Early Look

Monday, November 28, 2022

U.S. stock-index futures sink overnight as Asian markets fell following widespread public demonstrations in China and as oil prices hit a 2022 low. Note the S&P500 has been down on the Monday following Thanksgiving about 65% of the time over the last 60 years. In Asian markets, The Nikkei Index dropped -120 points to 28,162, the Shanghai Index slid -23 points to 3,078, and the Hang Seng Index falls -275 points to 17,297. In Europe, the German DAX is down -127 points to 14,414, while the FTSE 100 slips -27 points to 7,458. Stocks in Asia declined as thousands of protesters in major Chinese cities, including Shanghai, called for President Xi Jinping to resign. The unprecedented protests were spurred by frustration with China’s strict lockdowns as part of its “zero-COVID” policy. Oil prices fell sharply as investors worried about slipping demand in China. Brent crude is nearing $80 a barrel, lowest since January, as low demand from China and weak macroeconomic signals weighs on prices. The US dollar slides about -0.5%, as gold edges higher. Apple (AAPL) shares fall on reports it will see a production shortfall of nearly 6 mln iPhone Pro units due to unrest at Foxconn’s Zhengzhou plant. Stocks pulling back after declines last week as the S&P rose 1.54%, the Dow added 1.78%, and the Nasdaq gained 0.72%.

Market Closing Prices Yesterday

·     The S&P 500 Index slid -1.14 points, or 0.03%, to 4,026.12

·     The Dow Jones Industrial Average rose 152.97 points, or 0.45%, to 34,347.03

·     The Nasdaq Composite dropped -58.96 points, or 0.52%, to 11,226.36

·     The Russell 2000 Index advanced 5.67 points, or 0.30% to 1,869.19

Economic Calendar for Today

·     10:00 AM ET          Fed’s Williams Speaks to The Economic Club of New York

·     10:30 AM ET          Dallas Fed Manufacturing for November

Earnings Calendar:

·     Earnings Before the Open: PDD

·     Earnings After the Close: AZEK ARWR

Other Key Events:

·     Credit Suisse 26^th Annual Technology Conference, 11/28-12/1, in Arizona

·     Jefferies Aerospace & Defense Tour, 11/28-11/30, in Phoenix, AZ

·     Truist Atlanta Bank Virtual Summit, 11/28-11/29, in Atlanta, GA

Sector News Breakdown

Consumer

·     A record $9.12 billion was spent online for Black Friday, Nov. 25, up 2.3% year over year. Electronics were the major driver of the increase in sales, with online sales up 221% over the average day in October 2022, according to data from Adobe Analytics. Smart home items were up 271% and audio equipment up 230%. Toys rose 285%, while exercise equipment rose 218%

·     DraftKings (DKNG) downgraded to Underweight from Neutral at JPMorgan with an unchanged price target of $12 as sees downside in the shares following the post-earnings rally.

·     Beyond Meat (BYND) and Tyson (TSN) were downgraded to underweight from equal weight at Barclays saying most protein companies are facing a difficult outlook

·     Financial Times report that the European Union will propose a sharp increase in excise duties on cigarettes across the bloc, affecting British American Tobacco (BTI) and Imperial Brands, among others.

·     Wynn Resorts (WYNN) upgraded to Overweight from Neutral at JPMorgan and raise tgt to $91 from $71 saying Wynn should benefit from a Macau recovery as COVID restrictions are eased, which should reverse the stock’s underperformance since the onset of the pandemic.

·     WYNN (WYNN), Las Vegas Sands (LVS) and Melco (MLCO) also rising after the Macau government grants six incumbent casino operators new licenses to operate from January in the world’s biggest gambling hub

·     Williams-Sonoma (WSM) downgraded to underweight from equal weight at Morgan Stanley, saying that earnings revisions could turn sharply negative in 2023.

Energy, Industrials and Materials

·     Chevron (CVX) said the U.S. will allow them to resume pumping oil from its Venezuelan oil fields after President Nicolás Maduro’s government and an opposition coalition agreed to implement an estimated $3 billion humanitarian relief program and continue dialogue in Mexico City

·     Diamondback Energy (FANG) downgraded to Underperform from Neutral at Bank America with a $143 price target

·     Energy was a top shorted sector notionally according to Goldman Sachs Prime desk last week, as noted on Twitter last night https://gyazo.com/563c4ba37d508c53751308c9f5d69d8a

·     A small plane carrying two people got stuck in live power lines Sunday evening in Maryland, causing widespread power outages in the surrounding county

Financials

·     Business Development Companies Ares Capital Corp. (ARCC), Owl Rock Capital Corp. (ORCC), FS KKR Capital (FSK), and others in the sector offer dividend yields of around 10% but investors should steer clear given the economy looks to be on the verge of a downturn said Barron’s

Healthcare

·     American Well (AMWL) is in talks to buy Talkspace (TALK), an online therapy platform, for about $1.5 per share, Calcalist newspaper reports, without saying where it got the information. The deal would value the company at around $200 million https://bit.ly/3VtpRRH

·     Axsome Therapeutics (AXSM) announces AXS-05 achieves primary endpoint in the ACCORD Phase 3 Trial in Alzheimer’s Disease Agitation; AXS-05 statistically significantly delayed time to relapse of Alzheimer’s disease agitation versus placebo (p=0.014, primary endpoint); AXS-05 statistically significantly prevented relapse of Alzheimer’s disease agitation versus placebo

Technology, Media & Telecom

·     Apple (AAPL) slips on report of disruption in China production; Apple will see a production shortfall of nearly 6 mln iPhone Pro units due to unrest at Foxconn’s Zhengzhou plant – Bloomberg

·     Activision Blizzard (ATVI) upgraded to overweight from equal weight at Wells Fargo saying the video game developer is undervalued regardless of the outcome of the Microsoft merger deal (shares also upgraded by two other brokers)

·     Pinduoduo (PDD) Q3 adj EPS $1.21 vs. est. $0.65; Q3 revs $4.99B vs. est. $4.31B

·     Yahoo and Taboola (TBLA), a global leader in powering recommendations for the open web, today announced that they have entered a 30-year, exclusive commercial agreement. Taboola will exclusively power native advertising across all of Yahoo’s digital properties and will be available to buy through the Yahoo DSP, establishing Taboola as a leading native advertising offering for advertisers, publishers, and merchants on the open web.

·     More Americans tuned in to watch the US World Cup team tie a heavily favored England on Friday than any other men’s soccer match in history, according to Fox (FOXA) Sports which drew a television audience of nearly 15.4 million people for the game, which ended without either team scoring. That’s 6% more than the previous high of 14.5 million for the World Cup