Early Look

Tuesday, October 17, 2023

Futures	Up/Down	%	Last
Dow	-65.00	0.19%	34,069
S&P 500	-10.25	0.23%	4,390
Nasdaq	-40.50	0.26%	15,249

 

 

U.S. futures point to a lower open, as Treasury yields extend yesterday’s gains with the 10-year up around 4.75%, and investors eye monthly retail sales data at 8:30 AM, along with a handful of earnings results. Dow component and Pharma giant JNJ reported a top and bottom-line quarterly beat and raised guidance this morning. In M&A news, in the lodging sector, Choice Hotels (CHH) proposes to buy Wyndham (WH) for $90.00 per share in a cash-and-stock transaction. In geopolitical news, President Biden is off to Israel on Wednesday, while Representative Jim Jordan closed in on the votes he needs to be the next House speaker. In Asian markets, The Nikkei Index gains 381 points to 32,040, the Shanghai Index gains 9 points to 3,083, and the Hang Seng Index advances 132 points to 17,773. In Europe, the German DAX is down -50 points to 15,187, while the FTSE 100 rises about 30 points to 7,659.

 

Stocks closed higher Monday ahead of a deluge of corporate earnings reports this week and shrugged off a rise in Treasury yields, with investors possibly positioning ahead of option expiration later this week. Investors also shrugged off concerns that the conflict erupted last week between Israel and Hamas may lead to a broader war in the Middle East. The rally in the traditional safe-haven assets paused on Monday, with bonds and gold prices pulling back after last week’s gains. U.S. Treasury yields rose on Monday afternoon, with the yield on the 10-year Treasury up 8.1 bps to 4.709%, while the yield on the 30-year Treasury jumped 8.8 basis points to 4.865%.

 

Economic Calendar for Today

·     7:45 AM ET                  ICSC Weekly Retail Sales

·     8:00 AM ET                  Fed’s Williams Moderates Discussion at Economic Club of NY

·     8:30 AM ET                  Retail Sales M/M for October…est. +0.3%

·     8:30 AM ET                  Retail Sales – Less Autos M/M for October…est. +0.2%

·     8:55 AM ET                  Johnson/Redbook Weekly Sales

·     9:15 AM ET                  Industrial Production M/M for September…est. 0.0%

·     9:15 AM ET                  Capacity Utilization for September…est. 79.6%

·     10:00 AM ET                Business Inventory M/M for August…0.3%

·     10:00 AM ET                NAHB Housing Market Index for October…est. 44

·     10:45 AM ET                Fed’s Barkin Speaks on the Economic Outlook

·     4:30 PM ET                   API Weekly Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: ACI BAC BK CATC GS JNJ LMT MBWM PLD

·     Earnings After the Close: EQBK FULT HWC IBKR JBHT OMC PFBC PNFP UAL WTFC

 

Other Key Events:

·     China Retail Sales and Industrial Output for September

·     China GDP data for Q3

 

Market Closing Prices Yesterday

·     The S&P 500 Index climbed 45.85 points, or 1.06%, to 4,373.63.

·     The Dow Jones Industrial Average rose 314.25 points, or 0.93%, to 33,984.54.

·     The Nasdaq Composite jumped 160.75 points, or 1.20%, to 13,567.98.

·     The Russell 2000 Index advanced 27.35 points, or 1.59% to 1,747.06.

 

 

Macro	Up/Down	Last
Nymex	0.11	86.77
Brent	0.19	89.84
Gold	2.30	1,936.60
EUR/USD	-0.001	1.0547
JPY/USD	0.07	149.57
10-Year Note	+0.048	4.758%

 

 

World News

·     Interesting data point: the 10-year/3-month yield curve has now been inverted for a record 232 trading days while the 10-year/2-year curve has been inverted for 320 straight trading days, the second longest streak on record.

·     The Bank of Japan is likely to discuss raising its inflation projection for fiscal year 2023 and 2024 at its policy meeting later this month, extending the period in which it sees prices hitting or exceeding its 2% goal – Bloomberg.

 

Sector News Breakdown

Consumer

·     Choice Hotels (CHH) proposes to buy Wyndham (WH) for $90.00 per share in cash-and-stock transaction, which would be a 30% premium to latest closing price, in a total deal valued at about $70B (would pay $49.50 cash and 0.324 shares) – https://tinyurl.com/33rftmsc

·     Mondelez (MDLZ) upgraded to Outperform from Neutral at Exane BNP Paribas.

 

Energy, Industrials and Materials

·     APA Corp. (APA) downgraded to Market Perform from Outperform at Bernstein.

·     Devon Energy (DVN) downgraded to Market Perform from Outperform at Bernstein.

·     EOG Resources (EOG) downgraded to Market Perform from Outperform at Bernstein.

·     NOV Inc. (NOV) downgraded to Underweight from Equal Weight at Barclays.

 

Financials

·     Bank of America (BAC) Q3 EPS $0.90 vs. est. $0.81; Q3 revs $25.2B vs. est. $25.14B; Q3 tangible book value per share $23.79; Q3 CET1 capital ratio 11.9%; Q3 net charge-off ratio .35%; says U.S. consumer spending continuing to slow.

·     Bank of New York (BK) Q3 adj EPS $1.27 vs. est. $1.15; Net Interest revenue $1.02B, +9.7% y/y; Net interest margin 1.18% vs. 1.05% y/y; provision for credit losses $3M vs. recovery $30M y/y.

·     CrossFirst Bancshares (CFB) Q3 adj EPS $0.37 vs est. $0.32 on revs $61.1Mm vs est. $60.6Mm, adj ROCE $11.26%, adj ROAA 1.04%.

·     Equity Lifestyle (ELS) Q3 normalized FFO $0.71 vs. est. $0.72; Q3 revs $388.8M vs. est. $367.7M; sees FY normalized FFO $2.82-$2.88 vs. est. $2.84; Q3 Core property operating expenses increased 5.1% y/y.

·     FB Financial (FBK) Q3 adj EPS $0.71 vs est. $0.69 on NII $100.926Mm vs est. $99.33Mm; deposits $10.64B vs $10.87B sequentially.

·     ServisFirst (SFBS) Q3 EPS $0.98 vs est. $0.95 on NII $99.698Mm vs est. $102.55Mm, loss provision $4.282Mm; Loans grew 3%, while total deposits came in at $13.1B, compared with around $11B in the same quarter last year.

 

Healthcare

·     Johnson & Johnson (JNJ) Q3 adj EPS $2.66 vs. est. $2.51; Q3 revs $21.4B vs. est. $21.04B; boosts FY23 adjusted EPS to $10.07-$10.13 from $10.00-$10.10 (est. $10.03) and raises FY23 revenue view to $83.6B-$84B from $83.2B-$84B (est. $84.53)

·     Crispr Therapeutics (CRSP) downgraded to Neutral from Overweight at Cantor.

 

Technology, Media & Telecom

·     Adtran (ADTN) said sees prelim Q3 revenue $272.3M vs. est. $288.2M; said believes that customers will manage their inventories conservatively and adjust their capital expenditure budgets in the fourth quarter in response to the changed economic environment.

·     NetScout Systems (NTCT) cuts FY24 EPS view to $2.00-$2.20 from $2.20-$2.32 (est. $2.26) and lowered FY24 revenue view to $840M-$860M from $915M-$945M (est. $926.3M) after guiding Q3 revs $195M-$197M vs. est. $223.6M.

·     Ericsson (ERIC) said it expected the uncertainty impacting its mobile networks business to persist into 2024, after reporting a fall in Q3 revenue as demand for 5G equipment fell in North America; networks organic sales in North America were down by 60% from last year as telecoms customers adjusted their inventory and were slower to roll out new equipment.

·     Amazon.com Inc. (AMZN), Booking.com (BKNG), Expedia Group Inc. (EXPE), Tripadvisor Inc. (TRIP), Trustpilot Group PLC and Glassdoor said they have teamed up to create the global Coalition for Trusted Reviews to quash the proliferation of fake online reviews.

·     ViaSat (VSAT) upgraded to overweight from neutral at JPMorgan saying investors should be encouraged by the satellite company’s increased cost discipline.

·     Taiwan Semiconductor (TSM) said it would not build a advanced chip factory in a rural part of northern Taiwan after local residents protested that they did not want to move to accommodate an expansion of an industrial park.