Early Look

Tuesday, January 18, 2022

Futures	Up/Down	%	Last
Dow	-257.00	0.72%	35,539
S&P 500	-51.25	1.11%	4,603
Nasdaq	-275.50	1.77%	15,320

 

 

U.S. futures are tumbling, adding to last week losses as rising Treasury yields are weighing on the tech-heavy Nasdaq 100 index which is down almost 2% as traders return from a long holiday weekend. The 10-year yield moves above the 1.8% level while the 2-yr yield top the 1% level for the first time since February 2020 reflecting investor concern for not only a prolonged period of faster inflation readings but also an aggressive response from the Fed, which could rate rates at least three times this year. Major averages declined last week, as the S&P 500 and Nasdaq each slipped -0.3%, while the Dow and Russell 2000 dropped over -0.8% amid more hawkish Federal Reserve commentary ahead of a policy meeting next week. The S&P 500 is down 2.2% in 2022 so far, while the Dow has lost 1.1%, the Nasdaq has shed -4.8% year-to-date, with more than one third of companies in the index at least 50% from their 52-week highs. Crude oil futures are rising after settling with a fourth straight weekly gain on Friday (rose 6.2%), with rising tensions between Russia and Ukraine heightening the potential for a disruption to global crude supplies, while traders grow more optimistic over energy demand prospects. Note the S&P 500 Energy sector ETF (XLE) is already up 16% YTD through the first two weeks as energy remains a market leader. In Asian markets, The Nikkei Index fell -76 points to 28,257, the Shanghai Index rose +0.8% to 3,569, and the Hang Seng Index slid -0.43% to 24,112. In Europe, the German DAX is down 1.1% to 15,755, while the FTSE 100 drops about 50 points to 7,560.

Market Closing Prices Yesterday

·     The S&P 500 Index edged higher 3.82 points, or 0.08%, to 4,7662.85

·     The Dow Jones Industrial Average fell -201.79 points, or 0.56%, to 35,911.81

·     The Nasdaq Composite gained 86.95 points, or 0.59%, to 14,893.75

·     The Russell 2000 Index inched higher 3.02 points, or 0.14% to 2,162.46

 

Events Calendar for Today

·     7:45 AM ET                  ICSC Weekly Retail Sales

·     8:30 AM ET                  Empire Manufacturing Index, for January…est. 25.7

·     8:55 AM ET                  Johnson/Redbook Weekly Sales

·     10:00 AM ET                NAHB Housing Market Index for January…est. 84

·     4:00 PM ET                   Net Long-term TIC Flows for November

 

Earnings Calendar:

·     Earnings Before the Open: BK, FBK, FMBI, GNTY, GS, MBWM, ONB, PNC, SBNY, SI, TFC

·     Earnings After the Close: CNXC, FULT, HWC, IBKR, JBHT, PNFP, PRGS, UCBI

 

 

Macro	Up/Down	Last
Nymex	1.43	85.25
Brent	1.10	87.58
Gold	-2.90	1,813.60
EUR/USD	-0.0018	1.139
JPY/USD	0.05	114.65
10-Year Note	+0.039	1.811%

 

 

World News

·     China’s People’s Bank of China (PBoC) cut key interest rates for the first time since the peak of the pandemic in 2020; they cut the rate on its one-year policy loans by 10 bps to 2.85% and slashed the rate on the seven-day reverse repurchase agreements by 10bps to 2.1%.

·     Bank of Japan (BoJ) cuts 2021 Median GDP Forecast to 2.8% From 3.4%; raises 2022 median GDP forecast to 3.8% from 2.9% and cuts 2023 median GDP forecast to 1.1% from 1.3%; raises 2022 core CPI forecast to 1.1% from 0.9%; raises 2023 core CPI median forecast to 1.1% from 1.0%

·     Goldman Sachs cuts the year 2022 predictions for the United States to 3.4% from 3.8% previous estimations, 2021 GDP to around 5-6%

·     North Korea fired two suspected short-range ballistic missiles (SRBM) on Monday from an airport in its capital city of Pyongyang, South Korea’s military reported, the fourth test this month to demonstrate its expanding missile arsenal.

·     Republican Glenn Youngkin began his term as governor of Virginia on Saturday with executive actions that tackle education and the COVID-19 pandemic, including a ban on critical race theory in public schools and a lifting of school mask requirements.

 

Sector News Breakdown

Consumer

·     Unilever (UL) said Monday it would pursue a deal for GSK’s (GSK) consumer business, calling it a “strong strategic fit”, but shares slid amid investors doubts about its 50-billion-pound ($68.4 billion) offer. GlaxoSmithKline confirmed over the weekend that it had rejected three bids from the company for the consumer healthcare business

·     Airline stocks being watch (AAL, DAL, UAL, LUV) amid further warnings on the impact of 5G networks on aircraft navigation systems after AT&T (T) and Verizon (VZ) are set to roll out their 5G networks this week, even as the Federal Aviation Administration warns they could interfere with aircraft instruments and impact visibility. AT&T and Verizon have vowed to create ‘buffer zones’ in and around airports to limit disruption.

·     Macellum Advisors GP LLC, which has a roughly 5% stake in Kohl’s (KSS), has been urging the company to make changes including altering its board, people familiar with the matter said. Kohl’s has so far rejected Macellum’s request to add directors with retail experience or a shareholder to its board – WSJ https://on.wsj.com/3tBv4LT

·     Under Armour (UA) upgraded to Outperform from Market Perform at BMO Capital

·     Walmart (WMT) appears to be looking to enter the metaverse after filing several trademarks to make and sell virtual goods as well as applications to create its own cryptocurrency and non-fungible tokens, or NFTS, according to a CNBC report, which cited filings from the U.S. Patent and Trademark Office from late last year.

 

Energy, Industrials and Materials

·     Ashland (ASH) Q1 adj EPS $0.88 vs. est. $0.84; Q1 revs $512M vs. est. $528M; guides year revs $2.25B-$2.35B vs. est. $2.29B

·     ConocoPhillips (COP) upgraded to Buy from Neutral at Goldman Sachs and raise tgt to $101 from $78

·     Devon Energy (DVN), Pioneer Natural Resources (PXD) and ConocoPhillips (COP), now pay variable dividend payments based on their earnings in addition to steady, relatively lower dividends. “Energy variable dividends should be headed higher in 2022 thanks to a rally in oil prices,” Barron’s said

·     Eastman Chemical Co. (EMN) said it plans to invest up to $1 billion in a plastics-recycling facility in France, with a few major consumer-goods brands already signed up to use the plant.

·     Freeport McMoRan (FCX) a positive mention in Barron’s saying concerns about inflation, which hit a nearly 40-year high in December, and tighter monetary policy have pushed investors out of growth stocks and into value, and mining stocks have been among the beneficiaries. Higher copper prices should also help miners when they start reporting earnings this month

·     NJ American Water (AWK) files for rate adjustment with NJ Board of Public Utilities

 

Financials

·     BNY Mellon (BK) Q4 EPS $1.01, in-line w ests; Q4 revs $4.02B vs. est. $3.98B; Q4 CET1 capital ratio 11.1%; Q4 tangible book value per share $24.31; qtrly total noninterest expense of $3.0 bln, increased 1%; or 6% excluding notable items; Q4 AUM rose 8.5% YoY to $2.4 tln

·     Mercantile Bank (MBWM) Q4 EPS 74c vs. est. 86c; Q4 revs $45.2M vs. est. $45.2M; Q4 tangible book value per share $25.61

·     Signature Bank (SBNY) Q4 EPS $4.34 vs. est. $3.95; Q4 book value per share $117.63 and Q4 CET1 capital ratio 9.58%; Q4 total deposits rose $10.57B and NII rose 35.7% or $140.9M

·     Silvergate Capital (SI) Q4 EPS 66c vs. est. 72c; Q4 NII $40.2M vs. $39.0M for 3Q21 and $22.4M for 4Q20; did not record a provision for loan losses for 4Q21, 2Q21

·     Synchrony Financial (SYF) reported charge-offs for Dec. of 2.10%; delinquencies 1.42%

·     Truist Financial (TFC) Q4 adj EPS $1.38 vs. est. $1.25; Q4 revs $5.59B vs. est. $5.58B; Q4 CET1 capital ratio 9.6%; Q4 net charge-offs .25%; Q4 NII rose +0.3% and provision for credit losses was a benefit of $103M

 

Healthcare

·     Pfizer (PFE) and BioNTech (BNTX): a fourth shot of COVID-19 vaccine boosts antibodies to even higher levels than the third jab but it is not enough to prevent Omicron infections, according to a preliminary study in Israel, Reuters reported

·     Illumina (ILMN) upgraded to Buy from Hold at Stifel

·     Ionis Pharmaceuticals (IONS) announced that its partner, Roche (RHHBY), is designing a new Phase 2 trial to evaluate tominersen in Huntington’s disease, or HD

 

Technology, Media & Telecom

·     Alibaba (BABA) shares slide over 4% after a Reuters report that the Biden administration is reviewing whether its cloud business poses a risk to U.S. national security, according to three people briefed on the matter

·     Netflix (NFLX) late Friday said it has raised monthly prices in U.S., Canada starting today; standard plan raised to $15.49 from $13.99 in United States, and U.S. Prices increased $1 to $2 per month depending on plan; price for standard plan in Canada raised to c$16.49 from c$14.99

·     Angi (ANGI) mentioned positively in Barron’s saying Americans spend nearly $600 billion annually on home services and a merger of Angie’s List and HomeAdvisor is positioning itself for a bigger piece of that pie by expanding its platform to provide “all communication, scheduling and billing between homeowner and contractor.”

·     Elliott Investment Management and Vista Equity Partners are in advanced talks to buy software-maker Citrix Systems Inc. (CTXS), according to people familiar with the matter. Elliott and Vista have tapped banks to finance their offer, the people said. A deal could be announced within a few weeks, though talks could still end without an agreement https://bloom.bg/3nzviiZ

·     Activision Blizzard Inc. (ATVI) has fired or pushed out more than three dozen employees and disciplined about 40 others since July as part of efforts to address allegations of sexual harassment and other misconduct at the videogame giant – WSJ reports

·     DirecTV, which is owned by AT&T (T) and TPG via a joint venture, plans to drop One America News Network, dealing a major blow to the conservative channel that’s been a loyal fan in former President Donald Trump

·     A U.S. Senate panel is set on Thursday to debate a bill that aims to rein in app stores of companies that some lawmakers say exert too much market control, including Apple Inc (AAPL) and Alphabet Inc’s Google (GOOGL)

·     JD.com Inc. (JD) has inked a strategic partnership with Canada’s Shopify Inc. (SHOP) to boost its cross-border business – Bloomberg

·     Snowflake (SNOW) upgraded to Outperform from Market Perform at William Blair