Early Look

Friday, July 8, 2022

Futures are looking mixed, trading in a narrow range overnight, but holding around the 3,900 level for the S&P ahead of the monthly jobs report at 8:30 AM. It was gains across the board on Thursday for U.S. stocks, rising more than 1% as the S&P 500 index posts its first 4-day win streak since late March ahead of today’s nonfarm payroll figures. Estimates are +268K jobs to be added for Nonfarm payrolls, +240K private jobs and +15K manufacturing payrolls, the unemployment rate expected steady at 3.6% and avg hourly earnings to rise +0.3%. Fed speakers Bullard and Waller yesterday reiterated that a rate hike of another 75-bps in the July meeting would make a lot of sense and called for another 50-bps in the following meeting, while both seemed upbeat about the economy. In Asian markets, The Nikkei Index rose 26 points to 26,517, the Shanghai Index dipped -8 points to 3,356, and the Hang Seng Index jumped 82 points to 21,725. In Europe, the German DAX is up over 160 points to 13,000, while the FTSE 100 is little changed at 7,188. The euro dropped below $1.02 this week, continuing its slide to new 20-year lows and potential parity with the U.S. dollar. Will today’s jobs data be enough to push major averages highs, adding to the already strong weekly returns? Or will it raise more concerns about the health of the U.S. economy while facing more impending rate hikes from the Fed in coming months? In the U.S., bond markets continue to flash recession warnings, with 2-year Treasury note yields trading at 3.01% and 10-years notes trading at 2.98% as the curve remains inverted.

Market Closing Prices Yesterday

·     The S&P 500 Index gained 57.54 points, or 1.50%, to 3,902.62

·     The Dow Jones Industrial Average rose 346.87 points, or 1.12%, to 31,384.55

·     The Nasdaq Composite surged 259.49 points, or 2.28%, to 11,621.35

·     The Russell 2000 Index advanced 42.06 points, or 2.43% to 1,769.60

Economic Calendar for Today

·     8:30 AM ET         Nonfarm Payrolls for June…est. +268K

·     8:30 AM ET         Private Payrolls for June…est. +240K

·     8:30 AM ET         Manufacturing Payrolls for June…est. +15K

·     8:30 AM ET         Unemployment Rate for June…est. 3.6%

·     8:30 AM ET         Average Hourly Earnings M/M for June…est. +0.3%

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

·     3:00 PM ET         Consumer Credit for May

World News

·     Former Japanese Prime Minister Shinzo Abe died after being shot at a campaign event Friday, doctors said, Abe was giving the speech as part of a campaign for his former party, the Liberal Democratic Party

·     President Joe Biden will discuss possible reductions in US tariffs on Chinese goods in a meeting with his advisers set for Friday, according to people familiar with the matter, as his administration nears a closely-watched decision on trade with China – Bloomberg

·     Ukraine opposes Canada handing over a turbine to Russia’s Gazprom for natural gas supplies to Germany as the move would breach sanctions on Russia. Canada and Germany do not want the turbine to be an excuse for Russia to cut gas supplies going through the Nord Stream 1 pipeline – Reuters

Sector News Breakdown

Consumer

·     GameStop (GME) shares fell -5% after the company terminated its CFO Michael Recupero, who will be replaced by Chief Accounting Officer Diana Saadeh-Jajeh. The exit was first reported by Axios, which also said the company was laying off an undisclosed number of employees

·     Tesla (TSLA) achieved its highest monthly sales of China-made vehicles since opening its Shanghai plant in 2019, as the U.S. carmaker sold 78,906 China-made vehicles in June, including 968 for export (in May it sold 32,165 vehicles and exported 22,340.)

·     Costco (COST) June total comp sales +18.1%, vs. est. +14.1% and June us comp sales ex-gas, FX +13%, vs. est. +12.8%; reported net sales of $22.78 billion for the retail month of June, the five weeks ended July 3, 2022, an increase of 20.4% from $18.92 billion last year. For the forty-four weeks ended July 3, 2022, the Company reported net sales of $188.34 billion, up 16.9% Y/Y

·     Levi Strauss (LEVI) Q2 adj EPS $0.29 vs. est. $0.23; Q2 revs $1.47B vs. est. $1.43B; ​reaffirms annual guidance for revenue and EPS; increases quarterly div by 20%; said Q2 ​net revs through all digital channels represented about 20% of total; qtrly net rev in the Americas grew 17%, in Europe grew 3%, and in Asia grew 16%

·     WD-40 (WDFC) 3Q EPS $1.07 vs est. $1.27 on sales $127.8Mm vs est. $142.8Mm, gross margin 47.7% vs 53.1% year ago qtr; guides FY net sales $519-532Mm vs est. $537.5Mm and EPS $5.02-5.10 vs est. $5.18

·     Kura Sushi (KRUS) 3Q adj EPS $0.05 vs est. ($0.10) on sales $38Mm vs est. $35.5Mm; guides FY sales $137-142Mm vs est. $135.9Mm

·     Nu Skin Enterprises (NUS) sees 2Q revs $557-562Mm vs est. $604.7Mm; said Q2 revenue was softer than expected due to extended COVID-related factors in Mainland China, distractions in EMEA related to the ongoing conflict in Russia and Ukraine, and the general global economic downturn that is particularly challenging for developing regions like Latin America

·     Six Flags (SIX) downgraded to Neutral from Buy at Citigroup and cut tgt to $26 from $41 saying is beginning to see signs of weakness across the theme park industry (cuts tgts on SEAS, FUN)

Energy, Industrials and Materials

·     MRC Global (MRC) boosted its 2022 full year guidance as now targeted to be $3.3B, up from previous guidance of $3.1B and said it expects Q3 revenue will be higher than Q2 with a seasonal decline in q$; sees Q2 sales to be up approximately 14% over Q1

·     Illinois Tool Works (ITW) downgraded to Neutral from Buy at UBS

·     Kennametal (KMT) downgraded to Sell from Neutral at UBS

Financials

·     Marathon Digital Holdings (MARA) said produces 707 Bitcoin in Q2 2022, up 8% year-over-year and cash on hand was $88.7 mln, and total available liquidity was $153.7 mln at June 30

·     Upstart Holdings (UPST) shares fall -17%; cuts Q2 revenue view to $228M from $295M-$305M and below consensus $297.68M; lowers Q2 net Income view to ($31M)-($27M) from prior ($4M)-$0M; said Inflation and recession fears have driven interest rates up and put banks and capital markets on cautious footing

Technology, Media & Telecom

·     Twitter (TWTR) shares slide overnight after the Washington post reported Elon Musk’s $44B deal to buy the social media company is in “serious jeopardy”, citing three people familiar with the matter. In a separate report by the WSJ, TWTR said it laid off 30% of its talent acquisition team, as the company deals with increasing business pressures and a potential takeover

·     Taiwan Semiconductor (TSM) reported net revenue of ~NT$175.87B (-5.3% M/M), and 18.5% Y/Y growth; revenue for January through June 2022 marked a 39.6% increase Y/Y; Exports to the United States were up 27.9%, much faster than a 15.5% jump recorded the previous month.

·     iHeartMedia (IHRT) downgraded to Equal Weight from Overweight at Wells Fargo