Bespoke’s Morning Lineup – 11/13/24 – And The Number Is…
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“The punishment of every disordered mind is its own disorder.” – St Augustine
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Asian stocks closed with notable declines for the second day in a row, as Japan, India, and South Korea all fell at least 1%. However, China bucked the trend, with the Shanghai Composite rallying 0.5%. The region’s key data point was the October PPI in Japan, which rose 0.2% m/m and took the y/y reading up to 3.4%. Both readings were higher than expected.
In Europe, this morning’s trading remains much more subdued relative to Asia and the STOXX 600 is down a relatively modest 0.4%. News in the region has been on the quiet side as French Unemployment was right in line with expectations. In Germany, the country’s ECB governing council member Joachim Nagel warned that potential tariffs under the incoming Trump Administration could cut overall growth by 1%, warning that “If the new tariffs actually materialize, we could even slip into negative territory”.
With global markets trading lower, US futures have also seen a downside bias, and US Treasuries have caught a modest bid as the iShares 20+ Year Treasury Bond ETF (TLT) trades modestly higher in the pre-market (0.36%). That does little, however, to put a dent into the 10.2% decline that the ETF has seen since mid-September shortly after the Harris-Trump Presidential debate when the President-elect’s odds in the betting markets bottomed out.
For this morning’s gain in TLT to have legs, this morning’s CPI report will need to cooperate, and we have seen less of that in recent months. While overall trends in inflation continue to move in the right direction, in recent months we have started to see an uptick in the number of higher-than-expected CPI reports.
Starting with headline CPI, after bottoming out at 1 late last year, the 12-month rolling total of higher-than-expected monthly readings has ratcheted up to 5. While that is well off the record-high readings of nine that we saw in 2022 and below the long-term average of 5.4, it’s still higher than it was.
Looking at core CPI, we’ve seen the same trend. After surging to a record high of 8 in October 2020, the 12-month rolling total of higher-than-expected core CPI prints dropped down as low as 2 earlier this year but has since rebounded back up to 5, and that’s higher than the long-term average of 4.8. In both cases, these rolling 12-month totals are nothing out of the ordinary, but if you want bonds to rally, you’re going to need the pace of higher-than-expected inflation prints to slow down.
Q3 2024 Earnings Conference Call Recaps: NXP Semiconductors (NXPI)
Bespoke’s Conference Call Recaps use AI to summarize lengthy earnings calls. The commentary below is AI-generated and then edited by Bespoke for quality control. As always, none of these summaries should be construed as recommendations to buy or sell any securities, and investors should do their own research and/or consult with a financial professional before making any investment decisions.
Our latest recap available to Bespoke subscribers covers NXP Semiconductors’ (NXPI) Q3 2024 earnings call.
NXP Semiconductors (NXPI) specializes in secure connectivity products for automotive, industrial, and IoT markets. Known for its innovations in automotive electronics, especially in radar and battery management systems for EVs, NXPI delivers semiconductors that power critical applications like advanced driver assistance systems (ADAS), industrial automation, and secure IoT devices. NXPI serves automotive OEMs, industrial manufacturers, and mobile tech companies worldwide. This quarter, NXPI reported revenue down 3% YoY but up 4% sequentially, with China driving growth across segments, partially offsetting demand declines in Europe and North America. The company saw challenges in automotive and industrial/IoT markets, with macroeconomic factors driving cautious inventory positions among Tier 1 automotive customers. On mixed results and lowered guidance, NXPI shares fell 5.2% on 11/5…
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Q3 2024 Earnings Conference Call Recaps: Generac (GNRC)
Bespoke’s Conference Call Recaps use AI to summarize lengthy earnings calls. The commentary below is AI-generated and then edited by Bespoke for quality control. As always, none of these summaries should be construed as recommendations to buy or sell any securities, and investors should do their own research and/or consult with a financial professional before making any investment decisions.
Our latest recap available to Bespoke subscribers covers Generac’s (GNRC) Q3 2024 earnings call.
Generac (GNRC) is a designer and manufacturer of power generation equipment, specializing in home standby and portable generators, as well as clean energy and energy storage solutions. GNRC provides critical backup power during grid outages, serving residential, commercial, and industrial markets. The company’s expertise offers insights into rising trends in energy reliability, clean technology, and grid resiliency as extreme weather events drive demand for backup power across the US and globally. GNRC’s Q3 results exceeded expectations due to elevated power outage activity. This surge boosted home standby generator sales by 28% YoY and pushed gross margins to 40.2%, the highest since 2010. Notably, GNRC’s PWRcell 2, an upgraded energy storage system, is set to launch commercially, anchored by the Ecobee Smart Hub. While US demand was strong, international sales painted a less rosy picture, particularly in Europe, where economic challenges weighed on the C&I segment. In reaction to earnings, on 10/31, GNRC shares gapped down but recovered intraday to close marginally higher…
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The Closer – Rates Reconfigure, Bank Lending, Consumers – 11/12/24
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we begin with a recap of the latest earnings (page 1) followed by a look into how trading in rates markets has shifted (page 2). Next, we review the latest Senior Loan Officer Outlook Survey (pages 3 and 4) before finishing with a rundown of the latest NY Fed Survey of Consumer Expectations (pages 5 and 6).
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Daily Sector Snapshot — 11/12/24
Q3 2024 Earnings Conference Call Recaps: Altria (MO)
Bespoke’s Conference Call Recaps use AI to summarize lengthy earnings calls. The commentary below is AI-generated and then edited by Bespoke for quality control. As always, none of these summaries should be construed as recommendations to buy or sell any securities, and investors should do their own research and/or consult with a financial professional before making any investment decisions.
Our latest recap available to Bespoke subscribers covers Altria’s (MO) Q3 2024 earnings call.
Altria (MO) is a US-based tobacco company known for its premium cigarette brand Marlboro and its investments in smoke-free alternatives like nicotine pouches and e-vapor products. NJOY, MO’s e-vapor product, saw an 85% volume increase in promotional tests, though its success doesn’t go unchallenged by the rising illicit e-vapor market. MO’s on! nicotine pouches captured an 8.9% market share, supported by a 46% rise in shipment volume. Meanwhile, economic pressures are pushing consumers toward discount brands, and MO is launching a $600 million cost-saving initiative to streamline operations using AI. The company also remains in a heated patent dispute with vape giant JUUL. On EPS and revenue beats, shares of MO rose 7.8% on 10/31…
Continue reading our Conference Call Recap for MO by becoming a Bespoke Institutional subscriber. You can sign up for Bespoke Institutional now and receive a 14-day trial to read our newest Conference Call Recap. To sign up, choose either the monthly or annual checkout link below:
Chart of the Day – It Took Long Enough
Q3 2024 Earnings Conference Call Recaps: Caterpillar (CAT)
Bespoke’s Conference Call Recaps use AI to summarize lengthy earnings call transcripts. The commentary below is AI generated then edited by Bespoke for quality control. As always, none of these summaries should be construed as recommendations to buy or sell any securities, and investors should do their own research and/or consult with a financial professional before making any investment decisions.
Our latest recap available to Bespoke subscribers covers Caterpillar’s (CAT) Q3 2024 earnings call.
Caterpillar (CAT) manufactures heavy machinery and equipment for industries like construction, mining, energy, and transportation. Known for its iconic yellow machines, the company produces excavators, trucks, engines, turbines, and power generation systems. The company’s hand in the energy transition and efforts in autonomous mining solutions make it a bellwether for industrial and economic trends. In Q3, CAT saw a 4% revenue drop due to lower-than-expected sales in Construction and Resource Industries, though Energy & Transportation grew 5% on strong demand for power generation from data centers and AI. Looking forward, the company expects mixed demand across segments, with strength in power generation and moderate growth in Latin America but headwinds in construction in North America and Europe. Despite some pricing pressures, margins remained resilient, and Caterpillar anticipates strong free cash flow through year-end. On the weaker results, CAT shares fell 2.1% on 10/30…
Continue reading our Conference Call Recap for CAT by becoming a Bespoke Institutional subscriber. You can sign up for Bespoke Institutional now and receive a 14-day trial to read our newest Conference Call Recap. To sign up, choose either the monthly or annual checkout link below:
Bespoke Stock Scores — 11/12/24
Small Business: Poor Sales and Politics
Early this morning, the NFIB updated their latest gauge on small business sentiment. The headline number came in at 93.7 this month compared to a lower number of 91.5 last month. That was a larger than expected uptick as it was forecasted to only rise to 92. At current levels, the index remains in the bottom quartile of its historical range, but it’s tied with this past July for the strongest reading since February 2022.
In the table below, we show each category of the report including non-inputs to the Optimism Index. We show this month’s reading, last month’s reading, and the month over month change in addition to how each of those rank as a percentile of all periods. As shown, improvements were broad in October with no inputs to the Optimism Index falling and many of those MoM gains ranking in the upper quintile of monthly changes or better. Breadth was a bit weaker for indices that are not inputs to the Optimism Index. For example, higher prices was lower, although that can be considered a good thing.
Even though the release showed most categories moving higher, overall it was somewhat of a mixed bag. As we discussed in today’s Morning Lineup, labor readings are weak but showing some signs of stabilization. When it comes to many demand gauges, as shown below, outlook for general business conditions remains negative as has been the case for a record span of almost four years running (47 straight months). Granted, October saw the best reading since the 2020 election (this survey’s political sensitives discussed in more detail below). Meanwhile, the share of firms reporting now as a good time to expand their business is still very low historically, albeit picking up to 6%. Elsewhere in outlook/expectations indices, sales expectations have rebounded significantly but remain negative.
Those weak but improving expectation indices contrast with much weaker readings for actual sales and earnings. Actual sales changes continue to plummet reaching a new low of -20 in October. The only periods in which this was lower was the depths of COVID and during the Financial Crisis years. Actual earnings changes moved higher for a second month in a row, but current levels are likewise some of the worst on record. As for inflation, the higher prices index is no longer falling at the same pace as yesteryear having stabilized around still historically elevated levels.
The NFIB has some auxiliary data within the report that surveys businesses reporting lower earnings on the reason for such a response. Weak actual sales are again reflected here. The share of businesses reporting sales volumes as the cause for lower earnings jumped to 16%. That matches last November for the highest reading since March 2021 and unseats increased costs for the number one reason. While increased costs are no longer the most common response, the reading is still well above pre-pandemic norms and has been mostly flat over the past few years.
More broadly in response to the question posed to all businesses of what is their most important problem, 9% of firms reported poor sales. That reading has been trending higher and is now the most elevated since March 2021. While poor sales is rising, other issues like inflation (23%), quality of labor (20%) and taxes (16%) all rank higher at the moment.
Circling back on expansion outlooks, again a historically low share of firms see now as a good time to grow. As shown below, economic conditions are far and away the most common reason given for this outlook. However, the next most common reason is political climate. As we often note including in today’s Morning Lineup, one downside to the NFIB data is consistent sensitivity to politics.
In the chart below, we show the combined share of businesses reporting politics as their reason for a negative or uncertain expansion outlook. As shown, this reading has tended to rise sharply ahead of an election. After Trump won in 2016, this measure dropped sharply while the opposite played out in 2020 when Biden was elected. This go around, it has again risen into the election, but since Trump has won, it will likely head lower (maybe even dramatically so) in the next report. It also wouldn’t be surprising to see this sort of positive turnaround in other categories of the report.
