Early Look

Friday, December 16, 2022

Not a good look for U.S. S&P futures overnight, falling another 1% further post the FOMC policy meeting where Chairman Powell made it clear interest rate hikes will be longer and a bit deeper than markets had previously forecasted. As rates tumbled for years to historic lows, the mantra was “don’t fight the Fed” with stock markets rising daily. Now, with the Fed in a sharp rate hike cycle, it finally appears the market is listening and not fighting the Fed, just to the downside. With a sharp post-Federal Reserve slide, the S&P 500 (SP500) finished Thursday at a one-month trading low, falling below its 100-day moving average for the first time since early November and breaching its 200-day moving average just a day prior. The S&P 500 rounded out Thursday lower by 2.5%, at the 3,895 level. This was below the index’s 100-day moving average, which was at 3,930. Moreover, the close marked the first finish below 3,900 since Nov. 9. The S&P 500 posted its biggest daily pct decline since Nov. 2 yesterday -2.48%, the Nasdaq declines most since Nov. 2 falling -3.2%, and the Dow falls most since Sept. 13, down -2.25%. In Asian markets, The Nikkei Index declined -524 points or 1.87% to 27,527, the Shanghai Index was little changed again, and the Hang Seng Index rose 82 points to 19,450. In Europe, the German DAX is down -100 points to 13,883, while the FTSE 100 is down -42 points to 7,385.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -99.22 points, or 2.48%, to 3,896.10

·     The Dow Jones Industrial Average fell -763.54 points, or 2.25%, to 33,202.81

·     The Nasdaq Composite sunk -360.36 points, or 3.23%, to 10,810.53

·     The Russell 2000 Index declined -45.85 points, or 2.52% to 1,774.61

Economic Calendar for Today

·     9:45 AM ET            S&P Global Manufacturing PMI, Dec-Flash

·     9:45 AM ET            S&P Global Services PMI, Dec-F

·     9:45 AM ET            S&P Global Composite, Dec-F

·     10:00 AM ET          NAHB Housing Market Index for December

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

World News

·     U.S. Oct net overall capital flow +$179.9B vs +$30.4B in Sept (prev +$30.9 bln); U.S. Oct net long-term flow (ex-swaps/other) +$67.8B vs +$117.7B in Sept (prev +$118.0 bln)

·     Eurozone Trade Balance Total (EUR) Oct: -28.3B (vs. prior -36.4B); Eurozone Trade Balance EU (EUR) Oct: -26.5B (vs. prior -34.4B)

·     Eurozone CPI (Y/Y) Nov F: 10.1% (vs. est. 10.0%; and prior 10.0%); Eurozone CPI (M/M) Nov F: -0.1% (vs. est. -0.1% and prior -0.1%); Eurozone CPI Core (Y/Y) Nov F: 5.0% vs. est. 5.0%

Sector News Breakdown

Consumer

·     Krispy Kreme Inc (DNUT) reiterated its full-year 2022 guidance that was provided in conjunction with its second and Q3 2022 results; sees 2023 revenue growth of low double-digits in constant currency

·     Scholastic Corp. (SCHL) 2Q adj EBITDA $122.3Mm on revs $587.9Mm; affirming FY guide for adj EBITDA $195-205Mm and revs +8-10%

·     Shoe Carnival (SCVL) announces new $50 million share repurchase program and declares quarterly cash dividend

Energy, Industrials and Materials

·     Solar stocks will be active (FSLR, SPWR, SEDG) after California lowers financial incentives for rooftop solar panels in rules overhaul; the changes approved by the California Public Utilities Commission lessens the overall financial incentive for selling excess power back to utilities. The changes will only apply to customers of those three major utilities — Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric — and there will be a transition period

·     United States Steel Corp (X) said Q4 adjusted EBITDA is expected to be approximately $375M and guides Q4 adj EPS $0.58-$0.63 vs. est. $0.43; said Flat-rolled segment’s adjusted EBITDA is expected to be lower than Q3; Mini Mill segment’s adjusted EBITDA is expected to be negative in Q4; Tubular segment is expected to deliver another quarter of incremental earnings

·     A bill to rescind the COVID-19 vaccine mandate for members of the U.S. military and provide nearly $858 billion for national defense passed the Senate on Thursday and now goes to President Joe Biden to be signed into law.

·     QUANEX (NX) Q4 adj EPS $0.75 vs. est. $0.60; Q4 adj Ebitda +3.8% y/y to $38.7M; Q4 sales rise 5.4% y/y to $307.5M vs. est. $294.8M; says would be premature to give guidance at this time

·     Rio Tinto Ltd (RIO) completed its long-drawn-out acquisition of remaining 49% stake in Turquoise Hill Resources (TRQ), giving the Anglo-Australian firm a 66% stake in Mongolia’s Oyu Tolgoi, the world’s largest known copper and gold deposit.

Financials

·     LPL Financial Holdings Inc (LPLA) total advisory and brokerage assets at end of Nov were $1.14 trillion, an increase of 4.5%, compared to end of Oct 2022

Healthcare

·     Guardant Health (GH) shares fell -24% after saying a pivotal trial of its DNA blood test showed that it detected 83% of colorectal cancers and 13% of advanced adenomas, a cancer precursor, when measured against colonoscopy. Reuters notes had predicted the 20,000-person trial would likely show sensitivity of 85%-86% for colorectal cancer and 20%-25% for advanced adenomas. Guardant is one of several companies, including Exact Sciences (EXAS) and Illumina’s (ILMN’s) Grail unit, aiming to develop DNA blood tests that can detect early-stage cancer. Cologuard, a stool-based cancer test, identifies 92% of colorectal cancers and 42% of pre-cancerous polyps, according to data from Exact Sciences, Reuters noted

·     Avidity Biosciences (RNA) 12M share Secondary priced at $17.25

·     Novavax (NVAX) 6.5M share Secondary priced at $10.00

Technology, Media & Telecom

·     Adobe Systems (ADBE) 4Q adj EPS $3.60 vs est. $3.50 on revs $4.5B vs est. $4.5B; sees 1Q revs $4.6-4.64B vs est. $4.64B and adj EPS $3.65-3.70 vs est. $3.64

·     Meta Platforms (META) upgraded to Overweight from Neutral at JPMorgan and up tgt to $150 from $115

·     Twitter on Thursday suspended the accounts of several prominent journalists who recently wrote about its new owner Elon Musk, with the billionaire tweeting that rule banning the publishing of personal information applied to all, including journalists