Mid-Morning Look

Thursday, April 21, 2022

U.S. stocks jump overnight/extend gains at the open as the Nasdaq outperforms, along with the S&P 500, while the Dow trading at highest levels since early February with both technology and transports among leaders. The Nasdaq rises around 2% following a strong earnings quarter from TSLA helping lift higher multiple/growth stocks (same group that tumbled yesterday post NFLX results), while transports surge a 3^rd day after airlines UAL, AAL with upbeat outlooks heading into the summer and rails higher post CSX results. Rising Treasury yields (10-yr nearly hit 3% yesterday), an aggressive Fed outlook on interest rate hikes (expectations for 50-bps hike in May, followed by possible 50-bps at next meeting), and Ukraine/War ongoing have failed to dent investor outlook on stock markets. The S&P 500 topped its 200-day moving average resistance this morning (4,497 for SPX) and touched its 50-day MA resistance as well (4,514) before fading slightly. All eyes on earnings so far, with results mostly better overnight/this morning helping lead to sector advances. Like yesterday, seeing a broad-based bounce, led by transports, industrials, financials, REITs, Staples, and Discretionary. President Biden said today announces another $800 million for Ukraine in package that includes heavy artillery, drones.

Economic Data

·     Weekly Jobless Claims fell to 184K from 186K prior and vs. consensus 180K; the 4-week moving avg rose to 177,250 from 172,750 in prior week; continuing claims fell to 1.417M from 1.475M and vs. est. 1.455M; the U.S. insured unemployment rate fell to 1.0% from 1.1%

·     Philly Fed Business Index Actual reported at 17.6, below forecast 21.35 and prior 27.4

Sector Movers Today

·     Auto sector; TSLA posted a top and bottom line beat on better margins after the co raised prices in response to inflation, offsetting the impact of a Shanghai factory shutdown (revs rose to $18.8B vs. est. $17.8B) – noted deliveries tracking up 60% y/y to ~1.5M for 2022; shares of other EV stocks NKLA and charging BLNK move on results CVNA shares slide after posting a bigger-than-expected quarterly loss, widens to $260M, or $2.89 per share in Q1, from $36M y/y (est. was for loss (-$1.44) saying several factors impacted CVNA and the used vehicle industry (also announced a stock offering); auto suppliers tgt changes for ADNT at Deutsche Bank as anticipate an eventful US autos earnings season, with 1Q22 results generally in-line to slightly below consensus expectations due to global LVP in the quarter playing out a bit weaker than expected a few months ag; AN, GPC earnings in auto retail

·     Metals & Mining; busy day of earnings as AA Q1 revs miss estimates after EPS beat, while lowers its forecast for shipments of bauxite ore for this year by two million dry metric tons; BHP cut its FY copper output to 1.57M-1.62M metric tons from an earlier estimate of 1.59M-1.76M saying downgrade reflects lowered production guidance for the Escondido mine; in steels, STLD 1Q adj EPS $6.02 vs est. .$5.66 on sales $5.6B vs est. $5.32B, qtrly steel shipments 2.9Mm tons; raises 1Q cash dividend by 31%, while NUE also posts EPS beat; in copper, FCX posted Q1 EPS beat $1.07 vs. est. $0.91 on better revs $6.6B

·     Transports; make it a third day of gains (helping pare/erase a lousy start to April on recession fears), led by another strong report in the airline space as UAL posted a slightly larger Q1 EPS loss and a 21% drop in revs, but shares jump after saying expects to return to profitability in Q2 on a robust operating revenue outlook with approximate 10% operating margin (followed a strong report/outlook from DAL last week); shares of AAL also rise on results, saying demand for travel has continued to strengthen despite higher fares driven by surging fuel costs; ALK also reported quarterly results in a strong airline/travel sector today

·     In rails/truckers/freight: CSX posted a slight EPS beat as revs rose 21% to $3.41B, above views as operating ratio increased by 150 basis points to 62.4%, and targets full-year double digit revenue and operating income growth; UNP Q1 EPS and revenue topped estimates while noted fuel costs will pressure full-year results; KNX, HTLD and LSTR active movers after earnings results; in freight, Barron’s reported AMZN takes aim at FDX, going to open up its delivery service to allow Prime members to use its payment and shipping facilities on rival retailers’ sites

Stock GAINERS

·     CCL +3%; continued recovery in leisure/reopen names in crude, hotels and online travel given upbeat commentary from airlines the past week on improved demand (MAR )

·     DOW +6%; Q1 EPS of $2.34 beats ests amid stronger product prices as supplies remained tight amid robust demand saying local prices across Dow’s three segments were up between 24%-39%

·     MMC +4%; posted Q1 beat amid higher consulting revs

·     NUE +5%; along with strength in STLD after earnings from both steel producers beat

·     TSLA +9%; posted a top and bottom line beat on better margins after the co raised prices in response to inflation, offsetting the impact of a Shanghai factory shutdown (revs rose to $18.8B vs. est. $17.8B) – noted deliveries tracking up 60% y/y to ~1.5M for 2022

·     UAL +10%; posted a slightly larger Q1 EPS loss and a 21% drop in revs, but shares jump after saying expects to return to profitability in Q2 on a robust operating revenue outlook with approximate 10% operating margin

Stock LAGGARDS

·     AA -10%; Q1 revs miss estimates after EPS beat, while lowers its forecast for shipments of bauxite ore for this year by two million dry metric tons

·     BHP -4%; cut its FY copper output to 1.57M-1.62M metric tons from an earlier estimate of 1.59M-1.76M saying downgrade reflects lowered production guidance for the Escondido mine

·     CVNA -6%; after posting a bigger-than-expected quarterly loss, widens to $260M, or $2.89 per share in Q1, from $36M y/y as est. was for loss (-$1.44

·     DQ -7%; after earnings; notable weakness in solar today ENPH

·     DOV -4%; following earnings/guidance

·     EFX -10%; cut full year revenue and EPS to reflect a significant acceleration in the decline of the U.S. mortgage market

·     RAD -8%; confirms a NY Post report yesterday that it rejected a nonbinding takeover proposal from private-equity firm Spear Point Capital Management, saying the bid wasn’t credible and didn’t warrant exploration

·     XRX -19%; after posting an unexpected EPS loss on slightly better revs of $1.67B, saying supply issues and inflationary pressures weighed on profit, though maintains its 2022 guidance