Afternoon Round-up - May 10, 2023

🔮 Welcome back to Finsights, our fellow financial wizard. Let’s get you up to speed on the market with a flick of your finger! 🪄

• 📉 Debt ceiling limbo, Airbnb's numbers nosedive, and Russia threatens our bread basket. 🍞

• 📈CPI plays peekaboo, debt talks inch forward, and earnings surprise. Biden-Xi on the horizon? 🎉

• 💰 Disney releases earnings

Market Moves: Stocks were in the green on Wednesday, with both the S&P 500 and Russell 2000 Index getting a >50bp lift and the Nasdaq enjoying a >1% spike. However, the scene behind the curtain was a little different, with a stark contrast between the cap-weighted and equal-weighted versions of the S&P 500. While the former benefited from a tech rally, the latter was kept in check by cyclical groups selling off (banks, we're looking at you). Treasuries were the star performers of the day, courtesy of the CPI release and a solid 10-year auction. 2-year yields took an 11bp tumble while 10-year yields fell by 7bp. The market is now betting on a year-end Federal Funds Rate of 4.29%, marking a 12bp decline from Tuesday. On the currency and commodities front, the Dollar Index slipped 15bp, Brent Crude took a ~110bp hit, gold dipped ~25bp, and Bitcoin managed to stay afloat. 💹💰⛽🥇

🌪️ The Wednesday Whirl: Markets seemed a tad confused on Wednesday, initially cheering on the CPI, then shifting focus to the debt ceiling, only to ultimately return to an age-old strategy in uncertain times: piling into tech stocks (especially those unveiling AI-related products). 😵 The surge in tech concealed some underwhelming price action in the background, with key cyclical groups such as capital goods, energy, and financials experiencing selling pressure. As far as the overall narrative goes, it wasn't that the CPI was unappreciated (quite the contrary, especially given the whispers of a hot number), but rather that it wasn't considered strong enough to fully counterbalance the other issues looming over market sentiment, including the unresolved debt ceiling standoff. Even though a breach is widely expected to be dodged, markets are responding to the escalating threat of a crisis – US 5-year CDS is now among the highest globally at 76bp (according to the "WBMV" page on Bloomberg), and T-bills set to mature around the "X-date" have seen their yields skyrocket. On the conviction front, there's still a shortage.

🐻 Bear Buzz: Things aren't looking too rosy for the pessimists. The Federal Reserve seems to be more than halfway through its tightening cycle, with the Bank of Japan yet to even kickstart its own. The latest survey from Bank of America indicates a further dip in consumer spending in April, casting a shadow over the end-of-April retail earnings season (which kicks off next week with big names like Home Depot, Target, and Walmart). Airbnb's disappointing guidance, coupled with the airfare segment of the CPI report, raises concerns for the thriving travel and leisure sector. The ongoing turbulence in regional bank stocks is a ticking time bomb that could have widespread implications. 🏦 The deadlock in Washington over the debt ceiling is far from being broken, with the "X date" looming large. The bleak government budget numbers for April underscore the urgent need for a debt ceiling resolution. 💲US equity valuations are far from enticing, especially when the S&P 500 hovers at 4200 or above. Corporate buybacks, a significant market support, may be on the decline (as per a Bloomberg article). If Russia decides to back out of the Ukraine grain export deal, inflation could feel the heat in the coming months. The S&P 500 is on shaky ground, with tech shouldering the bulk of the burden as investors snub other sectors - this imbalance is unsustainable. 📉🌾

🐂 Bull Banter: On a brighter note, not only did the headline CPI underperform the Street's forecast on a YoY basis (contrary to expectations of an overshoot), but core services inflation also cooled off significantly, hinting at a 🕊️ dovish turn in the Fed's primary area of concern. The New York Fed's "Underlying Inflation Gauge" for April indicated even more pronounced disinflation compared to the headline CPI. Wednesday's 10-year auction saw strong demand. There's a glimmer of hope in the debt ceiling saga, with small steps towards resolution taken on Tuesday night and more talks scheduled for the coming days (including a leadership meet-up on Friday). Corporate America continues to exceed earnings expectations, with even the so-called "disappointments" (like Twilio) raking in more than anticipated. Furthermore, President Biden mentioned that a call with President Xi is "in the works", a positive sign hinting at a potential stabilization in US-China tensions. 📈💵

Consumer

🍔 BYND (Beyond Meat), the plant-based protein pioneers, reported less severe losses than expected with EBITDA at a negative $45.8M and revenues reaching $92.2M. Despite the sour note, their financials are showing signs of improvement, so Beyond Meat is not out of the race yet! 🌿

🍰 CAKE (Cheesecake Factory), the masters of dessert decadence, reported revenues of $866.1M, slightly missing the street's $870M expectation. However, their earnings per share of $0.61 sweetened the deal by outperforming the expected $0.59. A little less cake, but still pretty sweet! 🍬

🍽️ COOK (Traeger), the grill gurus, reported Q1 results that were on par with expectations, maintaining their 2023 guidance. It might seem bland now, but they're keeping the fire burning! 🔥

Financials

💰 COOP (Mr Cooper), the mortgage moguls, are expanding their empire by acquiring all outstanding shares of Home Point for about $324M in cash. They're not just securing homes, they're securing solid financial assets too! 🏠

💹 HOOD (Robinhood), the disruptors of the brokerage world, reported revenue of $441M and EBITDA of $115M, both figures besting street expectations. They're also ready to break new ground with their 24 Hour Market, turning trading into a round-the-clock opportunity. Robinhood is not robbing from the rich, but enriching their investors! ⏰

Industrials

🏗️ CR (Crane), the industrial infrastructure icons, reported earnings per share of $1.25, flying high above the street's $0.87 estimate. They're not just lifting heavy loads, they're lifting their financial performance! 📈

⚙️ CXT (Crane NXT), the industrial innovators, reported an adjusted earnings per share of $0.97. They're not just operating machinery, they're operating on a whole new financial level! 🚀

Tech

🚨 ALRM (Alarm.com), the tech-savvy company that keeps your crib secure, reported Q1 revenue of $209.7MM, beating the Street's estimate by a cool $2.1MM. Alarm.com is saying "catch us if you can" as they raise their full-year guidance. 📈

🎮 APP (AppLovin), the mobile gaming giant that keeps us hooked on our phones, knocked it out of the park with Q1 revenue of $715.4MM, a sweet $20.4MM more than what the Street predicted. They’re expecting to level up even more next quarter. 🕹️

🏰 DIS (Disney), the Mickey Mouse house that taught us dreams do come true, reported FQ2 revenue of $21.815B, just about aligning with the Street's expectations. The magic continues as their free cash flow conjured up a surprising $1.987B, defying Street's expectations of ~$1.4B. Bibbidi-Bobbidi-Boo! 💫

💻 DV (DoubleVerify), the digital media sheriff ensuring our ads aren't lost in the Wild West of the internet, pulled a rabbit out of its hat with Q1 revenue of $122.6MM, beating the Street's estimate by a solid $4.6MM. Looks like they're set to verify even more gains as they raise their full-year guidance. 👀

🔌 FLEX (Flex), the electronics manufacturing maestro that's probably had a hand in making your smartphone, reported FQ4 revenue of $7.47B, flexing on the Street's estimate by a significant $250MM. They're geared up to continue electrifying the market in the next fiscal year. ⚡

🎶 SONO (Sonos), the sound of music in many of our homes, unfortunately hit a sour note with an EBITDA of neg. $10.6MM, a jarring $26.1MM below the Street's forecast. They've decided to remix their expectations for the second half of Fiscal 2023, hoping to tune back into profitability. 🎧

📺 TTD (Trade Desk), the digital ad exchange platform that's probably influencing what you're binging next, aired a Q1 revenue of $383MM, outperforming the Street's script by $19MM. With a strong Q2 guidance, they're set to keep our eyeballs glued to the screen. 🎬

🎯 U (Unity), the game engine powering your quarantine gaming obsession, scored a critical hit with Q1 revenue of $500MM, outpacing the Street's bet by $22MM. They're leveling up their full-year guidance, ready to spawn even more success in the gaming world. 🕹️

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Fin-specto Revelio!