Today’s Big Picture
Asia-Pacific equity markets finished the day ahead except for Australia’s ASX All Ordinaries, which declined 0.27% as mining companies continue to come under pressure. Japan’s Nikkei gained 0.15%, Taiwan’s TAIEX rose 0.24%, Hong Kong’s Hang Seng advanced 0.42%, South Korea’s KOSPI added 0.44%, India’s SENSEX closed 0.58% higher, and China’s Shanghai Composite increased 0.67% after declining the past four sessions. European markets are mixed in midday trading and U.S. futures point to a positive market open later this morning spurred on largely by better than expected quarterly earnings.
Amid another barrage of earnings reports this morning, 8:30 AM ET will see the preliminary view on U.S. GDP for the March quarter. The consensus expectation is +2.0% YoY, down from +2.6% in the December quarter and 3.2% in the September 2022 quarter. While some will note the easy comparisons for the March quarter given the -1.6% GDP print for the year ago quarter, the report will be a report card on how the economy is performing amid higher interest rates aimed at quashing inflation.
Tucked inside that GDP report will be the PCE Price Index for the March quarter, and the core PCE price index for the period is expected to clock in at 4.7% YoY, up from 4.4% in the prior quarter. We won’t receive the March core PCE Price Index data until tomorrow, but with January and February figures in hand — +4.7% and +4.6%, respectively – folks will be breaking out their spreadsheets to determine the core PCE index’s direction in March. What that math shows could determine the Fed’s commentary about the forward path for monetary policy when it emerges from next week’s meeting. It could also jostle equity futures ahead of today’s market open.
As we move through the trading day, we would suggest readers keep an eye on the shares of First Republic Bank (FRC), which have reignited concerns over the banking industry and this has the market looking to see if a white knight steps in or if the Federal Deposit Insurance Corp. steps in.
Profits earned by China’s industrial firms dropped by 21.4% from a year earlier to CNY 1,516.74 billion in 1Q 2023 as factory activity struggled to recover from the slump caused by pandemic disruptions.
The economic sentiment indicator in the Euro Area came in at 99.3 in April, little changed from a revised 99.2 in the previous month and below market expectations of 99.9. The consumer price inflation expectations index dropped to 15.1 in April from a revised 18.8 the month before, hitting the lowest reading since December 2020.
In addition to the usual Thursday economic data, better known as weekly jobless claims data and natural gas inventories, as we noted above at 8:30 AM ET we have the first look at GDP for 1Q 2023.
At 10 AM ET, March Pending Home Sales will be released, and the headline figure is expected to rise 0.5% MoM, a slower pace than the 0.8% gain posted in February.
Yesterday’s premarket action in Technology stocks carried through the day and saw the Nasdaq Composite as the only major index to close higher, gaining 0.47%. The S&P 500 declined 0.38%, the Dow fell 0.68% and the Russell 2000 closed 0.89% lower. This same pattern was reflected in sectors as well with Technology (1.49%) the only sector to post a gain. The largest decline came in Utilities (-2.35%) and relative safety came from Consumer Discretionary and Consumer Staples which fell 0.51% and 0.78% as compared to the mostly 1%+ drawdowns in the remaining sectors. Traders bid up shares of Chipotle Mexican Grill (CMG) 12.91% yesterday after the company posted strong Q1 earnings prompting price target increases from several research firms.
Here’s how the major market indicators stack up year-to-date:
- Dow Jones Industrial Average: 0.47%
- S&P 500: 5.64%
- Nasdaq Composite: 13.26%
- Russell 2000: -1.75%
- Bitcoin (BTC-USD): 70.97%
- Ether (ETH-USD): 55.73%
Stocks to Watch
Before U.S. equity markets begin trading today, American Airlines (AAL), Bristol-Myers (BMY), Caterpillar (CAT), Comcast (CMCSA), Crox (CROX), Domino’s Pizza (DPZ), Eli Lilly (LLY), FirstCash (FCFS), Harley Davidson (HOG), Hershey Foods (HSY), Hertz Global (HTZ), Honeywell (HON), Keurig Dr Pepper (KDP), Mastercard (MA), Mobileye Global (MBLY), Quest Diagnostics (DGX), Tractor Supply (TSCO), Tradeweb Markets (TW), and Visteon (VC) will be among the companies reporting quarterly results.
Meta Platforms (META) delivered a beat and released an earnings report for its March quarter that showed its cost cutting measures are bearing fruit. EPS for the March quarter came in at $2.20 per share, $0.25 ahead of the consensus forecast, while revenue inched up 2.6% YoY to $28.64 billion vs the $27.66 billion consensus. Daily active people (DAP) rose 5% YoY to 3.02 billion on average for March, while the number of monthly active users (MAUs) was 2.99 billion exiting the quarter. Ad impressions and price per ad delivered across our the company’s family of Apps increased by 26% YoY and the average price per ad decreased by 17% YoY. For the current quarter, Meta sees revenue of $29.5-$32.0 billion vs. $29.47 billion. The company also reduced its 2023 expense guidance to $86-$90 billion from $86-$92 billion.
Samsung’s (SSNLF) revenue for the March quarter fell 18% YoY to 63.75 trillion Korean won (~$47.6 billion), missing the 63.9 trillion won consensus. For the current quarter, Samsung said it expected limited recovery for memory chips as major data center firms invested more conservatively in servers. The company’s chip business is expected to focus on high-capacity server and mobile products “based on expectations of a gradual market recovery and a rebound in global demand” in 2H 2023 as inventories have been liquidated. Samsung forecasts the smartphone market increasing in 2H 2023 in both shipments and revenue as the global economy recovers.
Semi-cap company KLA Corp. (KLAC) reported better than expected March quarter results despite continued headwinds related to the global macro economy and supply chains as well as customers adjusting capacity plans across foundry/logic and memory due to changing demand expectations. For the current quarter, KLA sees EPS of $4.23-$5.43 vs. the $4.52 consensus and the $5.49 posted in the March quarter. In terms of revenue, the company expects $2.125-$2.375 billion for the June quarter vs. the $2.19 billion consensus and $2.43 billion in the March quarter.
Top and bottom line results from Roku (ROKU) bested consensus forecasts for the March quarter with EPS of $1.38 and revenue up 1.0% YoY to $741 million. Exiting the quarter, the company’s Active Accounts were 71.6 million, a net increase of 1.6 million QoQ. Average Revenue Per User was $40.67, down 5% YoY. For the current quarter, the company sees revenue of $770 million vs. the $766.40 million consensus. The thinking behind that guidance is “consumers remain pressured by inflation and recessionary fears, and thus discretionary spending is likely to remain muted. Accordingly, we expect the advertising market in Q2 to look much the same as it did in Q1, with ad spend from certain verticals improving (travel and health and wellness), while others remain pressured (M&E and financial services).”
Unilever (UL), the home of Dove, Hellmann’s, Ben & Jerry’s, and other branded consumer products, posted March quarter results that topped expectations. Sales growth of 10.5% YoY in the quarter was entirely led by price growth of 10.7%. The company now expects underlying sales growth for full year 2023 to be at least at the upper end of its 3%-5% multi-year target, noting underlying price growth will remain high in the first half and soften through the year.
Despite being halted several times yesterday, First Republic Bank shares dropped another 30% touching new lows as the bank seeks to convince other banks to buy $50-$100 billion of its long-dated and mortgage securities in an effort to shore up its balance sheet.
Near-term the calendar for such activity looks rather thin. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.
After Today’s Market Close
Activision Blizzard (ATVI), Amazon (AMZN), Amgen (AMGN), Boston Beer (SAM), Capital One (COF), Cloudflare (NET), Coursera (COUR), First Solar (FSLR), Gilead Sciences (GILD), IMAX (IMAX), Intel (INTC), Mondelez International (MDLZ), Pinterest (PINS), Skechers USA (SKX), Snap (SNAP), Tanger Factory Outlets (SKT), T-Mobile US (TMUS), and US Steel (X) are slated to report their quarterly results after equities stop trading. Those looking for more on which companies are reporting when should head on over to Nasdaq’s Earnings Calendar.
On the Horizon
Friday, April 28
- Japan: Bank of Japan Interest Rate Decision
- Germany: 1Q 2023 GDP
- Eurozone: 1Q 2023 GDP
- Germany: Consumer Price Index – April
- US: Chicago PMI – April
- US: Employment Cost Index – 1Q 2023
- US: Personal Income & Spending, PCE Price Index – March
- US: The University of Michigan Consumer Sentiment – Final April
Thought for the Day
“Baseball is 90% mental and the other half is physical.” ~ Yogi Berra