Early Look

Thursday, June 30, 2022

Futures	Up/Down	%	Last
Dow	-362.00	1.16%	30,639
S&P 500	-54.25	1.41%	3,767
Nasdaq	-201.00	1.72%	11,490

 

 

Stock index futures point to sharply lower open, with tech leading the decline as the market wraps up one of its worst second quarters and 1H in its history. Recession fears, geopolitical tensions, & rising interest rates have significantly dragged down sentiment and the tech sector. Coming into the last trading day of month and 1H, the Nasdaq is down -28.5% YTD, the S&P 500 down about -20% YTD, the Russell 2000 -23.4% YTD and the Dow -14.6% YTD. For the month the Nasdaq, S&P 500 and Russell are all down-7.5%, and the Dow roughly -6%. The decline in Treasury yield continues with the 10-year Treasury yield down 4 basis points to 3.05% and the 2-year is down 6 basis points to 2.99%. A warning last night from home furnishing company RH Corp. (RH) sys it all: “the deteriorating macro-economic environment has resulted in lower-than-expected demand since our prior forecast & we are updating our outlook, particularly for the second half of the year…our expectation is that demand will continue to slow throughout the year.” The statement encapsulates what markets are going through right now and why sentiment about the U.S. economy is so somber. Stocks fluctuated on Wednesday, after the major averages made a failed attempt at a bounce in the previous session. Recession expectations were pulled forward yet again this month, as per a Deutsche Bank market survey. “90% expect the next US recession by the end of 2023 or before, with 20% anticipating one this year. That is up from 37% and 2% in January, respectively, and 78% and 13% last month.”

 

In Asian markets, The Nikkei Index drops -411 points to 26,393, the Shanghai Index rises 37 points to 3,398, and the Hang Seng Index slips -137 points to 21,859. In Europe, the German DAX is down -2.25% to 12,700, while the FTSE 100 slides 1.68% to 7,189. On the calendar today, Weekly Jobless Claims, May Personal Income, and Spending, along with PCE Price index data all at 8:30 AM ET and Chicago PMI for June (et. 58.0) at 9:45 AM ET. Lastly Bitcoin prices are falling sharply again, down -5.5% to $19,000 as the breakdown in the crypto currency markets continue. ADP said they will pause the jobs report in July, working on new methodology and targets Aug. 31 for new national employment report.

Market Closing Prices Yesterday

·     The S&P 500 Index slipped -2.72 points, or 0.07%, to 3,818.83

·     The Dow Jones Industrial Average rose 82.32 points, or 0.27%, to 31,029.31

·     The Nasdaq Composite dipped -3.65 points, or 0.03%, to 11,177.89

·     The Russell 2000 Index declined -3.65 points, or 1.12% to 1,719.37

 

Economic Calendar for Today

·     8:30 AM ET          Weekly Jobless Claims…est. 228K

·     8:30 AM EST        Continuing Claims…est. 1.31M

·     8:30 AM ET          Personal Income M/M for May…est. +0.5%

·     8:30 AM ET          Personal Spending M/M for May

·     8:30 AM ET          PCE Price Index M/M for May

·     8:30 AM ET          PCE Price Index Y/Y for May

·     8:30 AM ET          Core PCE Price Index M/M for May…est. +0.4%

·     8:30 AM ET          Core PCE Pride Index Y/Y for May…est. +4.8%

·     9:45 AM ET          Chicago PMI for June…est. 58.0

·     10:30 AM ET        Weekly EIA Natural Gas Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: AYI, LNN, SMPL, STZ, WBA

·     Earnings After the Close: ACCD, MU

 

Other Key Events:

·     Stifel Virtual Cell Therapy Summit (virtual), 6/29-6/30

·     European Society for Medical Oncology (ESMO) 6/29-7/2, in Spain

·     China Caixin Manufacturing PMI for June tonight

 

 

Macro	Up/Down	Last
Nymex	-0.57	109.21
Brent	-0.20	116.06
Gold	-6.80	1,810.90
EUR/USD	-0.0024	1.0415
JPY/USD	-0.20	136.38
10-Year Note	-0.03	3.063%

 

 

World News

·     The bull-bear spread in the American Association of Individual Investors (AAII) weekly survey was -23.9 vs -41.1 last week. Bulls rise to 22.8% from 18.2%, Neutrals rise to 30.5% from 22.5%, and Bears fall to 46.7% from 59.3%

·     ADP said they will pause the jobs report in July, working on new methodology and targets Aug. 31 for new national employment report

·     Chinese leader Xi Jinping traveled to Hong Kong to commemorate 25 years since Britain returned the territory to Beijing. The two-day visit is Mr. Xi’s first trip outside mainland China in nearly 2 1/2 years

·     China June manufacturing PMI 50.2 vs 50.5 estimate, non-manufacturing PMI 54.7 vs 50.5 est.

·     Japan May factory output -7.2% vs -0.3% est., y/y -2.8% vs 4.2% est.

·     Bitcoin is on track for its worst quarter in more than a decade, as a string of high-profile crypto blowups hammer sentiment. The 58% drawdown in the biggest cryptocurrency is the largest since the third quarter of 2011

 

Sector News Breakdown

Consumer

·     RH Corp. (RH) shares fall -6%; updates its 2022 outlook as sees Q2 revenue down 3% to down 1% and operating margin 23%-23.5%, while for the year sees rev growth down 2% to down 5% and op margins 21%-22% as expectation is for demand to slow throughout the year

·     MillerKnoll (MLKN) 4Q adj EPS $0.58 vs est. $0.47 on sales $1.1B vs est. $1.09B; guides 1Q sales $1.08-1.12B vs est. $1.05B and EPS $0.32-0.38 vs est. $0.35

·     Estee Lauder (EL) said it expects to record restructuring, other charges of about $154 mln (before tax) in connection with PCBA initiatives; expects majority of charges to be recorded through H1 of fiscal 2023; sees FY22 charges of $120M-$140M or over $2.26-$0.30 per share

 

Energy, Industrials and Materials

·     Acuity Brands (AYI) Q3 adj EPS $3.52 vs. est. $2.96; Q3 revs rose 17.9% to $1.1B vs. est. $985.42M

·     Ammo Inc. (POWW) 2022 EPS $0.53 up from $0.07 and revs rose 285% to $240.3M; Gross profit margin grew to approximately 37%, compared to approximately 18%; 2022 adjusted EBITDA of $75.5 million compared to $8.1 million, an 832% rise; sees FY 23 revenue $300M -$310M

·     Aspen Aerogels (ASPN) rises 53% after saying it won’t proceed with concurrent public offerings of common stock and green convertible senior notes due 2027, which were announced Tuesday

·     Culp Inc. (CULP) 4Q EPS ($0.49) vs est. ($0.35) on revs $56.9Mm vs est. $52.5Mm; guides 1Q revs comparable to 4Q level vs est. $73.4Mm, sees cash position end 1Q comparable to end FY22, taking measures including reducing inventory, limiting CAPEX, reducing production schedules to align with demand, suspended qtrly dividend on common stock

 

Financials

·     Franklin Covey (FC) 3Q EPS $0.51 vs est. $0.18 on sales $66.2Mm vs est. $64.4Mm; sees FY adj EBITDA $40-41.5Mm vs est. $38.8Mm

·     Cryptocurrency-related stocks drop as the price of Bitcoin slides below $19,000, amid a broader pullback in risk assets on worries over rising inflation. Coinbase (COIN), Riot Blockchain (RIOT), Marathon Digital (MARA), MicroStrategy (MSTR) all looking weaker

·     The U.S. SEC on Wednesday rejected a proposal to list a spot bitcoin exchange-traded fund by Grayscale, one of the world’s biggest digital asset managers, on Intercontinental Exchange Inc’s NYSE Arca exchange.

 

Healthcare

·     Avid BioServices (CDMO) Q4 EPS $1.65 as revs rose 13% to $31.2M vs. est. $28.96M; sees year revs $140M-$145M vs. est. $117.34M

·     Angion (ANGN) announces discontinuation of Phase 2 Trial of ANG-3070 in patients with primary protein uric kidney disease

·     Hyperfine (HYPR) said Dave Scott will step down from his role as CEO for personal reasons, effective July 29

·     Lexicon (LXRX) announces positive top-line results from phase 2 proof-of-concept study of lx9211 in painful diabetic neuropathy

 

Technology, Media & Telecom

·     Duck Creek Technologies (DCT) shares fall -19% overnight as 3Q adj EPS $0.01 vs est. $0.00 on revs $72.4Mm vs est. $72.2Mm; guides FY revs $295-297Mm vs est. $302.4Mm and adj EPS $0.09-0.10 vs est. $0.10

·     SMART Global Holdings (SGH) 4Q adj EPS $0.87 vs est. $0.76 on sales $463Mm vs est. $455.2Mm; guides 4Q adj sales $420-460Mm vs est. $478.8Mm and adj EPS $0.55-0.75 vs est. $0.84; to acquire Stratus for $225M upfront payment, with up to $50M earnout

·     Xerox Holdings Corp (XRX) said on Wednesday Chief Executive Officer John Visentin, 59, has died due to complications from an ongoing illness; the co named Steve Bandrowczak, president and chief operations officer, as interim CEO