Early Look

Tuesday, June 14, 2022

Futures	Up/Down	%	Last
Dow	58.00	0.19%	30,559
S&P 500	13.25	0.36%	3,767
Nasdaq	75.50	0.67%	11,403

 

 

U.S. futures edging higher ahead of key inflation data later this morning and some headlines (as per Axios) that the Biden Administration is leaning toward easing some of Trump China tariffs. Stocks closed in “bear-market” territory was the attention-grabbing headline last night, with the S&P 500 Index falling more than 20% from the January record, as high-tech shares underperformed amid concern the Fed may have to raise interest rates more aggressively, a move that could force the economy into recession. As of latest futures indicators, 12 rate hikes are now priced in by Feb 2023, up from 8 just two weeks ago, a big change following the CPI inflation report last Friday (40-yr highs) and a reason that stocks have tumbled the last 3-trading sessions. The Fed is expected to hike rates by 50 basis points when it concludes its two-day meeting on Wednesday, with traders now seeing a 75-basis point increase as having a 21% probability (has been rising). A surge in Treasury yields across the curve also spooked investors as two-year yields reached 3.34% (surging 30-bps Monday), the highest since December 2007, 5-year yields rose to 3.509%, the highest since July 2008, Benchmark 10-year yields hit 3.44% (up 20-bps), the highest since April 2011. Investors have seen profit warnings from some of the largest retailers (TGT, WMT) and tech companies (INTC, MSFT) in the last few weeks citing macro concerns, FX, and supply issues, which has not helped overall market sentiment either. More inflation data coming today (May PPI) ahead of the FOMC meeting results tomorrow. Bitcoin falls after U.S. stocks tumbled overnight on the prospect of the Federal Reserve raising interest rates more aggressively to combat inflation. Bitcoin drops 4% to $22,600 after hitting an 18-month low of $20,834 overnight, according to CoinDesk. In Asian markets, The Nikkei Index dropped -1.32% to 26,629, the Shanghai Index rose 33 points to 3,288, and the Hang Seng Index was little changed at 21,067. In Europe, the German DAX is down -118 points or -0.88% to 13,308, while the FTSE 100 declines about -60 points to -0.87% to 7,143. Monday was chock-full of stats, streaks, and records as 1) the S&P 500 fell 3.9% on Monday, its 5th decline of 3% or more this year; 2) the 2-year Treasury yield (3.44%) is now 2x higher than the S&P 500’s dividend yield (1.7%); 3) Bitcoin is down 69% from its high of $69k last November; 4) the S&P 500 is down 21.3% in the first 112 trading days of 2022, the worst start to a year since 1940.

 

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -151.23 points, or 3.88%, to 3,749.63

·     The Dow Jones Industrial Average fell -876.05 points, or 2.79%, to 30,516.74

·     The Nasdaq Composite tumbled -530.80 points, or 4.68%, to 10,809.23

·     The Russell 2000 Index declined -85.69 points, or 4.76% to 1,714.59

 

Economic Calendar for Today

·     6:00 AM ET         NFIB Small Business Optimism for May

·     7:45 AM ET         ICSC Weekly Retail Sales

·     8:30 AM ET         Producer Price Index (PPI) m/m for May…est. +0.8%

·     8:30 AM ET         Producer Price Index (PPI) y/y for May…est. +10.9%

·     8:30 AM ET         PPI Ex: Food & Energy m/m for May…est. +0.6%

·     8:30 AM ET         PPI Ex: Food & Energy y/y for May…est. +8.6%

·     8:55 AM ET         Johnson/Redbook Weekly Sales

·     4:30 PM ET         API Weekly Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: CNM, MPAA, PYYX

·     Earnings After the Close: CXM, IDW, IRNT, PL, RFIL

 

Other Key Events:

·     Credit Suisse Energy in Transition Conference, 6/14-6/15, in London

·     Deutsche Bank Global Consumer Conference, 6/14-6/16, in France

·     RBC Capital Financial Technology Conference, in NY

·     Oppenheimer Semiconductor & Software Bus Tour (virtual), 6/13-6/16

·     Oppenheimer Consumer Growth and E-Commerce Conference (virtual), 6/14-6/15

·     UBS Asian Consumer, Gaming & Leisure Conference (virtual), 6/13-6/15

·     Wells Fargo Streaming & Connectivity Conference, 6/13-6/14, in Texas

·     China Industrial Output and Retail Sales for May

 

 

Macro	Up/Down	Last
Nymex	0.94	121.87
Brent	0.89	123.16
Gold	-9.20	1,822.60
EUR/USD	0.0021	1.0429
JPY/USD	-0.16	134.24
10-Year Note	-0.069	3.303%

 

 

World News

·     President Biden, in an Oval Office meeting last week with key members of his Cabinet, indicated he’s leaning toward removing some products from the Trump administration’s China tariffs list, people familiar with the matter tell Axios https://bit.ly/3xq5ERK

·     The NFIB Small Business Optimism Index decreased marginally to 93.1 in May from 93.2 in April, the lowest level since April 2020, according to data released Tuesday by the National Federation of Independent Business. The reading is broadly in line with economists’ expectations

·     The German ZEW indicator of economic sentiment climbed 6.3 points to -28.0 in June. That was broadly in line with expectations but is still well below the level it was at the start of the year. The index was at +54.3 as recently as February, before the Ukraine war began

·     A bipartisan group of U.S. lawmakers agreed on a proposal to give the government sweeping new powers to block billions in U.S. investment into China, though the measure is part of a broader bill with an uncertain future. News of the provision grants chipmakers $52 billion to expand U.S. operations, drew opposition from China

·     Investors are gloomier about the world economy than they have been for nearly three decades, according to a survey of fund managers by Bank of America Global Research. The bank asked more than 260 investors managing about $750 billion in assets whether the economy would strengthen. A net minus 73% thought not, the lowest score in a series dating back to 1994. Most respondents thought inflation rates would fall over the next year – Dow Jones

 

Sector News Breakdown

Consumer

·     Best Buy (BBY) downgraded to Neutral from Buy at Bank America

·     Tractor Supply (TSCO) upgraded to Buy from Neutral

·     United Airlines (UAL) said on Monday searches for international travel increased after the United States ended a 17-month-old requirement that air travelers arriving in the country test negative for COVID-19

·     Coty Inc. (COTY) reaffirms its outlook for both 4Q22 and FY22; continues to expect low double digits LFL sales growth in 4Q22, with FY22 LFL sales growth at the upper end of its guidance range of low-to-mid teens; adjusted EBITDA is expected to be $900M in FY22

·     Kaival Brands (KAVL) announced it reached an agreement with Philip Morris Products, or PMPSA, a wholly owned affiliate of Philip Morris (PM), for the development and distribution of electronic nicotine delivery system

 

Energy, Industrials & Materials

·     World oil demand growth will slow in 2023, OPEC delegates and industry sources said, as surging crude and fuel prices help drive up inflation. An OPEC delegate and another source familiar with OPEC thinking said they expected world demand growth of 2 million barrels per day (bpd) or less in 2023, a rise of just 2%, compared with growth of 3.36 million bpd expected in 2022 – Reuters

·     Akzo Nobel (AKZOF) shares slip after warning on Q2 citing lockdowns in China and weak demand for decorative paints in EU

·     Chemours (CC) downgraded to Neutral from Buy at UBS and cut tgt to $44 from $48

·     Dow Chemical (DOW) files mixed securities shelf

·     PBF Energy (PBF) upgraded to Overweight from Equal Weight at Wells Fargo

 

Financials

·     Coinbase (COIN) downgraded to Neutral from Overweight at JPMorgan; cut tgt to $68 from $171

·     Qudian (QD) announces $200m share buyback

·     Root (ROOT) said it was set to join the Russell 3000 index after it was added to a preliminary list of additions as part of the 2022 Russell indexes annual reconstitution.

 

Healthcare

·     Eli Lilly and Company (LLY) and Incyte (INCY) said the FDA has approved OLUMIANT(R) (baricitinib), a once-daily pill, as a first-in-disease systemic treatment for adults with severe alopecia areata (AA), available as 4-mg, 2-mg, and 1-mg tablets

·     Outset Medical (OM) halted shipments on its Tablo Hemodialysis System for home use. The company also suspended guidance for the year

·     ResMed (RMD) agreed to acquire German health software company MediFox Dan Holding for ~$1B including debt

 

Technology, Media & Telecom

·     Oracle Corp. (ORCL) 4Q adj EPS $1.54 vs est. $1.37 on revs $11.8B vs est. $11.66B, cloud revs $2.9B; adj EBIT $5.6B vs est. $5.35B; Cloud license and on-premises license revs +18% Y/Y to $2.54B, Hardware revenue fell -2.9% Y/Y to $856M and service revs +2.6% Y/Y to $833M; sees Q1 EPS $1.04-$1.08 vs. est. $1.13 and revs up 20%-22% vs. est. $10.22B

·     Twitter (TWTR): Elon Musk is said set to address Twitter employees at an all-hands meeting this week for the first time since he agreed to purchase the social media company in late April.

·     Braze Inc. (BRZE) Q1 adj EPS loss (-$0.19) vs. est. loss (-$0.21); Q1 revs $77.5M vs. est. $72.57M; guides Q2 revs $80.5M-$81.5M vs. est. $80.13M; raises 20203 outlook

·     HP Enterprise (HPE) downgraded to Hold from Buy at Deutsche Bank and cut tgt to $16

·     NetApp (NTAP) upgraded to Buy from Hold at Deutsche Bank and cut tgt to $84

·     Netflix (NFLX) downgraded to Sell from Hold at Benchmark with a $157 price target.