>>> Robinhood Markets misses by $0.05, misses on revs, issues downside Q1 revenu

Robinhood Markets misses by $0.05, misses on revs, issues downside Q1 revenue guidance (11.61 -0.80)
  • Reports Q4 (Dec) GAAP loss of $0.49 per share, $0.05 worse than the S&P Capital IQ estimate of ($0.44); revenues rose 14.2% year/year to $362.7 mln vs the $366.64 mln S&P Capital IQ Consensus.
  • Options for the quarter increased 14% yr/yr to $163 million; Cryptocurrencies for the quarter increased 304% yr/yr to $48 million; Equities for the quarter decreased 35% to $52 million.
  • Monthly Active Users (MAU) increased 48% to 17.3 million for December 2021, compared with 11.7 million for December 2020. On a sequential basis, MAU decreased 8% compared with 18.9 million for September 2021.
  • Average Revenues Per User (ARPU) for the quarter decreased 39% to $64 on an annualized basis, compared with $106 in the fourth quarter of 2020.
  • HOOD issues downsideguidance , expects 1Q22 revenue will be less than $340 mln vs. the $438.7 mln S&P Capital IQ consensus estimate. which assumes some incremental improvement in trading volumes versus what we have seen so far. At the top end, this implies a year-over-year revenue decline of 35% compared to the first quarter of 2021, during which we saw outsized revenue performance due to heightened trading activity, particularly relating to certain meme-stocks.
    • For fiscal year 2022, Robinhood expects total operating expenses, excluding share-based compensation, to increase 15-20% year-over-year. Additionally, HOOD expects share-based compensation to decline 35-40% year-over-year.

>>> Juniper Networks beats by $0.03, beats on revs; guides Q1 EPS in-line, revs

Juniper Networks beats by $0.03, beats on revs; guides Q1 EPS in-line, revs in-line; increases dividend (31.45 +0.02)
  • Reports Q4 (Dec) earnings of $0.56 per share, excluding non-recurring items, $0.03 better than the S&P Capital IQ Consensus of $0.53; revenues rose 6.3% year/year to $1.3 bln vs the $1.27 bln S&P Capital IQ Consensus.
  • "We experienced better than expected demand during the December quarter, with strong double-digit order growth across all verticals, all customer solutions and all geographies," said Juniper's CEO, Rami Rahim.
  • Co issues in-line guidance for Q1, sees EPS of ~$0.31, plus or minus $0.05, excluding non-recurring items, which translates to ~$0.26-0.36 vs. $0.31 S&P Capital IQ Consensus; sees Q1 revs of ~$1.15 bln, plus or minus $50 mln, which translates to ~$1.100-1.200 bln vs. $1.13 bln S&P Capital IQ Consensus.
    • Non-GAAP gross margin will be approximately 58.0%, plus or minus 1%.
    • Non-GAAP operating margin will be approximately 11.8% at the mid-point of revenue guidance.
  • Juniper today announced a 5% increase in its quarterly cash dividend to $0.21 per share, to be paid on March 22, 2022 to stockholders of record as of the close of business on March 1, 2022.

>>> U.S. Steel misses by $0.61, beats on revs; also authorizes a new $500 mln st

U.S. Steel misses by $0.61, beats on revs; also authorizes a new $500 mln stock repurchase program (18.58 -0.03)
  • Reports Q4 (Dec) earnings of $3.64 per share, excluding non-recurring items, $0.61 worse than the S&P Capital IQ Consensus of $4.25; revenues rose 119.4% year/year to $5.62 bln vs the $5.35 bln S&P Capital IQ Consensus.
    • Q4 adjusted EBITDA jumped to $1.728 bln vs $87 mln a year ago.
  • "We enter 2022 from a position of strength and are relentlessly focused on continuing our disciplined approach to creating stockholder value. Our balance sheet has been transformed, record cash significantly de-risks strategy execution, and our capital allocation priorities have enhanced direct stockholder returns. We are a fundamentally different company from a year ago and expect 2022 to be another strong year."
  • Co also authorizes a new $500 mln stock repurchase program to commence in Q1. This is in addition to a previously announced $300 mln authorization.

>>> Celanese misses by $0.15, reports revs in-line; guides Q1 EPS above consensu

Celanese misses by $0.15, reports revs in-line; guides Q1 EPS above consensus; guides FY22 EPS below consensus (160.07 +0.43)
  • Reports Q4 (Dec) earnings of $4.91 per share, excluding non-recurring items, $0.15 worse than the S&P Capital IQ Consensus of $5.06; revenues rose 43.0% year/year to $2.27 bln vs the $2.26 bln S&P Capital IQ Consensus.
  • Co issues upside guidance for Q1, sees EPS of $4.30 to $4.60, excluding non-recurring items, vs. $4.28 S&P Capital IQ Consensus.
  • Co issues downside guidance for FY22, sees EPS of at least $15.00, excluding non-recurring items, vs. $15.92 S&P Capital IQ Consensus.

>>> Eastman Chemical misses by $0.06, beats on revs; guides FY22 EPS in-line, re

Eastman Chemical misses by $0.06, beats on revs; guides FY22 EPS in-line, revenue above consensus (118.54 -0.57)
  • Reports Q4 (Dec) earnings of $1.81 per share, excluding non-recurring items, $0.06 worse than the S&P Capital IQ Consensus of $1.87; revenues rose 23.2% year/year to $2.69 bln vs the $2.38 bln S&P Capital IQ Consensus.
  • Co issues in-line EPS guidance for FY22, sees EPS of $9.50-$10.00 vs. $9.72 S&P Capital IQ Consensus. Expects FY22 revenue to be higher than FY21 revenue of $10.48 bln compared to the $9.8 bln S&P Capital IQ consensus estimate.

>>> Apple beats on the top and bottom line lead by beats in iPhones and Mac reve

Apple beats on the top and bottom line lead by beats in iPhones and Mac revenue; iPad revenue misses (159.22 -0.47)
  • Reports Q1 (Dec) earnings of $2.10 per share, $0.21 better than the S&P Capital IQ Consensus of $1.89; revenues rose 11.3% year/year to $123.94 bln vs the $118.53 bln S&P Capital IQ Consensus.
  • Q1 iPhone revenue $71.6 bln vs. $67.5 bln ests
  • Q1 Mac revenue $10.8 bln vs. $9.5 bln ests
  • Q1 iPad revenue $7.25 bln vs. $7.8 bln ests.
  • Q1 wearables revenue $14.7 bln vs. $14.0 bln ests.
  • Q1 services revenue $19.5 bln vs. $19.7 bln ests.
  • Q1 gross margin was 43.7% versus 41.6% ests.
CEO Tim Cook tells CNBC that supply issues will likely ease in March quarter. Conference call begins at 17:00 ET, where Apple could give more color on Q2.

>>> US Close Dow -0.02% S&P -0.54% Nasdaq -1.40% Russell -2.29% VIX 30.49 -4.60%

Closing Stock Market Summary

The S&P 500 lost 0.5% on Thursday, closing lower for the third straight day as investors sold into early strength amid lingering concerns about a hawkish Fed. The Nasdaq Composite (-1.4%) and Russell 2000 (-2.3%) posted steeper declines while the Dow Jones Industrial Average (-0.02%) closed fractionally lower. 

Each of the major indices started the session with gains over 1.5% in another rebound-minded pursuit. There wasn't any specific news that triggered the positive bias, and likewise, there wasn't a catalyst to account for the intraday turnaround, although it's likely that the Fed remained a primary concern along with disappointing earnings reactions and stubborn technical factors.

The fed funds futures market started to price in the probability for five rate hikes this year following the FOMC meeting yesterday, and the Treasury market behaved accordingly as the 2-yr yield jumped 11 basis points to 1.19%. The 10-yr yield declined four basis points to 1.81% as investors sniffed the potential for the Fed to upset growth prospects with its tightening plans. 

Despite the negative index closes, six of the 11 S&P 500 sectors still closed in positive territory, including energy (+1.2%), utilities (+0.8%), and consumer staples (+0.6%). The consumer discretionary (-2.3%), information technology (-0.7%), and financials (-0.9%) sectors were the influential laggards.

The curve-flattening activity in the Treasury market was a headwind for the bank stocks, but as noted, the consumer discretionary sector was the weakest performer, primarily due to a 10% decline in Tesla (TSLA 829.10, -108.31, -11.6%), which delayed new vehicle launches amid persistent supply chain issues. 

The Philadelphia Semiconductor Index (-4.8%) was another weak spot, falling 5% after Intel (INTC 48.05, -3.64, -7.0%), Lam Research (LRCX 555.30, -41.37, -6.9%), and Teradyne (TER 111.24, -32.13, -22.4%) each provided disappointing quarterly guidance. 

McDonald's (MCD 248.74, -1.11, -0.4%), Dow Inc. (DOW 60.18, +2.96, +5.2%), MasterCard (MA 350.53, +5.87, +1.7%), and Comcast (CMCSA 48.01, -0.45, -0.9%) were other high-profile companies that reported earnings. Apple (AAPL 159.22, -0.47, -0.3%) closed lower in front of its earnings report after the close. 

Other factors in the mix included the S&P 500 finding technical resistance at its 200-day moving average (4434), which might have fueled the downside volatility in the broader market, and the Advance Q4 GDP report, which showed decent growth in the economy and inflation. 

Separately, the U.S. Dollar Index rose 1.4% to 97.25 amid a view that rate hikes will drive greater demand for the dollar in an environment where foreign central banks are hesitant to rein in policy support. Crude futures ($86.62, -0.74, -0.9%) and precious metals were clipped by the stronger dollar. 

Reviewing Thursday's economic data:

  • The Advance Q4 GDP report showed real GDP increasing at an annual rate of 6.9% (Briefing.com consensus 5.6%) following a 2.3% increase in the third quarter. The GDP Chain Deflator was also up 6.9% ( consensus 5.9%) after a 6.0% increase in the third quarter.
    • The key takeaway from the report is the recognition that services spending drove the 3.3% increase in personal spending and that inventory investment was the biggest contributor to the increase in real GDP. Real final sales of domestic product, which exclude the change in inventories, were up 1.9%.
  • Initial jobless claims for the week ending January 22 decreased by 30,000 to 260,000 ( consensus 260,000). Continuing claims for the week ending January 15 increased by 51,000 to 1.675 million.
    • The key takeaway from the report is that initial claims came down from the prior week, but are still somewhat elevated presumably due to the effects of the Omicron variant.
  • December Durable Goods Orders decreased 0.9% month-over-month (consensus -0.5%) while orders, excluding transportation, increased 0.4% ( consensus 0.4%).
    • The key takeaway from the report is the slowdown in business spending, evidenced by an unchanged reading for nondefense capital goods orders excluding aircraft that followed on the heels of a 0.3% increase in November.

Looking ahead, investors will receive Personal Income and Spending for December, PCE Prices for December, the final University of Michigan Index of Consumer Sentiment for January, and the Q4 Employment Cost Index on Friday. 

  • Dow Jones Industrial Average -6.0% YTD
  • S&P 500 -9.2% YTD
  • Russell 2000 -14.0% YTD
  • Nasdaq Composite -14.7% YTD

(ZH) JPMorgan: Not Enough Capitulation To Call A Bottom

JPMorgan: Not Enough Capitulation To Call A Bottom

One day (and one week and one month) after JPM called again to buy the dip, at least one group inside the largest US bank - arguably the most important one - is getting cold feet on a quick bounce. As the bank's trading desk writes this morning, while stocks reacted poorly to Powell's unexpectedly hawkish comments, interestingly retail investors bought $1.69bn on the day: "this is the second most on record."
This is a problem because it means that the market still refuses to capitulate and signal an all clear (see more below).
And while retail investors stubbornly continue to buy the dip, JPM also notes that it is still the case that "we hadn’t seen consistent signs of capitulation by HFs" and adds that it seems that there’s an impulse to buy the dip recently among a broad set of discretionary investors. "Given how much the market has declined recently, it does seem like we could see a bounce, but whether this is a sustainable rebound remains to be seen in our view."
Here are JPMorgan Prime's key points on recent flows:
  • HF Flows – dip buying on Mon and Tues, post large selling on Fri:
    • HFs bought the dip on Mon and Tues (just under +1z globally both days)
    • Notionally, the biggest buying was in N. America (+1.4z on Mon and 1.2z on Tues). N. America buying on Tues was evenly split between longs added and short covered. L/S funds were net buyers on both days, although the majority of buying on Mon was short covering, while ~75% of buying yest came from longs added.
  • EMEA also saw meaningful buying on Tues (+1.8z) following a week of neutral activity and most of the buying was due to longs added.
    • In contrast, APAC saw selling increase on Tues (-2z) as flows reverse. Notably APAC had seen the largest acceleration in buying in late Dec and early Jan, but has seen flows turn much more negative as the broad indices have hit new lows (rather than just going back to early Oct levels like in NA or EMEA). The selling on Tues was mostly longs sold
  • ETF Flows – turning more positive:
    • Second day in a row of buying yest at about +2.8bn (vs. +1.4bn), after 7 days of net selling
    • Note: these flows are based on a selection of broad index ETFs (e.g. SPY, IWM, QQQ) as well as sector ETFs (e.g. XLF, XLE)
  • Retail Flows – reversal to buying (based on data from Peng Cheng, JPM QDS Research):
    • Overall flows turned to >1Bn of net buying on Tues
    • Notably, single-stocks saw net buying return (almost ~$500mm bought) vs. the selling of the prior 4 days
    • Through Monday, single-stocks had been net sold for 4 days in a row. The 5d rolling net flows for single-stocks is at one of the most negative of the past 2 years...it only got a lot more negative in March 2020. Including ETFs, however, the 5d flows are still positive and the 20d are still very positive
For those wondering what stocks retail is buying and selling, here is the answer: first the stocks with the largest retail order buy imbalance:
And here are the ones with the smallest:
Is the coast clear? According to JPM's traders (and not its increasingly clueless sellside researchers who can only parrot "BTFD" every single week), given the set-up into the Fed and potential for earnings to be OK/better than feared, "it seems we could be in the rebound phase that often follows a large drawdown (i.e. nearly 10% or more)."
However, given the lack of strong capitulation, it is not yet clear to the bank whether this rebound should be any more than short-term and tactical in nature. In addition, how discretionary investors perform if there is a bounce over the next week or so could be critical.
Bottom line: "Given many have captured a large amount of the decline, if they don’t capture a lot of the rebound, it could continue to create risks."
* * *
So what does this mean for stocks from here? According to JPM desk trader Andrew Tyler, one should buy the highest quality names "and we are seeing their bifurcation within the Tech sector, with FANG+ outperforming." As for vol, it may remain elevated until we have liftoff at the Fed’s March 16 meeting.
Also, we should have seen Omicron dissipate in the US by that meeting as well as having completed this earnings season with the potential for positive pre-announcements/earnings revisions ahead of the April/May earnings period.
AS such, until March JPM advises clients to consider more of a market-neutral approach with a +high quality vs. –low quality within each sector of exposure. More broadly, the barbell trade (e.g. long FANG+, long Energy, long Metals/Miners, long Consumer Recovery, and long Transports vs. shorts in IG credit, Staples, and the SPX) feels like a prudent way to express risk, according to JPM.
Meanwhile, as the market moves toward a more fundamentally-driven approach, inflation concerns will dominate the 2022H1 narrative (at least until recession fears explode); but SPX companies have been able to weather these costs and 2021 was a year of at/near record margins. This may continue in 2022 as we see input costs decrease throughout the year, potentially more than offsetting any spikes to wage inflation.

>>> Western Digital beats by $0.18, reports revs in-line; guides MarQ EPS below

Western Digital beats by $0.18, reports revs in-line; guides MarQ EPS below consensus, revs below consensus (53.84 -0.74)
  • Reports Q2 (Dec) earnings of $2.30 per share, excluding non-recurring items, $0.18 better than the S&P Capital IQ Consensus of $2.12; revenues rose 22.6% year/year to $4.83 bln vs the $4.82 bln S&P Capital IQ Consensus.
  • Co issues downside guidance for Q3 (Mar), sees EPS of $1.50-1.80, excluding non-recurring items, vs. $1.93 S&P Capital IQ Consensus; sees Q3 revs of $4.45-4.65 bln vs. $4.73 bln S&P Capital IQ Consensus.
  • "While we continue to experience strong demand across our end markets, these challenges continue to present a headwind to near-term results. We've executed well in building a solid foundation for future profitable growth driven by innovative products within our flash and hard drive businesses. As these transitory headwinds subside, we expect to emerge in a stronger position..."