Early Look

Monday, August 15, 2022

U.S. futures giving back some of Friday’s big gains, as slowing growth in China raised concerns about the global economy while geopolitical tensions between Beijing-U.S. ramp up after China’s military said it carried out more exercises near Taiwan on Monday as a group of U.S. lawmakers visited the Chinese-claimed island and met President Tsai Ing-wen. Weaker China data (Industrial production, retail, and housing numbers all disappointed) is impacting commodity prices early, with oil sliding over 4%. Meanwhile the People’s Bank of China cut its one-year lending facility rate by 10 bps to 2.75% and cut the seven-day lending rate the same amount to 2% while added 2 billion yuan through seven-day reverse repos. Stocks surged again on Friday, adding to the stellar gains since the beginning of July as a slow summer Friday was met with another round of positive economic data, capping off a week of lower-than-expected inflation data. With the day’s advance, the S&P 500 has reclaimed just over half of the ground lost to recent pullback (S&P ended above the 4,231 level, retracing more than half of the losses it suffered since its January high on a closing basis). The S&P and Nasdaq have now registered four straight weekly gains, the longest week-over-week winning streaks since October-November. We are more than 90% complete of quarterly earnings, with results coming from big box retailers this week including Dow components HD and WMT (which has lowered guidance twice over the last few weeks) as well as comps TGT and LOW. In Asian markets, The Nikkei Index gained 324 points to 28,871, the Shanghai Index was nearly unchanged at 3,276, and the Hang Seng Index fell -134 points to 20,040. In Europe, the German DAX is little changed at 13,795, while the FTSE 100 dip a few points to 7,494.

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 72.88 points, or 1.73%, to 4,280.15

·     The Dow Jones Industrial Average rose 424.38 points, or 1.27%, to 33,761.05

·     The Nasdaq Composite surged 267.27 points, or 2.09%, to 13,047.19

·     The Russell 2000 Index advanced 41.36 points, or 2.09% to 2,016.62

Economic Calendar for Today

·     4:00 PM ET                   Net Long-term TIC Flows for June

Earnings Calendar:

·     Earnings Before the Open: AMPS CVSI DRIO LIDR NAVB NRXP RMTI SCYX TWKS TXMD WEBR XELB

·     Earnings After the Close: ALBO ASYS BIOR BLND CALA CIDM COMP DLPN DNA FXLV GAN GOCO HSDT INVO IZEA LHDX LUCD MARK NRDY NVTS PBLA POWW QRHC SBIG SHLS SLGC TDUP TTOO XSPA ZIP

Other Key Events:

·     Needham Med Tech & Diagnostics 1:1 Conference (virtual), 8/15-8/16

·     Stifel 2022 Biotech Summer Summit, 8/15-8/17 in Newport, RI

World News

·     According to official data, China’s retail sales grew by 2.7% in July from a year ago—well below the 5% growth forecast by a Reuters poll, and down from growth of 3.1% in June

·     A US congressional delegation led by Senator Ed Markey is kicking off a two-day visit to Taiwan today, per a statement from the American Institute in Taiwan.

·     Iran will respond to the European Union’s “final” text by midnight on Monday, Iranian Foreign Minister Hossein Amirabdollahian said, calling on the United States to show flexibility to resolve three remaining issues to save a 2015 nuclear pact – Reuters

Sector News Breakdown

Consumer

·     American Eagle Outfitters Inc. (AEO) mentioned positively in Barron’s saying shares are trading at a third of their all-time high reached in April 2021, but the company could be in a better position by the holidays as logistics headwinds ease, citing Jefferies analyst. Notes its Aerie division could reach more than $2 billion in revenue by fiscal 2023, up from $800 million in 2019.

·     Several retailers are getting squeezed according to Barron’s given they rely heavily on consumer demand and often can’t pass on higher costs to shoppers. Bed Bath & Beyond Inc. (BBBY), Party City Holdco Inc. (PRTY) and Rite Aid Corp. (RAD) are among companies whose short-term obligations exceed their cash balance and one-year earnings combined

·     Li Auto Inc. (LI) shares slip -6%; Q2 EPS loss (-$0.05) vs. est. loss (-$0.06); revenue grew 73.3% to RMB8.73 ($1.30 billion) but missed the FactSet consensus of $9.49 billion; deliveries jumped 63.2% to 28.687 vehicles; sees Q3 deliveries of 27,000 to 29,000 EVs and total revenue of RMB8.96 billion to RMB9.56 billion, while the FactSet revenue consensus is RMB14.26 billion.

Energy, Industrials and Materials

·     Turquoise Hill Resources Ltd (TRQ) rejected an offer by majority shareholder Rio Tinto Ltd (RIO) to buy the 49% stake it doesn’t already own for $2.7 billion, as it did not reflect the Canadian company’s full and fair value

·     The renewable energy sector mentioned positively in Barron’s noting some stocks (AES, BE, FCX, PLUG, RUN) to play in the push for renewable energy. Said subsidies will take Bloom Energy Corp. (BE) from break-even to strong profitability; legislation should also “tremendously accelerate profitability” at Plug Power Inc. (PLUG); investing in solar has largely been a bust but Sunrun Inc. (RUN) offers a way to get into the field; Freeport-McMoRan Inc. produces a key raw material used in electric vehicles and other renewable-power applications and should see rising demand

·     Covenant Logistics Group Inc (CVLG) files for mixed shelf; size not disclosed

·     Illinois Tool Works (ITW) downgraded to sell from hold at Deutsche Bank, which struggles to sees the equipment manufacturer’s valuation as justified

Financials

·     Capital One (COF) reported charge-offs for July of 2.36% vs. 1.45% y/y; Charge-offs 2.36% vs. 1.45% y/y; Delinquencies 2.56% vs. 1.71% y/y

·     Discover Financial Services (DFS) credit card delinquency rate 1.05% at July end vs 1.03% at June end; credit card charge-off rate 1.16% at July end vs 1.19% at June end – SEC filing

·     JPMorgan (JPM) reported charge-offs for July of 1.02%; Charge-offs 1.02%; Delinquencies 0.66%

·     Robinhood Markets Inc. (HOOD) hasn’t stolen back its momentum, but it might be getting there, reported the WSJ noting in Q2 the average revenue per user ticked higher for the first time since the start of the meme-stock frenzy in the first quarter of 2021, from $53 the prior quarter to $56. Notably, that was helped by a big increase in non-transaction revenue: Net interest income grew by more than a third from the first to second quarter, to $74 million

Healthcare

·     Barron’s noted new weight loss drugs known as incretins — originally developed to treat Type 2 diabetes — are helping people safely shed more than 20% of their weight and could be the best hope to stem America’s obesity epidemic. Incretins could become the best-selling drugs in pharmaceutical history, reaching more than $50 billion in annual sales by the start of the next decade for their developers, Novo Nordisk AS (NVO) and Eli Lilly & Co. (LLY).

·     Novartis AG’s (NVS) Phase 3 Canopy-A study for canakinumab as adjuvant treatment in non-small cell lung cancer didn’t meet the primary endpoint of disease-free survival versus placebo.; said it will present findings from the study, which concerned patients with stages II-IIIA and IIIB completely resected non-small cell lung cancer, at an upcoming medical meeting.

·     Plus Therapeutics (PSTV) reported data from two ongoing trials of its radiation therapy Rhenium-186 Nanoliposome (186RNL), radion to treat recurrent glioblastoma (GBM) and leptomeningeal metastases

·     Valneva (VALN) files $200M mixed securities shelf

Technology, Media & Telecom

·     Comcast (CMCSA), Charter (CHTR) both downgraded to Neutral at Atlantic Equities on broadband pressures

·     RumbleON inc. (RMBL) says selling securityholders may offer and sell up to 9.0 mln shares of class b common stock