Early Look

Wednesday, December 21, 2022

U.S. futures are looking higher following a beat and raise quarter from Dow component Nike (NKE) while Fed-Ex (FDX) rebounds about quarterly beat, while guidance was below views. S&P futures are higher by +0.5% to around 3,868, still below its 3,885 50-day moving average resistance which it dropped below this week. Stocks snapped a 4-day losing streak yesterday on low volumes into the Christmas Holiday weekend. Joe Biden is expected to unveil nearly $2 billion in assistance and announce moves to deliver a Patriot missile battery to help Ukraine bolster its defenses this winter as its leader, Volodymyr Zelenskiy, arrives in Washington to deliver an in-person address to Congress. In Asian markets, The Nikkei Index fell -180 points to 26,387, the Shanghai Index dipped -5 points to 3,068, and the Hang Seng Index rose 65 points to 19,160. In Europe, the German DAX is up about 100 points to 13,980, while the FTSE 100 rises 60 points to 7,430. Markets brushed aside a surprise monetary shift by the Bank of Japan, where it raised the yield at which it allows bond to trade.

Market Closing Prices Yesterday

·     The S&P 500 Index edged higher 3.96 points, or 0.10%, to 3,821.62

·     The Dow Jones Industrial Average rose 92.20 points, or 0.28%, to 32,849.74

·     The Nasdaq Composite little changed up 1.08 points, or 0.01%, to 10,547.11

·     The Russell 2000 Index advanced 9.44 points, or 0.54% to 1,748.02

Economic Calendar for Today

·     7:00 AM ET          MBA Mortgage Applications Data

·     8:30 AM ET          Current Account Balance for Q3

·     10:00 AM ET        Consumer Confidence for December

·     10:00 AM ET        Existing Home Sales M/M for November

·     10:30 AM ET        Weekly DOE Inventory Data

·     1:00 PM ET           US Treasury to sell $15B in 20-year notes

Earnings Calendar:

·     Earnings Before the Open: CCL CTAS RAD TTC

·     Earnings After the Close: MLKN MU

World News

·     The Bank of Japan announced an unscheduled operation: offered to buy JPY 100bln in 3-5yr JGBs and JPY 100bln in 5-10yr JGBs, according to Reuters

·     Democratic and Republican negotiators agreed early Tuesday morning on a $1.66 trillion government-funding bill through the end of its fiscal year on Sept. 30. The Senate voted 70-25 to proceed to debate of the bill, with some Republican senators hoping to offer amendments.

·     Ukrainian President Volodymyr Zelensky departed for his surprise state visit to the United States on Wednesday upon receiving the official invite from the White House last week.

Sector News Breakdown

Consumer

·     Nike (NKE) Q2 EPS $0.85 vs. est. $0.64; Q2 revs rose 17% y/y to $13.3B vs. est. $12.57B; qtrly greater China total rev $1.79B, down 3%; qtrly North America total revenue was $5.83B vs $4.48B reported last year; Q2 gross margin 42.9% vs. 45.9% y/y and inventory $9.33 billion, +43% y/y; raised its revenue outlook and said that its inventory challenges are abating

·     Calavo Growers (CVGO) Q4 adj EPS $0.03 vs. est. $0.33; Q4 revs fell -11% y/y to $243.6M vs. est. $297.97M; estimate the Mexican avocado crop will be 10-20% larger in 2023 and Jalisco fruit will be available for the full year

·     Tesla Inc (TSLA) has confirmed another wave of layoffs are coming in the next quarter, news website Electrek reported on Wednesday, citing a source familiar with the matter.

·     Delta Apparel (DLA) files for mixed shelf of up to $150M

Energy, Industrials and Materials

·     Fed-Ex (FDX) Q2 adj EPS $3.18 vs. est. $2.80; sees FY adj EPS $13.00 to $14.00, vs. est. $14.14; sees fiscal 2023 capital spending of $5.9B, down from prior forecast of $6.3B; is prioritizing actions to quickly reduce costs to align fiscal 2023 costs with weaker-than-expected volume

·     AAR Corp. (AIR) Q2 adj EPS $0.69 vs. est. $0.68; Q2 sales rose 8% y/y to $470M vs. est. $461.8M; Operating margins remained consistent at 6.9% in both the current and prior quarters, while adjusted operating margin increased from 6.1% in the prior quarter to 7.6%

·     Worthington Industries (WOR) Q2 adj EPS $0.44 vs. est. $0.66; Q2 revs $1.18B vs. est. $1.17B; says despite a somewhat murky economic outlook, steel prices appear to have stabilized; says end market demand remains solid across most markets, and optimistic about our start to 2023

·     The American Petroleum Institute said weekly crude stockpiles fell -3,1M barrels, Cushing rose 800K barrels, gasoline rose 4.5M barrels and distillates rose 3.4M barrels

·     China’s crude imports from Russia rose last month, while shipments from Saudi Arabia slipped. Abu Dhabi National Oil Co. bought a stake in OMV AG worth about $4 billion

Financials

·     American Equity (AEL) rejects unsolicited acquisition proposal from Prosperity Group Holdings LP and Elliott Investment MGT. AEL’s board unanimously concluded proposal significantly undervalues AEL and its value creation potential.

·     Comerica (CMA) upgraded to Buy from Neutral at DA Davidson

Healthcare

·     Celyad (CYAD) to discontinue development of CYAD-211, anti-BCMA CAR T candidate for relapsed or refractory multiple myeloma

·     Royal Philips (PHG) provides an update on the comprehensive test and research program of its subsidiary Philips Respironics, following the voluntary recall notification/field safety notice to address potential health risks related to the polyester-based polyurethane (PE-PUR) sound abatement foam in specific CPAP, BiPAP and mechanical ventilator devices.

·     Terns Pharmaceuticals (TERN) 10.35M share Secondary priced at $7.25

Technology, Media & Telecom

·     Alphabet’s (GOOGL) YouTube is close to an agreement to acquire the rights to the National Football League’s Sunday Ticket subscription service, WSJ reports. Satellite broadcaster DirecTV, which is co-owned by AT&T Inc. and private-equity firm TPG Inc., currently pays $1.5 billion annually for Sunday Ticket rights https://on.wsj.com/3BRPvHQ

·     BlackBerry (BB) Q3 adj EPS loss (-$0.05) vs. est. loss (-$0.07); Q3 revs $169M vs. est. $168.73M; IoT revenue of $51M, cybersecurity revenue of $106M, licensing & Other revenue of $12M

·     CalAmp (CAMP) Q3 adj EPS 0c, in-line with consensus; Q3 revs $78.89M vs. est. $75.29M; maintaining policy of not providing detailed qtrly guidance due to visibility into product shipments remaining difficult to accurately assess