Afternoon Round-up - May 18, 2023

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

• 💃 Some market ups and downs. The dance continues!

• 📝 Inflation report looks good?

• 🎙️ The Fed signals it’s finished…

💹 Market Levels: The SPX put its 'game face on', ending up 39 points (0.94%) at 4198, while its equally weighted cousin advanced 0.81%. The Dow played 'peek-a-boo' with a modest rise of 115 points (0.34%). The R2K climbed 10.3 points (0.58%), but the Nasdaq was the 'party animal', spiking 188 points (1.51%). Over in China, the HXC Index played 'tug of war' with a 3.51% dip. 📉 Treasuries took a tumble as stocks boogied, economic data outshone expectations, the debt ceiling drama approached its finale, and Fed officials chirped hawkish tunes. The 2-year yields hopped up 11bp, and the 10-year yields rose 9bp. Now, we’re seeing a year-end Funds Rate of 4.65%, an 0.11% bump from Wednesday. The DXY put on its dancing shoes, spiking 0.6%. Brent prices dipped 1.3% while US natural gas bounced 1%. Bitcoin stumbled 2.15% to $26.7K, and gold slipped 1.25% to $1,957.

🎭 What Happened: The rally played 'chicken' on Thursday, rattled by hawkish Fed chatter, but it held its ground and the major indices built upon Wednesday's gains. Corporate America continues to outperform expectations, and the macro picture isn’t as gloomy as some perceive. Add to that, the easing monetary overhang and the debt ceiling drama heading for a resolution, and you've got a party! 🎉

🔮 Our Market Thoughts: We've tuned our Fed policy outlook to a slightly more hawkish channel after Thursday's chatter, while our views on China took a slight hit (blame it on an article rather than anything BABA did or said). The earnings landscape still screams "bullish!", with CSCO and WMT being the cheerleaders. However, there's a visible slowdown in US discretionary spending (a mix of cyclical and secular, as consumers face macro pressures, but importantly, are returning to pre-COVID behaviour). The debt ceiling drama seems headed for a happy ending, although there might be more 'headline risk'. But let's be honest, it's not the hot topic anymore. 👋 For the same trio of reasons - strong earnings, the ending Fed rate hike cycle, and favourable technical factors - we’re still betting on the bulls. 🐂 We also feel the SPX is ready to stretch its wings and break free above 4200. An unnecessary Fed rate hike on 6/14 wouldn’t be a 'market assassin' if it does happen. Sure, valuations aren’t tempting us to buy, but they aren’t turning us away either, especially considering 2024 estimates. 💰

Consumer

🍞 FLO (Flowers Foods), the bakers behind many of your beloved carb-fests, whisked up a mixed FQ1 bag. They served an EPS beat at 38c (Street's 37c), but missed their revenue target at $1.53B (vs. Street's $1.55B). Moreover, their guidance is now on a low-carb diet, reducing their rev growth to 5.8-7%. Seems like they're a little doughy this quarter! 📉

🛍️ FTCH (Farfetch), your online fashion destination, strutted with a revenue boost of $556.4MM (over Street's $519MM). However, the EBITDA tripped over the runway at -$35MM (vs. the Street's -$32MM). Future guidance hasn't changed much. Looks like they need a new tailor for their financials! 🤷‍♀️

👔 ROST (Ross Stores), the budget-friendly fashionistas, showed some flair in FQ1. EPS dressed to impress at 1.09 (vs. Street's 1.06), and they returned 1% more on comps (vs. the Street's 0.7%). Still, the Q2 guidance could use a makeover with a projected EPS of 1.07-1.14, not quite up to Street's expectation of 1.25. Is it time for a fashion overhaul, Ross? 🤔

Tech

🔬 AMAT (Applied Materials), the semiconductor wiz, dazzled in FQ2 with a revenue growth of +6% to $6.63B (whooping the Street's $6.37B), and an EPS at a shiny $2.00 (beating the Street's $1.83). They're looking positive for FQ3 too, promising revenue of $6.15B and EPS of 1.74. Memory soft? No problem - diversification is key! 📈

🌐 DXC (DXC Technology), the business tech solution giant, had a slight hiccup with a FQ4 EPS miss at $1.02 (Street's was $1.03) and a lighter revenue bag at $3.59B (vs. Street's $3.62B). The F24 guidance looks quite optimistic, though, with an EPS projection of about 3.92 and a free cash flow of ~$900MM. Plus, they're opening the treasure chest with a new $1B buyback. 💼💰

🔧 PLXS (Plexus), the high-tech hardware maven, is keeping its non-GAAP EPS and revenue guidance steady, although their GAAP EPS outlook has been hit by a one-time restructuring charge. A bump in the road, but they're still cruising! 🚧

🌯 That's a wrap for the day. 🌯

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