Early Look

Thursday, July 7, 2022

Futures	Up/Down	%	Last
Dow	119.00	0.38%	31,132
S&P 500	10.25	0.27%	3,858
Nasdaq	37.50	0.32%	11,918

 

 

U.S. futures are looking higher amid a bounce in technology stocks after upbeat Samsung quarterly results (lifting chip stocks early) and on stimulus headlines out of China after Bloomberg reported China was considering allowing local governments to sell $220 billion of special bonds in the second half of the year, brought forward from next year’s quota, to shore up the country’s economy. Treasuries sold off sharply on Wednesday, first hit by less weak than feared data, and then by hawkish leaning FOMC minutes and continues into today as the 10-yr nears 3% but remains inverted against the 2-yr by 7 bps (2-yr at 3.02%) – recessionary. In Asian markets, The Nikkei Index jumped 382 points to 1.47% to settle at 26,490, the Shanghai Index edged higher 9 points to 3,364, and the Hang Seng Index gained 56 points to 21,643. In Europe, the German DAX is up 1.65% to 12,800, while the FTSE 100 rises 1.25% or 88 points to 7,196. In the UK, Boris Johnson will announce his resignation as British prime minister on Thursday according to reports. Oil prices look to rebound after an amazing pullback that has seen Brent crude oil collapse by nearly 14% over the past 5 days. Semiconductor stocks looking higher early after Samsung Electronics (SSNLF) posted an operating profit of 14 trillion won ($10.7 billion) for Q2, up 11% from 12.57 trillion won a year earlier.

Market Closing Prices Yesterday

·     The S&P 500 Index climbed 13.69 points, or 0.36%, to 3,845.08

·     The Dow Jones Industrial Average rose 69.86 points, or 0.23%, to 31,037.68

·     The Nasdaq Composite gained 39.61 points, or 0.35%, to 11,361.85

·     The Russell 2000 Index declined -13.78 points, or 0.79% to 1,727.65

 

Economic Calendar for Today

·     7:30 AM ET         Challenger Layoffs for June

·     8:30 AM ET          Weekly Jobless Claims

·     8:30 AM EST        Continuing Claims

·     8:30 AM ET          International Trade for May

·     10:30 AM ET        Weekly EIA Natural Gas Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: BYRN, HELE

·     Earnings After the Close: KRUS, LEVI, WDFC

 

 

Macro	Up/Down	Last
Nymex	0.95	99.51
Brent	0.91	101.60
Gold	4.10	1,740.50
EUR/USD	0.0023	1.0205
JPY/USD	0.00	135.93
10-Year Note	+0.045	2.956%

 

 

World News

·     Boris Johnson will announce his resignation as British prime minister on Thursday after he was abandoned by ministers and his Conservative Party’s lawmakers who said he was no longer fit to govern.

·     China was considering allowing local governments to sell $220 billion of special bonds in the second half of the year, brought forward from next year’s quota, to shore up the country’s economy. https://bloom.bg/3ypKlAo

·     The bull-bear spread in the American Association of Individual Investors (AAII) weekly survey was -33.4 vs -23.9 last week: Bulls fall to 19.4% from 22.8%, Neutrals fall to 27.8% from 30.5%, and Bears rise to 52.8% from 46.7%

·     The Bank of Japan is expected to raise its inflation forecast but maintain ultra-low interest rates at this month’s policy meeting, sources say, as fears of a U.S. recession and rising input costs cloud the outlook for its fragile economic recovery – Reuters

·     China announced a raft of new steps to spur consumer demand for cars, saying it would consider extending a tax break for electric vehicles and outlining plans to build more charging stations and encourage lower charging fees – Reuters

 

Sector News Breakdown

Consumer

·     GameStop (GME) announced that its Board of Directors has approved and declared a four-for-one split of the company’s Class A common stock

·     Cedar Fair L.P. (FUN) said that year-to-date revenue through July 4 was a record $704 million, up 20% from the comparable period in pre-pandemic 2019 that went through July 8. The increase in revenue was fueled by new highs for in-park per capita spending of $59.52 and growth in out-of-park revenue, such as resort properties, to $88 million

·     RBC Capital lowers PT on GM (GM) to $48 from $58 and on Ford (F) to $16 from $18 saying it does not see favorable risk-reward ahead of the automakers’ earnings and sees likely negative Q2 revisions into earnings owing to China shutdown

·     Duckhorn Portfolio (NAPA) offers to sell 5M shares of common stock for holder

 

Energy

·     The average gasoline price in U.S. has been declining for past 22 days … most recent daily drop was largest since March 2020

·     Shell PLC (SHEL) said it expects strong Q2 profit from higher fuel-refining margins that could add more than $1 billion to earnings, while forecasts for sustained high energy prices boosted the value of its oil and gas holdings. Said it expects the outlook for energy prices will allow the company to reverse between $3.5B-$4.5B in impairments it took early in the pandemic

·     The American Petroleum Institute reports a weekly build in crude oil of 3.825 mln barrels vs expectations of a draw of 1.1mln barrels

 

Financials

·     The bankruptcy filing by crypto broker Voyager Digital provides a road map of the firm’s relationships, including borrowers, lenders, and investors. It turns out Alameda Research, co-founded by crypto billionaire Sam Bankman-Fried, is all three https://bloom.bg/3RrbKdY

·     Saratoga Investment (SAR) Q1 adjusted EPS 53c, in-line with estimates; Q1 NAV per share $28.69. As of May 31, Saratoga Investment’s assets under management was $894.5M, an increase of 9.4% from $817.6M as of February 28 and an increase of 32% from $677.8M as of May 31, 2021

·     Crypto exchange Bitstamp reversed course, canceling a planned “inactivity fee” just five days after announcing the charges – Bloomberg

 

Healthcare

·     Merck (MRK) is aiming to finalize a deal for Seagen (SGEN) this month that would be one of the year’s largest at ~$40B or more, WSJ reports. The companies are discussing a price for Seagen above $200 a share and are seeking to seal a deal on or before the announcement of Merck’s quarterly earnings, set for July 28, https://on.wsj.com/3P4qAF4

·     Usana (USNA) guides prelim Q2 EPS $1.05 below consensus $1.26 and sees Q2 revs roughly $265M below consensus $272.77M and prior year figure of $337M; sees year EPS $3.85-$4.45 vs. est. $5.27 and sales $1.015B-$1.065B vs. est. $1.13B

·     Simulations Plus (SLP) 3Q adj EBITDA $6.3Mm vs est. $6.1Mm on revs $15Mm vs est. $14.3Mm; guides FY revs $52-53Mm vs est. $52.9Mm

·     Adverum Biotechnologies Inc (ADVM) announces restructuring plan, reducing its workforce by 78 employees (approximately 38%) and estimates that it will incur aggregate restructuring charges of approximately $4.2 million

·     DiaMedica Therapeutics Inc (DMAC) announced that U.S. FDA has placed a clinical hold on company’s phase 2/3 remedy2 trial

 

Industrials & Materials

·     Copper sector: Freeport McMoRan (FCX) downgraded to Peer Perform at Wolfe Research on lower Cu prices and limited growth, now assuming buybacks slip 50% from H1 levels in H2E. They also cut Southern Copper (SCCO) to Underperform on lower ests and limited growth near term, assuming it cuts its 2023E dividend to $3/shr from 2022E’s $4. Our PT falls to $47 from $62

·     Virgin Galactic Holdings Inc. (SPCE) said it contracted Boeing Co.’s (BA) Aurora Flight Sciences to design and make the space-tourism company’s next-generation motherships. Terms of the deal were not disclosed.

 

Technology, Media & Telecom

·     Samsung Electronics (SSNLF) posted an operating profit of 14 trillion won ($10.7 billion) for Q2, up 11% from 12.57 trillion won a year earlier, just shy of a 14.45 trillion won estimate; Q2 revs rose 21% to 77 trillion won, in line with market estimates (shares of chip stocks AMD, INTC, QCOM, NVDA looking higher after the results)

·     Cisco Systems Inc (CSCO) is in late stage talks to acquire India’s FireFly Networks Ltd for about 2 bln Indian rupees ($25.3 million), The Economic Times reports