Early Look

Monday, January 31, 2022

U.S. stock futures are mixed early as the S&P 500 is looking down slightly following the late Friday surge, while the tech heavy Nasdaq looks higher ahead of a big week of earnings and looking to rebound after falling roughly 12% MTD (far better than -16% late last week). Heading into the last trading day of the month, stocks are set for their worst January since 2008 as traders weigh earnings results against the threat of rising interest rates. That comes despite a strong rally late Friday as the Dow surged more than 560 points for its best day of 2022, S&P gains nearly 2.5%, and Nasdaq ends higher by more than 3%, as the late day push (literally last 30 minutes) helped major averages snap their weekly declines to finish mostly flat for the volatile 5-day stretch. The S&P 500 rose 2.4% amid the late day, coming up a few points short of its 200-day moving average (MA) a key level it has failed the past week (200-day MA at 4,435). The Nasdaq went green for the week with a massive 1% surge in the final 15 minutes (Nasdaq closed higher by +0.01%), helped by gains in Apple (AAPL) after earnings, snapping its 4-week losing streak. Another big week for tech earnings coming up with Amazon (AMZN), Alphabet (GOOGL) AMD (AMD), and Meta (FB) among them. The U.S. dollar posts biggest weekly rise in 7-months, up 1.7% on rising rate expectation. Leaders last week included Energy up 5%, Info tech +2.2% and Financials +1.3% top sector gainers this week, while industrials fell -1.46% (led by CAT, BA declines), Utes -1.33% and Cons Discretionary -1.29% top sector decliners. Investors remain concerned about the potential for faster tightening by the Federal Reserve, rising inflation, geopolitical tensions, and an uneven earnings season. Treasuries gained, with the short end outperforming as curves narrowed to around 61 bps for the 2s10s spread. In Asian markets, The Nikkei Index rose over 1% to 27,001, the Shanghai Index was closed or its week-long holiday, the Hang Seng Index gained 252 points or over 1% to 23,802. In Europe, the German DAX is higher by 75 points to just shy of 15,400, while the FTSE 100 is up a few points to 7,475. The U.S. and the European Union are nearing a package of sanctions against Russia if there’s an invasion of Ukraine

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 105.49 points, or 2.44%, to 4,432.00

·     The Dow Jones Industrial Average rose 565.42 points, or 1.66%, to 34,726.20

·     The Nasdaq Composite surged 417.79 points, or 3.13%, to 13,770.57

·     The Russell 2000 Index advanced 37.22 points, or 1.93% to 1,968.51

Events Calendar for Today

·     9:45 AM ET                  Chicago PMI for January

·     10:30 AM ET                Dallas Fed Manufacturing Index for January

Earnings Calendar:

·     Earnings Before the Open: AKTS, ARLP, ATKR, FFWM, FSBC, LHX, OTIS, TT

·     Earnings After the Close: AGNC, ARE, AXTA, CACC, CBT, CRUS, CSWC, FISI, GGG, HLIT, HP, HTLF, JJSF, LMPR, KRC, PCH, SANM, WWD

World News

·     Caixin Manufacturing Purchasing Managers’ index contracted for the second time in three months in January, falling to 49.1, from 50.9, and close to its lowest point since the start of the pandemic

·     The official National Bureau of Statistics fell to 50.1 in January, from 50.3 a month earlier. That’s just above the 50-point threshold that indicates expansion rather than contraction

Sector News Breakdown

Consumer

·     Beyond Meat (BYND) upgraded to Overweight from Underweight at Barclays and tgt raised to $80 from $70

·     Casino (CASP.PA) shares fell after the supermarket chain on Friday cut its 2021 guidance for its French retail business; had previously expected growth in its French retail operating profit, now expects a “slight decrease”; says France’s food retail sector had declined by a bigger margin than expected in Q4 2021

·     Ryanair (RYAAY) pricing recovery is dependent on no negative covid developments; demand has been incredibly strong; there is huge pent-up demand; sees huge pent-up savings; hope very strong recovery in summer will be not just volumes but also yield; we are cautiously optimistic; if no covid hit by easter, we will be set for very strong summer recovery – Reuters

Energy, Industrials and Materials

·     Chevron (CVX) downgraded to Hold from Buy at Truist, and the firm upgraded EOG Resources (EOG) to Buy from Hold

·     L3Harris Technologies (LHX) Q4 adj EPS $3.30 vs. est. $3.26; Q4 revs $4.4B vs. est. $4.48B; sees FY22 adjusted EPS $13.35-$13.65 vs. est. $13.65; sees FY22 revenue $17.3B-$17.7B vs. est. $18.05B

·     Otis Worldwide (OTIS) Q4 adj EPS $0.72 vs. est. $0.68; Q4 revs $3.57B vs. est. $3.58B; Q4 cash from operations of $277M decreased $32M and free cash flow of $236M decreased $2M; free cash flow benefited from a $30M reduction in capital expenditures.

·     Tesla (TSLA) upgraded to Outperform from Neutral at Credit Suisse with unchanged $1,025 tgt

·     Trane (TT) Q4 adj EPS $1.36 vs. est. $1.31; Q4 revs rose 12% $3.6B vs. est. $3.55B; sees FY22 adjusted EPS $6.95-$7.15 vs. est. $6.05

·     Wesco (WCC) a positive mention in Barron’s saying the distributor of electrical and communications products will benefit from a boost in spending on electrical infrastructure

Financials

·     LXP Industrial Trust (LXP) received a $16 per-share cash offer from activist investor Land & Buildings, offer represents am 11% premium to LXP’s most recent closing price of $14.41 https://bit.ly/3Hv9I7j

Healthcare

·     Illumina (ILMN) has announced that its new gene-sequencing platform, Infinity, will read larger chunks of DNA than its earlier platform — part of a bid to better diagnose rare diseases and unravel more of the genome – STAT News

·     Alex Therapeutics and Pfizer (PFE) have joined forces to provide evidence based, clinically validated and personalized digital therapies to patients.

·     IDEAYA Biosciences (IDYA) announced initiation of IND-enabling studies for IDE161, a PARG inhibitor development candidate

·     GoHealth (GOCO) disclosed that on January 24, Vance Johnston notified the company of his intention to resign from his position as the company’s Chief Financial Officer to pursue other business opportunities

·     Reata Pharmaceuticals (RETA) initiates rolling submission of New Drug Application with U.S. FDA for Omaveloxolone for the treatment of patients with Friedreich’s Ataxia; plans to complete submission by the end of the first quarter of 2022

·     Qatari Ministry of Health approved the Pfizer (PFE) – BioNTech’s (BNTX) coronavirus vaccine for children aged 5 to 11 years, source Reuters.

Technology, Media & Telecom

·     Citrix Systems Inc. (CTXS) is close to a deal to be taken private as Elliott Management Corp.’s private-equity arm, Evergreen Coast Capital, and Vista Equity Partners are near an agreement to pay $104 a share, or roughly $13 billion, for the software company, the WSJ reported, according to people familiar with the matter. https://on.wsj.com/3s66YX9

·     Spotify (SPOT): Joe Rogan, responding to Neil Young’s objections to his podcast and host Spotify, said his show has grown “out of control” and pledged to be more balanced and informed about controversial topics and guests. Rogan said, “If I pissed you off, I’m sorry,” referring to growing backlash against him and Spotify Technology SA stemming from the folk rocker’s accusations that they spread false information about Covid-19 vaccines through the popular podcast.

·     Sony (SONY), Microsoft (MSFT) and Nintendo (NTDOY): Consumers laid out $5.74 billion on PC gaming hardware and accessories last year, according to a report from the NPD Group, a jump of 25% from 2020. And 2020 had seen its own 62% increase on that measure, year-over-year.

·     T-Mobile (TMUS) will fire corporate employees who are not fully vaccinated against COVID-19 by April 2, according to an internal company memo

·     Microchip (MCHP) upgraded to Buy from Neutral at UBS

·     Netflix (NFLX) upgraded to Buy from Neutral at Citigroup and lower tgt to $450 from $595 and also upgraded Spotify (SPOT) to Buy