Early Look

Tuesday, March 15, 2022

Futures	Up/Down	%	Last
Dow	-68.00	0.21%	32,770
S&P 500	-5.25	0.14%	4,157
Nasdaq	-3.50	0.03%	13,040

 

Several factors continue to weigh on investor minds heading into the trading day, including interest rates as the FOMC kicks off its 2-day meeting today, with a decision to raise rates by 25-bps widely expected tomorrow. There were also more Covid concerns overnight as China reported 3507 new local Covid cases & 1768 local asymptomatic new cases, highest since early 2020, putting a key manufacturing city, Dongguan, on lock down. U.S. stocks did not like headlines late yesterday after reports the U.S. told allies that China signaled its willingness to provide military assistance to Russia according to officials. The communication used was not specific about the level or the timing of any assistance that may be provided. Meanwhile in the Ukraine, Reuters, along with other media outlets, said an adviser to Ukrainian President Zelensky (Oleksiy Arestrovich) said that the war is likely to be over by early May when Russia runs out of resources to attack. He also suggested a peace deal may be struck, though the exact timing would depend on how much resources the Kremlin was willing to commit to the campaign. Bond yields took a breather overnight after surging all day Monday. The U.S. Bond market is now down 7.5% from its high in August 2020, the largest correction we’ve seen in the last 25 years and the 10-Year Treasury yield has moved from 0.55% up to 2.14% during this time. The 2, 3-, 5-, 10-, and 30-year Treasury yields all closed at their highest levels since 2019. Wednesday’s FOMC rate hike is fully priced in, and the market is now expecting 6-7 additional hikes by year end. Note coming into today, the S&P 500 and Nasdaq Composite are down the last three days and 7 of the last 8. The Nasdaq Comp is at 15-month lows and down 19.6% YTD and down -21.7% from its Nov 2021 record close. Oil tumbles again as WTI and Brent are both down over 5%, with WTI sliding back below $100 per barrel (down from last week high above $130 per barrel).

 

In Asian markets, China’s stocks slumped to close at 21-month lows despite better retail sales and industrial production data as surging coronavirus cases threatened the outlook for the world’s second-largest economy and as the central bank dashed expectations for a cut in a key lending rate. China’s PBOC injected liquidity, as a net total of 100 billion yuan were injected via the medium-term lending facility but failed to cut the 2.85% lending rate as many had expected. Asian markets punished overnight as The Nikkei Index edged higher +0.15% to 25,346, the Shanghai Index fell -4.95% to 3,063, and the Hang Seng Index plunged -5.7% or 1,116 points to 18,415, led by an 8% decline in the Hang Seng tech index (-8.1% or 306 points). In Europe, the German DAX and FTSE 100 both down over 1%.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -31.20 points, or 0.74%, to 4,173.11

·     The Dow Jones Industrial Average rose 1.05 points, or 0.01%, to 32,945.24

·     The Nasdaq Composite sunk -262.59 points, or 2.04%, to 12,581.22

·     The Russell 2000 Index declined -37.95 points, or 1.92% to 1,941.72

 

Economic Calendar for Today

·     7:45 AM ET         ICSC Weekly Retail Sales

·     8:30 AM ET         Producer Price Index (PPI) m/m for February…est. +0.9%

·     8:30 AM ET         Producer Price Index (PPI) y/y for February…est. +10.0%

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

·     8:30 AM ET         PPI Ex: Food & Energy (core) y/y for February…est. +8.7%

·     8:30 AM ET         Empire manufacturing Index for March…est. 7.00

·     8:55 AM ET         Johnson/Redbook Weekly Sales

·     4:00 AM ET         Net Long-term TIC Flows for January

·     4:30 PM ET         API Weekly Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: ALT, ANIP, BBI, CTRN, FTCI, KPLT, SYRS

·     Earnings After the Close: ASPU, ATHX, CAL, EWCZ, HQI, KODK, LOTZ, OPNT, PFMT, RMBL, RYAN, S, SMAR, TCON

 

Other Key Events:

·     Barclays Global Healthcare Conference, 3/15-3/17 in Miami, FL

·     Deutsche Bank Media, Internet & Telecom Conference, 3/14-3/16, in Florida

·     JPMorgan Industrials Conference, 3/15-3/17, in NY

·     Mizuho 6th Annual Energy Summit (virtual), 3/14-3/15

·     Morgan Stanley European Financials Conference, 3/15-3/17, in London

·     Oppenheimer Annual Healthcare Conference (virtual), 3/15-3/16

·     Roth Annual Conference, 3/14-3/16, in CA

·     China House Prices y/y for February

 

 

Macro	Up/Down	Last
Nymex	-6.10	96.90
Brent	-6.22	100.68
Gold	-30.20	1,930.60
EUR/USD	0.0064	1.1003
JPY/USD	-0.25	117.93
10-Year Note	-0.035	2.105%

 

 

World News

·     Chinese Feb Retail Sales beat rising +6.7% y/y vs 3.0% consensus; Chinese Feb Industrial output beat, rising +7.5% y/y vs 3.9% consensus

·     Majority of economist’s see 25bps rise in rates from the BoE this Thursday, Inflation to peak at 7.7% next quarter vs previous expectation of 6.6% – Reuters

·     National Security Adviser Jake Sullivan and China’s top diplomat, Yang Jiechi, met for seven hours in Rome on Monday, as the U.S. grows concerned over Chinese involvement in the conflict in Ukraine

 

Sector News Breakdown

Consumer

·     Calavo Growers (CVGW) Q1 adj EPS loss (-$0.02) vs. est. $0.05; Q1 revs rose 24% to $274.09M vs. est. $257.99M; Fresh segment revenue increased 41% y/y to $162.6M, and Renaissance Food Group (RFG) and Foods segments revenues increased 6% and 4% y/y, respectively.

·     Vail Resorts (MTN) Q2 EPS $5.47 vs. est. $5.68; Q2 revs $906.54M vs. est. $956.9M; boosted dividend; revises FY22 Resort Reported EBITDA view to $813M-$837M which includes an estimated $13M of Resort Reported EBITDA

·     Tesla Inc (TSLA) raised its prices in China and the United States for the second time in less than a week, after CEO Elon Musk said the U.S. electric carmaker was facing significant inflationary pressure in raw materials and logistics.

·     Tilly’s (TLYS) board authorizes repurchase of up to 2M class A shares

·     Camposol Holding (CMSL), a Latin American supplier of fresh produce, has withdrawn its plans for a $450M initial public offering in the US.

 

Energy

·     Oil prices extend recent declines, with WTI crude dropping below $100 per barrel after hitting 14-year highs last week topping $130 per barrel; watch shares of CVX, XOM, HES, OXY, COP

·     Chevron (CVX) is preparing to take operating control of its joint ventures in Venezuela if the Biden administration relaxes sanctions on the country to increase crude supplies after banning Russia’s oil imports – Reuters

 

Financials

·     Capital One Financial (COF) February domestic credit card net charge-offs rate 2.19% vs 2.03% in January; 30+ day performing delinquencies rate for auto 4.01% at Feb end vs 4.42% at Jan end; February auto net charge-offs rate 0.57% vs 0.99% in January; 30+ day performing delinquencies rate for domestic credit card 2.51% at Feb end vs 2.40% at Jan end

·     Discover Financial Services (DFS) credit card delinquency rate 1.10% at February end vs 1.07% at January end

 

Healthcare

·     AnaptysBio (ANAB) reports Imsidolimab ACORN Phase 2 Clinical Trial Data in Moderate-to-Severe Acne; Imsidolimab (anti-IL-36R Ab) treatment did not demonstrate improvement over placebo in top-line primary or secondary endpoints

·     Cano Health (CANO) Q4 EPS loss (-$0.12) vs. est. loss (-$0.02); Q4 revs $492.3M vs. est. $531.65M; Q4 total membership of 227,005, including 125,999 Medicare capitated members, an increase of 115% and 69%, respectively y/y; sees year membership 290K-295K

·     Exelixis (EXEL) announced results from the final analysis of the second primary endpoint of overall survival from the phase 3 COSMIC-312 trial, which evaluated cabozantinib in combination with atezolizumab versus sorafenib in patients with previously untreated advanced hepatocellular carcinoma.

·     A jury finds CareDx (CDNA) and Natera (NTRA) engaged in false advertising; Natera continues to pursue its own patent enforcement action against CareDX; final monetary relief, if any, remains to be decided by the court

·     DocGo, Inc. (DCGO) Q4 revs rose 28% to $121.3M vs. est. $100.9M; sees FY22 revs $400M-$420M vs. est. $385.2M; Q4 net income $20.3M vs. ($4.4M) last year

·     Sema4 Holdings Corp, (SMFR) Q4 EPS (17c) vs est. (26c) on revenue $57.8M vs est. $49.7M; reiterates FY22 revenue outlook $215M-$225M vs est. $273.6M, expects test volume growth (ex-Covid tests) to exceed 20%

·     Sunshine Biopharma Inc. (SBFM) said it closed its previously announced private placement with certain institutional and accredited investors.

·     Vor BioPharma (VOR) files for $350M mixed shelf offering

 

Industrials & Materials

·     Delta Airlines (DAL) raising March quarter revenue outlook to about 78% recovered versus 2019 and said is well positioned to recapture higher fuel prices; expect positive free cash flow in March quarter on strong spring and summer travel demand; expect to achieve flat TRASM in March month versus March 2019; expects to deliver meaningful profitability in 2022 on its path to improved earnings power beyond pre-pandemic levels by 2024

·     United Airlines (UAL) expects q1 2022 CASM-ex to increase about 18% vs q1 2019, as compared to previous guidance of an increase of between 14% and 15%; system bookings for future travel have improved close to 40 points since first week of 2022; said business traffic has increased more than 30 points since peak of omicron impact in January 2022; expects Q1 total operating revenue to be near better end of previous guidance of down between 20% and 25% vs. Q1’19; expects Q1 capacity down about 19% vs Q1’19, below previous guidance down 16%-18%

·     Mosaic (MOS) upgraded to Buy from Neutral at Goldman Sachs with $83 tgt saying the Russia/Ukraine conflict has the potential to be one of the most disruptive events across the food and agricultural supply chain in decades

·     Olin Corporation (OLN) announced that it is temporarily curtailing integrated epoxy production at its Stade, Germany facility. During first quarter 2022, Olin has experienced weaker epoxy resin demand in Europe than anticipated, which has been exacerbated by the uncertainty following the Russian invasion of Ukraine.

·     Volkswagen (VWAGY) CEO – despite pandemic receding, semiconductor supplies improving steadily, war in Ukraine puts 2022 outlook into question

 

Technology, Media & Telecom

·     Coupa Software (COUP) shares fell -18%; Q4 adj EPS $0.19 vs. est. $0.05; Q4 revs $193.3M vs. est. $185.68M; guides Q1 EPS $0.03-$0.06 vs. est. $0.05; Q1 revs seen $189M-$191M vs. est. $196.1M; sees year revs $836M-$840M vs. est. $877.5M

·     U.S. Listed Chinese stocks extend declines on listing uncertainties, Covid surge in cases that shut down some provinces and strict gov’t regulatory actions: BABA shares down 67% over the last year, JD -49%, BIDU -60%, NIO -31%, TCEHY -52%

·     Asur Software (ASUR) Q4 adj EPS 2c vs est. (4c) on revenue $21.1N vs est. $20.8M; sees Q1 adj EPS 4c-6c vs est. 12c on revenue $23.25M-$23.75M vs es. $23.6M, FY revenue $85M-$90M vs est. $86M

·     Digital Media Solutions, Inc. (DMS) Q4 EPS loss (-$0.11) vs. est. $0.01; Q4 revs $122M vs. est. $113M; sees Q1 revenue $102M-$107M vs. est. $107.37M; Q4 Gross profit margin of 30%, compared to 27% in the year-ago quarter

·     GitLab (GTLB) Q4 adj EPS (0.16) vs est. ($0.25) on revenue $77.8M vs est. $70.3M; sees FY23 adj EPS ($1.02)-($0.97) vs est. ($1.04) on revenue $385.5M-$390.5M vs est. $336.6M

·     SentinelOne (S) announced it has entered into a definitive agreement to acquire Attivo Networks, an identity security and lateral movement protection company for $616.5M