Early Look

Thursday, October 26, 2023

Futures	Up/Down	%	Last
Dow	118.00	0.36%	33,032
S&P 500	-26.25	0.63%	4,183
Nasdaq	-132.50	0.92%	14,345

 

 

Another rough start for US stock markets, with S&P futures down -0.6% to lowest levels since June, on track for its 6^th down day in the last 7 as disappointing results and outlooks, coupled with rising Treasury yields and rate hike fears, put investors on the defensive and postponing the “Santa Claus” rally. US stocks declined on Wednesday as weakness in big technology shares dragged the Nasdaq into correction territory. Alphabet shares sunk nearly -10% after Google’s parent reports relatively weak cloud-computing sales. Amazon shares slid -5.6% on caution ahead of its results due on Thursday. Texas Instruments falls 3.5% after reporting 3Q results, weighing on other semiconductor makers. The U.S. dollar touched its highest level against the Japanese yen in a year to 150.32 as rising Treasury yields helped push the greenback higher against most of its rivals. Another rough go of earnings overnight/this morning as package delivery giant UPS reports weaker sales and cut its year sales outlook citing lower e-commerce delivery demand (adding to the earnings woes in transports (ODFL, NSC, UAL) this quarter, which will likely impact retailers as well. In tech, META shares rose overnight following better quarterly results, but comments about ad spending reversed shares lower. In Pharma, Merck (MRK) reports better results while raising the yearly sales view but cuts profit outlook. The CBOE Volatility index (VIX), or fear index, rises over +5% at 21.25 (weekly high remains 23.08 on Monday 10/23). In Asian markets, The Nikkei Index tumbled -668 points or 2.1% to 30,601, the Shanghai Index rose 14 points to 2,988, and the Hang Seng Index slid -40 points to 17,044. In Europe, the German DAX is down -1.4% or over 200 points to 14,684, while the FTSE 100 is down -0.6% or 44 points to 7,370 following weaker earnings results overseas from Standard Chartered, BNP Paribas, Unilever, WPP and Mercedes. The S&P 500 on track to open well below its key 200-dy moving average of roughly 4,238 after closing below 4,200.

 

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -60.91 points, or 1.43%, to 4,186.77.

·     The Dow Jones Industrial Average fell -105.45 points, or 0.32%, to 33,035.93.

·     The Nasdaq Composite plunged -318.65 points, or 2.43%, to 12,821.22.

·     The Russell 2000 Index declined -28.07 points, or 1.67% to 1,651.43.

 

Economic Calendar for Today

·     8:30 AM ET                  Weekly Jobless Claims…est. 208K

·     8:30 AM ET                  Continuing Claims…est. 1.74M

·     8:30 AM ET                  Gross Domestic Product (GDP) Q3-Advance…est. +4.3%

·     8:30 AM ET                  GDP Price Deflator for Q3-A…est. +2.5%

·     8:30 AM ET                  Personal Consumption for Q3-A…est. +4.5%

·     8:30 AM ET                  PCE Prices Q3-Advance

·     8:30 AM ET                  Core-PCE Prices for Q3…est. +2.5%

·     10:00 AM ET                Pending Home Sales M/M for September…est. (-1.8%)

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

·     11:00 AM ET                Kansas City Fed Manufacturing for October

·     1:00 PM ET                   US Treasury to sell $37B in 7-year notes.

 

Earnings Calendar:

·     Earnings Before the Open: AIT AMAL AMT AOS ARCH BC BFH BG BMY BSX BTU CARR CBZ CFR CMCSA CMS CRS CTS CWT DGICA EME EXLS EXP FAF FCFS FCN FRME GWW HAS HOG HON HSY HTZ INSM IP ITGR KDP KEX KIM KRNY KVUE LAZ LEA LH LII LIN LKQ LUV MA MAS MDC MO MRK NEM NOC NYCB OSIS OSK OSTK PATK PCG RCL RS SAH STX THRM TSCO TW TXT ULCC UPS VC VLO VLY VMC WEX WST 

·     Earnings After the Close: AB AMZN APPF ATGE AYX BIO BJRI BY CC CINF CMG COF COLM COUR CTO CUBI CUZ DECK DLR DXCM EHC EMN ENPH ERIE ESS EXPO F FE FISI GLPI GSIT HUBG INTC JNPR LHX LPLA MHK MMSI MTX NOV NRDS OLN ORC PEB PFG PTCT RMD ROG RSG SAM SKX SKYW SSB SSNC TEX TXRH UDR VRSN WY X ZYXI

 

 

Macro	Up/Down	Last
Nymex	-1.07	84.32
Brent	-0.84	89.29
Gold	3.50	1,998.40
EUR/USD	-0.002	1.0543
JPY/USD	0.05	150.26
10-Year Note	+0.002	4.955%

 

 

World News

·     The bull-bear spread in the American Association of Individual Investors (AAII) weekly survey was -13.9 vs -0.5 last week. Bulls fall to 29.3% from 34.1%, Neutrals fall to 27.5% from 31.3%, Bears rise to 43.2% from 34.6%.

 

Sector News Breakdown

Consumer

·     Ford Motor (F) and United Auto Workers (UAW) union negotiators reached a tentative labor deal after a six-week strike, UAW President Shawn Fain said on Wednesday, agreeing on a 4-1/2-year contract that would provide a record pay boost. The union is still in striking GM and Stellantis.

·     Brunswick (BC) Q3 adj EPS $2.42 vs. est. $2.36; Q3 revs $1.59B vs. est. $1.66B; cuts FY23 EPS view to $9.00 from $9.50 (est. $9.30) and lowers FY23 revenue view to $6.45B-$6.5B from $6.7B-$6.8B below consensus $6.65B (watch other boating names MBUU, MCFT, HZO).

·     Mattel (MAT) Q3 EPS $1.08 vs. est. $0.86; Q3 revs $1.92B vs. est. $1.83B; raises FY23 EPS view to $1.15-$1.25 from $1.10-$1.20 vs. est. $1.21 and sees year adj Ebitda $925M-$975M; said “Barbie” movie success helped 3q results as Q3 worldwide doll gross billings up 27%.

·     O’Reilly Automotive (ORLY) Q3 EPS $10.72 vs est. $10.40 on sales $4.2B vs est. $4.094, comps +8.7%; sees FY revs $15.7-15.8B vs est. $15.695B and EPS $37.80-38.30 vs est. $37.89; FY24 new store opening target 190-200 net.

·     VICI Properties (VICI) AFFO/shr $0.54 vs est. $0.53 on revs $904.3Mm vs est. $898.8Mm; increases AFFO/shr guide to $2.14-2.15 vs est. $2.15.

·     Whirlpool (WHR) Q3 adj EPS $5.45 vs. est. $4.25; Q3 revs $4.93B vs. est. $4.79B; lowers FY23 adjusted EPS view to about $16.00 from $16.00-$18.00 prior and cuts FY23 cash provided by operating activities view to approximately $1.1B from $1.4B and FCF to $500M from $800M.

·     Wyndham Hotels & Resorts (WH) Q3 EPS $1.31 vs. est. $1.26; Q3 revs $402M vs. est. $395.47M; Q3 global RevPAR grew 3% y/y constant currency and system-wide rooms grew 3% y/y; boosts FY23 adjusted EPS view to $3.94-$4.08 from $3.92-$4.06 (est. $3.99). Choice Hotels (CHH) said it had asked the board of Wyndham to engage in merger talks after they rejected Choice’s $7.8 billion acquisition offer last week.

 

Energy

·     Berkshire Hathaway lifted its stake in Occidental Petroleum (OXY) in recent days, making its first purchase since late June. Berkshire bought 3.9 million shares, increasing its stake to 228 million shares worth $14.5 billion, according to a Form 4 filing.

·     Antero Resources (AR) Q3 EPS $0.06 vs. est. 0c; Q3 revs $1.13B vs. est. $1.11B; Q3 net production averaged 3.5 Bcfe/d, up 9% y/y; liquids production averaged 202 MBbl/d, an increase of 18% y/y and nat gas production averaged 2.3 Bcf/d, up 4% y/y; raises year production outlook.

·     EQT Corp. (EQT) Q3 adj EPS $0.30 vs est. ($0.08), adj EBITDA $520Mm vs est. $443.23Mm’ Q3 revs $1.19B vs. est. $1.14B.

 

Financials

·     Morgan Stanley (MS) announced that Co-President Edward “Ted” Pick will become its chief executive, effective Jan. 1, replacing James Gorman who announced he was stepping down this past May. Gorman will become executive chairman, Morgan Stanley said.

·     Ameriprise Financial (AMP) Q3 adj EPS $6.96 vs est. $7.56 on net revs $3.925B vs est. $3.84B; Assets under management and administration reached $1.2 trillion, up 12 percent from strong client net inflows and market appreciation.

·     Annaly Capital (NLY) Q3 adj EPS $0.66 vs est. $0.68.

·     AvalonBay (AVB) Q3 core FFO $2.66 vs. est. $2.64; raises FY23 core FFO view to $10.58-$10.68 from $10.46-$10.66 (est. $10.59); Same Store Residential operating expenses increased 5.0%, and Same Store Residential NOI increased 5.3%.

·     Equinix (EQIX) Q3 FFO/shr $5.97 vs est. $5.39 on revs $2.06B vs est. $2.06B; sees FY AFFO/shr $31.87-32.19.

·     Invitation Homes (INVH) Q3 AFFO/shr $0.44 on revs $618Mm vs est. $611.8Mm; sees FY AFFO/shr $1.75-1.79 and adj revs +6.25-6.75%.

·     Lending Club (LC) Q3 EPS $0.05 vs est. $0.04 on revs $200.8Mm vs est. $196.96Mm, credit loss provision$64.5Mm.

·     Western Union (WU) Q3 adj EPS $0.43 vs. est. $0.38; Q3 revs $1.1B vs. est. $1.03B; narrows FY23 adjusted EPS view to $1.68-$1.75 from $1.65-$1.75 (est. $1.71) and now sees FY23 revenue down 3%-4% vs. prior view of down 3%-5% (est. $4.29B); Branded Digital business achieved 3% revenue growth in Q3 on double-digit transaction growth.

 

Healthcare

·     Merck (MRK) Q3 adj EPS $2.13 vs. est. $1.84; Q3 revs $16B vs. est. $14.44B; cuts FY23 adj EPS view to $1.33-$1.38 from $2.95-$3.05 (well below consensus $2.86) but raised FY23 revenue view to $59.7B-$60.2B from $58.6B-$59.6B (est. $55.98B)

·     Align Technologies (ALGN) Q3 adj EPS $2.14 vs est. $2.26 on revs $960.2Mm vs est. $994.47Mm; guides Q4 revs $920-940Mm vs est. $1.02B, sees GAAP op mgn down sequentially.

·     Edwards Lifesciences (EW) Q3 adj EPS $0.59 vs est. $0.59 on revs $1.48B vs est. $1.479B, adj gr mgn 76.4%, adj FCF $411Mm; sees FY sales +10-13% vs est. +11.5%, continues to see adj EPS $2.50-2.60 vs est. $2.55.

·     ICON Plc (ICLR) Q3 EPS $3.30 vs. est. $3.28; Q3 revs rose 6% y/y to $2.06B vs. est. $2.05B; posted double digit adjusted EBITDA and adjusted EPS growth of 14% and 10%, respectively; said reaffirming 2023 guidance for EPS and revs.

·     Molina Healthcare (MOH) Q3 adj EPS $5.05 vs. est. $4.88; Q3 revs $8.55B vs. est. $8.24B; reaffirms FY23 adj EPS view at least $20.75 vs. est. $20.81; Company served approximately 5.2 million members, an increase of 1% year over year.

 

Industrials & Materials

·     Honeywell (HON) Q3 EPS $2.27 vs. est. $2.23; Q3 revs $9.21B vs. est. $9.23B; Q3 orders up 10% and Q3 backlog up 8% to $31.4B; narrows FY23 adj EPS view to $9.10-$9.20 from $9.05-$9.25 and narrows FY23 revenue view to $36.8B-$37.1B from prior $36.7B-$37.3B.

·     IDEX Corp. (IEX) Q3 adj EPS $2.12 vs. est. $1.89; Q3 revs $793.4M vs. est. $794.5M; sees Q4 adjusted EPS $1.74-$1.79 vs. est. $1.82 and sees Q4 organic sales down 8%-9%; boosts FY23 adjusted EPS view to $8.13-$8.18 from $7.90-$8.00 while backs organic sales for FY of -1%-2%.

·     Landstar System (LSTR) Q3 EPS $1.71, in-line with consensus and revs $1.29B vs. est. $1.31B; 3Q truck rev per load and volumes fell below prior year levels and said number of loads hauled via truck has trended below historical for October.

·     Northrop Grumman (NOC) Q3 EPS $6.18 vs. est. $5.81; Q3 revs $9.8B vs. est. $9.58B; backs FY23 EPS view $22.45-$22.85 vs. est. $22.72 while boosts FY23 revenue view to ~$39B from $38.4B-$38.8B vs. consensus $38.77B; sees 2024 FCF of $2.25B-$2.65B.

·     Tronox Holdings (TROX) Q3 adj EPS ($0.08) vs est. $0.05, adj EBITDA $116Mm vs est. $119.59Mm; sees Q4 adj EBITDA $105-125Mm vs est. $116.97Mm.

·     United Rentals (URI) Q3 EPS $11.73 vs. est. $11.20; Q3 revs $3.77B vs. est. $3.69B; narrows FY23 revenue view to $14.1B-$14.3B from $14.0B-$14.3B (est. $14.2B) and narrows FY23 adj EBITDA view to $6.775B-$6.875B from $6.75B-$6.9B.

·     UPS Inc. (UPS) Q3 adj EPS $1.57 vs. est. $1.52; Q3 revs $21.06B vs. est. $21.45B; maintains capex spending at about $5.3B; cuts FY23 revenue view to $91.3B-$92.3B from about $93B and below consensus $92.76B; sees consolidated adj operating margin of between 10.8% and 11.3%.

 

Technology, Media & Telecom

·     Meta Platforms (META) Q3 EPS $4.39 vs. est. $3.64; Q3 revs rise 23% y/y to $34.15B vs. est. $33.51B; Q3 ad revs $33.64B, +24% y/y, Family of Apps revenue $33.94B, +24% y/y while Reality Labs revenue $210M, -26% y/y, well below Street; Facebook daily active users 2.09B, +5.6% y/y; sees Q4 revs $36.5B-$40B vs. est. $38.76B; but like SNAP did the day prior, warned of ‘softer ad spend’ following outbreak of Israel-Hamas conflict.

·     IBM Corp. (IBM) Q3 adj EPS $2.20 vs. est. $2.12; Q3 revs rose 4.6% y/y to $14.75B vs. est. $14.77B; Revenue in IBM’s software segment — which includes its AI platform — rose 7.8% from a year ago to $6.3B or 6% adjusted for currency; Consulting revenue was $5 billion, up 5.6%, slower than the Street consensus forecast for 8.7% growth.

·     KLA-Tencor (KLAC) Q1 EPS $5.74 vs. est. $5.40; Q1 revs $2.40B vs. est. $2.36B; sees Q2 EPS $5.26-$6.46, vs. consensus $5.51 and revs $2.23B-$2.58B vs. est. $2.4B.

·     Flex Inc. (FLEX) Q2 adj EPS $0.68 vs. est. $0.58; Q2 revs $7.5B vs. est. $7.52B; boosted FY23 adj EPS view to $2.49-$2.66 from $2.35-$2.55 (est. $2.45), but cuts FY23 revenue view to $28.1B-$28.8B from $30.5B-$31.5B (est. $30.97B. Also, Nextracker (NXT) announced Flex plans to effect a spinoff of all its remaining interests in Nextracker to its shareholders, which would result in a separation by Flex from its ownership of Nextracker.

·     Impinj Inc. (PI) Q3 adj EPS $0.00 vs est. ($0.10) on revs $65.005Mm vs est. $64.75Mm, adj gr mgn 50.5%, adj EBITDA $300k vs est. ($2.665)Mm; guides Q4 revs $65.5-68.5Mm vs est. $65.97Mm, adj EBITDA ($0.9)Mm – $0.7Mm vs est. ($1.733)Mm, adj EPS $($0.04)-$0.01 vs est. $($0.06).

·     ServiceNow Inc. (NOW) Q3 adj EPS $2.92 vs est. $2.56 on revs $2.288B vs est. $2.27B, subscription revs $2.216B, adj FCF $196Mm; guides Q4 subscription revs $2.32-2.325B.

·     SK Hynix has said it opposes the proposed acquisition between Kioxia and Western Digital (WDC), the Financial Times reported noting back in 2018, SK Hynix invested $3.5B in the Bain Capital-led consortium that acquired Kioxia so a merger between Kioxia and Western Digital cannot proceed without SK Hynix’s approval https://tinyurl.com/eubmannc

·     Endeavor Group Holdings (EDR), the talent agency and sports company run by Ari Emanuel, said Wednesday it would start exploring strategic alternatives for the company, which could mean a potential sale. https://tinyurl.com/bp62hxdx