Early Look

Tuesday, July 19, 2022

Futures	Up/Down	%	Last
Dow	218.00	0.70%	31,265
S&P 500	34.25	0.89%	3,868
Nasdaq	109.50	0.92%	12,016

 

 

After losing ground all day yesterday to end lower on the trading day, U.S. stocks are looking at a higher open amid a weaker dollar on reports the ECB may be more aggressive on their interest rate hike progression while markets prep for a busy round of earnings. The major U.S. equity averages finished lower on Monday, giving up gains seen earlier in the day. Investors showed a lack of conviction amid ongoing concerns about the Federal Reserve and the flood of earnings releases due out this week. Solid results in banking helped set the positive tone early, although the initial gains dissipated in the afternoon. The Nasdaq led the major averages higher earlier in the day but ended the session -0.8%. The 10-year Treasury yield advanced 3-bps to 2.96% and the 2-year yield gained 3-bps to 3.16% as the curve remains inverted. There were no major economic indicators on the calendar and the Fed has entered its blackout period ahead of the July 27 FOMC decision, but we see Housing Starts and Building Permit data later this morning. In Asian markets, The Nikkei Index rose 173 points to 26,961, the Shanghai Index edged slightly higher at 3,279, and the Hang Seng Index fell -185 points to 20,661. In Europe, the German DAX is flat at 12,960, while the FTSE 100 edges slightly higher to 7,234. The euro jumped ~1% against the dollar after a report that the ECB may consider raising interest rates by 50 basis points because of the worsening inflation backdrop. US retail gasoline prices fell below $4.50 a gallon for the first time since mid-May, starting to ease pressure at the pump for millions of Americans.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -68.28 points, or 1.63%, to 3,

·     The Dow Jones Industrial Average fell -348.58 points, or 1.05%, to 3

·     The Nasdaq Composite tumbled -304.16 points, or 2.47%, to 11,

·     The Russell 2000 Index declined -14.62 points, or 0.77% to 1,7

 

Economic Calendar for Today

·     7:45 AM ET          ICSC Weekly Retail Sales

·     8:30 AM ET          Housing Starts M/M for June

·     8:30 AM ET          Building Permits M/M for June

·     8:55 AM ET          Johnson/Redbook Weekly Sales

·     4:30 PM ET          API Weekly Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: ALLY, CATC, CFG, FHN, HAL, HAS, JNJ, LMT, MAN, MRTN, SBNY, SI, TFC

·     Earnings After the Close: AEHR, ASPU, CALM, EQBK, FOR, HOPE, HWC, IBKR, JBHT, NFLX, OMC, PNFP, UCBI

 

Other Key Events:

·     Farnborough International Airshow, 7/18-7/22

·     Structured Finance Association Conference, 7/17-7/20, Las Vegas

 

 

Macro	Up/Down	Last
Nymex	-0.90	101.70
Brent	-0.77	105.49
Gold	2.30	1,712.50
EUR/USD	0.0108	1.0251
JPY/USD	-0.51	137.61
10-Year Note	+0.029	2.989%

 

 

World News

·     The U.S. Department of the Treasury released Treasury International Capital (TIC) data for May 2022. The total in May of all net foreign acquisitions of long-term securities, short-term U.S. securities, and banking flows was a net TIC inflow of $182.5 billion. Of this, net foreign private inflows were $220.5 billion, and net foreign official outflows were $38.0 billion. Foreign residents increased their holdings of long-term U.S. securities in May; net purchases were $132.5 billion. Net purchases by private foreign investors were $140.8 billion, while net sales by foreign official institutions were $8.3 billion

·     RBA Minutes of July Meeting: Board remains committed to doing what’s needed to bringing inflation back to target over time; members agreed further steps needed to normalize monetary conditions over months ahead; gauging level of neutral rate is challenging in practice because it can’t be directly observed; members considered raising rates 25 or 50bps; level of rates was still very low for economy with tight labor market & facing period of high inflation

·     The EU doesn’t expect gas supplies to Europe from Russia through the Nord Stream pipeline to restart when scheduled maintenance ends this week – WSJ

 

Sector News Breakdown

Consumer

·     Elon Musk plans to file a counter-lawsuit against Twitter (TWTR) in the coming days, his latest attempt to scrap his $44 billion agreement to buy the social-networking giant, a source close to the case told The NY Post https://bit.ly/3IMoRCm

·     Hasbro (HAS) Q2 adj EPS $1.15 vs. est. $0.95; Q2 revs $1.34B vs. est. $1.37B; qtrly franchise brands rev $743.9M vs $677.2M; sees low-single digit revenue growth on a constant currency basis for 2022; says making significant progress in our strategic plan review and are identifying and realizing cost savings across business

·     Chinese authorities are preparing to impose a fine of more than $1 billion on ride-hailing firm Didi Global (DIDIY.PK) that could bring an end to a probe into the company’s cybersecurity practices, the Wall Street Journal reported on Tuesday.

 

Energy

·     Halliburton (HAL) Q2 adj EPS $0.49 vs. est. $0.44; Q2 revs $5.1B vs. est. $4.7B; North America Q2 revs up 26% q/q to $2.4 billion and Q2 international revenue rose 12% to $2.6 billion q/q; completion and production revenue in q2 2022 was $2.9 billion, and evaluation revenue in the q2 2022 was $2.2 billion, an increase of $232 million, or 12%, when compared to q1 of 2022

·     APA Corp. (APA) sees Q2 international adjusted production is forecast to be 105 Mboe/d, compared to guidance of 107 Mboe/d, with the primary variances attributable to the impact of strong Brent oil prices on Egypt PSC volumes and lower gas production in Egypt

·     Occidental Petroleum (OXY) disclosed that its major shareholder Berkshire Hathaway bought another 1.9M shares of common stock in a total transaction size of $112.1M on July 14^th

·     Exxon Mobil (XOM) upgraded to overweight from neutral at Piper saying that the setup for US energy stocks heading into 2Q earnings is looking increasingly attractive.

·     SunRun (RUN) and Sunnova (NOVA) downgraded at Piper and upgraded FTC Solar (FTCI), saying that the resilience of the sector to recession is likely to come into focus heading into 2Q earnings.

 

Financials

·     Cboe Global Markets (CBOE) upgraded to Overweight from Underweight at Morgan Stanley

·     Jefferies (JEF) announces strategic transactions to simplify operations to continue focus on building the leading independent, full-service global investment banking firm. Will merge its two SEC reporting companies to achieve simplicity and cost savings; $239M agreed sale of Idaho timber resulting in estimated pre-tax gain of $140M

·     Equity Lifestyle (ELS) 2Q EPS $0.33 vs est. $0.34 on revs $365.3Mm vs est. $316.2Mm; FFO $0.64 vs est. $0.64

·     FB Financial Corp. (FBK) Q2 adj EPS $0.64 vs. est. $0.78

·     ServisFirst Bancshares (SFBS) 2Q EPS $1.14 vs est. $1.13 on NII $116.4Mm vs est. $113.4Mm

·     Marathon Digital (MARA) announced that the company has secured approximately 254 megawatts of new hosting arrangements for its Bitcoin mining operations, with an option to increase to 324 megawatts, from a variety of hosting providers

·     Sunstone Hotel Investors (SHO) will replace Vonage (VG) in the S&P SmallCap 600 effective July 21 after market opens.

·     Citizens Financial (CFG) Q2 adj EPS $1.14 vs. est. $0.86; board of directors has authorized company to repurchase up to $1.0 bln of company’s common stock and raised dividend

·     Silvergate Capital (SI) Q2 EPS $1.13 vs. est. $0.84; Book value per share $38.86; Digital currency customers 1,585; Net interest income $70.5 million

·     Truist Financial (TFC) Q2 adj EPS $1.20 vs. est. $1.16; Q2 revs $5.68B vs. est. $5.65B; Q2 CET1 capital ratio 9.2%. Reports Q2 net charge-offs .22%. ROA was 1.14%; adjusted ROA was 1.25%. ROCE was 10.3%; adjusted ROCE was 11.3%. ROTCE was 22.7%; adjusted ROTCE was 24.8%

 

Healthcare

·     Johnson & Johnson (JNJ) Q2 EPS $2.59 vs. est. $2.57; Q2 revs rose 3% to $24.02B vs. est. $23.77B; cuts year sales view to $93.3B-$94.3B from prior $94.8B-$95.8B; qtrly worldwide covid-19 vaccine sales $544 mln vs $164 mln; said stronger dollar impacted results; lowers year EPS to $10-$10.15 from $10.15-$10.35 (est. $10.25)

·     Axogen (AXGN) reported preliminary Q2 estimates with revenue up 2% Y/Y to $34.4M vs. consensus of $33.29M; growth in revenue is expected to be 8% when excluding the impact of $1.8M revenue of Avive Soft Tissue Membrane in the second quarter of 2021; reaffirming its full-year 2022 financial guidance of revenue between $135M-$142M

·     Invitae (NVTA) announces strategic business realignment to accelerate its path to positive cash flow and realize full potential of industry-leading genetics testing platform; exiting non-core businesses and geographies to prioritize higher-margin business initiatives; sees Q2 revs $136M vs. est. $142.7M and margins to be 18%-19% GAAP and 39%-40% non-GAAP

·     iRhythm (IRTC) backs FY22 revenue view $410M-$420M vs. consensus $418.28M; estimates preliminary unit volumes for the three months ended June 30 to be slightly ahead of expectations

·     Incyte (INCY) said the FDA approved its Opzelura cream to treat non-segmental vitiligo in patients 12 years of age and older.

·     Acadia Pharmaceuticals (ACAD) submits new drug application to the U.S. FDA for trofinetide for the treatment of Rett syndrome

 

Industrials & Materials

·     Forward Air (FWRD) raises Q2 EPS view to $1.98-$2.10 from $1.59-$1.63 and above consensus $1.66 while sees Q2 revenue approximately $515M, a slight increase above the high end of prior guidance, consensus $500.33M.

·     Marten Transports (MRTN) 2Q EPS $0.39 vs est. $0.32 on revs $329.6Mm vs est. $286.6Mm

·     Boeing (BA), 777 partners announce new order and commitment for up to 66 737 MAX Jets

·     Triumph Group, Inc., (TGI) and Moog Inc. have entered into a four-year agreement to provide maintenance, repair and overhaul solutions for Boeing 787 landing gear and cargo door actuation control systems through Moog’s

 

Technology, Media & Telecom

·     IBM Corp. (IBM) Q2 EPS $2.31 vs. est. $2.27; Q2 revs $15.54B vs. est. $15.18B; says continue to expect full-year revenue growth at the high end of our mid-single digit model; says recurring revenue stream and solid cash generation positions co well to continue to invest in R&D, acquire new companies; Q2 software rev $6.17B vs about $5.80B, consulting revs $4.81B vs $4.38B, Red Hat rev up 12%, up 17% at constant currency; now expects about $10B in FCF in 2022

·     Arista Networks (ANET) upgraded to Buy from Hold at Needham