After Hours Summary: VMI +3.4%, CSX +2.4% higher on earnings; CNXN -6.3% lower on guidanceAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: VMI +3.4% (also $400 mln share repurchase reauthorization and a 9% dividend increase), FFBC +3%, CSX +2.4%, HTH +1.8%, PPG +0.6%, OZK +0.5%, KNX +0.1%
Companies trading higher in after hours in reaction to news: WISH +29.4% (authorizes new $50 mln share repurchase program), TMUS +2.5% (Mint Mobile acquisition faces DOJ scrutiny, according to NY Post), ASPN +1.4% (suing Korean supplier for patent infringement), GOOG +0.7% (updates specific reporting topics), PKE +0.2% (enters into cooperation agreement with activist firm), AMZN +0.1% (Whole Foods to cut several hundred corporate jobs as it reorganizes structure, according to WSJ)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: CNXN -6.3%, OCFC -3.1%, WRB -3%, GBCI -2%
Companies trading lower in after hours in reaction to news: UNP -2% (in sympathy with CSX earnings), PFG -1.5% (reports March AUM), SPRY -1.5% (stock offering byselling shareholders), BAM -0.8% (exploring possible counterbid for Network Intl, according to WSJ), AXTA -0.3% (in sympathy with PPG earnings), UAL -0.2% (UAL discusses BA delays in 10-Q filing)
Closing Stock Market SummaryThe stock market had a mostly negative disposition today, digesting a slate of weak economic data and disappointing earnings results from Tesla (TSLA 162.99, -17.60, -9.8%). Bank stocks were also a big drag on the broader market today following several earnings misses from regional banks.
Despite Tesla's sizable decline and other headwinds, index level performance was fairly resilient until mid-afternoon. Some relative strength from other mega cap names helped spur a rebound effort from openeing declines for the major indices, which traded right around their flat lines before selling picked up around 2:00 p.m. ET. The afternoon pullback looked technical in nature after the S&P 500 failed to break above the 4,150 level, hitting 4,148 at its high of the day.
Bank stocks were a notable pocket of weakness for the entire session. This followed relatively disappointing earnings reports from several regional banks, such as Zions Bancorporation (ZION 31.12, -1.60, -4.9%) and Truist Financial (TFC 33.48, -1.31, -3.8%). The SPDR Regional Bank ETF (KRE) fell 1.9% and the SPDR Bank ETF (KBE) decline 1.7%.
Dow component American Express (AXP 163.28, -1.67, -1.0%) was another notable loser following a large Q1 earnings miss. AXP, however, did reiterate its full year outlook. Fellow Dow component IBM (IBM 126.36, +0.04, +0.03%) finished the day little changed after its earnings report.
There were some big outperformers today, however. Chief among them were the homebuilders following a positive response to D.R. Horton's (DHI 107.60, +5.74, +5.6%) impressive quarterly results and outlook. This fueled buying interest in other homebuilders as evidenced by the 1.7% gain in the iShares U.S. Home Construction ETF (ITB) and a 0.7% gain in the SPDR S&P Homebuilder ETF (XHB).
Treasuries saw gains across the curve, reflecting slowdown concerns following some weak economic data this morning that featured the highest continuing jobless claims level since November 27, 2021, the weakest reading for the Philadelphia Fed Index (-31.3) since May 2020, the weakest level for the U.S. Leading Economic Index since November 2020, and a 22% year-over-year decline in existing home sales in March. The 2-yr note yield fell nine basis points to 4.17% and the 10-yr note yield fell six basis points to 3.55%.
The Treasury market overlooked a Wall Street Journal report that New York Fed President Williams (FOMC voter) signaled support for another rate hike at the May FOMC meeting and Cleveland Fed President Mester's view, according to CNBC, that policy needs to move somewhat further into tightening territory with the fed funds rate above 5.00%.
- Nasdaq Composite: +15.2% YTD
- S&P 500: +7.6% YTD
- S&P Midcap 400: +2.9% YTD
- Dow Jones Industrial Average: +1.9% YTD
- Russell 2000: +1.6% YTD
Reviewing today's economic data:
- Initial jobless claims for the week ending April 15 increased by 5,000 to 245,000 (consensus 242,000) while continuing jobless claims for the week ending April 8 increased by 61,000 to 1.865 million.
- The key takeaway from the report is that continuing jobless claims are at their highest level since November 27, 2021, suggesting it is becoming more challenging to find new employment after a layoff.
- The April Philadelphia Fed Index slumped to -31.3 (consensus -20.0) from -23.2 in March. That is the eighth straight reading in negative territory for this manufacturing survey and the lowest reading since May 2020. The dividing line between expansion and contraction for this report is 0.0.
- With the diffusion index for general activity running at -1.5 (versus -8.0 in March), the key takeaway from the report is that respondents' expectations for growth over the next six months remain subdued.
- Existing home sales declined 2.4% month-over-month in March to a seasonally adjusted annual rate of 4.44 million (Briefing.com consensus 4.50 million) versus a downwardly revised 4.55 million (from 4.58 million) in February. Sales were down 22.0% from the same period a year ago.
- The key takeaway from the report is the recognition that the inventory of existing homes for sale remains extremely tight, which is due in part to the strength of the labor market (and ability to work remotely) and the jump in mortgage rates that is deterring existing home owners' interest in moving.
- The Leading Index was down 1.2% in March (consensus -0.4%) after falling a revised 0.5% (from -0.3%) in February.
- Weekly natural gas inventories increased by 75 bcf after increasing by 25 bcf a week ago.
Ahead of tomorrow's open, Procter & Gamble (PG), Freeport-McMoRan (FCX), and SLB (SLB) are among the more notable companies reporting earnings.
Looking ahead to Friday, market participants will receive the following economic data:
- 9:45 ET: Preliminary April IHS Markit Manufacturing PMI (prior 49.2) and preliminary IHS Markit Services PMI (prior 52.6)
Europe’s Air-Traffic Agency Under Attack From Pro-Russian Hackers
Air traffic isn’t at risk but the attack is ongoing, Eurocontrol said, amid fears about the safety of Europe’s critical infrastructure
Europe’s air-traffic control agency said Thursday that it was under attack from pro-Russian hackers amid fears that Moscow could interfere with the region’s critical infrastructure as its confrontation with the West escalates.
The cyberattack on the agency’s website started on April 19, a spokeswoman for the European Organisation for the Safety of Air Navigation, also known as Eurocontrol, said, adding that it wasn’t affecting the agency’s air-traffic control activities.
“Since 19 April, the Eurocontrol website has been under attack by pro-Russian hackers. The attack is causing interruptions to the website and web availability,” the spokeswoman said. “There has been no impact on European aviation.”
A senior Eurocontrol official familiar with the situation said that the agency had ringfenced its operational systems and that air-traffic safety wasn’t at risk. But internal and external communication had been affected, the person added, forcing some of the roughly 2,000 employees to use WebEx and other commercial tools to communicate.
“It’s been a heavy cyber-battle and while operations are entirely safe, doing other things has been difficult,” the official said.
The agency’s website was intermittently unreachable on Thursday evening.
Eurocontrol is a critical part of air-traffic safety in Europe, managing cross-border traffic across airspaces covered by national air-traffic authorities. In addition, its office in Maastricht in the Netherlands provides direct air-traffic control in the upper airspace for that country as well as for Belgium, Luxembourg and northwest Germany for both civilian and military flights.
European authorities have grown concerned that Russia could attack parts of Europe’s transport, communications, and energy infrastructure since it attacked Ukraine in February last year, sparking its biggest confrontation with the West since the Cold War.
Renault criticises Tesla for cutting electric-vehicle prices
French group says reducing price will ‘kill’ second-hand car values sending the market into a spiral
Renault has lambasted Tesla for cutting electric-vehicle prices, warning that the US group would “kill” second-hand values of cars and send itself into a “spiral”.
The comments by the French carmaker’s finance boss Thierry Piéton came hours after Elon Musk vowed to keep reducing prices in order to drive sales higher.
Renault shares slumped as much as 7 per cent despite it posting higher first-quarter revenues on Thursday, with analysts citing worries about pricing pressures across the industry, and despite the French carmaker’s insistence that it would not slash its own price tags.
Renault said its main aim was to keep customer monthly lease payments as low as possible, something that required it to protect the “residual value” of a car.
Most new cars are bought on finance deals that see motorists finance the depreciation of a car over a lease period, rather than its overall value.
The more value a car is expected to lose over the three years, the higher monthly payments typically are. About 80 per cent of the French carmaker’s EVs are sold on finance.
“When you cut prices significantly, residual value takes a hit,” Piéton said.
“There is no big incentive to go cut the prices and kill the residuals and go into a spiral that some of the competition has done,” he said. “If it results short term in slightly lower volume, so be it.”
Piéton’s comments are a direct aim at Tesla, which has cut prices by up to a fifth since the start of the year, leading to fears of a price war across the industry.
Renault’s share tumble came in spite of its recent turnround efforts after steep losses during the coronavirus pandemic.
Philippe Houchois, an analyst at Jefferies, said the French carmaker was often seen as a “weak link” in the industry, with lower margins than many of its peers. “The market is worried about pricing coming off after Tesla,” Houchois said.
On Thursday, Renault posted a 30 per cent rise in first-quarter revenues from a year earlier to €11.5bn, slightly above analyst expectations, and maintained its target to improve operating margins to at least 6 per cent in 2023, from 5.6 per cent last year.
Despite the French carmaker’s comments, some analysts said the group may still have to reconsider its prices to remain competitive, and find savings elsewhere to keep margins growing.
“Renault may be forced to lower its prices and find new efficiencies via its new manufacturing plants in northern France,” Third Bridge analyst Orwa Mohamad said.
Renault’s comments came hours after Elon Musk on Wednesday evening indicated that Tesla would keep lowering prices to pursue its target of increasing market share.
The electric-car maker has an unofficial target of selling 20mn vehicles a year by 2030, which would make it larger than industry leaders Toyota and Volkswagen combined.
“This is a good time to increase our lead further, and we’ll continue to invest in growth as fast as possible,” Musk told investors.
Tesla has seen the residual value of its vehicles fall significantly since it started cutting prices earlier this year, the Financial Times reported last month, potentially making its cars more expensive to lease.