| To: Return to Sender who wrote (89053) | 9/28/2022 11:31:38 PM | | From: Return to Sender | | | | 5 New 52 Week Lows on the NDX Today and No New 52 Week Highs:
New Lows:
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| | Semi Equipment Analysis | Stock Discussion ForumsShare | RecommendKeepReplyMark as Last ReadRead Replies (1) |
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| To: Return to Sender who wrote (89054) | 9/28/2022 11:34:59 PM | | From: Return to Sender | | | | Market Snapshot
briefing.com
| Dow | 29654.24 | +517.22 | (1.78%) | | Nasdaq | 11027.25 | +197.89 | (1.83%) | | SP 500 | 3714.21 | +66.85 | (1.83%) | | 10-yr Note | +62/32 | 3.71 |
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| | NYSE | Adv 2687 | Dec 401 | Vol 1.0 bln | | Nasdaq | Adv 3115 | Dec 1051 | Vol 4.5 bln |
Industry Watch
| Strong: Energy, Materials, Financials, Health Care |
| | Weak: -- |
Moving the Market
-- Big pullback in Treasury yields
-- Bounce from oversold conditions
-- Sizable losses for Apple after Bloomberg reported plans to hold back on increasing production of the iPhone 14
-- Bank of England announcing a plan to purchase long-dated UK government bonds in an attempt to "restore orderly market conditions"
| Closing Summary
28-Sep-22 16:25 ET
Dow +548.75 at 29685.77, Nasdaq +222.13 at 11051.49, S&P +71.75 at 3719.11
[BRIEFING.COM] The stock market was in rally mode today, bouncing from oversold conditions. The S&P 500, which set a new low for the year yesterday (3623.29), broke a six-session losing streak and closed above the 3,700 level. The stage was set for a strong rebound effort before the stock market opened as Treasury yields fell in response to a Bank of England (BoE) bond purchase announcement. The major averages were all able to log big gains despite losses in Apple (AAPL 149.84, -1.92, -1.3%) following a Bloomberg report that the company plans to hold back on increasing production of the iPhone 14.
The 10-yr note yield breached the 4.00% level overnight before the BoE said it is going to postpone the sale of gilts slated to begin next week and instead carry out temporary purchases of UK government bonds between September 28 and October 14 in a bid to restore orderly market conditions. The 10-yr note yield dropped 26 basis points on the day to 3.71% and the 2-yr note yield dropped 21 basis points to 3.71%.
The U.S. Dollar Index also fell noticeably after the announcement, down 1.2% to 112.75 with GBP/USD +1.4% to 1.0879.
Buying was broad in nature with many stocks coming along for the ride. Apple, however, logged a decent loss following a Bloomberg report that indicated it's pulling back on a plan to increase production of its iPhone 14 beyond its original target of 90 million units due to weaker-than-expected demand.
Despite losses for Apple, the information technology sector was able to squeeze out a 0.9% gain. Notably, it finished the session in last place for the 11 S&P 500 sectors. Energy (+4.4%) and communication services (+3.2%) rose to the top of the leaderboard.
Communication services had Netflix (NFLX 245.20, +20.84, +9.3%) to thank for its gains after the company received an upgrade to Overweight from Neutral at Atlantic Equities.
Another bright spot in the market was health care (+2.2%), boosted by Biogen (BIIB 276.61, +78.82, +39.9%), which surged after reporting its early Alzheimer's treatment drug, Lecanemab, met its Phase 3 clinical trial primary endpoint.
Energy complex futures settled higher with WTI crude oil futures rising 4.1% to $81.96/bbl and natural gas futures rising 2.0% to $6.93/mmbtu.
Looking ahead to tomorrow, market participants will receive the following economic data:
- 8:30 ET: Weekly Initial Claims (Briefing.com consensus 213,000; prior 213,000), Continuing Claims (prior 1.379 mln), Q2 GDP -- third estimate (Briefing.com consensus -0.6%; prior -0.6%), and Q2 GDP Deflator -- third estimate (Briefing.com consensus 8.9%; prior 8.9%)
- 10:30 ET: Weekly natural gas inventories (prior +103 bcf)
Reviewing today's economic data:
- Weekly MBA Mortgage Application Index showed a 3.7% drop following last week's 3.8% increase
- August Advance report for International Trade in Goods showed a deficit of $87.3 billion versus the revised deficit of $90.2 billion (from $89.1 billion) in July. The Advance report for Retail Inventories rose 1.4% versus the increase of 1.1% in July. The Advance report for Wholesale Inventories rose 1.3% versus July's revised increase of 0.6% (form 0.8%)
- August Pending Home Sales dropped 2.0% (Briefing.com consensus -0.5%) following a revised 0.8% decrease (from 1.0%) in July
- Weekly EIA Crude Oil Inventories showed a draw of 0.215 million barrels after last week's 1.14 million barrel build
Dow Jones Industrial Average: -18.3% YTD
S&P Midcap 400: -20.3% YTD
S&P 500: -22.0% YTD
Russell 2000: -23.6% YTD
Nasdaq Composite: -29.4% YTD
Market pushed higher into close
28-Sep-22 15:30 ET
Dow +607.80 at 29744.82, Nasdaq +240.58 at 11069.94, S&P +79.60 at 3726.96
[BRIEFING.COM] The stock market is inching higher ahead of the close.
The Russell 2000 shows the biggest gains, up 3.3%.
Looking ahead to tomorrow, market participants will receive the following economic data:
- 8:30 ET: Weekly Initial Claims (Briefing.com consensus 213,000; prior 213,000), Continuing Claims (prior 1.379 mln), Q2 GDP -- third estimate (Briefing.com consensus -0.6%; prior -0.6%), and Q2 GDP Deflator -- third estimate (Briefing.com consensus 8.9%; prior 8.9%)
- 10:30 ET: Weekly natural gas inventories (prior +103 bcf)
Market comes off highs
28-Sep-22 15:05 ET
Dow +517.22 at 29654.24, Nasdaq +197.89 at 11027.25, S&P +66.85 at 3714.21
[BRIEFING.COM] In recent trading, the market continued to pullback from session highs but maintains solid gains.
Treasury yields continue to fall. The 2-yr note yield is down 21 basis points to 4.10% and the 10-yr note yield down 26 basis points to 3.71%.
Energy complex futures made sizable upside moves today. WTI crude oil futures settled up 4.1% to $81.96/bbl and natural gas futures settled up 2.0% to $6.93/mmbtu.
CarMax gains ahead of earnings, VFC slips after guidance
28-Sep-22 14:30 ET
Dow +404.03 at 29541.05, Nasdaq +148.46 at 10977.82, S&P +51.24 at 3698.60
[BRIEFING.COM] We've slipped a hair off session highs in recent trading, the benchmark S&P 500 (+1.40%) now narrowly in front.
S&P 500 constituents Marathon Petroleum (MPC 98.62, +5.77, +6.21%), CarMax (KMX 85.59, +4.44, +5.47%), and Target (TGT 155.69, +7.22, +4.86%) pepper the top of the index. MPC is higher alongside gains in crude oil prices, and KMX gains in front of tomorrow morning's earnings report.
Meanwhile, apparel firm V.F. Corp (VFC 33.45, -1.62, -4.62%) slips to the bottom of the standings following guidance.
Gold solidly higher as fears grow; dollar, yields fall
28-Sep-22 14:00 ET
Dow +416.59 at 29553.61, Nasdaq +136.50 at 10965.86, S&P +51.51 at 3698.87
[BRIEFING.COM] We're still decently higher in the major averages with about two hours remaining on Wednesday, the tech-heavy Nasdaq Composite (+1.26%) still at the "bottom" of the standings, albeit on gains of more than 136 points.
Gold futures settled $33.80 higher (+2.1%) to $1,670.00/oz, fueled in part by safe haven attraction given ongoing recession fears, losses in the greenback, and a dip in yields.
Meanwhile, the U.S. Dollar Index is down about -1.2% to $112.71.
BoE bond purchase plan soothes market for now
The equity futures market was noticeably weaker overnight as the 10-yr note yield topped 4.00%. It saw some welcome improvement, however, as did the 10-yr note, when the Bank of England (BoE) announced a plan designed to restore proper market functioning in the UK government bond market.
The BoE's plan will involve postponing gilt sale operations slated to begin next week. Instead, the BoE "...will carry out temporary purchases of long-dated UK government bonds from 28 September."
The scope of the purchases will be carried out "on whatever scale is necessary" to effect orderly market functioning, although the purchase operations will be strictly time limited, ending October 14. The bank intends to make the first gilt sales on October 31 and stick to its plan whereby its holdings of UK bonds will be reduced by GBP80 bln annually.
In a Pavlovian fashion, the BoE's announcement was the ringing of the bell for many market participants. The 10-yr UK gilt yield came well off a high approaching 4.60% and now trades at 4.02%. In turn, the 10-yr Treasury note yield has backed down to 3.86% and the equity futures market has sharply pared its overnight losses.
Currently, the S&P 500 futures are up 12 points and are trading 0.3% below fair value, the Nasdaq 100 futures are down seven points and are trading slightly below fair value, and the Dow Jones Industrial Average futures are up 142 points and are trading 0.5% above fair value.
One can assume that the reversal has some moral hazard roots in it. In other words, here is yet another case of a central bank intervening in the markets to keep bad things from happening. The assumption is that the Fed would be compelled to do the same if the Treasury market went haywire (or decidedly more haywire than it has already); hence, the rapid downtick in Treasury yields off an announcement that only directly affects the UK government bond market.
To be fair, the UK government put the BoE in a bad spot with its stunning tax cut plan. Traders -- and, now, even the IMF -- found reason to castigate the UK government's plan as ill-advised at this juncture. Still, we have our doubts that the BoE's plan will be the silver bullet to kill all of the angst that has been pressuring the pound and UK bond market since the tax cut announcement considering its plan doesn't have permanency.
There is an end date (October 14), and unless the UK government renounces its own tax cut plan, the same issue will be hanging over the market come October 15. That may be why the British pound hasn't necessarily come screaming back after today's announcement. GBP/USD is off its low (1.0540), but still down 0.5% at 1.0680.
Anyway, that is something not to lose sight of amid today's reversal.
We can tell the market is captivated by the BoE announcement, because it has managed to bounce back in spite of a Bloomberg report that suggests weak demand is prompting Apple (AAPL) to hold back on increasing production of the iPhone 14 above its original target of 90 million units. Shares of AAPL are down 2.4%.
On a better note that extends beyond the stock market, shares of Biogen (BIIB) have soared nearly 50% following the news that its early Alzheimer's treatment drug, Lecanemab, met its Phase 3 primary endpoint. That is decidedly positive news, as the stock's response suggests, and we can all hope that there is permanency to this particular development.
Again, that isn't the case for the BoE plan, but that doesn't mean it can't be a positive market driver (for a market that needs a positive driver) on a temporary basis.
-- Patrick J. O'Hare, Briefing.com
Biogen soaring as promising clinical trial data provides second chance to lead AD market (BIIB)
Biogen (BIIB) is skyrocketing higher and generating plenty of buzz after the company and its Japanese development partner, Eisai, announced positive Phase 3 data for their Alzheimer's Disease (AD) treatment, lecanemab. The study met its primary endpoint by reducing cognitive and functional decline by 27% after 18 months of treatment. This is not only potentially great news for BIIB and for AD patients, it's also surprising news given the company's recent disappointment with aduhelm.
Aduhelm, a once promising treatment for AD, was also co-developed with Eisai and received a controversial FDA approval in June 2021. If fact, many were stunned by the approval because an FDA advisory committee voted nearly unanimously against approving the drug in November 2020. Ultimately, though, aduhelm failed to gain market acceptance, especially after the Centers for Medicare and Medicaid Services (CMS) said that Medicare would limit its coverage of monoclonal antibodies for treatment of AD to only those patients who participate in clinical trials. Importantly, that decision applied to all drugs in that category.
With this turn of events, BIIB's AD program fell off the radar as expectations declined for its other drug candidates. Notably, like aduhelm, lecanemab also targets a protein plaque called amyloid beta, which is believed to be the key agent behind the progression of AD. Due to this similarity, hopes for lecanemab were not very high. However, lecanemab apparently takes aim at a different amyloid than aduhelm, potentially explaining the difference in efficacy. On that note, aduhelm was only shown to significantly reduce a certain plasma (p-tau181) that's been correlated to cognitive and functional decline in AD, rather than shown to meaningfully reduce actual cognitive decline.
Investors who were burned on the high hopes that surrounded aduhelm can be forgiven for feeling a bit skeptical about today's developments, but this truly does look like a landmark event. Every secondary endpoint was also met in the study, while the incidence of amyloid-related imaging abnormalities-edema/effusion fell within the expected range. Other key points to consider include:
- The full results of the clinical trial will be published in a peer-reviewed journal in November. These results will serve as the basis for whether the FDA grants approval to lecanemab on January 2, 2023 -- the current PDUFA date.
- If approved, BIIB will have to split the profits evenly with Eisai. That obviously limits BIIB's profit potential, but the addressable market is huge with approximately 6.5 mln people in the U.S. alone suffering from AD. Furthermore, little progress has been made over the years in treating AD, limiting lecanemab's competition. The bottom line is that lecanemab would likely become a multi-billion drug for BIIB should it receive FDA approval.
- Other pharmaceutical companies, such as Eli Lilly (LLY), Roche (RHHBY), Acumen Pharmaceuticals (ABOS), and Prothena (PRTA), also have AD drugs in various stages of clinical trials. Each of these stocks are rallying today, with ABOS and PRTA exploding to the upside as both of those companies are developing AD and neurodegenerative treatments that focus on amyloid protein reduction.
The pathway to gaining FDA approval and market acceptance for a new drug can be a rollercoaster ride, as we saw with aduhelm. If lecanemab does receive FDA approval, there will be another hurdle to jump in the form of the CMS's policy of not covering amyloid-targeting drugs. Perhaps the CMS will change its tune based on the positive trial results for lecanemab. The main takeaway, though, is that today's unexpected good news may be a game-changer for BIIB and for those suffering from AD.
BlackBerry lower despite modest upside; automotive supply chain issues remain a headwind (BB)
BlackBerry (BB -2%) is trading a bit lower following its Q2 (Aug) earnings results last night despite slight upside. BB reported a loss, but it was narrower than expected. Revenue fell 4% yr/yr to $168 mln, but that also was better than expected. We think the weakness is being spurred by some cautious comments on the call about the months ahead.
The company is still thought of by many as a mobile phone company but it's really not. You will still find Blackberry phones in the market, but they are not designed or made by Blackberry. Instead, BB decided a few years ago to license out the Blackberry name to third party manufactures. Today, BB is primarily focused on IoT (automotive technology) and cybersecurity. BB also is in the process of selling substantially all of its non-core patents to Catapult for $600 mln.
- The more exciting segment and the growth segment is on the IoT side. Segment revs rose 28% yr/yr to $51 mln, led by QNX design phase revenue. Of note, Volkswagen recently selected BlackBerry QNX for its new VW.OS platform. This follows design wins in recent quarters with BMW, Volvo and a long list of EVs in China.
- The IoT results can be a little tricky. When BB wins a new automotive design, this design revenue is immediately recognized with royalties coming later when the vehicle enters into production. On the positive side, BB has a solid pipeline of potential new designs in the upcoming quarters. However, on the production front, royalty revenue remains below pre-pandemic levels, mainly due to supply chain headwinds which is slowing automotive production.
- BB says the macro environment for autos remains a mixed picture. The Chinese market, where BlackBerry has won a number of designs recently, is bouncing back due to the end of some COVID-related shutdowns and robust stimulus measures. However, there appears to be a short-term contraction in silicon chip supplies in North America and Europe, which is constraining the ability of OEMs to build inventory and meet demand.
- Given the strength of the QNX business, BB says it would normally raise its revenue outlook. However, given the macro headwind, it only reaffirmed FY23 revenue for the IoT business at $200-210 mln.
- The Cybersecurity segment is much larger, but revenue fell 8% yr/yr to $111 mln. This was in-line with internal expectations, with particular strength in core verticals of govt and financial services. However, we think investors are disappointed with the Cyber results, considering that BB posted 6% growth in Q1 (May). BB reiterates flat segment growth in FY23.
The market does not seem very impressed with BB's Q2 report. Granted, it reported slight upside, but the cautious comments on the automotive OEM supply chain issues means that royalty revenue will take some time to hit the P&L. We think that is spooking investors a bit because the IoT side is really the growth engine. We also think the yr/yr decline in cybersecurity revs is a bit of a letdown, especially after posting growth in Q1. Other cyber firms have been posting better results. Overall, we think the jury is still out on BlackBerry. Its automotive tech segment looks promising, but supply chain remains an issue for now. Also, the Cyber business should be doing better.
Thor Industries delivers thunderous JulQ earnings beat; remains upbeat on future RV demand (THO)
Thor Industries (THO +4%) delivered another thunderous quarter, topping earnings estimates by triple-digits for the fifth consecutive period and edging past analysts' revenue expectations in Q4 (Jul). The even bigger news is that the RV manufacturer will begin providing annual guidance, something it had not done since before the pandemic, which even then was largely a commentary on the fiscal year. THO plans to guide for FY23 (Jul) following its Dealer Open House, which ends this week, and in conjunction with 1Q23 (Oct).
It is no secret that THO is amid many headwinds, from rising interest rates and higher fuel costs to increased competition for individuals' time. However, RV component manufacturer LCI Industries (LCII) pointed out last month that gas prices are not climbing as quickly as hotel, airline, and rental car prices, a plus for the RV industry. Also, LCII noted that RV rental prices have barely budged yr/yr in 2022. With RV rental rates holding relatively steady, individuals may be more inclined to opt for a rental, adding potential RV buyers into the mix.
- Meanwhile, despite the macroeconomic challenges, THO has crushed analyst EPS estimates in Q4, growing its bottom line by 25% yr/yr to $5.15. THO's beat is even more notable, considering it was the first time since 4Q20 that analysts called for earnings to contract yr/yr.
- As a result of THO's massive earnings outperformance in Q4, investors are shrugging off a considerable slowdown in revenue growth. THO expanded its top line by just 6.4% yr/yr to $3.82 bln. Although this was good enough to exceed consensus, it highlighted the current economic environment's effect on the highly discretionary RV industry. By comparison, THO grew revs by +34.6%, +42.1%, and +56.0% in Q3, Q2 (Jan), and Q1, respectively.
- Nevertheless, THO remained upbeat on future consumer demand, a recurring tone from the past few quarters. The company remarked that North American consumer demand will remain strong for the foreseeable future. THO sentiment on Europe was also unchanged, noting that a high level of interest in RVs remains despite persistent supply constraints.
- We have heard a similar tone from RV dealer Camping World Holdings (CWH), which commented last month that demand for new and used RVs is on par with some of the best periods it has seen over the previous ten years.
- Rival Winnebago Industries (WGO) was also optimistic in late June, noting it is confident in the long-term health of RV demand. However, WGO followed this up by saying that the short-term will be choppy.
Overall, investors are applauding THO's ability to grow its bottom line given the current headwind-plagued environment, as well as its decision to begin providing annual guidance. Headwinds remain strong but with shares down roughly 30% on the year, giving THO an attractive ~6x forward earnings, a lot of negativity may already be baked in. Meanwhile, THO just approved an additional $450 mln for share repurchases, bringing the total to $700 mln, signaling management's confidence in future cash flows. |
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| From: Sam | 9/29/2022 4:23:58 PM | | | | | | Micron Q4 results and Q1 guidance--Q4 was pretty good relative to expectations. Q1, not so much. They still project positive earnings though and they are almost always very conservative in their projections.
Record revenue year in mobile, auto, industrial, and networking markets
BOISE, Idaho, Sept. 29, 2022
(GLOBE NEWSWIRE) -- Micron Technology, Inc. (Nasdaq: MU) today announced results for its fourth quarter and full year of fiscal 2022, which ended September 1, 2022.
Fiscal Q4 2022 highlights
Revenue of $6.64 billion versus $8.64 billion for the prior quarter and $8.27 billion for the same period last year
GAAP net income of $1.49 billion, or $1.35 per diluted share
Non-GAAP net income of $1.62 billion, or $1.45 per diluted share
Operating cash flow of $3.78 billion versus $3.84 billion for the prior quarter and $3.88 billion for the same period last year
Fiscal 2022 highlights
Revenue of $30.76 billion versus $27.71 billion for the prior year
GAAP net income of $8.69 billion, or $7.75 per diluted share
Non-GAAP net income of $9.48 billion, or $8.35 per diluted share
Operating cash flow of $15.18 billion versus $12.47 billion for the prior year
[....]
The following table presents Micron’s guidance for the first quarter of 2023:
FQ1-23 GAAP(1) Outlook Non-GAAP(2) OutlookRevenue $4.25 billion ± $250 million $4.25 billion ± $250 million
Gross margin 25.0% ± 2.0% 26.0% ± 2.0%
Operating expenses $1.09 billion ± $25 million $1.00 billion ± $25 million
Diluted earnings (loss) per share ($0.09) ± $0.10 $0.04 ± $0.10
more at investors.micron.com/... |
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| To: Return to Sender who wrote (89057) | 9/29/2022 7:00:58 PM | | From: Return to Sender | | | | BPNDX Remains 14 PnF Buy Signals - [AEP removed ILMN added]
| Mon | Tues | Wed | Thur | | ADP | ADP | ADP | ADP | | AEP | AEP | AEP | BIIB | | CPRT | CPRT | BIIB | BKNG | | CSCO | CSCO | BKNG | CPRT | | FAST | FAST | CPRT | CSCO | | GILD | GILD | CSCO | FAST | | KDP | KDP | FAST | GILD | | PEP | PEP | GILD | ILMN | | SIRI | SIRI | KDP | KDP | | TMUS | TMUS | ORLY | ORLY | | VRTX | VRTX | PEP | PEP |
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| To: Return to Sender who wrote (89059) | 9/29/2022 7:29:36 PM | | From: Return to Sender | | | | 14 New 52 Week Lows on the NDX and No New 52 Week Highs:
New Lows:
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| To: Return to Sender who wrote (89060) | 9/29/2022 7:35:53 PM | | From: Return to Sender | | | |
Market Snapshot
briefing.com
| Dow | 29026.82 | -658.95 | (-2.22%) | | Nasdaq | 10638.24 | -413.25 | (-3.74%) | | SP 500 | 3613.91 | -105.20 | (-2.83%) | | 10-yr Note | -1/32 | 3.75 |
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| | NYSE | Adv 512 | Dec 2523 | Vol 1.0 bln | | Nasdaq | Adv 1105 | Dec 3030 | Vol 4.4 bln |
Industry Watch
| Strong: -- |
| | Weak: Consumer Discretionary, Real Estate, Information Technology |
Moving the Market
-- Rising Treasury yields
-- Initial jobless claims falling, giving the Fed a basis to continue aggressive rate hikes
-- UK Prime Minister Truss doubling down on tax cut plans, fueling volatility for the UK gilt and British pound
-- Geopolitical tension as President Putin is set to announce annexation of four Ukrainian territories
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Closing Summary
29-Sep-22 16:25 ET
Dow -458.13 at 29227.64, Nasdaq -314.13 at 10737.36, S&P -78.57 at 3640.54
[BRIEFING.COM] There was a heavy sell off in the market today. Yesterday's rally effort was completely undone as the S&P 500 fell to a fresh low for 2022 (3610.40). The major indices were able to climb off session lows ahead of the close, but still suffered big losses.
The stock market was weighed down by Apple's (AAPL 142.48, -7.36, -4.9%) outsized loss following a BofA downgrade to Neutral from Buy that was tied to concerns about negative earnings estimate revisions being driven by weaker consumer demand.
Market participants were also dealing with rate hike and recession concerns after Cleveland Fed President Mester (FOMC voter) said that the Fed is not yet in restrictive territory with its policy rate. This was followed closely by the weekly initial jobless claims number, which fell to the lowest level (193,000) since early May, giving the Fed a basis to maintain an aggressive line with its rate hikes.
Adding fuel to the fire, UK Prime Minister Truss defended her tax cut plan in spite of the tumult it has caused for the UK gilt and British pound. This only added to participants' unwillingness to take on risk in an environment charged with worries, given all the volatility across capital markets, about a systemic issue coming to light.
Geopolitical worries were at the forefront, too, with President Putin expected to announce the annexation of four Ukraine territories on Friday. This is cause for concern due to Putin's earlier claim that Russia will take all actions necessary, including using nuclear weapons, if its territorial interests are threatened.
There was a noticeable drop in Treasury yields from earlier highs, yet that did not offer much support for the stock market. The 10-yr yield was at 3.81% shortly before the open and settled at 3.75%, up four basis points from yesterday. The 2-yr note yield, which hit 4.23% at its overnight high, settled up seven basis points at 4.17%.
Decliners led advancers by a 5-to-1 margin at the NYSE and a nearly 2-to-1 margin at the Nasdaq.
Mega cap stocks were among the biggest losers today, led by Apple. The Vanguard Mega Cap Growth ETF (MGK) fell 2.7% versus a 1.9% loss in the Invesco S&P 500 Equal Weight ETF (RSP) and a 2.1% loss in the S&P 500.
All 11 S&P 500 sectors closed with losses that ranged from 4.1% (utilities) to 0.1% (energy). Consumer discretionary (-3.4%) closed near the bottom of the pack, weighed down by recession concerns and disappointing quarterly results from CarMax (KMX 65.15, -21.26, -24.6%).
Energy complex futures settled the session lower. WTI crude oil futures fell 0.5% to $81.55/bbl; natural gas futures fell 1.0% to $6.86/mmbtu; unleaded gasoline futures fell 1.4% to $2.41/gal.
Carnival (CCL) will report earnings ahead of tomorrow's open.
Looking ahead to Friday, market participants will receive the following economic data:
- 8:30 ET: August Personal Income (Briefing.com consensus 0.3%; prior 0.2%), Personal Spending (Briefing.com consensus 0.2%; prior 0.1%), PCE Prices (Briefing.com consensus 0.2%; prior -0.1%), and core PCE Prices (Briefing.com consensus 0.4%; prior 0.1%)
- 9:45 ET: September Chicago PMI (Briefing.com consensus 51.9; prior 52.2)
- 10:00 ET: Final University of Michigan Consumer Sentiment (Briefing.com consensus 59.5; prior 59.5)
Reviewing today's economic data:
- Weekly initial jobless claims totaled 193,000 (Briefing.com consensus 213,000) following last week's revised count of 209,000 (from 213,000). Continuing claims totaled 1.347 million following last week's revised count of 1.376 million (form 1.379 million)
- The key takeaway from the report is the same as last week: The low level of initial claims -- a leading indicator -- will register with the Fed as a basis to maintain an aggressive line with its rate hikes since it sees a softening in the labor market as a necessary ingredient for helping to bring inflation back down to its 2.0% target. To be sure, an initial claims reading below 200,000 is not at all consistent with a labor market softening in a manner that would placate Fed officials.
- The Q2 GDP Third Estimate was unchanged from the prior reading, which showed a 0.6% decline (Briefing.com consensus -0.6%). The Q2 GDP Deflator Third Estimate was 9.0% (Briefing.com consensus 8.9%) following the prior reading of 8.9%
- The key takeaway from this report is that it won't register at all as a market mover since we are a day away from being done with the third quarter.
- Weekly EIA Natural Gas Inventories showed a build of 103 bcf versus a build of 103 bcf last week
Dow Jones Industrial Average: -19.6% YTD
S&P Midcap 400: -21.9% YTD
S&P 500: -23.6% YTD
Russell 2000: -25.4% YTD
Nasdaq Composite: -31.4% YTD
Market lifts off lows ahead of close
29-Sep-22 15:30 ET
Dow -545.89 at 29139.88, Nasdaq -369.75 at 10681.74, S&P -92.02 at 3627.09
[BRIEFING.COM] The major average inched somewhat off session lows ahead of the close.
After the close, Nike (NKE) and Micron (MU) report earnings. Carnival (CCL) will report earnings ahead of tomorrow's open.
Looking ahead to Friday, market participants will receive the following economic data:
- 8:30 ET: August Personal Income (Briefing.com consensus 0.3%; prior 0.2%), Personal Spending (Briefing.com consensus 0.2%; prior 0.1%), PCE Prices (Briefing.com consensus 0.2%; prior -0.1%), and core PCE Prices (Briefing.com consensus 0.4%; prior 0.1%)
- 9:45 ET: September Chicago PMI (Briefing.com consensus 51.9; prior 52.2)
- 10:00 ET: Final University of Michigan Consumer Sentiment (Briefing.com consensus 59.5; prior 59.5)
Market clings to session lows
29-Sep-22 15:00 ET
Dow -658.95 at 29026.82, Nasdaq -413.25 at 10638.24, S&P -105.20 at 3613.91
[BRIEFING.COM] The major indices are moving sideways near session lows.
Energy complex futures settled the session lows. WTI crude oil futures fell 0.5% to $81.55/bbl; natural gas futures fell 1.0% to $6.86/mmbtu; unleaded gasoline futures fell 1.4% to $2.41/gal.
On a related note, BP (BP 28.62, +0.06, +0.2%) and Chevron (CVX 144.00, -1.78, -1.2%) restarted oil production in areas impacted by Hurricane Ian, according to Oil Price.
Caesars slips after Nevada gaming data, Chubb outperforms in aftermath of Ian landfall
29-Sep-22 14:30 ET
Dow -661.79 at 29023.98, Nasdaq -418.39 at 10633.10, S&P -106.06 at 3613.05
[BRIEFING.COM] The benchmark S&P 500 (-2.85%) is still in second place on Thursday afternoon.
S&P 500 constituents Caesars Entertainment (CZR 31.76, -2.74, -7.94%), Generac (GNRC 171.60, -15.77, -8.42%), and Bath & Body Works (BBWI 33.26, -2.12, -5.99%) dot the bottom of the standings. CZR gains after August Nevada gaming metrics, GNRC slips a day after a modest rebound, while BBWI falls after retail peer Bed Bath & Beyond (BBBY 5.84, -0.62, -9.60%) reported a wider than expected Q2 loss.
Meanwhile, insurance firm Chubb (CB 182.95, +2.63, +1.46%) is one of today's better performers, gains possibly connected to Hurricane Ian.
Gold slightly lower as yields gain
29-Sep-22 14:00 ET
Dow -617.45 at 29068.32, Nasdaq -391.70 at 10659.79, S&P -98.37 at 3620.74
[BRIEFING.COM] The broader market slips to session lows in recent trading, the tech-heavy Nasdaq Composite (-3.54%) still the worst performer.
Gold futures settled down $1.40 (-0.1%) to $1,668.60/oz, pressured by gains in yields with losses capped by a modestly weaker dollar.
Meanwhile, the U.S. Dollar Index is down about -0.2% to $112.33.
MillerKnoll shares sink below pandemic lows after a Q1 sales miss and weak Q2 guidance
The warning signs flashed by fellow office furniture manufacturers HNI Corp (HNI) and Steelcase (SCS) materialized in the form of a Q1 (Aug) sales miss and downbeat Q2 (Nov) guidance for MillerKnoll (MLKN -12%) yesterday after the bell. While MLKN was optimistic in late June regarding the foundation its elevated backlog provided for AugQ, HNI's slashed FY22 outlook and SCS's missed AugQ sales expectations on weak order growth set an uneasy backdrop for MLKN heading into its AugQ report. Coinciding with MLKN's disappointing results is an analyst downgrade at Craig Hallum today.
- Many of MLKN's AugQ numbers illuminate the headwinds its peers faced recently. Softness has ticked up globally, with some areas much worse than others. In the U.S., which is included in MLKN's Americas Contract segment (~50.0% total AugQ revs), businesses displayed inflation concerns, placing smaller orders. Meanwhile, in MLKN's Global Retail segment, performance was adversely affected by a shift in consumer tastes toward experiences, such as travel, similar to what we heard from Wayfair (W) last month.
- The challenges in AugQ culminated in revenue growth of 36.6% yr/yr, coming in at the low end of MLKN's prior guidance of $1.08-1.12 bln. Meanwhile, organic revs fell 12% yr/yr as orders slumped 11%, primarily driven by MLKN's Americas Contract and Global Retail segments.
- A bright spot stemmed from MLKN's International Contract & Specialty segment, where organic sales climbed 30% yr/yr on a 1% improvement in new orders. MLKN's international presence acts as a key competitive advantage, and the company does not expect to let up on expanding anytime soon. In fact, MLKN is looking to bolster its overseas footprint by introducing its international dealer cross-sell pilot to India and the EMEA region later this year.
- MLKN's guidance illustrated the stickiness of current headwinds. For NovQ, the company expects EPS of $0.39-0.45, a 17.6% drop yr/yr at the midpoint, and revs of $1.027-1.067 bln, just 2.0% growth yr/yr at the midpoint.
Conversely, MLKN noticed supply chain stabilization as lead times returned to near normal levels in the quarter. Also, MLKN expects to see traction from net price hikes and cost reduction initiatives translate to meaningful margin expansion in subsequent quarters. Although this does depend on moderated inflationary pressures, recent CPI reports indicate that this massive headwind may be cooling off.
Bottom line, with investors sending shares of MLKN below pandemic lows, MLKN is in the hot seat. If inflationary pressures are not enough, the company must also adapt to increasing levels of hybrid work. Its brands are strong, and overseas growth is encouraging. However, we view the near term as too uncertain and think it is better to remain on the sidelines until MLKN works through some of its challenges.
Jefferies upside results aided by sale of a non-core asset, but IB business gains share again (JEF)
Jefferies (JEF), which continues to expand its investment banking operations as it takes aim at Wall Street's biggest names, reported better-than-expected Q3 results in a very volatile environment. Since JEF issues quarterly results a few weeks before earnings season kicks in for the financial sector, the company's performance is often viewed as a precursor for what's to come. On the surface, JEF's top and bottom-line beat looks like an encouraging sign, suggesting that business conditions may be healthier than many assume. However, when taking a closer look at JEF's results, we don't believe its upside report necessarily points to many similar outcomes in the weeks ahead.
- By far, JEF's strongest segment was Merchant Banking, which generated revenue growth of 60% to $397.8 mln. The increase was mainly driven by the sale of Idaho Timber in July for $239 mln. Given that JEF is winding down its Merchant Banking business and is looking to sell off the rest of its portfolio (Vitesse Energy, Linkem, FXCM Group, JETX Energy), it's not a positive sign that this segment led the way. In fact, it removes some of the luster from JEF's earnings beat and largely nullifies the notion that its outperformance bodes well for its competitors.
- Where JEF really wants to shine is in its Investment Banking (IB) unit. Heightened market volatility and rising macroeconomic uncertainties make it a very difficult environment for JEF's IB business to prosper in, but the company believes that it gained market share once again in Q3. If that is the case, then companies like Goldman Sachs (GS), Morgan Stanley (MS), and JPMorgan Chase (JPM), must have struggled mightily in Q3 because JEF's IB revenue fell by 44% yr/yr to $681.8 mln.
- With the IPO market remaining nearly frozen in Q3, it's not surprising that JEF's equity underwriting revenue plunged by 59% to $150.9 mln. The collapse was even worse for debt underwriting, which took a 66% nosedive.
- M&A activity has also slowed considerably, but the 17% drop in advisory revenue may be better than some expected, especially since JEF lapped record high advisory revenue of $584 mln in the year-earlier period.
- On the Capital Markets side, net revenue edged higher by 2% yr/yr to $452.1 mln, driven by higher commissions and a 17% increase in equities trading. Rising interest rates created a major headwind for fixed income trading, though, as reflected in the 15% yr/yr drop.
- This decline is especially worrisome for a company like MS that generates a substantial amount of revenue from fixed income trading. In 2Q22, MS's fixed income trading revenue totaled $2.5 bln, representing nearly 20% of total revenue.
The main takeaway is that JEF's upside performance may not be quite as strong as it seems since the sale of its Idaho Timber asset played a major role. Undoubtedly, business conditions are turbulent, particularly for the investment banking and fixed income trading businesses. It's also worth pointing out that JEF, and its peers, are lapping very difficult yr/yr comparisons in the investment banking business. Overall, JEF's results were perhaps a little better than feared, but they also didn't provide a very upbeat outlook for other financial companies that are poised to report in the weeks ahead.
Bed Bath & Beyond reports a larger-than-expected loss as it makes a lot of changes (BBBY)
Bed Bath & Beyond (BBBY -5%) is holding up fairly well today despite a much larger than expected loss with its Q2 (Aug) report this morning. However, the good news was that revenue was in-line and same store comps of -26% were in-line with prior guidance. Also, it sounds like BBBY is making some early progress on the strategic and financial actions it announced last month.
- To quickly review, on the financial side, BBBY announced in August that it will implement an at-the-market (ATM) 12 mln share offering program. On the strategic side, BBBY will be scaling back its owned brands to focus more on National brands. There were also some cost cutting measures, including closing 150 stores and cutting corporate and supply chain staff by 20%. It also reduced its FY22 cap-ex guidance to $250 mln from $400 mln. We were also surprised to hear BBBY put the kibosh on any talk of spinning off or selling its buybuy BABY segment.
- Looking ahead, the next big decision will be the naming of a new CEO. Sue Gove is acting as interim CEO for now. We thought we might get a new person named today, but that was not the case.
- Quickly on the comps, the Bed Bath & Beyond banner was the main culprit for the large comp decline, coming in at -28%, reflecting a legacy merchandise assortment, out of stocks, and continued trends in customer traffic. buybuy BABY was a bit better, not great with a comp decline in the high-teens as this banner focused on maintaining market share. It was also lapping tough high-teens comps in the year ago period.
- In terms of the big loss, it seems that the changes that were just announced last month will take time to impact the P&L. However, BBBY says it is made progress in Q2 relative to Q1, including accelerated markdowns and promotions. Also, BBBY is seeing positive sales trends where in-stock positions and visual merchandising have improved. Also, its Welcome Rewards loyalty program has grown rapidly since launching this summer.
Overall, we think investors were expecting a rough and messy quarter, especially on EPS given all the merchandise and other recent changes. So this was not a surprise and explains why the stock is holding up. We remain cautious on BBBY and would avoid the stock. We suspect it will remain volatile given its meme status and short squeeze potential. Also, the ATM offering is likely to keep a lid on the shares. We do not expect a near term turnaround.
CarMax amid a sell-off following a sizeable Q2 EPS miss sparked by softening market conditions (KMX)
By reporting Q2 (Aug) earnings and revs considerably below consensus as retail and wholesale units sold tumbled yr/yr, used car retailer CarMax (KMX -22%) is facing intense selling pressure today. Typical macroeconomic headwinds, such as rising rates and high inflation, were in full force during the quarter. KMX's lackluster results are taking a slew of other auto retailers down with it, including Carvana (CVNA -21%), AutoNation (AN -10%), and Group 1 Automotive (GPI -12%), to name a few.
There were still some positive numbers from AugQ, albeit rather slim, comprised mainly of a 4.4% yr/yr climb in gross profit per retail used unit, as well as a 50.0% increase in vehicles purchased compared to before KMX launched its pre-Instant Offer two years ago. However, these few bright spots were made dull from gross profit per retail used unit falling 2.4% sequentially as average selling prices continued to fall qtr/qtr. Likewise, on a yr/yr basis, KMX's vehicles purchased slid by 8.1%.
- Perhaps the most glaring issues from AugQ were the underwhelming headline numbers. Earnings dropped 54% yr/yr to $0.79 on top-line growth of just 2.0% to $8.14 bln. Meanwhile, same-store used unit sales fell by -8.3%.
- In late June, KMX noted that through the first few weeks of AugQ, it was running a low single-digit decline in comp sales. However, KMX began seeing comps fall sharply in July and August, ending in mid-teen drops.
- Used vehicle unit sales ended the quarter down 6.4% yr/yr, while wholesale unit sales tumbled 15.1%. The wider wholesale drop was caused by KMX continuing to reallocate older vehicles from wholesale to retail to keep up with demand for lower-priced cars. KMX estimates wholesale unit sales would have fallen by less than 10% without this decision.
- Furthermore, gross profit per wholesale unit dipped 12.3% yr/yr. With wholesale prices at dealer auctions already falling by 2.3% through the first half of September, we suspect this trend will persist into Q3 (Nov).
- KMX's finance arm is also experiencing some headwinds, with income falling 8.6% yr/yr. On the bright side, KMX remains confident in its ability to leverage its credit platform to ensure Tier 1 credit losses remain within its 2.0-2.5% range.
Overall, economic headwinds took their toll on the retail auto industry and KMX in AugQ. Despite the gloomy near-term future, KMX did offer a few encouraging remarks. Like rival CVNA noted last month, KMX stated that it continued to grow its market share. We believe these companies can simultaneously capture market share as consumers shift away from the traditional dealer model to more online/e-commerce offerings. Also, KMX continued to make in-roads on its strategic growth initiatives, such as investments to advance its online platform.
Nevertheless, as we pointed out last quarter, KMX faces a bumpy road ahead. Although car prices fell slightly from last quarter, they were still up nearly 10% yr/yr. As inflation remains widespread, consumers will have fewer dollars to allocate toward these rising car prices, especially as KMX's inventory of sub-$25K vehicles is shrinking.
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