Early Look

Friday, April 22, 2022

After a massive reversal day on Thursday, that saw major averages swing around 3% from highs to settle at the lows, U.S. futures are currently pointing to a lower open, barely bouncing at all overnight. Stocks fell Thursday in a sharp reversal, as a jump in Treasury yields and comments showing Federal Reserve Chair Jerome Powell’s support for front-end loading of monetary tightening, offset the optimism coming from another batch of solid corporate earnings. The Dow slid 1.05%, the S&P 500 fell 1.47% and the tech heavy Nasdaq tumbled 2.07%. Fed Chairman Powell pivoting toward a 50-bps hike at the upcoming May FOMC meeting, initially bouncing markets (briefly) with recent Fed talk suggesting a 75-bps hike could be warranted, but markets quickly slid and bled into the close as rising rate fears and its impact to high multiple/growth stocks weighed heavily on tech stocks. Inflation remains a big problem for the White House, consumers, and the Fed, with no easy fox following several catalysts responsible for the massive surge in prices to 40-year highs: 1) the Build Back Better plan, 2) student debt cancellation, 3) eviction moratoriums, 4) White House push for higher wages, 5) tariffs and sanctions, 6) the free money thrown at individuals through PPP among them. The combination of factors has sent prices surging in commodities, food, housing, and the like, putting the Fed in the unenviable position to fight with aggressive monetary tightening. As of last night, Fed Fund Futures are now pricing in 50 bps rate hikes in May, June, and July which would bring the Fed Funds Rate up to 1.75%-2.00%. In Asian markets, The Nikkei Index tumbled nearly 450 points or 1.63% to settle at 27,105, the Shanghai Index rose 7 points to 3,086 and the Hang Seng Index slipped -43 points to 20,639. In Europe, the German DAX is falling -275 points or 1.9% to 14,225, while the FTSE 100 is down around-60 points to 7,570. Markets brace for one of the busier weeks of earnings season coming up after mixed results thus far. Gold headed for a weekly drop on prospects for faster-than-anticipated rate hikes in the U.S.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -65.79 points, or 1.48%, to 4,393.66

·     The Dow Jones Industrial Average fell -368.03 points, or 1.05%, to 34,792.76

·     The Nasdaq Composite tumbled -278.41 points, or 2.07%, to 13,174.65

·     The Russell 2000 Index declined -46.72 points, or 2.29% to 1,991.46

Economic Calendar for Today

·     9:45 MA ET        Markit Manufacturing PMI Apr-F

·     9:45 AM ET         Markit Services PMI Apr-F

·     1:00 PM EST       Baker Hughes Weekly rig count data

Earnings Calendar:

·     Earnings Before the Open: AXP, AZZ, CLF, FHB, GNTX, HCA, KMB, NEM, RF, SLB, VZ

Sector News Breakdown

Consumer

·     Carvana (CVNA) 15.625M share Secondary priced at $80.00

·     Anheuser-Busch InBev (BUD) said it will sell its stake in its Russian joint venture in a deal, which could result in a $1.1 billion hit; said it is in talks to sell its non-controlling interest in joint venture AB InBev Efes to Turkish partner Anadolu Efes.

·     Autoliv (ALV) shares fall -7%; Q1 adj EPS misses at $0.45 vs. est. $1.11 on revs $2.12B vs. est. $2.18B; said sales declined organically by 1.0% as global LVP declined by around 4% vs. Q1 last year; lowers year organic revenue +12% to +17%, from about +20% and sees adj operating margin 5.5% to 7%, below the prior guidance of about 9.5%

·     Gap Stores (GPS) announced today that Old Navy President and CEO Nancy Green is exiting the Old Navy business this week; updates Q1 net sales growth guidance to approximately low to mid-teens year-over-year declines from its prior guidance of mid to high-single-digit declines; takes a more aggressive approach to assortment balancing resulting in increased promotional levels

·     BJ Restaurants (BJRI) 1Q EPS $0.06 vs est. $($0.26) on revs $298.7Mm vs est. $297.2Mm, comps +33.9%, says sequentially improved restaurant margins through the quarter; will open as many as 8 new units this year

·     Boston Beer (SAM) Q1 revs $430.1M vs. est. $444.8M; Q1 EPS loss (-$0.16) vs. est. $1.97; guides year EPS $11.00-$16.00 vs. est. $13.85; Q1 depletions decreased 7% and first quarter shipments decreased 25.1% compared to the quarter ended March 27, 2021; Q1 shipment volume was approximately 1.7 million barrels, a 25.1% decrease from the prior year, reflecting decreases in the Company’s Truly Hard Seltzer, Twisted Tea, Angry Orchard, and Dogfish Head brands

·     Corsair Gaming (CRSR) guides Q1 adj Ebitda $14M-$15M and revs about $380M, well below the $447.4M estimate; said Q1 revenue was lower than we expected, mainly due to a short-term slowdown in consumer spending in Europe

·     American Airlines (AAL) upgraded to Neutral from Underweight, and United (UAL) upgraded to Overweight from Underweight at JPMorgan

Energy, Industrials and Materials

·     AZZ Inc. (AZZ) Q4 adj EPS $0.86 vs. est. $0.71; Q4 revs $224.65M vs. est. $219.07M; anticipate metal coatings will exceed $150 million in sales and exceed 30% ebitda for the first quarter of fiscal year 2023; anticipate infrastructure solutions for the first quarter of fiscal 2023 will exceed their results in the first quarter of fiscal 2022

·     Cleveland-Cliffs (CLF) Q1 EPS $1.50 vs. est. $1.41; Q1 revs $6.0B vs. est. $5.37B; expect to set another free cash flow record in 2022; increasing its full-year 2022 average selling price expectation by $220 to $1,445 per net ton

·     PPG Industries (PPG) 1Q adj EPS $1.37 vs est. $1.11 on revs $4.3B vs est. $4.24B; guides 2Q adj EPS $1.60-1.90 and aggregate sales volumes -low-mid-single-digit % yr/yr; says implementing further selling price increases in all businesses given higher energy prices

·     First Energy (FE) 1Q adj EPS $0.60 vs est. $0.61 on revs $3.0B vs est. $2.82B; guides FY adj EPS $2.30-2.50 vs est. $2.41

Financials

·     Allstate Corp (ALL) announced estimated catastrophe losses for month of March of $227M or $179 mln, after-tax; for Q1, unfavorable non-catastrophe prior year reserve re-estimates totaled approximately $160M

·     Associated Banc-Corp (ASB) Q1 EPS $0.47 vs. est. $0.38; announces changes to overdraft fees; Average loans were up $302 million to $24.1 billion; Q1 net interest margin was up two basis points to 2.42%; net interest income was up $1 million to $188 million

·     Bank OZK (OZK) Q1 EPS $1.02 vs. est. $0.95; qtrly net interest income after provision for credit losses $245.2M vs $266.2M; provision for credit losses was $4.2 million for the first quarter of 2022 compared to negative provision for credit losses of $31.6 million y/y

·     WSFS Financial (WSFS) 1Q core EPS $0.66 vs est. $0.68, guides FY loan growth Mid-to-high single digit growth excluding residential mortgage portfolio; leasing and Consumer Partnership portfolio expecting double-digit growth; assumes reduction in loan payoff levels due to rate environment; guides deposit growth flat; sees NIM 3.15-3.2% assumes three +25bps rate increases

Healthcare

·     Globus Medical (GMED) reported preliminary Q1 net sales of about $230.5 million, compared to consensus estimates of $236.1 million, and said CEO Dave Demski resigns

·     Intuitive Surgical (ISRG) Q1 adj EPS $1.13 vs. est. $1.08; Q1 revs rose 15% to $1.49B vs. est. $1.43B; qtrly worldwide Da Vinci procedures grew about 19% compared y/y; ended q1 of 2022 with $8.40 bln in cash, cash equivalents, and investments; placed 311 Da Vinci surgical systems, an increase of 4% compared with 298 in q1 of 2021

·     Hexo (HEXO) provides update on strategic plan; announces changes to further streamline operations; says ~230 employees will be impacted

Technology, Media & Telecom

·     Snap Inc. (SNAP) shares fall -3%; guides Q2 rev growth 20%-25% vs. est. 28%; Q1 EPS loss (-$0.02) vs. est. $0.01; Q1 revs rose 38% to $1.06B vs. est. $1.07B; qtrly daily active users increased 18% to 332M vs. est. 330M; Q1 average revenue per user increased 17% to $3.20 and ending cash, equivalents, marketable securities $5B; Q1 DAUs increased sequentially and y/y

·     Qualtrics International (XM) 1Q adj EPS $0.01 vs est. (0.01) on revs $335.6Mm vs est. $325.6Mm; guides 2Q ad EPS ($0.01)-$0.01 and revs $344-346Mm; sees FY revs $1.428-1.432B vs est. $1.406B

·     Verra Mobility (VRRA) 4Q adj EPS $0.25 vs est. $0.22 on revs $169.9Mm vs est. $159.9Mm; reiterates FY guide

·     A10 (ATEN) to replace Ferro Corp (FOE) in the S&P Smallcap 600