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Big Q1 Beats After the Close; Markets Struggle to Gain

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Thursday, April 18th, 2024

Market indices continue trying to find ways to dig out of the ditch. Unfortunately for investors this week, nothing seems to be working. Today we saw oil prices come down, jobless claims remain steady and low, and Philly Fed manufacturing jump surprisingly high. This led to all major indices launching into the green, only to mostly give everything back by the closing bell. The Dow gained +0.06%, the S&P 500 was -0.22%, the Nasdaq -0.52% and the small-cap Russell 2000 was -0.29%.

Existing Home Sales for the month of March came out this morning at 10am ET. Headline was slightly ahead of estimates to 4.19 million seasonally adjusted, annualized units, from 4.17 million projected. This represents a pullback from the February print of 4.38 million, which is easily the highest tally of the past 12 months, and as such appears to be something of an outlier. For perspective, the 12-month low came in October of 2023, at 3.85 million units. Pending Home Sales data for March is due next Thursday.

The Leading Economic Index (LEI) from The Conference Board, also for March, came out today, as well. It saw a deeper-than-expected miss to -0.3% from the -0.1% consensus, and the +0.2% reported for February. The LEI describes itself as “provid[ing] an early indication of significant turning points in the business cycle… to signal peaks and troughs… for major economies around the world...” This metric had decoupled in a big way from year-over-year changed in Real GDP going back to early 2022, but in recent months has begun to pull closer. September through March is down -2.2%, but an improvement from -3.6% over the previous six months.

After today’s close, we see strong Q1 earnings numbers from across industries. First up is streaming leader Netflix (NFLX - Free Report) , which crushed estimates on both top and bottom lines. Earnings of $5.28 per share zipped past the $4.51 in the Zacks consensus, which was already a big jump from the $2.88 per share reported in Netflix’s year-ago quarter. Revenues of $9.37 billion swept beyond the $9.26 billion expected, up +15% from Q1 2023 and adding 9.3 million new subscribers in the quarter.

This amounts to +16% subscriber growth year over year, which is considerable considering Netflix is no longer the only major streaming service in town. Next-quarter earnings guidance is equally impressive: $4.68 per share, from $4.53 consensus. However, revenue guidance is down somewhat: $9.49 billion from the $9.55 billion in the Zacks consensus. That, plus the +30% earnings growth year to date has set up Netflix with a classic “sell the news” story, as shares are down -3.3% in late trading.

Taiwan Semiconductor (TSM - Free Report) also outperformed estimates on both top and bottom lines this afternoon, posting earnings of US$1.38 per ADR versus expectations for $1.29, and swinging to a profit year over year. Revenues of $18.87 billion outpaced the $18.38 billion analysts were looking for, amounting to a +16.3% positive revenue surprise. Revenue guidance has been bumped up to a range of $19.6-20.4 billion, well ahead of previous estimates. But questions surrounding overall industry market growth are keeping a damper on shares in the late market.

Intuitive Surgical (ISRG - Free Report) makes it an earnings-beat trifecta. The maker of the daVinci medical device, popular among minimally invasive surgeries like prostatectomies, reported earnings of $1.50 per share, surpassing the consensus estimate by a solid dime. Revenues in the quarter came in at $1.89 billion, +11% ahead of projections. It’s share are up +1% on the news, adding to its +12% gains year to date.

A week from tomorrow, Personal Consumption Expenditures (PCE) data comes out. This is the next major economic report to inform investors — as well as the Fed — about key changes in consumer appetites, among other things. Separate prints, such as the CPI and PPI, are plugged into monthly PCE data; as a result, there tend to be fewer and narrower revisions to previous reports, making it a steady barometer for the overall economy. Of course, we’ll also see Q1 earnings season pick up the pace next week.

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