Mid-Morning Look: June 07, 2022

Mid-Morning Look
Tuesday, June 07, 2022
Index |
Up/Down |
% |
Last |
|
||
DJ Industrials |
-70.74 |
0.21% |
32,845 |
|||
S&P 500 |
-3.93 |
0.10% |
4,117 |
|||
Nasdaq |
-4.01 |
0.03% |
12,057 |
|||
Russell 2000 |
-1.03 |
0.05% |
1,888 |
|||
U.S. stocks start the day lower, led by retailers after target (TGT) lowers guidance for the second time in a few weeks, dragging down shares of HD and WMT in the Dow, but overall market holding up relatively well, rebounding to turn flattish The U.S. trade deficit narrowed in April as imports fell sharply, reflecting a moderating appetite for foreign goods and materials as the trade gap in goods and services fell to 19.1% in April from the prior month to a seasonally adjusted $87.1B (down from March’s record $107.7B deficit). Investors once again flock to oil and energy stocks, with Exxon (XOM) topping the $100 level for the first time in 8-years after an analyst upgrade and another bounce in oil prices. Treasury yields ease and the buck pulls back. Coming into today, the Nasdaq is up 9.3% from its May 20th lows, but still down -22.9% YTD, while the S&P 500 is up 8.2% from its May 20 low, but down -13.5% YTD. Markets still await key inflation data later this week (CPI on Friday) and ECB policy meeting on Thursday.
Economic Data
· International Trade in Goods and Services for April narrowed to deficit of (-$87.1B) vs. -$90.2B consensus and -$107.7B in March (revised from -$109.8B) as exports were $252.6B, up 3.5% or $8.5B from March, while imports declined -3.4% or $12.1B to $339.7B. The April decrease in the goods and services deficit reflected a decrease in the goods deficit by $19.1B to $107.7B and an increase in the services surplus of $1.5B to $20.7B. The U.S.-China April trade deficit $30.57B vs March deficit $34.00B
Macro |
Up/Down |
Last |
|
||
WTI Crude |
1.30 |
119.79 |
|||
Brent |
1.24 |
120.75 |
|||
Gold |
6.70 |
1,850.40 |
|||
EUR/USD |
-0.0006 |
1.0688 |
|||
JPY/USD |
0.68 |
132.54 |
|||
10-Year Note |
-0.052 |
2.986% |
|||
Sector Movers Today
· Retailers; the sector under attack again after retailing giant TGT tumbled after slashing its quarterly margin forecast to about 2% from prior view 5.3% issued just weeks earlier, and said it would have to offer deeper discounts and cut back on stocking discretionary items, as inflation dents consumer spending – shares of big box retail WMT, COST, BJ pressured as well as BBBY, WSM, W, TJX following cautious home category comments and electronics retailers BBY, GME, WHR also active on the guidance
· Other retail news: KSS confirms entry into three-week exclusive negotiation with FRG over $60.00/share acquisition proposal. Confirm comes after the WSJ reported last night KSS is in exclusive advanced talks with Franchise Group (FRG) to be sold to the retail holding company in a deal that could value the department store chain at about $8B https://on.wsj.com/3GTnmS4 ; CHS raises its 2022 EPS forecast to 64-74 cents from 40-50 cents, now expects revenue of $2.130 bln-$2.160 bln from earlier estimates of $2.085 bln-$2.115 bln after better Q1 results; GIII boosted its Q2 and 202 sales and profit forecasts after posting better Q1; REAL founder Julie Wainwright to step down as CEO, chairperson of RealReal
· Utilities & Solar; NRG was downgraded to Underperform from Neutral (on valuation) at Bank America after the latest rally in shares from a recent low of $36 up to ~$46 today, and relatively in line with peers VST despite few changes to the long-term story and minimal upside exposure to power rally; Mizuho lowered ests for FE to reflect FirstEnergy’s exposure to rising costs including operating and maintenance costs, pension expenses and interest expenses; PPL remains one of the top names at Guggenheim to own heading into an unusually busy analyst day season (i.e., of the four events over the next two weeks including ETR, NEE, PCG) – Wells Fargo said PPL has the most at stake given the event will serve as the long-awaited intro of the “new PPL” following the ’21 exit from the U.K. utility operations.
· Auto sector; LEA upgraded to overweight at Wells Fargo and raise tgt to $180 on compelling valuation, strong EPS growth and EV tailwinds & optionality and believe BWA remains the best positioned in e-powertrain, though MGA and LEA also benefit (auto suppliers); in rental cars, Morgan Stanley lowers price targets of HTZ (to $23 from $25, maintains Equal-Weight) and CAR (to $156 from $168, maintains Underweight) – says the rental car market is in the latter stages of a post-COVID economic boom as both HTZ and CAR through-cycle margins are double historic averages but wait for negative revisions before wading in; CZOO said it plans to reduce its employee headcount by roughly 15% and take other actions to slow expansion and focus on profitability, citing tougher macroeconomic conditions
Stock GAINERS
· ASO +5%; after the company posted first-quarter earnings that beat Wall Street estimates, though said it would lower its total sales forecast for the year
· BLUE +10% after its blood disorder therapy seen effective according to FDA staff reviewers
· CHS +6%; raises its 2022 EPS forecast to 64-74 cents from 40-50 cents, now expects revenue of $2.130 bln-$2.160 bln from earlier estimates of $2.085 bln-$2.115 bln after better Q1 results
· KSS +9%; confirms entry into three-week exclusive negotiation with FRG over $60.00/share acquisition proposal. Confirm comes after the WSJ reported last night KSS is in exclusive advanced talks with Franchise Group (FRG) to be sold
· NEWR +6%; after announced Monday that it is adding new members to its board of directors during an ongoing board refresh and signs agreement with Jana Partners
· PLAY +3%; Q1 revs rose 24% y/y to $451.1M above est. $440.6M and comp store sales rose 10.9% from Q1 2019 while EBITDA up ~45% vs. same period in 2019
· XOM +3%; topping $100 per share for first time since 2014 after Evercore upgrade/energy strength in general
Stock LAGGARDS
· ARCB -9%; rising oil prices along with a profit warning from retailer Target fueled renewed concerns about the health of the American consumer and weighed on transports (LSTR )
· CBRL -5%; posted Q3 adj EPS $1.29, missing the $1.33 estimate as revs rose 11& y/y to $790.2M, also just below consensus of $793M as adj op income of $33.6M misses the $38.7M est. and sees 4q operating margins adversely impacted
· EHC -4%; lowers FY operating revs to $5.33B-$5.42B from $5.38B-$5.50B and lowers FY adj Ebitda view as well to $1.01B-$1.05B from prior view $1.02B-$1.07B
· REVG -19%; after posting a top and bottom line miss for Q2 and lowers FY22 revenue view $2.25B-$2.4B from $2.3B-$2.55B and FY22 adjusted EBITDA $100M-$120M from $125M-$155M while cuts FY22 adjusted net income to $43M-$62M from $64M-$89M
· TGT -2%; tumbled after slashing its quarterly margin forecast to about 2% from prior view 5.3% issued just weeks earlier, and said it would have to offer deeper discounts and cut back on stocking discretionary items as inflation dents consumer spending (WMT, COST, HD weak)
· UNP -1%; reaffirmed that co expects to achieve full year FY22 operating ratio improvement y/y but warns increased pressure from fuel prices, inflation, higher network costs will pressure incremental margins below original FY forecast
Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.