Early Look

Tuesday, January 25, 2022

Futures	Up/Down	%	Last
Dow	-270.00	0.79%	33,983
S&P 500	-58.25	1.33%	4,345
Nasdaq	-270.50	1.86%	14,231

 

 

Volatility continues after one of wildest days on Wall Street ever, as U.S. stock futures are down roughly 1% (Nasdaq down -2%) after major averages exhibited one of the unlikeliest rebounds ever yesterday to close near the highs (S&P fell about 4% Monday before ending slightly higher). Was yesterday’s incredible market rebound simply a “dead cat bounce”? Or the start of a bigger uptrend after starting out the year awfully? The answer at this moment appears the former, with futures broadly lower led by another sharp decline in high-growth tech stocks, as Treasury yields are climbing. The Cboe Volatility Index (VIX) is up for a sixth session on Tuesday after jumping to the highest since October 2020. Big tech and growth stocks decline in U.S. premarket trading amid a slide in Nasdaq 100 Index futures, as worries linger over the prospect of Fed rate hikes and rising bond yields. Meanwhile, the U.S.-Russia tension over Ukraine continues to weigh on sentiment with the U.S. putting as many as 8,500 troops on heightened alert for deployment to bolster NATO forces in Eastern Europe if needed. In addition to a heavy dose of large cap earnings this week (JNJ, MMM, GE already this morning), we also get Fed Chairman Powell/FOMC comments tomorrow afternoon as the Fed is expected to talk up the interest rate cycle to fight off soaring inflation/prices, with expectations for them to call for an interest rate hike in March (the first of many expected this year).

 

As for yesterday, U.S. stocks staged mid-afternoon rally Monday that cut heavy early declines, with the S&P 500 Index finishing in the green to snap a four-session losing streak. The VIX climbed above 30 for the first time in over a month. Haven currencies marginally outperformed as hedging alternatives with Russia moving closer to military action against Ukraine. Treasuries yields climbed despite a positive take-up of Monday’s two-year auction while precious metals were mixed and Bitcoin rose for the first time in almost a week after dropping below $33K early Monday. Stats (for those who like that sort of thing) after yesterday’s massive midday reversal: S&P 500 down 3.99% today at the lows – since 1950, there have been 88 other days to be down this much at one point during the day. Today was only the 3rd time stocks closed higher when the dust settled (both of the others were Oct ’08). In Asian markets, The Nikkei Index tumbled -450 points or 1.66% to 27,131, the Shanghai Index plunged -2.58% to 3,433, and the Hang Seng Index fell -1.67% to 24,243. In Europe, the German DAX is higher by 0.75% to 15,120, while the FTSE 100 is up 0.9% to 7,360.

Market Closing Prices Yesterday

·     The S&P 500 Index climbed 12.56 points, or 0.29%, to 4,410.50

·     The Dow Jones Industrial Average rose 101.30 points, or 0.30%, to 34,366.67

·     The Nasdaq Composite jumped 86.21 points, or 0.63%, to 13,855.13

·     The Russell 2000 Index advanced 45.59 points, or 2.29% to 2,033.51

 

Events Calendar for Today

·     7:45 AM ET          ICSC Weekly Retail Sales

·     8:55 AM ET          Johnson/Redbook Weekly Sales

·     9:00 AM ET          CaseShiller 20 city Index for November

·     10:00 AM ET        Consumer Confidence for January

·     10:00 AM ET        Richmond Fed Index for January

·     1:00 PM ET           U.S. Treasury to sell $55B in 5-year notes

·     4:30 PM ET           API Weekly Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: ADM, AUB, AXP, BANC, CVLT, DSKE, GATX, GE, IVZ, JNJ, LKFN, LMT, MMM. NEE, NEP, PEBO, PII, RTX, VZ, WRLD, XRX

·     Earnings After the Close: AGYS, BUSE, BXP, CADE, COF, FCF, FFIV, GSBC, HA, HAFC, LOB, LRN, MSFT, NAVI, NXGN, PCAR, QCRH, RNST, SLGN, TRMK, TXN, UMBF, VBTX

 

Other Key Events:

·     Goldman Sachs Global Macro Conference Asia Pacific 2022 (virtual), 1/25-1/26

·     Jefferies Winter Restaurant, Foodservice, Gaming, Lodging & Leisure Summit (virtual), 1/24-1/25

 

 

Macro	Up/Down	Last
Nymex	0.48	83.79
Brent	0.66	86.93
Gold	-3.50	1,839.50
EUR/USD	-0.0048	1.1278
JPY/USD	0.16	114.11
10-Year Note	+0.045	1.78%

 

 

World News

·     Singapore tightens in surprise move, sending currency higher; further monetary action expected at policy meeting in April; SGD hits 3-month high after first off-cycle change since 2015

·     Australia’s hotter inflation fuels bets on earlier rate hike; Money markets pricing in a good chance of rate increase in May; CBA, Deutsche, TD, RBC, Citi now see first rate rise in August per Bloomberg

 

Sector News Breakdown

Consumer

·     Inter Parfums (IPAR) Q4 sales rose 15% to $210.8M vs. est. $162.4M; raises FY21 EPS view to $3.00 from $2.45-$2.65 prior (est. $2.84) and boosts year revs to $975M vs. est. $833.76M.

·     Victoria’s Secret & Co. (VSCO) announced a partnership agreement with Regina Miracle International (Holdings) Limited related to its existing company-owned business in China

·     Hyundai Motor Co forecast on Tuesday its vehicle production would rebound in the first half of this year as a global chip shortage is expected to ease gradually from the second quarter.

 

Energy, Industrials and Materials

·     3M (MMM) Q4 adj EPS $2.31 vs. est. $2.01; Q4 sales $8.61B vs. est. $8.6B; qtrly health care sales of $2.3B, up 0.7%; Q4 transportation and electronics sales of $2.3B, down 1.5%; Q4 consumer sales of $1.5B, up 4.1%

·     General Electric (GE) Q4 EPS $0.92 vs. est. $0.87; Q4 revs $20.3B vs. est. $21.48B; Q4 Industrial organic revenues $19.6B, down 3% and adj industrial profit margin 9%; sees 2022 organic revenues to grow in the high-single-digit range; sees year EP S$2.80-$3.50; sees FY22 free cash flow $5.5B-$6.5B; expects aviation revenue to increase more than 20 percent in 2022

·     Crane Inc. (CR) Q4 EPS $1.16 vs. est. $1.13; Q4 sales rose 13% to $771M vs. est. $745.7M; sees year EPS $6.85-$7.25 vs. est. $7.23; FY 2022 sales are expected to be about $3.3 bln with core sales growth of 4% to 6%

·     Flexsteel Industries (FLXS) 2Q adj EPS ($1.05) on revs $141.7Mm; guides 3Q sales +14-22%; says taking actions to assertively manage costs and address margin pressure where possible

·     Steel Dynamics (STLD) 4Q adj EPS $5.78 vs est. $5.72 on sales $5.3B vs est. $5.3B, says believe market dynamics are in place for domestic steel consumption to further increase in 2002 vs 2021, believe construction will remain strong in coming year

·     Sonoco (SON) to boost prices for paperboard tubes & cores by min 6%

·     Hess Midstream Partners (HESM) raises quarterly distribution 1.2% to 51.67c per share

 

Financials

·     Equity Lifestyle Properties (ELS) Q4 FFO $0.64 vs. est. $0.62; Q4 revs rose 19.6% to $325.3M; issues 2022 guidance to $2.64-$2.74 vs. est. $2.70; raises annual dividend to $1.64 from $1.45

·     HomeStreet (HMST) Q4 EPS $1.43 vs. est. $1.31; Q4 revs $81.78M misses by $2.82M

·     Hope Bancorp (HOPE) 4Q EPS $0.43 vs est. $0.41 on NII $133.3Mm vs est. $130.9Mm, loan origination +23% sequentially

·     ServisFirst (SFBS) Q4 EPS $1.03 vs. est. $0.98; Q4 tangible book value per share $20.99; net interest income was $101.2M for Q4, compared to $92.1M YoY

·     Verisk (VRSK) entered into a definitive agreement to sell its 3E business to New Mountain Capital for a potential aggregate cash consideration of up to $950 million.

·     Zions Bancorp (ZION) Q4 EPS $1.34 vs. est. $1.31; 4Q NII $553Mm vs est. $555.5Mm

 

Healthcare

·     Johnson & Johnson (JNJ) Q4 adj EPS $2.13 vs. est. $2.12; Q4 sales $24.8B vs. est. $25.32B; Sees adjusted EPS $10.40-$10.60 vs. est. $10.32; sees FY sales $98.9B-$100.4B vs. est. $97.76B; Q4 Pharmaceutical sales $14.29B, +16% y/y and worldwide medical devices sales $6.86B, +4.1% y/y

·     Stryker (SYK) announced that it is commencing, through a wholly owned subsidiary, Voice Merger Sub Corp., a cash tender offer to purchase all outstanding shares of common stock of Vocera Communications, Inc. (VCRA) for $79.25 per share in cash. The offer is being made pursuant to the previously announced merger agreement, dated as of January 6, 2022, among Stryker, Voice Merger Sub Corp. and Vocera

·     Pfizer Inc (PFE) and BioNTech SE (BNTX) said on Tuesday they started a clinical trial to test a new version of their vaccine specifically designed to target the COVID-19 Omicron variant, which has eluded some of the protection provided by the original two-dose vaccine regimen.

·     Allscripts (MDRX) guides Q4 revenue $390M-$395M vs. est. $386.75M; announces new buyback of up to $250M; raises FY21 adjusted EBITDA view to $295M-$300M from $275M-$285M

·     PetMed Express (PETS) 3Q EPS $0.21 vs est. $0.30 on revs $60.7Mm vs est. $64.1Mm

·     SmileDirectClub (SDC) announces strategic actions to increase profitability; int’l footprint prioritized to mkts w best potential for n-t profitability; cost reductions to right size op structure & focus investments on core growth initiatives; affirms previously issued rev est’s

·     Israeli government’s advisory panel has recommended offering a fourth COVID-19 vaccine dose to all adults, Reuters reports (watch MRNA, PFE, BNTX)

 

Technology, Media & Telecom

·     IBM Corp. (IBM) shares rise 6%; 4Q adj EPS $3.35 vs est. $3.30, revs $16.7B vs est. $15.96B; 4Q adj gr margin 58% vs 60%; says 4Q results give confidence in ability to deliver objectives of sustained mid-single digit revs growth and strong free cash flow in 2022

·     Nvidia (NVDA) is quietly preparing to abandon its purchase of Arm Ltd. from SoftBank Group Corp. after making little to no progress in winning approval for the $40 billion chip deal, according to people familiar with the matter, Bloomberg reported https://on.mktw.net/3qYPKvN

·     Logitech International (LOGI) reported a 2% drop in Q3 sales to $1.63B but topped the $1.27B estimate; raised its forecast for the current fiscal year to between 2% and 5% sales growth in constant currency, and between $850M-$900M in non-GAAP operating income, above the prior view of flat sales growth, plus or minus 5%, and non-GAAP operating income of $800M-$850M

·     Xerox (XRX) Q4 adj EPS $0.34 vs. est. $0.33; Q4 revs $1.78B vs. est. $1.82B; sees FY22 revenue ‘at least $7.1B in actual currency,’ slightly above consensus $7B

·     Unity Software (U) said it is acquiring Ziva Dynamics, a Canadian computer graphics firm; no terms were disclosed

·     Snowflake (SNOW) upgraded to Buy with $370 tgt at Loop Capital saying the pullback in the enterprise software sector since its mid-November highs has driven many stocks in the group down 30% or more vs. a 15% decline in the NASDAQ and 23% decline in the broader IGV software index