Early Look

Friday, January 21, 2022

U.S. futures are looking lower, but well off the worst levels of the night, trying to recover after a bloodbath the first three days of this holiday shortened trading week. The Russell 200 is down -6.4% this week coming into Friday, having broken down below key technical levels, while the Nasdaq has fallen nearly 5%, led behind a 10% drop this week alone in semiconductor stocks as higher Treasury yields and rising expectations of 3 to 4 rate hikes from the Fed this year has crimped growth stocks. The S&P 500 is down -3.85% week-to-date and the Dow down -3.3% as there has been no where to hide in the weekly sell-off that saw major averages plunge into the close the last two-sessions. A combination of the rate hike fears, tensions with Russia, concern heading into earnings season, and major markets breaking below technical levels that have held up prior are all leading to the sell-off. Technology/Nasdaq destruction thus far in 2022: The Nasdaq 100 ETF (QQQ) closed below its 200-day moving average today for the first time since April 2020 (was 365.50), ending one of the longest runs in history (450 trading days). Tech stocks are tumbling again early behind weak subscriber growth figures and weaker Q1 rev guidance from Netflix (NFLX) last night, with shares down around 20% overnight. In Asian markets, The Nikkei Index declined -250 points or 0.9% to settle the week at 27,522, the Shanghai Index fell -32 points or also 0.9% to 3,522 and the Hang Seng Index edged higher 13 points to 24,965. In Europe, the German DAX is lower by 1.5% or 250 points to 15,665, while the FTSE 100 slides over -60 points to 7,520. Bitcoin prices tumble overnight, falling over 6% to move below $39,000, while Ethereum drops 7.5% to $2,850. In geopolitical news, top Russian and U.S. diplomats played down any prospect of resolving their differences over Ukraine at talks on Friday, but Washington hoped they would reduce tensions over a Russian troop buildup that has stoked fears of a new conflict.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -50.21 points, or 1.11%, to 4,482.55

·     The Dow Jones Industrial Average fell -315.24 points, or 0.90%, to 34,713.41

·     The Nasdaq Composite slumped -186.24 points, or 1.30%, to 14,154.02

·     The Russell 2000 Index declined -38.75 points, or 1.88% to 2,024.03

Events Calendar for Today

·     10:00 AM ET       Leading Index MoM for December

·     1:00 PM EST       Baker Hughes Weekly rig count data

Earnings Calendar:

·     Earnings Before the Open: ALLY, FHB, HBAN, SLB

Other Key Events:

·     American Society of Clinical Oncology (ASCO) Gastrointestinal Cancers Symposium, 1/20-/1/22

Sector News Breakdown

Consumer

·     Peloton (PTON) guided Q2 revenue $1.14B vs. consensus $1.15B, said ending Q2 Connected Fitness Subscriptions of about 2.77M vs. prior view of 2.8M-2.85M and said Q2 adj EBITDA loss in a range of ($270M)-($260M), versus previously provided guidance of ($350M)-($325M)

·     PetSmart is in talks to go public through a SPAC deal with KKR Acquisition Holdings Corp (KAHC), Bloomberg News reported on Thursday, citing people familiar with the matter.

·     Coty (COTY) upgraded to Buy from Neutral at DA Davidson

Energy, Industrials and Materials

·     CSX Corp. (CSX) Q4 EPS $0.42 vs. est. $0.41; Q4 revs $3.43B vs. est. $3.32B; Q4 2021 operating ratio was 60.1% compared to 57.0% in prior year period; Q4 operating income improved 12% to $1.37B

·     PPG Industries (PPG) 4Q adj EPS $1.26 vs est. $1.17 on sales $4.2B vs est. $4B, qtrly organic sales nearly +4%, raw material cost inflation +30% yr/yr; guides 1Q adj EPS $1.02-1.20 vs est. $1.51, expect ongoing elevated raw materials costs and supply chain disruption

·     SunPower (SPWR) said it sees Q4 adjusted EBITDA at low end of prior guidance range and Q4 revs within prior guidance of $361M-$421M (est. $379.5M); to replace certain connectors within light commercial value-added reseller and commercial & industrial solutions

·     Morgan Stanley said it expects Brent crude oil prices to advance to $100 a barrel in the second half of this year, with the market heading for a simultaneous “triple deficit” of inventories, spare capacity and investment.

Financials

·     Associated Banc-Corp (ASB) 4Q EPS $0.49 vs est. $0.42, NII $187Mm vs est. $188.8Mm, announces CFO retirement (says will continue in role until successor is in place)

·     Bank Ozk (OZK) Q4 EPS $1.17 vs. est. $0.98; Q4 revs $280.5M vs. est. $273.42M; recorded negative provision for credit losses of $8.0M during Q4 and $77.9 for FY; annualized returns on average assets, average common stockholders’ equity, and average tangible common stockholders’ equity for the fourth quarter of 2021 were 2.25%, 13.08% and 15.34%, respectively

·     Banner Corp. (BANR) Q4 EPS $1.44 vs. est. $1.17; Q4 net interest income decreased to $121.5M compared to $130.1 mln in preceding quarter

·     Independent Bank (INDB) Q4 EPS $1.63 vs. est. $1.10; Q4 net interest income $122.5M vs. $91.4M last year

·     Metropolitan Bank Holding Corp. (MCB) 4Q EPS $1.69 vs est. $1.42 on revs $51.9Mm vs est. $47.8Mm, NII $44.8Mm vs est. $41.8Mm

·     SVB Financial (SIVB) Q4 EPS $6.22 vs. est. $6.51; Q4 net interest income (fully taxable equivalent basis) of $947 million; Q4 provision for credit losses was $48 million; still sees 2022 net interest margin 1.9% to 2% and sees 2022 net charge-offs ratio 0.15% to 0.35%

·     Texas Capital Bancshares (TCBI) Q4 EPS $1.19 vs. est. $0.92; Q4 net interest income was $194.0, compared to $190.5 mln for Q3; Non-interest income for Q4 increased $6.7 million, or 27%

·     Jack Ma’s Ant Group implicated in corruption scandal by Chinese state media; documentary on state broadcaster CCTV adds to pressure on billionaire’s internet empire – Financial Times

Healthcare

·     Moderna (MRNA) upgraded to neutral from Underperform and raise tgt to $180 from $135 at Bank America

·     Ecolab (ECL) said it expects to report a 10% Y/Y sales increase in Q4 but sees earnings coming in below expectations, citing COVID-related effects on broad business activity; guides Q4 EPS $1.26-$1.28, below consensus of $1.41

·     Kura Oncology (KURA) said the U.S. FDA lifted the partial clinical hold on the KOMET-001 phase 1b study of KO-539 in patients with relapsed or refractory acute myeloid leukemia (AML).

·     Intuitive Surgical (ISRG) Q4 EPS $1.30 vs. est. $1.28; Q4 revs rose 17% to $1.55B vs. est. $1.52B; shipped 385 da Vinci Surgical Systems, an increase of 18% compared with 326 in Q4’20; Worldwide da Vinci procedures increased approximately 19% compared with Q4’20; ended Q4 of 2021 with $8.6B in cash, cash equivalents, and investments

Technology, Media & Telecom

·     Netflix (NFLX) shares fall -18% as subscriber outlook misses estimates; 4Q EPS $1.33 vs est. $0.82 on revs $7.7B vs est. $7.7B, net adds 8.28Mm vs est. 8.6Mm; guides 1Q EPS $2.86 vs est. $3.46, sees revs $7.9B vs est. $8.1B, sees 1Q global streaming paid net adds 2.5Mm; shares of other streaming/subscriber co’s DIS, ROKU slipped) – shares downgraded by several analysts

·     Limelight Networks, Inc. (LLNW) 4Q adj EPS ($0.06) vs est. $0.01 on revs $62.9Mm vs est. $61.6Mm; guides FY22 adj EPS loss $0.01-0.06 vs est. loss $0.04, sees FY22 revs $240-250Mm vs est. $241Mm

·     Ribbon Communications, Inc. (RBBN) shares fell -18%; guides Q4 revs $231M, below est. $248.7M and said margins is expected to be 50%, non-GAAP gross margin is expected to be 54%, operating loss is expected to be $4M and adjusted EBITDA is expected to be $26M

·     Intel Corp (INTC) will invest $20 billion in two new plants in Ohio to make advanced chips, the company said on Friday

·     Cloudflare (NET) upgraded to Outperform from Neutral at Credit Suisse