Today’s Big Picture
Asia-Pacific equity markets continue to have a quiet week because many countries are celebrating holidays. In addition to China and Taiwan celebrating the Lunar New Year, Australia Day is today, and India is marking Republic Day, prompting closures in those markets as well. Japan’s Nikkei was down slightly, losing 0.12% while South Korea’s KOSPI gained 1.65% and Hong Kong’s Seng rose 2.37% on a broad rally led by Electronic Technology names. By mid-day trading, European equity indices are up across the board, and U.S. futures point to a positive market open.
Before the market open, another rush of quarterly earnings reports will be released, and market watchers will also get the first look at U.S. GDP for 4Q 2022 at 8:30 PM ET. The headline figure, which arguably at this point is somewhat rear view facing, is expected to slow sequentially but the report also brings the full quarter view for one of the Fed’s more closely watched inflation metrics – the Personal Consumption Expenditure (PCE) price index. Following declines in the Consumer Price Index and the Producer Price Index during 4Q 2022, odds are that the headline and core PCE data for the quarter will soften compared to those for 3Q 2022. What the market will focus on, however, is the degree of that sequential decline and what it potentially means for what the Fed could say exiting next week’s monetary policy meeting.
Data Download
Domestic Economy
In addition to the usual weekly Thursday reports that include Initial and Continuing Jobless Claims and Natural Gas Inventories from the Energy Information Administration, at 8:30 AM ET investors will get the first look at 4Q 202 GDP. The consensus view has it slowing to +2.6% YoY from 3.2% in 3Q 2022. Also, at 8:30 AM, the December Durable Orders data will be published and then at 10 AM ET New Home Sales data for December will be released.
Markets
Yesterday saw both the Dow and the S&P 500 essentially “Unch’d,” or unchanged, as the street likes to say, with results of 0.03% and -0.02%, respectively. The Nasdaq Composite declined 0.18% and the Russell 2000 advanced 0.25% on the day. Sectors generally had similar small moves except for Utilities (-1.35%) and Financials (0.78%). Utilities fell largely on the 8.71% decline in NextEra Energy (NEE) after the company’s Earnings Before Interest (Expense), Taxes, Depreciation, and Amortization (EBITDA) miss. From an attribution perspective, the move accounted for just under 110% of yesterday’s move in Utilities.
Here’s how the major market indicators stack up year-to-date:
- Dow Jones Industrial Average: 1.80%
- S&P 500: 4.60%
- Nasdaq Composite: 8.09%
- Russell 2000: 7.33%
- Bitcoin (BTC-USD): 39.36%
- Ether (ETH-USD): 34.74%
Stocks to Watch
Before trading kicks off for U.S.-listed equities, Alaska Air (ALK), American Airlines (AAL), Comcast (CMCSA), Mastercard (MA), McCormick & Co. (MKC), Nokia (NOK), Northrop Grumman (NOC), Nucor (NUE), Oshkosh (OSK), and Sherwin Williams (SHW) will be among the companies reporting their quarterly results.
Results at Tesla (TSLA) beat market expectations for both December quarter revenue and EPS, shared that January has seen its strongest orders in history, and targets 1.8 million cars for 2023 vs. the 1.3 million delivered in 2022. For the December quarter, Tesla produced 439,701 vehicles, up 44%, and delivered 405,278, up 31% with each vehicle factory producing a record number of vehicles.
Layoffs and weaker-than-expected guidance weighed on shares of semiconductor capital equipment company Lam Research (LRCX) despite delivering top and bottom-line beats for its December quarter. For the current quarter, Lam sees EPS of $5.75-$7.25 on revenue of $3.5-$4.1 billion vs. the respective consensus forecasts of $7.73 in EPS and $4.31 billion in revenue. The company explained its ~7% workforce reduction as follows: “Given the decline in wafer fabrication equipment spending expected in calendar year 2023, we are taking proactive steps to lower our cost structure and drive efficiencies across our global footprint while preserving critical R&D.”
IBM (IBM) reported a mixed December quarter with EPS a tad below expectations while flat revenue vs. the year-ago quarter modestly beat the consensus forecast. By revenue category, the company’s software revenue rose 3% YoY, consulting revenue was up 0.5%, and infrastructure revenue grew 2%. In terms of the coming year, IBM sees constant currency revenue growth consistent with its mid-single digit model and ~$10.5 billion in consolidated free cash flow, up more than $1 billion year to year. The company also announced it would shed 3,900 jobs, roughly 1.5% of its workforce.
Early this morning, SAP (SAP) shared it will lay off 2.5% of its global workforce of 112,000, or around 2,800 employees.
Bottom-line results for the December quarter at Steel Dynamics (STLD) crushed expectations, coming in at $4.37 per share vs. the $3.64 consensus. Revenue for the quarter grew 9.1% YoY to $4.83 billion also topping the consensus forecast. Per the company, “Customer order entry activity continues to be healthy across our businesses…Steel pricing has firmed, and our order activity and backlogs remain solid. We believe North American steel consumption will increase in 2023.”
Despite missing consensus EPS forecasts for its December quarter, the shares of United Rentals (URI) soared in after-market trading last night. While some may chalk this up to the 18.7% YoY revenue growth delivered by the company as well as its consensus topping revenue guidance for the coming year – $13.70-$14.20 billion vs. the $13.56 billion consensus – odds are United announcing an initial quarterly dividend of $1.48 per share had something to do with it. The company also shared that it plans to restart its share repurchase program, with the intent to buy back $1 billion of stock in 2023.
Shopify (SHOP) shares soared yesterday after the company published a blog post sharing that for the first time in over a decade, prices for its basic, mid-range, and advanced services will be increased. Prices for each plan are slated to increase by about 33% and are expected to begin in April for existing customers.
Dell (DELL) acquired Israeli startup Cloudify for around $100 million to expand its cloud services business.
Dutch and U.S. officials are expected to meet in Washington on Friday to discuss potential new controls on exporting semiconductor manufacturing gear to China. Reports suggest a possible deal could be struck by early next week.
IPOs
The IPO calendar could be a bit warmer than in recent weeks with potential pricings from Genelux (GNLX), Elate Group (ELGP), MorningStar Partners (TXO), and Syla Technologies (SYT). Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.
After Today’s Market Close
Fair Isaac (FICO), Intel (INTC), KLA Corp. (KLAC), and Visa (V) are among the companies slated to report their latest quarterly results after equities stop trading today. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar.
On the Horizon
Friday, January 27
- US: Personal Income & Spending, PCE Price Index – December
- US: Pending Home Sales – December
- US: University of Michigan Consumer Sentiment Index (Final) – January
Thought for the Day
“You don’t have to be great to start, but you have to start to be great.” – Zig Ziglar
Disclosures
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
