Early Look

Tuesday, September 6, 2022

Futures	Up/Down	%	Last
Dow	221.00	0.71%	31,533
S&P 500	29.25	0.75%	3,954
Nasdaq	99.50	0.82%	12,203

 

 

U.S. futures are looking higher, getting a rebound alongside easing energy concerns in Europe after incoming UK Premier Liz Truss drafts a £130 billion plan to freeze energy bills. The move helped reverse energy prices in Europe lower, as the U.S. dollar slipped from 20-year highs. Meanwhile Reuters reported that Russia’s biggest natural gas pipeline to Europe (Nord Stream 1) will not resume pumping until Siemens Energy repairs faulty equipment, Gazprom’s Deputy Chief Executive told Reuters. Markets return from the 3-day Labor Day holiday weekend, trying to snap three week losing streaks for major averages after the S&P fell -3.28% last week, the Dow lost -2.99%, and the Nasdaq shed -4.21%. According to bespoke Investment, the S&P has been below its 200-DMA for more than 100 trading days now — the longest streak since the Financial Crisis. News of a prolonged halt of natural gas flows through a key Russian pipeline rattled global markets on Friday, erasing earlier gains after what was seen as best-case August payroll report. The 10-year yield rose 15-bps to 3.19% last week, its best 1-week gain in a month and the yield is up for five consecutive weeks, its longest winning streak since the week ending Oct. 8, 2021, when the market rose for seven straight weeks. The 2-year yield edged slightly higher on the week to 3.398% this week, off 14-yr highs above 3.5% the day prior and is up for five consecutive weeks (longest streak since April). The dollar index (DXY) pulled back after hitting touched 20-year highs of 110.27, early in the European session, as EUR–USD fell below 0.99 and cable below 115 against the background of the escalating energy crisis in Europe. The buck retreated after incoming UK Premier Liz Truss drafts a £130 billion plan to freeze energy bills. In Asian markets, The Nikkei Index was little changed at 27,626, the Shanghai Index rose 1.36% to 3,243 and the Hang Seng Index dipped -22 points to 19,202. In Europe, the German DAX is up 1.1% to 12,900, while the FTSE 100 rises +0.25% to 7,305. Another big week for central bank policy meetings, with hikes expected from the European Central bank (ECB) on Thursday (50 or 75 bps), the Bank of Canada on Wednesday (again 50 or 75 hike expected), the Aussie central bank on Tuesday (possibly 50-bps hike expected) as well as other banks in action including the Bank of Chile (Tuesday), Polish central bank (Wed) and Malaysian Central Bank (Thursday). The Federal Open Market Committee (FOMC) is due the next week.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -42.59 points, or 1.07%, to 3,924.26

·     The Dow Jones Industrial Average fell -337.98 points, or 1.07%, to 31,318.44

·     The Nasdaq Composite tumbled -154.26 points, or 1.31%, to 11,630.86

·     The Russell 2000 Index declined -13.07 points, or 0.72% to 1,809.75

 

Economic Calendar for Today

·     7:45 AM ET         ICSC Weekly Retail Sales

·     8:55 AM ET         Johnson/Redbook Weekly Sales

·     9:45 AM ET         S&P Global Composite PMI, Aug-F

·     9:45 AM ET         S&P Global Services PMI, Aug-F

·     10:00 AM ET       ISM Non-Manufacturing Index for August

·     4:30 PM ET         API Weekly Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: None

·     Earnings After the Close: CDMO COUP GTLB GWRE HQY PATH

 

Other Key Events:

·     Barclay’s CEO Energy-Power Conference, 9/6-9/8, in NY

·     Barclay’s Global Consumer Staples Conference, 9/6-9/8, in Boston, MA

·     Credit Suisse Asian Technology Conference (virtual), 9/5-9/8

·     Deutsche Bank Annual Aircraft Finance & Leasing Conference, 9/6-9/8, in NY

·     Wolfe Research Tech, Media, Telecom Conference 2022, 9/6-9/8 in San Francisco, CA

·     China Imports, Exports, and Trade Balance data for August

 

 

Macro	Up/Down	Last
Nymex	-0.46	86.41
Brent	-2.98	92.76
Gold	-0.40	1,722.20
EUR/USD	0.0005	0.9931
JPY/USD	1.17	141.76
10-Year Note	+0.051	3.242%

 

 

World News

·     UK Prime Minister Truss earmarks £130 Billion to Keep UK energy bills below £2,000 ‘; Truss will set a fixed unit price for energy suppliers to sell gas & electricity to households – energy suppliers will be obliged to charge households a reduced rate for gas & electricity; the government will guarantee financing to cover the difference; costing approximately £130bn over 18 months

·     Japan’s services sector activity shrank for the first time in five months in August. The final Japan Services purchasing managers’ index (PMI) dropped to a seasonally adjusted 49.5, marking the first contraction since March. The figure was slightly better than a 49.2 flash reading but worse than a slight expansion in activity of 50.3 in July.

·     European PMIs showed German service PMIs falling to 47.7 to drag the composite index to a 27-month low of 46.9. The EU PMI also made back-to-back sub- 50 readings, with the composite down to an 18-month low of 48.9

·     China reduced the amount of foreign-exchange deposits banks need to set aside as reserves. Financial institutions will need to hold 6% of their foreign-currency deposits in reserves starting from Sept. 15, the People’s Bank of China said

·     Russian Energy Minister says: Russia will respond to price caps on Russian oil by shipping more oil to Asia; Russia and partners are considering setting up own insurer to facilitate oil trade; Nothing has been decided on Nord Stream 1 gas pipeline resumption

 

Sector News Breakdown

Consumer

·     Bed Bath & Beyond Inc.’s (BBBY) Chief Financial Officer (CFO) Gustavo Arnal died by suicide Friday after jumping from a New York building. Mr. Arnal, 52 years old, died two days after he had briefed investors on the retailer’s plans to secure new financing, slash jobs and close about a fifth of its namesake stores. He had been with the company for about two years

·     Saturday’s National Cinema Day promotion to boost attendance at movie theaters (AMC, CNK, IMAX, SONE, PARA, DIS) with $3 tickets drew more than eight million moviegoers nationwide, according to reports. The preliminary box office tally showed sales of $24.3 million, according to comScore, 9% more than the previous Saturday. Domestic summer ticket sales from films reached $3.3 billion, 21% lower than ticket sales before the pandemic.

·     PVH Corp. (PVH) and PENN Entertainment (PENN) will join the S&P 400 from the S&P 500; PVH and PENN will replace Hudson Pacific Properties Inc. (HPP) and Mercury General Corp. (MCY) respectively in the S&P MidCap 400

·     Target Corp. (TGT) mentioned positively in Barron’s saying after a 29% drop in its shares this year, investors should consider buying shares. Miramar Capital founder Max Wasserman sees the shares rebounding to more than $200 next year, citing growing earnings and a “great” dividend

 

Energy

·     Gas prices surged more than 30% in Europe on Monday as traders reacted to Russia’s decision late Friday to keep its main gas pipeline shut indefinitely; the euro also slid

·     Sitio Royalties Corp. (STR) and Brigham Minerals Inc. (MNRL) have reached a deal to merge to form one of the largest publicly traded mineral and royalty companies in the U.S., worth about $4 billion, according to people familiar with the matter. https://on.wsj.com/3xmKaGr

·     Patterson-UTI (PTEN) reported that for the month of August 2022, the Company had an average of 128 drilling rigs operating in the United States. For the two months ended August 31, 2022, the Company had an average of 127 drilling rigs operating in the United States

·     Shell (SHEL) and Exxon Mobil (XOM) have put up for sale one of Europe’s largest and oldest natural gas production ventures, betting on soaring energy prices amid tensions with Russia to attract buyers, according to a document and industry sources. The top two Western energy giants could raise over $1 billion from the sale of the 50-50 NAM joint venture in the Netherlands

·     Veritas Capital Fund Management LLC agreed to acquire Chromalloy Gas Turbine from Carlyle (CG) for more than $1.6 billion, including debt, Reuters reported https://bit.ly/3TL0rhV

 

Financials

·     CoStar Group Inc. (CSGP) and Invitation Homes Inc. (INVH) will replace PVH Corp. (PVH) and PENN Entertainment Inc. (PENN) respectively in the S&P 500.

·     Hudson Pacific Properties and Mercury General will replace American Public Education Inc (APEI) and eHealth Inc. (EHTH) respectively in the S&P SmallCap 600

·     MarketAxess (MKTX) reported trading volume for August of $30.6 billion. August Trading volume $30.6 billion; US high-grade volume $4.91 billion; Other credit volume $5.26 billion

 

Healthcare

·     CVS Health Corp. (CVS) announced on Monday that it would buy home healthcare firm Signify Health (SGFY) in an $8 billion purchase. The companies confirmed the $30.50 all-cash deal, which should close in Q1’23, confirming previous reports from The Wall Street Journal. https://on.mktw.net/3AJqWvm

·     Amazon (AMZN) disclosed that it received a request for additional information from the Federal Trade Commission related to its planned $3.9 billion purchase of One Medical (ONEM). The FTC received a so-called “second request” from the FTC on Friday

·     Iveric Bio Inc. (ISEE) said a second Phase 3 clinical trial for its geographic atrophy treatment Zimura met its primary endpoint with statistical significance and a favorable safety profile.

·     ShockWave Medical (SWAV) downgraded to Underperform from Perform at Oppenheimer

 

Industrials & Materials

·     Global sales of industrial robots and factory automation are forecast to more than double by 2027 because of the labor shortage, Barron’s cites Alger’s director of market strategy Brad Neuman as saying. The companies that dominate this market are Switzerland’s ABB Ltd. (ABB), Japan’s Fanuc Corp. and Yaskawa Electric Corp., and Germany’s Kuka AG

·     FedEx (FDX) downgraded to neutral from Buy at Citigroup, noting that it’s concerned about the pace of freight activity heading into year-end

·     NASA on Saturday delayed its latest effort to launch a rocket around the moon, the second cancellation within a week. The next possible launch date isn’t any earlier than late September

 

Technology, Media & Telecom

·     Advanced Micro Devices Inc. (AMD) will replace DuPont de Nemours Inc. (DD) in the S&P 100

·     Dynatrace Inc. (DT) and Annaly Capital Management Inc. (NLY) will replace American Eagle Outfitters Inc. (AEO) and Minerals Technologies Inc. (MTX) respectively in the S&P MidCap 400

·     American Eagle Outfitters and Minerals Technologies will replace CalAmp Corp. (CAMP) and Glatfelter Corp. (GLT) respectively in the S&P SmallCap 600

·     OutFront Media Inc. (OUT) will replace Fossil Group Inc. (FOSL) in the S&P SmallCap 600

·     Digital World Acquisition Corp. (DWAC) shares plunged 18% in premarket trade after Reuters reported that the blank-check company did not get enough shareholder support for a one-year extension to complete its merger with Donald Trump’s social media company.