Early Look

Thursday, May 19, 2022

Futures	Up/Down	%	Last
Dow	-352.00	1.12%	31,088
S&P 500	-46.25	1.17%	3,876
Nasdaq	-144.50	1.21%	11,791

 

 

U.S. stock futures signal more pain and losses ahead for investors amid worries that inflation is cutting into corporate performance. Disappointing earnings results/cautious outlooks from two of the largest retailers in the world (Wal-Mart) and Target (TGT) recently due to rising costs, and a shift in spending to Staples and away from general merchandise from customers has really taken its toll on the consumer discretionary sector. Technology names have tumbled, with the Nasdaq down -27% YTD on surging rate expectations as investors dump high growth stocks. Cisco (CSCO) last night the latest in the tech sector to issue a dire outlook for profit and sales, sending shares lower overnight. The S&P 500 closed lower by -4% for worst day since June 2020, while the Nasdaq 100 closes -5.1% for its worst day since May 5^th in a total breakdown of markets on Wednesday. Both the S&P and Nasdaq are on track for a 7^th weekly decline if things don’t turn quickly and the Dow remains on track for a 8^th straight losing week. The S&P 500 is down -17.7% in the first 95 trading days of 2022, the 2nd worst start to a year in history (1932 being the worst, down -32.9% over that stretch). In Asian markets, The Nikkei Index plunged -508 points or 1.89% to settle at 26,402, the Shanghai Index rose 10 points to 3,096, and the Hang Seng Index fell -523 points or 2.54% to settle at 20,120. In Europe, the German DAX is down about -2% to 13,725, while the FTSE 100 is down -2.5% to 7,250. Surging inflation, slowing growth, fears of a recession and aggressive central bank rate hikes have pushed global markets lower.

Market Closing Prices Yesterday

·     The S&P 500 Index tumbled -165.17 points, or 4.04%, to 3,923.68

·     The Dow Jones Industrial Average fell -1,164.52 points, or 3.57%, to 31,490.07

·     The Nasdaq Composite plunged -566.37 points, or 4.73%, to 11,418.15

·     The Russell 2000 Index declined -65.45 points, or 3.56% to 1,774.85

 

Economic Calendar for Today

·     8:30 AM ET          Weekly Jobless Claims…est. 200K

·     8:30 AM EST        Continuing Claims…est. 1.32M

·     8:30 AM ET          Philly Fed Survey for May…est. 16.0

·     10:00 AM ET        Existing Home Sales M/M for April…est. 5.65M

·     10:00 AM ET        Leading Indicators for April…est. 0.0%

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

 

Earnings Calendar:

·     Earnings Before the Open: BJ, EXP, KSS, MNRO, WMS

·     Earnings After the Close: AINV, AMAT, DECK, FLO, PANW, ROST, VFC

 

Other Key Events:

·     Citigroup European Chemicals Conference (virtual), 5/19-5/19

·     Needham Annual Technology & Media Conference (virtual), 5/16-5/20

·     RBC Capital Auto, Industrials and Transportation Conference, 5/17-5/19, in Toronto

·     UBS Best of Europe Virtual 1:1 Conference (virtual), 5/17-5/19

·     Wells Fargo Financial Services Investor Conference, 5/18-5/19, in Chicago

·     Goldman Sachs Utilities Conference: Electrify Now – Green Energy & Security of Supply, in London

 

 

Macro	Up/Down	Last
Nymex	-2.14	107.45
Brent	-0.92	108.19
Gold	9.50	1,825.60
EUR/USD	0.0037	1.0503
JPY/USD	-0.56	127.65
10-Year Note	-0.054	2.83%

 

 

World News

·     The bull-bear spread in the American Association of Individual Investors (AAII) weekly survey was -24.4 vs -24.7 last week.; Bulls rise to 26% from 24.3%; Neutrals fall to 23.6% from 26.6%; Bears rise to 50.4% from 49%

·     Philadelphia Fed President Patrick Harker said late yesterday he expects two more 50 bps rate increases, with the Federal Reserve continuing to raise the federal funds rate “until we’re confident that inflation is moving toward our target.” The rate hikes are important because inflation “is a truly urgent problem,” he noted. Currently the rate stands at 0.75%-1.0%.

·     WSJ reports China’s Communist Party will block promotions for senior cadres whose spouses or children hold significant assets abroad, people familiar with the matter said, as Beijing seeks to insulate its top officials from the types of sanctions now being directed at Russia. The ban, outlined in an internal notice by the party’s powerful Central Organization Department, could play a role in Chinese leader Xi Jinping’s efforts to increase his influence at a twice-a-decade leadership shuffle scheduled for later this year

 

Sector News Breakdown

Consumer

·     Bath & Body Works (BBWI) Q1 adj EPS $0.64 vs. est. $0.53; Q1 sales fell -1% to $1.45B vs. est. $1.44B; guides Q2 EPS $0.60-$0.65 vs. est. $0.67; lowers FY EPS cont ops $3.80-$4.15, from prior $4.30-$4.70

·     Copart (CPRT) Q3 EPS $1.17 vs. est. $1.14; Q3 revs $939.9M vs. est. $878.0M.

·     Ford (F) recalls 39,000 Expedition and Lincoln navigator vehicles after reports of 16 fires, tells owners to park outside pending fix

·     Under Armour Inc (UAA) CEO Patrik Frisk to step down; Colin Browne appointed interim president and Chief Executive Officer, effective June 1, 2022

 

Energy, Industrials and Materials

·     CSX Corp. (CSX), Norfolk Southern (NSC), Union Pacific (UNP) all downgraded to Neutral from Buy, while lowering 2023 estimates across the board

·     Eagle Materials (EXP) authorizes additional 7.5m share buyback; Q4 revs $413.1M vs. est. $403.3M

·     Hawkins Inc. (HWKN) 4Q EPS $0.50 vs est. $0.43 and adj EBITDA $22.3Mm vs est. $18.64Mm on sales $223Mm vs est. $188.9Mm

·     Schnitzer Steel (SCHN) downgraded to Sector Weight from Overweight at KeyBanc

 

Financials

·     Axos Financial (AX), formerly Bank of Internet or BOFI, lost a lawsuit over allegations made in a 2015 lawsuit they failed to notify regulators of risky loans to dubious borrowers and didn’t disclose to regulators it had received grand jury and other subpoenas https://bit.ly/3NpGBEG

·     Mastercard (MA) and Fintech giant, OPay announced a strategic partnership for enabling OPay consumers and merchants in the region to engage with brands and businesses anywhere across the globe led by Mastercard virtual payment solution linked to the OPay eWallet.

·     UWM Holdings (UWMC) downgraded to Underweight from Neutral at Piper Sand cut tgt to $3 from $5 saying the company will struggle to generate earnings that exceed the current dividend run rate of 10c per share as production revenue declines at a rapid pace due to lower demand

 

Healthcare

·     Roche (RHHBY) and bluebird bio (BLUE) are resolving a trademark infringement litigation related to the Cambridge, Mass.-based gene therapy company’s sickle cell disease (SCD) awareness campaign, “Be the Spark,” Fierce Pharma reported. https://bit.ly/3wsFsqo

 

Technology, Media & Telecom

·     Cisco Systems (CSCO) shares fell -13% after hours as Q3 adj EPS $0.87 vs. est. $0.86; Q3 revenue of $12.8B missed the $13.34B estimate; said sees Q4 revs down 1%-5.5% Y/Y vs. est. $13.87B and guides Q4 EPS $0.76-$0.84, below the $0.92 estimate; says pulling out of Russia cost $200 million in revenue; lowers FY revs growth 2%-3% Y/Y from 5.5%-6.5% prior and cuts year EPS view to $3.29-$3.37 from $3.41-$3.46 (watch shares of other networking/comm names in reaction ANET, JNPR, INFN, CIEN)

·     Synopsis (SNPS) 2Q adj EPS $2.50 vs est. $2.37 on revs $1.279B vs est. $1.26B; guides 3Q adj EPS $2.01-2.06 vs est. $1.61 and revs $1.21-1.24B vs est. $1.137; sees FY adj EPS $8.63-8.70 vs est. $7.90 and revs $5.0-5.05B vs est. $4.8B

·     Blackberry (BB) sees FY22 revenue $655M vs. est. $730.14M; sees approaching breakeven adj. EPS in FY2024 and sees FY2027 revenue $1.21B