The S&P 500 futures are down 33 points (0.6% below fair value), the Nasdaq 100 futures are down 128 points (0.3% below fair value), and the Dow Jones Industrial Average futures are down 238 points (0.6% below fair value).
Stock futures suggest a lower start for major indices due to rising market rates. The 10-year note yield is up three basis points to 4.57% after an eight basis point jump yesterday. The 2-year note yield remains below 5.00% at 4.97%.
The weekly MBA Mortgage Applications Index fell 5.7%, with refinance applications down 14% and purchase applications down 1%.
Today's session includes a $44 billion 7-year Treasury note auction at 1:00 ET and the release of the Fed's Beige Book at 2:00 ET. Participants will closely watch the Treasury market's reaction following two weak Treasury sales yesterday.
In corporate news:
- Advance Auto (AAP 72.18, +2.00, +2.9%): Missed earnings by $0.01, reported revenues in line; provided FY24 EPS and revenue guidance in line. Announced Ken Bush, SVP chief merchant, will retire and be succeeded by Bruce Starnes as EVP chief merchant effective June 24, 2024.
- American Airlines (AAL 12.30, -1.14, -8.5%): Lowered Q2 EPS, adjusted operating margin, and TRASM guidance in SEC filing.
- United Airlines (UAL 50.00, -0.64, -1.3%): Reaffirmed Q2 EPS guidance.
- ConocoPhillips (COP 115.05, -3.91, -3.4%): To acquire Marathon Oil (MRO, Financial) in an all-stock transaction; provided shareholder distribution update. The acquisition is immediately accretive to ConocoPhillips on earnings.
- Merck (MRK 126.25, +0.16, +0.1%): To acquire EyeBio for a $1.3 billion upfront payment and up to $1.7 billion in future milestone payments, totaling a potential value of $3 billion.
- Dick's Sporting Goods (DKS 209.00, +14.00, +7.2%): Beat earnings by $0.34, beat on revenues, with comparable sales growth of +5.3%. Raised FY25 EPS and comparable sales guidance, guided revenue in line.
- Robinhood Markets (HOOD 20.82, +0.35, +1.7%): Announced in SEC filing that it has approved a share repurchase program for up to $1.0 billion of its outstanding Class A common stock.
- Box (BOX 24.90, -0.14, -0.6%): Beat earnings by $0.03, reported revenues in line; guided Q2 EPS above consensus, revenues below consensus; guided FY25 EPS in line, revenues below consensus.
Reviewing overnight developments:
Today's News
Net exposure to the Magnificent 7 group of stocks, including Apple (AAPL, Financial), Amazon (AMZN, Financial), Google (GOOG, Financial), Meta (META, Financial), Microsoft (MSFT, Financial), Nvidia (NVDA, Financial), and Tesla (TSLA, Financial), is back above the peak hit last summer. These stocks now make up 20.7% of total U.S. single stock net exposure, the highest level on record. This surge is driven by long buys and short covers, with little change in aggregate net activity recently.
AST SpaceMobile (ASTS, Financial) saw its stock surge about 15% premarket after announcing that Verizon (VZ, Financial) will commit $100M to provide direct-to-cellular service. This partnership aims for 100% coverage of the continental U.S., marking a significant commercial milestone for AST SpaceMobile. The $100M commitment includes $65M in commercial prepayments and $35M in convertible notes.
ConocoPhillips (COP, Financial) agreed to acquire Marathon Oil (MRO, Financial) in an all-stock deal valued at $22.5B, including $5.4B of net debt. Marathon Oil shareholders will receive 0.255 shares of ConocoPhillips common stock for each share of Marathon common stock, representing a 14.7% premium. The acquisition will add highly complementary acreage to ConocoPhillips' U.S. onshore portfolio and is expected to achieve $500M in cost synergies within the first year.
Chewy (CHWY, Financial) traded higher in premarket trading after surpassing Q1 earnings expectations and unveiling a stock buyback plan. Sales increased by 3.1% to $2.88 billion, and adjusted EBITDA rose 47% to $162.9 million. Net income for the quarter was $66.9 million, up from $22.9 million a year ago. The company also reported free cash flow of $52.6 million for the quarter.
Arista Networks (ANET, Financial) was in focus after Barclays updated its view on the data center switching market, which is experiencing strong growth due to artificial intelligence. Despite increased competition, Barclays believes Arista Networks can exceed its guidance of $750M in revenue for the upcoming period.
Tellurian (TELL, Financial) announced it agreed to sell its integrated upstream assets to Aethon Energy Management for $260M. The deal includes a heads of agreement for Aethon to purchase 2M tons/year of liquified natural gas from Tellurian's planned Driftwood LNG plant. The proceeds will help retire senior secured notes and strengthen Tellurian’s balance sheet.
Advanced Auto Parts (AAP, Financial) saw its stock climb in premarket trading despite mixed Q1 results. The company raised its sales guidance for 2024, offsetting a decline in both profits and sales for the quarter. CEO Shane O’Kelly emphasized the need to streamline operations to improve overall performance and shareholder value.
American Airlines (AAL, Financial) stock slid 9% after the company lowered its Q2 adjusted profit guidance to $1.00-$1.15 per share, below Wall Street expectations. The airline also revised its adjusted operating margin and total revenue per available seat mile downward, citing higher costs and lower-than-expected revenue.
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