Early Look

Wednesday, March 23, 2022

After posting another day of strong returns for U.S. stocks, as the S&P 500 has now risen over 1% for 5 of last 6 sessions, futures are edging slightly lower, slipping -0.32% to 4,490, but trading in a very narrow range with an overnight high of 4,514 and low 4,485.50 – still holding above its key 200-day moving average technical support level (4,468). Oil prices rise ahead of a flurry of emergency summits in Brussels that are expected to produce fresh sanctions on Russia. Meanwhile, global Treasury yields are touching fresh cyclical highs, as the U.S. 10-year rises to 2.38%, remaining inverted against the 3, 5, and 7-year yields. The U.S. dollar hit a 6-year high above 1212 vs. the haven Japanese yen. In Asian markets, The Nikkei Index surged 3% or over800 points to close above 28,000, the Shanghai Index climbed +0.34% to 3,271 and the Hang Seng Index advanced 1.2% to 22,154. In Europe, the German DAX is down -0.2% at 14,440, while the FTSE 100 is up about +0.2% to 7,495. No fear in global equities over the last week, as the CBOE Volatility index (VIX) posted its first 6-day losing streak yesterday, despite several warning signs of a changing narrative, mainly the Federal Reserve on track to raise interest rates between 6-7 times according to Fed Fund futures as they look to tame inflation that has spiraled out of control, especially in commodity markets. The mantra “don’t fight the Fed” during the past decade easy money policy was echoed as major averages hit record highs time and time again – yet at this point, investors have felt very comfortable fighting the upcoming rising interest rate hike environment. Billionaire activist investor Carl Icahn said last night on CNBC that it appears that the stock market is in for a “rough landing.” He went on to say, “one thing I did learn many years ago you don’t fight the Fed,” and “now the Fed I think pretty much has turned and when you don’t have the Fed put it’s a whole new dimension that’s brought to this market.” A quiet economic data day ahead with only monthly New Home Sales data at 10:00 and earnings remains light.

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 50.43 points, or 1.13%, to 4,511.61

·     The Dow Jones Industrial Average rose 254.47 points, or 0.74%, to 34,807.46

·     The Nasdaq Composite surged 270.36 points, or 1.95%, to 14,108.82

·     The Russell 2000 Index advanced 22.41 points, or 1.08% to 2,088.34

Economic Calendar for Today

·     7:00 AM ET          MBA Mortgage Applications Data

·     10:00 AM ET        New Home Sales m/m for February

·     10:30 AM ET        Weekly DOE Inventory Data

Earnings Calendar:

·     Earnings Before the Open: AWH, AYRO, CTAS, EPAC, FWRG, GIS, HYZN, REX, WGO, YOU

·     Earnings After the Close: APTX, CNVY, COOK, CYN, FUL, KBH, OLLI, OXM, PHUN. RLMD, SCS, SIEN, SONX

Other Key Events:

·     Goldman Sachs Disruptive Technology Symposium, 3/22-3/23, in London

·     Piper Annual Energy Conference, 3/21-3/23, in Las Vegas

·     Sidoti Small Cap Conference (virtual), 3/23-3/24

·     Society of Gynecologic Oncology, 3/18-3/22, in Phoenix

World News

·     Kremlin spokesman Dmitry Peskov says the only time Russia would use nuclear weapons if its very existence were threatened.

·     U.S. and U.K. have struck a trade deal that will remove U.S. tariffs on British steel and aluminum, while the U.K. will lift levies on American whiskey, motorcycles, and tobacco.

·     Fed’s Mester calls for frontloading rate hikes, sees rise to 2.5% in 2022‘; would like to raise rates to about 2.5% by year end, bigger rate hikes in the first half and if inflation is not beginning to moderate by mid-year the Fed could speed up the rate increases

Sector News Breakdown

Consumer

·     Ryan Cohen’s investment company bought 100,000 shares of GameStop Corp (GME) according to a regulatory filing as the purchase takes Cohen’s stake in the company marginally higher to 11.9%, with the total number of shares owned at 9.1 million.

·     Gan Ltd (GAN) issues prelim qtrly total revenue of $30.5M, below $32.3M in the prior quarter and below consensus $35.2M and guides full year 2022 revenue expectations of $155M-$165M (est. $171M) and Ebitda expectations of $15M-$20M

·     Hawaiian Holdings Inc (HA) expects its capacity for full year of 2022 to decrease between approximately 2% to 6% compared to full year of 2019; expects full restoration of its historical Japan network by summer of 2022, a delay of a few months from its previous expectation; sees q1 adjusted EBITDA to be a loss of between $90M-$130M

·     Poshmark (POSH) Q4 EPS loss (-$0.19) vs. est. loss (-$0.18); Q4 revs rose 22% to $84.2M vs. est. $80.59M; guides Q1 revs $86M-$88M vs. est. $90.53M; Q4 gross merchandise value increased 27% year-over-year to $490.8M

Energy, Industrials and Materials

·     The American Petroleum Institute (API) reported weekly crude inventories fell -4.3M barrels, crude inventories at Cushing rose 700K barrels, gasoline inventories fell -600k barrels and distillates fell -800K barrels

·     Worthington Industries (WOR) Q3 adj EPS $1.13 and sales rose 82% to $1.4B vs. est. $1.37 and $1.29B; steel price volatility is expected to remain a headwind for co; says overall, our businesses are performing well, and underlying end market demand remains healthy

·     Archaea Energy (LFG) 12.99M share Spot Secondary priced at $17.75

Healthcare

·     CareDx Inc (CDNA) wins $44.9m in damages in trial against Natera (NTRA); wins $21.2m in compensatory damages and $23.7m in punitive damages as a jury found that Natera intentionally and recklessly misled the transplant community by deliberately engaging in false advertising in the promotion and marketing of its Prospera kidney transplant rejection assessment test.

·     HealthEquity (HQY) Q4 EPS $0.20 vs. est. $0.22; Q4 revs $203.3M vs. est. $200.07M; said with record HSA and asset growth in fiscal 2022, pandemic headwinds beginning to subside, and the emergence of potential tailwinds, we believe we are well-positioned for continued growth in fiscal 2023; sees year EPS $1.21-$1.30 vs. est. $1.41 and revs $820M-$830M vs. est. $817.4M

·     Argenx SE (ARGX) commenced a global offering of $500 mln of ordinary shares, which may be represented by American depository shares

·     Novavax (NVAX) and Serum Institute of India announce first emergency use authorization of Novavax’ COVID-19 vaccine in adolescents ≥12 to <18 in India

·     Codex DNA (DNAY) reports Q4 EPS loss ($-0.43) vs. est. loss (-$0.37); Q4 revs $3.08M vs. est. $3.83M; sees 2022 revs $19M-$21M vs. est. $25.2M

Technology, Media & Telecom

·     Adobe Systems (ADBE) Q1 adj EPS $3.37 vs. est. $3.34; Q1 revs $4.26B vs. est. $4.24B; sees Q2 adj EPS roughly $3.30 vs. est. $3.35; sees Q2 revs about $4.34B vs. est. $4.41B; achieved record Q1 revenue as Creative Cloud, Document Cloud and Experience Cloud continue to be pivotal in driving the digital economy; Q1 Digital Media segment revenue was $3.11 billion, which represents 9% y/y growth

·     NetApp Inc. (NTAP) board had authorized repurchase of up to an additional $1 billion of the Co’s common stock, with no expiration date

·     Nielsen (NLSN) rises overnight after a report that Elliott Investment Management and Brookfield Asset Management (BAM) are considering raising their $25.40/share offer for the TV/Internet measurement firm – report comes after Nielsen rejected the $9 billion bid late Sunday

·     T-Mobile (TMUS) upgraded to Overweight from Sector Weight at KeyBanc

·     Tencent (TCEHY) qtrly revenues rmb144,188 mln vs rmb133,669 mln; qtrly profit attributable rmb94,958 mln vs rmb59,302 mln; as at dec 31, combined MAU of Weixin and WeChat 1,268.2 mln vs 1,225.0 mln; revenues from online advertising down 13% to rmb21.5 billion for q4 on a year-on-year basis