Early Look

Monday, January 24, 2022

Futures	Up/Down	%	Last
Dow	-55.00	0.16%	34,102
S&P 500	-9.25	0.22%	4,380
Nasdaq	-53.50	0.37%	14,373

 

 

U.S. futures have reversed lower after overnight gains, with the Spuz down about -0.25% at 4,380, well off overnight highs of 4,425 amid Fed and Ukraine concerns; the 10-year yield slips to under 1.73% as haven assets bonds and gold gain ($1,839 an ounce). Geopolitical tensions are adding to market instability as daily headlines warn of a possible Russian incursion into the Ukraine. The warnings over Ukraine are coming in loud after the U.S. State Department ordered diplomats’ family members to leave the country this weekend saying, “military action by Russia could come at any time,” the U.S. Embassy said in a statement, and the “United States government will not be in a position to evacuate American citizens in such a contingency.” Markets finally showing some fear as the Cboe Volatility Index (VIX) was above 30 Monday, its highest level since early December 2021. In addition to the Russian concerns, investors are worried about a rising rate environment ahead of the FOMC decision Wednesday as markets are pricing in four interest-rate increases from the Fed, with the first in March, so the first 2022 meeting of the central bank’s monetary policy group will be closely watched. In Asian markets, The Nikkei Index gained 66 points to 27,588, the Shanghai Index was little changed at 3,524 and the Hang Seng Index fell over -300 points or 1.24% to 24,656. In Europe, the German DAX is down -1.8% or 280 points to 15,325, while the FTSE 100 drops -1.1% to 7,400.

 

Nasdaq posts biggest weekly percentage drop since March 2020 (down 7.57%), while the S&P notches largest weekly percentage decline since March 2020 as well (-5.68%), Dow suffers biggest weekly percentage drop since October 2020 (-4.58%) and Russell 2000 weekly percentage plunge biggest since June 2020 (-7.75%) and fell as much as 18% from Nov peak. The S&P 500 closes below its 200-day moving avg (of 4,429) for first time since June 2020. The Dow falls for 6th straight session, longest losing streak since Feb 2020, Nasdaq, and S&P 500 fourth straight. CBOE market volatility index (VIX) closes at highest level since Dec 3^rd, rising 12.7% to 28.85.

 

Bitcoin extended its tumble from last week, trading to lows of $33,000 this morning, more than 50% off its all-time highs of $67,802 on Nov 9, 2021, and has lost more than 24% of its value, in just three weeks. Ethereum (ETH) dropped to lows below $2,300, down over 13% with Solana and Cardano each falling at least 17% this weekend, according to Coinbase, in a broad pullback in riskier assets.

Market Closing Prices Yesterday

·     The S&P 500 Index tumbled -85.00 points, or 1.90%, to 4,397.73

·     The Dow Jones Industrial Average fell -449.89 points, or 1.30%, to 34,265.50

·     The Nasdaq Composite plunged -385.10 points, or 2.72%, to 13,768.92

·     The Russell 2000 Index declined -36.13 points, or 1.79% to 1,987.91

 

Events Calendar for Today

·     9:45 AM ET        Markit Manufacturing PMI, Jan-F

·     9:45 AM ET        Markit Service PMI, Jan-F

·     9:45 AM ET        Markit Composite PMI, Jan-F

·     1:00 PM ET        U.S. Treasury to sell $54B in 2-year notes

 

Earnings Calendar:

·     Earnings Before the Open: BMRC, BOH, CBU, HAL

·     Earnings After the Close: BRO, CFB, CR, CUBI, EFSC, HMST, HOPE, IBM, IBTX, PETS, RBB, SFBS, SMBK, STLD, TRST, WSFS, ZION

 

 

Macro	Up/Down	Last
Nymex	-0.32	84.82
Brent	-0.13	87.76
Gold	3.75	1,839.10
EUR/USD	-0.0029	1.1311
JPY/USD	0.04	113.72
10-Year Note	-0.015	1.732%

 

 

World News

·     The U.K. said it has exposed a plot by Russia to install a friendly government in Ukraine, supporting an earlier U.S. assessment suggesting that the Kremlin is laying plans to oust its neighbor’s leadership. The allegations by the British Foreign Office, come amid warnings that Russia could invade Ukraine with the around 100,000 troops it has gathered near the border.

·     Ireland is dropping most pandemic restrictions in a further sign that Europe’s approach to Covid-19 is shifting toward something resembling a road back to normal. England, France, and Belgium are also easing curbs even as omicron cases remain high

·     Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI) rose to a seasonally adjusted 54.6 from the prior month’s final of 54.3 to mark the fastest pace of expansion since January 2018.

 

Sector News Breakdown

Consumer

·     A consortium backed by activist hedge fund Starboard Value LP has offered roughly $9 billion to buy department store Kohl’s Corp. (KSS), the WSJ reported. A group led by Acacia Research Corp., which Starboard controls, offered to buy the department-store chain for $64 a share in cash Friday, the people said. https://on.wsj.com/32nSFV8

·     Peloton Interactive (PTON) is being targeted by an activist investor that wants the fitness product company to fire Chief Executive John Foley and explore a sale https://on.wsj.com/3KDfS6X

·     Warby Parker (WRBY) will benefit from worsening eye strain due to increased use of digital devices and the aging of society, according to Barron’s citing the CIO of Durable Capital saying the eye-care company has exceptional leadership

·     Dana (DAN), Genuine Parts (GPC) – the average age of cars on U.S. roads is an elderly 13, and demand for new cars will boost free cash flow for auto-parts companies including Dana and Genuine Parts, Barron’s said, citing Mario Gabelli, CEO of Gamco Investors

·     Nelson Peltz’s activist hedge fund Trian Partners has built a stake in Unilever (UL), ratcheting up the pressure on the FTSE 100 company after its abortive pursuit of GlaxoSmithKline’s (GSK) consumer health business

·     Wynn (WYNN) is attempting to sell its WynnBet online gaming app and has reduced the price to $500M after scrapping a deal to take WynnBet pubic through a $3.2B SPAC transaction with Austerlitz Acquisition Corp. I (AUS) in November, according to a NY Post report

 

Energy, Industrials & Materials

·     Boeing (BA) to invest an additional $450 million in Wisk to support development of future pilotless flying taxis, the U.S. aerospace giant said on Monday.

·     Hollysys Automation Technologies (HOLI) after the company revealed that it received a buyout bid that would value the company at about $1.53 billion; said a buyer consortium submitted in December a bid to buy the co for $25 a share in cash https://bit.ly/3FXTYbb

·     Brazilian airline Gol (GOL) said it has signed a deal with U.S. private equity firm Castlelake LP to get up to $600 million in financing to purchase new Boeing 737 Max 8 BA.N aircraft.

·     JSW Steel’s margin is likely to decline going forward due to lower steel prices and higher prices of coking coal that is used in steel production, as per Jefferies which cuts its target price on JSW to INR550 from INR600

 

Financials

·     Goldman Sachs (GS) may still be a buy according to Barron’s despite shares falling 10% last week on an earnings miss, now down nearly 20% (Bear mkt territory) below their November high; says the selloff provides an opportunity to invest in Wall Street’s most prestigious investment bank

·     Mr. Cooper Group (COOP) will be one of the few mortgage companies to weather higher interest rates according to Barron’s because it also processes payments, handles escrows, and deals with loan issues; Fiserv (FISV) might also see a turnaround after two years of declines

·     Bitcoin leveraged stocks adding to last week sharp losses, with many names approaching or at 52-week lows amid the 50% pullback in Bitcoin prices off November record highs above $69,000 (last down below $34K); watch RIOT, MARA, RIOT, SI, MSTR, OSTK, BTBT, NCTY among others

 

Healthcare

·     BeiGene (BGNE) announced positive findings from the global Phase 3 RATIONALE 305 trial of tislelizumab versus placebo in combination with chemotherapy as a first-line treatment for patients with locally advanced, unresectable, or metastatic gastric or gastroesophageal junction (G/GEJ) adenocarcinoma

·     OPKO Health (OPK) shares slipped late Friday as the FDA declines to approve growth hormone deficiency treatment Somatrogon that OPK developed with Pfizer Inc (PFE)

·     MediWound (MDWD) announces positive topline results from its U.S. Phase 2 clinical study of EscharEx for the debridement of venous leg ulcers

 

Technology, Media & Telecom

·     Netflix (NFLX) mentioned somewhat positively in Barron’s saying shares have been struggling for months, but it may be a good time to buy shares after the co missed subscriber estimates last Thursday, plunging more than 20% following results

·     Arista Networks (ANET) upgraded to buy from neutral at Citigroup following more than 17% YTD pullback in the shares through Friday, and with several positive catalysts in the near term

·     Snap (SNAP) downgraded to Neutral from Outperform at Wedbush