Markets

Daily Markets: Three Fed Speakers and Nvidia Earnings on Deck

Close up of the Wall Street sign with the American flag in the background
Credit: Carlo Allegri - Reuters / stock.adobe.com

Today’s Big Picture

Asia-Pacific equity markets finished the day lower, except for China’s Shanghai Composite which gained 0.97% and Hong Kong’s Hang Seng which rose 1.57% as regulators froze trading accounts of a large ($8.3 billion) hedge fund that had been aggressively selling at the start of the week. South Korea’s KOSPI fell 0.17%, Japan’s Nikkei declined 0.26%, Taiwan’s TAIEX dropped 0.41%, India’s SENSEX shed 0.59%, and Australia’s ASX All Ordinaries closed 0.65% lower in a mixed day that saw losses in Electronic Technology names tip that scale. European markets are mostly higher in midday trading and U.S. equity futures indicate a weak start to the trading day.

Today’s market open is being influenced by several disappointments relative to consensus earnings expectations last night, including Palo Alto Networks (PANW) (more below), which are weighing on equity futures. More companies are reporting this morning, but the market’s attention will be more on what three Fed speakers have to say although we expect them to stick to the Fed’s current playbook. This afternoon brings the Fed’s January meeting minutes at 2 PM ET, but our thinking is the comments will be only modestly constructive given the recent spate of figures showing inflation remains far stickier than many thought it would. Still, comments on what economic conditions could spur the Fed to start cutting interest rates could be helpful, but here too, so far, the U.S. economy continues to defy expectations even with Fed policy in restrictive territory.

After today’s market close, following the parabolic move in its shares, the market will be laser-focused on quarterly results and guidance from Nvidia (NVDA). Consensus expectations have the company guiding 2024 EPS to $22.07 up from $12.42 in 2023 and $3.34 in 2022. Given its weighting in both the S&P 500 and the Nasdaq Composite, 4.24% and 5.03%, respectively, the market reaction to Nvidia’s result and guidance will undoubtedly trigger a healthy amount of aftermarket activity and set the tone for tomorrow’s trading. For the company that has been able to pivot from strength (video gaming) to strength (cryptocurrency mining) over the past decade, today’s earnings will serve as a barometer between AI hopes and reality.

Data Download

International Economy

China’s housing authority announced that 162 projects in 57 cities have received bank financing of ¥29.43 billion ($4.09 billion) under a "white list" mechanism launched last month. According to data from the Bank of China, China Construction Bank, the Agricultural Bank of China, and the Postal Savings Bank of China, development loans of ¥123.6 billion ($17.20 billion) have been approved for "white list" projects.

At 10 AM ET, the Flash February reading for Consumer Confidence in the Eurozone will be published. The consensus calls for a modest improvement to -15.5 from January’s -16.1.

Domestic Economy

Besides the latest Fed meeting minutes this afternoon, we also have the usual Wednesday “weeklies” which are the MBA Mortgage Applications Index and crude oil inventory data from the Energy Information Administration.

We also have a trio of Fed speakers today but following last week’s data, we should not expect any meaningful deviation from the Fed’s current playbook. Those speakers are Atlanta Fed President Raphael Bostic (8 AM ET), Richmond Fed President Tom Barkin (9:10 AM ET), and Fed Governor Michelle Bowman (1 PM ET).

Markets

Technology (-1.02%) came under some pressure from downward moves in Applied Materials (AMAT), Advanced Micro Devices (AMD), and Nvidia ahead of today’s earnings release. Consumer Discretionary fell 0.94% as Amazon (AMZN) and Tesla (TSLA) combined to contribute to just over 88% of the sector’s result. Consumer Staples was the only sector to post a gain as aside from two names that ended the day flat, only three of the 37 holdings in the Consumer Staples Select Sector SPDR Fund (XLP) ended the day lower.

Broad indexes ended the day lower, following a now familiar pattern of the Dow declining the least, down 0.17% and the Russell 2000 falling the most, off 1.41% while the S&P 500 shed 0.60% and the Nasdaq Composite closing 0.92% lower. Here’s how the major market indicators stack up year-to-date:

  • Dow Jones Industrial Average: 2.32%
  • S&P 500: 4.31%
  • Nasdaq Composite: 4.13%
  • Russell 2000: -1.13%
  • Bitcoin (BTC-USD): 25.56%
  • Ether (ETH-USD): 31.30%

Stocks to Watch

Analog Devices (ADI), Bausch + Lomb (BLCO), Garmin (GRMN), Gildan Activewear (GIL), Shutterstock (SSTK), Travel + Leisure (TNL), and Wingstop (WING) are expected to release quarterly earnings before equities begin trading later this morning.

Pre-market breadth is back to a more normal level today as 242 names in the S&P 500 have traded hands so far this morning with 86 gainers and 156 decliners. Names poised to open 5% lower this morning include International Flavors and Fragrances (IFF) (more below), but it is Palo Alto Networks that is putting in the kind of move we haven’t seen since the 2001 dotcom bubble and is on track to open over 23% lower (more below). The only standout in names being bid up this morning is Zions Bancorporation (ZION) after it was reported that Deutsche Bank AG (DB) had increased its holdings in Zions, following a trend of institutions adding shares.

Amazon will join the Dow Jones Industrial Average (DJIA) before the start of trading on Feb. 26, replacing Walgreens Boots Alliance (WBA) in the first change in the 30-stock index since 2020.

Shares of Palo Alto Networks fell in aftermarket trading last night as downside guidance overshadowed the company’s January quarter top and bottom line beat. For 2024, the company sees EPS of $5.45-$5.55 on revenue between $7.95-$8.00 billion compared to the consensus forecast of $5.52 on $8.19 billion in revenue. Full-year bookings are targeted between $10.10-10.20 billion, down from Palo Alto’s prior guidance of $10.70-$10.80 billion. On the company’s earnings call, management shared it expects weakness in its U.S. Federal government business to continue in the coming quarters but “the threat landscape continues to challenge our customers with increasing scale and sophistication of attacks.”

Mixed quarterly results and disappointing guidance also walloped shares of Teladoc Health (TDOC). For its December quarter, the company reported EPS of -0.17 compared to the consensus forecast of -0.22 but revenue for the period came in at $660.5 million, missing the $670.79 million market forecast. For the current quarter, Teladoc calls for revenue between $630-$645 million compared to the $672.95 million consensus. Turning to full-year 2024, the company’s guidance also came up short of the $2.77 billion consensus with revenue in the range of $2.635- $2.735 billion. Additionally, Teladoc expects approximately $11M in pre-tax restructuring charges in Q1, primarily related to employee transition and other costs.

Shares of SolarEdge (SEDG) were also under pressure following the company sharing it anticipates further sales declines, projecting its current quarter will range between $175-$215 million. That gap is significantly lower than the consensus forecast of $373 million.

Like the companies just mentioned, International Flavors & Fragrances are getting hit in pre-market trading. It too reported a mixed December quarter and issued quarterly guidance that was below Wall Street expectations, but it also slashed its quarterly dividend by ~50% to $0.40 per share from $0.81. Per the company, right-sizing the dividend to enable faster deleveraging of the balance sheet and provide improved financial flexibility. However, dividend cuts, especially ones of that magnitude, are never well received by investors.

In a bit of good news, homebuilder Toll Brothers (TOL) bested January quarter forecasts led by the 10% YoY increase for its home sales revenue. That gain reflected the delivery of 1,927 homes at an average price of approximately $1.0 million, generating home sales revenues of $1.93 billion, up 6% YoY. Backlog value exited the quarter was $7.08 billion, down 18% YoY with 6,693 homes in backlog, down 13%. Toll expects to deliver 2,400-2,500 homes in the current quarter and targets full-year 2024 deliveries of 10,000-10,500 units.

Uber (UBER) is partnering with Mitsubishi Electric and robotics firm Cartken to deliver food using autonomous robots in parts of Tokyo, Japan, starting by the end of next month.

IPOs

Readers who want to dig deeper into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Bally’s Corp. (BALY), Camping World (CWH), Cheesecake Factory (CAKE), Digital Ocean (DOCN), Dutch Bros (BROS), Etsy (ETSY), Jack in the Box (JACK), Lucid Group (LCID), Mosaic (MOS), Nvidia (NVDA), Physicians Realty Trust (DOC), Rivian Automotive (RIVN), and Sunrun (RUN) are expected to report quarterly results after equities stop trading today. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Thursday, February 22

  • Japan: Jibun Bank Flash Manufacturing & Services PMIs - February
  • Eurozone: HCOB Flash Manufacturing & Services PMIs - February
  • US: S&P Global Flash Manufacturing & Services PMIs – February
  • Eurozone: Inflation Rate (Final) - January
  • US: Weekly Initial & Continuing Jobless Claims
  • US: S&P Global Flash Manufacturing & Services PMIs - February
  • US: Existing Home Sales – January
  • US: Weekly EIA Natural Gas Inventories

Monday, Thursday, February 26

  • US: New Home Sales - January

Tuesday, February 27

  • Japan: Inflation Rate – January
  • Germany: GfK Consumer Confidence – March
  • US: Durable Orders – January
  • US: S&P Case Shiller Home Price Index – February
  • US: Consumer Confidence – February

Wednesday, February 28

  • Eurozone: Economic Sentiment & Consumer Confidence - February
  • US: Weekly MBA Mortgage Applications
  • US: GDP (Second Estimate) – 4Q 2023
  • US: Weekly EIA Crude Oil Inventories

Thursday, February 29

  • Japan: Retail Sales, Housing Starts – January
  • Germany: Retail Sales, Inflation Rate – January
  • UK: Bank of England Consumer Credit - January
  • US: Weekly Initial & Continuing Jobless Claims
  • US: Personal Income & Spending, PCE Price Index – January
  • US: Pending Home Sales – January
  • US: Weekly EIA Natural Gas Inventories

Friday, Mach 1

  • Japan: Jibun Bank Manufacturing PMI (Final) - January
  • China NBS Manufacturing & Non-Manufacturing PMI - February
  • China: Caixin Manufacturing PMI – January
  • Eurozone: HCOB Manufacturing PMI (Final) – February
  • UK: S&P Global Manufacturing PMI (Final) - February
  • US: S&P Global Manufacturing PMI (Final) – February
  • US: ISM Manufacturing Index – February
  • US: Construction Spending – January
  • US: University of Michigan Final Consumer Sentiment Index – February

Thought for the Day

“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.” ~ Charlie Munger

Disclosures

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Chris Versace

Christopher (Chris) Versace is the Chief Investment Officer and thematic strategist at Tematica Research. The proprietary thematic investing framework that he’s developed over the last decade leverages changing economic, demographic, psychographic and technology landscapes to identify pronounced, multi-year structural changes. This framework sits at the heart of Tematica’s investment themes and indices and builds on his more than 25 years analyzing industries, companies and their business models as well as financial statements. Versace is the co-author of “Cocktail Investing: Distilling Everyday Noise into Clear Investing Signals” and hosts the Thematic Signals podcast. He is also an Assistant Professor at NJCU School of Business, where he developed the NJCU New Jersey 50 Index.

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Mark Abssy

Mark Abssy is Head of Indexing at Tematica Research focused on index and Exchange Traded Product development. He has product development and management experience with Indexes, ETFs, ETNs, Mutual Funds and listed derivatives. In his 25 year career he has held product development and management positions at NYSE|ICE, ISE ETF Ventures, Morgan Stanley, Fidelity Investments and Loomis Sayles. He received a BSBA from Northeastern University with a focus in Finance and International Business.

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