Welcome to your new week.
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PLEASE NOTE β we needed to change the date to Tuesday, April 2nd at 4pm ET. You should receive confirmation of this to your email soon.
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Key Earnings Announcements:
Carnival Cruise Lines, GameStop, McCormicks, RH, Rumble and Walgreens.
Monday (3/25): Bitcoin Depot, Rekor Systems, Syra Health
Tuesday (3/26): Bragg, Direct Digital Holdings, Gamestop, Luna, McCormick, Ouster, Progress
Wednesday (3/27): Altimmune, Braze, Carnival Cruise Line, Cintas, Jeffries, Lands End, Paychex, RH, Rumble
Thursday (3/28): Azul, Consolidated Water Co, Hut 8, Oxford Industries, Walgreens Boots Alliance
Friday (3/29): N/A
What Weβre Watching:
RH (RH)
If you didnβt know β Restoration Hardware officially changed its title to βRH.β So when you see us no longer saying the full name, thatβs why!
The high-end home furnishing retailer RH is slated to release its fiscal Q4 earnings on March 27.Β With higher interest rates and a general slowdown in housing-related spending β investors havenβt known what to do with RH. The stock is up +13.66% over the last month, but just +1.97% YTD.
RHβs most recent report saw a βdouble missβ on revenue and earnings. Company leadership blamed the disappointing quarter on a reliance to product discounts when managing excess inventory.
Analysts are hoping to hear about improved inventory management and international expansion plans in this weekβs report.
Analysts expect $1.76 GAAP EPS on Revenue of $777.77 billion.
You can explore the most recent RH investor release here and here.
Walgreens (WBA)
Itβs been a brutal stretch for Walgreens. Whether itβs dealing with widespread crime, being replaced by Amazon in the Dow Jones Industrial Average, or anything in betweenβ¦ the stock has taken a beating.
During WBAβs last earnings call β leadership slashed its dividend from 48 cents per share to 25 cents per share βto strengthen its long-term balance sheet and cash position.β This marked the companyβs first dividend cut in nearly five decades.
Despite the bad news surrounding Walgreens β its earnings beat last quarter broke a streak of two straight missed earnings estimates (something that hadnβt happened in nearly a decade). Walgreens bulls are begging for another beat.
Investor Events / Global Affairs:
U.S. chipmakers face a blockade in China, rate cut debates continue, and Adobe hosts one of its biggest events of the year.
Intel (INTC) & Advanced Micro Devices (AMD) Assessing Chinese Block
China is phasing out U.S. microprocessors from Intel and AMD in government computers. This follows suit with new guidelines aimed at bolstering domestic technology that is βsafe and reliable.β
Last year β China accounted for 27% of Intel's $54 billion in sales and 15% of AMD's $23 billion.Β
Amid Chinaβs escalating tensions with the U.S. β they also βsidelined Microsoftβs Windows operating system and foreign-made database software in favor of domestic options.βΒ
As both Intel and AMD are significant customers of TSMCβs advanced process nodes β this move is expected to influence TSMCβs future order status.
Shares of China-based semiconductor companies like ACM Research (ACMR) and Intchains Group (ICG) are both up +5-10% on the news.
Expect the Rate Cut Debate to Continue
While the corporate default tally continues to climb, Atlanta Fed President Raphael Bostic has called for just ONE rate cut in 2024.
This comes three weeks after he said that βthere will probably be bumps along the wayβ and that itβs βprobably appropriateβ to ease rates this summer.
Whatβs the takeaway? The Fed is trying to stick the landing here. Be sure to follow Nick Timiraos (AKA the βFed Whispererβ) for updates leading throughout April.
"I'm definitely less confident than I was in December [that inflation will get down to the Fedβs 2% target]β¦ If we have an economy that is growing above potential, and we have an economy where unemployment is at levels that were deemed to be unimaginable without pricing pressures, and if we have an economy where inflation is moderatingβ¦ those are good thingsβ¦ That gives us space for patience."
βThe higher rates are, the more stress there is over time on commercial real estate, on the over-levered consumer and the over-levered company β those are really your stress points. And itβs across the spectrum.β
Adobe (ADBE) Summit β The Digital Experience Conference
Thatβs right people β weβve got Shaq as a keynote speaker for Adobe this week.
One of Adobeβs biggest events of the year has returned. The Adobe Summit will feature leadership from Google, Delta, GM, Coca-Cola, Mattel, Marriott, Bayer, US Bank, and Vanguard.
Major Economic Events:
Debt updates, consumer confidence metrics, and durable goods orders.
Monday (3/25): New home sales
Tuesday (3/26): Consumer confidence, Durable goods orders, Durable goods minus transportation, S&P Case-Shiller home price index (20 cities)
Wednesday (3/27): N/A
Thursday (3/28): Chicago business barometer (PMI), Consumer sentiment (final), GDP (2nd revision), Initial jobless claims, Pending home sales
Friday (3/29): Advanced retail inventories, Advanced U.S. trade balance in goods, Advanced wholesale inventories, PCE Index, Personal income (nominal), Personal spending (nominal)
What Weβre Watching:
US Debt
The national debt has risen +$600 billion in less than three months and will continue to rise with the debt ceiling uncapped for the year.Β
The current debt-to-GDP ratio is at 123.7% and is quickly approaching the 2020 peak of 126.2% β a level historically linked to default risks.Β
With the Fed aiming for a βsoft landingβ β more critical inflation data released this week will determine if we are heading in the right direction.Β Β
Brian Higgins, Co-Founder of King Street Capital Management thinks the βsoft landing" could be more like a βslow-motion car crashββ¦
βAs you go into yearend, youβll start to begin slowing. Itβll be ultimately looked at as no landing, soft landing, progressing into a harder landing as time goes on, just because the amount of debt that is out there is just too high.β
Consumer Confidence
In February, the Consumer Confidence Index dipped to 106.7 from January's revised 110.9 β marking the end to three months of gains.
This decline reflects broader concerns about the labor market and political scene βdespite slight easing in inflation worries.
The Present Situation Index and Expectations Index also saw declines β with the latter flashing potential recession indicators as it fell below 80.
Latest Conference Board Press Release:
Consumersβ assessment of current business conditions fell slightly in February.
21.2% of consumers said business conditions were βgood,β down slightly from 21.3% in January.
17.1% said business conditions were βbad,β up from 15.3%.
Consumersβ appraisal of the labor market was also less positive in February.
41.3% of consumers said jobs were βplentiful,β down from 42.7% in January.
13.5% of consumers said jobs were βhard to get,β up from 11.0%.
Durable Goods Orders
Durable goods orders are a leading economic indicator of industrial production β reflecting a change in the value of orders received by US manufacturers of durable goods (goods expected to last more than 3-years like appliances, equipment, etc.)Β Β
January had a significant decline in new orders for manufactured durable goods β dropping by $18.0 billion or 6.1% to $276.7 billion.Β
This was a continuation of a downward trend, with decreases in three of the past four months. This also marked the most substantial drop since April 2020.
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Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.