Early Look

Friday, June 3, 2022

Futures	Up/Down	%	Last
Dow	-80.00	0.24%	33,143
S&P 500	-17.25	0.41%	4,158
Nasdaq	-97.50	0.76%	12,796

 

 

U.S. futures edge lower ahead of the monthly jobs report at 8:30 AM, with estimates for gains of +325K jobs in both nonfarm and payroll figures and the unemployment rate to come in at 3.5%. Stocks rose Thursday, with all three major U.S. indexes in the green, putting the S&P 500 on track to finish the week in positive territory barring a collapse on Friday. Futures fall as a second prominent CEO this week issued caution about the U.S. economy, after Tesla’s Elon Musk overnight said he wants to cut 10% of its workforce, noting he had a “super bad feeling” about the economy (according to Reuters). The comments follow JPMorgan CEO Jamie Dimon this week who Wednesday equated the economy to a “hurricane” and advised we “brace ourselves”, while also noting he expects price turmoil in commodities to continue as fallout from the Ukraine war. Oil prices are down slightly after surprisingly rising in yesterday’s session despite OPEC+ increasing production for the July and August timeframes (WTI crude is up 84% over one-year and Brent 76%). Investors have struggled in recent months to assess how much and how quickly the Federal Reserve will boost interest rates in a quest to temper inflation. Some investors remain concerned that policy tightening could slow economic growth or even tip the U.S. into a recession. Federal Reserve Vice Chairwoman Lael Brainard on Thursday said half-percentage-point interest-rate increases would likely be appropriate at the Fed’s next two meetings but didn’t commit to a slower path at subsequent meetings. So, the question remains, is the latest two week rally a true recovery? Or a “bear-market”” near-term bounce? In Asian markets, The Nikkei Index gained 347 points or 1.27% to settle at 27,761, while China and Hong Kong are closed for holidays. In Europe, the German DAX is up 50 points to 14,540, while the FTSE 100 was closed for holiday.

 

Economic Calendar for Today

·     8:30 AM ET         Nonfarm Payrolls for May…est. +325K

·     8:30 AM ET         Private Payrolls for May…est. +325K

·     8:30 AM ET         Manufacturing Payrolls for May…est. +40K

·     8:30 AM ET         Unemployment Rate for May…est. 3.5%

·     8:30 AM ET         Average Hourly Earnings for May…est. +0.4%

·     9:45 AM ET         S&P Global Composite PMI, May-F

·     9:45 AM ET         S&P Global Services PMI, May-F

·     10:00 AM ET       ISM Non-Manufacturing Index for May…est. 56.4

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

 

Other Key Events:

·     American Society of Clinical Oncology (ASCO) 2022 meeting, 6/3-6/7, in Chicago

·     Bernstein 38th Annual Strategic Decisions Conference, 6/1-6/3, in NY

·     Wells Fargo West Coast MedTech Tour, 5/31-6/3, in Menlo Park, CA

·     China Caixin Services PMI for May

 

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 75.59 points, or 1.84%, to 4,176.82

·     The Dow Jones Industrial Average rose 435.05 points, or 1.33%, to 33,248.28

·     The Nasdaq Composite surged 322.44 points, or 2.69%, to 12,316.90

·     The Russell 2000 Index advanced 42.85 points, or 2.31% to 1,897.67

 

 

Macro	Up/Down	Last
Nymex	-0.70	116.17
Brent	-0.85	116.76
Gold	-3.70	1,867.70
EUR/USD	-0.0007	1.074
JPY/USD	0.31	130.13
10-Year Note	+0.004	2.919%

 

 

Sector News Breakdown

Consumer

·     Kohl’s (KSS) reversed an earlier drop after the WSJ reported private equity firm Sycamore Partners offered in the mid-$50s/share for Kohl’s, while Franchise Group (FRG) offered around $60/share, citing people familiar. The Kohl’s (KSS) board is expected to review the bids in the coming days https://on.wsj.com/396pqcX

·     Lululemon (LULU) Q1 EPS $1.48 vs. est. $1.43; Q1 revs rose 32% to $1.6B vs. est. $1.53B; qtrly comparable sales increased 28% or increased 29% on a constant dollar basis; sees Q2 revs $1.75B-$1.775B and year revs $7.61B-$7.71B vs. est. $7.54B; raises FY22 EPS view to $9.35-$9.50 from $9.15-$9.35 (est. $9.28)

·     RH Corp. (RH) has authorized an additional $2.0B for the purchase of shares; 1Q adj EPS $7.78 vs est. $5.40 on revs $957Mm vs est. $924.8Mm; guides 2Q net revs -1% to -3% vs est. +5.5% with adj op margin 23.0-23.5%; sees FY net revs +0-2% vs est. +6.6% with adj op margin 23.0-24.0%

·     Tilly’s (TLYS) Q1 EPS $0.03 vs. est. $0.02; Q1 revs $145.8M vs. est. $145.2M; ended Q1 with inventories per square foot up 12.7% y/y; expects its inventory levels to be more consistent with its sales performance by end of Q3; sees Q2 EPS $0.14-$0.20 vs. est. $0.34 on lower revs

·     Elon Musk is reportedly looking to cut the Tesla (TSLA) workforce by about 10%. Musk wrote he was looking at those cuts and had a “super bad feeling” about the economy in an email to Tesla (TSLA) executives with the subject line “pause all hiring worldwide” that was seen by Reuters.

·     Costco (COST) reports May sales of $18.23B, up 16.9%; May comparable sales up 15.5% and reports May e-commerce sales up 6.3%

·     Calavo Growers (CVGO) 2Q adj EPS $0.33 vs est. $0.22 on revs $331.4Mm vs est. $316.9Mm

·     Chegg (CHGG) increases share repurchase program by $1B

·     Duckhorn Portfolio (NAPA) Q3 adj EPS $0.17 vs. est. $0.13; Q3 revs rose 29% Y/Y to $91.6M vs. est. 84.7M; raises FY22 EPS view to 59c-62c from 55c-58c (est. 60c) and boosts FY22 revenue view to $369M-$373M from $364M-$369M (est. $367.74M)

·     Joann Inc. (JOAN) 1Q EPS ($0.86) vs est. $0.10 on revs $498Mm vs est. $517Mm, says gr margin 48.3% hit by 580bps of excess import supply chain costs (adj gr margin +140bps), adj EBITDA $18.6Mm vs est. $36.1Mm

·     Zumiez (ZUMZ) 1Q ($0.02) vs est. $0.07 on sales $220.7Mm vs est. $217.3Mm, says May sales -20.9% y/y and +3.3% vs 2019; sees 2Q sales $232-239Mm vs est. $243.7Mm, op margin 5.0-6.5% and EPS $0.45-0.55 vs est. $0.68

 

Energy, Industrials and Materials

·     Alaska Air (ALK) sees Q2 passenger load factor about 87% to 88%, sees Q2 capacity (ASMS) down about 7% to 9% vs. 2019; sees Q2 revenue passengers % change versus 2019 to be down about 9% to 10% and sees Q2 total revenue percentage change versus 2019 up 12% to 14%

·     Frontier Group Holdings Inc (ULCC) has agreed to pay a break-up fee of $250 million in a bid to secure its acquisition of Spirit Airlines Inc (SAVE) the companies said. The sweetening of the terms comes after proxy advisory firm Institutional Shareholder Services Inc urged Spirit shareholders to vote against the deal with Frontier, in part because Spirit failed to negotiate a break-up fee should U.S. antitrust regulators shoot down their deal.

·     Quanex Building (NX) 2Q adj EPS $0.80 vs est. $0.43 on net sales $322.9Mm vs est. $286Mm; guides FY net sales $1.18-1.2B vs est. $1.14B and adj EBITDA $150-155Mm vs est. $135.9Mm

·     Stellantis (STLA) said that it signed an agreement to secure lithium for North America electric vehicle production from Controlled Thermal Resources, which operates in California’s Salton Sea

·     Worthington Industries (WOR) announced the acquisition of Level5 Tools, including automatic drywall taping and finishing tools, skimming blades, hand tools and accessories for $55M

 

Financials

·     StoneCo (STNE) Q1 adj EPS R$0.43 vs. R$0.60 last year and Q1 revenue R$2.07B vs. R$867.7M last year; accelerates growth, recovering profitability, and reports record revenue of BRL 2.07 billion in 1q22, with 138.6% increase year over year

·     Riot Blockchain Inc (RIOT) said in May 2022, produced 466 Bitcoin, an increase of approximately 104%, as compared to May 2021 production of 228 Bitcoin; as of May 31, 2022, Riot held approximately 6,536 Bitcoin, all produced by company’s self-mining operations and sold 250 Bitcoin generating net proceeds of approximately $7.5M

·     Travelers (TRV) downgraded to Sell from Neutral at Goldman Sachs and cut tgt to $170 

·     Voya Financial (VOYA) Upgraded to Buy from Neutral at Goldman Sachs

·     Huntington (HBAN) downgraded to Underperform from Market Perform at Keefe Bruyette

·     New York Community (NYCB) downgraded to Market Perform at Keefe Bruyette

 

Healthcare

·     Biogen (BIIB) said that 12-month data for Tofersen showed that earlier initiation of the drug slowed decline in clinical, and respiratory function, muscle strength, and quality of life in patients with superoxide dismutase 1 (SOD1) amyotrophic lateral sclerosis (ALS). Tofersen was licensed by Biogen from Ionis (IONS) in 2018.

·     Cooper Companies (COO) Q2 adj EPS $3.24 vs. est. $3.43; Q2 revs $829.8M vs. est. $821M; lowers FY22 EPS view to $13.09-$13.29 from $13.60-$14.00 (below consensus $13.74), while narrows FY22 revenue view to $3.28B-$3.31B from $3.26B-$3.33B (est. $3.29B); Gross margin of 64% compared with 68% y/y and Operating margin of 16% compared to 20% y/y

·     Phreesia (PHR) 1Q EPS ($0.99) vs est. ($0.95) on revs $63.4Mm vs est. $62.3Mm; says maintaining FY revs outlook $271-275Mm vs est. $273.6Mm, raising FY adj EBITDA outlook to ($126)Mm to ($122)Mm vs est. ($151)Mm; now expects to reach profitability in FY25

 

Technology, Media & Telecom

·     Asana Inc. (ASAN) Q1 EPS loss (-$0.30) vs. est. loss (-$0.36); Q1 revs $120.6M vs. est. $115M; expects revenues of $536M-$540M, representing y/y growth of 42% to 43% vs. est. $529.8M; Revenues from customers spending $5,000 or more on an annualized basis grew 73% y/y and customers spending $50,000 or more on an annualized basis increased to 979, up 102% y/y

·     CrowdStrike (CRWD) Q1 adj EPS $0.31 vs. est. $0.25; Q1 revs $487.8M vs. est. $463.27M; Q1 revs rose 61% to $487.8M vs. est. $463.27M; Ending ARR grows 61% y/y to $1.9 billion with over $190 million in net new ARR; raises FY23 EPS view to $1.18-$1.22 from $1.03-$1.13 (est. $1.10) and boosts FY23 revenue view to $2.1905B-$2.2058B from $2.133B-$2.163B

·     Okta (OKTA) 1Q adj EPS ($0.27) vs est. ($0.34) on revs $415Mm vs est. $388.99Mm; sees 2Q revs $428-430Mm vs est. $422.3Mm and adj EPS ($0.32) to ($0.31) vs est. ($0.33); guides FY revs $1.805-1.815B vs est. $1.785B and adj EPS ($1.14) to ($1.11) vs est. ($1.25)

·     PagerDuty (PD) Q1 EPS loss (-$0.04) vs. est. loss (-$0.08); Q1 revs rose 34% to $85.4M vs. est. $82.7M; sees Q2 EPS loss (8c-9c) vs. est. loss (-$0.08) and revs $87M-$89M vs. est. $87.2M; Total paid customers of 15,040 as of April 30, 2022, compared to 13,918 in the year ago period; Customers with ARR over $100,000 was 655 as of April 30, 2022, compared to 458 y/y

·     American Tower (AMT) 8.35M share Spot Secondary priced at $256.00

·     Micron (MU) downgraded to Underweight from Neutral at Piper