Mid-Morning Look

Monday, June 13, 2022

U.S. stocks open in “bear market” territory, with the S&P making new 2022 lows (after posting its worst week since January and on track for worst 3-day loss since March 2020) as fear rises ahead of this week’s FOMC policy meeting. The S&P 500 would officially enter a bear market with a close below 3,837.25, marking a 20% drop from its record high in early January. The decline in the Nasdaq 100 from its peak last November (-31.7%) is larger than its decline during the 2020 Covid pandemic crash (-30.4%). Bespoke note the Nasdaq 100 barely hanging onto a 2% gain since Election Day 2020, down 13% since Inauguration Day 2021. Dow Transports hitting 52-week lows. Not many places to hide as Treasury yields sharply higher across the curve as bonds fall (10-year 3.28%, 2-yr 3.2% and 30-yr 3.3%). Following last Friday’s “hotter” than expected CPI data, where consumer prices hit fresh 40-year highs (showing that inflation has not peaked), markets fear a more aggressive rate hike cycle than previously expected, with some economists calling for a potential 75 bps hike this week and roughly 175 bps in the next 3-meetings combined. That is a far cry from the prior expectation of two 50-bps hikes the next two meetings and then a potential pause in September. Oil tumbles along with gold as well, but Bitcoin and other crypt destruction grabbing lots of headlines today as Bitcoin (BTC) down as much as -19% below $23,500, while Ethereum (ETH) crumbles as much as -27% to $1,225. FOMC policy meeting this week and PPI inflation data tomorrow morning. So far, straight down day across the board for markets.

Stock GAINERS

·     AMLX +6%; had its ALS drug Albrioza approved by Health Canada, though is still under FDA scrutiny, and an approval decision is expected in September

·     BLUE +36%; after a U.S. FDA panel unanimously backs company’s two gene therapies – eli-cel for a rare neurological disease and beti-cel for certain Beta-thalassemia patients. FDA decision for beti-cel and eli-cel expected by Aug 19 and Sept 16

·     DAWN +106%; following early data from a pivotal Phase 2 trial for its experimental therapy Tovorafenib in children with pediatric low-grade glioma, a brain tumor.

·     DRE +3%; be acquired by PLD in a deal worth $26 billion, including the assumption of debt, the companies said as Duke Realty shareholders would receive 0.475 times a Prologis share for each Duke Realty share they own, an improvement from prior offer of 0.466 times

·     EDU +2%; as Chairman Yu Minhong brought back English teaching with a live-streaming session on Friday evening on Douyin, the Chinese version of TikTok owned by ByteDance, SCMP reported (also upgraded at J.P Morgan to Overweight from Neutral

·     PWR ; upgraded to Buy from Neutral at UBS and raise tgt to $156 from $140 now that the solar overhang has cleared, and they have more confidence in EPS growth ahead

Stock LAGGARDS

·     ASTR -25%; as its mission to send tiny storm-monitoring NASA satellites to orbit on Sunday failed after a second-stage booster engine shut down early in space; failure occurred roughly 10 minutes after a successful liftoff of Astra’s Rocket 3.3 at 1:43 p.m. ET

·     COIN -16%; Crypto currency stocks tumbling along with broader stock markets, with Bitcoin (BTC) down as much as -19% below $23,500, while Ethereum (ETH) crumbles as much as -27% to $1,225 as investors bail out of riskier assets (MSTR also tumble)

·     CZR -10% among biggest decliners in consumer discretionary space (NCLH, PENN, BKNG, LVS, EXPE) and leisure on fears of inflation and rates hitting consumer spending

·     DWAC -9%; after the SPAC that is buying the company behind Donald Trump’s Truth Social said it received another subpoena from the SEC related to the acquisition

·     PLD -7%; after agreeing to acquire DRE in $26B deal

·     REV -34%; extending Friday’s -52% decline after reports the Co is preparing to file for Chapter 11 protection as soon as this week (WSJ among other media outlets reported late Friday)