Market Snapshot
briefing.com
| Dow | 33743.83 | +157.40 | (0.47%) | | Nasdaq | 12074.28 | -10.07 | (-0.08%) | | SP 500 | 4121.57 | +11.19 | (0.27%) | | 10-yr Note | -1/32 | 3.43 |
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| | NYSE | Adv 2162 | Dec 781 | Vol 817 mln | | Nasdaq | Adv 2806 | Dec 1868 | Vol 4.6 bln |
Industry Watch
| Strong: Materials, Energy, Industrials, Health Care, Financials, Consumer Staples |
| | Weak: Information Technology, Communication Services |
Moving the Market
-- Wait-and-see mode ahead of the March Consumer Price Index tomorrow and earnings from several large banks on Friday
-- Relative weakness in mega cap stocks
-- Bump in Treasury yields ahead of inflation data tomorrow
-- Outperformance of cyclical sectors boosting broader market
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Closing Summary
11-Apr-23 16:25 ET
Dow +98.27 at 33684.70, Nasdaq -52.48 at 12031.87, S&P -0.17 at 4110.21
[BRIEFING.COM] The stock market held up okay today on relatively light volume, again showing resilience to selling efforts ahead of tomorrow's Consumer Price Index report for March and the release of the minutes for the March 21-22 FOMC meeting. Relative weakness from some mega cap names limited index level performance, leading the Nasdaq to lag its peers. The Russell 2000 (+0.8%), however, was able to maintain its performance edge over other major indices.
Some of the mega cap stocks were able to climb off their session lows as the broader market settled into a steady grind higher in the afternoon. The main indices took a sharp turn lower, though, with about 30 minutes left in the session as names like Microsoft (MSFT 282.83, -6.56, -2.3%), Apple (AAPL 160.80, -1.23, -0.8%), and NVIDIA (NVDA 271.69, -4.10, -1.5%) retested early session lows.
The Vanguard Mega Cap Growth ETF (MGK) logged a 0.6% decline while the Invesco S&P 500 Equal Weight ETF (RSP) gained 0.7%, reflecting underlying strength in the market. In turn, advancers led decliners by a nearly 3-to-1 margin at the NYSE and a 5-to-3 margin at the Nasdaq.
Nine of the 11 S&P 500 sectors closed with a gain led by the cyclical energy (+0.9%), financial (+0.9%), materials (+0.7%), and industrial (+0.6%) sectors. Losses from their respective mega cap components drove the information technology (-1.0%), communication services (-0.4%), and consumer discretionary (flat) sectors to the bottom of the pack.
On a individual basis, Coinbase Global (COIN 70.19, +4.06, +6.1%) made an outsized move today after Bitcoin reached $30,000, Moderna (MRNA 155.25, -4.90, -3.1%) dropped 3.1% following its acknowledgment that its influenza vaccine candidate did not accrue sufficient cases at the interim efficacy analysis to declare early success, and CarMax (KMX 72.21, +6.35, +9.6%) logged a nearly 10% gain after its better than expected fiscal Q4 earnings results.
Treasury yields settled somewhat higher in front of tomorrow's inflation data. The 2-yr note yield rose five basis points to 4.05% and the 10-yr note yield rose two basis points to 3.43%.
- Nasdaq Composite: +15.0% YTD
- S&P 500: +7.0% YTD
- S&P Midcap 400: +2.8% YTD
- Dow Jones Industrial Average: +1.6% YTD
- Russell 2000: +1.4% YTD
Today's economic data was limited to the NFIB Small Business Optimism Survey at 6:00 ET, which fell to 90.1 in March from 90.9 in February.
Looking ahead to Wednesday, market participants will be keenly focused on the March Consumer Price Index report (Briefing.com consensus +0.3%; prior +0.4%) and core Consumer Price Index (Briefing.com consensus +0.4%; prior +0.5%) at 8:30 a.m. ET. Other data releases tomorrow include:
- 7:00 ET: Weekly MBA Mortgage Index (prior -4.1%)
- 10:30 ET: Weekly crude oil inventories (prior -3.74 mln)
- 14:00 ET: March Treasury Budget (Briefing.com consensus -$253.00 bln; prior -$262.40 bln)
Treasury yields settle higher
11-Apr-23 15:30 ET
Dow +172.65 at 33759.08, Nasdaq -9.03 at 12075.32, S&P +11.98 at 4122.36
[BRIEFING.COM] The market remains near the highs of the day ahead of the close.
Treasury yields settled the session higher. The 2-yr note yield rose five basis points to 4.05% and the 10-yr note yield rose two basis points to 3.43%.
Looking ahead to Wednesday, market participants will be keenly focused on the March Consumer Price Index report (Briefing.com consensus +0.3%; prior +0.4%) and core Consumer Price Index (Briefing.com consensus +0.4%; prior +0.5%) at 8:30 a.m. ET. Other data releases tomorrow include:
- 7:00 ET: Weekly MBA Mortgage Index (prior -4.1%)
- 10:30 ET: Weekly crude oil inventories (prior -3.74 mln)
- 14:00 ET: March Treasury Budget (Briefing.com consensus -$253.00 bln; prior -$262.40 bln)
Mega caps pare losses
11-Apr-23 15:05 ET
Dow +157.40 at 33743.83, Nasdaq -10.07 at 12074.28, S&P +11.19 at 4121.57
[BRIEFING.COM] The Nasdaq is pushing toward flat line, trading near its high for the day.
Many mega cap stocks have recovered from steeper losses. Meta Platforms (META 214.62, -0.08, -0.04%) and Alphabet (GOOG 106.85, -0.10, -0.05%) are standouts in that regard, trading nearly flat. Amazon.com (AMZN 100.38, -1.80, -1.8%) has also recovered some losses after flirting with its 50-day moving average (98.43) at its low for the day.
Market breadth remains decidedly positive. Advancers lead decliners by a nearly 5-to-1 margin at the NYSE and a nearly 2-to-1 margin at the Nasdaq.
Market keeps climbing
11-Apr-23 14:40 ET
Dow +176.03 at 33762.46, Nasdaq -6.60 at 12077.75, S&P +12.98 at 4123.36
[BRIEFING.COM] The major indices are little changed in the last half hour. The Nasdaq is flirting with its flat line.
Aside from mega cap weakness, the broader market continues to build up strength. The Invesco S&P 500 Equal Weight ETF (RSP) is up 0.9% near its high of the day.
Energy complex futures settled the session higher. WTI crude oil futures rose 2.1% to $81.53/bbl and natural gas futures rose 1.3% to $2.20/mmbtu. On a related note, the S&P 500 energy sector sits atop the leaderboard for the 11 sectors.
Market hits fresh highs
11-Apr-23 14:00 ET
Dow +168.52 at 33754.95, Nasdaq -8.89 at 12075.46, S&P +12.72 at 4123.10
[BRIEFING.COM] The major indices have all climbed in the last half hour with the S&P 500 and Dow hitting fresh session highs.
As the market climbed, all the S&P 500 sectors reached positive territory with the exception of information technology (-0.6%).
A short time ago, Chicago Fed President Goolsbee (FOMC voter) said in a speech that "We should gather further data and be careful about raising rates too aggressively until we see how much work the headwinds are doing for us in getting down inflation."
Conviction lacking on patchwork news drivers
There isn't a great deal of conviction ahead of today's open. The S&P 500 futures are up three points and are trading fractionally above fair value, the Nasdaq 100 futures are down five points and are trading fractionally below fair value, and the Dow Jones Industrial Average futures are up 19 points and are trading fractionally above fair value.
Translation: things are looking pretty flat for the major indices when the opening bell rings. That could change between now and the opening bell, but at the moment it is clear that buyers and sellers are sticking close to the sidelines insomuch as it relates to their index-level interest.
Conviction has been reserved for individual stocks like Moderna (MRNA), which is down 5.1% on the news that its first influenza candidate "did not accrue sufficient cases at the interim efficacy analysis to declare early success," and CarMax (KMX), which is up 5.6% after posting better-than-expected fiscal Q4 earnings results.
It's a bit of a patchwork market when it comes to attention-grabbing news items.
Bitcoin prices are back above $30,000 for the first time since June; Warren Buffett's Berkshire Hathaway (BRK.B) is increasing its stake in five Japanese trading houses, according to CNBC; China's March CPI was up 0.7% yr/yr, versus up 1.0% in February, which was the lowest since September 2021; and New York Fed President Williams (FOMC voter) expects inflation pressures to cool gradually and for the unemployment rate to increase to 4.0-4.5%, according to Reuters.
There is enough to talk about but there isn't enough for the stock market to crow about as a broad market driver.
That kind of driver it seems is waiting in the wings. Tomorrow will feature the March Consumer Price Index, so the chatter this morning -- and yesterday for that matter -- is that market participants are adopting a wait-and-see stance in front of that report and the earnings reports from several major banks on Friday.
Elsewhere, the 10-yr note yield is down three basis points to 3.39%, oil prices are up 0.1% to $79.82 per barrel, and the U.S. Dollar Index is down 0.4% to 102.13.
-- Patrick J. O'Hare, Briefing.com
Whirlpool shares aided by an upgrade at Goldman today; continue to find support around $125 (WHR)
Whirlpool (WHR +4%) is gapping higher today following an upgrade at Goldman Sachs to "Buy" from "Neutral." Per Briefing.com's coverage, Goldman's upgrade today was the first analyst rating in 2023 and the first upgrade since October 2021.
Briefing.com notes that given the state of the housing market, which the household appliance maker heavily depends on, it may not be too surprising that analysts have not warmed up much to WHR. However, homebuilders like KB Home (KBH) and Lennar (LEN) are starting to signal a bottoming out in the housing market, evidenced by improving demand and normalizing cancellations as the year progresses. As such, we suspect further upgrades may be on the horizon.
Furthermore, shares have continually found support around the $125 mark over the past six months, paving the way for potential upside to outweigh the downside, especially if interest rates level off and inflationary pressures subside.
- WHR's turnaround will rely most on improving conditions in North America, given this region comprises around 60% of its global appliance business. It helps that WHR manufactures approximately 80% of the products it sells in the U.S. within the U.S., putting less pressure on global supply chains, which remain disrupted.
- Past supply chain issues, such as a one-off disruption that occurred during Q4 and has since been resolved, were primarily within WHR's control. Although that makes past blunders reflect poorly on management, it also means that WHR could take swift action, putting out whatever fires were caused due to internal missteps. It also heightened management's focus on better execution in its supply chain, which is one of its priorities in 2023, meaning that WHR will be more aggressive in dual sourcing and guaranteeing stability within its supply chains.
- Reducing complexity will also be a vital component of WHR's potential turnaround, and divesting its EMEA operations earlier this year was a significant part of this strategy. Further examples, such as reducing the number of components, eliminating some of the various platforms used across appliances, and condensing the overall portfolio, will also play a hand in simplifying operations, which should lead to improved margins.
- Also assisting margin growth would be a continuation of falling raw material costs. WHR reiterated its view of $300-400 mln of raw material deflation in FY23 last month, an encouraging sign that input costs have not reversed course since the company first initiated this outlook in late January. Although WHR tends to lock in key commodities with contracts, they are of varying timelines as opposed to the more-annual agreements of the past, allowing the company to secure lower prices quicker if costs continue to ease.
With Q1 earnings coming up on April 24, WHR will have plenty on its plate. Investors will be looking for healthy progress on the above developments before possibly igniting a turnaround in WHR's shares, which have been trending downward for nearly two years.
ADTRAN under pressure on guidance; inventory correction and supply chain issues hurt Q1 (ADTN)
ADTRAN (ADTN -25%) is under pressure today after significantly lowering its Q1 revenue guidance to just $322-326 mln from $355-375 mln. This supplier of communications platforms, software, and services for the broadband access market cited customer inventory corrections as the primary cause for the lowered outlook.
- Basically, its customers, which are primarily cable/telecom network operators, are concerned over inventory stocking levels. As a result, customers want to use their current inventory before buying more product. This impacted ADTN's Subscriber Solutions product line.
- Inventory corrections were not the only problem. ADTN was also hurt by supply constraints, which prevented it from meeting customer demand across all categories. These issues are not only hurting sales, but they are suppressing margins. ADTN expects non-GAAP operating margin to be between -1% and -2.5% vs prior guidance of 5.0-6.5%. ADTN did not guide for Q1 EPS but a negative operating margin suggests a loss appears likely. Analysts had been expecting a profit in Q1.
- Unfortunately, ADTN expects this over-supply condition in CPE products will continue into Q2. It was not all bad news as revenue for its Access and Optical Networking products grew sequentially. But again, supply constraints limited ADTN's flexibility to clear past-due backlog across all product categories. However, ADTN expects the inventory impact is transitory with some improvement expected during Q2. ADTRAN made a huge acquisition in July 2022 when it bought ADVA Optical Networking, so it is good to see this segment doing fairly well.
Clearly, the lowered guidance is not great to see. However, ADTN does not see any material changes to its near-term opportunities or its long-term growth catalysts. Carriers around the world continue to race to upgrade their networks to fiber. And ADTN is a play on that trend. The massive buildout of fiber broadband networks paired with the deployment of mesh Wi-Fi systems in the home should help drive sales in the years ahead.
From everything ADTN is saying today, it sounds less like a demand issue and more like a strategic shift by customers to work down inventories, which makes sense in this macro environment. However, the stock has been quite weak in recent months, so we would use caution if bottom fishing here until the share price can stabilize. ADTN's comments about Q2 make us wary in the near term.
CarMax's surprise profit in FebQ and focus on its long-term positioning jumpstarts its shares (KMX)
After posting a surprise profit in Q4 (Feb) after two-straight quarters of double-digit earnings misses, CarMax (KMX +6%) is receiving a solid boost today, surpassing early March highs. The used vehicle retailer did fall short of sales estimates, experiencing a more pronounced revenue decline than analysts forecasted. However, KMX has prioritized per-unit margins over volume sales by keeping prices relatively high, clipping vehicle unit sales and driving market share loss. Therefore, the market is not shocked by the company's top-line miss in Q4. Also helping push this blemish aside was KMX targeting similar capital expenditure levels yr/yr in FY24 and reiterating its long-term financial goals.
- Aside from sales falling 25.6% yr/yr to $5.72 bln, a minor acceleration from Q3 (Nov), sequential improvements were the general theme throughout KMX's Q4 report. Comparable store used unit sales fell just -14.1% in the quarter, a considerable improvement over the -22.4% decline in Q3. Additionally, earnings of $0.44 per share were good enough for a double-digit beat and represented an improvement over the $0.24 registered in Q3.
- Combined retail and wholesale unit sales fell just 15.5% yr/yr, a massive improvement over the 28.0% decline in Q3. Gross profit per retail unit increased $82 yr/yr and $40 sequentially to $2,277. Meanwhile, on the wholesale side, although profits per unit were flat yr/yr, they jumped $221 from Q3 to $1,187. Overall, gross profits were down just 14.1% yr/yr in Q4 compared to -31.1% in Q3.
- The sequential improvements reflect KMX's commitment to its margin management strategies, which have acted as a double-edged sword regarding market share. As KMX noted last quarter, it could lower prices to sell more cars and maintain its market share in the short run, but this would not only come at the expense of margins but also total revenue. Instead, KMX is focused on its longer-term positioning.
- As a result of its farsightedness, KMX was confident in reiterating its long-term financial targets updated last year. The company expects to sell 2.0-2.4 mln vehicles combined by FY26 (a substantial increase from the 1.4 mln sold in FY23), generate $33-45 bln in revenue (a 31% jump at the midpoint from FY23), and expand its nationwide share of the age 0-10 used vehicle market to over 5% by the end of CY25.
Overall, KMX's Q4 report gave further credence to the possibility that the worst of its struggles is in its rearview mirror. The firm has endured a lengthy period of high-interest rates and souring vehicle affordability due to inflationary pressures. KMX is not anticipating these headwinds to ease meaningfully in FY24 either. However, the company's conservative approach to its capital structure, keeping its $2.45 bln repurchase program paused, maintaining flexibility to access capital markets, and keeping CapEx similar to FY23 levels should help it steer through the heavy fog ahead.
Finally, KMX's Q4 results set a bullish tone ahead of rival Carvana's (CVNA) Q1 (Mar) report slated for May 4.
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