Early Look

Monday, May 16, 2022

Futures	Up/Down	%	Last
Dow	-35.00	0.09%	32,090
S&P 500	-10.25	0.29%	4,008
Nasdaq	-60.50	0.49%	12,322

 

 

U.S. stocks are looking at a weaker open as S&P futures slipped -0.3% to around 4,008 (off overnight highs 4,042 and lows 3,981.75), following weak Chinese economic data (retail sales and industrial production) and increasing tensions with Russia after Finland and Sweden both said will apply Monday for NATO application. Goldman Sachs cut its end-2022 Target for the S&P 500 to 4,300 from 4,700, but if there is a recession, it would push the S&P down to 3,600. Macro events, data, interest rates and geopolitical headlines continue to move the needs for major U.S. averages as the S&P and Nasdaq come into the week with a 6-week losing streak and the Dow a 7-week losing streak. Stocks jumped on Friday as the Nasdaq ended up nearly 4%, with growth stocks leading the rally, clawing back losses from earlier in the week when concerns about high inflation and aggressive Federal Reserve interest rate hikes dented risk appetite and sent stocks tumbling. All the 11 major S&P sectors advanced on Friday, with consumer discretionary, information technology and energy rising the most. Investors remain worried that the Federal Reserve could tighten monetary conditions too far as it tries to reign in mounting price pressures, which could tip the economy into recession. In Asian markets, The Nikkei Index gained 119 points to 26,547, the Shanghai Index dipped -10 points to 3,073, and the Hang Seng Index gains 50 points to 19,950. In Europe, the German DAX is down about -0.6% to 13,940, while the FTSE 100 is up a few points to 7,425. Bitcoin traded down to $28.6k on Saturday and up to $31.4k on Sunday before trading back down to $29,600.

 

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 93.81 points, or 2.39%, to 4,023.89

·     The Dow Jones Industrial Average rose 466.36 points, or 1.47%, to 32,196.66

·     The Nasdaq Composite surged 434.04 points, or 3.82%, to 11,805.00

·     The Russell 2000 Index advanced 53.28 points, or 3.06% to 1,792.66

 

Economic Calendar for Today

·     8:30 AM ET         Empire Manufacturing for May

·     8:50 AM ET         Fed’s Williams Takes Part in Moderated Discussion

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

 

Earnings Calendar:

·     Earnings Before the Open: ACRX, ALBO, BCLI, CLSN, CMRX, ENJY, GOED, HOOK, KALA, NOVN, PASG, SANW, SSYS, SUNW, SYN, SYRS, TSHA, WEBR, WRBY, YOU

·     Earnings After the Close: ADMP, AUTO, BZFD, CELC, CVV, CWBR, DNA, EAST, FXLV, GAN, HYRE, INVO, IPWR, KBNT, MARK, MSGM, NGS, NRDY, REED, RKLB, RMTI, SHLS, SPRO, TTWO, TXMD, VERB, VOXX

 

Other Key Events:

·     Canaccord Global Metals & Mining Conference, 5/15-5/17 in CA

·     JPMorgan Homebuilding & Building Products Conference (virtual), 5/16-5/17

·     Needham Annual Technology & Media Conference (virtual), 5/16-5/20

 

 

Macro	Up/Down	Last
Nymex	-0.61	109.88
Brent	-0.61	110.94
Gold	-6.60	1,801.70
EUR/USD	0.0011	1.0423
JPY/USD	0.18	129.37
10-Year Note	-0.002	2.931%

 

 

World News

·     Chinese April data was weak as Industrial production fell -2.9% YoY vs +0.5% expected. Retail sales were down -11.1% vs -6.6% expected and the surveyed jobless rate rose to 6.1%, up from 5.8%. 

·     Finland confirms it will apply to join NATO to ‘maximize’ country’s security following Russia’s invasion of Ukraine. Formal application to be submitted next week. Sweden to also seek broad support for NATO membership as Prime Minister Magdalena Andersson will seek parliamentary approval Monday for NATO application. Lavrov says that the west has declared a total hybrid war against Russia, hard to predict how long it will last, Putin warns Finland that abandoning neutrality would be a mistake

·     The European Commission (EC) predicts that growth will expand to 2.7% in 2022 and 2.3% in 2023 down from February readings of 4% and 2.7%. On inflation they now predict 6.1% for this year and 2.7% in 2023 up from previous forecasts of 3.5% and 1.7%.

 

Sector News Breakdown

Consumer

·     Carvana (CVNA) forecast significant core earnings for 2023, as the co spelled out plans to rein in spending on advertising, expansion, and other areas to offset waning demand late Friday

·     Donerail Group is close to reaching a settlement with Turtle Beach Corp (HEAR) that will give the activist investment firm representatives on the U.S. gaming gear company’s board of directors, people familiar with the matter said on Sunday – Reuters reported https://reut.rs/3PmIdAY

·     Ford (F) sold an additional 7 million shares of electric-car maker Rivian (RIVN) on Friday at $26.99 per share for about $188 million after dumping 8M shares earlier in the week following IPO lockup period expiration according to a regulatory filing (Ford still owns 87 million Rivian shares)

·     JetBlue Airways Corp. (JBLU) plans to launch a hostile takeover attempt for discount carrier Spirit Airlines Inc. (SAVE), according to people with the matter, after Spirit rejected JetBlue’s $3.6 billion offer in favor of an existing deal with Frontier Airlines (ULCC) https://bit.ly/3a4M0Tp ; saves shares rally this morning following the report

·     McDonald’s (MCD) announced it will exit the Russian market and has initiated a process to sell its Russian business. This follows McDonald’s announcement on March 8, that it had temporarily closed restaurants in Russia and paused operations in the market. As part of McDonald’s decision to exit, the company is pursuing the sale of its entire portfolio of McDonald’s restaurants in Russia to a local buyer. As part of the exit, the company expects to record a non-cash charge of about $1.2 billion to $1.4 billion.

·     Peloton (PTON) mentioned positively in Barron’s this weekend noting it has been just over three months since activist investment firm Blackwells Capital targeted Peloton and the case for change, including a sale of the company, and that case may have only grown stronger after the stock plunged 8% this past week after Q4 earnings and forward guidance came in below

 

Energy, Industrials & Materials

·     Array Technologies (ARRY) files to sell 13.89M shares of common stock for holders

·     Shell (SHEL) mentioned positively in Barron’s saying the energy giant has seen investors pile into energy stocks this year, sending prices sharply higher, but bargains remain in the sector. Shell is one of them as it has some of the most attractive assets in the global energy business, notably the world’s largest liquefied natural-gas business and the biggest network of service stations. But at a recent $55, its U.S.-listed shares trade for just six times projected 2022 earnings

 

Financials

·     Capital One Financial (COF) reports April newt-charge-offs 2.19% vs. 2.4% Y/Y, and delinquencies 2.18% vs. 1.92% Y/Y and vs. 2.32% the end of March

·     Citizens Financial (CFG) mentioned positively in Barron’s saying the bank has been growing, and the stock could gain 29%. To meet its goals, Citizens has been on an acquisition spree of late, the adding that Citizens’ business lines have become more diversified as well.

·     Goldman’s equity strategy team cut its end-2022 target for the S&P 500 to 4,300 from 4,700, but if there is a recession, it would push the S&P down to 3,600, which would be an 11% drop from current levels.

·     SoFi Technologies (SOFI) upgraded to Overweight from Neutral at Piper Sandler

 

Healthcare

·     Emergent BioSolutions Inc. (EBS) entered into a definitive agreement with Chimerix, Inc. (CMRX), to acquire Chimerix’s exclusive worldwide rights to TEMBEXA(R), the first antiviral approved by the U.S. FDA for all age groups for the treatment of smallpox.

·     Sanofi (SNY) said new data from a Phase III late-stage study of its multiple myeloma therapy Sarclisa, in combination with other drugs, showed reducing the risk of disease getting worse by a median of nearly three years.

·     Cigna (CI) upgraded to Overweight from Neutral at JPMorgan

·     Seagen Inc. (SGEN) announces resignation of president, chairman & CEO clay Siegall

·     Bellicum Pharmaceuticals (BLCM) files $200M mixed securities shelf

 

Technology, Media & Telecom

·     Netflix (NFLX) upgraded to Outperform from Neutral at Wedbush

·     Twitter (TWTR) shares extended declines in pre-market trading after Tesla (TSLA) CEO Elon Musk said the social media group’s legal team told him he had violated a non-disclosure agreement that could further delay his $44 billion takeover bid. Musk, who last week said his Twitter pursuit was ‘on hold’ pending an investigation into the number of fake and spam accounts on the micro-blogging website, said Saturday that “Twitter legal just called to complain that I violated their NDA by revealing the bot check sample size is 100!”

·     Electronic Arts (EA), Take-Two Interactive (TTWO), Activision (ATVI), Sony (SONY): Videogame industry sales slipped 8% year-over-year in April – the sixth straight month that was worse than the year before; December sales had shown up down 1% from the prior year, while January dipped 2%; February sales slipped 6%; and March fell a full 15%. April overall sales fell 8% from April 2021, to $4.337 billion, according to NPD Group. Hardware sale eked out some rare growth, rising 16% to $343 million as some console supply strains eased.

·     Western Digital (WDC) and Micron (MU), which make digital storage, have been lousy investments but, at a time of nearly unprecedented tech stock volatility, investors should now buy them both, according to a Barron’s article this weekend. Micron is one of the market’s cheapest stocks on a price/earnings basis-it trades at about five times projected profits for the next 12 months. Meanwhile, Western Digital trades for six times profits for the same period. That makes it the second-cheapest tech stock

·     Wix.com (WIX) shares slip -10%; reported a wider-than-expected quarterly loss, but said its businesses were showing steady growth; now sees Q2 revenue of $342M-$346M below est. of around $356M and sees year revs up 10-13% Y/Y or $1.396B-$1.434B below consensus at $1.45B.

·     Chinese Internet names upgraded at JPMorgan saying significant uncertainties facing the China’s e-commerce sector should begin to abate on the back of recent regulatory announcements, raising: upgraded shares of BABA, BIDU, BZUN, BILI IQ, JD, NTES, PDD, ZH