Early Look

Monday, February 27, 2023

Futures	Up/Down	%	Last
0Dow	131.00	0.40%	32,957
S&P 500	17.25	0.45%	3,993
Nasdaq	65.50	0.55%	12,062

 

 

US stock futures are looking higher to start the week after falling Friday on rising Treasury yields and interest rate expectations as data showed a rise in inflation prices. Stocks look to bounce back after posting their worst week of year for major averages as the S&P 500 fell -2.7%, the Dow fell -3.0% and the Nasdaq fell -3.3%. The Nasdaq posted its largest weekly percentage drops since December, the Dow its biggest weekly percentage slide since September and fourth straight weekly percentage decline – longest weekly losing streak since April-May 2022. Prices declined Friday as the Federal Reserve’s preferred inflation gauges (core PCE) unexpectedly accelerated in January and consumer spending surged, adding pressure on Fed policy makers to keep ratcheting up interest rates. The personal consumption expenditures price index rose 5.4% from a year earlier and the core metric was up 4.7%, both marking pickups after several months of declines. The Treasury two-year yield topped 4.8%, setting its highest level since 2007, the dollar climbed, and swaps are now pricing in 25-basis-point hikes at the Fed’s next three meetings, and bets on the peak rate rose to about 5.4% by July. A busy earnings week to start but slows by week’s end as the quarter comes to an end. In Asian markets, The Nikkei Index dips -29 points to 27,423, the Shanghai Index slips -9 points to 3,258, and the Hang Seng Index falls -66 points to 19,943. In Europe, the German DAX is jumps 230 points to 15,441, while the FTSE 100 rises 670 points to 7,938. Oil prices look lower, the 10-yr yield is at 3.95% and the dollar slips.

 

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -42.28 points, or 1.05%, to 3,970.04.

·     The Dow Jones Industrial Average fell -336.99 points, or 1.02%, to 32,816.92.

·     The Nasdaq Composite slumped -195.46 points, or 1.69%, to 11,394.94.

·     The Russell 2000 Index declined -17.61 points, or 0.92% to 1,890.49.

 

Economic Calendar for Today

·     8:30 AM ET             Durable Goods Orders, for January

·     8:30 AM ET             Durable Goods Ex: Transportation for January

·     10:00 AM ET           Pending Home Sales M/M for January

·     10:30 AM ET           Dallas Fed Manufacturing for February

 

Earnings Calendar:

·     Earnings Before the Open: AXSM BGCP FRPT FSR FUBO HSC ITRI KOP KOS LINC PNW RC TREE TWI VTRS

·     Earnings After the Close: ACAD ACHC ADUS AMRC ASUR BMRN CDNA CLAR DAR DO EBS EVER FGEN FSK GRBK HEI HIMS HSII IIPR INN MKSI NEWT NGVT NSA OKE OXY PGNY PRA PRAA RLJ RRC RYAM SIBN TASK TDW TREX TTEC TTI UHS VMEO VRAY WDAY ZM

 

Other Key Events:

·     Deutsche Bank Annual Media, Internet & Telecom Conference, 2/27-3/1, in Palm Beach, FL

·     Mobile World Congress, 2/27-3/2, in Barcelona, Spain

·     Truist Texas Bank Summit (virtual), 2/27-2/28

 

 

Macro	Up/Down	Last
Nymex	-0.20	76.12
Brent	-0.29	82.87
Gold	1.10	1,818.12
EUR/USD	0.0015	1.0561
JPY/USD	-0.24	136.22
10-Year Note	+0.006	3.955%

 

 

World News

·     Apartment rents fell in every major metropolitan area in the U.S. over the past six months through January, a trend that is poised to continue as the biggest delivery of new apartments in nearly four decades is slated for this year. – WSJ. Renters with new leases in January paid a median rent that was 3.5% lower than they would have paid last August, according to estimates from listing website Apartment List. https://on.wsj.com/3IBELju

·     A tweet by @charliebilello this weekend noted: 3 years ago: 30-yr mortgage rate was 3.45% & average new home price in the US was $384k. Today: 30-yr mortgage rate is 6.50% & average new home price is $474k. Result: $18k increase in down payment (assuming 20% down) & 75% increase in monthly payment (from $1,370 to $2,396).

 

Sector News Breakdown

Consumer

·     Li Auto Inc. (LI) shares up 4% after reporting Q4 net income fell to RMB265.9 million ($37.3 million), or RMB0.25 per ADR from RMB295.5 million, or RMB0.29 y/y while adj EPS of RMB0.98 beat consensus of RMB0.47. Total revenue grew 66.2% to RMB17.65 billion ($2.56 billion).

·     LKQ Corp. (LKQ) agreed to buy Canada-based automotive finish and industrial coatings products company Uni-Select Inc. in a deal valued at $2.1 billion (C$2.8 billion). Under terms of the deal, LKQ will pay C$48.00 in cash for each Uni-Select share outstanding, which represents a 19.2% premium to Friday’s closing price of C$40.28. https://on.mktw.net/3xVlrIZ

·     Freyr Battery (FREY) Q4 EPS $0.20 vs. est. loss (-$0.22); said it is focused on advancing the following strategic mandates and milestones over the next 12 months: Successfully complete the start of operations at the CQP in 1Q 2023.

·     Amazon (AMZN) is expanding ultrafast delivery options, a sign that it remains committed to pushing its logistics system for speed as it scales back plans in other areas – WSJ.

·     Nomad Foods (NOMD) upgraded to Buy from Neutral at Goldman Sachs with a $21 price target following its Q4 results and the accompanying reset of expectations.

·     Tesla’s (TSLA) is holding investor day Wednesday at the company’s Texas headquarters.

 

Energy, Industrials and Materials

·     Pioneer Natural Resources Co. (PXD) said this weekend it’s not contemplating a “significant business combination or other acquisition transaction.” Bloomberg reported Friday the company is considering an acquisition of natural gas producer Range Resources Corp. (RRC).

·     Union Pacific Corp. (UNP) said it plans to name a new CEO this year, hours after a major shareholder publicly urged the railroad giant’s board to oust Lance Fritz from the job. Soroban Capital Partners disclosed a letter pushing for the change.

·     Lithium Americas Corp. (LAC) can move ahead with building a mine in Nevada, after a judge denied a request by opponents of the project to halt construction – Bloomberg.

·     FirstEnergy Corp. (FE) a positive mention in Barron’s this weekend saying it could be one of the winners as the US tries to wean itself off fossil fuels. The outlook for electric utilities is the best in decades as they invest in transmission grids and renewable power to meet growing demand.

·     Shell (SHEL) upgraded to Buy from Neutral at Goldman Sachs.

 

Financials

·     Warren Buffett’s Berkshire Hathaway (BRK/A) posts big 2022 loss in rocky market; affirms optimism in U.S. economy in his annual letter to shareholders; reported Q4 net earnings of $18.16B, -54% vs YoY $39.65B; Q4 EPS was $12,412 vs YoY $26,690; earnings reflected a sharp drop in investment and derivative gains, which fell ~65% from $39.65B in 2021 to $11.46B in 2022; operating earnings, referring to income from its portfolio Co’s, dropped by 7.9% to $6.71B.

·     Ready Capital (RC) and Broadmark Realty Capital (BRMK) to merge in deal expected to create company with equity capital base of $2.8B https://on.mktw.net/3KCkpcx

·     Radian Group (RDN) files automatic mixed securities shelf.

 

Healthcare

·     Pfizer (PFE) is in discussions to acquire biotech firm Seagen (SGEN) in a deal that could be worth more than $30 billion, The Wall Street Journal reported. Seagen is currently valued at about $30-billion and a buyout would likely require a premium to that. The talks are still at an early stage and there is no guarantee of a transaction, the report said https://on.mktw.net/3IUJr5m

·     SpringWorks Therapeutics (SWTX) announces FDA acceptance and priority review of NDA for Nirogacestat for the treatment of adults with desmoid tumors; PDUFA 08/27/23.

 

Technology, Media & Telecom

·     Tegna Inc. (TGNA) shares tumble -20% after the Federal Communications Commission put off consideration of hedge fund Standard General LP’s proposed purchase of the broadcaster, a delay that could kill the $5.4 billion transaction.

·     Corning Inc. (GLW) is among five companies identified by Barron’s as benefiting from a clean-energy manufacturing boom. The other companies named are Enphase Energy Inc. (ENPH), Freyr Battery SA (FREY), Neste Oyj (NTOIY) and Schneider Electric SE (SBGSY).

·     Warner Bros. Discovery Inc. (WBD), is suing Paramount Global (PARA), saying its competitor aired new episodes of the popular animated comedy series “South Park” after Warner paid for exclusive rights.