Early Look

Thursday, May 26, 2022

Futures	Up/Down	%	Last
Dow	59.00	0.18%	32,135
S&P 500	4.25	0.11%	3,981
Nasdaq	-21.50	0.18%	11,920

 

 

U.S. futures are higher with the S&P rising +0.1% to 3,981 (overnight high 3,993.50 and low 3,960.50), looking to build on yesterday’s strong gains and snap its 7-week losing streak (up 1.98% WTD into today). The Federal Reserve FOMC May minutes revealed a less-hawkish-than-feared tone late yesterday, helping boost stocks the last 2-hours of the day, while China’s premier gave warnings about the economic outlook. In stock news, a rough night in tech as chip giant NVDA posted a top and bottom-line beat, but guided Q2 revs below views, sending shares down 5% while software company SNOW falls -14% after its results and weaker margins. Bloomberg reported last night that Apple (AAPL) plans to keep iPhone production for 2022 roughly flat at about 220 mln units. Twitter (TWTR) rises after Elon Musk dropped plans to partially fund his purchase of Twitter with a margin loan tied to his Tesla stake and increased the size of the deal’s equity component to $33.5 billion. U.S. stocks finished higher Wednesday as investors studied the release of minutes from the Federal Reserve’s most recent policy meeting for details on the path of coming interest-rate rises. Consumer-discretionary stocks paced the S&P 500’s gain, rising 2.8% as several retail companies, including Nordstrom and Express, raised their 2022 forecasts, while others such as Dick’s Sporting Goods indicated business wasn’t getting worse. The S&P 500 is down nearly 18% from its last record high in January and briefly fell into bear-market territory last Friday before paring losses. In Asian markets, The Nikkei Index fell -72 points to 26,604, the Shanghai Index rose +0.5% to 3,123, and the Hang Seng Index dipped -55 points to 20,116. In Europe, the German DAX is up 0.5% to 14,085, while the FTSE 100 rises about 10-points to 7,530. Bitcoin falls about -2% to $29,150 as crypto broadly lower; Ethereum -6% to $1,835. A very busy morning of economic data coming up with Initial & continuing jobless claims, GDP Q1 annualized QoQ data is due at 8:30, along with PCE inflation data. Pending Home Sales and KC Fed Manufacturing are due later this morning as well.

Market Closing Prices Yesterday

·     The S&P 500 Index gained 37.25 points 0.57, or 0.95%, to 3,978.73

·     The Dow Jones Industrial Average rose 191.66 points, or 0.60%, to 31,120.28

·     The Nasdaq Composite jumped 170.29 points, or 1.51%, to 11,434.74

·     The Russell 2000 Index advanced 34.34 points, or 1.95% to 1,799.16

 

Economic Calendar for Today

·     8:30 AM ET         Gross Domestic Product (GDP) Q1 (2^nd est.)…est. (-1.3%)

·     8:30 AM ET         GDP Consumer Spending for Q1…prior 2.7%

·     8:30 AM ET         GDP Deflator, Q1-Prelim…est. +8.0%

·     8:30 AM ET         PCE Prices Prelim Q1…

·     8:30 AM ET         Core PCE Prices Index, Q1-P…est. +5.2%

·     8:30 AM ET         Weekly Jobless Claims…est. 215K

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

·     10:00 AM ET       Pending Home Sales for April…est. (-2.0%)

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

·     11:00 AM ET       Kansas City Fed Manufacturing for May

·     1:00 PM ET          Fed’s Daly speaks on CNBC

·     1:00 PM ET          The US Treasury will auction $42B in 7-year notes

 

Earnings Calendar:

·     Earnings Before the Open: AMWD, BJE, BRC, BURL, DG, DLTR, DXLG, GCO, HLNE, JACK, M, MOV, ROLL, TITN

·     Earnings After the Close: ADSK, AEO, COST, DELL, DOMO, GPS, LGF/A, ME, MRVL, STEP, SUMO, ULTA, VMW, WDAY, ZS

 

Other Key Events:

·     B Riley 22nd Annual Institutional Investor Conference, 5/25-5/26, in CA

·     Wolfe Global Transportation & Industrials Conference 2022, 5/24-5/26 (virtual)

 

 

Macro	Up/Down	Last
Nymex	1.00	111.33
Brent	0.81	114.84
Gold	-2.0	1,844.30
EUR/USD	0.0033	1.0713
JPY/USD	-0.61	126.70
10-Year Note	-0.014	2.733%

 

 

World News

·     Russia’s central bank cut its key interest rate for a third time since early April as it sought to steady a strengthening ruble and support a faltering economy. The Bank of Russia Thursday lowered its key interest rate to 11% from 14%.

·     South Korea’s central bank raised the benchmark seven-day repo rate 25 bps to 1.75 as expected, BOK forecasts 4.5% inflation in 2022 vs earlier projection of 3.1%, Cuts growth projection for this year to 2.7% from 3%

·     The bull-bear spread in the American Association of Individual Investors (AAII) weekly survey was -33.7 vs -24.4 last week. Bulls fall to 19.8% from 26%; Neutrals rise to 26.7% from 23.6%; Bears rise to 53.5% from 50.4%

 

Sector News Breakdown

Consumer

·     Elf Beauty (ELF) 4Q adj EPS $0.84 vs est. $0.06 on sales $105.1Mm vs est. $91.2Mm; guides FY23 net sales $432-440Mm vs est. $401.6Mm and adj EPS $0.78-0.81 vs est. $0.84

·     Guess Inc. (GES) Q1 adj EPS $0.24 vs est. $0.29; Q1 revs rose 14% to $593.5M vs. est. $584.4M; expects FY23 revenue growth of about 4% in U.S. dollars, 10% in constant currency; enters $175M accelerated share repurchase arrangement; sees FY23 GAAP and adjusted operating margins of 10.1% and 10.3%, respectively

·     William Sonoma (WSM) 1Q ESP $3.50 vs est. $2.90 on revs $1.89B vs est. $1.81B, comps +9.5% (incl pottery barn +14.6% and west elm +12.8%); reiterates FY and long-term outlook; sees FY revs +mid-high-single-digit vs est. +4.3%

·     Southwest Airlines (LUV) sees q2 operating revenue compared with 2019 up 12% to 15%; continues to experience strong load factors and an acceleration in bookings for summer travel; says barring any unforeseen events and based on current trends, expects solid profits, operating margins, excluding special items, in q2

 

Energy, Industrials & Materials

·     Ashland (ASH) announces new $500M buyback program

·     EnLink Midstream, LLC (ENLC) said it has entered into a definitive agreement to acquire North Texas gathering and processing assets from Crestwood Equity Partners LP (CEQP) for $275 million, subject to certain customary adjustments and regulatory approval.

·     EnerSys (ENS) 4Q adj EPS $1.20 vs est. $1.15 on revs $907Mm vs est. $872.4Mm; sees 1Q adj EPS $1.10-1.20 vs est. $1.20, sees FY23 CAPEX approx $100Mm

·     Genpact Ltd (G) files for potential mixed shelf offering; size not disclosed

·     Safe Bulkers (SB) 1Q adj EPS $0.24 vs est. $0.28 on revs $77.7Mm vs est. $73.7Mm, says do not have Ukrainian or Russian crew, otherwise limited ops in Russia and Ukraine

·     Shell (SHEL) is in talks with a consortium of Indian energy companies to sell its stake in a major liquefied natural gas plant in Russia which the British company abandoned following Moscow’s invasion of Ukraine, three sources told Reuters.

·     ZTO Express (ZTO) Q1 Parcel volume was 5,226 million, an increase of 16.8% from 4,475 million in the same period of 2021; cuts 2022 parcel volume growth view to 12%-16% from 18%-24%

 

Financials

·     Agree Realty (ADC) 5M share offering priced at $68.65 per share

·     Royal Bank of Canada (RY.TO) posted earnings that topped analysts’ estimates as business loans and solid credit conditions powered its retail-banking business. Revenue in the personal and commercial banking business rose 17% to C$2.23 billion ($1.74 billion) in the fiscal second quarter

·     Toronto-Dominion (TD) Q2 adjusted EPS C$2.02 vs. C$2.04 last year; Q2 revs C$11.04B vs. C$10.23B a year ago

 

Healthcare

·     Acadia Pharmaceuticals (ACAD) files prospectus related to disposition from time to time of up to 42.4 mln shares of common stock

·     Change Healthcare (CHNG) 4Q adj EPS $0.39 vs est. $0.41 on revs $920Mm vs est. $894.2Mm; not providing guidance due to proposed transaction with Optuminsight

·     Pfizer (PFE) plans on providing nearly two dozen of its patent-protected medicines and vaccines at not-for-profit prices to 45 developing countries. Pfizer will ship products like its Covid-19 vaccine and antiviral pill to Rwanda, Ghana, Malawi, Senegal, and Uganda later this year – STAT News

 

Technology, Media & Telecom

·     Nvidia Corp. (NVDA) shares fell -5%; Q1 adj EPS $1.36 vs. est. $1.30; Q1 revs rose 46% Y/Y to $8.29B vs. est. $8.1B; guides Q2 revs $8.1B vs. est. $8.44B; increased & extended share repurchase program to repurchase additional common stock up to total of $15 bln through dec 2023; Q1 data center revenue was a record $3.75 bln, up 83% from a year ago; Q1 automotive revenue was $138 mln, down 10% from a year ago and up 10% from previous quarter

·     Snowflake (SNOW) shares fall -13%; Q1 EPS loss (-$0.53) vs. est. $0.01; Q1 revs rose 85% to $422.4M vs. est. $412.8M; sees Q2 product revenue $435M-$440M; backs FY23 product revenue view of $1.885B-$1.90B, up 65%-67% Y/Y; Q2 Non-GAAP operating margin (2%) vs est. 0.3%

·     Splunk (SPLK) 1Q adj EPS ($0.32) vs est. ($0.74) no revs $674Mm vs est. $628.8Mm; guides 2Q revs $735-755Mm vs est. $737Mm and FY revs $3.3-3.35B vs est. $3.27B

·     Baidu (BIDU) Q1 EPS $1.77 vs. es. $0.81; Q1 revenue $4.48B vs. est. $4.18B

·     Box Inc. (BOX) 1Q adj EPS $0.23 vs est. $0.25 on revs $238.4Mm vs est. $234.6Mm; guides 2Q adj EPS $0.27-0.28 vs est. $0.27 and revs $244-246Mm vs est. $243.7Mm; sees FY adj EPS $1.11-1.15 vs est. $1.13 and revs $992-996Mm vs est. $993.5Mm

·     Lenovo (LNVGY) executive says company’s shipments will fall in the short-term due to macro weakness and supplies shortages; says supply shortages originally driven by demand for small chips is worsened by covid outbreaks in China; says sees some relief in supply shortages for pc, but smartphone and data center businesses remain heavily impacted – Reuters

·     Nutanix (NTNX) shares fall -25%; 3Q adj EPS ($0.05) vs est. $($0.22) on revs $403.7Mm vs est. $397.9Mm; guides 4Q revs $340-360Mm vs est. $439.5Mm

·     DXC Technology (DXC) Q4 EPS $0.84 vs. est. $0.99; Q4 revs fell -8.6% to $4.01B vs. est. $4.12B; says after end of quarter, DXC exited its domestic Russian business; sees 2023 revs $14.9B-$15.05B vs. est. $16.14B

·     Twitter (TWTR) Elon Musk disclosed in an SEC filing that on May 24, he committed to provide an additional $6.25 billion in equity financing to fund a portion of the $44-billion deal to buy Twitter

·     ePlus (PLUS) Q4 non-GAAP EPS $1.01 on revs rising 28.1% to $451.5M, technology segment net sales increased 26.4% to $419.4M; service revenues increased 16.6% to $61.6M; adjusted gross billings increased 20.8% to $638.5M

·     ViaSat Inc. (VSAT) 4Q adj EPS $0.06 vs est. ($0.05) on revs $701.7Mm vs est. $724.4Mm; sees stand-alone FY23 revs and adj EBITDA +double-digit

·     Zuora (ZUO) Q1 adj EPS loss (-$0.03) vs. est. loss (-$0.01); Q1 revs rise 16% Y.Y to $93.2M vs. est. $92.7M; sees FY revs $402M-$406M and Q2 revs $96.5M-$98.5M