Early Look

Monday, September 12, 2022

U.S. futures are looking higher, with the S&P hitting highs just above the 4,100 level, looking to make it a 4^th straight day of gains as investors await a week of key inflation data, with the CPI tomorrow and PPI on Wednesday, ahead of the FOMC policy meeting next week. The S&P 500 rose to cap a winning week, topping its 50- and 100-day moving averages and breaking past strong technical resistance levels as major averages snapped their 3-week losing streak. All 11 sectors in the S&P 500 closed in the green for the week, with Consumer Discretionary sector as the top gainer. Stocks gained as the dollar slid from 20-year highs, while several central banks this past week (ECB, BoC, others, etc.) boosted interest rates, with market views that the same could happen in the US as the Federal Reserve is expected to hike rates by 75-bps Wednesday. The rates curve continues to price in cuts in 2023, ignoring warnings from officials that borrowing costs will stay higher for longer. For the week, the S&P 500 rose 3.6%, the Dow added 2.7%, the Nasdaq climbed 4.1%. Bespoke Investment noted the S&P 500’s 3-day breadth reading was the highest since 3/26/2020 (although three days ending 5/27/22 was close). The highlight this week is the August consumer price inflation (CPI) data on Tuesday, as the market expects some cooling in headline inflation which is expected to rise at 8.0% y/y for August vs 8.5% the month before and core inflation at 6.1% vs 5.9% previously. In Asian markets, The Nikkei Index gains 327 points or 1.16% to 28,542, the Shanghai Index gains 26 points to 3,262, and the Hang Seng Index rises over 500 points or 2.69% to 19,362. In Europe, the German DAX is up over 200 points to 13,300, while the FTSE 100 rises about 100 points to 7,450. There are no major economic data points today. Bitcoin continues upward move from last week, +4% to 22,166. The euro is extending gains, rising the most in six months against the dollar, as hawkish commentary from ECB policy makers continue.

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 61.23 points, or 1.53%, to 4,067.41

·     The Dow Jones Industrial Average rose 377.19 points, or 1.19%, to 32,151.71

·     The Nasdaq Composite surged 250.18 points, or 2.11%, to 12,112.31

·     The Russell 2000 Index advanced 35.94 points, or 1.95% to 1,882.84

Economic Calendar for Today

·     No Major Economic Data

Earnings Calendar:

·     Earnings Before the Open: AKTS RCAT

·     Earnings After the Close: BRZE MIND MTRX OPTT ORCL PL RENT SEAC

Other Key Events:

·     Barclay’s Global Financial Services Conference (virtual), 9/12-9/14

·     European Society for Medical Oncology (ESMO), 9/9-9/13, in Paris France

·     Goldman Sachs 2022 Communacopia + Technology Conference, 9/12-9/15, in San Francisco, CA

·     Morgan Stanley Annual Global Healthcare Conference, 9/12-9/14, in NY

·     Truist Internet Growth Summit (virtual), 9/12-9/16

·     Wells Fargo Annual Virtual Net Lease REIT Forum, 9/12

Sector News Breakdown

Consumer

·     Pool Corp. (POOL) mentioned positively in Barron’s noting shares have plunged this year after a pandemic bump in 2021 installations, but investors should note that pool upkeep is year-round and 80% of the company’s business is from pool supplies

·     Home fitness business Tonal Systems Inc. is raising financing that would value the company at about $1.9 billion – Bloomberg

Energy, Industrials and Materials

·     APA Corp. (APA) upgraded to Buy from Neutral at Citigroup

·     Occidental Petroleum (OXY) downgraded to Neutral from Buy at Citigroup

·     US freight railroads are due to reduce their services starting Monday and workers could be on strike by the end of the week, posing political risks before midterm elections

·     General Electric (GE) said it expects to complete the spin-off of its healthcare business by the first week of January 2023.

·     Venezuela’s second largest refinery has suspended gasoline production following an internal electrical failure, Reuters reported. A blackout took place on Saturday afternoon at the facility, which has the capacity to process 310,000 barrels per day (bpd) of gasoline, diesel, and domestic gas, and although power has returned to the facility, production at the refinery remains halted.

Financials

·     MicroStrategy (MSTR) announced a $500 mln “at the market offering” to buy bitcoin; saying it entered an agreement with Cowen and Company to sell the shares

·     Synchrony Financial (SYF) August 30+ Day Delinquency Rate3.1% of Loan Receivables12 and Synchrony Financial August Net Charge-Offs 3.1% of Average Loan Receivables

·     Visa Inc. (V), Mastercard Inc. (MA) and American Express Co. (AXP) will add a new merchant category for firearms retailers, a victory for gun-control advocates. Merchant category codes, MCCs, are four-digit numbers that networks use to identify types of merchants by the goods and services they sell. Card networks assign specific codes to many kinds of specialty merchants.

Healthcare

·     Bristol Myers Squibb (BMY) rises 6% after saying the FDA approved Sotyktu, which the drugmaker said was the first innovation in oral treatment for moderate-to-severe plaque psoriasis in nearly 10 years. Bristol Myers Squibb said the approval came after Phase 3 trials found it was more effective compared to placebo and twice-daily Otezla, made by Amgen

·     Deciphera Pharmaceuticals, Inc. (DCPH) phase 1/2 data for Vimseltinib showed Objective Response Rate (ORR) of 69% in Phase 1, 53% in Phase 2 Cohort A, and 46% in Phase 2 Cohort B; demonstrated clinical benefit rate of 100% across all phase 1/2 patients; prelim patient-reported outcome data in phase 2 demonstrate clinically meaningful improvements in pain and stiffness

·     ImmunoGen (IMGN) presents additional analyses evaluating Mirvetuximab Soravtansine in Ovarian Cancer at ESMO; patient-reported outcomes with Mirvetuximab versus chemotherapy in FORWARD I study reinforces differentiated tolerability profile

·     Spectrum Pharmaceuticals, Inc. (SPPI) said late Friday the FDA approved ROLVEDON(TM) injection to decrease the incidence of infection, as manifested by febrile neutropenia, in adult patients with non-myeloid malignancies receiving myelosuppressive anti-cancer drugs associated with clinically significant incidence of febrile neutropenia.

Technology, Media & Telecom

·     Watch shares of U.S. chip equipment makers Lam Research Corp (LRCX), Applied Materials Inc (AMAT) after a report that the Biden administration plans to broaden curbs on U.S shipments to China of semiconductors used for artificial intelligence (AI) and chipmaking tools in October, Reuters reported. China is the biggest market for LRCX, KLAC and AMAT according to Refinitiv

·     Shopify (SHOP) files mixed-securities shelf

·     Electronic Arts Inc. (EA) is giving more of its video game properties to Vince Zampella, who oversaw the blockbusters Call of Duty and Modern Warfare, according to Barron’s.

·     Walt Disney Co. (DIS) CEO Bob Chapek said he rejected activist investor Dan Loeb’s suggestion to sell or spin off the ESPN sports network, the Financial Times reported

·     Tesla (TSLA) CEO Elon Musk disclosed that on September 9, his advisors sent a letter to Twitter (TWTR) formally notifying the company that Musk “has become aware of certain facts that serve as a basis for terminating their merger agreement separate and distinct from the bases” on which he terminated the merger agreement on July 8, and alternatively on August 29.

·     Cable One (CABO) downgraded to Equal Weight from Overweight at Wells Fargo