Early Look

Friday, June 17, 2022

U.S. stocks are edging higher (S&P up +0.8% to 3,700) after a tumultuous week thus far, with the S&P and Nasdaq on track for its 10^th weekly decline in the last 11-weeks and the Dow its 11^th drop in last 12-weeks in a week dominated by central banks around the world (including the FOMC) raising interest rates to fight inflation. Down over 6% this week alone, the Nasdaq is now 34% below its all-time highs of 16,212.22 on Nov 22, 2021, while the S&P 500 is also down -6% this week and over 23% YTD. In a remarkable stat overnight, more than 90% of stocks in the S&P 500 declined Thursday – the 5th time in the past 7 days it has done that – a feat never recorded since 1928. Stocks tumbled around the globe Thursday as recession fears resurfaced with data in the U.S. pointing to a slowdown in growth. Homebuilder stocks fell as mortgage rates jumped the most since 1987. Bitcoin coming into today, down 10-straight days holding around the $21,000 level. In Asian markets, The Nikkei Index fell -468 points or 1.77% to 25,963, the Shanghai Index gains 31 points or nearly 1% to 3,316, and the Hang Seng Index advances 1.1% to 21,075. In Europe, the German DAX is up 150 points or 1.18% to 13,191, while the FTSE 100 rises +0.9% to 7,108.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -123.22 points, or 3.25%, to 3,666.77

·     The Dow Jones Industrial Average fell -741.46 points, or 2.42%, to 29,927.07

·     The Nasdaq Composite tumbled -453.06 points, or 4.08%, to 10,646.10

·     The Russell 2000 Index declined -81.30 points, or 4.70% to 1,649.84

Economic Calendar for Today

·     9:15 AM ET         Industrial Production m/m for May…est. +0.4%

·     9:15 AM ET         Capacity Utilization for May…est. 79.2%

·     10:00 AM ET       Leading Index for May…est. (-0.4%)

·     1:00 PM EST       Baker Hughes Weekly rig count data

World News

·     The Bank of Japan announced that it would leave Monetary Policy and forward guidance unchanged and committed to unlimited Fixed Rate operations. The bank made a reference to FX in the statement, saying it “is necessary to pay due attention to developments in financial and foreign exchange markets and their impact on Japan’s economic activity and prices.”

·     The European Commission is planning to recommend candidate status for Ukraine & Moldova as a symbolic step forward in the long process towards membership of the EU

·     WikiLeaks founder Julian Assange will be extradited from the U.K. to the U.S. to face espionage charges after British Home Secretary Priti Patel approved the order. The decision, which Mr. Assange has said he would appeal, is the latest step in a long-running legal saga – WSJ

Sector News Breakdown

Consumer

·     Homebuilders MDC and MTH downgraded to Underweight from Equal Weight at Wells Fargo and downgrade TOL to Equal Weight from Overweight saying given that fundamental housing data is likely to incrementally get worse from here and continue to feed negative investor sentiment, we try to estimate how much lower the stocks can go based on perceived risk.

·     Revlon (REV) rises 50% after Reuters reported Indian conglomerate Reliance Industries is considering buying out Revlon in the United States https://reut.rs/3xBtbPS

·     Target Corp. (TGT) announced the return of its highly anticipated Target Deal Days sales event, with incredible savings on hundreds of thousands of items — no membership fee required. Featuring three full days of savings exclusively on Target.com and the Target app, the annual Target Deal Days sale returns July 11-13 (AMZN Prime Day was July 12-13)

Energy

·     Oasis Petroleum (OAS) declares $15.00 per share special dividend payable July 8, in connection with, and its payment is subject to, the closing of Oasis’ previously announced merger with Whiting Petroleum (WLL).

·     TechnipFMC (FTI) said it has been awarded a significant contract by TotalEnergies EP Angola to supply subsea production systems for the CLOV3 development in Block 17, offshore Angola

Financials

·     China’s central bank has accepted Ant Group’s application to set up a financial holding company, three people with knowledge of the matter said, a key step in finishing a year-long revamp of Jack Ma’s fintech business and reviving its stock market debut, Reuters reports

Healthcare

·     Addex Therapeutics (ADXN) shares down -40%; after announced it would end its lead program, Phase 2b/3 study for experimental therapy dipraglurant in dyskinesia associated with Parkinson’s disease (PD-LID)

·     Bausch Health (BHC) said it was suspending its plans for an initial public offering (IPO) for its Solta Medical business.

·     Centene (CNC) authorizes $3B boost to stock buyback program; raises FY22 adjusted EPS view to $5.55-$5.70 from $5.40-$5.55 (est. $5.49) to reflect the increased Medicaid premium revenue reflecting the assumed ongoing suspension of Medicaid eligibility redeterminations to Nov 1

·     Myovant Sciences (MYOV) and Pfizer (PFE) announced that results of the Phase 3 SPIRIT 1 and SPIRIT 2 studies of investigational once-daily relugolix combination therapy in over 1,200 women with moderate to severe pain associated with endometriosis

·     Rhythm Pharmaceuticals Inc. (RYTM) said the FDA approved its supplemental new drug application for Imcivree to treat patients with Bardet-Biedl, a genetic disorder which can cause obesity and other difficulties. Also said it entered a non-dilutive revenue interest financing agreement for up to $100 million with HealthCare Royalty Partners

Industrials & Materials

·     Glencore PLC (GLNCY) said Friday it made more money trading oil, metals, & other commodities in six months than it had expected to make all year; said its trading division expects to post half-year Ebit of more than $3.2 billion, at the top end of the company’s full-year guidance

·     Methode Electronics’ (MEI) board approves dividend and authorizes $100 million increase to existing share buyback program

·     United Steel (X) issues Q2 guidance as sees 2q adj EBITDA about $1.6B vs. est. $1.34B and guides Q2 EPS $3.83-$3.88, consensus $3.20 Q2 EPS $3.83-$3.88 above consensus $3.20

·     Chemical companies Dow Chemical (DOW), Westlake (WLK) Olin (OLN), CF Industries (CF) all downgraded to Neutral from Buy at Citigroup noting YTD commodity chemicals outperformed S&P 500 until last week by >30%, but we think that’s about to end.

Technology, Media & Telecom

·     Adobe Systems (ADBE) 2Q adj EPS $3.35 vs est. $3.31 on revs $4.39B vs est. $4.35B; guides 3Q adj EPS $3.33 vs est. $3.40 and revs $4.43B vs est. $4.51B; guides FY adj EPS $13.50 vs est. $13.66

·     JD.com Inc’s (JD) is working on an on-demand food-delivery service that will pit it against offerings from Meituan and Alibaba Group (BABA), JD Retail CEO Xin Lijun tells Bloomberg TV

·     Roku (ROKU) struck a partnership with Walmart (WMT) allowing viewers to make purchases with their remotes while streaming television programs.

·     Roblox (RBLX) downgraded to Hold from Buy at Truist