Mid-Morning Look: May 27, 2022
Mid-Morning Look
Friday, May 27, 2022
Index |
Up/Down |
% |
Last |
|
||
DJ Industrials |
269.37 |
0.83% |
32,906 |
|||
S&P 500 |
63.26 |
1.56% |
4,121 |
|||
Nasdaq |
261.55 |
2.23% |
12,002 |
|||
Russell 2000 |
24.07 |
1.31% |
1,862 |
|||
U.S. stocks looking at big gains this week, with the S&P 500 and Nasdaq set to snap their 7-week losing streaks and the Dow its 8th straight (longest since 1932), each on track for weekly gains of more than 4% as investors put money to work (Bloomberg reported Bank of America’s Flow Show shows nearly $22 billion has poured into U.S. equity funds this week, the most in more than 10 weeks). Many commentators in the media (CNBC) believe we are in the middle of a “bear market rally” as recession fears, weaker economic data, rising rates, along with macro issues remain. Inflation showing signs of easing (or at least not rising), has given investors hope the Fed may reign in (slightly) its aggressive rate hike cycle, especially following other weaker data points of late (rising jobless claims, plunging savings rate, manufacturing misses). Expectations remain for back-to-back 50 bps hikes from the Fed at upcoming meetings, but the picture after that appears cloudy, which has given markets a boost off YTD lows. A big bounce this week, especially in heavily beaten-up consumer discretionary, technology and communications sectors, while financials lag and energy still a leader after market weakness as Covid-19 lockdowns in China and the war in Ukraine have exacerbated supply-chain woes. Treasury yields falling, with the 10-year approaching the 2.70% level to the downside.
Economic Data
· Inflation data better than feared: April PCE Price Index rose +0.2% M/M vs. +0.3% expected and +0.9% prior, while on a Y/Y basis rose +6.3% (in-line) and +6.6% prior. Core PCE Price Index rose +0.3% M/M (in-line w ests and prior reading), while rose +4.9% Y/Y (in-line) and +5.2 % prior.
· Personal Income for April rose +0.4% M/M below the +0.6% expected and +0.5% prior, while Personal spending rose +0.9% M/M vs. +0.7% expected and +1.4% prior. The personal savings rate crashes from 5.0% to 4.4%, the lowest since Lehman filed for bankruptcy back in 2008
· Advance International Trade in Goods for April reported at -$105.94B vs. -$118.0B expected and -$125.94B prior (revised from -$127.12B)
· Advance Wholesale Inventories for April rose +2.1% to $860.8B vs. 2.0% expected and +2.7% in March (revised from +2.3%); while on a Y/Y basis, +23.8%; Advance Retail Inventories rise +0.7% in April to $696.3B vs. prior +0.5%.
· University of Michigan surveys of consumers sentiment final May 58.4 (consensus 59.1) vs preliminary May 59.1 and final April 65.2; current conditions index May-F 63.3 vs prelim May 63.6 and final April 69.4 and expectations index May-F 55.2 vs prelim May 56.3 and final April 62.5
Macro |
Up/Down |
Last |
|
||
WTI Crude |
0.00 |
114.09 |
|||
Brent |
0.58 |
117.98 |
|||
Gold |
4.20 |
1,851.80 |
|||
EUR/USD |
0.0016 |
1.0741 |
|||
JPY/USD |
-0.31 |
126.83 |
|||
10-Year Note |
-0.042 |
2.716% |
|||
Sector Movers Today
· Discount & Specialty Retailers: BIG reports unexpected Q1 EPS loss of (-$0.39) vs. est. $0.93; Q1 revs $1.37B misses the $1.46B estimate; 3-year comparable sales growth of 2% with significant slowdown in April; HIBB missed earnings expectations for Q1 after sales dropped without the spending boost from government stimulus money that consumers received a year earlier; ULTA posted a better-than-expected F1Q and raise annual guidance by 7% to $19.20-$20.10 and boosted FY22 comp store sales view to 6%-8% from 3%-4% (upgraded to Buy at Jefferies); COST F3Q sales beat consensus by $1.2B and core comp sales grew 11% on top of 15% in the year-ago period – Total company comp sales ex: fuel, in c/c +10.8% vs. +15.1% Y/Y
· Apparel Retailers: GPS falls after cuts FY forecast as inflation rips demand – guides FY adj EPS $0.30-0.60 vs est. $1.34, EBIT margin 1.8-2.8%, revs -low-to-mid-single digit % vs est. -2.3%; AEO slides on EPS and sales miss (Q1 EPS $0.16 vs. est. $0.25; Q1 revs $1.05B vs. est. $1.14B) as qtr-end total ending inventory at cost increased 46% to $682M compared to $467M last year and slashed its operating income outlook (downgraded to Neutral at JPM as see potential markdown risk tied to supply vs. demand imbalances); FTCH Q1 GMV grew just 2% YoY (vs. consensus +16%), adjusted EBITDA loss of $36 million was far worse YoY ($19 million loss in 1Q21) and lowered FY digital GMV growth to 5-10% (from 28-32% prior)
· Auto sector; DIDI rises initially after a Bloomberg News report that state-owned automaker China FAW Group is considering acquiring a significant stake in the ride-hailing company; NIO is looking to hire for vehicle manufacturing-related positions in the U.S., suggesting that it may be planning a new plant in the country according to local media outlet; LI has cuts this year’s sales target by 15%, according to local tech outlet
· Healthcare Services: Bernstein upgraded HCA to Outperform from MP with $271 tgt while downgraded CVS ($112 tgt) and UNH ($561 tgt) to Market Perform, positive on the group and sees it well positioned in an inflationary environment – positive on HCA ability to pass through labor costs and resulting earnings recovery – also resumed ANTM, CNC at Outperform and CI, HUM at Market Perform
Stock GAINERS
· ACET +11%; said data from early-stage trial of its CAR-T cancer therapy showed 4 of 6 lymphoma patients taking treatment had no signs of cancer at 28 days
· DELL +13%; as Q1 adj EPS $1.84 tops est. $1.40 and Q1 revs rose 16% Y/Y to $26.1B vs. est. $25B while posting record revs for infrastructure solutions group and Client Solutions Group
· PMVP +32%; said it would be presenting data from its lead program, PC14586, at the 2022 American Society of Clinical Oncology meeting next month
· RRGB +22%; 1Q results reflected slightly better than expected sales and higher EBITDA due primarily to lower than expected advertising costs
· ULTA +10%; better-than-expected F1Q and raise annual guidance by 7% to $19.20-$20.10 and boosted FY22 comp store sales view to 6%-8% from 3%-4% (upgraded to Buy at Jefferies)
· ZS +6%; delivered an impressive quarter/guide, highlighted by 54% y/y billings growth and 76% y/y CRPO growth, and we believe that a long runway for growth remains
Stock LAGGARDS
· AEO -7%; on EPS and sales miss (Q1 EPS $0.16 vs. est. $0.25; Q1 revs $1.05B vs. est. $1.14B) as qtr-end total ending inventory at cost increased 46% to $682M compared to $467M last year and slashed its operating income outlook
· BIG -15%; reports unexpected Q1 EPS loss of (-$0.39) vs. est. $0.93; Q1 revs $1.37B misses the $1.46B estimate; 3-year comparable sales growth of 2% with significant slowdown in April
· CGC -14%; after reports a bigger adjusted Q4 core loss, as demand for cannabis fell from COVID-19 lockdown-induced highs
· GPS -7%; after co cuts FY forecast as inflation rips demand – guides FY adj EPS $0.30-0.60 vs est. $1.34, EBIT margin 1.8-2.8%, revs -low-to-mid-single digit % vs est. -2.3%
· IOVA -45%; announced new clinical data for its experimental melanoma drug, including a 29% objective response rate in one cohort of patients
· MRTX -40%; after announced full data from its Ph2 registrational cohort of the KRYSTAL-1 study evaluating adagrasib (600mg BID) in patients with KRASG12C-mutated NSCLC (Full adagrasib data in ASCO Abstracts raises safety questions)
· SWTX -54%; after shared initial data from a Phase 1/2 trial involving its lead product candidate nirogacestat in patients with relapsed or refractory multiple myeloma
· WDAY -7%; after Q1 EPS of $0.83 missed by $0.03 on in-line revs of $1.43B, as analysts cut tgt prices saying Q2 backlog forecast implies further growth deceleration
Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.