Early Look

Wednesday, September 6, 2023

Futures	Up/Down	%	Last
Dow	-54.00	0.16%	34,626
S&P 500	-9.25	0.21%	4,493
Nasdaq	-45.50	0.29%	15,488

 

 

U.S. futures are pointing to a slightly lower open a day after U.S. stocks dropped Tuesday following a jump in Treasury yields and energy prices, led by sharp pullback in Smallcaps (Russell 2000 was down over 2%) and Transports while the Nasdaq finished just slightly below the flat line, as investors assess prospects for the Federal Reserve’s interest rate path. The U.S. 10-Year Treasury yield is down 2 bps after rising back to around 4.27% yesterday. On August 22, the yield hit a high of 4.3660% before deflating back to a low of 4.06% just this past Friday. Meanwhile, NYMEX crude futures are trying to make it a rise for an eighth-straight day. A majority of the S&P 500 sectors closed lower with Materials, Industrials, and Utilities taking the biggest hit, but Healthcare and REITs also fell 1%. In Asian markets, The Nikkei Index gained 204 points to 33,241, the Shanghai Index edged higher 3 points to 3,158, and the Hang Seng Index dipped -6 points to 18,449. In Europe, the German DAX is down -50 points to 15,722, while the FTSE 100 is down -48 points to 7,390 as European stocks are set to fall for a sixth straight session as weak German data weighs on sentiment. Attention turns back to the Fed and interest rates with earnings season behind us, with several Fed speakers expected today as well as many Wall Street conferences to watch.

 

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -18.98 points, or 0.42%, to 4,496.79.

·     The Dow Jones Industrial Average fell -195.61 points, or 0.56%, to 34,642.10.

·     The Nasdaq Composite slipped -10.86 points, or 0.08%, to 14,020.95.

·     The Russell 2000 Index declined -40.38 points, or 2.10% to 1,880.45.

 

Earnings Calendar:

·     Earnings Before the Open: AEO A LOT BNED CNM EXPR KIRK PLAB ZFOX

·     Earnings After the Close: AGX AI BASE CHPT CTLP CURV CVGW CXM GME INTA LAKE LMNR PATH PHR PLAY SPWH VRNT YEXT

 

Other Key Events:

·     Barclay’s CEO Energy-Power Conference 9/5-9/7, in New York

·     Citigroup Global Technology Conference, 9/6-9/8, in New York

·     Citigroup 18th Annual BioPharma Conference, 9/6-9/7, in Boston, MA

·     DA Davidson Big Sky Summit, 9/6-9/7, in Big Sky, MT

·     Deutsche Bank European TMT Conference 2023, 9/5-9/6, in London

·     Deutsche Bank 13th Annual Aircraft Finance & Leasing Conference & Airline One on One Day, 9/5-9/7, in New York

·     Goldman Sachs Communacopia + Technology Conference 2023, 9/5-9/8, in San Francisco, CA

·     Goldman Sachs 20th European MedTech & Healthcare Services Conference, 9/6-9/7, in London

·     Jefferies 2023 Industrials Conference, 9/6-9/7, in New York

·     TD Cowen 16th Annual Global Transportation Conference, 9/6-9/7, in Boston MA

·     China Imports, Exports and Trade Balance for August

 

Economic Calendar for Today

·     7:00 AM ET                  MBA Mortgage Applications Data

·     7:45 AM ET                  ICSC Weekly Retail Sales

·     8:30 AM ET                  Fed’s Collins Speaks on Economy, Policymaking

·     8:30 AM ET                  International Trade for July

·     8:55 AM ET                  Johnson/Redbook Weekly Sales

·     9:00 AM ET                  Ex-Fed Official Bullard Speaks at NABE

·     9:45 AM ET                  S&P Global Composite PMI, Aug-Final

·     9:45 AM ET                  S&P Global Services PMI, Aug-Final

·     10:00 AM ET                ISM Non-Manufacturing PMI for August

·     10:30 AM ET                Weekly DOE Inventory Data

·     2:00 PM ET                   Federal Reserve Releases Beige Book

·     3:00 PM ET                   Fed’s Logan Takes Part in Community Listening Session

 

 

Macro	Up/Down	Last
Nymex	-0.29	86.40
Brent	-0.42	89.62
Gold	-0.60	1,952.00
EUR/USD	0.0016	1.0736
JPY/USD	-0.39	147.32
10-Year Note	-0.022	4.246%

 

 

World News

·     German industrial orders fell more than expected in July, the federal statistics office said; Incoming orders fell by 11.7% on the previous month on a seasonally and calendar adjusted basis – a Reuters poll of analysts had pointed to a drop of 4.0%.

·     NY Fed data shows a decline in neutral rate during second quarter: The current reading suggests a federal funds rate of around 2.5% would represent a neutral setting. Given that the Fed’s current target rate range is at 5.25% to 5.5%, it suggests monetary policy remains at a notably restrictive level for the economy.

 

Sector News Breakdown

Consumer

·     Alaska Airlines (ALK) said it sees Q3 revenue up 1%-2% vs. prior view of flat to up 3%; said over the past several weeks, fuel prices have increased considerably, driving a downward revision to our adjusted pre-tax margin expectations for the quarter. We now expect economic fuel cost per gallon to be approximately $3.15 to $3.25 and adjusted pre-tax margin to be 10% to 12% for Q3 2023. Our operation continues to perform at an exceptionally high level and throughout peak summer flying our completion rate reached record levels during July and August.

·     Hawaiian Holdings (HA) sees 3q capacity +4% to +5.5%, down from prior view +4.5% to +7.5%; now expects its operating revenue per ASM for quarter ending September 30, 2023, to be down 4.0% to 7.0% y/y; now expects its capacity for year to be up approximately 8.0% to 10.0%.

·     Southwest Airlines (LUV) said it sees Q3 RASM down 5%-7%, had seen down 3%-7%, sees Q3 economic fuel costs $2.70 to $2.80/ gallon; does not expect august 2023 weather-related disruptions to have a material impact on its q3 2023 financial results; has not made any material revisions to its 2023 capacity plans compared with previous guidance.

 

Energy, Industrials and Materials

·     AeroVironment (AVAV) Q1 adj EPS $1.00 vs est. $0.26, gr mgn 43%, on revs $152.3Mm vs est. $128.5Mm, adj EBITDA $37Mm vs est. $18.58Mm; guides FY revs $645-675Mm vs est. $655.88Mm, adj EBITDA $117-127Mm vs est. $121.25Mm and adj EPS $2.30-2.60 vs est. $2.60.

·     Cummins (CMI), Paccar (PCAR): Heavy duty trucking data out as Stephens noted ACT Research released preliminary August Class 8 net order figures of 19,000 units. Orders in August decreased 9% y/y, but increased 5% seq, and when adjusting for seasonality, August orders increased 7.1% seq. Looking ahead, we expect orders to accelerate seq. as 2024 order books begin to take shape.

·     Daimler Truck Holding, Cummins (CMI) and Paccar (PCAR) are forming a joint venture to build a battery plant in the US to help accelerate production of electric trucks. The factory is expected to cost between $2 billion to $3 billion to supply 21 gigawatt hours of power.

·     Dominion Energy (D) announced that it has concluded competitive sale process and executed three separate definitive agreements to sell its three natural gas distribution companies to Enbridge (ENB); deal comprised of $9.4B of cash consideration and $4.6B of assumed debt.

·     First Solar (FSLR) upgraded to equal-weight from underweight at Morgan Stanley and downgraded Stem (STEM) to equal-weight from overweight.

·     Tellurian Inc. (TELL) and Baker Hughes (BKR) announced an agreement to supply eight main refrigerant compression packages for Phase 1 of the Driftwood LNG project. The agreement secures a delivery schedule for the eight LM6000PF+ gas turbines, main refrigerant compressors, and control units required for Phase 1, supporting Driftwood’s ability to achieve initial liquefied natural gas (LNG) production in 2027.

·     XPO (XPO) reported Aug 2023 LTL tonnage per day increased 3.1%, as compared with August 2022, attributable to a y/y increase of 8.1% in shipments per day and a decrease of -4.6% in weight per shipment.

 

Financials

·     Block (SQ) downgraded to Neutral from Buy at UBS and cut tgt to $65 from $102 saying gross profit growth will likely slow given softening of consumer discretionary spending, a slowdown in Cash App monthly active user growth and moderation of Cash App monetization.

·     CME Group (CME) upgraded to Neutral from Underperform at Bank America.

 

Healthcare

·     AstraZeneca (AZN) said the U.S. FDA has requested modifications to improve its Ultomiris treatment’s risk evaluation and mitigation strategy. AZN said the FDA issued a response letter to a Biologics License Application requesting to enhance the mechanism to further validate patients’ meningococcal vaccination status or prophylactic administration of antibiotics prior to treatment.

·     HealthEquity (HQY) Q2 adj EPS $0.53 vs est. $0.48, adj EBITDA $88.1Mm vs est. $84.42Mm on revs $243.549Mm vs est. $239.99Mm, sees FY revs $980-990Mm vs est. $981.07Mm, adj EPS $1.97-2.06 vs est. $1.93 and adj EBITDA $338-348Mm vs est. $339.66Mm.

·     Royalty Pharma plc (RPRX) and Ascendis Pharma A/S (ASND) announced that Royalty Pharma has entered into a $150 million capped synthetic royalty funding agreement with Ascendis based on U.S. net Skytrofa revenue.

 

Technology, Media & Telecom

·     Apple Inc. (AAPL): China ordered officials at central government agencies not to use Apple’s iPhones and other foreign-branded devices for work or bring them into the office, people familiar with the matter said – WSJ https://tinyurl.com/mt4jnbcc

·     Roku Inc. (ROKU) announced a workforce reduction that is expected to impact approximately 10% of the company’s employees; said Excluding the restructuring and impairment charges which will impact total gross profit and net income, Roku now expects total net revenue in the range of $835M-$875M vs. est. $829.2M, and adjusted EBITDA in the range of ($40M)-($20M).

·     Asana Inc. (ASAN) Q2 adj EPS loss (-$0.04) vs. est. loss (-$0.11); Q2 revs $162.5M vs. est. $157.91M; noted Q2 rev growth was better than our guidance, operating margin improved 37 bps and posted positive FCF; guides Q3 above; raises FY24 EPS view to loss of (42c)-(39c) from (55c)-(50c) and est. (-$0.52) and narrows FY24 revs to $642M-$648M from $640M-$648M.

·     Gitlab Inc. (GTLB) Q2 EPS $0.01 vs. est. loss (-$0.03); Q2 revs $139.58M vs. est. $129.78M; sees FY EPS loss (-$0.05-$0.08) on revs $555M-$557M vs. est. loss of (-$0.14) and $542.8M.

·     Zscaler (ZS) Q4 adj EPS $0.64 vs est. $0.49 on revs $455Mm vs est. $430.38Mm; guides Q1 revs $472-474Mm vs est. $464.75Mm and adj EPS $0.48-0.49 vs est. $0.45; sees FY revs $2.05-2.065B vs est. $2.036B and adj EPS $2.20-2.25 vs est. $2.10.

·     CSG Systems (CSGS) says the board increased authorization under existing stock repurchase program by additional $100 mln and announces proposed offering of conv senior notes.

·     Gogo (GOGO) approves a $50M share repurchase program.