Weekly Market Update: Signs of slowing and CPI support Chairman Powell's messaging
Trading opened this week with Mime stocks “Roaring” back in vogue after a tweet sent Gamestop up more than 100% on no real news. AMC and others tied to the wild volatility from a few years ago also saw outsized gains before faltering later in the week. On Friday GME preannounced lackluster Q1 results while also filing for the sale of up to 45M shares. US Treasury Sec Yellen called out China for unfair trade practices ahead of widely telegraphed Biden tariff announcement on EVs and a host of other industries that source products from China. Separately, China announced several new programs intended to bolster their property markets which helped drive copper prices to new all-time highs.
April PPI data ran hotter than expected, but markets quickly looked past that report after Fed Chairman Powell called the data more “mixed” than “hot”, and emphasized he still does not see the next Fed move as likely to be a hike. April CPI data didn’t likely increase the Fed’s confidence that inflation is returning to target, but was clearly step in the right direction. Numbers mostly met or came in below expectations showing deceleration from the hot readings seen in Q1. Of particular note the rent of primary shelter index saw the smallest gain since August 2021 after that indicator was flagged by Fed officials of late. April retail sales also printed below estimates with significant revision lower for March data. May Philly Fed and housing starts/permits were much weaker than expected too. Stocks jumped on a surge in volumes hitting new all-time highs for the S&P and NASDAQ while the Dow would test 40K for the first time. Treasury prices rose while the US dollar plumbed to fresh 1-month lows. Nevertheless, Fedspeak would continue to push the higher-for-longer message with Mester, Williams and Barkin echoing the view more evidence is needed inflation is progressing towards 2% target. By Friday markets were once again fully discounting a Fed rate cut in November, with 68% chance of a cut in September, the same situation seen ahead of US CPI. For the week the S&P rose 1.5%, NASDAQ gained 2.1% and the Dow added 1.2%.
Walmart wowed investors with its Q1 earnings report and raised guidance, powering its shares to all-time highs along with the DJIA. Management allayed some fears about the shape of the US consumer after Home Depot and Under Armour offered up disappointing results. Shares of Deere stumbled after cutting its outlook on softening global demand for agricultural and turf products. China’s Alibaba continued down the road to recovery with solid quarterly results and an announcement that its preparing for a primary listing in Hong Kong, in an effort to capture southbound flows from mainland China investors. OpenAI and Google debuted the latest versions of their AI models with powerful new features that make the AI assistants faster and more helpful to average consumers. Also in the AI realm, Reddit struck a partnership deal with OpenAI, surging the recent IPO’s shares higher. AMAT posted solid results with China sales doubling in Q2. Cisco Q3 number topped estimates and the company raised their FY rev outlook with management talking up stabilization in demand.
MON 5/13
(IN) INDIA APR CPI Y/Y: 4.8% V 4.8%E
(US) Citi Mid-May Economic Surprise Index -18.5 v -7.3 prior (second straight negative print and lowest since Jan 2023)
(US) Redfin: An early look at this year’s data shows that demand for second homes hasn’t picked up in 2024
AAL.UK Rejects ~14.5% raised BHP's all-stock offer of 0.8132 BHP shares for each ordinary share in Anglo American, implying £27.53/shr for AAL and EV of £34B [**Note: prior rejected offer was 0.7097 shares for each share in Anglo American (implied £25.08/shr offer)]
OPENAI.IPO Announces new flagship model GPT-4o (Omni) with AI voice assistant and real time translation capabilities, to be available for free - Spring update event
SDF.DE Reports Q1 EBITDA €200M v €195Me, Rev €988M v €898Me
TUES 5/14
(CN) CHINA PBOC CONDUCTS CNY125.0B IN 1-YEAR MEDIUM TERM LENDING FACILITY (MLF) MONTHLY SETTING AT 2.50% VS. 2.50% PRIOR
(CN) Ex-PBOC adviser Yu Yongding: PBOC should play a more active role in facilitating fiscal stimulus
(DE) GERMANY MAY ZEW CURRENT SITUATION SURVEY: -72.3 V -75.9E; EXPECTATIONS SURVEY: 47.1 V 46.4E
(RU) Russia newly appointed Defense Min Belousov: There will be no mobilization
(US) APR PPI FINAL DEMAND M/M: 0.5% V 0.3%E; Y/Y: 2.2% V 2.2%E (highest annual pace since Sept 2023)
(US) Morgan Stanley: Y/Y growth in card delinquencies slowed across the broader group in Q1, which is encouraging and a clear indication that we are past peak deterioration
(US) NY Fed reports household debt in Q1 rose 1.1%; An increasing number of borrowers missed credit card payments
(US) WHITE HOUSE RELEASES DETAILS ON TARIFFS ON $18B OF CHINESE IMPORTS AHEAD OF BIDEN ANNOUNCEMENT; CONFIRMS TARIFF RATE ON CHINESE EVS TO INCREASE FROM 25% TO 100% THIS YEAR; TARIFF ON SEMICONDUCTORS TO INCREASE FROM 25% TO 50% BY 2025
OPEC Monthly Oil Report (MOMR)
2317.TW Reports Q1 (NT$) Net 22.0B v 29.3Be, Op 36.8B v 35.2Be, Rev 1.32T v 1.37Te; Raises Q2 Rev to rise significantly y/y (prior growth y/y)
6758.JP Reports FY23/24 Net ¥178.3B v ¥937B y/y, Op ¥1.21T v ¥1.21T y/y, Rev ¥13.0T v ¥11.5T y/y; To conduct 5-for-1 stock split at Sep 30th: Announces ¥250B buyback (2.46%)
700.HK Reports Q1 (CNY) adj Net 50.3B v 43.0Be, Rev 159.5B (+6% y/y) v 158.8Be; On track to repurchase over HK$100B of shares in 2024
AMZN Amazon Web Services CEO Adam Selipsky to step down - The Verge citing internal memo
BABA Reports Q1 (CNY) 10.14 v 10.71 y/y, Rev 221.9B v 219.8Be; Approves $4.0B dividend for FY24 ($1.00/ADS regular annual dividend and special $0.66/ADS dividend); Prepares for primary listing in Hong Kong by end-Aug 2024
BABA Exec: We are still seeing good healthy growth domestic eCommerce sales in Apr and May; AI-related Rev rose triple digits y/y - conf call
FDX Affirms FY24 NG EPS $17.25 to $18.25 v $17.70e, Rev 'low single digit rev decline'; Notes muted small package and macro-economic backdrop - Tier1 analysts citing CEO/CFO meeting 31st Annual BofA Transportation, Airline, and Industrials conference
HD CFO: The home improvement customer is extremely healthy from a financial perspective; And so it’s not the case of not having the ability to spend. What they tell us is they’re just simply deferring these projects as given higher rates, it just doesn’t seem the right moment to execute – CNBC
OPENAI.IPO Co-founder and Chief Scientist Ilya Sutskever to leave OpenAI after almost a decade in the company
TRIP Tripadvisor's Summer Travel Index: Nearly all (92%) US respondents plan to spend at least the same amount on travel as last summer, while more than half expect to spend even more than in 2023
VOD.UK Reports FY24 adj €0.07 v €0.11 y/y, adj EBITDA €11.0B v €12.4B y/y, Rev €36.7B v €37.7B y/y
WED 5/15
(AU) AUSTRALIA APR EMPLOYMENT CHANGE: +38.5K V +23.7KE; UNEMPLOYMENT RATE: 4.1% V 3.9%E (Highest unemployment rate since Jan)
(CN) China Foreign Min Wang Yi: US tariffs show that some people in the US have reached the point of losing their minds
(EU) EU Commission Spring Economic Forecasts
(EU) EURO ZONE Q1 PRELIMINARY GDP Q/Q: 0.3% V 0.3%E; Y/Y: 0.4% V 0.4%E
IEA Monthly Oil Report (OMR)
(US) APR ADVANCE RETAIL SALES M/M: 0.0% V 0.4%E; RETAIL SALES (EX-AUTO) M/M: 0.2% V 0.2%E
(US) APR CPI M/M: 0.3% V 0.4%E; Y/Y: 3.4% V 3.4%E (1st deceleration in Y/Y pace in 3 months)
(US) Atlanta April Sticky-CPI annualized 4.6% v 5.0% m/m, Core 4.6% v 5.2% m/m (update)
(US) Atlanta Fed GDPNow: Cut Q2 GDP forecast to 3.8% from 4.2% prior (update)
(US) DOE CRUDE: -2.5M V -1ME; GASOLINE: -0.2M V +0.5ME; DISTILLATE: -0.0M V +0.5ME
(US) MAY EMPIRE MANUFACTURING: -15.6 V -10.0E; Prices Paid: 28.3 v 33.7 prior (lowest since Jan 2024)
(US) MAY NAHB HOUSING MARKET INDEX: 45 V 50E
(US) Tier1 analysts May Spending Survey (conducted May 8-13th): New Vehicle next 12-month spending expectations have increased significantly in May on a sequential and year-over-year basis to highest level since Jan 2023, with 43.0% of respondents expecting to buy a vehicle vs. 35.8% last month and 41.2% last year
(US) Redfin: Real estate investors bought ~44K U.S. homes in Q1 2024, +0.5% y/y (the first increase since Q2 2022)
BRBY.UK Reports prelim FY23/24 £0.74 v £1.26 y/y, Adj Op £418M v £634M y/y, Rev £2.97B v £3.09B y/y; Expect H1 to remain challenging
BRBY.UK CEO: Americas remain quite challenging; Americas decline is broader than aspirational clients - post earnings comments
CBK.DE CEO: No longer expect a recession in 2024 - post earnings comments
COF Reports Apr net charge-offs 6.07% v 6.15% m/m; Domestic Card delinquencies: 4.23% v 4.48% m/m
CSCO Reports Q3 $0.88 v $0.83e, Rev $12.7B v $12.5Be; Raises FY Rev guidance; Seeing stabilization of demand
EOAN.DE Reports Q1 Adj Net €1.05B v €1.03B y/y, adj EBITDA €2.75B v €2.72B y/y, Rev €22.6B v €33.5B y/y
JJC Copper NY futures Comex surge over 4% to record high around $5.10/pound (equivalent to ~$11.2K/ton)
NFLX To launch in house ad technology platform by end of 2025 in pact with TTD
TKA.DE Reports Q2 Net -€377M v -€105M y/y, adj EBIT €268M v €373M y/y, Rev €17.2B v €19.1B y/y; Cuts Net and Rev outlook citing volume reductions and lower prices at Steel Europe and Materials Services
TUI1.DE Reports Q2 Underlying EBIT -€198M v -€242.4M y/y, Rev €3.65B v €3.15B y/y; Bookings for the Summer 2024 season continue to be promising, with 60% of the season sold
THRS 5/16
(CN) Reportedly US to place 25% tariff on China synthetic graphite ending its exemption; Tariff to be imposed in stages over next two years - press [**Note: China produces ~60% of global synthetic graphite]
(CN) China Ministry of Industry and Information Technology said to have asked automakers including SAIC Motor, BYD, Dongfeng Motor, GAC Motor and FAW Group to increase their local procurement of automotive-related chips to 20-25% by next year from ~10% currently – Nikkei
(US) APR IMPORT PRICE INDEX M/M: 0.9% V 0.3%E; Y/Y: 1.1% V 0.4%E
(US) APR HOUSING STARTS: 1.360M V 1.421ME; BUILDING PERMITS: 1.440M V 1.480ME (1-year low)
(US) Atlanta Fed GDPNow: Cut Q2 GDP forecast to 3.6% from 3.8% prior (update)
(US) BOFA INSTITUTE: WEEK-TO-MAY 11TH TOTAL CARD SPENDING +2.3% Y/Y V +0.3% AVERAGE IN APR; Overall, y/y spending growth is likely boosted by the Mother's Day timing mismatch (May 12 in 2024 vs May 14 in 2023)
(US) INITIAL JOBLESS CLAIMS: 222K V 220KE; CONTINUING CLAIMS: 1.794M V 1.78ME
Ocean Freight Bookings remain strong after the Chinese Labor Holiday; Shippers talking up another rate hike for June, following May hikes - Flexport
AMAT Reports Q2 $2.09 v $1.97e, Rev $6.65B v $6.51Be; Sales to China doubles; Some customers that make semiconductors used for ICAPS pausing orders
BIDU Reports Q1 $2.76 v $2.30e (2 est), Rev $4.37B v $4.31Be
BT.A.UK Reports final FY23/24 Pretax £1.19B v £1.73B y/y, Adj EBITDA £8.10B v £8.13Be, Rev £20.8B v £20.9Be
CSCO TTN Earnings Call Quotes summary: "We're getting to the tail end of this supply chain situation that we've been navigating for the last several years"
DE Cuts FY24 US/Canada Global Roadbuilding Equipment -5% to flat y/y (prior flat y/y); Reports Apr (rolling 3-month) US/Canada Combines retail sales 'down double digits'; Apr 2WD Tractors dealer inventories 31% v 29% y/y - earnings slides
DE Reports Q2 $8.53 v $7.86e, Net sales $13.6B v $13.3Be; Cuts outlook again citing global agricultural and turf demand further softens
JD Reports Q1 (CNY) 5.65 v 4.76 y/y, Rev 260.0B v 243.0B y/y; Notes general merchandise category continue to pick up momentum, thanks to the robust recovery of supermarket category
JPM CEO Dimon: Repeats "A lot of inflation forces are in front of us" and may keep rates higher
RDDT OpenAI to bring Reddit content to ChatGPT and OpenAI products; OpenAI to become Reddit advertising partner
ROG.CH Reports positive Phase I results for dual GLP-1/GIP receptor agonist CT-388 in people with obesity; At week 24, 100% of CT-388 treated participants with once-weekly subcutaneous injection achieved >5% weight loss, 70% achieved >15% and 45% achieved >20% weight loss; CT-388 Phase 1 cohort data expected 2H24
SIE.DE Reports Q2 Net €2.20B v €3.55B y/y, Rev €19.2B v €19.4B y/y; Affirm outlook
SIE.DE CFO: Will end up at lower end of FY revenue guidance range (+4-8% y/y); Latest announcement on China tariffs is not helpful - post earnings comments
UA Reports Q4 $0.11 v $0.08e, Rev $1.33B v $1.32Be; Guides FY25 weak; Announces restructuring program and up to $500M share buyback; Notes challenging retail environment that included high inventories and a consistent drumbeat of promotions
WMT Reports Q1 $0.60 v $0.52e, Rev $161.5B v $159.4Be; Raises outlook; Notes US LFL inflation is 'slightly positve'
WMT Grocery inflation +LSD in Q1 but moderated 80bps q/q; Unit volumes in hardlines and home increased - earnings slides
WMT *CFO: WE’VE GOT CUSTOMERS THAT ARE COMING TO US MORE FREQUENTLY THAN THEY HAVE BEFORE - PRE-RECORDED MEDIA CALL COMMENTS
WOSG.UK Q4 FY24 Trading Update: Q4 Rev £380M +5% (cc); Q4 FY24 saw a significant improvement in jewellery performance; US sales remained strong across all regions; FY25 outlook reflects cautious optimism
FRI 5/17
(CN) CHINA PBOC ADJUSTS INTEREST RATE FOR COMMERCIAL HOUSING LOANS; SCRAPS NATIONWIDE INTEREST RATES FLOOR FOR 1ST AND 2ND HOMES – PRESS
(US) Tier1 week-to-May 16th US Truckload Demand Indicator at 53.7 v 56.5 prior (back below 54 avg freight recession level)
(UR) NATO allies reportedly inching closer to sending troops into Ukraine to train Ukrainian forces; As a part of NATO, US with other allies would be obligated under the alliance’s treaty to aid in the defense of any attack on the trainers - NYT (update)
(US) Apr Leading Index: -0.6% v -0.3%e
6752.JP CEO: EV market slowdown in US is "steep" and worse than expected – Nikkei
ALK Exec: No demand challenges have been identified and record travel volumes are expected this summer - BoFA conf comments summary
CFR.CH Reports FY23 Net €2.36B v €301M y/y, Op €4.79B v €5.03B y/y, Rev €20.6B v €20.0B y/y; Names Nicolas Bos as CEO; effective June 1st; Increased proposed dividend 10% to CHF 2.75 per 1 ‘A’ share / 10 ‘B’ shares
CVLG *CEO: This is the worst market in my 51 years in trucking; See our recent annual contract renewals down 4-5% v the market's down 8-9%; Do not expect positive contract rates until 2025 - BoFA conf comments summary
GME Files to sell up to 45M common shares (16.8% of total float)
JBLU Exec: Business trends discussed on the Q1 2024 earnings call are intact and there have been no unforeseen changes to business performance Q2-to-date - BoFA conf comments summary
RXO CEO: Somewhat delay the company's expectation for a truckload market recovery from H2 2024 to late H2 2024-early 2025, as the pace of carrier exits slowed - BoFA conf comments summary