(Bloomberg) -- Stock futures are up small, the 10-year is back down to ~2.95%, the dollar is slightly lower, and Mnuchin and company have touched down in China (no incremental news is out just yet) -- while Elon Musk’s relationship with the sell-side is hanging by a thread.
Eurozone CPI came in a bit weaker than expected (0.7% vs est. 0.9%), and we’ll get a dump of economic data throughout the morning (initial jobless claims, trade balance, Markit PMIs, durable goods) with all eyes on the jobs and wage data tomorrow.
We also received Class 8 truck orders last night from ACT Research (important for Cummins, Paccar, Navistar) that saw the string of 40,000+ orders end after three straight months with 34,800 in April.
Ugly Earnings Reactions
We’ve got a bloodbath on our hands in regards to earnings reactions since Wednesday’s close, which has been the story for much of this week (but for some reason last night seemed worse than any other post-market session):
- Tesla: Shares slid more than 5% on a very unorthodox conference call -- "the most unusual call I have experienced in 20 years on the sell-side," Morgan Stanley’s Adam Jonas said (once an uber-bull on the stock), adding that "many investors we spoke with post the call agree"
- Tech: Square -4.4%, Spotify -6.9%, Fitbit -5.5%, FireEye -4.3% (might pressure cybersecurity stocks), Apple supplier Cirrus Logic -7.3%, NXP Semi -2.2%, 3D Systems -2.4%,
- Insurers: AIG -5.5% (after a rough tape for insurers yesterday after Unum and Allstate)
- Industrials/Materials/Energy: DWDP ticking lower, XPO -1.7%, Apache -1.4%
- Consumer: Adidas fell as much as 3.5% in Frankfurt
- Health Care: Cerner -8%, Hologic -6.2%
The far fewer stocks in the green post-results are Kraft Heinz +3.9% (after a rough day for packaged foods thanks to Mondelez), insurer MetLife +2%, Tableau Software +6.5%, lithium-exposed FMC +4.2% (which may lift Albemarle and SQM), managed care name Cigna indicated up, and biotech Exelixis +6.2%.
Kellogg reports later this morning, an important name given the persistent weakness in staples and the recent short attack on the name. Earnings tonight include the speculation-laden CBS, floundering GoPro, Spotify competitor Pandora, Fortnite-impacted Activision, Danny Meyer’s Shake Shack and recent Einhorn short Assured Guaranty.
About Yesterday’s Sell-Off
The relief rally in Apple (up almost 9% this week), a rip in Mastercard to a record, and a relatively painless FOMC statement were offset by several concerns which caused the market to go out near lows for the second time this week. And this time it was on the highest volume in a month!
- Miserable reactions to earnings, especially in the consumer space (EL -8.5%, TAP -15%, MDLZ -2.8%, YUM -7.4%, YUMC -13%) in addition to the insurers (UNM -17% and ALL -4.2%), as well as biotech GILD -7.8% and transport name CHRW -8.6%
- The endless climb in the dollar, up 11 of the last 13 sessions, with the DXY hitting its highest level of the year
- Anxiety over some whippy movement in 10-year yields, which came extremely close to hitting 3% at one point
- Jitters over China trade talks ahead of Mnuchin’s trip to China, as all signs point to both sides tempering their expectations for any sort of massive breakthrough; a WSJ report that said the White House is considering curbs on Chinese telecom sales didn’t help sentiment
- Geopolitical tensions flaring in the Middle East, with headlines like "Israel Sees Iran War Looming as Mideast Tinderbox Awaits a Spark" and "Iran Expects U.S. to Leave Nuclear Deal by May 12: IRNA" hitting the wires yesterday
Feeling Slighted, and Other Notes From the Sell Side
Tesla’s conference call was the showstopper last night. Here are some responses from the analysts who got burned by Musk:
- Bernstein’s Toni Sacconaghi, who was abruptly shot down (in favor of a back-and-forth with a retail investor on YouTube) for "boring bonehead questions" that are "not cool," said that beneath the "bizarre theatrics," the quarter was in-line on most metrics while the Model 3 ramp feels like a work in progress, and thus delivery numbers were slashed
- RBC’s Joe Spak, who also felt the wrath of Musk ("These questions are so dry. They’re killing me.") cut his price target to $280 from $305, adding that the odd call lacked answers to questions on investors’ minds and overshadowed earnings: "Investor feedback is that the performance shook confidence, which we’d argue is an important piece of the Tesla story"
- Baird’s Ben Kallo, who urged the company to give more Model 3 updates to help the stock price, was met with a "I think that if people are concerned about volatility, they should definitely not buy our stock"; in a note, he said Musk’s refusal to answer several questions on the call may create pressure on the stock, and recommends investors "ignore the noise and focus on metrics"
Elsewhere, Nvidia is trading up nearly 2% on an upgrade from Barclays related to its potential in the AI market; Goldman also out on buy-rated NVDA, expecting a 1Q beat, though a disappointment on the 2Q guidance... Barclays also upgraded Square to a buy after post-earnings weakness... and BofAML cuts its ratings on Caterpillar and Cummins and moves Deere to a buy.
Tick-by Tick Guide to Today’s Actionable Events
- Today -- MNK FDA Panel to discuss stannsoporfin
- 7:00am -- APO, APRN, CHD, TPX, SEE, TEVA, CAH earnings
- 7:30am -- ICE earnings
- 8:00am -- K, PF, VMC earnings; DWDP, Fresenius (may impact AKRX) earnings call
- 8:15am -- Kerrisdale’s Sahm Adrangi at Tilson’s Short Selling conference
- 8:30am -- Trade Balance, Initial Jobless Claims
- 8:30am -- NYT earnings
- 9:00am -- SFM earnings
- 9:00am -- Vitalogy Capital’s Jonathan Tunick at Tilson’s Short Selling conference
- 9:15am -- Off Wall Street’s Mark Roberts at Tilson’s Short Selling conference
- 9:30am -- Greenlight’s David Einhorn at Tilson’s Short Selling conference
- 9:45am -- Markit Services PMI
- 10:00am -- Durable Goods, Factory Orders, ISM Non-Manufacturing
- 10:00am -- VAC earnings call (may impact ILG)
- 10:30am -- EIA natgas storage
- 11:00am -- Lakewood’s Anthony Bozza at Tilson’s Short Selling conference
- 11:30am -- Muddy Waters’ Carson Block at Tilson’s Short Selling conference
- 12:00pm -- Spruce Point’s Ben Axler at Tilson’s Short Selling conference
- 12:15pm -- Glaucus’ Soren Aandahl at Tilson’s Short Selling conference
- 4:00pm -- AGO earnings
- 4:01pm -- P, MELI (roughly) earnings
- 4:05pm -- CBS, GPRO, ATVI, ANET, ALRM, ZAYO, SHAK, WING, CENX earnings
- 4:10pm -- ACIA (roughly), OLED, MSI, HLF earnings
- 4:15pm -- FTNT, SWKS, FLR, WTW, CC earnings
- 4:20pm -- LYV (roughly)
- 4:30pm -- STMP earnings; CBS earnings call
- 5:00pm -- GPRO earnings call
- 5:01pm -- POST earnings
- 9:45pm -- China Services PMI
- Tonight -- Carbon Black (CBLK) and Construction Partners (ROAD) expected to price IPO
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