Early Look

Monday, February 28, 2022

Futures	Up/Down	%	Last
Dow	-423.00	1.24%	33,571
S&P 500	-61.25	1.41%	4,318
Nasdaq	-192.50	1.36%	13,988

 

 

The rollercoaster ride for global stock markets continues as S&P futures fall -1.4% at 4,319 (well off overnight lows of 4,251) as the West ramped up sanctions against Russia for its attack on Ukraine that included blocking banks from the Swift Global Payments system. Oil soars more than 4% as more sanctions on Russia spur energy crisis fears. Russia’s central bank raised its key interest rate to 20% from 9.5% in an emergency move to counter the risks of the Rouble’s rapid depreciation and higher inflation. Russian forces seized two small cities in southeastern Ukraine and the area around a nuclear power plant, the Interfax news agency said on Monday, as we enter day four of the Russian invasion of Ukraine. BP Plc (BP) shares slumped after Europe’s second-largest oil company said it would dump its near 20% in Russian energy giant Rosneft. The dollar strengthens against all FX majors except the yen; euro weakens more than 1%. Meanwhile talks between Russian and Ukrainian officials began on the Belarusian border on Monday, Moscow said. Once again, geopolitical headlines out of Europe is impacting global stock markets. Last week, it was another wild week as Wall Street ended with back-to-back solid gains for major averages on Friday, as the S&P 500 snapped its 2-week losing streak as it rose 0.8%, the Dow fell 0.1%, and the Nasdaq rose 1.1% (after having fallen as much as 20% from all-time highs earlier in the week – bear market territory), but now down about -12.5% YTD after reports Russia said it was ready to hold talks after attacking Ukraine. Commodity prices also volatile this week as WTI crude was barely higher Friday after falling last week to snap an 8-week streak of higher prices. Gold prices faded -$38.70, or -2%, to settle at $1,887.60, well off Thursday’s high of $1972.50, its highest level since August 2020. In Asian markets, The Nikkei Index rose 50 points to 26,526, the Shanghai Index rose 0.3% to 3,462, and the Hang Seng Index fell -54 points to 22,713. In Europe, the German DAX is down -2.3% to 14,225, while the FTSE 100is down over 1% to 7,400.

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 95.95 points, or 2.24%, to 4,384.65

·     The Dow Jones Industrial Average rose 834.92 points, or 2.51%, to 34,058.75

·     The Nasdaq Composite surged 221.04 points, or 1.64%, to 13,694.62

·     The Russell 2000 Index advanced 44.92 points, or 2.25% to 2,040.93

 

Economic Calendar for Today

·     8:30 AM ET          Advance Goods Trade Balance, for January

·     9:45 AM ET          Chicago PMI, for February…est. 63.0

·     10:30 AM ET        Dallas Fed Manufacturing for February

 

Earnings Calendar:

·     Earnings Before the Open: ARDX, ASTE, BFLY, CANO, CVEO, EYE, HNI, ITRI, JLL, KOS, LINC, MRSN, NLSN, PRTY, RETA, RIDE, TGNA, WHD, XPEL, XRAY

·     Earnings After the Close: AAON, ACAD, ACHC, AMBA, APLS, APPF, ATRA, BIGC, BLNK, CLDX, CSR, CSTL, DAR, DDD, DVAX, EVA, FATE, FSK, GDRX, GMRE, GOEV, GRPN, HHC, HPQ, HRTX, HSII, ICAD, KD, LAZR, MBI, MEG, NKTR, NVAX, NVEE, OCUL, OKE, OSH, OTIC, PGNY, PRIM, PUBM, RVNC, SAIL, SBAC, SCOR, SDC, SUPN, TASK, TREX, VCYT, VLDR, VRM, WDAY, ZM

 

Other Key Events:

·     BMO Capital Global metals & Mining Conference, 2/27-3/2, in Florida

·     Credit Suisse Annual Energy Summit, 2/27-3/2 in Colorado

·     Credit Suisse London Global Healthcare Conference, 2/28-3/2, in London, England

·     Deutsche Bank ESG Conference (virtual), 2/28-3/2

·     Stephens West Coast Bank Trip (virtual), 2/28-3/2

·     China NBS Manufacturing Index for Feb

·     China Caixin Manufacturing PMI for Feb

 

 

Macro	Up/Down	Last
Nymex	4.12	95.71
Brent	4.04	101.97
Gold	20.40	1,908.00
EUR/USD	-0.0056	1.1212
JPY/USD	0.01	115.56
10-Year Note	-0.069	1.915%

 

 

World News

·     Western nations agreed to exclude some Russian banks from the SWIFT messaging system, used for trillions of dollars’ worth of transactions between banks around the world, further isolating Russia’s economy and financial system – Bloomberg

·     Russia’s central bank raised its key interest rate to 20% from 9.5% in an emergency move to counter the risks of the Rouble’s rapid depreciation and higher inflation, which threaten Russians’ savings; the Rouble slid almost 30% to record lows versus the dollar.

·     The risk of the Kremlin and its banks defaulting on their debts is higher than at any point since the invasion of Crimea as S&P cut Russia’s credit rating into junk territory and warned of more downgrades – Bloomberg

·     North Korea followed up January’s record barrage of missile tests with the firing of a suspected mid-range ballistic rocket on Sunday, ramping up tensions as global attention is focused on Ukraine. The projectile reached an apogee of about 600 kilometers (375 miles) and flew at a range of about 300 km before splashing down in waters outside of Japan

·     President Joe Biden’s approval rating fell to a record low in a new Washington Post-ABC News poll, with 37% saying they approve of the job he is doing and 55% saying they disapprove ahead of his first State of the Union address on Tuesday

 

Sector News Breakdown

Consumer

·     Goodyear (GT) mentioned positively in Barron’s saying the stock could rise 50% thanks to Electric vehicles. Said shares of Goodyear look appealing after being hammered following its Q4 earnings report on Feb. 11, adding that unlike the major auto makers that are being disrupted by the shift to electric vehicles, tire makers stand to benefit quickly.

·     Under Armour (UAA) files automatic mixed securities shelf

 

Energy

·     Renewable Energy Group (REGI) shares jumped late Friday after Bloomberg reported Chevron Corp. (CVX) is in advanced talks to buy the company for about $3 billion, or $61.50 per share as the oil major looks to make a big bet on green diesel https://on.mktw.net/3so8ipY

·     BP Plc (BP) board announced that BP will exit its shareholding in Rosneft. BP has held a 19.75% shareholding in Rosneft since 2013. Additionally, BP CEO Bernard Looney is resigning from the board of Rosneft with immediate effect.

·     Exelon (EXC) reaffirmed its guidance range for full year; 2022 as adjusted non-GAAP Operating Earnings of $2.18-$2.32 per share from its utility subsidiaries and holding company, as first presented during its Analyst Day on January 10; GAAP Net Income and Adjusted non-GAAP Operating Earnings was $1.74 per share and $2.82 per share, respectively, for the year end

·     Range Resources Corp. (RRC) will replace Molina Healthcare (MOH) in the S&P MidCap 400 (which is joining the S&P 500). The changes are effective Wednesday before the bell.

 

Financials

·     TD Bank Group (TD) announced that they have signed a definitive agreement to acquire First Horizon (FHN) in an all-cash transaction valued at US$13.4 billion, or $25.00 for each common share of First Horizon. TD accelerates its long-term growth strategy in the United States by acquiring a premier regional bank with an aligned culture and risk-management framework.

·     Berkshire Hathaway (BRK/A) Q4 operating income rose 45% to $7.29 billion vs. $5.02 billion y/y; insurance underwriting operating profit $372 million vs. loss $299 million y/y; railroad, utilities & energy businesses operating earnings $2.24 billion, +12% y/y

·     European stocks dropped, especially those most exposed to Russia, including Austria’s Raiffeisen Bank, UniCredit and Societe Generale, dropped between 9 and 15%, while the wider euro zone banking index fell 7%.

·     W. R. Berkley (WRB) announces 3-for-2 stock split

 

Healthcare

·     Molina Health (MOH) will join the S&P 500 index, replacing IHS Markit Ltd (INFO), which is being acquired by S&P Global Inc. (SPGI). Range Resources Corp. (RRC) will replace Molina Healthcare in the S&P MidCap 400. The changes are effective Wednesday before the bell. The IHS Markit deal is expected to be completed Monday.

·     GlaxoSmithKline PLC (GSK) said that it plans to demerge and list its consumer healthcare business–recently named Haleon–in July 2022, and set targets for the company, including 4%-to-6% sales growth in the medium term.

·     Aurinia Pharmaceuticals (AUPH) forecasts 2022 Lupkynis sales in range of $115-135M, which is well below $178M consensus estimate.

·     Cigna (CI) to deploy more than $7B in capital to share buyback

·     Lexicon (LXRX) voluntarily withdraws Sotagliflozin new drug application, resubmission targeted early 2q 2022; resubmission to correct recently identified technical issue

·     Thermo Fisher (TMO) files automatic mixed securities shelf

·     Zimmer Biomet (ZBH) files automatic mixed securities shelf

·     Dentsply Sirona (XRAY) Q4 adjusted EPS $0.76 vs. est. $0.79; Q4 revs $1.09B vs. est. $1.13B; raises quarterly dividend; sees 2022 adjusted EPS $3.05-$3.25 vs. est. $3.19; sees revenue $4.3B-$4.4B vs. est. $4.48B.

 

Industrials & Materials

·     Private equity firm Cinven is said near an agreement to Bayer AG’s (BAYRY) pest control business. Cinven won out over other investment firms for Bayer’s Environmental Science Professional unit and a transaction may be announced as soon as this week – Bloomberg https://bloom.bg/35eSVY6

·     Deere (DE), CarMax (KMX), Evoqua Water Technologies (AQUA), American Water Works (AWK) are among quality companies doing business mostly in the U.S., according to Barron’s which noted the U.S. stock market entered correction territory this past week and now war threatens to disrupt Europe. The knee-jerk reaction might be to give up, sell stocks, and ride out the volatility, but that could mean missing out on bargains in quality stocks

·     UPS (UPS) and FedEx (FDX) have said they are halting delivery service to Russia and Ukraine considering the Russian invasion of its neighbor, Reuters reported

·     Russia is the world’s No. 1 supplier of wheat, while Ukraine exports corn, wheat, and oilseeds, according to Barron’s. Unpredictable commodity prices may mean investors will be better served in actively managed funds that can adapt to changing geopolitical tensions. Pimco Commodity Real Return Strategy (PCRAX) and Columbia Commodity Strategy (CCSAX) as good options

 

Technology, Media & Telecom

·     Zendesk (ZEN) terminated its $4B deal to acquire SurveyMonkey parent Momentive Global Inc. (MNTV). Zendesk had proposed to buy Momentive in October in an all-stock deal, which drew opposition shortly after from investors

·     Nielsen (NLSN) Q4 adjusted EPS $0.46 vs. est. $0.35; Q4 revs $894M vs. est. $898.13M; approves $1B shares repurchase program; sees 2022 total revenue growth on a constant currency basis of +3.5% to 4.5%; sees 2022 organic revenue growth on a constant currency basis of +4.0% to 5.0%

·     Toshiba (TOSYY) CEO says going private too risky as activists seek sale – Bloomberg News