Early Look

Monday, December 5, 2022

Futures	Up/Down	%	Last
Dow	-125.00	0.36%	34,334
S&P 500	-15.25	0.37%	4,060
Nasdaq	-25.50	0.21%	11,984

 

 

U.S. stocks slip while the U.S. dollar and Treasury yields pullback slightly as markets prep for a busy week of inflation data and macro headlines, with stocks looking to continue to pare losses into year-end. Stocks rose last week as the S&P 500 rose 1.13%, the Dow added 0.24%, and the Nasdaq gained 2.10% after dovish Fed commentary but mixed economic data messages. The Ten-year Treasury yields fell 2.3 bps to 3.502% on Friday, falling to mid-September levels, and they’re down about 20bps on week, marking four consecutive weeks yields have fallen and it’s the longest losing streak since July 30, 2021. Stocks have halved losses for the year since October as Bank America noted last Friday in its weekly strategy note that it seems we have hit peak inflation, peak China COVID, peak bond yields, peak US dollar = the Q4 rally has been led by the dollar and yield slump and oversold global cyclicals: China 30%, EM 15%, materials 15% past 4 weeks, energy 21%, EU stocks 19%, semis 18%, EU HY bonds 11%…but warned lots of good news is baked into markets. Global oil prices moved higher Monday after OPEC leaders, as well as key allies including Russia, agreed to maintain their program of production cuts until at least the end of next year. Note we are 11 days out from the December Fed decision. In Asian markets, The Nikkei Index gains 42 points to 27,820, the Shanghai Index jumps 55 points to 3,211, and the Hang Seng Index climbs 842 points or 4.51% to 19,518. In Europe, the German DAX is slips -60 points to 14,465, while the FTSE 100 rises 20 points to 7,577. China Loosens covid rules China’s Covid as cities ease testing rules Shanghai, Hangzhou scrap range of testing requirements.  

Market Closing Prices Yesterday

·     The S&P 500 Index slipped -4.87 points, or 0.12%, to 4,071.70

·     The Dow Jones Industrial Average rose 34.87 points, or 0.10%, to 34,429.88

·     The Nasdaq Composite dropped -20.95 points, or 0.18%, to 11,461.50

·     The Russell 2000 Index advanced 11.16 points, or 0.59% to 1,892.84

 

Economic Calendar for Today

·     9:45 AM ET            S&P Global Composite Nov-F

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

·     10:00 AM ET          Employment Trends for November

·     10:00 AM ET          Factory Orders M/M for October

·     10:00 AM ET          Durable Goods Orders M/M for October

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

 

Earnings Calendar:

·     Earnings Before the Open: DLHC SAIC VERU

·     Earnings After the Close: GTLB IDT POWL SUMO

 

Other Key Events:

·     OPEC+ production meeting (virtual)

·     Goldman Sachs 14th Annual Industrials Week, 12/5-12/9, in London

·     Piper Cloud Automation & Security Software Bus Tour (virtual), 12/5-12/6

·     UBS Global Tech, Media, & Telecom Conference, 12/5-12/7, in NY

·     Wolfe Consumer Growth Conference (virtual), 12/5-12/6

 

 

Macro	Up/Down	Last
Nymex	2.05	82.03
Brent	1.84	87.41
Gold	-1.70	1,807.90
EUR/USD	0.0017	1.0555
JPY/USD	1.05	135.35
10-Year Note	+0.012	3.515%

 

 

Sector News Breakdown

Consumer

·     Tesla (TSLA) plans to cuts Dec Model Y output at its Shanghai plant by more than 20% vs. Nov, two sources told Reuters. Separately, TSLA delivered 100,291 China-made EVs in Nov, highest monthly sales since Shanghai plant opened in late 2020

·     Starbucks (SBUX) downgraded to Hold from Buy at Deutsche Bank and up tgt to $106 from $100 citing valuation call on the shares

·     Housing-related stocks (TOL, LEN, PHM, DHI, KBH) have taken some big hits this year, but the stocks are now trading at attractive price/earnings ratios, Barron’s reported. However, there remain many negatives, some bigger than others. Housing affordability measures have plunged for first-time buyers and even wealthier move-up purchasers. New orders are off sharply, with Toll Brothers reporting a 60% drop in the most recent quarter

·     Makers of appliances and building products such as Whirlpool Corp. (WHR), Masco Corp. (MAS) and Fortune Brands Home & Security Inc. (FBHS) could be insulated from the weak housing market as they rely more on repair and remodeling demand, according to Barron’s.

·     Small-cap stocks are currently 30% cheaper than large-caps, according to Barron’s, the biggest discount since the dot-com bubble over two decades ago, citing Bank America head of US small- and mid-cap strategy. Barron’s identifies eight companies that could outperform, including retailer Boot Barn Holdings Inc. (BOOT); Ceridian HCM Holding Inc. (CDAY), and sales software provider HubSpot Inc. (HUBS).

·     MGM Resorts (MGM) upgraded to Buy from Hold at Truist and raise tgt to $50 from $40

 

Energy, Industrials and Materials

·     OPEC+ didn’t change their targets for shipping oil to the global economy amid uncertainty about the impact of new Western sanctions against Russia that could take significant amounts of oil off the market. The decision at a meeting of oil ministers Sunday comes a day ahead of the planned start of two measures aimed at hitting Russia’s oil earnings in response to its invasion of Ukraine.

·     President Volodymyr Zelenskiy called the $60 per barrel price cap on Russian crude a sign of weakness toward Moscow. The cap agreed on by European Union countries is higher than the price at which Russian oil has been trading recently, and the Kremlin said it’s preparing a workaround in any case – Bloomberg

·     Patterson-UTI (PTEN) reported that for the month of November, the company had an average of 131 drilling rigs operating in the United States.

·     TOP Ships (TOPS) 6.75M share Spot Secondary priced at $2.00

 

Financials

·     Credit Suisse (CS) Attracts Saudi Crown Prince; Mohammed bin Salman could invest $500 million to back CS First Boston and CEO-designate Michael Klein – WSJ https://on.wsj.com/3VyHiQv

·     LedgerX, one of the few solvent pieces of Sam Bankman-Fried’s crumbled FTX empire, is for sale and attracting interest from would-be buyers including crypto giants Blockchain.com and Gemini, according to people familiar with the matter – Bloomberg

 

Healthcare

·     Johnson & Johnson (JNJ) said it doesn’t intend to make an offer for Horizon Therapeutics (HZNP), days after the developer of medicines for rare autoimmune and inflammatory diseases revealed it was in talks with the company – Bloomberg

·     Axsome Therapeutics (AXSM) files automatic mixed securities shelf

·     AbbVie Inc. (ABBV) mentioned positively in Barron’s saying concern over the expiration of patents for its blockbuster Humira drug has clouded the co, but argues the company has other profitable products that have begun to fill the gap left by the immunosuppressive drug’s decline.

·     Clovis Oncology (CLVS) said in a filing that it expects to file for Chapter 11 bankruptcy “in the very near term.”

·     Agiliti Inc. (AGTI), SJW Group (SJW) and Cushman & Wakefield Plc (CWK) will replace LL Flooring Holdings Inc. (LL), The Cato Corp. (CATO) and Diebold Nixdorf Inc. (DBD) respectively in the S&P SmallCap 600

·     TherapeuticsMD Inc (TXMD) said it signed a license deal with Australia-based Mayne Pharma Group Ltd including for sale of certain assets for upfront payment of $140 mln

 

Technology, Media & Telecom

·     Apple (AAPL) has accelerated plans to shift some of its production outside China, long the dominant country in the supply chain that built the world’s most valuable company – WSJ

·     Foxconn said November revenue totaled 551.1 billion new Taiwan dollars ($14.7 billion), down more than 29% versus October and over 11% lower compared to Nov. 2021; said the fall was due to “production gradually entering off-peak seasonality and a portion of shipments being impacted by the epidemic in Zhengzhou.”

·     Comcast (CMCSA) upgraded to Equal Weight from Underweight at Wells Fargo

·     Allegro Microsystems Inc. (ALGM) and CubeSmart (CUBE) will replace Semtech Corp. (SMTC) and NuVasive Inc. (NUVA) respectively in the S&P MidCap 400 on Monday, December 19

·     Semtech (SMTC) and NuVasive (NUVA) will replace Diversified Healthcare Trust (DHC) and Tupperware Brands Corp. (TUP) respectively in the S&P SmallCap 600

·     AT&T Inc. (T) agreed to pay a $6.25 million penalty to settle an unusual lawsuit by federal regulators claiming its executives selectively disclosed nonpublic information about the company’s finances to Wall Street analysts.

·     Fox (FOXA) and DirecTV signed a multi-year renewal of FS1, FS2, Big Ten Network, FOX Deportes, FOX Soccer Plus, and retransmission consent for local Fox television stations across DirecTV, DirecTV Stream, and U-verse