Early Look

Friday, May 20, 2022

U.S. futures are bouncing early, pointing to a stronger open attempting to snap the ongoing 6-week losing streak for the S&P 500 and Nasdaq and 7-week for the Dow Jones Industrial Average after another topsy-turvy week of disappointing earnings in retail space (WMT/TGT). Coming into today’s action, the S&P 500 index is down about -3% week-to-date, the Nasdaq down -3.5% WTD and the Dow down -2.9% WTD. Carrying bigger weekly losses are the Dow Transports, down about -7% over that stretch on rail and trucker weakness. Wall Street lacked clear direction on Thursday, with all the major U.S. equity indices spending time on either side of the unchanged mark. The uncertain action came as investors attempted to regain their bearings after the previous day’s massive selloff. Chinese banks cut 5-year loan prime rate by 15bps (expectations had been for 5bps), most since 2019 interest rate revamp, to boost weak mortgage demand amid a property slump, while keeping the 1-yr rate unchanged. In Asian markets, The Nikkei Index jumped 336 points or 1.27% to 26,739, the Shanghai Index gained 1.6% to 3,146, and the Hang Seng Index surged 596 points or nearly 3% to 20,717. In Europe, the German DAX is up 255 points or 1.8% to 14,135, while the FTSE 100 gains 1.8% to 7,435. Oil rebounded overnight after two days of losses. WTI is on course for a fourth consecutive weekly gain, which would be the best run since mid-February. Bitcoin prices steady, holding just above $30K.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -22.89 points, or 0.58%, to 3,900.79

·     The Dow Jones Industrial Average fell -236.94 points, or 0.75%, to 31,253.13

·     The Nasdaq Composite slipped -29.66 points, or 0.26%, to 11,388.50

·     The Russell 2000 Index advanced 1.38 points, or 0.08% to 1,776.20

Economic Calendar for Today

·     1:00 PM EST        Baker Hughes Weekly rig count data

Earnings Calendar:

·     Earnings Before the Open: BAH, DE, FL

Other Key Events:

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

World News

·     Chinese banks cut 5-year loan prime rate by 15bps, most since 2019 interest rate revamp, to boost weak mortgage demand amid a property slump.

·     UK consumer confidence falls to its lowest level since 1970s, while retail sales unexpectedly jump on alcohol, tobacco spending

Sector News Breakdown

Consumer

·     Tesla (TSLA) CEO Elon Musk took to Twitter to denounce as “utterly untrue” claims in a news report that he had sexually harassed a flight attendant on a private jet in 2016. Business Insider reported on Thursday that Musk’s SpaceX paid $250,000 in 2018 to settle a sexual harassment claim from an unnamed private jet flight attendant who accused Musk of exposing himself to her. The article quoted an anonymous person who said she was a friend of the flight attendant

·     Decker’s Outdoors (DECK) Q4 EPS $2.51 vs. est. $1.32; Q4 revs rose 31.2% Y/Y to $736.0M which tops consensus $639.2M; guides FY23 EPS $17.40-$18.25 well above Street at $15.08; sees FY23 revenue $3.45B-$3.50B vs. est. $3.05B; UGG brand net sales increased 24.7% to $374.6M, HOKA brand net sales increased 59.7% to $283.5M and Teva brand net sales decreased 8.8% to $54.8M

·     Flowers Foods (FLO) Q1 adj EPS $0.44 vs. est. $0.39; Q1 revs $1.44B vs. est. $1.4B; lowers FY22 adjusted EPS view to $1.20-$1.30 from $1.25-$1.35 (est. $1.28); raises FY22 rev view to $4.76B-$4.85B from $4.660B-$4.695B

·     NIO (NIO) successfully listed its Class A ordinary shares on the Main Board of the Singapore Exchange Securities Trading Limited on Friday.

·     Ross Stores (ROST) shares fell -18% after hours; 1Q EPS $0.97 vs est. $1.00 on revs $4.3B vs est. $4.56B; guides 2Q comps -4 to -6%, FY comps -2 to -4%, FY EPS $4.34-4.58 vs est. $5.02

·     VFC Corp (VFC) Q4 adj EPS $0.45 vs. est. $0.46; Q4 revs rose 9% Y/Y to $2.8B vs. est. $2.84B; sees FY23 EPS $3.30-$3.40 below est. $3.57; sees FY23 adjusted cash flow from operations roughly $1.2B; sees FY3 total VF revenue up at least 7% in constant dollars; qtr-end inventories were up 34% compared with same period last year; Vans barely growing, revs flat

·     DoorDash (DASH) to buy back up to $400M shares to offset employee grants

·     European Wax Center (EWCZ) 4.5M share Secondary priced at $21.50

Energy, Industrials and Materials

·     Deere (DE) Q2 EPS $6.81 vs. est. $6.71; Q2 revs rose 11% to $13.37B vs. est. $13.2B; Guides FY net $7.0B-$7.4B from prior $6.7B-$7.1B (est. $6.99B)

·     China increased its energy imports from Russia in April, even as Covid lockdowns slowed domestic demand – Bloomberg

·     Con Ed (ED) – Mizuho notes that the NYPSC is expected to issue their recommendations in the CECONY electric and gas rate case today and believe Staff will recommend an ROE in the 8.7-8.8% range which is in-line with the 2021 O&R electric and gas Staff recommendation.

Financials

·     Chubb (CB) announces 29th consecutive annual dividend increase; Chubb Limited board declares record date for first dividend installment and authorizes new share repurchase program; announces new $2.5B share repurchase program

·     LPL Financial LLC (LPLA) said April total advisory and brokerage assets at the end of April were approximately $1.10 trillion, a decrease of $67 billion, or 5.8%, compared to the end of March 2022; total net new assets for April were $1.9 billion, translating to a 2.0% annualized growth rate; total net new advisory assets were $2.2 billion, translating to a 4.2% annualized growth rate

·     SelectQuote (SLQT) announces departure of Chief Financial Officer Raff Sadun at end of May; SVP of Financial Planning & Analysis Ryan Clement will serve as interim CFO

·     BlackRock’s (BLK) iShares will close its MSCI Russia and MSCI Eastern Europe exchange-traded funds because of the Ukraine conflict, BlackRock said on Friday.

Healthcare

·     Atara Bio (ATRA) receives notification of Bayer’s intention to end exclusive worldwide licensing agreement for next-gen CAR T-cell therapies, sending shares lower. Collaboration included funding and development of two of ATRA’s CAR-T cell anti-tumor treatments

·     Foghorn Therapeutics (FHTX) said the FDA placed a partial clinical hold on its Phase 1 dose-escalation study of FHD-286 in R/R myelogenous leukemia (AML) and myelodysplastic syndrome

·     Mirati therapeutics (MRTX) submits marketing authorization application to the European Medicines Agency for investigational adagrasib as a treatment for previously treated krasg12c-mutated non-small cell lung cancer

Technology, Media & Telecom

·     Applied Materials (AMAT) Q2 EPS $1.85 vs. est. $1.90; Q2 revs $6.25B vs. est. $6.37B; sees Q3 EPS $1.59-$1.95 vs. est. $2.04; sees Q3 revs $$6.25B plus/minus $400M vs. est. $6.73B’ on a non-GAAP adjusted basis, company reported gross margin of 47.0%, in qtr

·     Palo Alto Networks (PANW) Q3 adj EPS $1.79 vs. est. $1.68; Q3 revs $1.4B vs. est. $1.36B; guides Q4 adj EPS $2.26-$2.29 vs. est. $2.22 and revs $1.53B-$1.55B with total billings in the range of $2.32B-$2.35B, representing year over year growth of between 24%-26%

·     Globant (GLOB) Q1 EPS $1.19 vs. est. $1.16; Q1 revs $401.4M vs. est. $397.75M; sees FY22 adj EPS at least $4.94 vs. est. $4.96; sees FY22 revenue $1.77B vs. est. $1.77B

·     HP Enterprise (HPE) downgraded to Neutral from Buy at Bank America

·     Wix.com (WIX) downgraded to equal-weight from overweight at Morgan Stanley