Early Look

Monday, November 14, 2022

Stock futures slip overnight, trading in a narrow 20-point range after the S&P 500 posted its biggest weekly gain in almost five months on the back of easing inflation data. The S&P 500 rallied 5.9% last week for its best week since June as the entire narrative for stocks changed because CPI came in at 7.7% (below estimates of 7.9%). Investors cheered the lighter-than-expected inflation reading, betting that the Federal Reserve would soon slow its aggressive tightening campaign. For the week, unofficially, the S&P rose 5.90%, the Dow added 4.15%, the Nasdaq gained 8.10% (Nasdaq 100 climbs 9.4% in best two-day gain since 2008). But this weekend, Fed Governor Christopher Waller downplayed the data saying, “we’ve still got a ways’ to go” before the US central bank stops raising interest rates, despite good news last week on consumer prices. The Cboe Volatility Index (VIX) fell 1 point to 22.5, hitting the lowest level since August. The dollar slumped about 1% Friday, rounding off a fourth week of losses and posted its biggest weekly drop since the pandemic-fueled volatility in March 2020 (down 4%). Meanwhile, cryptocurrencies resumed a selloff amid FTX’s deepening woes, with Sam Bankman-Fried’s crypto empire filing for bankruptcy. Bitcoin dropped as much as 8% and Ether fell as much as 9.2%. In Asian markets, The Nikkei Index fell -300 points to 27,963, the Shanghai Index dipped a few points to 3,083, and the Hang Seng Index climbed 294 points to 17,619. In Europe, the German DAX is up 50 points to 14,275, while the FTSE 100 rises 30 points to 7,350. Earnings season is mostly behind us, but we get a healthy round of retailer earnings this week – WMT, TGT, HD, LOW, KSS, ROST, Macy’s.

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 36.56 points, or 0.92%, to 3,992.93

·     The Dow Jones Industrial Average rose 32.49 points, or 0.10%, to 33,747.86

·     The Nasdaq Composite surged 209.18 points, or 1.88%, to 11,323.33

·     The Russell 2000 Index advanced 14.81 points, or 0.79% to 1,882.74

Economic Calendar for Today

·     6:30 PM ET              Fed’s Williams Moderates Panel at the Economic Club

Earnings Calendar:

·     Earnings Before the Open: ACM CVSI GLS HOOK MASS MICT MOVN PTN RMTI ROIV SANW SNDA TSN TWKS VRI VRDN WHF XRAY YOU

·     Earnings After the Close: ACRX ADMP BZFD CALA CBAY DNA EGAN FAZE FXLV GAN GETY GLAD HOFV HYRE IKT IPWR JJSF KINS LUCD MOTS NGS NRDY POWW REXR QRHC RUM SHLS TCON TDUP VTSI

Other Key Events:

·     Citigroup FinTech Conference, 11/14-11/15, in NY

·     Edison Electric Institute (EEI) 57^th Annual Financial Conference, 11/13-11/15, in Hollywood, FL

·     Piper Battery Summit, 11/14-11/16, in Palo Alto, CA

·     China Industrial Output, Retail Sales data

World News

·     U.S. Treasury yields edge higher, unwinding some of last week’s big price gains, after a Federal Reserve official said the central bank would not soften its stance on inflation. The 10-year yield was last up 7 basis points at 3.901%, having fallen by 33 bps last week, its largest weekly decline in over two and a half years. The two-year yield, which is the most sensitive to changes in rate expectations, was last up 6.7 bps at 4.393%, posting its biggest daily gain since Nov. 3.

·     Federal Reserve Governor Christopher Waller said that markets should now pay attention to the “endpoint” of rate increases, not the pace of each move, and the endpoint is likely “a ways off”- Reuters

Sector News Breakdown

Consumer

·     DR Horton Inc. (DHI), PulteGroup Inc. (PHM) and Toll Brothers Inc. (TOL) mentioned cautiously in Barron’s saying housing stocks are no bargain even if mortgage rate increases slow. Still, some of the pain has already been priced in and buying shares could be considered a contrarian bet

·     Hasbro (HAS) downgraded to Underperform from Buy at Bank America and cut tgt to $42 from $73

Energy, Industrials and Materials

·     United Rentals Inc (URI) said it will acquire the assets of smaller rival Ahern Rentals Inc in an all-cash deal for about $2 billion, as the equipment rental firm looks to expand its U.S. presence.

·     Occidental Petroleum (OXY) upgraded to Equal Weight from Underweight at Wells Fargo

·     Chart Industries (GTLS) downgraded to Equal Weight from Overweight at Wells Fargo

Financials

·     Bank America (BAC) downgraded to Neutral from Buy at Citigroup saying “we are in a tricky period for bank stocks as NII tailwinds seem fully factored in, and we see downside risk to 2023 NII largely from a catch up on deposit repricing and noninterest bearing deposit outflows outweighing the benefits of fixed rate assets repricing.

·     Blackstone Inc. (BX) and Italy’s billionaire Benetton family will move forward with their bid for infrastructure giant Atlantia, even after their takeover offer fell just short of the required 90% shareholder threshold

Healthcare

·     MorphoSys (MOR) lost a third of their value after its partner Roche (RHHBY) slides after saying their Alzheimer drug trial failed. Roche slumped as the company said Phase 3 studies evaluating gantenerumab in people with mild cognitive impairment (MCI) due to Alzheimer’s and mild Alzheimer’s dementia did not meet their primary endpoint of slowing clinical decline (note shares of BIIB which has an approved Alzheimer drug rallies 4%)

·     Ionis Pharmaceuticals, Inc. (IONS) and Metagenomi announced that the companies have entered a collaboration that will leverage Ionis’ extensive expertise in RNA-targeted therapeutics and Metagenomi’s versatile next-generation gene editing systems to pursue a mix of validated and novel genetic targets that have potential to expand therapeutic options for patients.

·     Medical Properties Trust (MPW) upgraded to Buy from Neutral at Bank America

·     Oscar Health (OSCR) downgraded to Equal Weight from Overweight at Morgan Stanley

·     Protalix (PLX) and Chiesi Announce Resubmission of BLA for Pegunigalsidase Alfa for the Treatment of Fabry Disease

·     Teva (TEVA) downgraded to Underweight from Neutral at JPMorgan

Technology, Media & Telecom

·     SoftBank (SFTBY) shares fell as much as 9% after its Vision Fund arm posted a $7.2 billion loss and the company failed to announce a widely expected stock buyback

·     Bumble (BMBL) mentioned positively in Barron’s this weekend saying The female-forward dating-app company looks underpriced, considering how quickly it’s taking market share in a growing market

·     AMD (AMD) upgraded to Buy from Neutral at UBS and raise tgt to $95 from $75.

·     ASML (ASML) upgraded to Positive from Neutral at Susquehanna