TheChek News Flow

US stock markets opened the week continuing to recoup losses from early August. Breadth remained notably strong, though equity volumes dwindled and would remain at seasonably low levels. Treasury yields remained under modest pressure, the US dollar slumped to an 8-month low, and gold hit new all-time highs on Tuesday after Philly Fed services data missed expectations, showing further deceleration. On Wednesday, the BLS released annual payroll revisions of -818K payrolls or ~68K/month which was towards larger end of what Wall Street was expecting, and was the largest downward revision since 2009. The highly anticipated reading further set the table for the Fed to solidify expectations for a September rate cut at Jackson Hole later in the week. Also July FOMC minutes confirmed some officials had already been open to a rate cut when they last met. Crude oil prices remained heavy on worries about China demand, and potentially lingering hopes of a Gaza peace deal.

Heading into Powell’s speech on Friday the US 2-year yield was holding at ~4%. Futures markets projected investors expected the Fed to begin lowering rates next month, perhaps by as much as 100 bps by year’s end. The Fed Chair clearly delivered what investors wanted to hear as he acknowledged “the time has come for policy to adjust.” Importantly, by underscoring his increased confidence in the inflation path and stating no further cooling in the labor market is welcome, Powell cemented investors’ belief that a series of rate cuts are going to begin in September. Futures markets continued to project 100 bps of easing by early next year with close to 200 bps over the next 12 months or so. For the week, the S&P gained 1.5%, the DJIA was up 1.3%, and the Nasdaq rose 1.4%.

A host of retailers and software companies reported this week, illustrating varying degrees of execution through macroeconomic cross currents. Target was decidedly strong, beating on the top- and bottom-line, as well as SSS with improving trends seen across discretionary categories. TJX posted another very strong quarter remaining in what appears to be a sweet spot given the current environment. Palo Alto Networks rose after topping estimates and raising FY product revenue guidance, though margins declined. Workday offered up another standout quarter and raised long term operating margin targets. Lowe’s was expectedly weak with SSS missing estimates and a lowered outlook citing challenging macroeconomic backdrop. Relatively poorer execution was seen in quarterly reports from Macy’s, Snowflake, Williams-Sonoma, and BJ’s Wholesale Club. Fast casual Mediterranean restaurant Cava beat and raised with impressive 14%+ SSS growth, as opposed to Red Robin Gourmet which missed and cut FY profit prospects again. AMD made a splash on Monday when investors welcomed its $5B deal to acquire ZT Systems to better compete with Nvidia in the data center.

MON 08-19

(US) BOFA INSTITUTE: WEEK-TO-AUG 10TH TOTAL CARD SPENDING -1.0% Y/Y V -1.7% PRIOR WEEK AND -0.4% AVERAGE IN JULY; While still negative,department store, home improvement & furniture spending growth saw the largest increase since last week

(US) Former US President Trump: If elected will prevent Japan's Nippon Steel from buying US Steel; Would consider ending $7.5K EV vehicle tax credit - prepared remarks

(US) NY Fed: SCE Labor Market Survey Shows Sharp Increase in Job Seekers, While Current Job Satisfaction Deteriorates; Rising number of workers dissatisfied with work compensation in July

(US) Mid-Aug Manheim wholesale used vehicle Index: 202.6 v 201.6 prior; +0.5% m/m; -4.5% y/y

(US) Redfin: Sales of existing homes rose 0.6% m/m in July, but fell 2% y/y (the lowest July level in records dating back to 2012); Pending sales—a more current gauge of demand that includes both existing and newly-constructed homes—fell to the lowest level of any month on record aside from April 2020

(US) Sea-Intelligence data/advisory firm: Every one day of a International Longshoremen's Association (ILA) strike would take about five days for ports to clear the resulting cargo backlog - press [**Note: current ILA contract set to expire on Sept 30th, 2024]

005930.KR TTN Research Alert: Nikkei piece says Samsung Electronics is reportedly shifting its focus from the High Bandwidth Memory (HBM) market, where it trails behind SK Hynix, to the emerging CXL (Compute Express Link) memory tech; The CXL module stacks DRAM layers and enhances memory sharing between CPUs and attached devices, expanding server memory capacity roughly up to tenfold

AMD Acquires ZT Systems, a provider of AI infrastructure for the world’s largest hyperscale computing companies, for $4.9B cash-stock deal; Expected to be accretive on a non-GAAP basis by the end-2025; AMD plans to sell ZT's manufacturing business after the acquisition is complete, keeping its system-design business

EL Reports Q4 $0.64 adj v $0.25e, Rev $3.87B v $3.83Be; Guides FY25 below estimates citing continued soft consumer sentiment in China in FY25 and more tempered growth in certain large markets, such as North America; Expects global prestige beauty to re-accelerate to historical mid-single-digit growth in FY26

MAERSKB.DK Receives notification that a potential Canada rail stoppage could commence from Aug 22nd following the expiry of the current 13-day “cooling off period” imposed by the Canada Industrial Labor Relations Board (CIRB); To halt further acceptance of any Canada destined shipments which require movement via rail

PANW Reports Q4 $1.51 v $1.41e, Rev $2.20B v $2.16Be; Guides Q1 and FY25 strong; Board authorizes $500M buyback

RHM.DE Recent notable premarket weakness being attributed to press report that Germany will no longer grant new requests for aid to Ukraine amid govt spending cuts; Existing aid programs will generally continue

UGA Gas Buddy data: For the first time since Jan 2022, US's average price diesel fuel was below $3.70/gal

TUES 08-20

(CN) China mulls letting local govts issue bonds to purchase homes – press

(IL) US officials: Gaza peace deal on brink of collapse - US press

(SE) SWEDEN CENTRAL BANK (RIKSBANK) CUTS REPO RATE BY 25BPS TO 3.50%; AS EXPECTED; Expects two or three More rate cuts this year; Notes cuts can be somewhat faster

(TW) TAIWAN JULY EXPORT ORDERS Y/Y: 4.8% V 2.7%E; Orders from US accelerate; Sees August total orders between +6.7-11.0% y/y

(US) Reportedly Former Pres Trump open to RFK Jr in admin role provided he backs Trump – press

ANTO.UK Reports H1 Pretax $712.6M v $764.5M y/y, EBITDA $1.39B v $1.37Be , Rev $2.96B v $2.96B y/y

COTY Reports Q4 -$0.03 v +$0.04e, Rev $1.36B v $1.38Be; Guides above consensus; Anticipates beauty demand in mature markets to expand in the mid-single-digits

EMR.UK Reports H1 -1.2p v -0.8p y/y, Rev £121.8M v £125.7M y/y; Believes it has seen the bottom of the hiring market and starting to see some cautious positive movement in demand in some areas; FY adj results are expected to be broadly in line with current market expectations although market conditions remain challenging

LOW Reports Q2 $4.10 adj v $3.96e, Rev $23.6B v $23.9Be; Cuts outlook citing challenging macroeconomic backdrop, especially for the homeowner

LLY 176-week SURMOUNT-1 study show tirzepatide (Zepbound and Mounjaro) significantly reduced risk of progression to type 2 diabetes by 94% in adults with pre-diabetes and obesity; Patients on highest Zepbound dose lost 23% of body weight in 176 weeks in the longest continuous study of Zepbound to date

TOL Reports Q3 $3.60 v $3.28e, Rev $2.73B v $2.70Be; Raises FY guidance, notes July was strongest month of quarter and saw solid activity through first three weeks of Aug

WED 08-21

(CA) Canadian National Railway Co notes deal with Teamsters Union not possible, calls on the Federal Labor Min to intervene to prevent a stoppage; Says the Union is unwilling to negotiate seriously [**Note: earlier, : Teamsters Canada confirmed to have served 72 hours notice to withdraw services, effective Thurs, Aug 22nd at 00:01 ET]

(US) Bureau of Labor Statistics (BLS) benchmark revisions to Nonfarm Payrolls: Revises Apr 2023-March 2024 Nonfarm Payrolls: -818K

(US) FOMC JULY MINUTES: SOME OFFICIALS NOTE RISKS TO MORE DETERIORATION IN LABOR MARKET; SOME SAW CASE TO CUT RATES 25 BPS AT JULY MEETING

(US) Independent Presidential Candidate RFK, Jr. to drop out of presidential race by end of week - ABC News

A Reports Q3 $1.32 v $1.25e, Rev $1.58B v $1.56Be

ADI Reports Q3 $1.58 v $1.50e, Rev $2.31B v $2.27Be; Expects to grow again sequentially in Q4

ARCH Confirms plan of all-stock merger with CONSOL Energy; Arch to convert to 1.326 CONSOL shares, termination fee at $82M – filing

FNMA August 2024 commentary: Despite the recent pullback in mortgage rates, total home sales are expected to come in lower than previously forecast through the rest of 2024, and then not pick up meaningfully until further out in 2025; Homebuying will not pick up meaningfully until income growth begins to outpace home price growth and mortgage rates move closer to 6.0%

M CEO: Customers aren’t spending as freely across all of Macy’s brands, even higher-end department store Bloomingdale’s; We see that there is definitely a softness, a carefulness, a delay in the conversion of purchasing – CNBC

SNPS Reports Q3 $3.43 v $3.28e, Rev $1.53B v $1.53Be; Raises FY guidance

TJX *CEO: Q3 IS OFF TO A STRONG START; WILL NOT BE COMPLACENT

TJX Reports Q2 $0.96 v $0.92e, Rev $13.5B v $13.3Be; Raises guidance; Q2 comp sales growth was entirely driven by customer transactions, which increased at every division

TOL TTN Research Alert: Home construction firm Toll Brothers became the first US firm to offer macroeconomic color for the first 3 weeks of August. It noted solid deposit and traffic activity through the first three weeks of this month

TGT Reports Q2 $2.57 v $2.18e, Rev $25.5B v $25.2Be; Saw improving trends across discretionary categories, most notably in apparel; Seeing continued strength in beauty

ZM Reports Q2 $1.39 v $1.21e, Rev $1.16B v $1.15Be; Raises FY guidance

THRS 08-22

(CA) Canada Labor Min: Has ordered Canada's two largest railway companies to enter in binding arbitration with Teamsters Union

(CN) China Industry Ministry (MIIT): Revises steel production capacity replacement measures from Aug 23rd

(CN) Nikkei: China property developers’ loss warnings exceed $8.0B in the past week alone

(FR) FRANCE AUG PRELIMINARY MANUFACTURING PMI: 42.1 V 44.5E (19th month of contraction and 7-month low); Services PMI highest since May 2022; Notes August is likely an outlier due to the Olympic Games

(JP) Bank of Japan (BOJ) Gov Ueda: Concerns over US economy a factor for recent market rout; July rate hike was appropriate, would hike again if economy develops as expected; Very high uncertainty on where rates will eventually rise to - Lower House special session testimony

(JP) JAPAN JULY NATIONAL CPI Y/Y: 2.8% V 2.7%E; CPI EX FRESH FOOD (CORE) Y/Y: 2.7% V 2.7%E

(UK) AUG PRELIMINARY MANUFACTURING PMI: 52.5 V 52.2E (4th month of expansion); Cost pressures faced by UK businesses increased at the weakest rate since Jan 2021; Data could help lower the bar for further interest rate cuts

(US) AUG PRELIMINARY S&P MANUFACTURING PMI: 48.0 V 49.5E (2nd month of contraction)

(US) INITIAL JOBLESS CLAIMS: 232K V 232KE; CONTINUING CLAIMS: 1.863M V 1.870ME

(US) WEEKLY EIA NATURAL GAS INVENTORIES: +35 BCF VS. +28 BCF TO +30 BCF INDICATED RANGE

AAP Reports Q2 $0.75 v $0.97e, Rev $2.68B v $2.67Be; Cuts outlook

BIDU Reports Q2 (CNY) 21.02 v 18.54e, Rev 33.9B v 34.1Be; Notes ongoing macro headwinds for online marketing revenue; "For AI Cloud in particular, we expect growth to maintain a strong momentum."

CP Follow up: locks out TCRC employees, moves to full shut down of Canadian rail network

CNR.CA CN Moves forward with lock out of 6,000 Teamster union members (as expected)

HAS.UK Reports FY24 Pretax £14.7M v £97.1Me, Net fees £1.11B v £1.29B y/y; In Perm, as reported at our Q4 24 trading update, weaker activity levels in Q4 24 have resulted in more subdued summer trading than normal in Germany, UK&I and EMEA

INTU Reports Q4 $1.99 v $1.86e, Rev $3.18B v $3.08Be; Guides Q1 light but sees recovery in Q2 citing transition to subscription model

Neuralink: Surgery for its second implant in a human “went well” and the patient is now able to design 3D objects and play video games like Counter-Strike 2

NESN.CH Appoints Laurent Freixe CEO; CEO Mark Schneider leaves the company, effective Sept 1st

MAERSKB.DK Market Update: Notes global economic trends driven by US growth and easing inflation. This positive economic outlook is reflected in the growth of both ocean and airfreight volumes, which are expected to maintain momentum into H2 2024

PFE US FDA Approves PFE/BNTX and MRNA updated Covid Vaccines, covering current dominant KP.2 strain; FDA anticipates the composition of COVID-19 vaccines will need to be assessed annually

WDAY Reports Q2 $1.75 v $1.63e, Rev $2.09B v $2.07Be; Affirms FY25 guidance; Board approve $1B buyback

FRI 08-23

(US) FED CHAIR POWELL: CONFIDENCE HAS GROWN THAT INFLATION IS ON SUSTAINABLE PATH TO 2%; TIME HAS COME FOR POLICY TO ADJUST - JACKSON HOLE

(US) Fed's Goolsbee (non-voter for 2024; voter for 2025): Powell gave an excellent speech today; Inflation is on a path to 2%, and agree with Powell's labor market concerns - CNBC interview

(US) Fed's Harker (non-voter): Need to start moving rates down; Should start process of cuts and keep moving

(UK) BOE Gov Bailey: Second round inflation effects appear to be smaller than we expected, but it is too early to declare victory - Jackson Hole speech

(CA) Follow up: Teamsters Canada: Canadian National Railway workers to begin returning to work on Friday, Aug 23rd after lockout ended - financial press

(US) JULY NEW HOME SALES: 739K V 623KE

(CA) CANADA JUN RETAIL SALES M/M: -0.3% V -0.3%E; RETAIL SALES (EX-AUTO) M/M: +0.3% V -0.2%E

(EU) Euro Zone July Consumer Expectation Survey: 1 Year CPI Expectations: 2.8% v 2.7%e

(US) TIER1 WEEK-TO-AUG 22ND US TRUCKLOAD DEMAND INDICATOR FOR SHIPPERS' 0- TO 3-MONTH FREIGHT DEMAND OUTLOOK ROSE TO 51.7 V 44.3 PRIOR; August softness bodes ill for post-Labor Day bounce, shippers now focused on the potential boost a rate cut in September may have in increasing confidence and drive volume moves into the fall