Early Look

Monday, July 25, 2022

U.S. stock futures are rebounding after Friday’s losses, while Treasury yields advance amid recession concerns. European stocks bounce after their best week since May, with energy shares leading declines with oil. Overall lighter earnings result this morning, but picks up steam the rest of the week while U.S. data today includes Chicago National Activity and Dallas Manufacturing activity indices. Stocks tumbled on Friday following a handful of disappointing earnings results and guidance, punishing the technology and communication services sector, but still managed strong weekly advances. The S&P 500 climbed 2.6% for its best week in a month while the Nasdaq rises 3.5% for its best week since July 8. Investors now prep for the busiest week of the quarterly earnings season with roughly 1/3 of the S&P 500 expected to report results and the FOMC monetary policy meeting results due on Wednesday. Markets are preparing for the Fed to raise rates by at least 75-bps points this week, with still an outside possibility of an overly aggressive 100-bps hike to help stem the rampant inflation that has plagued markets and has been slowing the economy. In Asian markets, The Nikkei Index declined -215 points to 27,699, the Shanghai Index dropped -0.6% to 3,250, and the Hang Seng Index dips -46 points to 20,562. In Europe, the German DAX rises 60 points to 13,313, while the FTSE 100 rises 23 points to 7,300.

Market Closing Prices Yesterday

• The S&P 500 Index dropped -37.32 points, or 0.93%, to 3,961.63
• The Dow Jones Industrial Average fell -137.61 points, or 0.43%, to 31,899.29
• The Nasdaq Composite tumbled -225.50 points, or 1.87%, to 11,834.11
• The Russell 2000 Index declined -29.81 points, or 1.62% to 1,806.88

Economic Calendar for Today

•  8:30 AM ET                 National Activity Index for June

·      1:00 PM ET                   US to sell $45B in 2-year notes

·      10:30 AM ET                Dallas Fed manufacturing for July

Earnings Calendar:

·      Earnings Before the Open: BOH CBU DORM DX ICPT LKFN NEM RPM SBSI SQSP

·      Earnings After the Close: ACC AGNC AIN ARE BDN BRO CADE CALX CATY CDNS CR CVLG FFIV FSBC HLX HMST HSII HTLF HXL IBTX KALU KREF LBRT MEDP MEDS OTIC PCH PETS PKG RBB RRC SMBK SSD SUI TBI UHS WHR WSFS

World News

• U.S. Treasury Secretary Janet Yellen said on Sunday that the U.S. economic growth was slowing and she acknowledged the risk of a recession, but she said a downturn was not inevitable.

Sector News Breakdown

Consumer

• World Wrestling Entertainment’s (WWE) Vince McMahan announced his retirement saying as majority shareholder, will continue to support WWE in any way he can
• Ryanair (RYAAY) said a return to pre-COVID levels of profitability this year was not certain even as it topped Q1 estimates; after-tax profit of 170 million euros ($174 million) for the quarter ended June was ahead of estimates of 157 million euros but down y/y
• Tesla (TSLA) is scheduled for court-ordered settlement talks in a shareholder lawsuit over Chief Executive Officer Elon Musk’s 2018 tweets suggesting he had funding to take the company private – WSJ
• Yum! Brands (YUM) positively mentioned in Barron’s saying shares while the fundamentals look lousy, restaurant stocks have begun showing signs of life, and in an environment of slowing growth, Yum! Brands (YUM) looks particularly attractive
• United Airlines (UAL) downgraded to Neutral from Positive at Susquehanna
• Corsair Gaming (CRSR) files to sell 54.18M shares of common stock for holders

Energy, Industrials and Materials

• Boeing (BA): The International Association of Machinists and Aerospace Workers voted to strike after rejecting a contract offer from Boeing that is said did not "adequately compensate our members’ 401(k) plan." The plants, which largely produce military aircraft for the plane maker, are located in Missouri and Illinois. Union leaders said Boeing’s three-year contract offer, put its members’ retirement plans in jeopardy, while the company said it had offered a $3,000 ratification bonus and called the offer "highly competitive.
• U.S. crude prices settled below $95 a barrel for the first time since April in choppy trading on Friday after the European Union said it would allow Russian state-owned companies to ship oil to third countries under an adjustment of sanctions agreed by member states this week.
• Babcock & Wilcox (BW) renewable awarded $12 million in contracts for 144-megawatts of utility-scale solar installation projects
• Huntsman (HUN) downgraded to Neutral from Buy at UBS

Financials

• Equifax (EFX) files automatic mixed securities shelf
• Ally Financial (ALLY) downgraded to Underweight from Neutral at Piper Sandler
• Open Lending (LPRO) downgraded to Underweight from Equal Weight at Morgan Stanley
• Travelers (TRV) upgraded to Strong Buy from Market Perform at Raymond James

Healthcare

• Philips (PHG) posted a bigger-than-expected drop in Q2 core earnings saying supply shortages and lockdowns in China had dented sales; cut its estimate for full-year sales growth to between 1% and 3%, from 3% to 5%, while forecasting 2H growth of 6% to 9% on a strong order backlog.
• SIGA Technologies (SIGA), Tonix Pharma (TNXP), Chimerix (CMRX), Inovio Pharma (INO) and other vaccine related names seeing strength after the W.H.O. Declares Monkeypox Spread a Global Health Emergency. There have been more 16,000 cases outside Africa, and the virus has reached 75 countries and territories.
• AstraZeneca (AZN) announced that "Ultomiris, or ravulizumab, has been recommended for marketing authorization in the European Union (EU) as an add-on to standard therapy for the treatment of adult patients with generalized myasthenia gravis

Technology, Media & Telecom

• Intel (INTC) says it will produce chips for Taiwan’s MediaTek Inc. but did not provide any financial terms of the deal or details on the number of chips. INTC says first products would be manufactured in the next 18 to 24 months using the Intel 16 process
• Infosys (INFY) Q1 EPS $0.16 vs. est. $0.18; Q1 revs $4.44B vs. est. $4.37B; raises FY23 revenue view to up 14%-16% from 13%-15% and still sees FY23 operating margin 21%-23%
• Squarespace (SQSP) Q2 EPS $0.45 vs. est. $0.15; Q2revs $212.07M vs. est. $212.01M; said the annual run rate revenue increased 8% y/y to $837.8M; unique subs increased 6% y/y to 4.2M. Average revenue per unique subscription increased 6% y/y to $204; sees Q3 revenue $213M-$218M below consensus $221.87M
• Rogers Communications (RCI) said on Sunday it will invest C$10B over the next three years in Artificial Intelligence, and more testing and oversight, just weeks after the company reported network issues that caused widespread disruptions across the country – Reuter
• Amazon (AMZN) mentioned positively in Barron’s saying shares never looked more attractive for investors. When Amazon reports second quarter earnings on July 28, Wall Street analysts expect revenue growth of just 5%, which is a tepid number by its standards, and if things are just slightly worse than expected, revenue could actually decline
• Vodafone (VOD) is making progress towards resolving issues in its biggest market Germany after suffering a drop in service revenue there; said it lost 79,000 TV and 64,000 broadband customers in the first quarter, resulting in a 0.5% decline in service revenue in the country after a new law ended automatic renewals and an IT system underperformed.
• Lam Research (LRCX), Camtek (CAMT) and Ouster (OUST)  downgraded to Equal Weight from Overweight at Barclays saying they are not buyers of the recent bounce and think Semis are still in for a substantial reset (more Tech Bubble than Financial Crisis). We outline our updated Semi forecast, cut WFE estimates, and downgrade LRCX, CAMT, and OUST