Mid-Morning Look

Friday, April 29, 2022

U.S. stocks remain volatile and very choppy after a rough week of earnings, which saw some big upside movers (FB, HON, MSFT) but felt like even more came to the downside in high profile names. Overnight saw a strong quarter from tech giant Apple (AAPL) across the board but warned y/y Q3 revenue growth to be impacted by COVID, as sees $4B-$8B in constraints in Q3. Amazon (AMZN) tumbles over 10% after its Q2 guidance falls well short of consensus. Several transport stocks have posted good quarters but warns of rising costs. Same can be said in medical device sector as several have noted waning spending (hospitals/MedTech hit hard this week). Dow component Boeing (BA) this week posted a larger than expected Q1 loss (-$2.75) vs. est. (-$0.12) and missing estimates for revenues ($14B vs. est. $15.8B). Chip maker INTC guiding Q2 lower overnight citing demand weakness in its largest end market of PCs, as well as increased supply-chain uncertainty. The list goes on and on. While inflation appears to have peaked, it remains stubbornly high, and markets remain fearful ahead of next weeks FOMC meeting where the Fed is expected to hike rates by 50 bps in a strong of aggressive rate hikes to combat inflation. Data this morning showed another high inflation reading as month-over-month and year-over-year core PCE readings came in at 0.3% and 5.2% vs estimates calling for 0.3% and 5.3%. Treasury yields remain volatile as the 10-year yield hit highs of 2.93% this morning before fading. The U.S. dollar hit 20-year highs this week before pulling back today (posting best month since Jan 2015), and oil prices on track for weekly gains. Stocks on track for another rough month with the S&P down -6.8% MTD, the Dow -3.2%, Nasdaq -10.7% and the Russell 2000 -7.5%.

Economic Data

·     April Chicago PMI Actual reported at 56.4, well below forecast of 62 and previous 62.9

·     University of Michigan consumers sentiment final April 65.2 vs. consensus 65.7 vs preliminary April 65.7 and final March 59.4; current conditions index final April 69.4 vs prelim April 68.1 and final March 67.2; expectations index final April 62.5 vs prelim April 64.1 and final March 54.3

·     March Personal Income rose +0.5% M/M vs. +0.4% expected and +0.7% prior (revised from +0.5%) driven by a boost in compensation, proprietors’ income, personal income receipts on assets and government social benefits; Personal spending rose +1.1% M/M vs. +0.7% consensus and +0.6% previously (revised from +0.2%). The Q1 Employment Cost Index: +1.4% Q/Q vs. +1.1% consensus and +1.0% prior.

·     March overall PCE price index rises +0.9% vs. Feb +0.5% and March core PCE price index +0.3%, in-line with ests and vs. Feb +0.3%; March year-over year PCE price index +6.6% vs Feb +6.3% and Core +5.2% vs. est. +5.3% and Feb +5.3%

Sector Movers Today

·     Internet, Media & Telecom movers; U.S. listed Chinese stocks BABA, BIDU, PDD, JD others rise after China’s top leaders pledged more support to spur economic growth and vowed to contain Covid outbreaks (lifting shares of U.S. listed China stocks early); ROKU 1Q beat was followed by below 2Q guidance – 1Q EPS ($0.19) vs est. ($0.18) on revs $805Mm vs est. $718Mm; added 1.1Mm incremental active accounts to reach 61.3Mm, ARPU rose to $42.91; guides 2Q net revs $805Mm vs est. $815.7Mm; CHTR follows CMCSA lower in cable space as broadband slowdown continues, with Charter saying it added 185,000 new broadband customers versus 355,000 last year (recall yesterday Comcast 1Q new additions were down 43% to 262,000); VRSN falls after quarterly results and narrowed guidance (was upgraded to Overweight at Wells Fargo largely attributable to the significant uptick in demand trends in 1Q22 reseller survey)

·     Energy stock movers; major oils with earnings today as CVX Q1 adj EPS $3.36 (biggest profit since 2012) vs. Refinitiv est. $3.27 (Bloomberg est. $3.44); Q3 revs $54.37B vs. est. $47.94B; 1q net production 3.06m BOE/day; 1q downstream earnings $331m and 1q upstream earnings $6.93B; XOM boosts share buyback program to up to $30B through 2023; Q1 adjusted EPS $2.07 vs. est. $2.12; Q1 revs $90.5B vs. est. $92.73B; SHEL to acquire SPRNG energy group, one of India’s leading renewable power platforms: SLCA posted a smaller than expected Q1 loss and revenues that rose 30% y/y and 7% q/q to $305M, as foresees an active well completions env’t

·     Metals & Materials; CLW shares soar EPS beats by $0.16 as sales top views driven by higher prices, strong demand, and increased production volumes; U.S. Steel (X) Q1 adj EPS $3.05 vs. est. $2.95; Q1 revs $5.23B vs. est. $5.27B; Q1 net $882M; Steel shipments 3.69 million tons vs. 3,911 y/y, estimate 3.7 million; in chemicals, CE posted a beat and guide higher for Q2; aluminum producer CENX reported 1Q’22 EBITDA of $106m, vs. our consensus of $85m but 2Q’22 EBITDA Target of $120-130m is below consensus of $195m on incremental cost pressures; RS upgraded to Outperform w/ $226 PT at Wolfe after another strong beat points to non-ferrous strength

Stock GAINERS

·     CLW +17%; EPS beats by $0.16 as sales top views driven by higher prices, strong demand, and increased production volumes

·     HON +4%; boosted its full-year profit forecast as a recovery in aviation markets due to a pickup in travel boosted demand for the company’s parts, software, and aftermarket services as sees FY22 EPS $8.50-$8.80 from prior $8.40-$8.70

·     PDD +15%, along gains in BABA, BIDU, JD, TCEHY and other U.S. listed Chinese stocks after China’s top leaders pledged more support to spur economic growth and vowed to contain Covid outbreaks (lifting shares of U.S. listed China stocks early)

·     ROKU +4%; after Q1 results beat analyst expectations and revenues increased 28% from last year

·     TSLA +4%; after filings showed Elon musk sold an additional 4.18M shares of stock yesterday in addition to last night’s filings of 4.4M shares to fund $44B Twitter deal (as per reg filings)

·     ZYME +34%; as investment firm All Blue Capital approaches co with a $773M acquisition, or non-binding offer of $10.50 per share in cash

Stock LAGGARDS

·     ABBV -7%; on Q1 revenue miss ($13.54B vs. $13.63B) and lowering FY EPS to $13.92-$14.12 from $14-$14.20 due to an $0.08 per share charge from acquired in-process R&D

·     ACCD -51%; as forecasts FY2023 revs between $350M-$365M, below estimates of $387.4M noting a large customer said they would be ending their service relationship with ACCD after end of 2022

·     AMZN -11%; disappoints after reporting a Q1 net loss of $3.8B, or $7.56 per share, mainly due to a decline in the valuation of its stake in EV maker RIVN while guidance for next quarter well below views (seen $116B-$121B below est. $125.5B)

·     CHTR -5%; saying it added 185,000 new broadband customers versus 355,000 last year

·     CL -4%; posts in-line Q1 EPS and sales but profit fell to $559M from $681M y/y, impacted by significant increases in raw material and logistics costs worldwide

·     INTC -4%; Q1 sales and profit beat estimate but guides Q2 EPS $0.70, below est. $0.83 and revs about $18B vs. est. $18.3B citing demand weakness in its largest end market of PCs

·     WU -8%; top and bottom-line results beat estimates but cuts FY22 adj EPS view to $1.75-$1.85 from $1.90-$2.00 (est. $1.93) and lowers FY22 GAAP revenue view