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Morning Briefing: August 22nd, 2023

Market Overview

Equity futures are signaling a positive start to the day, riding on the back of yesterday’s significant gains in the S&P 500 and Nasdaq, primarily driven by mega-cap stocks. This optimistic sentiment is further bolstered by a decline in the 10-yr Treasury note yield, which has seen a drop of three basis points, now standing at 4.31%.

Retail Sector Performance

Several retailers have unveiled their results today, and the market’s reaction has been varied:

  • Lowe’s (LOW): The stock is up by 2.2%, with the company beating earnings estimates by $0.09 and reporting revenue in line with expectations. They have also reaffirmed their FY24 EPS and revenue guidance.
  • Macy’s (M): Despite beating earnings by $0.12 and surpassing revenue expectations, the stock has dipped by 1.3%. The company has also provided a Q3 EPS guidance below consensus but has reaffirmed its FY24 EPS, revenue, and comp guidance.
  • Dick’s Sporting Goods (DKS): The stock has taken a significant hit, down by 19.3%. The company missed earnings estimates by $0.99, although their revenue was in line with expectations.

Banking Sector Concerns

S&P Global has taken a bearish stance on the banking sector, downgrading its credit ratings and revising its outlook for several banks. This follows closely on the heels of last week’s warning from Fitch Ratings and Moody’s recent decision to cut the ratings of ten small to mid-sized U.S. banks.

China’s Shadow

While concerns about China’s economic and political landscape persist, they haven’t significantly impacted the market sentiment today.

Economic Calendar

Investors should keep an eye out for the July Existing Home Sales report, scheduled to be released at 10:00 a.m. ET. The consensus is pegged at 4.15 million, slightly below the prior figure of 4.16 million.

Corporate Highlights

  • Zoom Video (ZM): The company has outperformed expectations, beating earnings by $0.28 and reporting higher revenues. Their guidance for Q3 EPS is above consensus, although revenue expectations are slightly below.
  • Baidu (BIDU): The Chinese tech giant has surpassed earnings and revenue expectations.
  • Activision Blizzard (ATVI) and Microsoft (MSFT): The UK’s Competition and Markets Authority (CMA) has indicated that Microsoft’s revised deal is up for review after blocking the original agreement.
  • AppLovin (APP): The company has announced a significant share repurchase agreement, aiming to buy back 15 million shares of its Class A common stock from KKR Denali Holdings.
  • Nordson (NDSN): Despite beating earnings by $0.03, the company missed on revenues. They remain optimistic about Q4 sales and have provided a FY23 EPS guidance below consensus.
  • Coinbase Global (COIN): The company is expanding its support for stablecoins, investing in Circle, which will now take over USDC issuance and governance.

Global Equities and Tech Focus

Global stocks are witnessing a resurgence, with tech stocks, especially Nvidia Corp. (NVDA), in the spotlight. Nvidia has signaled further gains ahead of its earnings report this week. Contracts on the Nasdaq 100 Index (NDX) have risen by 0.8%, and Europe’s Stoxx 600 Index is set for its most significant gain in nearly a month. Nvidia’s stock has added 1.9% in premarket trading, following an 8% surge on Monday. Tesla Inc. has advanced by 4.3%.

Final Thoughts

With Nvidia’s results due this week, the market is keenly awaiting any news, especially concerning AI demand. Options traders are notably bullish on Nvidia, anticipating a significant move post the earnings release. Moreover, investors are closely monitoring the US monetary policy trajectory, especially after the recent rate hike. Lori Heinel, CIO at State Street Global Advisors, expressed concerns about potential slowdowns and recessions if the rate hikes continue.

In conclusion, while the market seems to be on a positive trajectory, it remains highly sensitive to any significant news or changes, especially in the tech and banking sectors. Investors are advised to stay informed and tread cautiously.




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