Early Look

Wednesday, September 14, 2022

Futures	Up/Down	%	Last
Dow	25.00	0.03%	3,
S&P 500	2.25	0.05%	4,
Nasdaq	4.50	0.33%	12,

 

US equity futures are a touch higher, after the rout yesterday, rising +0.4% to 3,965 (overnight high 3,979.50 and low 3,945.50) after major averages dropped over 4% on Tuesday, its biggest one day drop in 2 years. Stocks tumbled, Treasury yields and the dollar spiked as every stock in the Nasdaq 100 closed negative, all eleven S&P sectors declined, and all 30 Dow components were “red” following the jump in inflation data, in the form of consumer price index (CPI) on Tuesday. The Dow, S&P 500 and Nasdaq all posted their biggest one-day percentage drop since June 2020. Traders are now fully pricing in a rate increase of 75-bps at next week’s FOMC meeting, with wagers rising for moves in November and policy rates ultimately reaching around 4.3% early in 2023. The two-year Treasury yield, the most sensitive to policy changes, jumped as much as 21 basis points, pushing it more than 30-bps above the 10-year rate and deepening an inversion. Last night, Doubleline’s Jeff Gundlach said he expects the S&P 500 Index to fall to 3,000 or about a 20%-25% drop from its current level, believes the Fed should do a 25-bps rate increase, though he expects the Fed will institute a 75-bps increase when it meets next week and said he plans to buy emerging markets when the U.S. Dollar falls below its 200-day moving average. The consumer Price (CPI) report weighed heavily on US stocks markets, with the August producer Price Index (PPI) expected later this morning. In Asian markets, The Nikkei Index plunged nearly -800 points or 2.78% to 27,818, the Shanghai Index dropped -26 points to 3,237, and the Hang Seng Index fell -479 points or 2.48% to 18,847. In Europe, the German DAX is down -68 points to 13,120, while the FTSE 100 falls -65 points to 7,320. Yields stay elevated (2-yr at 3.78%) and the dollar is lower.

Market Closing Prices Yesterday

·     The S&P 500 Index tumbled -177.72 points, or 4.32%, to 3,932.69

·     The Dow Jones Industrial Average fell -1,276.37 points, or 3.94%, to 31,104.97

·     The Nasdaq Composite plunged -632.84 points, or 5.16%, to 11,633.57

·     The Russell 2000 Index declined -74.51 points, or 3.91% to 1,831.58

 

Economic Calendar for Today

·     7:00 AM ET         MBA Mortgage Applications Data

·     8:30 AM ET          Producer Price index (PPI) M/M for August…est. (-0.1%)

·     8:30 AM ET          Producer Price index (PPI) Y/Y for August…est. +8.8%

·     8:30 AM ET          PPI Ex: Food & Energy (core) M/M for August…est. +0.3%

·     8:30 AM ET          PPI Ex: Food & Energy (core) Y/Y for August…est. +7.1%

·     10:30 AM ET        Weekly DOE Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: None

·     Earnings After the Close: IDW IRNT LPTH RFIL

 

Other Key Events:

·     Baird Global Healthcare Conference, 9/13-9/14, in NY

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

·     Credit Suisse 35th Annual Basic Materials Conference, 9/13-9/14, in NY

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

·     Lakestreet 6th Annual Best Ideas Growth Conference, 9/14, in NY

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

·     Piper Growth Frontiers Conference, 9/13-9/14, in Nashville, TN

·     RBC Capital Global Industrials Conference, 9/13-9/14, in Las Vegas

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

 

 

Macro	Up/Down	Last
Nymex	0.60	87.91
Brent	0.20	93.37
Gold	-3.40	1,714.00
EUR/USD	0.0043	1.0013
JPY/USD	-1.46	143.09
10-Year Note	+0.018	3.441%

 

 

World News

·     UK Annual consumer price growth slowed to 9.9% from July’s 40-year high of 10.1%, the Office for National Statistics said, the first drop since September 2021 and below expectations in a Reuters poll for it to rise to 10.2%

·     Japan Sept manufacturers’ sentiment index +10 vs Aug +13; Sept service-sector index +11 vs +19 in Aug; Manufacturers’ Dec outlook flat, services rising; Inflation torments Japan Inc, weak yen’s impact mixed

·     Japanese authorities will act “swiftly without any interruption” if they decide to intervene in the currency market to stem sharp yen falls, Finance Minister Shunichi Suzuki said on Wednesday.

 

Sector News Breakdown

Consumer

·     Starbucks Corp. (SBUX) Interim CEO Howard Schultz outlined a wide-ranging revamp of the coffee chain, ranging from cafe upgrades to expanded employee benefits; expects to spend between $2.5 to $3 billion annually through its 2025 fiscal year to build new types of stores

·     Watch electric vehicles (EV) like Tesla (TSLA), Rivian (RIVN), and charging co’s like Blink (BLNK), ChargePoint (CHPT) as President Biden plans to highlight at the Detroit Auto Show automakers’ increasing shift to electric vehicles and billions of dollars in new investments in battery plants

·     Copa Holdings (CPA) said passenger traffic for Aug. 2022 rose 2% from the level before the COVID-19 pandemic in Aug. 2019; consolidated capacity gained 0.4% for Aug. 2022 from the level before the pandemic in Aug. 2019.

·     Vintage Wine Estates (VWE) 4Q adj EPS $0.17 vs est. $0.14 on revs $75.5Mm vs est. $74.2Mm; sees RY revs $300-310Mm vs est. $330.4Mm

 

Financials

·     Block (SQ) downgraded to Underperform from Outperform at Evercore ISI

·     PayPal (PYPL) upgraded to Outperform from Market Perform at Raymond James

·     SoFi Technologies (SOFI) upgraded to Buy from Neutral at Bank America

·     Manning & Napier, Inc. (MN) preliminary assets under management as of August 31, 2022, of $18.7 billion, compared with $19.3 billion at July 31,2022, and $18.5 billion at June 30, 2022.

 

Healthcare

·     Johnson & Johnson (JNJ) announces $5 billion share repurchase program; reaffirms its full-year 2022 adjusted operational sales growth and earnings per share guidance of 6.5% – 7.5% and $10.65 to $10.75 per share (est. $10.07), respectively; does not expect to incur debt to fund share repurchase program

·     Akero Therapeutics (AKRO) announces $175m proposed public offering of common stock

·     Point Biopharma (PNT) 13.9M share Secondary priced at $9.00

 

Industrials & Materials

·     Flowserve (FLS) said Q3 expected to be negatively impacted by approximately $0.18-$0.22 due to certain unanticipated, period-specific issues; continue to expect bookings to exceed $1 billion for the third consecutive quarter based on supportive traditional and energy end-markets

·     O-I Glass (OI) now expects Q3 results will be at the high-end or slightly exceed its adjusted earnings guidance of $0.55-$0.60 per share reflecting continued momentum into Q4 and boosted its FY22 EPS view to $2.10-$2.25 from prior $2.05-$2.20 and boosts FY FCF outlook to at least $200 million (previously at least $175 million)

·     Raytheon Technologies (RTX) cut its free cash flow outlook to reflect the impact of legislation requiring capitalization of research and experimentation for tax purposes; now sees 2022 free cash flow to be ~$4B instead of ~$6B; reaffirmed its 2022 sales and adj. EPS guidance

·     Union Pacific (UNP) and CSX Corp. (CSX) both downgraded to Market Perform from Outperform at Bernstein

·     US railroads are set to halt shipments of farm products and other goods starting Thursday ahead of a possible labor strike that could cost the economy $2 billion a da

 

Technology, Media & Telecom

·     Apple (AAPL) plans to use latest chip producing technology from Taiwan’s TSMC (TSM) in its iPhones and MacBook’s next year, the Nikkei Asia newspaper reported

·     IBM Corp. (IBM) said sees non-cash pretax pension settlement charge ~$5.9B in 3q

·     Aspen Group (ASPU) 1Q adj EBITDA ($1.2)Mm vs est. ($1.07)Mm on revs $18.9Mm vs est. $18.6Mm

·     Taboola (TBLA) announced a cost restructuring program that will allow the company to continue focusing on top priorities, and ensuring profitable growth and free cash flow in 2023 and beyond; to reduce headcount by 6%