Early Look

Monday, April 25, 2022

The bleeding for global stock markets continues into the new week, with broad selling pressure after a big decline last week and in China stocks overnight (falls 5%), Treasury yields and commodity prices slide with oil down over 4% after a technical breakdown last week raises concern that “this time is different.” For years, major U.S. stock markets have rebounded following aggressive selling pressure, with the Federal Reserve as the market backstop with low rates and accommodation. However, this time, as stocks appear on track for another sharp daily decline, the Fed is not there, as they remain on track with aggressive interest rate hikes to help tame surging inflationary prices. The 10-year yield is down 8 basis points to 2.83%, while the 2-year is off 11 basis points to 2.61%. Bitcoin prices join the slide, down over 2.75% to $38,500 while Ethereum tumbles around 5% to $2,825.

U.S. stocks appear on track for another bumpy start after stocks plunged on Friday, pulling the Dow and S&P 500 down for consecutive weekly declines (Dow 4^th straight), as traders weighed a raft of corporate earnings and rising interest rates from the Fed. The Dow fell 2.81%, the S&P 500 lost 2.77% and the Nasdaq shed 2.55%. For the week, unofficially, the S&P fell 2.75%, the Dow lost 1.85%, the Nasdaq shed 3.83%. After the S&P failed to break above its 100-day moving average on Thursday morning above 4,500 and dropped back below its 200-day MA support of 4,490 that same morning, it has been elevator down ever since for broader averages.

In Asian markets, The Nikkei Index slides -1.9% to 26,590, the Shanghai Index tumbled -158 points or over 5% to 2,928 (lowest since May 20202), and the Hang Seng Index declines -769 points or 3.7% to 19,869 in a rout of Asian stock markets. Rising COVID cases increase fears of a wider lockdown in Beijing. In Europe, the German DAX is down -230 points or 1.65% to 13,900, while the FTSE 100 drops over 2% or -165 points to 7,350. The Japanese yen has tumbled to a 20-year low against the U.S. dollar.

Market Closing Prices Yesterday

·     The S&P 500 Index tumbled -121.88 points, or 2.77%, to 4,271.78

·     The Dow Jones Industrial Average fell -981.36 points, or 2.82%, to 33,811.40

·     The Nasdaq Composite sunk -335.36 points, or 2.55%, to 12,839.29

·     The Russell 2000 Index declined -50.55 points, or 2.54% to 1,940.80

Economic Calendar for Today

·     8:30 AM ET         National Activity index for March

·     10:30 AM ET       Dallas Fed Manufacturing for April

Earnings Calendar:

·     Earnings Before the Open: ATVI, BOH, CBU, DORM, KO, LII, LFKN, WASH

·     Earnings After the Close: ACC, AIN, AMP, ARE, AXTA, BRO, CADE, CALX, CATY, CCK, CDNS, CR, EFSC, HLX, HMST, HTLF, HXL, IBTX, MEDP, OI, PCH, PKG, RBB, ROIC, SBAC, SSD, SUI, TBI, UHS, WHR, WRB, ZION

World News

·     The U.S. announced additional military aid for Ukraine as Secretary of State Antony Blinken and Defense Secretary Lloyd Austin arrived in Kyiv for talks.

·     French President Emmanuel Macron was re-elected, wins a 2nd term with 58.55% of vote vs 41.45% for marine Le Pen

Sector News Breakdown

Consumer

·     Nissan (NSANY) falls following a Bloomberg report that top shareholder Renault (RNLSY) is considering selling some of the 43% stake it owns in the Japanese automaker.

·     WW International (WW) said committed to restructuring plan consisting of organizational realignment to simplify corporate structure, reduce associated costs; restructuring plan consisting of continued rationalization of its real estate portfolio

·     Kellogg (K) downgraded to Hold from Buy at Deutsche Bank

Energy, Industrials and Materials

·     Deere (DE) downgraded to Neutral from Buy at Bank America and cut tgt to $450 from $475 saying a lot of the good news has been priced into the stock

·     Maxar Technologies (MAXR) received U.S. Government mission support contracts in 1Q22 valued at up to $202M over a 6-year period

·     Newmont (NEM) and Barrick Gold (GOLD) both downgraded to Market Perform from Outperform at Bernstein saying the stock’s leverage to the gold price is at levels that can’t be sustained

·     Otis Worldwide (OTIS) Q1 adj EPS $0.77 vs. est. $0.74; Q1 revs $3.41B vs. est. $3.43B; Q1 new equipment orders up 8.8%; backlog up 4%, up 6% at constant currency with growth in all regions; guides FY net sales $14.1B-$14.3B, up 0.5%-1.5% and organic sales up 3%-4%

Healthcare

·     Pfizer (PFE) said late Friday it was voluntarily recalling five batches of Accupril blood pressure tablets over elevated levels of potential cancer-causing agent; said the batches were distributed in U.S. and Puerto Rico from December 2019 to April 2022

·     AstraZeneca PLC (AZN) said its liver cancer treatment tremelimumab was accepted for priority review by U.S. federal health regulators; said the FDA regulatory decision action date is expected in the fourth quarter of 2022

Technology, Media & Telecom

·     Twitter (TWTR) is nearing a deal to sell itself to Tesla (TLSA) CEO Elon Musk, the New York Times reported, citing two people with knowledge of the situation. Twitter’s board was negotiating with Musk into the early hours of Monday over his unsolicited bid to buy the company, after he began lining up $46.5B in financing for the offer last week https://nyti.ms/3L9MeWW

·     Twitter (TWTR) is re-examining Elon Musk’s $43 billion takeover offer after the billionaire lined up financing for the bid, the WSJ reported. Twitter had been expected to rebuff the offer, which Mr. Musk made earlier this month without saying how he would pay for it. https://on.wsj.com/3Mwk2xV

·     Nvidia ‘s (NVDA) incredible winning streak may soon be coming to an end, Barron’s reported saying the maker of graphics chips is facing headwinds that range from the aftereffects of pandemic-era spending to waning demand from gamers. And it could get far worse: A key crypto market development in the coming months may lead to a spectacular glut of its products

·     Silicon Motion Technology Corp. (SIMO) is said to be considering a potential sale amid takeover interest in the semiconductor company. The co is working with advisers as it holds talks with possible bidders, according to a Bloomberg report. https://bit.ly/36Hgd9I

·     AMD (AMD) upgraded to Strong Buy from Outperform at Raymond James

·     Warner Bros. Discovery (WBD) files to sell 198.2M shares of Series A common for holder

·     Verizon (VZ) downgraded to Neutral from Buy at Goldman Sachs