Early Look

Wednesday, May 18, 2022

Futures	Up/Down	%	Last
Dow	-84.00	0.26%	32,497
S&P 500	-17.25	0.43%	4,067
Nasdaq	-85.50	0.68%	12,474

 

 

U.S. stock futures are looking at modest losses to start, a day after Fed Chairman Powell warned of further rate hikes while futures have recently extended those declines after retail giant Target (TGT) reported a wide Q1 earnings miss on lower operating margins (sending shares down over 20%). Target results like Wal-Mart (WMT) yesterday saying that food inflation is causing dollars to shift to staples and away from general merchandise (watch for more weakness in retailers as consumers appear to be pushing back on the recent price hikes by companies amid rising costs). As for yesterday, it was a solid day for U.S. stock markets on Monday, closing sharply higher and near the highs of the day as technology led the gains, while consumer staples were the lone sector decliner following disappointing earnings and guidance from Wal-Mart (WMT) as shares tumbled more than 10% for its biggest one-day decline since 1987. The U.S. dollar slipped from 20-year highs, falling over -0.7% while oil also ended up lower after initially hitting 7-week highs prior in the session. Treasury yields jumped with the benchmark 10-year hitting highs just under 3%. The S&P 500 and the Dow advanced 2.0% and 1.3%, respectively, while the tech-heavy Nasdaq jumped 2.8%. Retail sales and industrial output data provided a dose of optimism for market participants who fear the expected series of 50-basis-point interest rate hikes could drag the economy into recession. Meanwhile, reports that authorities in China are preparing to relax COVID-19 restrictions allayed worries of supply chain issues. Fed speakers dominated Tuesday, headlines by Chairman Powell who said they will not hesitate to hike above neutral if required, while Mester didn’t rule out 75bps hike. In Asian markets, The Nikkei Index gained 251 points or 0.94% to settle at 26,911, the Shanghai Index slipped -7 points to 3,085, and the Hang Seng Index gained 41 points to 20,644. In Europe, the German DAX is up about 30 points to 14,215, while the FTSE 100 is flattish around 7,520. UK CPI inflation hit 40-year highs of over 9% last night. The U.S. Treasury will issue $17B of new 20-yr notes later today

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 80.84 points, or 2.02%, to 4,088.85

·     The Dow Jones Industrial Average rose 431.17 points, or 1.34%, to 32,654.59

·     The Nasdaq Composite surged 321.73 points, or 2.76%, to 11,984.52

·     The Russell 2000 Index advanced 56.87 points, or 3.19% to 1,840.30

 

Economic Calendar for Today

·     7:00 AM ET         MBA Mortgage Applications Data

·     8:30 AM ET         Housing Starts M/M for April

·     8:30 AM ET         Building Permits M/M for April

·     10:30 AM ET       Weekly DOE Inventory Data

·     4:00 PM ET         Fed’s Harker Discusses the Economic Outlook

 

Earnings Calendar:

·     Earnings Before the Open: ADI, DT, LOW, SCVL, TGI, TGT, TJX

·     Earnings After the Close: BBWI, CSCO, IBEX, HWKN, SNPS

 

Other Key Events:

·     Citigroup European Chemicals Conference (virtual), 5/19-5/19

·     Goldman Sachs Global Staples Forum 2022, 5/17-5/18, in NY

·     Jefferies West Coast Aerospace and Defense Bus Tour, 5/16-5/18

·     Needham Annual Technology & Media Conference (virtual), 5/16-5/20

·     RBC Capital Auto, Industrials and Transportation Conference, 5/17-5/19, in Toronto

·     UBS Best of Europe Virtual 1:1 Conference (virtual), 5/17-5/19

·     Wells Fargo Financial Services Investor Conference, 5/18-5/19, in Chicago

 

 

Macro	Up/Down	Last
Nymex	1.60	114.00
Brent	1.14	113.07
Gold	-1.50	1,817.40
EUR/USD	-0.0021	1.0525
JPY/USD	-0.30	129.09
10-Year Note	+0.005	2.965%

 

 

World News

·     Beijing reported 69 new covid cases up from 52 on Monday, raising the possibility for more curbs

·     Finland and Sweden have applied for NATO membership, a move that, if approved, would fundamentally transform the security landscape of Northern Europe

·     Cleveland Federal Reserve President Loretta Mester says it is too soon to say whether U.S. inflation has peaked., “and we’ll want to keep every option on the table, including 75bps

·     British consumer price inflation (CPI) hit an annual rate of 9.0% in April, the highest since official estimates began in the late 1980s, data showed on Wednesday (ests for reading of 9.1%).

·     UK CPI M/M actual 2.5% (forecast 2.6%, previous 1.1%)

·     UK Core CPI YOY actual 6.2% (forecast 6.2%, previous 5.7%)

·     UK PPI output prices M/M actual 2.3% (forecast 1.1%, previous 2.0%)

·     UK PPI input prices M/M actual 1.1% (forecast 1.1%, previous 5.2%)

·     Japan GDP preliminary for Q1 2022 above expectations; -0.2% q/q vs -0.4% consensus

·     Japan GDP annualized SA above expectations; -1.0 % y/y vs -1.8% consensus

·     Australian wages index for Q1 below expectations; 0.7% q/q vs 0.8% consensus

 

Sector News Breakdown

Consumer

·     Target Corp. (TGT) shares fall -20% on earnings miss; Q1 adj EPS $2.19 well below the consensus $3.06 est. (very similar to WMT); Q1 sales rose 4% Y/Y to $24.83B vs. est. $24.34B; says faced unexpectedly high costs in Q1; Q1 comp sales rose 3.3% vs. est. 1.15% and comp digital sales +3.2% vs. est. 3.6%; Q1 operating margins 5.3%, below the Bloomberg est. 8.13%; sees 2Q operating income margin rate “in a wide range centered around” 1Q’s operating margin rate

·     Lowe’s (LOW) Q1 EPS $3.51 vs. est. $3.22; Q1 revs $23.7B vs. est. $23.76B; Q1 comp sales decreased (-4.0%); affirms 2022 EPS outlook as still sees year sales $97B-$99B (est. $98.13B), comp sales down 1% to up 1%; said Q1 sales impacted by cooler Spring temperatures; says pleased with improved sales trends seen in May

·     Lulu’s Fashion (LVLU) Q1 EPS $0.05, in-line with ests on revs $111.9M vs. est. $98.8M; raises year revs view to $490M-$500M or about 30%-33% growth vs. est. $486.9M

·     Container Store (TCS) Q4 adj EPS $0.46 vs. est. $0.26; Q4 revs $305.5M vs. est. $279.82M; guides Q1 EPS $0.15-$0.20 vs. est. $0.20 and guides Q1 revs growth mid-single digits

·     European Wax Center Inc (EWCZ) says selling stockholders offering 4.5 mln shares of Class A common stock of Co – SEC filing

·     Monster Beverage (MNST) upgraded to Outperform from Market Perform at Bernstein

·     Penn National (PENN) upgraded to Buy from Hold at Jefferies with $49 tgt

 

Energy, Industrials and Materials

·     The American Petroleum Institute (API) reported crude inventories fell -2.5M barrels in the latest week, crude inventories at Cushing fell -3.1M barrels on the week, gasoline inventories fell -5.1M barrels and distillate inventories rose 1.1M barrels

·     Transocean (RIG) Director Buys 2,000,000 Of Transocean Ltd at $3.75 per share for total purchase of $7.5M on May 13^th, according to a Form4 filing

·     Comstock Resources (CRK) downgraded to Underweight from Neutral at Piper

·     Carrier Global (CARR) downgraded to Neutral from Buy at Bank America

 

Financials

·     Payment sector: Goldman Sachs launched coverage on eight names, with Buy ratings on Visa (V), Mastercard (MA) and Fidelity National (FIS) and a sell on Western Union (WU) saying they are constructive on the payments sector, as relative valuations have fallen significantly over the past 6-months and believe these stocks are well set to navigate a low-growth

·     Dlocal Ltd (DLO) Q1 EPS $0.08, in-line with ests on revs $87.5M, rising 111% Y.Y vs. est. $82.8M

·     Ares Commercial (ACRE) 7M share Spot Secondary priced at $14.95

 

Healthcare

·     Doximity (DOCS) shares fell -17%; Q4 non-GAAP EPS $0.21 vs. est. $0.15; Q1 revs $93.7M vs. est. $90.11M; new $70M stock buyback program; sees Q1 revenue $88.6M-$89.6M vs. est. $96.78M; raises FY23 revenue view to $454.0M-$458.0M from $450M

·     NextGen Healthcare (NXGN) Q4 adj EPS $0.19, in-line with ests; Q4 revs $151.3M vs. est. $150.06M; reaffirms year EPS and rev view

·     Cardinal Health (CAH) upgraded to Outperform from In Line at Evercore ISI

 

Technology, Media & Telecom

·     Dynatrace (DT) reports Q4 adj EPS $0.17 vs. est. $0.15; Q4 revs $253M vs. est. $246.55M; sees FY23 adjusted EPS 74c-77c vs. est. 74c and FY23 revenue $1.142B-$1.158B vs. est. $1.15B

·     Keysight Technologies (KEYS) Q2 EPS $1.83 vs. est. $1.67; Q2 revs $1.35B vs. est. $1.30B; guides Q3 EPS $1.74-$1.80 vs. est. $1.75 and revs $1.33B-$1.35B vs. est. $1.34B; Q2 Orders grew 9% to reach $1.46B, compared with $1.33B last year, or 11% on a core basis