.7B-$7.2B below est. $7.22B; lowers year rev growth adjusted for currency to up +4%-6%, from prior +5%-7% vs. est. +4.85%; slightly raised its year adj EPS forecast by $0.04 on top and bottom end of range.

·     Twilio Inc. (TWLO) shares rose late yesterday after The Information reported that activist investor Legion Partners, which has a stake in the software company was pressing it to shake up its board and think about possible divestitures.