Early Look

Monday, April 4, 2022

U.S. futures are looking at a slightly higher open after settling mixed last week as investors monitored Russia’s war with Ukraine. Last week saw the S&P 500 finish fractionally higher on the week and the Nasdaq -0.6%, while the Dow slipped -0.12% on the week, while transports underperformed down -5.3%, led by weakness in truckers on Friday. Markets are watching whether new reports of war crimes will add to pressure on the Biden administration and European allies to tighten sanctions on Russia. The Treasury yield curve remains inverted as the 2-year rises to 2.45%, above the benchmark 10-yr at 2.40%, renewing recession fears for the U.S. In Asian markets, The Nikkei Index gained 70 points to 27,735, the Shanghai Index rose 30 points to 3,282, and the Hang Seng Index advanced over 2.1% or 462 points to 22,502. In Europe, the German DAX rises about 20 points to 14,465, while the FTSE 100 is up about +0.15% to 7,550. Oil prices looking little changed with WTI crude just below $100 per barrel. Twitter (TWTR) shares jump over 20% after an SEC filing shows Tesla (TSLA) CEO holds a passive 9% stake in the company. Fairly quiet day ahead with no major earnings and only a few economic data points. Over the weekend, Tesla (TSLA) reported that it delivered 310,048 vehicles during Q1, a record number of shipments, and up 67.8% from 184,800 vehicles shipped y/y.

Market Closing Prices Yesterday

·     The S&P 500 Index gained 15.45 points, or 0.34%, to 4,545.86

·     The Dow Jones Industrial Average rose 139.87 points, or 0.40%, to 34,818.27

·     The Nasdaq Composite climbed 41.00 points, or 0.29%, to 14,261.50

·     The Russell 2000 Index advanced 20.99 points, or 1.01% to 2,091.11

Economic Calendar for Today

·     10:00 AM ET        Factory Orders m/m for February

·     10:00 AM ET        Durable Goods Orders m/m for February

World News

·     Eurozone Sentix’s index for the euro zone fell to -18.0 in April from -7.0 the previous month, hitting its lowest level since July 2020 and worse than the -9.2 estimate; a current conditions index fell to -5.5 from 7.8, its lowest level since April last year, while an expectations index fell to -29.8 from -20.8, its lowest level since December 2011.

·     Russia maintained gas flows through key pipeline routes into Europe on Monday, despite uncertainty over payment terms and as European leaders called for more sanctions against Moscow after war crimes allegations in Ukraine

·     Hong Kong Chief Executive Carrie Lam said she won’t seek a second term in office, as she nears the end of a five-year stint as the city’s top official that was marred by large-scale antigovernment protests in 2019 – WSJ

Sector News Breakdown

Consumer

·     Tesla (TSLA) reported Saturday that it delivered 310,048 vehicles during Q1, a record number of shipments, and up 67.8% from 184,800 vehicles shipped y/y. Shipments also rose about 0.5% from Q4, when the company delivered its previous record of 308,600 vehicles. Still, the latest period’s shipments trailed analysts’ reported consensus estimate of 317,000 vehicles.

·     Starbucks (SBUX) said that it will suspend its stock repurchasing program, effectively immediately, as Howard Schultz returns to the company as CEO for the third time.

·     Crocs Inc. (CROX) downgraded to Hold from Buy at Loop Capital and cutting our price target for the shares from $150 to $80 saying investor sentiment on the stock has changed materially as Crocs is put in the “Covid winner” camp

·     Flowserve Corp (FLS) files for potential mixed shelf offering; size not disclosed

·     Freyr Battery (FREY) announced the appointment of Oscar Brown to the position of Group CFO

·     Nio Inc. (NIO) upgraded to buy from neutral at UBS following drop in shares of about 44% over the past year, and with potential for sales acceleration on new model launches planned for 2022.

Energy, Industrials and Materials

·     SPI Energy (SPI) said 2021 net sales rose 17% to $162 million; the company said it “fortified our foundations in multiple business segments,” including expanding residential solar operations and products and launching new utility and commercial-scale solar projects.

·     Truckers tumbled on Friday, led by declines in CHRW, JBHT, ODFL in the S&P 500: Jim Cramer on CNBC spoke Friday about the weakness in transports, down 4.7% Friday at 15,511 today (most since June 2020) noting that in the last 4-weeks spot trucking rates have fallen by as much as 35% with another big decline this week – notes there are more drivers back from shortages prior

·     Manitowoc Company Inc (MTW) has been curtailing its operations in Russia since beginning of conflict in Ukraine and stopped taking new Crane orders; said with roughly 20 local employees, sales to Russia were less than two percent of total sales in 2021

Financials

·     JPMorgan (JPM) CEO Jamie Dimon warns the bank may lose about $1B on Russia exposure, detailing extent of its potential losses resulting from conflict in Ukraine for first time. Dimon said the U.S. economy is facing unprecedented risks that have him preparing for dramatic upheavals. Dimon warned that the war in Ukraine could collide with rising inflation to slow the pandemic recovery and alter global alliances for decades to come. Dimon warned that the Federal Reserve could move interest rates “significantly higher than the markets expect.”

·     British financial regulators said on Monday that they would review the way the London Metal Exchange (LME) handled a halt in chaotic nickel trading last month and said the episode underlined questions about the LME’s transparency

Healthcare

·     Regeneron Pharmaceuticals (REGN) and Sanofi (SNY) said the U.S. FDA granted priority review to Dupixent to treat patients aged 12 years and older with eosinophilic esophagitis (EoE); if approved, Dupixent would be the first medicine available in the U.S. indicated to treat EoE

·     Hologic (HOLX) downgraded to In Line from Outperform at Evercore ISI

·     Quest Diagnostics (DGX) downgraded to Neutral from Buy at Citigroup

·     Ocugen Inc. (OCGN) slips as the WHO on Saturday suspended supply through UN agencies of OCGN partner Bharat Biotech’s COVID-19 vaccine Covaxin. WHO said suspension would allow manufacturer to upgrade facilities and address deficiencies found in an inspection.

Technology, Media & Telecom

·     Twitter (TWTR) rises 16% as Elon Musk reports a passive stake of 9.2% as per SEC filing

·     China confirmed plans to revise confidentiality rules regarding overseas listings in a move that could help Chinese companies avoid being delisted in the U.S. The China Securities Regulatory Commission (CSRC) confirmed its plans in a release on its website. The regulator said its original rules, which were established in 2009, had become outdated (shares of BABA, BIDU, TCEHY, VIPS, NTES and other U.S. listed China stocks looking higher early)

·     Micron Technology (MU) mentioned positively in Barron’s saying strong growth potential and expanding market opportunities, as well as low valuations, make the memory chip manufacturer a solid investment opportunity