Early Look

Wednesday, June 22, 2022

U.S. stock futures are sharply lower, failing to hold yesterday’s strong gain as recession and/or stagflation concerns resurface ahead of today’s Fed Chairman Powell semi-annual testimony to Congress on monetary policy and fears of a hard economic landing rise. Citigroup economists see the chance of global recession nearing 50% as central banks tighten monetary policy and demand for goods weakens, which follows Goldman Sachs view yesterday for a 30% chance of the U.S. economy tipping into recession over the next year, up from its previous forecast of 15%. The Dollar is broadly stronger, stocks and commodities are deep in the red. Treasury prices rise in a flight to safe-haven assets as the 10-yr yield slips to 3.22%, though gold falls. Gold prices tumble with WTI crude down 5% to $104 per barrel on rising recession fears (lets see if pump prices fall as quickly as they rose when prices were higher). After six-straight winning months, WTI is down about 9% for June, while Brent is down nearly 11%. UK inflation rises to new 40-year high with more gains expected. Stocks rose Tuesday following a brutal week as investors assessed a more aggressive Federal Reserve and rising chances of a recession as the Dow jumped 2.15%, the S&P 500 climbed 2.45% and the Nasdaq popped 2.51%, but those gains appear very short lived as markets fail to hold any rally. In Asian markets, The Nikkei Index fell -96 points to 26,149, the Shanghai Index dropped -1.2% to 3,267, and the Hang Seng Index slid -2.5% or 551 points to 21,008. In Europe, the German DAX is down -2% or -260 points to hold just above 13,000, while the FTSE 100 is lower -1.4% or 100 points to 7,050.

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 89.95 points, or 2.45%, to 3,764.79

·     The Dow Jones Industrial Average rose 641.47 points, or 2.15%, to 30,530.25

·     The Nasdaq Composite spiked 270.95 points, or 2.51%, to 11,069.30

·     The Russell 2000 Index advanced 28.34 points, or 1.70% to 1,694.03

Economic Calendar for Today

·     7:00 AM ET         MBA Mortgage Applications Data

·     8:55 AM ET         Johnson/Redbook Weekly Sales

·     9:30 AM ET        Fed Chair Powell Delivers Semi-Annual Testimony Before Senate Panel

·     12:50 PM ET       Fed’s Evans Discusses Economic Outlook

·     1:30 PM ET         Fed’s Harker and Barkin Discuss the Economic Outlook

·     4:30 PM ET         API Weekly Inventory Data

Earnings Calendar:

·     Earnings Before the Open: KFY, WGO

·     Earnings After the Close: FUL, KBH, SCS, WGO

Other Key Events:

·     Citigroup Asia Pacific Property Conference (virtual), 6/22-6/24

·     Cowen 7th Annual Future Health Conference (virtual), 6/22-6/23

·     Goldman Sachs Business Services, Transport & Leisure Conference, 6/20-6/22, in London

·     JPMorgan Energy, Power, & Renewables Conference 2022, 6/22-6/23, in NY

·     Piper Upper Midwest Bank Tour (virtual), 6/21-6/22

Sector News Breakdown

Consumer

·     Kohl’s (KSS) bidder Franchise Group (FRG) is said in talks to retain management, including the department store’s CEO Michelle Gass, if a planned sale is completed. https://bit.ly/3HL1VTO

·     CarLotz (LOTZ) closes 50% of its stores to strategically focus on path to profitability; closures will result in an estimated workforce reduction of 25% to 30%; estimates an additional savings of $7.5 mln to $8.5 mln in occupancy costs per year

·     La-Z-Boy (LZB) Q4 EPS $1.33 vs. est. $0.92; Q4 sales rose 32% Y/Y to $684.6M vs. est. $669M; Operating income rose 57% Y/Y to $78.8M; sees Q1 sales up 7%-10% Y/Y

·     Toyota Motor Corp. (TM) lowered its global production plan for July by about 50,000 units, citing its decision to extend the suspension of operations at some plants and production lines; production volume for July is expected to be roughly 800,000 units

·     Kraft Heinz (KHC) upgraded to Outperform from Market Perform at BMO Capital

Energy, Industrials and Materials

·     ArcelorMittal (MT) downgraded to Neutral from Overweight at JPMorgan

·     Dow Inc. (DOW) downgraded to Underperform from Neutral at Credit Suisse

·     Safe Bulkers (SB) announces 5M share stock repurchase program

·     Sempra Infrastructure, a subsidiary of Sempra (SRE), and INEOS Energy Trading, a subsidiary of INEOS, have entered into a head of agreement for the long-term supply of liquefied natural gas, according to a statement

·     Scotts Miracle-Gro (SMG) downgraded to Equal Weight from Overweight at Wells Fargo

·     ProFrac Holdings (PFHC) agreed to acquire U.S. Well Services (USWS) in a stock-for-stock deal with an exchange ratio of 0.0561 ProFrac common shares for each U.S. Well common share. https://bit.ly/3bm4eR3

Healthcare

·     BioMarin (BMRN) announces the Ministry of Health, Labor and Welfare in Japan granted approval for Voxzogo® (vosoritide) for injection for the treatment of children with achondroplasia, whose growth plates are not closed

·     Cigna (CI) upgraded to Overweight from Equal Weight at Morgan Stanley and the firm downgraded to Anthem (ANTM) to Equal Weight from Overweight and cut tgt to $533 from $607

·     Ormat Technologies, Inc. (ORA) announces proposed offering of $350 million of green convertible senior notes

·     Paratek Pharmaceuticals (PRTK) NUZYRA® receives FDA Fast Track Designation for the treatment of Pulmonary Nontuberculous Mycobacterial (NTM) Disease

·     Zynerba Pharmaceuticals (ZYNE) said its transdermal CBD gel Zygel helped improve behavior symptoms of 22q11.2 Deletion Syndrome in children/adolescents in a mid-stage study.

Technology, Media & Telecom

·     Jana Partners disclosed a 5.3% stake in New Relic (NEWR), which represents over 3.52M shares in a 13D filing

·     PubMatic (PUBM) will join the broad-market Russell 3000 and the small-cap Russell 2000 Indexes