Early Look

Friday, September 24, 2021

U.S. futures are lower following the S&P 500’s largest two-day gain since July as China’s Evergrande, the indebted property developer at the heart of systemic risk concerns in Asia, missed an $83.5 million dollar-bond debt payment Thursday and entered a 30-day grace period that it must use to meet obligations for foreign creditors. Meanwhile, cryptocurrencies tumbled after China’s central bank declared all cryptocurrency-related transactions illegal. Today, President Biden will meet leaders from Australia, India and Japan where they will discuss semiconductor supply chains, among other topics. European markets slide following weaker-than-expected economic data. Also weighing, Dow component Nike (NKE) shares slide after mixed earnings and a lower forecast for next year. U.S. stocks rallied for a second straight session Thursday as investors embraced the Federal Reserve’s bullish economic outlook while downplaying the risk of a contagion from China Evergrande Group’s potential default. Treasury yields climbed, led by the 30-year, which rose more than 12 basis points for its biggest increase this month and the 10-year topped 1.4%.

In Asian markets, The Nikkei Index rises just over 600 points to 30,248, the Shanghai Index drops -29 points (0.80%) to 3,613 and the Hang Seng Index declines -318 points (1.3%) to 24,192. In Europe, the German DAX is lower by -115 points (0.75%) to 15,525, while the FTSE 100 is down about -15 points ton 7,060. Bitcoin and other crypto assets such as Ethereum, Litecoin, Ripple are markedly lower (down over 5% or more for most) after Bloomberg reported that the People’s Bank of China said all crypto-related transactions are illegal, crypto-related businesses are illegal financial activities and financial institutions are not allowed to provide services for crypto

Market Closing Prices Yesterday

·     The S&P 500 Index gained 53.34 points, or 1.21%, to 4,448.98

·     The Dow Jones Industrial Average rose 506.50 points, or 1.48%, to 34,764.82

·     The Nasdaq Composite surged 155.40 points, or 1.04%, to 15,052.24

·     The Russell 2000 Index advanced 40.48 points, or 1.82% to 2,259.04

Events Calendar for Today

·     10:00 AM ET      New Home Sales MoM for August

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

World News

·     Germany Sept IFO Business Climate 98.8 vs 98.9 consensus; Current Assessment 100.4 vs 101.8 cons; Expectations 97.3 vs 96.5 consensus; index showed supply shortages in industry sector has worsened in September; no signs of easing in shortages, expected to last until least end 2021; upward trend in construction sector is continuing

·     The Peoples Bank of China injects 120b yuan via 14-day RR, net daily 70b injection, PBOC have injected a net 270b yuan on the week

Sector News Breakdown

Consumer

·     Costco (COST) 4Q EPS $3.76 vs est. $3.57 on sales $61.44B vs est. $59.8B, qtrly e-comm comps +11.2%, total company comps +15.5%, adj total company comps +9.4%, says 4Q was negatively impacted by a write-off of certain IT assets of $84Mm pre-tax ($0.14 per diluted share)

·     Nike Inc. (NKE) Q1 EPS $1.16 vs. est. $1.11; Q1 revs $12.2B vs. est. $12.46B; qtrly gross margin increased 170 basis points to 46.5%; qtrly revenues for Nike brand were $11.6 bln, an increase of 12% to prior year on a currency-neutral basis; Q1 Asia pacific & Latin America rev up 33% to $1.47B, Q1 Europe, middle east & Africa revs $3.31B, Q1 Greater China rev up 11% to $1.98B, Q1 N.A. revs up 15% to $4.88B; cuts FY22 revenue view to up mid-single-digits from up low double-digits saying transit time situation has deteriorated in Q1 due to port and rail congestion as well as labor shortages. Says factories in Indonesia are fully operational, but all footwear factories in Vietnam remain closed by order of the government.

·     Invitation Homes (INVH) 12.5M share Spot Secondary priced at $40.00

·     Scholastic (SCHL) 1Q EPS ($0.70) on revs $259.8Mm +21%, says currently experiencing strong demand for its products and programs as schools begin to re-open this fall; expects sequential improvements in its school-based distribution channels in each qtr of current FY; faces certain headwinds in fiscal 2022 with higher labor costs, discontinuation of certain covid-related government subsidies

·     Vail Resorts (MTN) Q4 EPS loss ($3.49) vs. est. loss ($3.53); Q4 revs $204.2M vs. est. $170.91M; issued its fiscal 2022 guidance range and expects Resort Reported EBITDA to be between $785M-$835M; Pass product sales through September 17, 2021 for the upcoming 2021/2022 North American ski season increased approximately 42% in units and approximately 17% in sales dollars as compared to the period in the prior year through September 18, 2020

Energy, Industrials and Materials

·     AAR Corp. (AIR) Q1 adj EPS $0.52 vs. est. $0.48; Q1 sales 4455M vs. est. $438.4M; adjusted Ebitda $37.0M, +71% YoY

·     Lockheed Martin Corporation (LMT) authorized an increase in its quarterly dividend and share repurchase authority and board has authorized the purchase of up to an additional $5 billion of common stock under its share repurchase program. With this increase, total authorization for future repurchases under the share repurchase program is approximately $6 billion.

Financials

·     AvalonBay (AVB) raises outlook for 3q residential rental revenue; expects total residential rental revenue for Same Store communities to increase between 0.9% and 1.1% over the prior year period (midpoint of this range is 180 bps above what the company’s expectation)

·     Shares of companies leveraged to the price of Bitcoin are lower; Marathon Digital (MARA), Bit Digital (BTBT), Riot Blockchain (RIOT), Coinbase (COIN), MicroStrategy (MSTR) after Bloomberg reported that the People’s Bank of China said all crypto-related transactions are illegal

·     Telus International (TIXT) 12M share Secondary priced at $34.00

Healthcare

·     Thermo Fisher Scientific (TMO) authorizes $3B of share repurchases

·     vTv Therapeutics (VTVT) announces Results of multiple ascending dose study and development plan for HPP737, an oral pde4 inhibitor for the treatment of psoriasis; HPP737 exhibited favorable safety and tolerability profile, with no dose limiting gastrointestinal side effects; results build on data from previous multiple ascending dose study and support advancement of HPP737 into Phase 2 in moderate to severe psoriasis.

·     AstraZeneca PLC (AZN) said that the Propel Phase 3 trial met its primary point, proving that its Lynparza drug significantly delayed disease progression of first-line metastatic castration-resistant prostate cancer in combination with the abiraterone drug.

·     Cue Health (HLTH) 12.5M share IPO priced at $16.00

Technology, Media & Telecom

·     Aehr Test Systems (AEHR) Q1 EPS (2c) versus (9c) in Q1 last year; Q1 revs $5.65M vs. $2M YoY; said Q1 ends with record bookings for a single quarter of $20.7M. Since the end of the quarter, we have announced an additional $19.4 million in bookings, bringing our total bookings for the fiscal year to over $40M as of today’s date

·     CalAmp Corp. (CAMP) 2Q adj EPS $0.08 vs est. $0.06 on revs $79Mm vs est. $79.9Mm; not providing guidance as visibility into product shipments remains uncertain

·     Progress Software (PRGS) Q3 EPS $1.18 vs. est. $0.82; Q3 revs $147.4M vs. est. $131.07M; raises FY revs to $548M-$552M, from $529M-$535M and ups year EPS view to $3.68-$3.70, from prior $3.46-$3.50; also agreed to acquire privately-held always-on application experience company Kemp for $258M in cash

·     Roku (ROKU) downgraded to Equal-weight from Overweight at Wells Fargo and cuts tgt to $350 from $488 saying combined with a pick-up in competition and high penetration of CTV (Connected TV), they see limited multiple market expansion and notes with competition picking up from Amazon, Google, and Comcast, think ROKU’s valuation is more constrained, especially if net adds aren’t accelerating

·     Meredith (MDP) rises after hours on the report that Barry Diller and his IAC/InterActiveCorp (IAC) have their eye on buying the publisher; IAC is in advanced talks to acquire Meredith and its lifestyle brands – WSJ https://on.wsj.com/3u8ClB0

·     Clearwater Analytics (CWAN) 30M share IPO priced at $18.00