After Hours Report

The stock market had a weak showing today. Money flowed into blue chip names and countercyclical sectors while more economically-sensitive sectors logged decent losses following another batch of weak economic data this morning. 

Briefly, the ADP Employment Change for March was weaker than expected (actual 145,000; Briefing.com consensus 205,000), the February trade deficit widened more than expected (actual $70.5 billion; Briefing.com consensus -$69.0 billion) with monthly declines in exports and imports, and the March ISM Non-Manufacturing Index was weaker than expected (actual 51.2%; Briefing.com consensus 54.5%).

Buying interest picked up in the Treasury market following the data releases. Equities didn't respond positively to the drop in market rates, though, due to a sense that a weaker economic backdrop will translate into further cuts to earnings estimates. The 2-yr Treasury note yield fell eight basis points to 3.76% and the 10-yr note yield fell five basis points to 3.29%. The U.S. Dollar Index rose 0.3% to 101.91.

The main indices spent most of the morning in a slow grind lower, but climbed off their worst levels of the day by the closing bell. Index level losses were paced by the Nasdaq (-1.1%) while the Dow Jones Industrial Average (+0.2%) squeezed out a slim gain, benefitting from blue chip favoritism. Johnson & Johnson (JNJ 165.61, +7.12, +4.5%) and UnitedHealth (UNH 509.23, +15.98, +3.2%) were among the biggest winners in the Dow. 

Shares of Johnson & Johnson moved on news that its subsidiary LTL Management re-filed for voluntary Chapter 11 bankruptcy protection to resolve claims from cosmetic talc litigation and will pay an $8.9 billion settlement. UnitedHealth reacted to an upgrade to Strong Buy from Outperform at Raymond James.

Unsurprisingly, JNJ and UNH helped boost the S&P 500 health care sector (+1.7%) toward the top of the leaderboard today. Utilities (+2.6%), energy (+1.4%), and consumer staples (+1.4%) were the only other sectors to close with a gain. 

Meanwhile, the information technology (-1.2%), industrial (-1.3%), and consumer discretionary (-2.0%) sectors were the top laggard today.

• Nasdaq Composite: +14.6% YTD
• S&P 500: +6.5% YTD
• S&P Midcap 400: +0.9% YTD
• Dow Jones Industrial Average: +1.0% YTD
• Russell 2000: -0.5% YTD

Reviewing today's economic data:

• The weekly MBA Mortgage Applications Index fell 4.1% with purchase applications falling 4.0% and refinancing applications declining 5.0%. 
• The ADP Employment Change Report for March showed private sector employment increasing by 145,000 (Briefing.com consensus 205,000) following an upwardly revised 261,000 (from 242,000) in February. Weak pockets included manufacturing (-30,000), financial activities (-51,000), professional/business services (-46,000), and information (-7,000).
• The February Trade Balance Report showed a widening in the trade deficit to $70.5 billion (Briefing.com consensus -$69.0 billion) from a downwardly revised $68.7 billion (from -$68.3 billion) in January. Exports were $6.9 billion less than January exports and imports were $5.0 billion less than January imports.
  • The key takeaway from the report is that the decline in both exports and imports is reflective of a slowdown in global trade activity.
• The March IHS Markit Services PMI fell to 52.6 in the final reading from 53.8.
• The ISM Non-Manufacturing Index for March dropped to 51.2% (Briefing.com consensus 54.5%) from 55.1% in February. The dividing line between expansion and contraction is 50.0%, so the March reading reflects continued growth in the services sector, albeit at a demonstrably slower pace than the prior month.
  • The key takeaway from the report is that activity in the U.S. economy's largest sector is slowing noticeably with a cooling off in the new orders growth rate. The slowdown in activity and improved supply chain dynamics, though, have helped temper the pace of price increases for services.
• The weekly EIA Crude Oil Inventories showed a draw of 3.74 million barrels following last week's draw of 7.49 million barrels. 

Looking ahead to Thursday, market participants will receive the following economic data:

• 8:30 a.m. ET: Weekly initial (Briefing.com consensus 203,000; prior 198,000) and continuing (prior 1.689 million) jobless claims 
• 10:30 a.m. ET: Weekly EIA Natural Gas Inventories (prior -47 bcf)

• Europe: DAX -0.5%, FTSE +0.4%, CAC -0.4%
• Asia: Nikkei -1.7%, Hang Seng market closed, Shanghai market closed

Commodities: 

• Crude Oil -0.11 @ 80.61
• Nat Gas +0.02 @ 2.14
• Gold -0.50 @ 2037.80
• Silver -0.07 @ 25.08
• Copper slightly higher @ 3.99

After-Hours Spotlight:

• AbbVie (ABBV) guides Q1 earnings below consensus; lowers FY23 earnings outlook due to acquired IPR&D and milestone expenses... ABBV down 0.8%
• Costco (COST) reports March net sales +0.5% yr/yr to $21.71 bln; total monthly comparable sales -1.1%, adj comps (ex gas fx) +2.6%... COST down 2.1%
• Lumentum (LITE) lowers Q3 revenue guidance well below consensus due to large network equipment manufacturer not taking the shipments company had originally projected; recently approved increase in share repurchase program to $1.2 bln... LITE down 10.5%
• Planet Labs (PL) in filing: Kevin Weil, President Product & Business, purchases $1.9 mln of stock... PL up 7.4%
• Simulations Plus (SLP) beats by $0.02, misses on revs; reaffirms FY23 EPS guidance, revs guidance... SLP down 2.6%

Fair Value for Thursday, April 6:

•  S&P 500: 4,118
• Nasdaq 100: 13,080
• DJIA: 33,658

For a full rundown of today's market and after hours developments, see Live In Play

• Earnings/Guidance (Full Earnings Calendar):
  • Conagra (CAG) beats by $0.12, reports revs in-line; raises FY23 EPS above consensus
  • Delek US Holdings (DK) provides Q1 Outlook in investor presentation
  • dLocal Limited (DLO) misses on top and bottom lines; sees FY23 revs above consensus
  • Exxon Mobil (XOM) discloses that it expects change in unsettled derivatives (mark-to-market) to negatively impact Q1 earnings by $1.8-2.2 bln; says change in liquid prices will negatively impact earnings by $0.6-1.0 bln
  • Kura Sushi (KRUS) reports Q2 (Feb) results, beats on revs, comps of +17.4%; reaffirms FY23 revs guidance
  • Niu Technologies (NIU) releases sales volumes for 1Q23; total units fell 42.3% yr/yr to 94,407; China units fell 45.3%, International units fell 12.2%
  • Resources Connection (RGP) beats by $0.04, beats on revs
  • Schnitzer Steel (SCHN) misses by $0.05, beats on revs
  • Seadrill Ltd (SDRL) reports Q4 results; misses on revs
  • Simply Good Foods (SMPL) beats by $0.02, reports revs in-line
  • SMART Global (SGH) beats by $0.16, misses on revs; guides MayQ EPS in-line, revs below consensus
  • UMH Properties (UMH) reports Q1 updates
  • Walmart (WMT) affirms FY24 EPS, net sales growth, comp growth guidance; reaffirms Q1 EPS guidance; affirms commitment to financial framework of 4% sales growth and 4%+ operating income growth over the next 3-5 years
  • Western Alliance Bancorp (WAL) provides Q1 financial update
  • Western Alliance Bancorp (WAL) discloses additional unaudited financial information and clarifies deposit levels as of March 31, 2023
• General News
  • Progressive Brandon Johnson wins Chicago Mayor race. He plans $4 per employee tax on corporations and new taxes on hotels, airlines, and securities trading, according to Bloomberg
  • Cleveland Fed President Loretta Mester (not a voting FOMC member) says rates will need to go higher than 5%, according to Reuters
  • NGP Energy Capital Management aiming to sell two Permian basin oil producers for $7 bln, according to Reuters
  • EU reportedly close to deal to aid semiconductor industry, which could be done on April 18, according to Reuters
  • House Speaker Kevin McCarthy (R-CA) meets with Taiwan President Tsai Ing-wen, according to NY Times
  • March class 8 truck orders -10% yr/yr at 19,200 units, according to Act Research
  • Amazon (AMZN) laying off over 100 employees in its video games division, according to CNBC
  • Arcutis Biotherapeutics (ARQT) announces that ZORYVE cream 0.3% for the treatment of plaque psoriasis, including intertriginous psoriasis, in adults and adolescents is being covered without prior authorizations by an additional eight national and regional health plans effective April 1
  • AstraZeneca (AZN) reports Lynparza and Imfinzi combination improved progression-free survival in newly diagnosed patients with advanced ovarian cancer
  • Aurinia Pharma (AUPH) announces promising topline data from renal biopsy sub-study of the aurora trial
  • Barings BDC (BBDC) CFO Jonathan Landsberg stepped down as of April 4; Elizabeth Murray appointed as successor, effective immediately
  • BELLUS Health (BLU) Announces Positive Results from its Phase 1 Bioavailability Equivalence Study Evaluating Once-Daily Extended-Release Formulation of Camlipixant in Comparison to Twice-Daily Immediate Release Formulation
  • Boeing (BA) ForeFlight acquires flight debriefing software provider CloudAhoy; terms not disclosed
  • Celanese (CE) has entered into an agreement with Glaukos Corporation (GKOS) to supply its VitalDose® Drug Delivery Platform for use as a component in Glaukos’ iDose TR
  • Compass Minerals (CMP) reducing its workforce by approximately 16%; expects this step alongside cost structure actions to benefit adjusted EBITDA by $17-18 mln per year
  • Eagle Pharma (EGRX) reaches settlement agreement with Dr. Reddy’s Laboratories (RDY) related to BENDEKA
  • ePlus (PLUS) announces new stock repurchase program
  • Exelixis (EXEL): Farallon Capital Management planning proxy battle with EXEL, according to the Wall Street Journal
  • Exelixis (EXEL): Farallon issues letter to Exelixis Board of Directors outlining case for change; intends to nominate three accomplished, independent director candidates who will bring new perspectives to the boardroom to help drive change and promote accountability to shareholders
  • Exxon (XOM) ends Brazil oil drilling after it did not find any oil, according to the Wall Street Journal
  • FedEx (FDX) announces consolidation of operating companies; sees $4 bln in permanent cost reductions, dividend boost
  • Ford Motor (F) confirms electric vehicle lineup eligible for Inflation Reduction Act consumer incentives
  • Fox Factory Holding (FOXF) announced that Scott R. Humphrey, Chief Financial Officer and Treasurer, will be leaving the Company on April 14, 2023
  • General Motors (GM) Defense receives full-rate production decision from U.S. Army for Infantry Squad Vehicle Program
  • Glatfelter Co (GLT) announced that Mr. Boris Illetschko has been appointed to the role of Senior Vice President, Chief Operating Officer
  • Google (GOOG) artificial intelligence computer is faster than Nvidia (NVDA) A100 chip, according to Reuters
  • Granite Constr (GVA) awarded an ~$126 mln contract to support the relocation of United States Marines
  • Gritstone bio (GRTS) Announces Presentations Evaluating Self-amplifying mRNA (samRNA) Against SARS-CoV-2 at ECCMID 2023
  • Grupo Aeroportuario del Pacifico (PAC) reports March traffic increased 15.8% yr/yr
  • Harsco (HSC) announces that its Rail division has been awarded a five-year stoneblower operation and maintenance contract with Network Rail
  • Health Catalyst (HCAT) announces multi-year partnership with Contexture, a health information exchange firm
  • HealthEquity (HQY) announces a strategic collaboration with Microsoft (MSFT) to modernize healthcare benefit administration through Microsoft Azure
  • Hesai Group (HSAI) passed the highest assessment level (AL3) of TISAX
  • Hudbay Minerals' (HBM) Copper World Project receives positive permitting update
  • Hut 8 Mining (HUT) reports 131 Bitcoin mined in March
  • IBEX Ltd. (IBEX) CFO Karl Gabel to retire, effective June 30; initiates search for new CFO
  • Illumina (ILMN): Carl Icahn releases another open letter to shareholders - reits that board of directors should dismiss Mr. deSouza immediately and bring back Jay Flatley
  • Intercontinental Exchange (ICE) reports March 2023 trading volume and related revenue statistics
  • International Money Express (IMXI) completes La Nacional acquisition of Non-U.S. based assets for $8.6 mln on closing
  • Johnson & Johnson (JNJ) subsidiary LTL Management re-files for voluntary Chapter 11 bankruptcy protection to resolve claims from cosmetic talc litigation; to pay $8.9 bln
  • KKR's (KKR) Envision Healthcare in creditor negotiations after missing March earnings deadline, according to WSJ
  • Leonardo DRS (DRS) awarded contracts valued at over $1.0 bln, when fully funded, to support U.S. Navy's Columbia-class submarine program
  • loanDepot (LDI) Announces Settlement and Cooperation Agreement with Anthony Hsieh
  • Manchester United (MANU): Glazer family is planning to negotiate as asking price reportedly moves to £6 billion, according to Telegraph
  • McEwen Mining (MUX) announces new assay results
  • Merck (MRK): Proxygen announces collaboration and license agreement with MSD for the discovery and development of novel molecular glue degraders
  • Meta Platforms (META): Italy probe started for abuse of economic dependence by Meta towards SIAE
  • Microsoft (MSFT): UK Ofcom proposes to refer UK cloud market for investigation
  • MicroStrategy (MSTR) acquired approx. 1,045 bitcoins for approx. $29.3 mln in cash during the period between March 24, 2023 and April 4, 2023
  • MicroVision (MVIS) launches solid-state flash-based MOVIA lidar sensor and wins order for legacy sensor
  • Mirum (MIRM) submits for European approval of LIVMARLI in progressive familial intrahepatic cholestasis
  • Motorola Solutions (MSI): UK CMA’s decision places limit on how much Motorola can charge the emergency services to use the Airwave Network
  • MP Materials (MP): China considering export ban for rare-earth magnet technology, according to Nikkei
  • Nano Dimension (NNDM) is prepared to commence a special tender offer targeting total ownership of at least 51% of the outstanding shares of common stock of Stratasys (SSYS) for $18.00/share in cash
  • NGM Biopharmaceuticals (NGM) approves restructuring; reducing workforce by approximately 33%
  • Palantir Technologies (PLTR) and Microsoft (MSFT) expand cloud partnership to public sector
  • Palomar Holdings (PLMR) secures approximately $187.5 million of incremental excess of loss limit to support and provide incremental limit for its earthquake line of business
  • Petrobras (PBR) has received no proposal from the Ministry of Mines and Energy regarding the change in the Pricing Policy
  • Pitney Bowes (PBI): Hestia Capital Management calls for the company to replace its CEO and reset its finances, according to the Wall Street Journal
  • PLBY Group (PLBY) has sold its Yandy Enterprises subsidiary for $3 mln
  • Qualcomm (QCOM) AI chips beat Nvidia (NVDA) in 2 out of 3 measurements of power efficiency, according to Reuters
  • Rambus (RMBS) extends patent license agreement with SK hynix for an additional ten years, effective July 1, 2024
  • Riot Platforms (RIOT) announces unaudited production and operations updates for March 2023
  • Rollins (ROL) has acquired pest management company FPC Holdings; transaction valued at $350 mln
  • Seadrill Ltd (SDRL): Elliott Investment Management discloses 9.3% active stake and registration rights agreement in connection with the Aquadrill merger
  • Select Medical (SEM) has signed an agreement to acquire Vibra Hospital of Richmond, a long-term acute care hospital in Richmond, Virginia; financial terms were not disclosed
  • Stellantis (STLA): All-new, all-electric 2025 Ram 1500 REV unveiled at New York International Auto Show with Targeted Range of up to an unsurpassed 500 miles
  • Stellantis (STLA): Most STLA models will see EV tax credit cut by 50% to $3750 due to new rules, according to Reuters
  • Sun Country Airlines (SNCY) acquires five 737-900ERs that will expand its passenger fleet in late 2024 and 2025
  • Tradeweb Markets (TW) reports total trading volume for March 2023 of $34.7 trln
  • Trinseo (TSE) has signed an agreement to sell its land, buildings and equipment in Matamoros, Mexico to Plaskolite; financial terms were not disclosed
  • VirnetX Holding (VHC) and WeSecure announce a non-exclusive commercial agreement for WeSecure to sell VirnetX cybersecurity products in the U.S., Canada and the Middle East
  • Vodafone PLC (VOD) Spain unit is receiving takeover interest, according to Bloomberg
  • W&T Offshore (WTI) apparent high bidder on two Gulf of Mexico Blocks in Lease Sale 259

(see Upgrades/Downgrades calendar for full list):

• Upgrades:
  • Accenture (ACN) upgraded to Buy from Hold and added to Stock Focus List and Equity Income Buy List at Edward Jones
  • Livent (LTHM) upgraded to Buy from Neutral at BofA Securities; tgt lowered to $27
  • Sallie Mae (SLM) upgraded to Overweight from Underweight at Morgan Stanley; tgt raised to $15
  • Sealed Air (SEE) upgraded to Buy from Neutral at UBS; tgt $59
• Downgrades:
  • Albemarle (ALB) downgraded to Underperform from Neutral at BofA Securities; tgt lowered to $195
• Others:
  • SolarEdge Technologies (SEDG) initiated with a Buy at Janney; tgt $351

• Econ data (Thursday):
  • 8:30 ET: Weekly Initial Claims (Briefing.com consensus 203,000; prior 198,000) and Continuing Claims (prior 1.689 mln)
  • 10:30 ET: Weekly natural gas inventories (prior -47 bcf)
• Earnings:
  • Monday (April 3)
    • Pre-Market:  SAIC
    • After-Hours: None
  • Tuesday (April 4)
    • Pre-Market:  AYI LNN MSM
    • After-Hours: DLO RGP SGH
  • Wednesday (April 5)
    • Pre-Market: CAG SCHN SMPL
    • After-Hours: SLP
  • Thursday (April 6)
    • Pre-Market: STZ LW RPM
    • After-Hours:  LEVI WDFC
  • Friday (April 7)
    • Pre-Market: None
    • After-Hours: None