Early Look

Tuesday, May 31, 2022

Futures	Up/Down	%	Last
Dow	-134.00	0.40%	33,024
S&P 500	-17.25	0.41%	4,138
Nasdaq	-10.50	0.08%	12,667

 

 

U.S. markets are taking a breather, with S&P futures looking lower by -0.35% to 4,140, but off lows of 4,121.50. The S&P 500, Nasdaq snapped their longest weekly losing streaks since early 2001 on Friday; Dow snaps longest weekly losing streak since 1932; S&P 500 and Dow post strongest week since November 2020 and Nasdaq has strongest week since March. For the week, the S&P rose 6.59%, the Dow added 6.24%, and the Nasdaq gained 6.84%. Signs of peaking inflation and consumer resiliency boosted investor sentiment last week into the long holiday weekend with growing optimism that the Federal Reserve will be able to tighten monetary policy without tipping the economy into recession. During the S&P’s seven straight weeks of losses, from its April 1 to May 20 Friday closes, the S&P shed -14.2% of its value. Data released on Friday showed better-than-expected consumer spending and appeared to confirm that inflation has peaked. This, combined with the minutes from the central bank’s most recent policy meeting last Wednesday helped which reaffirmed its commitment to rein in spiking prices while remaining responsive to economic data, helped boost risk appetite.

 

In Asian markets, The Nikkei Index fell -89 points to 27,279, the Shanghai Index rose 37 points to 3,186, and the Hang Seng Index gained 291 points to 21,415. In Europe, the German DAX is down -115 points or -0.8% to 14,460, while the FTSE 100 rises 20 points to 7,620. Eurozone inflation accelerated to record high 8.1% in May from 7.4% in April, beating expectations for 7.7% as price growth continued to broaden. Oil prices jump over 3% to $118.80 for WTI after European Union leaders agreed to pursue a partial ban on Russian oil, paving the way for a sixth package of sanctions to punish Moscow for its invasion of Ukraine (also boosting energy stocks).

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 100.40 points, or 2.47%, to 4,158.24

·     The Dow Jones Industrial Average rose 575.77 points, or 1.76%, to 33,212.96

·     The Nasdaq Composite surged 390.48 points, or 3.33%, to 12,131.13

·     The Russell 2000 Index advanced 48.43 points, or 2.63% to 1,886.67

 

Economic Calendar for Today

·     7:45 AM ET          ICSC Weekly Retail Sales

·     8:55 AM ET          Johnson/Redbook Weekly Sales

·     9:00 AM ET          Monthly Home Price M/M fir March

·     9:00 AM ET          CaseShiller 20-City for March

·     9:45 AM ET          Chicago PMI for May

·     10:00 AM ET        Consumer Confidence for May

·     10:30 AM ET        Dallas Fed manufacturing for May

 

Earnings Calendar:

·     Earnings Before the Open: KIRK

·     Earnings After the Close: AMBA, APPS, BARK, CHPT, CRM, HPQ, SPWH, VIEW, VSCO

 

Other Key Events:

·     Deutsche Bank Global Financial Services Conference, 5/31-6/1, I NY

·     Piper Philadelphia MedTech Bus Tour, 5/31-6/1, in Philadelphia

·     Wells Fargo West Coast MedTech Tour, 5/31-6/3, in Menlo Park, CA

 

 

Macro	Up/Down	Last
Nymex	3.76	118.83
Brent	2.08	123.75
Gold	-4.90	1,852.40
EUR/USD	-0.0053	1.072
JPY/USD	0.33	127.88
10-Year Note	+0.072	2.821%

 

 

World News

·     Eurozone inflation accelerated to record high 8.1% in May from 7.4% in April, beating expectations for 7.7% as price growth continued to broaden

·     China reported the fewest new Covid-19 cases in almost three months this weekend, with the easing of outbreaks in Beijing and Shanghai encouraging authorities to relax some of the strictest virus controls. In Beijing, infections dropped to 12 on Sunday, from 21 on Saturday. Beijing reopens some public transport & malls, testing requirements will also be eased from June 1

·     Moody’s lowered China’s 2022 GDF to 4.5% from 5.3%; sees 2023 GDP picking up to 5.3%

 

Sector News Breakdown

Consumer

·     Unilever PLC (UL) said it would add Nelson Peltz to its board and disclosed his fund now holds a 1.5% stake; the investment is worth about $1.6 billion

·     Tesla (TSLA) has restored weekly output at its Shanghai plant to nearly 70% of the level which it had operated at before the city’s COVID-19 lockdown – Reuters

·     American Eagle (AEO) downgraded to Underweight from Equal Weight at Morgan Stanley

 

Energy, Industrials & Materials

·     European Union leaders agreed to pursue a partial ban on Russian oil, paving the way for a sixth package of sanctions to punish Moscow for its invasion of Ukraine. Europe intensified its competition for oil with Asia following the purchase of the most Emirati crude in at least six years

·     Cenovus Energy (CVE) and its partners agreed to restart the West White Rose Project offshore Newfoundland and Labrador; the project is a $3.2B expansion project for the White Rose offshore oil field.

·     South African miner Gold Fields Ltd (GFI) agreed to buy Canada-based precious metals miner Yamana Gold Inc (AUY) in an all-share deal valuing the Toronto-listed company at $6.7 billion. Gold Fields said its shareholders will own about 61% of the combined group

·     PotlatchDeltic (PCH) and CatchMark Timber Trust (CTT) have entered into a definitive agreement to combine in an all-stock transaction. Based on the closing stock prices of PotlatchDeltic and CatchMark on May 27, 2022, the combined company is expected to have a pro forma market capitalization over $4B and total enterprise value of more than $5B, including $557M in net debt

·     Linde (LIN) upgraded to Outperform from In Line at Evercore ISI

·     Steel Dynamics (STLD) downgraded to Neutral from Buy at Goldman Sachs

 

Healthcare

·     Bristol-Myers Squibb (BMY) and Novartis (NVS) have obtained the U.S. regulatory approval to sell their cancer medications, Opdivo and Kymriah, for additional indications in esophageal cancer and blood cancer, respectively.

·     Moderna (MRNA) and Takeda (TAK) announce plans to transfer marketing authorization for Spikevax COVID19 vaccine in Japan to Moderna

·     Regeneron Pharmaceuticals (REGN) and Sanofi’s (SNY) Dupixent Medical’s application seeking approval of Dupixent to treat prurigo nodularis (PN) received FDA priority review

·     TherapeuticsMD, Inc. (TXMD) shares jump 350%; entered into a definitive merger agreement to be acquired by an affiliate of EW Healthcare Partners. The deal has been unanimously approved by TXMD’s board of directors, where EW Healthcare Partners will commence a tender offer to acquire all outstanding shares of TXMD common stock for $10.00 per share in an all-cash transaction, followed immediately by a merger (deal valued about $177M). https://bit.ly/3x15MYR

 

Technology, Media & Telecom

·     Samsung (SSNLF) shares fall early following a report they have significantly reduced its smartphone production target for 2022; Samsung has notified its partners to cut smartphone production for the rest of 2022 and manufacture ~280M devices, down from ~310M as initially planned https://bit.ly/3N6s9Sg

·     Alphabet Inc. (GOOGL) is expected to grow sales 15% next year, while earnings may rise 19% from this year, according to Barron’s. The 26% drop in the stock this year has left valuations at 18.6 times forward earnings, down from more than 25 times at the start of 2022.

·     Lam Research Corp. (LRCX) mentioned positively in Baron’s saying shares have dropped 29% this year and is trading at 14 times forward earnings, a discount to its five- year average and the S&P 500 Index’s 17.4 times. Sales could grow 7% and earnings rise 10% in 2023, Barron’s says.

·     Paramount’s (PARA) “Top Gun: Maverick” set a record for Memorial Day weekend openings, drawing $126 million over the three-day weekend, and paced toward $156 million counting Monday’s Memorial Day holiday (became Tom Cruise’s first $100 million debut). – also watch shares of movie chain theaters AMC, CNK, IMX

·     Rogers Communications (RCI) and Shaw Communications (SJR) agreed to put their deal on hold as the telecom companies attempt to come to resolution with a Canadian antitrust regulator

·     Microsoft (MSFT) co-founder Bill Gates still has a “multi-billion dollar” short position in electric-vehicle maker Tesla (TSLA), according to Elon Musk. Gates had a short position of $500 million that has increased to $1.5 billion to $2 billion, Musk said in a series of tweets on Friday.