Early Look

Wednesday, June 15, 2022

Futures	Up/Down	%	Last
Dow	108.00	0.36%	30,463
S&P 500	16.25	0.45%	3,757
Nasdaq	69.50	0.61%	11,415

 

 

S&P futures are edging higher, awaiting the Federal Reserve’s Federal Open Market Committee (FOMC) interest rate decision later this afternoon (2:00 PM ET), with a hike of at least 50 basis points expected at each of the next two meetings (today and July), but in the last few days, markets are now pricing in a 75-bp hike when the FOMC announces its decision today. The Fed has said it remains data dependent, so given the 40-year high in consumer prices last week, the 75-bps hike is possible. Stocks sunk for a fifth day on Tuesday, falling deeper into bear market territory ahead of the Fed as Treasury yields surged ahead of the announcement with short-term 2-yr yields jumping over 40bps in just 2 days and the benchmark 10-year yield hitting 3.48%, its highest level in 11-years. Mortgage rates hit 6.28% on Tuesday, up 150- bps in just a few weeks, leading to some headcount reduction in the industry as COMP said it was eliminating 10% of jobs and RDFN a 6% loss of headcount. Job concerns are perking up the last few weeks with many top companies talking about job freezes (WMT, TGT, AMZN), but today we saw COIN announce an 18% cut of headcount, and WBD 30% of global ad salesforce as the economy is turning aggressively – at the same time the Fed is getting the most hawkish it’s been in over a decade. Bitcoin prices extend losses, down -7.8% to $20,200, lowest levels since 2020; Ethereum -13% to $1,030 and shares of MSTR down over -9%. In Asian markets, The Nikkei Index fell -303 points to 1.14% to 26,326, the Shanghai Index rose 16 points to 3,305, and the Hang Seng Index rose 240 points or 1.14% to 21,308. In Europe, the German DAX is up 145 points or 1.1% to 13,450, while the FTSE 100 gains 90 points to 1.3% to 7,280. U.S. data includes May retail sales, the May import prices index, the June Empire Manufacturing survey, and of course the June FOMC meeting.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -14.15 points, or 0.38%, to 3,735.48

·     The Dow Jones Industrial Average fell -151.91 points, or 0.50%, to 30,364.83

·     The Nasdaq Composite gained 19.12 points, or 0.18%, to 10,828.35

·     The Russell 2000 Index declined -6.77 points, or 0.39% to 1,707.83

 

Economic Calendar for Today

·     7:00 AM ET          MBA Mortgage Applications Data

·     8:30 AM ET          Empire Manufacturing for June…est. 3.0

·     8:30 AM ET          Import Prices m/m for May…est. +1.1%

·     8:30 AM ET          Export Prices m/m for May…est. +1.3%

·     8:30 AM ET          Retail Sales m/m for May…est. +0.2%

·     8:30 AM ET          Retail Sales Ex: Autos m/m for May…est. +0.8%

·     10:00 AM ET        Business Inventories for April…est. +1.2%

·     10:00 AM ET        NAHB Housing Market Index for June …est. 68

·     10:30 AM ET        Weekly DOE Inventory Data

·     2:00 PM ET           FOMC Policy Meeting on Interest Rates – 50-75 bps hike expected

 

Earnings Calendar:

·     Earnings Before the Open: WLY

·     Earnings After the Close: None

 

Other Key Events:

·     Credit Suisse Energy in Transition Conference, 6/14-6/15, in London

·     Deutsche Bank Global Consumer Conference, 6/14-6/16, in France

·     Deutsche Bank Global Auto Industry Conference, 6/15-6/16

·     JMP Securities Life Sciences Conference, 6/15-6/16, in NY

·     Oppenheimer Semiconductor & Software Bus Tour (virtual), 6/13-6/16

·     Oppenheimer Consumer Growth and E-Commerce Conference (virtual), 6/14-6/15

·     UBS Asian Consumer, Gaming & Leisure Conference (virtual), 6/13-6/15

 

 

Macro	Up/Down	Last
Nymex	-1.19	117.75
Brent	-1.38	119.79
Gold	13.90	1,827.40
EUR/USD	0.0068	1.0482
JPY/USD	-1.16	134.30
10-Year Note	-0.106	3.377%

 

 

World News

·     European Central Bank officials called an unscheduled emergency meeting to tackle volatile market conditions

·     China May Retail Sales beat, falling -6.7% y/y vs -7.1% consensus while China May Industrial output rose +0.7% y/y vs -0.7% consensus and +3.3% y/y vs 3.1% consensus

·     Japan June Tankan Large Manufacturing Index higher: 9 vs 5 previous; Japan April Machinery Orders beat +10.8% m/m vs -1.5% consensus and +19% y/y vs 5.3% consensus

 

Sector News Breakdown

Consumer

·     Five Below (FIVE) announces $100M stock repurchase plan

·     Monster Beverage (MNST) authorizes new $500M share repurchase program

 

Energy

·     The American Petroleum Institute (API) reported a weekly crude build of 736K barrels, while Cushing inventories fell -1.067M barrels, gasoline with a drawdown of -2.159M barrels and distillates with a build of +234K barrels (ahead of the EIA data later today)

 

Financials

·     Robinhood (HOOD) downgraded to Underweight from Neutral at Atlantic Equities

·     Capital One Financial (COF) May domestic credit card net charge-offs rate 2.40% versus 2.19% in April; May auto net charge-offs rate 0.63% versus 0.40% in April; 30+ day performing delinquencies rate for domestic credit card 2.22% at May end versus 2.18% at April end

·     Discover Financial Services (DFS) credit card delinquency rate edged down again to 1.71% in May from 1.73% in April, but up from 1.50% in the year-ago period; net charge-off rate of 2.03% in May increased from 2.02% in April and 1.50% in May 2021

·     JPMorgan Chase (JPM) credit card charge-off rate 1.27% in May vs 1.24% in April and credit card delinquency rate 0.67% at May end vs 0.70% at April end

 

Healthcare

·     Day One Biopharmaceuticals (DAWN) 10M share Secondary priced at $15.00

·     Pfizer (PFE) said it would stop enrollment in its phase 2/3 EPIC-SR study of its COVID-19 pill Paxlovid in standard-risk patients due to a low rate of hospitalization or death observed amongst them.

·     MorphoSys AG (MOR) and Human Immunology Bioscience entered into an equity participation agreement and license agreements to allow HIBio to develop and commercialize MorphoSys’ felzartamab, an anti-CD38 antibody, and MOR210, an anti-C5aR1 antibody

·     Geovax Labs Inc (GVAX) files prospectus relates to resale of up to 21.4 mln shares of common stock by selling stockholders

·     A panel of U.S. FDA advisors voted unanimously to recommend approval of Moderna’s (MRNA) COVID-19 vaccine for children and adolescents between the ages of six and 17 years old

 

Industrials & Materials

·     Methode Electronics (MEI) lowers FY22 EPS view to $2.68-$2.72 from $3.05-$3.15 and narrows FY22 revenue view to $1.164B from $1.160B-$1.170B (est. $1.17B); sees FY23 EPS $2.70-$3.10, vs. consensus $3.51 saying supply chain constraints and other cost headwinds accelerated toward the end of the fourth quarter

·     Planet Labs (PL) Q1 EPS loss (-$0.17) vs. est. loss (-$0.15) and Q1 revs rose 26% y/y to $40.1M vs. est. $39.5M; expects revenue growth rate to more than double YoY for FY’23; sees Q2 revs about $41M-$43M vs. est. $42.3M

·     The Pentagon said Raytheon Technologies Corp. (RTX), Pratt and Whitney Military Engines received a modification not to exceed $4.38M to an existing contract for propulsion systems for the Joint Strike Fighter.

 

Technology, Media & Telecom

·     Zendesk Inc. (ZEN) is in talks to settle with activist investor Jana Partners LLC, days after the software company ended an unsuccessful bid to sell itself, the WSJ reported. Zendesk and Jana are discussing a truce that could involve Mikkel Svane stepping down as the software company’s chief executive, as well as changes to the board https://on.wsj.com/3mQkRqy

·     Baidu Inc (BIDU) is in talks to sell its controlling stake in iQIYI Inc. (IQ) in a deal that could value all iQIYI at about $7 billion, two people with knowledge of the matter said – Reuters reported (BIDU owns 53% of iQIYI and holds more than 90% of its shareholder voting rights)

·     Qualcomm (QCOM) won its fight against a 997 million euro ($1.05 billion) fine imposed by EU antitrust regulators four years ago, for allegedly pressuring Apple to only buy its 4G chips

·     Netflix (NFLX) has approved a reality TV series inspired by its hit show “Squid Game” which will see 456 players compete in a series of games inspired by the show compete for $4.56M

·     IronNet (IRNT) Q1 EPS loss (-$0.33) vs. est. loss (-$0.17) on revs $6.69M; reaffirm our revenue and ARR guidance for fiscal year 2023

·     Spotify (SPOT) upgraded to equal weight at Wells Fargo saying the music streaming firm’s recent investor day laid out a more profitable company than they modeled for

·     Businesses’ and consumers’ annual global spending related to the metaverse could reach $5 trillion by 2030, according to a new report from consulting firm McKinsey & Co. E-commerce in the metaverse will comprise some $2 trillion to $2.6 trillion of the total, while virtual advertising endeavors will make up another $144 billion to $206 billion, McKinsey said. By comparison, spending around artificial intelligence totaled $93 billion last year, McKinsey said. – WSJ