Mid-Morning Look
Monday, May 16, 2022
Index |
Up/Down |
% |
Last |
|
||
DJ Industrials |
-8.79 |
0.03% |
32,187 |
|||
S&P 500 |
-2.13 |
0.05% |
4,021 |
|||
Nasdaq |
-17.46 |
0.15% |
11,787 |
|||
Russell 2000 |
3.46 |
0.19% |
1,796 |
|||
Will U.S. stock markets get the bounce they have been looking for? The S&P 500 is down 6 weeks in a row (longest streak since 2011 and hasn’t fallen 7-straight weeks since 2001), while the Nasdaq Composite also comes into Monday with 6-straight down weeks and the Dow seven straight. The same fears have pressured global stock markets for weeks including more aggressive rate hikes by central banks, China lockdown impact on global markets (terrible month retail sales and industrial production data overnight), surging labor, commodity, material costs impacting business for corporate America, rising inflation fears impacting consumer spending/hurt housing market, uncertainty in Europe with Russia conflict. News that Shanghai set out plans on Monday for the end of its COVID-19 lockdown that has lasted more than six weeks failed to lift investor optimism early. Economic data this morning abysmal as NY Fed Manufacturing got obliterated, posting negative numbers and badly missing expectations (unexpectedly falls -11.6 in May (below estimate of +17.0) and well below vs April +24.6; new orders index -8.8 in May vs April +25.1). NATO members rallied around Finland and Sweden on Sunday after they announced plans to join the alliance, marking another dramatic change in Europe’s security triggered by Russia’s war in Ukraine. Goldman Sachs cut its year-end S&P500 target to 4300 from 4700 to reflect higher interest rates, slower economic growth than previously assumed, and a forward P/E of 17X and lowered its GDP growth outlook. Uncertainty in the crypto asset space in recent weeks also weighing on market sentiment with bitcoin down below $30K. The CBOE Volatility index (VIX) down early, holding below the 30 level.
Economic Data
· NY Empire state current business conditions index unexpectedly falls -11.6 in May (below estimate of +17.0) and well below vs April +24.6; new orders index -8.8 in May vs April +25.1, prices paid index +73.7 in May vs April +86.4; employment index at +14.0 in May vs April +7.3 and the six-month business conditions index +18.0 in May vs April +15.2
Macro |
Up/Down |
Last |
|
||
WTI Crude |
0.97 |
111.46 |
|||
Brent |
0.21 |
111.76 |
|||
Gold |
4.20 |
1,812.40 |
|||
EUR/USD |
0.0006 |
1.0417 |
|||
JPY/USD |
-0.10 |
129.09 |
|||
10-Year Note |
-0.06 |
2.873% |
|||
Sector Movers Today
· Retailers; WEBR shares fall after Q2 EPS loss (-$1.02) vs. est. $0.18, Q2 revs of $607.2M miss ests $659M, and issues weak guidance as sees FY22 revenue $1.65B-$1.8B below consensus $2.09B; big earnings week for retailers with HD and WMT Tuesday morning, LOW, TGT, TJX on Wednesday morning, BJ, KSS Thursday morning and DECK, ROST at night; GME appointed Nir Patel to the role of Chief Operating Officer, effective May 31, 2022 after recently was Chief Executive Officer at Belk, a privately-owned national retailer; WRBY reported an unexpected Q1 loss and revenue that came up shy of expectations, but reiterated its full-year outlook; Wedbush lowered BBY tgt to $80 from $110 and stay cautious into 1Q22 results on Tuesday, May 24 as model 1Q22 comps of -9.8% vs. consensus of -8.4% but see more downside than upside risk
· Restaurants: MCD announced it will exit the Russian market and has initiated a process to sell its Russian business. This follows McDonald’s announcement on March 8, that it had temporarily closed restaurants in Russia and paused operations in the market. As part of the exit, the company expects to record a non-cash charge of about $1.2 billion to $1.4 billion; SHAK upgrade from Neutral to Buy w/ $70 PT at Northcoast; Goldman Sachs said encourages investors to focus on companies with pricing power (CMG, FWRG, WING) unique reopening dynamics (SHAK, SG) and those that benefit from trade-down trends (MCD) in restaurants
· Internet; NFLX upgraded to Outperform from Neutral at Wedbush as think that Netflix is positioned to exceed its guidance for Q2, particularly because of the staggered release date for Ozark (maintains $280 tgt); WIX reported a wider-than-expected quarterly loss, but said its businesses were showing steady growth; now sees Q2 revenue of $342M-$346M below est. of around $356M and sees year revs up 10-13% Y/Y or $1.396B-$1.434B below consensus at $1.45B; Chinese Internet names upgraded at JPMorgan (BABA, BIDU, BZUN, BILI ) saying significant uncertainties facing the China’s e-commerce sector should begin to abate on the back of recent regulatory announcements, raising
· Auto sector; CVNA rebounded after forecast significant core earnings for 2023, as the co spelled out plans to rein in spending on advertising, expansion, and other areas to offset waning demand late Friday; Ford (F) sold an additional 7 million shares of electric-car maker RIVN on Friday at $26.99 per share for about $188 million after dumping 8M shares earlier in the week following IPO lockup period expiration according to a regulatory filing (Ford still owns 87 million Rivian shares); NIO upgraded to Buy from neutral at Bank America with $26 tgt saying NIO is trading at 1.7x 1-year forward EV/sales, 1SD below its historical average which seems attractive given the improving outlook
· Consumer Finance: DFS April net-charge off (NCO) rate of 2.02% increased 27bps m/m, but is still down 53bps y/y while the 30+ day delinquency rate decreased 4bps m/m, slightly ahead of the average 7bps decrease historically seen in April; COF reports April newt-charge-offs 2.19% vs. 2.4% Y/Y, and delinquencies 2.18% vs. 1.92% Y/Y and vs. 2.32% the end of March; SYF delinquency rate of 2.7% in April compared with 2.8% in March and 2.4% in April 2021, and net charge-offs as a percentage of average loan receivables were 2.7% in April vs. 2.9% in March and 3.8% in the year-ago period; SOFI was upgraded to Overweight at Piper after shares sold off 70% in the past six months as the combination of an extension of the student loan moratorium, rising interest rates and heavy pressure on fintech stocks have weighed on shares.
Stock GAINERS
· CFG +1%; upbeat mention in Barron’s this weekend saying the bank has been growing, and the stock could gain 29%, while was also upgraded to Buy with $54 tgt (from $48) at Bank America
· CVNA +11%; rebounded after forecasting significant core earnings for 2023 late Friday as the co spelled out plans to rein in spending on advertising, expansion, and other areas
· GFF +13%; announced that its Board has initiated a process to review a comprehensive range of strategic alternatives to maximize shareholder value including a sale, merger, divestiture, recapitalization, or other strategic transaction
· MANT +14%; to be acquired by Carlyle Group in all-cash transaction valued at approximately $4.2B, with ManTech shareholders to receive $96.00 per share in cash https://bit.ly/3PlTCB3
· NFLX +3%; upgraded to Outperform from Neutral at Wedbush as think that Netflix is positioned to exceed its guidance for Q2, particularly because of the staggered release date for Ozark (maintains $280 tgt)
· OXY +4%; energy stocks early leaders, with OXY making new 52-week highs
· SAVE +15%; after reports that JBLU plans to launch a hostile takeover attempt for the discount carrier, according to people with the matter, after Spirit rejected JetBlue’s $3.6 billion offer in favor of an existing deal with Frontier Airlines (ULCC) https://bit.ly/3a4M0Tp
Stock LAGGARDS
· COIN -6%; after briefly rally last week off lower levels for Bitcoin and other crypto, seeing weakness again early with Bitcoin back down below $30K
· LEN -4%; housing stocks underperform in the S&P early on rising rate concerns (DHI )
· MCD -1%; announced it will exit the Russian market and has initiated a process to sell its Russian business. As part of the exit, the company expects to record a non-cash charge of about $1.2 billion to $1.4 billion
· TWTR -5%; falling for a 7th straight day, and now down roughly $16 below its $54.50 offer from Elon muck to buy the social media company amid growing fears the deal could fail
· WEBR -3%; after Q2 EPS loss (-$1.02) vs. est. $0.18, Q2 revs of $607.2M miss ests $659M, and issues weak guidance as sees FY22 revenue $1.65B-$1.8B below consensus $2.09B
· WIX ; reported a wider-than-expected quarterly loss, but said its businesses were showing steady growth; now sees Q2 revenue of $342M-$346M below est. of around $356M
· WRBY -2%; reported an unexpected Q1 loss and revenue that came up shy of expectations, but reiterated its full-year outlook
Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.