Markets put a bow on a week, a month, and a quarter last week by putting more distance between today and the mid-March banking turmoil. Large cap stocks are now trading at levels above pre-SVB marks while small caps (more financials and credit risk sensitivity) continue to struggle. Key events during the week included Congressional Fed testimony and typical post-FOMC week Fed speaking circuits alongside a relatively important economic calendar. The S&P 500 turned in a third consecutive weekly gain (+3.5%), with healthy March (+3.7%) and first quarter (+7.5%) gains as well. International developed markets also turned in a positive week (+3.9%), month (+2.4%), and quarter (+9%). Interest rates moved higher across the curve last week, likely correcting the sharp reaction to banking turmoil mid-month, while commodities rallied 4.5% and the USD weakened slightly.

• Is the 60/40 portfolio in comeback mode? March delivered gains for a fourth time in the past six months and closed out a second consecutive quarterly gain of approximately 4% for Q1.

• Mega cap (index heavy) growth stocks have continued to lead markets higher, driving large cap stocks back above pre- SVB levels while small caps, with a larger share of financials and more sensitivity to high yield credit spreads, have lagged significantly in March.

• Monitoring bank health metrics such as deposits, deposit ratios, and capital ratios is important. Additionally, monitoring Fed emerging lending programs to banks are showing Fed discount window borrowing fell $22b last week while BTFP rose $11b for a net $11b liquidity removal.

• Depositor behavior has clearly been pushing bank deposits into money funds wherein we see the increase in the Fed Overnight Reverse Repo facility matching money fund flows and the YTD decline in deposits almost exactly matching the move higher in money fund balances.

• The FDIC completed the bank carcass sales of SVB to First-Citizens Bank & Trust and SBNY to NY Community Bank with partial loss sharing and steep discounts of over 20% on loan purchases.

• Fed speakers (Barkin and Collins) and Congressional testimony from Vice Chair Barr left investors with some hawkish soundbites, finger pointing at inept bank management, and many questions surrounding how much the tightening of lending standards will dampen future growth.

• Goldman noted last week the industry composition of bank lending suggests a more cautious outlook for employment growth because leisure & hospitality and other service industries rely heavily on bank lending for funding.

• We’re at the important doorstep of first quarter earnings season where analysts have been busy lowering EPS estimates (-6.3%) by a larger than normal (3.8%) margin when you compare estimates from December 31 to March 30th.

• A big upside surprise in China’s service PMI reading of 58.2 versus 55.0 has investors hoping the reopening process will translate to a significant consumption boost.

• The February PIO (Personal Income and Outlays) report showed inflation slightly softer than forecast with YOY PCE headline and core inflation of 5.0% and 4.6% alongside MoM headline and core of 0.3%.
• The February PIO report measure of Personal Consumption Expenditures (+0.2%) and Personal Income (+0.3%) were both right in line with consensus.
• The final revision of 4Q U.S. GDP was revised downward from a 2.7% to 2.6% annual rate driven largely by a downward revision of 4Q PCE from 1.4% to 1.0%.
• Weekly jobless claims of 198k and the 4-week moving average of 198.25k both increased over the past week.
• The Consumer Confidence Index in March increased unexpectedly to 104.2, well above the spot forecast of 101 and an improvement over February’s reading of 103.4. However, the final revision of the U of M Consumer Sentiment index came down from 63.4 to 62.0.
• January’s Case-Shiller Home Price Index saw residential housing prices fall 0.2% MOM with a YoY change of +2.5%, below consensus forecast and in the low end of the range.
• Pending Home Sales in February increased 0.8% versus expectations for a 1.0% gain.

Markets continued to move erratically last week with the first clear casualties (SVB, SBNY) of this Fed tightening cycle on display all week. Because bank failures and bailouts aren’t enough, we saw ample geopolitical risk currents and clear evidence of P&L stress in some hedge fund circles adding some price- insensitive buying and selling noise to the fold. In short, we had markets trading on a significant amount of illiquidity and fear this week. By the end of the week, equity markets saw the S&P 500 net a 1.43% gain while small caps fell 2.64%. Developed and emerging international equity markets were down 2.14% and 0.61% respectively thanks in part to U.S. banking volatility jumping across the pond (Credit Suisse). Bond yields fell sharply in a bear steepener with 2yr yields cratering 0.79% and 10yr and 30yr yields falling 0.31% and 0.10% respectively. Oil prices fell nearly 13% taking WTI crude down to $66.74 while the USD weakened slightly given the recalibrated FOMC outlooks.

• As often said, the Fed will hike until something breaks and it seems banks have emerged as the first of those things with SVB and Signature Bank now occupying the second and third largest failures in U.S. history. Markets have moved quickly to recalibrate expected hikes.

• A look at the banking industry reveals several important considerations including that despite significant industry consolidation, small and medium size banks are significant commercial, consumer, and C/R real estate lenders – likely a primary reason why historically banking crises are often intertwined with global recessions.

• A critical issue addressed early last week saw the U.S. Treasury and Federal Reserve enable the FDIC to stand behind SVB and SBNY uninsured depositors. However, comments from Secretary Yellen on Thursday attempted to walk back the blank check concept for depositors.

• SNB and European policy makers brokered an emergency megamerger over the weekend with UBS acquiring Credit Suisse for approximately $3b. The Swiss government provided $9b in loan loss reserves. The SNB provided CSFB a $54b line followed by $100b to UBS to get the deal done.

• FRC received a vote of confidence with 10 national banks depositing $30b on the lender’s balance sheet for at least 120 days, likely putting the significant real estate lender in a position to meet depositors at the door with cash in hand.

• SVB is in a class by itself from a risk management perspective in that they seemingly had none. A look at the mark to market impact rising rates had on their reserves (bonds) is staggering.

• The record 2yr/10yr bull steepener we saw last week was historic (largest 3-day move since 1982) but it should be noted that reports of macro hedge fund Brevan Howard being forced to close out positions added real fuel to the fire.

• The ECB delivered an expected 50bps rate hike to 3.0% and in doing so, did a very good job buying time to assess the fallout of the U.S. banking situation and its leap across the pond.

• February’s headline and core CPI measured 6.04% and 5.53% YoY with 0.37% and 0.45% MOM readings. February’s headline and core PPI measured 4.58% and 4.40% YoY with -0.15% and -0-00% MOM readings.

• February Retails Sales fell 0.4%, just below forecasts for a -0.3% decline and on the back of a two year high 3.2% surge in January.

• U of M Consumer Sentiment came in short of consensus and fell from 67.0 to 63.4 in March.

• February MOM Housing Starts (+10%) and Permits (+14%) came in significantly above expectations.

• U.S. Industrial Production was flat 0% in February following a 0.27% January.

Markets last week were focused on Jerome Powell taking the mound with a relatively limited, but closely watched, set of economic reports – right up until we witnessed the second largest bank failure in U.S. history. A highly anticipated February jobs report and semi-annual FOMC Chair congressional testimony quickly took a back seat when a classic run on the bank took down Silicon Valley Bank in the back half of the week. Market reactions to the anticipated and unanticipated events during the week amounted to sizable 5%- 8% losses in U.S. equity markets, effectively wiping out all of the gains in 2023. Non-U.S. (-3.15%) and emerging (-4.3%) equity markets held up relatively better with a surging/softening USD ending relatively flat on the week. Strong demand for U.S. treasury bonds took interest rates down sharply across the curve pushing the 10 yr UST yield from 3.97% down to 3.70%.

• Silicon Valley Bank (‘SVB’) failure was unquestionably the biggest news last week as one of the most storied early stage (VC) oriented banks experienced a classic bank run bringing the lender to its knees. As of Friday’s close, the broader market context remains unclear but a domino effect in the near term remains a key concern.

• The highly anticipated jobs report, while mixed, was generally positive for markets with job creation exceeding expectations but this ‘good news’ anxiety was somewhat offset by ‘bad news’ relief of an increasing unemployment rate and soft hourly earnings and hours worked.

• Powell delivered his semi-annual monetary policy report to the Senate Banking and House Financial Services Committees last week where he signaled more rate hikes to come and reiterated the FOMC policy course will be data driven as they move forward.

• Beyond the obvious SVB related volatility, the recent market swoon is primarily associated with pricing in a higher for longer policy from the Fed. The terminal rate has increased nearly 50bps in recent weeks with pricing for a 50bps hike in March rising to 68.3% by the end of the week.

• The inverted 3mo/10yr yield curve may be the most alarming recession predictor but as Jonathan Golub, US equity strategist at Credit Suisse Group AG, pointed out last week in every instance the recession didn’t start until the slope began to steepen and timing varied widely.

• Bloomberg made note of the record pace ($261b) of stock buybacks to begin the year with JP Morgan pointing out two thirds of that figure is spread across only five companies.

• Now over one year past the Russian invasion of Ukraine, it is remarkable that natural gas prices in Europe are below pre- invasion levels which can be largely attributed to a relatively mild winter and aggressive efforts to ramp up storage.

• The oil & gas capex cycle has turned up sharply with the EIA reporting U.S. producers have increased E&P spending by 36% YOY. Importantly, hawkish central bank policies represent a risk to the aggressive spend cycle happening across the energy sector.

• For those unaware, Wall Street did of course pay someone millions of dollars to manufacture a clever alternative to the ‘TINA’ term, deeming ‘TARA’ the new world order. The truth is comparing stocks to treasuries is misguided if your return horizon is around 10 years.

• China’s annual legislative session opened last week and while Covid reopening initiatives bring hopes of increasing consumption and growth, the Party seems more focused on hawkish national security and maintaining relatively tight economic policy (underwhelming stimulus).

• The February Employment Report tallied 311,000 jobs, above the spot consensus of 223,000 but within the forecast range of 160,000-325,000. The Unemployment rate increased more than expected (2bps) to 3.6% as did the Labor Market Participation rate (1bps) of 62.5%. Average Hourly Earnings of 0.2% MOM and 4.6% YOY were both 1bps softer than consensus forecast.

• January’s JOLT Survey reported 10.824mm, above the 10.6mm forecasted but down from the prior month reading of 11.234mm. Quit rates declined but remained very elevated thanks to high wage increases being captured by changing jobs.

• Factory Orders in January declined 1.6%, relatively in line with the expected 1.8% decline and in the middle of consensus forecast range of -1.0% – -3.7%.

Markets digested more economic data last week and a parade of Fed speaking engagements, ending with a nice move higher Friday to post decent gains for the week across U.S. (+2%), developed international (+2.7%), and emerging markets (+3.25%). Gains were broad based across the cyclicals while most defensive sectors lagged (healthcare, utilities, staples). The yield curve became further inverted with shorter maturities
(3mo + 5bps, 2yr +8bps) rising more than the long end. The 10 yr UST briefly crossed 4% but closed just under that key psychological level by week’s end. Commodities were up over 3% thanks to a rally in oil which fell just short of $80 to close the week. The USD softened 0.66% on the week thanks to pro-risk sentiment and some elevated inflation readings in Europe.

• Bond markets last week continued to move toward pricing in a more hawkish second half 2023 of monetary policy with economic data highlighting robust consumption in services and persistent survey based pipeline price pressures.

• The direction of core PCE and resulting monetary policy is widely accepted as the most important factor when attempting to forecast financial markets for the remainder of 2023 through inflation data trends, economic models, and survey-based data.

• Inflation may be the bigger risk to 2023 than recession with forecasts for economic growth, a well-capitalized and well- paid consumer, and expanding and readily available consumer credit.

• A quick look at sentiment measures shows fund managers remaining very underweight equities, individual investors feeling better but still short of net bullish, and overall consumer sentiment (U of M, Conf Board) improving but still depressed.

• An Alpine Macro research paper last week on the labor crisis highlighted multiple contributing factors including aging demographics, declining immigration, and a labor market mismatch – all in motion well before the pandemic with immigration seemingly the only valid solution.

• A Bloomberg article last week highlighted the rapidly fading SPAC fad noting the frequency of SPAC IPOs folding in bankruptcy or quietly wound down for cents on the dollar.

• The decline in money supply means much less since the FSRR Act passed in 2006 authorizing the Fed to pay interest on bank reserves, first used in October 2008, effectively severing the link between money supply and the price of credit.

• One notable data point on Russia’s relaxed concerns about giving China leverage over its economy is the share of Russian exports paid for in yuan rising from 0.4% to 14% since the beginning of the invasion of Ukraine.

• The February ISM Manufacturing Index registered 47.7, in line with the 48.0 spot forecast and within the consensus range of 47.0-49.0. The February ISM Services Index registered 55.1, in excess of the 54.5 spot forecast and within the consensus range of 53.0-55.5.

• ECB inflation data in February surprised to the upside similar to January’s readings in the U.S.

• The January Durable Goods Orders reported New Orders (-4.5% vs -4.0%),
  Ex-Transportation (0.7% vs 0.0%), and Core Capital Goods (0.8% vs -0.1%).

• January Pending Home Sales were up 8.1%, well in excess of the 1% forecast and consensus range of -1.3%-1.3%.

• December’s Case Shiller Home Price Index declined -0.5% MoM, right in line with consensus, and posted a YoY increase of 4.6%, slightly below the 5.3% spot forecast.

• The resilient economic backdrop and persistent inflation since Powell’s press conference on February 1st has driven a pronounced shift higher in yields across 6-months, 2-year, and 10-year maturities, impacting bond markets, equity market multiples, and overall financial conditions.

• Markets are actively pricing in changing expectations toward the formal Fed forecasts for rate hikes on a go forward basis with the terminal rate of 5.37% now expected to be reached in August 2023. Based on constant 3m forward segments, the terminal rate is over 5.52%.

• One model anecdote supporting the improving Q1 growth backdrop is that the Atlanta Fed GDPNow model has grown from its initial January estimate of 0.7% to +2.7& most recently. Contrary signals include the yield curve inversion, housing market, and trends in the U.S. LEIs.

• A revision to the U of M consumer sentiment reflects further improvement in consumer sentiment toward the economy but B of A fund manager sentiment remains historically low and equity funds (retail investors) saw their biggest outflow in seven weeks last week.

• Federal Reserve data on U.S. household debt service show mortgage debt service, while increasing, remains near 20- year lows while consumer debt is at its highest levels since 2008 with delinquencies steadily on the rise since early 2022.

• With geopolitics seemingly in a constant state of anxiety, a SIPRI look at the world’s two largest arms dealers, with Russia representing 22% of global exports and the U.S. 35%, shows exactly who needs us (KSA, Aussie, South Korea, UAE) and them (India, China, Algeria) the most.

• Preqin noted the difficult market for public technology stocks translated to a ripple effect in venture capital fundraising with Q422 registering a nine year low in fundraising.

• • The January PIO (Personal Income and Outlays) reported accelerating and above consensus YoY PCE headline and core inflation of 5.4% and 4.7% alongside MoM readings of 0.6% and 0.6%.

  • The January PIO report showed strong Personal Consumption Expenditures of 1.8% and Personal Income growth of 0.6%.

  • U.S. PMIs (C,M,S) for February of 50.2, 47.8, 50.5 improved over the prior month and came in slightly (manufacturing) and well (services) above the consensus forecast.

  • Global PMIs (C, M, S) for February of 50.2, 47.8, 50.5 were higher than forecasted across the board and improved notably over January’s readings with Europe registering particularly strong.

  • The first 4Q U.S. GDP estimate came in at 2.7% versus consensus of 2.9%, squarely within the street forecast range of 2.5%-3.0%.

  • Existing Home Sales declined -0.7% in January to 4mm, coming in below consensus forecast but well within the low and high end of the range.

Markets had plenty of news to process last week between central bank policy moves, a heavy dose of corporate earnings, and a very busy economic calendar. Equity markets posted another weekly gain in what has been somewhat of a soft landing/goldilocks-feeling start to the year for both stocks and bonds. The FOMC met expectations with a 25 bps hike but a very strong jobs report on Friday poured a little cold water on a relatively dovish sounding Fed. Markets are weathering the back end of a tightening campaign, a challenging earnings season, and seemingly ever growing geopolitical tensions across both ponds. The S&P 500 returned 1.6%, outpacing both developed (-0.25%) and emerging (-3.36%) markets. Commodities lost 5.6% thanks to softness across the energy complex while interest rates moved higher most notably in the 2 yr
 to 5 yr portion of the curve.

• The FOMC delivered the expected 25 bps rate hike, taking the upper bound to 4.75%. The post meeting statement was received as somewhat dovish while still jawboning markets not to expect rate relief this year as they seek more evidence of tamed inflation.

• Perhaps one of the data points that kept the good news jobs report from being outright bad policy news is average hourly earnings growth of 4.4% is the lowest rate since August 2021, but the surge in payrolls sent both rates and equity market volatility higher.

• Fed Funds futures rate expectations are pricing in another 25bps at the March 22nd meeting and a coin toss of whether there will be any more hikes at the May 3rd meeting or beyond.

• Bianco Research noted that with a Fed focused on taming inflation and government pandemic assistance ended, YoY money supply (M2) as of 12/31/22 actually declined by 1.3%, the first time this has occurred since 1938.

• Halfway through 4Q earnings season and results have moved steadily lower with blended top and bottom lines of 4.3% and -5.3% respectively. Earnings beat rates (70%) and beat margins (0.6%) are coming in lower than historical averages.

• The technical backdrop of the U.S. market looks more encouraging today with the market having broken out above its downtrend and its 200 dma while posting higher highs and higher lows.

• With a far greater percentage of S&P 500 companies now carrying fixed rate debt, the surge in rates ought to have a more delayed and measured impact on debt service costs. The same cannot be said however for borrowers in syndicated and middle market direct lending areas.

• Favorable equity market trends so far in 2023 include European markets, small caps, multinationals with high percentages of foreign sales, and last year’s losers (low quality stocks) in what might be considered a dash for trash.

• An interesting phenomenon since the beginning of the pandemic is that retail trade volume as a percentage of overall trade volume has increased from consistently around 8% to approximately 12% with some spikes as high as 20%.

• January payrolls surged 571,000 with upward revisions of 71,000 to prior months. The Household survey showed a gain of +894,000 and the unemployment rate declining to 3.4% while labor force participation improved to 62.4%.

• Average Hourly Earnings of 0.3% MOM and 4.4% YOY were in line with forecasts. The BLS Employment Cost Index rose 1% in December.

• The JOLT Survey registered 11.01mm job openings, an increase of 5.48% over November.

• The U of M Consumer Confidence reading in January improved notably from 59.7 to 64.9 with improvements across

  headline, current conditions, and future expectations measures.

• January ISM Manufacturing Index softened slightly to 47.4 while ISM Services surged from 49.2 to 55.2

• Case-Shiller Home Price Index in November rose 6.78% YOY.

Favorable market trends in place thus far in the first month of 2023 stayed intact last week with a very busy economic calendar and fourth quarter earnings reports the primary market forces. A refreshing blackout period on Fed speaking engagements in anticipation of this week’s FOMC meeting left equity and bond markets focused on fundamentals and they seem to be applauding what they see. U.S. stocks were up approximately 2.5% with technology, REITs, and shadow technology leading the way while non-U.S. developed (+0.9%) and emerging markets (+1.4%) continued to add to their impressive January. Interest rates edged slightly higher with the 10 yr UST sticking around the 3.5% mark but remain down 20-30 bps on the year. Commodities were down slightly with oil (-2%) dropping back below $80 and the USD was flat for the week (-1.5% YTD).

• We’re now almost a third of the way through a relatively sub-par 4Q earnings season with the bottom line at -5.0%, top line growing 3.9%, profit margins compressing to 11.4%, and forward earnings priced at approximately 17.8x.

• Decelerating PCE inflation and economic growth were evident with last week’s economic data and markets seem to be comfortable with trends on both fronts.

• Markets are pricing a 25 bps rate hike this week and another at the March FOMC meeting, consistent with a ‘soft- landing’ view of the economy, taking Fed funds rate up to 450-475.

• While M2 growth has fallen from 26% YOY at the pandemic peak to 0% recently, consumer savings, bank deposits, and money market funds all remain very elevated.

• A close look at U.S. housing market metrics shows how rising interest rates have translated to notably higher mortgage debt service but risks of downward pressure in housing prices leaving large swaths of homeowners with negative equity, ala 2008, is still fairly remote.

• Slowing global growth, falling leading economic indicators, contractionary PMIs, and inverted yield curves have most economists forecasting recession but the mix of weakness and resilience becomes clear when viewed across labor markets, liquidity, and personal consumption.

• The December PIO report revealed inline and decelerating YOY PCE headline and core inflation of 5.5% vs 5.5% and 4.4% vs 4.4% alongside MOM readings of 0.1% vs 0.0% and 0.3% vs 0.3%.
• The December PIO report showed strong Personal Consumption Expenditures (2.1% vs 2.6%) and inline/accelerating Personal Income growth of (0.2% vs 0.2%).
• January U.S. flash PMIs (C, M, S) of 46.6, 46.8, 46.6 were slightly above consensus estimates.
• January non-U.S. PMIs (C, M, S) show Japan (50.8, 48.9, 52.4), Eurozone (50.2, 48.8, 50.7), U.K. (47.8, 46.7, 48.0)
• The first estimate of 4Q GDP registered 2.9%, slightly ahead of consensus 2.7% but squarely within the forecast range of 1.2% to 3.5%.
• December Durable Goods Orders came in ahead of consensus for New Orders (5.6% vs 2.8%), Ex-Transportation (-0.1% vs -0.2%), and Core Capital Goods (-0.2% vs -0.2%).
• New Home Sales for December of 616k registered right at the forecasted consensus call. Pending Home Sales grew 2.5%, well above the consensus call of -1.0%.

Markets last week digested several 4Q earnings calls, a rather busy economic calendar, and an outsized dose of central bank policy speaking engagements from the Fed and ECB. A nice rally on Friday largely offset a fair amount of mid-week selling pressure to leave the S&P 500 down less than 1% on the week, +3.5% in January. Developed (+1.2%) and emerging (+1.7%) equity markets both managed respectable gains aided in part by a weaker USD. Interest rates were slightly lower with 10 yr yields largely unchanged while 2 yr yields fell 8bps to yield 4.14%. Commodity markets were up 1.7% aided by a strong rally in industrial metals and WTI oil closing up 1.8% to close back above $80, a level it hasn’t been able to sustain since mid-November.

• While U.S. equity market trends have yet to break out of a well-established downtrend, international equity markets are exhibiting something different with Europe breaking out in November and the MSCI ACWI ex/US seeing its 50 dma crossing through its 200 dma last week.

• Early (11% reported) 4Q earnings reports aren’t off to a great start with beat rates and magnitudes both below average and earnings contraction of -4.6% and revenue growth of 3.7%.

• Coming off the back of two consecutive losing years in the bond market, yields have fallen in sympathy with falling inflation to begin 2023.

• Wage growth is slowing, disinflation is prevailing, and employment has remained strong but, while great for now, these are not equilibrium trends we can expect indefinitely with demand driven inflation later in 2023 a key focus on the part of policy makers.

• Very hawkish ECB meeting minutes and eight Fed speaking engagements, where officials echoed hawkish remarks, set a clear monetary policy tone, one that is at odds with market expectations.

• While labor market resilience feels contrary to layoff announcements in the technology and banking sectors, their size relative to leisure and hospitality may explain the divergence.

• The Beveridge Curve which illustrates a tight inverse relationship between job vacancies and unemployment may be the most important factor to monitor in 2023 as to whether tight labor markets can be loosened by reducing vacancies rather than increasing unemployment.

• It is likely the looming February 5 EU embargo on Russian refined product imports will lead to larger trade dislocations because, unlike Russian crude oil, which India and China happily absorbed, they are both net exporters of refined product.

• The need for some form of accommodation in China is supported given annual GDP slowed from 8.4% in 2021 to 3.0% in 2022 and q/q GDP slowed from 3.9% in Q3 to 0.0% in Q4 (3.9% y/y to 2.9% y/y).

• CPI in December eased from 7.1% (0.1% MoM) in November to 6.5% (-0.1% MoM) in December. Core also moderated from 6.0% (0.2% MoM) to 5.7% (0.3% MoM).

• December Retail Sales missed expectations for headline (-1.1% vs -0.8%), ex-vehicles (-1.1% vs -0.5%), and ex-vehicles & gas (-0.7% vs -0.1%).

• Weekly jobless claims fell to 190k, lower than the consensus call for a slight increase, pulling the 4-week moving average to an eight-month low of 206k.

• Industrial Production in December came in below expectations for headline (-0.7% vs -0.1%) and manufacturing output (-1.3% vs -0.2%).

• Regional Fed manufacturing indices for Philly (-8.9) and Empire State (-32.9) both registered well into contractionary territory.

• January’s Housing Market Index registered 35, ahead of consensus and above the high end of the range.

• Housing Starts (1.382MM) and Permits (1.330MM) for December registered in the middle of their expected ranges, slightly above and below their spot estimates respectively.

• Existing Home Sales for December fell 1.5%MoM and 34%YoY, registering 4.02MM, slightly ahead of consensus estimates.