Early Look

Monday, February 7, 2022

U.S. stocks are looking modestly lower to start a busy week of earnings, inflation data (CPI) among other macro concerns as Treasury yields remain elevated at 1.92% for the 10-year after strong economic data last week adds to growing expectations the Fed will need to ramp up interest rates in 2022 to fight surging prices. FedWatch tool is pricing in a 100% chance of a March rate hike, with more than a third of those bets suggesting the Fed may increase its benchmark rate by 50 basis points. A big week of inflation on deck, led by the January CPI on Thursday as the consumer price index probably jumped 7.3% in January from a year ago, the largest annual advance since early 1982. Oil prices ease, as WTI crude slips off fresh 7-year highs on Friday. China stocks climb the most in 2-months in holiday catch-up trade after being closed all last week for Lunar holiday. In Asian markets, The Nikkei Index fell -191 points to 27,248, the Shanghai Index gained over 2% to 3,429, and the Hang Seng Index edged higher 6 points to 24,579. In Europe, the German DAX is up about 20 points to 15,120, while the FTSE 100 adds +0.35% to 7,540. Bitcoin and other crypto assets surging, adding to tail end of week strength, up 5% to $42,600 and Ethereum up 4% to $3,075

Stocks finished last week with gains across the board, as the three indices were positive with the Dow up 1.0%, the S&P 500 1.6% and the Nasdaq 2.4%, though ended Friday with a late day pullback to pare its daily/weekly gains. U.S. Treasuries fell Friday with the 10-year yield briefly climbing above 1.93% and stocks erased early losses to finish in the green after a better-than-expected U.S. jobs report increased bets of tighter Federal Reserve monetary policy. U.S. payrolls came in at a three-month high as employers added more jobs than forecast last month while average hourly earnings also increased more than anticipated. U.S. gasoline prices surged to the highest in more than seven years, WTI crude hit another seven-year high topping $93 per barrel (settled below however). Earnings were a key driver for stocks last week as a plunge in shares of Meta Platforms (FB) late week sunk tech stocks though a solid earnings report from Amazon.com (AMZN), SNAP and SPOT helped rally the sector. Amazon posted the biggest single day market-cap gain for a stock on Friday, a day after Meta posted the largest market-cap loss ever the day prior.

Market Closing Prices Yesterday

·     The S&P 500 Index climbed 23.09 points, or 0.52%, to 4,500.53

·     The Dow Jones Industrial Average fell -21.42 points, or 0.06%, to 35,089.74

·     The Nasdaq Composite surged 219.19 points, or 1.58%, to 14,098.01

·     The Russell 2000 Index advanced 10.46 points, or 0.53% to 2,002.13

Events Calendar for Today

·     3:00 PM ET        Consumer Credit for December

Earnings Calendar:

·     Earnings Before the Open: AMG, BABA, CNA, CRNC, ENR, GTES, HAS, L, ON, TSN, ZBH

·     Earnings After the Close: ACLS, ACM, AMGN, AOSL, BRX, CHGG, CNXN, KE, KFRC, KMT, LEG, MTRX, NUAN, PDM, PFG, RMBS, SLQT, SPG, SSD, TDC, THC, TTWO, VRNS

World News

·     China PBOC injects 20 billion yuan via 7-day reverse repo on February 7. 150-billion-yuan due today, so 130 bln yuan will be drained from the market.

Sector News Breakdown

Consumer

·     Peloton (PTON) is attracting interest from potential suitors including Amazon.com (AMZN), The Wall Street Journal reported late Friday, citing people familiar with the matter. Amazon has been speaking to advisers about a potential deal, nut there’s no guarantee it will follow through with an offer or that Peloton, which is working with its own advisers https://on.wsj.com/3snOPnU

·     Unilever Plc (UL) top shareholders are calling for the consumer goods company to make some major changes especially after its recent failed $68B bid for GlaxoSmithKline’s (GSK) consumer health business, the Financial Times reported. The shareholder comments come after reports last month that activist investor Trian Partners took a stake in the consumer goods company.

·     Hasbro (HAS) Q4 adj EPS $1.21 vs. est. $0.88; Q4 revs rise 17% to $2.01B vs. est. $1.87B; raises dividend to $0.70; expects revenue and operating profit growth at low-single digit rate for 2022; for 2023, sees operating profit margin is expected to exceed 16% and operating cash flow should reach approximately $1 billion

·     Boston Beer (SAM) mentioned positively in Barron’s saying over the past two years, Boston Beer’s stock chart has resembled a steeply sloped mountain peak, having closely tracked the hard seltzer hype on the way up and tumbled alongside the ensuing disillusionment, but reset expectations and a discounted stock price now make Boston Beer’s stock interesting again

·     Barron’s said hotels are readying for a surge in demand as people begin to travel, according to the lodging and leisure analyst with Truist Securities who says Hyatt Hotels (H), Hilton Grand Vacations (HGV) and Marriott Vacations Worldwide (VAC) are a buy

·     Bath & Body Works (BBWI) entered an accelerated share buyback pact and will buy $1 billion of own outstanding stock

Energy, Industrials and Materials

·     Spirit Airlines, Inc. (SAVE) and Frontier Group Holdings, Inc. (ULCC), parent company of Frontier Airlines, Inc., today announced a definitive merger agreement valued at $6.6B under which the companies will combine, creating America’s most competitive ultra-low fare airline. Spirit shareholders will receive 1.9126 Frontier shares plus $2.13 in cash for each share owned, equal to a value of $25.83 per Spirit share at Frontier’s closing stock price on Friday

·     Air Products (APD) downgraded to Neutral from Buy and cut tgt to $285 from $337 at JPMorgan

·     NOV Inc. (NOV) downgraded to Neutral from Overweight at JPMorgan

·     American Airlines (AAL) agreed to buy an additional 23 737 MAX 8 aircraft from Boeing Co (BA) by exercising existing purchase options and deferring the delivery of some 787-9 Dreamliner aircraft.

Financials

·     CNA Financial (CNA) Q4 core EPS $0.97 vs. est. $1.01; Q4 book value per share $47.20; said Q4 gross written premium growth ex captives was 16% in the quarter and 10% for the year; rates were stable with the third quarter at 8%, and for the full year we achieved 9%; raises dividend

·     Walker & Dunlop (WD) is acquiring GeoPhy, a commercial real estate technology company for $85M in cash to be paid at closing with an additional $205M of cash earn-out potential

·     RenaissanceRe Holdings Ltd (RNR) raises quarterly dividend to $0.37 per common share and approved renewal of Co’s authorized share repurchase program, bringing total current authorization to $500M

Healthcare

·     Medtronic (MDT) mentioned positively in Barron’s saying after a rough stretch, this year could make investors feel a whole lot better; says shares could gain 20% saying with the stock beaten down as omicron has hurt demand for hospital elective procedures, but Medtronic could be a bargain for investors seeking a stable grower in a rocky market 

·     Zimmer Biomet (ZBH) Q4 EPS $1.95 vs. est. $1.98; Q4 revs $2.04B vs. est. $2.07B; sees FY22 adj EPS $6.40-$6.80 vs. est. $7.92; sees FY22 revenue down 4% to flat; sees FY22 adjusted tax rate 16%-16.5%

·     AstraZeneca Pharmaceuticals LP (AZN), a U.S. subsidiary of the company will terminate its $1.3 billion pension plan later this year, according to company officials

·     Intellia Therapeutics (NTLA) upgraded to Outperform from Perform at Oppenheimer

Technology, Media & Telecom

·     Snowflake (SNOW) upgraded to Overweight from Equal Weight at Morgan Stanley and raise tgt to $390 from $344

·     DISH Network Corporation (DISH) announced it reached a new carriage agreement with Tegna Inc. (TGNA). Local stations have been immediately restored on DISH TV, in time for the Winter Olympics and Super Bowl LVI.

·     Swedish price comparison firm PriceRunner said it was suing Alphabet-owned (GOOGL) for about 2.1 billion euros ($2.4 billion), the latest firm to take legal action alleging the search giant manipulated search results.