Jamie Dimon and Tim Cook Were Saved by the Tape: Taking Stock
(Bloomberg) -- There’s a whole mess of moving parts this morning that may make it a Herculean task to boil into a single trend: Further China stimulus measures, another Brexit vote, a twist in the government shutdown saga, @AOC likely joining a House committee to oversee Wall Street, a huge merger in the payments space (Fiserv buying First Data in $22 billion all-stock deal), more turnover at Snap (shares tumbling 11%), and another dump of earnings results in the financials space.
But the one thing that has been constant since the turn of the year, and really since Christmas, is momentum favoring the bulls. That wasn’t the case for most of the fourth quarter, but things changed on a dime in late December and haven’t looked back despite a barrage of eye-opening disappointments.
This wide-ranging display of crushing news was almost immediately gobbled up by traders in true buy-the-dip fashion, and that remains the case even with the S&P 500 finally breaching resistance at ~2,600 (after stalling just below that level for four days in a row).
From Apple, which is close to erasing all of its losses since slashing its outlook on Jan. 3, and Samsung, up ~7% since its horrid earnings print last week, to JPMorgan, which reversed intraday more than 3% on Tuesday despite the "very un-JPMorgan-like" results (first EPS miss in almost ten quarters), and the tape shrugging off an underwhelming Empire Manufacturing print for January.
For now, CEOs that have missed the mark so far this year, like Jamie Dimon and Tim Cook, should be breathing a sigh of relief given the beating that their company’s share price could have taken given the news. In other words, it could have been worse.
Bank Rally Overextended?
Despite the surprisingly more positive than negative reactions, financials as a whole remain in the hot seat.
While Citi set an encouraging tone from the get-go (shares are up >8% in two days), the results were a bit misleading after a deeper dive into the metrics suggested read-across that showed up in the statements of both JPMorgan and Wells Fargo (traders were warned!).
Even if the banks take another leg higher off the back of Bank of America’s initial reaction (shares up >3%), some may start to worry that the rally may be getting a bit overextended: The BKX is now up ~15% since Christmas (vs the S&P 500 up 11%) with both the 50-day moving average and an RSI of 70 within reach.
And for what it’s worth, two smaller-cap banks, Lancaster, Penn.-based Fulton Financial and Los Angeles-based Hanmi, both reported EPS that missed the lowest estimates on the Street.
No Ripple Effect
Unnerving preannouncements from a couple of cyclically-levered companies, like paint specialist Sherwin-Williams and tire bellwether Goodyear (down ~4% and 13%, respectively), also didn’t appear to be having any ripple effect across the rest of the market.
These types of developments would be important at any time of the year, but especially so coming off what we saw last quarter when numbers from Sherwin’s coatings peer PPG and industrial distributor Fastenal (both report tomorrow) sent a cascade of cyclicals crumbling, adding to the dour mood that helped crush the broader tape.
Sectors in Focus Today
- Banks with Bank of America ticking higher, Goldman reporting shortly and JPMorgan CEO Jamie Dimon speaking in New York midday
- Asset managers with Blackrock indicated lower as quarterly AUM dipped 5% on institutional outflows
- Airlines after United Continental popped ~6% on a beat, quieting concerns from Delta’s disappointing outlook
- Consumer discretionary, after last week’s mini-retailpocalypse, with Nordstrom tanking on soft comp sales
- Printing-related names may be weak on Electronics for Imaging, which sank close to 20% on rough preliminary results
- Online brokers, like TD Ameritrade, with Charles Schwab set to release results later this morning
- FAANGs, or more specifically Netflix, as its bounce is becoming more pronounced by the day; shares have soared >50% since Christmas, toppling all other members in the S&P 500, though the question is how much is now priced in with just two trading sessions to go before earnings (options imply a one-day move of 8.5%)
- Post-market earnings will focus squarely on the rails and aluminum names with both CSX and Alcoa reporting
Notes From the Sell Side
Morgan Stanley’s Katy Huberty downgraded her sector view on IT Hardware to in-line from attractive as "cyclical tailwinds are fading." The analysts are shifting their preference towards hardware names with a higher mix of software, and thus are downgrading Hewlett Packard Enterprise to equal-weight and NetApp to underweight while upgrading both Nutanix and Teradata to overweight.
Keybanc’s latest carrier survey indicated increasing disappointing demand for both the iPhone XR and XS/Max. Inventories have spiked significant, "which indicates this could be one of the most disappointing phone cycles since the 6s," and now sees increasing risk to forward estimates for Broadcom, Cirrus Logic, Qorvo, Skyworks, and Synaptics.
Tick-by-Tick Guide to Today’s Actionable Events
- Today -- FDA meeting to discuss AMGN/UCB’s romosozumab
- Today -- IPO lockup expiry: REPL
- 7:15am -- F keynote at Deutsche Bank auto conference
- 7:30am -- GS earnings (Top Live available)
- 8:00am -- BAC, BK earnings call
- 8:30am -- Retail Sales, Import Price Index
- 8:30am -- BLK earnings call
- 8:30am -- CSCO CEO Chuck Robbins on Bloomberg TV
- 8:45am -- SCHW earnings
- 8:55am -- BWA at Wolfe Research global auto conference
- 9:00am -- USB earnings call
- 9:00am -- RHT shareholder vote on IBM deal
- 9:05am -- ALV at Deutsche Bank auto conference
- 9:30am -- GS earnings call
- 9:40am -- TEN at Wolfe Research global auto conference
- 10:00am -- NAHB Housing Market Index, Business Inventories
- 10:00am -- PNC earnings call
- 10:25am -- ALV at Wolfe Research global auto conference
- 10:30am -- DoE oil inventories (Top Live available)
- 10:30am -- UAL earnings call
- 10:35am -- AXL at Deutsche Bank auto conference
- 10:45am -- NEM CEO Gary Goldberg on Bloomberg TV
- 11:00am -- CMA earnings call
- 11:10am -- NIO, DLPH at Wolfe Research global auto conference
- 11:55am -- GT at Wolfe Research global auto conference
- 12:00pm -- JPM CEO Jamie Dimon speaks at ECNY (Top Live available)
- 12:15pm -- GM at Deutsche Bank auto conference
- 1:10pm -- MGA, DLPH at Deutsche Bank auto conference
- 1:35pm -- CTB at Wolfe Research global auto conference
- 2:00pm -- Fed’s Beige Book
- 2:00pm -- UK Parliament votes on Brexit deal (Top Live available)
- 2:00pm -- UNFI investor day
- 3:05pm -- APTV at Wolfe Research global auto conference
- 4:00pm -- TIC Flows
- 4:03pm -- CSX earnings
- 4:05pm -- KMI earnings
- 4:10pm -- AA earnings
- 4:15pm -- PLXS earnings
- 4:30pm -- CSX earnings call
- 5:00pm -- AA earnings call
- 5:00pm -- Quibi CEO Meg Whitman and founder Jeff Katzenberg on Bloomberg TV
- 5:30pm -- QCOM’s ousted chairman Paul Jacobs on Bloomberg TV
- 6:30pm -- Fed’s Kashkari speaks on panel about financial crisis anniversary
- 8:00pm -- FUL earnings (roughly)
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