Market Snapshot
briefing.com
| Dow | 32377.97 | -54.02 | (-0.17%) | | Nasdaq | 11683.95 | -84.88 | (-0.72%) | | SP 500 | 3966.05 | -12.75 | (-0.32%) | | 10-yr Note | -2/32 | 3.56 |
|
| | NYSE | Adv 1721 | Dec 1168 | Vol 797 mln | | Nasdaq | Adv 1885 | Dec 2549 | Vol 3.9 bln |
Industry Watch
| Strong: Energy, Industrials, Consumer Staples, Utilities, Materials |
| | Weak: Communication Services, Information Technology, Consumer Discretionary, Real Estate, Health Care |
Moving the Market
-- Lagging mega caps weighing down index performance
-- Bank stocks pulling back after leading in the early going
-- Treasury yields moving higher and U.S. Dollar Index weakening
-- Lack of conviction from buyers and sellers on below average volume
|
Closing Summary
28-Mar-23 16:25 ET
Dow -37.83 at 32394.16, Nasdaq -52.76 at 11716.07, S&P -6.26 at 3972.54
[BRIEFING.COM] Today's price action occurred in a relatively tight trading range on below average volume. The main indices closed with modest declines after climbing off their worst levels in the afternoon trade. The Nasdaq trailed its peers again today, weighed down by lagging mega cap stocks.
In the early going, money flows looked somewhat similar to yesterday's trade with bank stocks leading the market higher. Sentiment seemed to shift, though, around the time that FDIC Chairman Michael Barr told the Senate Banking Committee that he anticipates having to increase capital and liquidity standards for firms over $100 billion, adding that more regulation is needed.
Still, there was some underlying strength in the market as evidenced by the 0.2% gain in the Invesco S&P 500 Equal Weight ETF (RSP) versus the 0.2% decline in the market-cap weighted S&P 500.
Roughly half of the 11 S&P 500 sectors closed in the green, but energy (+1.5%) was the only sector to gain more than 1.0%. On the flip side, the communication services sector (-1.0%) was the worst performer by a decent margin, feeling the weight of its mega cap components. The health care (-0.6%) and information technology (-0.5%) sectors were also notable laggards today.
Market breadth also reflected mixed action and a lack of conviction from both sellers and buyers. Advancers led decliners by a roughly 4-to-3 margin at the NYSE while decliners led advancers by the same margin at the Nasdaq.
Treasuries settled the session with losses. The 2-yr note yield rose six basis points to 4.06% and the 10-yr note yield rose four basis points to 3.56%.
- Nasdaq Composite: +11.9% YTD
- S&P 500: +3.4% YTD
- S&P Midcap 400: +0.1% YTD
- Russell 2000: -0.5% YTD
- Dow Jones Industrial Average: -2.3% YTD
Looking ahead to Wednesday, market participants will receive the following economic data:
- 7:00 ET: Weekly MBA Mortgage Index (prior 3.0%)
- 10:00 ET: February Pending Home Sales (Briefing.com consensus -2.3%; prior 8.1%)
- 10:30 ET: Weekly crude oil inventories (prior +1.12 mln)
Reviewing today's economic data:
- The advanced report for international trade in goods showed a $91.6 billion deficit in February versus the prior revised $91.1 billion deficit in January (-$91.5billion). The advanced report for retail inventories reflected a 0.8% build in February following a 0.1% increase in January. The advanced report for wholesale inventories showed a 0.2% build in February after a revised 0.5% decline in January (from -0.4%).
- The FHFA Housing Price Index rose 0.2% in January following a 0.1% decline in December. The S&P Case-Shiller Home Price Index rose 2.5% in January (Briefing.com consensus 2.5%) following a 4.6% increase in December.
- The Conference Board's Consumer Confidence Index for March hit 104.2 (Briefing.com consensus 101.5) versus an upwardly revised 103.4 (from 102.9) for February. In the same period a year ago, the index stood at 107.6.
- The key takeaway from the report is that consumer confidence held up well even though the survey period covered the week after Silicon Valley Bank collapsed. That said, the Expectations Index remained below 80.0 for the 12th month out of the last 13, which serves as a concerning signal about future growth.
Market declines ahead of close
28-Mar-23 15:30 ET
Dow -120.51 at 32311.48, Nasdaq -96.85 at 11671.98, S&P -18.40 at 3960.40
[BRIEFING.COM] The market is fading back again ahead of the close.
Treasuries settled the session with losses. The 2-yr note yield rose six basis points to 4.06% and the 10-yr note yield rose four basis points to 3.56%.
Looking ahead to Wednesday, market participants will receive the following economic data:
- 7:00 ET: Weekly MBA Mortgage Index (prior 3.0%)
- 10:00 ET: February Pending Home Sales (Briefing.com consensus -2.3%; prior 8.1%)
- 10:30 ET: Weekly crude oil inventories (prior +1.12 mln)
Energy complex settles session mixed
28-Mar-23 15:00 ET
Dow -54.02 at 32377.97, Nasdaq -84.88 at 11683.95, S&P -12.75 at 3966.05
[BRIEFING.COM] The major averages continued to climb off their intraday lows recently.
Even with the market near session lows, advancers still lead decliners by a 5-to-3 margin at the NYSE. Decliners, meanwhile, lead advancers by the same margin at the Nasdaq.
Energy complex futures settled the session in mixed fashion. WTI crude oil futures rose 0.1% to $73.09/bbl and natural gas futures fell 3.6% to $2.15/mmbtu.
Humana, Arista among top decliners in S&P 500 on Tuesday
28-Mar-23 14:25 ET
Dow -112.89 at 32319.10, Nasdaq -111.27 at 11657.56, S&P -21.16 at 3957.64
[BRIEFING.COM] Downward momentum has moderated in the last half hour, the S&P 500 (-0.53%) hovering now just off session lows.
S&P 500 constituents Humana (HUM 484.93, -22.06, -4.35%), Arista Networks (ANET 162.01, -5.95, -3.54%), and CDW (CDW 185.05, -6.62, -3.45%) dot the bottom of the standings. HUM losses step up, continuing after yesterday's news that Ohio AG Yost filed a suit against certain healthcare companies alleging price fixing, while ANET caught some cautious sell side commentary this morning, and CDW dips alongside broader weakness in technology stocks.
Meanwhile, Maryland-based CPG food company McCormick (MKC 80.72, +6.66, +8.99%) is atop the S&P following this morning's Q1 earnings beat.
Gold snaps back-to-back losses with winning Tuesday, now +7% higher in March
28-Mar-23 14:00 ET
Dow -124.85 at 32307.14, Nasdaq -128.40 at 11640.43, S&P -23.94 at 3954.86
[BRIEFING.COM] The last half hour has been much of the same among the major indices, the tech-heavy Nasdaq Composite (-1.09%) at lows and leading declines.
Gold futures settled $19.70 higher (+1.0%) to $1,973.50/oz, ending higher after posting back-to-back losses to close in on gains of +7.4% on the month.
Meanwhile, the U.S. Dollar Index is down about -0.4% to $102.43.
Market poised for flattish open
Equity futures have fallen from their best levels, but moves are still modest in scope. The S&P 500 futures are down 5 points and are trading slightly below fair value. The Nasdaq 100 futures are down 13 points and are trading 0.1% below fair value. The Dow Jones Industrial Average futures are down 31 points and are trading slightly below fair value.
The stock market is poised to open somewhat flat with market participants lacking conviction on either side of the tape. Money flows this morning look a lot like yesterday's session with many bank stocks showing nice gains while lagging mega cap stocks weigh down the broader market.
Treasury yields have pulled back from their overnight highs. The 2-yr note yield, which rose above 4.00% earlier, is unchanged at 3.99%. The 10-yr note yield is up two basis points to 3.54%. The U.S. Dollar Index is down 0.3% to 102.51.
Energy complex futures are moving higher. WTI crude oil futures are up 0.2% to $72.95/bbl and natural gas futures are up 0.1% to $2.22/mmbtu.
The advanced report for international trade in goods showed a $91.6 billion deficit in February versus the prior revised $91.1 billion deficit in January (-$91.5billion). The advanced report for retail inventories reflected a 0.8% build in February following a 0.1% increase in January. The advanced report for wholesale inventories showed a 0.2% build in February after a revised 0.5% decline in January (from -0.4%).
The FHFA Housing Price Index rose 0.2% in January following a 0.1% decline in December. The S&P Case-Shiller Home Price Index rose 2.5% in January (Briefing.com consensus 2.5%) following a 4.6% increase in December.
Other economic data today is limited to:
- 10:00 ET: March Consumer Confidence (Briefing.com consensus 101.5; prior 102.9)
PVH's long-term plan outlined last April fuels excellent Q4 results and buoyant FY24 guidance (PVH)
PVH (PVH +19%), the company behind the Tommy Hilfiger and Calvin Klein brands, is gapping up toward 52-week highs set in early February on a massive Q4 (Jan) earnings beat and upbeat FY24 (Jan) earnings and revenue guidance. The clothing company's excellent quarter reflected healthy progress regarding its long-term growth plan dubbed PVH+, outlined during Investor Day last April. The central focus of PVH+ was on two key brands: Tommy Hilfiger and Calvin Klein. Additionally, PVH+ was built around expanding DTC and digital offerings.
- PVH delivered exceptionally well on its plan in Q4, returning to positive yr/yr sales growth after two-straight quarters of declines, improving the figure by 2.4% to $2.49 bln. PVH also posted its most prominent earnings beat since 2Q22 (Jul), fueled by SG&A expenses falling by nearly 400 bps yr/yr and operating margins advancing by 140 bps to 8.6%.
- Unlike many of its peers, PVH delivered these solid headline results despite a heightened promotional period. Inventory was still up 34% at the end of Q4 compared to the prior-year period, partly due to earlier receipts than expected due to easing supply chain constraints. However, absent the elevation due to the timing of receipts, PVH noted its inventory normalized toward levels that support its planned growth.
- A highlight from Q4 stemmed from PVH's international business, which registered 11% sales growth yr/yr, exceeding pre-pandemic levels significantly. The robust growth emanated from Europe, which boasted another record quarter following its first €1.0 bln quarter in Q3 (Oct).
- On the flip side, PVH's Asia Pacific business lagged, tumbling 8% yr/yr, which included an unfavorable 9 pt impact from currency fluctuations. Also, a surge in COVID cases following China's easing restrictions severely hurt sales growth in the quarter.
- On the bright side, PVH started seeing improvements in China's economy toward the end of Q4.
- PVH is exiting FY23 with significant momentum from its PVH+ plan, illuminated by buoyant FY24 earnings guidance of $10.00, well above analyst expectations, and sales growth projections of +3-4% yr/yr. Echoing sentiments felt by numerous organizations across the retail sector, PVH is staring at a more favorable second half of the year than the first, underpinned by improving costs in 2H24. For example, ocean freight rates are coming down rapidly, PVH is utilizing less airfreight, and abnormally high raw material costs should ease toward the back half of FY24.
Bottom line, PVH is proving its capacity to succeed despite a challenging economic backdrop. Although the company expects the landscape to remain unfavorable for the rest of the year, its PVH+ plan gives it the confidence to exit FY24 with positive top-line growth, improved profitability, and double-digit earnings growth yr/yr.
Walgreens Boots Alliance's FebQ results may be the antidote to its ailing stock price (WBA)
Walgreens Boots Alliance's (WBA +3%) upbeat Q2 (Feb) earnings report may be the antidote to its ailing stock price, which has sunk by roughly 11% on the year and over 20% from December highs. The retail pharmacy giant exceeded top and bottom line estimates in Q2 and reiterated its FY23 earnings outlook of $4.45-4.65. WBA also continued to see solid +30% pro forma growth in its U.S. Healthcare segment, which it has been bolstering through its roughly $17 bln investments in VillageMD, Summit Health, Shields, and CareCentrix.
- WBA's adjusted EPS of $1.16 fell yr/yr by less than analysts expected on its first quarter of positive revenue growth since 2Q22, as sales climbed 3.3% to $34.86 bln.
- WBA's core segment, U.S. Retail Pharmacy, saw sales nearly flat from the year-ago period, falling by just 0.3% to $27.6 bln. Sales growth would have been 3.5 pts higher if not for the ongoing drag from AllianceRX. Meanwhile, comparable sales expanded by +3.1% despite lapping robust comps of +9.5%.
- WBA returned to positive growth in its International segment, improving sales by 1.6% yr/yr to $5.7 bln. Also, if not for continued unfavorable foreign exchange impacts, sales would have been 7.5 pts higher.
- U.S. Healthcare, the centerpiece of WBA's ongoing transformation, boasted Q2 sales of $1.6 bln, a $1.1 bln jump from the year-ago period. VillageMD, which includes Summit Health, grew pro forma sales by 30%, Shields by 41%, and CareCentrix by 25%.
- Looking ahead, eyes will primarily be on performance within U.S. Healthcare. Although adjusted EBITDA in this business was still in negative territory in Q2, WBA reiterated in January that it expects positive adjusted EBITDA by the end of FY23. It is also worth keeping in mind that Q2 represented a peak investment period for the segment, so the rest of the year should bring a mid-teens EPS tailwind. Speaking of which, WBA is confident it will pivot to strong overall growth during the back half of the year.
However, there are still lingering concerns. Although COVID-related impacts are not expected to be as significant a tailwind in the second half of FY23 (Aug) as in the first half, WBA noted that this variable remains a wildcard. This uncertainty, paired with macroeconomic challenges potentially clipping discretionary spending, held WBA back from upping its FY23 earnings forecast. Furthermore, WBA's massive investments to fortify its U.S. Healthcare segment are coinciding with recession fears globally, which could become particularly troubling if additional cash is needed for further integration of WBA's acquisitions.
Nevertheless, management was not too concerned about a sluggish economic landscape given its robust U.S. retail comps of +4.5%, excluding its test kits, private label penetration, and ongoing cost management. CEO Rosalind Brewer also pointed out that during 2008-2009, it saw only a slight dip in growth, underscoring a resilient business model to weather economic storms.
Finally, WBA's solid FebQ report bodes well ahead of rival CVS Health's (CVS) Q3 (Mar) report slated for May 3.
Lyft is lifting higher today on hope that a new CEO can get the stock back on track (LYFT)
Lyft (LYFT +1%) is lifting higher today after the ride sharing giant announced a new CEO. Co-founders, Logan Green (CEO) and John Zimmer (President) have decided to transition from their full-time executive management positions into non-executive roles as chair and vice chair of the Lyft board, effective April 17 and June 30, respectively. David Risher has been named the new CEO, effective April 17.
- Lyft describes Risher as a seasoned technology executive who previously served as Amazon's first head of product and head of US retail. He was an early employee at Amazon (#37) and helped lead the company from an online bookstore to the "everything store" giant that it evolved into. He also was a general manager at Microsoft before co-founding Worldreader.
- We think that Lyft noting Risher's role in transforming Amazon beyond book sales into a variety of new categories was not accidental. One of the criticisms of Lyft relative to its larger rival Uber (UBER) is that it does not have a food delivery service. So maybe this news signals a change in that direction. Other changes are possible as well in terms of pricing strategy relative to Uber. Or maybe the new CEO signals a possible sale?
- Ride sharing companies were hurt substantially by the pandemic as fewer people felt safe getting into unknown cars. However, increased sales for their food delivery segments helped to offset that. We are not arguing that the small likelihood of another pandemic should be the main reason to get into food delivery, but some diversification would help. It would not be easy as ride sharing and food delivery are both super competitive, but we think Lyft's business goals needs a fresh look.
- Importantly, Lyft also announced that there is no change to the guidance for Q1 revenue, Contribution Margin and Adjusted EBITDA provided on February 9. We think the goal here was to reassure investors that this decision was not made because of some impending earnings miss when Lyft reports in early May. In fact, analysts are predicting that Lyft will finally become profitable on a full year basis in 2023, so the financials are improving.
Bottom line, we think a change at the top is probably a good thing. Risher seems like a good choice to shake things up. It makes us think about Peloton's (PTON) founder recently turning the reins over to a more seasoned professional. As we made the point when PTON did this, we think founders bring a different skill set. They are great at being an entrepreneur and getting a company off the ground. However, when it gains significant scale, we think that requires a different skill set to keep growing the business. Also, founders can be too emotionally attached, so when a company struggles as has been the case with Lyft, a fresh perspective can be a good thing. Hopefully, a new CEO can get stock back on track.
Novartis' ailing growth prospects receive needed remedy with promising Kisqali trial results (NVS)
With shares down by about 8% so far this year, Swiss pharmaceutical company Novartis (NVS) was in need of a remedy. This morning, that antidote came when the company announced that its Kisqali Phase 3 trial met its primary endpoint, sending the stock sharply higher. Kisqari, which has already been approved to treat hormone-driven breast cancer that has spread to other parts of the body, is being evaluated as a treatment with endocrine therapy in earlier stages of the disease.
- Encouragingly, the trial results showed that Kisqali plus endocrine treatment significantly reduced the risk of cancer recurrence compared to endocrine on its own with consistent benefits in patients with stage II and stage III early breast cancer.
- NVS also started with a lower dose of 400 mg compared to the dose approved for metastatic breast cancer with the hope of minimizing side effects and improving quality of life. Even at this lower dosage, the Independent Data Monitoring Committee recommended stopping the trial early because the primary endpoint had been met.
- The next step for NVS is to meet with regulators, including the FDA, to solidify approvals. At this point, it's unclear exactly when these meetings will take place, but the next few months should be quite active for NVS.
This promising development comes at an ideal time for NVS.
- Over the past three quarters, the company's top-line has decreased on a yr/yr basis, including the 4.1% drop in Q4. Weighing on the company's growth has been its generic drug segment Sandoz, which saw sales fall by 8% in Q4 on a reported basis.
- In 2H23, NVS is expected to spin-off Sandoz as the company homes in on stronger growth opportunities in its Innovative Medicines (IM) segment.
- Included in the IM business is Kisqali. Last year, sales of the breast cancer drug jumped by 38% in constant currency to $1.2 bln with solid growth experienced across all geographies. Kisqali's growth essentially matched that of Entresto, the company's highly-successful heart failure treatment, which generated sales of $4.6 bln in 2022.
The main takeaway is that the positive read-out from the Kisqali Phase 3 trial provides a much-needed boost for NVS's growth prospects. When the company reported Q4 results in early February, it guided for modest FY23 revenue growth in the low-to-mid single digits. If everything goes to plan and Kisqari achieves FDA approval later this year, that anticipated growth rate may need to be upwardly revised.
Carnival is sailing a bit flat today following mixed earnings report (CCL)
Carnival (CCL -2%) is sailing a bit lower today following a mixed Q1 (Feb) earnings report/guidance. The cruise line reported a sizeable adjusted loss of $(0.55) per share, but that better than expected. Revenue was also a bit better than expected. Adjusted EBITDA may be a better metric to use given the huge depreciation generated by capital-intensive cruise ships. That came in at $382 mln, which was above prior guidance of $250-350 mln.
- The main problem was CCL guiding to larger than expected losses for both Q2 (May) and FY23. Also, adjusted EBITDA guidance estimates of $600-700 mln in Q2 and $3.90-4.10 bln in FY23 were below street estimates.
- CCL reported record Q1 net per diems, exceeding the high end of guidance, driven by improving ticket prices and sustained growth in onboard revenue. CCL also benefitted from an additional seven points of occupancy on higher capacity compared to the prior quarter. CCL says it is enjoying a phenomenal wave season, achieving its highest ever quarterly booking volumes and breaking records in both North America and Europe. CCL says its strong performance has extended into March.
- CCL's finances and cash balance are also a closely watched metric. Based on its expectations for positive adjusted free cash flow in FY23, a reduced capex profile and $8+ bln of liquidity as well as some other factors, CCL believes it's well positioned to pay down near term debt maturities from excess liquidity and therefore the company has no intention to sell equity (except in connection with its advantageous and non-dilutive stock swap program).
- Bookings are a closely watched metric. CCL says it is well booked for the remainder of the year at higher prices (normalized for FCCs), which coupled with continued strength in onboard revenue, supports its improving outlook for the remainder of the year. CCL is very encouraged with the improving demand environment. The company had its highest booking volumes for all future sailings for any quarter in its history in Q1. Higher advertising spend has helped.
Overall, CCL provided enough encouraging data points to keep the stock flattish despite the downside guidance. Also, CCL is known for being conservative on guidance so maybe investors are discounting that outlook a bit. Furthermore, we think investors are very happy to hear CCL say it has no intention to sell equity. The confluence of all these factors seems to be resulting in a flattish reaction in the stock.
Finally, we think CCL is benefitting from some pent up demand for travel from consumers. Air travel has mostly recovered, but we always felt cruise demand would take longer for people to feel safe following the pandemic. It's one thing to take a 2 hour flight then go wherever, but on a cruise, you're in the same enclosed space with the same people for a week. Recall there was Omicron in January 2022, so this was really the first winter season without a significant COVID element and the results were pretty good. Consumers seem to be finally turning the corner and getting back on cruise ships.
|
