Early Look

Friday, January 28, 2022

Futures	Up/Down	%	Last
Dow	-165.00	0.48%	33,878
S&P 500	-17.00	0.39%	4,300
Nasdaq	-8.00	0.06%	13,978

 

 

U.S. futures were higher most of the night, getting a bounce as tech bellwether Apple Inc. (AAPL) posted a sound beat on the top-line, bottom line and both iPhones and Macs for the quarter, beating by revenue by 5% despite noting a supply headwind. The comments may allow investors to take a deep breadth after a month of non-stop selling pressure on rising inflation, geopolitical concerns, a rising interest rate cycle underway by the Fed and supply chain issues/rising costs for corporate companies. Futures have since reversed, with the S&P and Dow futures moving lower while Nasdaq futures are flat. Geopolitical tensions also drive sentiment after Russian Foreign Minister Sergei Lavrov said that the American proposal to defuse tensions with Ukraine contained “rational elements,” even though some key points were ignored. This week goes in the books as one of the more volatile in some time, on track to close out the first month of trading with double-digit % losses.

 

Another early market rally bites the dust, with stocks sinking late Thursday morning throughout the afternoon, led by another rout in tech (semiconductor index, SOX, falls 4.78% and now down 17.79% to start 2022) and major averages failed again against key technical resistance levels (SPX 200-day MA). Quarterly GDP for Q4 came in at up 6.9%, the strongest since 1984 – that was the good news. The bad news was the GDP price index soared 7%, above forecast for 5.9% and prior reading 6% and by the most since 1981 exceeding consensus estimates, suggesting the Federal Reserve may accelerate the pace of rate hikes. Wednesday’s FOMC meeting did nothing to sway the minds on Wall Street, with 4-interst rate hikes apparently in the cards, with even a 5^th on the table according to fed funds futures. The U.S. dollar traded near 18-month highs, while Treasury curves bear flatted with the two-year yield — which is more sensitive to near-term policy moves – rising and the benchmark 10-year falling.

 

Mainland China indexes were mixed ahead of a week-long Lunar New Year holiday after state media again urges investor confidence following recent slump. In Asian markets, The Nikkei Index rose 547 points or 2% to 26,717, the Shanghai Index fell about 1% to 3,361, and the Hang Seng Index declined -1.08% to 23,550. In Europe, the German DAX is down about 2% or over 300 points to 15,210, while the FTSE 100 is down -1.25% at 7,460.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -23.42 points, or 0.54%, to 4,326.51

·     The Dow Jones Industrial Average fell -7.31 points, or 0.02%, to 34,160.

·     The Nasdaq Composite slumped -189.34 points, or 1.40%, to 13,352.78

·     The Russell 2000 Index declined -45.18 points, or 2.29% to 1,931.29

 

Events Calendar for Today

·     8:30 AM ET         Personal Spending for December

·     8:30 AM ET         Personal Income for December…est. +0.5%

·     8:30 AM ET         PCE Price Index MoM, for December

·     8:30 AM ET         PCE Price Index YoY, for December

·     8:30 AM ET         Core PCE Price Index MoM, for December…est. +0.5%

·     8:30 AM ET         Core PCE Price Index YoY, for December…est. +4.8%

·     8:30 AM ET         Employment Cost Index for Q4…est. 1.2%

·     10:00 AM ET       University of Michigan Confidence, Jan-F…est. 68.7

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

 

Earnings Calendar:

·     Earnings Before the Open: ABTX, BAH, BMI, BSVN, CAT, CFFN, CHD, CHTR, CL, CVX, DCOM, GNTX, LYB, MOG/A, PFS, PSX, SBSI, SYF, VFC, WETF, WY

 

 

Macro	Up/Down	Last
Nymex	0.70	87.31
Brent	0.72	90.06
Gold	-13.10	1,784.35
EUR/USD	-0.0012	1.1133
JPY/USD	0.23	115.60
10-Year Note	+0.001	1.783%

 

 

World News

·     Decelerating economic growth will present a challenge to cyclical financials in the coming months, Goldman Sachs strategists said lowering their sector recommendation in financials from overweight to neutral. Historically, financials have performed poorly when yield curve flattens, as it is expected now, and ahead of first Fed rate hike. Strategists also raise energy stocks to overweight from neutral, citing the positive outlook for crude oil prices, attractive valuations. Downside risks for sector include slowing economy, aversion by some ESG-sensitive institutional investors to owning energy shares

 

Sector News Breakdown

Consumer

·     Mondelez (MDLZ) 4Q adj EPS $0.71 vs est. $0.72 on revs $7.66B vs est. $7.59B (organic net revs +5.4%); guides FY22 sees performance in line with long-term growth algorithm of 3+ percent organic net revs growth, sees adj EPS growth +HSD constant currency vs est. +7.7%

·     Autoliv (ALV) Q4 adj EPS $1.30 vs. est. $1.18; Q4 revs $2.12B vs. est. $2.17B; Q4 organic sales decline of 16%; Most outlook indications for 2022 reflect continuing uncertainty in the automotive markets and are mainly based on our customer call-offs and global LVP outlook according to HIS Markit, indicating a full year 2022 global LVP growth of around 9%

·     Beazer Homes (BZH) 1Q EPS $1.14 from cont ops vs est. $0.67; $ value homes in backlog at yr-end +20.9% to $1.4B; Homebuilding gross margin was 20.9%, up 330 basis points; Net new orders of 1,141, down 20.9% on a 16.2% decrease in average community count to 114

·     Boot Barn Holdings (BOOT) Q3 EPS $2.27 vs est. $2.22 on revenue $485.9M vs est. $483.1M; same-store sales +54.2%; has surpassed $1B in sales in first 9 months of this fiscal year, which would be an annual record; sees FY22 new unit growth of 10%

·     Ethan Allen (ETD) Q2 adj EPS $0.95 vs est. $0.76 on revenue $208.1M vs est. $187.25M; said they are taking selective price increases to counter rising costs

·     Robert Half (RHI) Q4 EPS $1.51 vs est. $1.45 on revenue $1.77B vs est. $1.71B, both exceeding high-end of previous guidance

 

Energy, Industrials and Materials

·     U.S. Energy stocks raised to overweight from neutral at Goldman Sachs

·     Chevron (CVX) Q4 adj EPS $2.56 vs. est. $3.12; Q4 revs $48.1B vs. est. $45.69B

·     Caterpillar (CAT) Q4 adj EPS $2.69 vs. est. $2.27; Q4 revenue rose 23% to $13.8B vs. est. $13.15B; dealers decreased inventories during Q4 compared to remaining about flat during Q4 2021; at end of 2021, Financial’s allowance for credit losses totaled $337M, or 1.22% of finance receivables; saw lower sales in China driven by lower end-user demand; sees headwinds to Q1 adjusted operating profit margin vs year-ago

·     Canadian Pacific (CP) Q4 adj EPS C$0.95 vs. est. C$0.98; Q4 revs C$2.04B vs. est. C$2.03B; operating ratio 59.2% vs. 53.9% y/y, estimate 56.5%

·     Celanese (CE) 4Q EPS $4.83 vs est. $5.02 on sales $2.26B vs est. $2.28B; guides 1Q adj EPS $4.30-4.60 vs est. $4.19

·     Eastman Chemical (EMN) 4Q adj EPS $1.81 vs est. $1.86 on revs $2.69B vs est. $2.4B; guides FY22 revs up yr/yr with adj EPS $9.50-10 vs est. $9.61

·     Haynes Int’l (HAYN) 1Q EPS $0.37 vs est. $0.20 on revs $99.4Mm vs est. $94.8Mm; guides 2Q revs about +10% sequential

·     Matthews Int’l (MATW) 1Q adj EPS $0.74 vs est. $0.58 on sales $438.6Mm vs est. $393Mm; sees FY22 adj EBITDA at least $220Mm vs est. $211Mm

·     Olin Corp. (OLN) Q4 EPS $1.89 vs. est. $2.44; Q4 sales $2.43B vs. est. $2.38B; sees 2022 adj Ebitda to improve to $2.5B-$2.8B

·     U.S. Steel (X) Q4 adj EPS $3.64 vs. est. $4.41; Q4 revs $5.62B vs. est. $5.44B; authorized a new $500M share buyback program; Q4 adjusted EBITDA of $1.728B; full-year 2021 adjusted EBITDA of $5.592B; liquidity of $4.971B, including cash of $2.522B

 

Financials

·     Visa Inc. (V) Q1 adj EPS $1.82 vs. est. $1.70; Q1 revs rose 25% YoY to $7.1B vs. est. $6.8B; total cross-border volume on a constant dollar basis increased 40% in the quarter; cross-border volume excluding transactions within Europe increased 51% on a constant-dollar basis; payments volume for the three months ended December 31, 2021, increased 20% over the prior year

·     Robinhood (HOOD) 4Q EPS ($0.49) vs est. ($0.45) on revs $363Mm vs est. $362Mm, transaction-based revs +12% to $264Mm; sees FY22 total op exp excl share-based comp +15-20%, sees FY22 share-based comp down 35-40%

·     Affirm (AFRM) shares rose after hours after Visa (V) CEO said last night the company will part with Affirm for its debit card

·     Byline Bancorp (BY) Q4 adj EPS $0.69 vs est. $0.50 on revenue $80.7M vs est. $76.1M; CET1 ratio 11.39%, net interest margin 3.96%

·     Cathay General Bancorp (CATY) Q4 EPS $0.98 vs est. $0.92; Q4 total loans ex-PPP +$444.6M (+11.4%), total deposits increased $1.1B (+24.7%); provision for credit losses $3.5M vs $3.1M in Q3 and losses of $5M in 4Q20

·     Fair Isaac (FICO) 1Q adj EPS $3.70 vs est. $3.36 on revs $322.4Mm vs est. $327.9Mm; guides FY22 adj EPS $14.12 vs est. $14.81, sees FY revs $1.35B vs est. $1.38B

·     Synchrony (SYF) Q4 EPS $1.48, in-line with ests; Q4 net charge-offs 2.37% and new accounts increased 20% to 7.3M; qtrly net interest income increased $171 million, or 5%, to $3.8 billion

·     WR Berkley (WRB) Q4 EPS $1.59 vs. est. $1.26; Q4 revs $2.58B vs. est. $2.44B; Q4 quarterly underwriting income a record of $260.9M; net premiums written increased 26.6%; current accident year combined ratio before catastrophe losses of 2.2 loss ratio points was 86.0%

·     Western Alliance (WAL) acquires Digital Settlement Technologies, DBA Digital Disbursements – a digital payments platform for the class action legal industry.

·     U.S. Financials cut to neutral from overweight at Goldman Sachs

 

Healthcare

·     Biogen (BIIB) confirmed that they have entered into an agreement whereby Samsung Biologics will acquire Biogen’s equity stake in the Samsung Bioepis joint venture for an aggregate consideration of up to $2.3B

·     Oscar Health (OSCR) prelim FY21 adj EBITDA ($430,000) vs est. ($479,350), direct and assumed premiums $3.43B; total enrollment for 2022 tops 1M, sees FY22 premiums $6.1B-$6.4B that represents more than 80% growth at midpoint, adj EBITDA ($480,000)-($380,000) vs est. ($325,220); also announced a $305M capital raised

·     ResMed (RMD) 2Q adj EPS $1.47 vs est. $1.52 on revs $894.9Mm vs est. $935.3Mm, gross margin 56.4%

·     Stryker (SYK) Q4 adj EPS $2.71 vs. est. $2.72; Q4 revs $4.7B vs. est. $4.65B; qtrly organic net sales increased 9.0% from 2020; sees FY22 EPS $9.60-$10.00 vs. est. $10.15; sees 2022 organic net sales growth to be in range of 6% to 8%; anticipates 2022 sales and eps will be modestly unfavorably impacted as compared to 2021

·     The U.S. ITC is investigating whether two companies stole trade secrets to market a biosimilar of AbbVie’s (ABBV) best-selling biologic, Humira. AbbVie has been trying to ward away competition from Teva Pharmaceuticals (TEVA) and its partner, Alvotech, which have been gearing up to create a cheaper competitor for the rheumatoid arthritis drug – STAT News

 

Technology

·     Apple Inc. (AAPL) shares rise 3%; Q1 $2.10 vs. est. $1.89; Q1 revs rise 11% YoY to $123.95B vs. est. $119.05B; products revenue rose 9.1% YoY to $104.43B; CFO says supply chain issues cost more than $6 bln in qtr, in line with guidance; segment breakdown” iPhone revs up 9.2% to $71.63B (est. $67.74B), Mac revs up 25% YoY to $10.85B (beat) and iPad revs fell -14% YoY to $7.25B (moss); Q1 wearables, home and accessories $14.70B up 13%; CFO says supply chain issues primarily chip shortages for older models of products; CFO says easing of supply chain issues in current qtr due to ongoing work with suppliers; Q1 gross margin 43.8% vs. est. 41.7%

·     Atlassian Corporation Plc (TEAM) 2Q EPS $0.50 non-IFRS vs est. $0.39 on revs $689Mm vs est. $641.3Mm, op margin 26%; guides 3Q revs $690-705Mm vs est. $662.9Mm with gross margin 82-83% and adj EPS $0.29-0.31 non-IFRS basis

·     Juniper Networks (JNPR) 4Q adj EPS $0.56 vs est. $0.53 on revs $1.3B vs est. $1.27B, adj op margin 18.3%; guides 1Q revs $1.15B vs est. $1.13B; sees Q1 EPS $0.26-$0.32 vs. est. $0.32

·     KLA-Tencor (KLAC) Q2 adj EPS $5.59 vs. est. $5.45; 2 revs $2.35B vs. est. $2.33B; sees Q3 EPS $4.35-$5.52 and revs $2.1B-$2.3B vs. est. $5.50 and $2.37B

·     National Instruments (NATI) Q4 adj EPS $0.60 vs. rest. $0.20; Q4 revs $420.641M vs. est. $404.96M; sees Q1 EPS $0.35-$0.49 vs. est. $0.22; sees Q1 revs $385M-$415M vs. est. $393.28M; approves $250M share repurchase

·     Western Digital (WDC) shares fell -9%; 2Q adj EPS $2.30 vs est. $2.13 on sales $4.83B vs est. $4.82B; guides 3Q revs $4.45-4.65B vs est. $4.75B and adj EPS $1.50-1.80 vs est. $1.94