Early Look

Friday, June 10, 2022

Stock futures in the U.S. are looking lower as inflation remains front and center ahead of the U.S. CPI later this morning (8:30 AM), the next key risk event for the traders with yesterday’s ECB meeting now merely a distant memory. After trading in a roughly 100-point range for the last 2-weeks, stocks finally broke in a direction, unfortunately to the downside, caving the last 2-hours of trading on Thursday to settle at its lowest levels since May 26^th ahead of today’s crucial CPI inflation report. The estimate for CPI is to rise +0.7% m/m for May and +8.3% y/y, while on a core basis (ex food & energy), CPI expected to rise +0.5% m/m and +5/9% y/y. If the readings are not in-line to slightly lower, more pain may be in store as it raises the spectre that Fed’s work on rising rates is likely just starting. Amid ongoing worries about the economy and interest rates, the Nasdaq plunged nearly 3% on Thursday, closing at the lows (11,753) while the Dow posted a decline of more than 600 points. Communication Services and Info Tech both dropped the most, down over 2.7%, while Energy, Financials, Health Care, Materials, Real Estate and Utilities all declined more than 2% in the broad-based retreat. Heading into today’s inflation print, economists see a 50 bps rise in June and July, with a 50% probability of a 50-bps hike in September. The median probability for a similar move in November and December was 30% and 25%, respectively. In Asian markets, The Nikkei Index tumbles -422 points or 1.49% to 27,824, the Shanghai Index rises 45 points or 1.42% to 3,284 as President Xi urges efforts to balance Covid Zero with the needs of the economy, and the Hang Seng Index slips -62 points to 21,806. In Europe, the German DAX is down -1.43% falling just below 14,000, while the FTSE 100 is down -1.2% to 7,385.

Economic Calendar for Today

·     8:30 AM ET         Consumer Prices (CPI) M/M for May…est. +0.7%

·     8:30 AM ET         Consumer Prices (CPI) Y/Y for May…est. +8.3%

·     8:30 AM ET         CPI Ex: Food & Energy M/M for May…est. +0.5%

·     8:30 AM ET         CPI Ex: Food & Energy Y/Y for May…est. +5.9%

·     10:00 AM ET       University of Michigan Confidence, June-P…est. 58.0

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

·     2:00 PM ET         Federal Budget for May…est. (-$120.0B)

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -97.95 points, or 2.38%, to 4,017.82

·     The Dow Jones Industrial Average fell -638.11 points, or 1.94%, to 32,272.79

·     The Nasdaq Composite plunged -332.04 points, or 2.75%, to 11,754.23

·     The Russell 2000 Index declined -40.15 points, or 2.12% to 1,850.86

World News

·     China May CPI showed: Annual CPI rose +2.1% vs. est. +2.2%, monthly CPI fell -0.2% vs. est. -0.3% and annual PPI rose +6.4%, in-line with estimates and vs. +8.0% prior month

·     Russian central bank cuts its key interest rate by 150 bps to 9.50%

Sector News Breakdown

Consumer

·     MGM Resorts (MGM) said it agreed to sell the operations of its Gold Strike Tunica resort in Mississippi to Cherokee Nation Entertainment Gaming Holdings LLC, a subsidiary of Cherokee Nation Businesses, for $450 million in cash.

·     StitchFix (SFIX) shares -16% AH; 3Q EPS ($0.72) vs est. ($0.55) on revs $492.9Mm vs est. $493.3Mm, qtrly active clients of 3.907Mm -5% y/y; sees 4Q revs $485-495Mm vs est. $495Mm

·     Vail Resorts (MTN) 3Q EPS $9.16 vs est. $9.06 on revs $1.18B vs est. $1.16B; guides FY EBITDA $823-842Mm vs est. $827.6Mm

·     Rent the Runway (RENT) 1Q EPS ($0.67) vs est. ($0.68) on revs $67.1Mm vs est. $70.5Mm, active subs 134,998 +82% y/y; sees 2Q revs $72-74Mm vs est. $70.5Mm and FY revs $295-305Mm vs est. $303.9Mm

Energy, Industrials & Materials

·     PG&E (PCG) pleaded not guilty on Thursday to involuntary manslaughter and other charges after its equipment sparked a wildfire that killed four people in California’s Zogg Fire two years ago

·     Matador Resources Company (MTDR) entered into a definitive agreement with a wholly owned subsidiary of Summit Midstream Partners, LP to acquire Summit’s Lane Gathering and Processing System in Eddy and Lea Counties, New Mexico for $75 million

·     Yellow Corporation (YELL) reported 14.3% year-on-year decline in shipments per workday and 25.9% growth in revenue per shipment; in May 2021, shipments per workday dropped 16.2%, while revenue per shipment was up 27.2%.

Financials

·     AllianceBernstein (AB) reports preliminary AUM $687B as of May 31, up from $685B at the end of April. The increase was due to firm-wide net inflows and slight market appreciation.

·     Invesco Ltd. (IVZ) reported preliminary month-end assets under management of $1.4516B, a decrease of 1.7% versus previous month-end. The firm experienced net long-term outflows of $2.4B in the month

·     Marathon Digital (MARA) increased total bitcoin holdings to 9,941 BTC as of June 1. Current operating mining fleet consists of 36,830 active miners producing approximately 3.9 EH/s. Increased total bitcoin holdings to 9,941 BTC with a fair market value of $315.1 million. Produced 268 self-mined bitcoin during May 2022.

Healthcare

·     Bluebird bio (BLUE) said a U.S. FDA panel voted in favor by margin of 15-0 on its gene therapy candidate elivaldogene autotemcel (eli-cel) for cerebral adrenoleukodystrophy (CALD) saying the benefits of eli-cel outweighed the risks – shares remain halted as awaits meeting on another

·     Caribou Biosciences (CRBU) reported additional initial data from a phase 1 trial of its CAR-T cell therapy CB-010 to treat patients with relapsed or refractory B cell non-Hodgkin lymphoma.

·     GlaxoSmithKline (GSK) said that its respiratory syncytial virus, or RSV, vaccine candidate showed a statistically significant and clinically meaningful efficacy in adults aged 60 and over.

Technology, Media & Telecom

·     DocuSign (DOCU) shares fall -23% AH; 1Q adj EPS $0.38 vs est. $0.46 on revs $588.7Mm vs est. $581.8Mm, adj gross margin 81% vs est. 80.1%; sees 2Q revs $600-604Mm vs est. $601.7Mm and adj EBIT margin 16-18%; guides FY revs $2.47-2.482B vs est. $2.479B

·     Comtel (CMTL) shares fall -11% AH; 3Q adj EPS $0.06 vs est. $0.06 on revs $122.1Mm vs est. $122.4Mm; sees 4Q net sales about $123Mm vs est. $157Mm and FY net sales about $482Mm vs est. $517.3Mm

·     Roblox (RBLX) downgraded to Sell from Neutral at Goldman Sachs citing the weaker macro environment, lower revenue growth and broader industry maturation, while also downgrading Netflix (NFLX) and eBay (EBAY)

·     Acer (ACEYY) reports Acer May 2022 revenues of NT$22.18 billion (-10.6% Y/Y) and 15.4% month-over-month; Year-to-May consolidated revs of NT$119.78B marked a slight decline of 1.3% Y/Y

·     Advanced Micro (AMD) outlined its strategy to deliver its next phase of growth driven by the company’s expanded portfolio of high-performance and adaptive computing products spanning the data center, embedded, client, and gaming markets. Unveils next-generation hardware and software roadmaps, expanded product portfolio addressing new markets, and strategies to accelerate data center growth and deliver pervasive AI leadership