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Morning Briefing: August 23rd, 2023

Stock Market Overview

The stock market is gearing up for an optimistic start, bolstered by a dip in Treasury yields and modest upticks in mega cap stocks. All eyes are on NVIDIA’s (NVDA) earnings report, scheduled for release after the market closes. The 10-yr note yield has seen a decrease of six basis points, settling at 4.27%, while the 2-yr note yield has dropped five basis points to 4.99%.

European PMI Data Influences Treasury Market

The recent shifts in the Treasury market can be attributed to the latest PMI data from Europe. While the Manufacturing PMIs for August surpassed expectations, the Service PMIs weren’t as fortunate, falling short of predictions.

Retail Sector: A Mixed Bag

The retail sector presented a varied picture today. Foot Locker’s (FL) stock plummeted by over 30% post their earnings report. In contrast, Abercrombie & Fitch (ANF) witnessed a surge, with stocks rising by more than 15%.

Mortgage Applications on the Decline

A concerning report revealed a 4.2% decline in the weekly mortgage applications index. Purchase applications took a significant hit, dropping by 5.0% and reaching their lowest since 1995. Refinancing applications also decreased by 3.0%.

Upcoming Reports

The New Home Sales report for July is set to be unveiled at 10:00 a.m. ET. The consensus stands at 701,000, with the prior figure being 697,000.

Corporate Highlights

  • Foot Locker (FL): Despite reporting in-line EPS and revenues, the company’s stock took a hit, primarily due to the guidance for FY24 EPS and revenues falling below consensus. The company also announced a pause on its dividend.
  • Brown-Forman (BF.B): The company’s stock received a boost following an upgrade to ‘Overweight’ from ‘Underweight’ by Morgan Stanley.
  • Toll Brothers (TOL): The company outperformed expectations on both EPS and revenues. They also reported a 5% increase in homes delivered and raised their FY23 home deliveries guidance.
  • Charles Schwab (SCHW): The company’s stock dipped slightly amidst news of debt offerings and operational streamlining, which includes office reductions and layoffs.
  • Kohl’s (KSS): The company beat EPS expectations but missed on revenues. However, they reaffirmed their FY24 EPS and revenue guidance.
  • Peloton (PTON): The company’s stock took a significant hit after missing EPS expectations and guiding Q1 revenues below consensus.
  • Analog Devices (ADI): The company reported in-line revenues but missed EPS expectations. They also provided a below-consensus guidance for Q4 EPS and revenues.
  • Urban Outfitters (URBN) and Bath & Body Works (BBWI) both reported positive earnings, with the former beating both EPS and revenue expectations and the latter meeting revenue expectations while beating on EPS.
  • Advance Auto (AAP): Despite missing EPS expectations, the company reported in-line revenues and announced changes in executive leadership.
  • Tesla (TSLA): The company’s Germany plant is reportedly reducing production targets.
  • Apellis (APLS): The company provided updates on its Injection Kits and rare safety events related to SYFOVRE (pegcetacoplan injection).
  • Abercrombie & Fitch (ANF): The company surpassed both EPS and revenue expectations and provided an above-consensus guidance for Q3 and FY24 revenues.

Investor Sentiment and Global Markets

US equity futures experienced a slight setback after disappointing earnings updates impacted investor sentiment. The spotlight remains on chipmaker Nvidia Corp, with the market eagerly awaiting their results. European stocks experienced a minor setback after PMI data indicated a potential downturn in the euro area. The global market is also in anticipation of Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole Economic Policy Symposium.

Analyst Predictions and Market Insights

Analysts are optimistic about Nvidia’s second-quarter revenue, expecting it to surpass its three-month-old forecast. The options market is also preparing for a potential 10% shift post-results. Investors are keenly awaiting insights on interest rates, especially after the Fed’s recent hike to a range of 5.25% to 5.5%, marking a 22-year high. US PMI figures for August will shed light on the economy’s strength, setting the stage for Powell’s remarks on Friday.

Asian Market Update

Mainland Chinese stocks faced challenges despite positive signs of an earnings recovery among tech giants.

In conclusion, the market is in a state of anticipation, with major events like Nvidia’s earnings and Jerome Powell’s speech on the horizon. Investors are advised to stay informed and make decisions based on comprehensive research and analysis.




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