Mid-Morning Look: April 01, 2022

Auto PostDaily Market Report

Mid-Morning Look

Friday, April 01, 2022

Index

Up/Down

%

Last

 

DJ Industrials

62.28

0.18%

34,740

S&P 500

10.50

0.23%

4,540

Nasdaq

30.35

0.21%

14,252

Russell 2000

18.12

0.87%

2,088

 

 

U.S. stocks open higher after yesterday’s late day swoon pushed major averages to settle at their lows, as investors digest the impact of a mostly stronger March payroll report. March headline jobs missed expectations, but revisions to prior month were sharply higher, while the unemployment rate slipped, and wages stayed healthy. Treasury yields spike after posting their best quarter since 1994, as 2s and 10-yr yield invert again with the 10-yr up over 10 bps to 2.425% while 2-yr yield up 15bps to 2.434% after the better jobs data. A persistent inversion the 2-year/10-year curve is seen by investors and economists as a solid recession warning signal (CNBC noted that the last 6-recessions were preceded by an inversion of the curve). The U.S. dollar rose behind the better monthly jobs report on falling unemployment. In Europe, Russian forces are being pushed back around Kyiv, but fighting is still fierce in some areas near Ukraine’s capital, Ukrainian officials said on Friday. Russia said during negotiations this week that it would scale down operations in the Kyiv and Chernihiv regions, both of which are in northern Ukraine, but officials in both regions say fighting has continued in some areas. None of today’s data appears to deter the aggressive rate hike cycle expected by the Fed this year. Stocks are coming off a volatile quarter as Bespoke noted Q1 2022 was only the 12th quarter post-WW2 that saw the S&P fall 10%+ from a closing high and rally back 10%+ from its intra-quarter low. Fed’s Evans said today he expects the equivalent of 7 1/4 rate hikes this year, 3 next year as developments may cause him to alter this assessment but will learn more thru the year & will be prepared to adj policy as needed.

 

Economic Data

·     March Nonfarm payrolls +431,000 below est. +490,000 while February upwardly revised to +750,000 from +678,000. Private sector jobs +426,000 below est. +480,000 and prior month upwardly revised to +739,000 from +654,000. March average hourly earnings all private workers +0.4% in-line with views and Feb upwardly revised. The unemployment rate fell to 3.6% from 3.8% prior and below est. 3.7%. Labor force participation rate 62.4% vs 62.3% in February.

·     ISM U.S. Manufacturing activity index 57.1 in March (lowest since Sept 2020) vs 58.6 in February; prices paid index 87.1 in March vs 75.6 in February; new orders index 53.8 (lowest since May 2020) in March vs 61.7 in February; employment index 56.3 in March vs 52.9 in February

·     IHS Markit March final manufacturing PMI at 58.8 (vs flash 58.5); Manufacturing sector final output index for March at 56.1 vs flash reading 56.5 and final February 52.5; final input prices index for March at 79.5 vs flash reading 79.7 and final February 79.2

·     Construction spending rises +0.5%, below consensus +1.0% to $1.704 trln, vs Jan +1.6%; Feb private construction spending +0.8%, public spending -0.4%

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.14

100.14

Brent

0.15

104.86

Gold

-19.40

1,934.60

EUR/USD

-0.002

1.1045

JPY/USD

1.18

122.84

10-Year Note

0.103

2.428%

 

 

Sector Movers Today

·     U.S. listed China stocks BIDU, BABA, JD, NTES, TCEHY, BILI, VIPS after Bloomberg reported overnight that Chinese authorities are preparing to give U.S. regulators full access to auditing reports of most of the 200-plus companies listed in New York. U.S listed Chinese EV auto makers LI, XPEV, NIO also rise early on story, as well as monthly delivery totals

·     Retailers; GME rises after said it intends to implement stock split through dividend; retail downgrades at Barclays as Wayfair (W) downgraded to Underweight from Equal Weight with $103 tgt, Gap Stores (GPS) downgraded to Underweight and tgt cut to $13 from $17, American Eagle (AEO) downgraded to EW from OW and tgt to $19 from $24 and Urban Outfitters (URBN) downgraded to EW from OW and tgt to $29 from $34; LVLU rises as 4Q adj EPS ($0.03) vs est. (0.07) on revs $97Mm vs est. $92.75Mm; sees FY revs $480-490Mm above est. $472Mm; POSH downgraded to Hold from Buy and cut tgt to $15 from $19 at Stifel as the company faces numerous growth challenges that may limit share price appreciation relative to other eCommerce ideas despite its current low statistical valuation

·     Hardware, Components & Services; BB reports mixed quarter as revs miss; Q4 EPS $0.01 vs. est. loss (-$0.03); Q4 revs $185M vs. est. $208M while Canaccord says F2023 guidance below their expectations; in research, AAPL, QCOM removed from JPM Focus List while adding CIEN and ANET saying they are starting to see early signs of a reversal of the Value vs. Growth momentum; DELL downgraded a second day as Goodman Sachs cuts to Neutral saying it remains inexpensive compared to its peers, but see increasing fundamental headwinds hindering this value unlock; Goldman Sachs also downgraded COMM to Neutral from Buy with $9 tgt as ongoing commodity cost inflation looks more likely to delay the company’s margin recovery

·     Healthcare Services & MedTech Equipment; ZBH downgraded to Neutral from Buy at Citigroup, adding EW to the Citi Focus list, assigning a High Risk label to SGHT, and updating estimates for COO, DXCM, JNJ, NVRO, SYK and ZBH adding concerns for 1) the impact of Chinese lock downs given COVID-19 and the BA.2 variant, 2) the geopolitical environment, including Russia/Ukraine; and 3) macroeconomic headwinds, including shifting FX, higher inflation, and rising interest rates; WBA extends losses after disappointing guidance yesterday, hitting 52-week lows; DXCM said the new Dexcom ONE continuous glucose monitoring (CGM) system will launch in U.K. in May

·     Auto sector; several Chinese EV companies out with monthly delivery totals: LI reported March deliveries that more than doubled from a year ago saying deliveries of its Li ONEs rose 125.2% to 11,034 vehicles, a slight deceleration in growth from recent months as Q1 deliveries grew 152.1% to 31,716 vehicles; NIO delivered 9,985 vehicles in March, representing an increase of 37.6% y/y; delivered 25,768 vehicles in three months ended March 2022, increasing by 28.5% y/y; XPEV said deliveries rise 202% year-over-year to 15,414 EVs. Q1 deliveries rose 159% to 34,561; FSR passes 40,000 reservations for Fisker ocean SUV and will open pre-orders for limited-edition Fisker Ocean one on July 1, 2022

 

Stock GAINERS

·     BABA +7%; along with gains in other U.S. listed China stocks BIDU, JD, NTES, TCEHY, BILI, VIPS after Bloomberg reported overnight that Chinese authorities are preparing to give U.S. regulators full access to auditing reports of most of the 200-plus companies listed in New York

·     GME +14%; said it intends to implement stock split through dividend

·     LVLU +15%; rises as 4Q adj EPS ($0.03) vs est. (0.07) on revs $97Mm vs est. $92.75Mm; sees FY revs $480-490Mm above est. $472Mm

·     MN +39%; said it would go private and be acquired by Callodine Group LLC, as the purchase price of $12.85 a share is a 41% premium above the $9.11 closing price

·     NCNO +4%; as forecast FY23 revs $398M-$400M, above estimates for $368M which follows Q4 beat for revenue of $75M above $69.3M est.

·     SAGE +6%; after saying data from a Phase 2 study that showed SAGE-718 was generally well-tolerated and associated with improvement on multiple tests in patients with mild cognitive impairment and mild dementia due to Alzheimer’s disease.

·     TELL +13%; upgraded to Outperform from Neutral at Credit Suisse and lift tgt to $8/share from $5.50/share as believe TELL is close to sanctioning the Driftwood LNG project, are ascribing value to future project phases given the strong demand for US LNG and LNG prices remain high

 

Stock LAGGARDS

·     ABIO -21%; announced that its experimental COVID-19 therapy rNAPc2 failed to meet the primary endpoint with statistical significance in a Phase 2b trial

·     BB -9%; mixed as revs miss; Q4 EPS $0.01 vs. est. loss (-$0.03); Q4 revs $185M vs. est. $208M while Canaccord says F2023 guidance below their expectations

·     BLND -11%; shares slide Q4 EPS (-$0.32) vs. est. (-$0.19) and guides Q1 revs $63M-$66M vs. est. $75.8M, prompting downgraded at Wells Fargo and Canaccord

·     DELL -2%; downgraded to hold from buy at Goldman and removed from its Conviction List as see increasing fundamental headwinds hindering this value unlock

·     DCT -11%; as Q2 results beat consensus estimates on the top and bottom line along with ARR growth of 28% Y/Y and SaaS net dollar retention of 115.5% healthy, but guided Q3 revs $71M-$73M below the $75.9M view

·     PNC -1%; lowered its 1Q22 Q/Q revenue guidance from down 3% to 5% to down 8% to 10% and said fee income is expected to decline by 14% to 16% from down 4% to 6%; expects 2022 revenue to increase 9% to 11%, vs. previous expected 8% to 10% increase

·     SBTX -11%; after discontinues two experimental cancer drugs, which promoted several analyst downgraded

·     WBA -2%; extends losses after disappointing guidance yesterday, hitting 52-week lows

_________________________________________________________________

Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.

Live Trading

Open an Account

Paper Trading

Register