Early Look

Friday, January 14, 2022

Futures	Up/Down	%	Last
Dow	45.00	0.13%	36,035
S&P 500	1.25	0.03%	4,653
Nasdaq	-18.50	0.12%	15,473

 

 

Stocks are looking to rebound following a sharp decline Thursday that saw major averages close at their lows, as surging CPI and PPI prices this week and ongoing reminders by a parade of Fed speakers that interest rates will rise between three and four times this year to prevent inflation from getting much more out of control. U.S. stocks struggled on Thursday as a rebound in tech stocks faded along with healthcare and biotech stocks as the Nasdaq tumbled 2.51%. Energy stocks have been market leaders to start 2022 along with industrials and materials amid a rotation and as energy prices surge. In Asian markets, The Nikkei Index fell -1.28% to 28,124, the Shanghai Index dropped nearly 1% to 3,521, and the Hang Seng Index slipped -0.19% to 24,383. In Europe, the German DAX is down roughly -100 points to 15,940, while the FTSE 100 is little changed at 7,560. Comments this week from several Fed speakers, including Powell and Fed Governor Brainard among others underscores the central bank’s commitment to lowering the country’s inflation rate, the fastest since 1982, with rate hikes and reduced policy support. Banks will be a focus today with earnings from JPMorgan, Citi, and Wells. Yesterday stocks tumbled late but putting yesterday’s sell-off in perspective: according to a tweet late day after the S&P and Nasdaq slumped late day: “To put the incredible gains of the last few years into perspective; A 20% decline would bring you back to 2021 levels; a 30% decline would bring you back to 2020 levels; a 40-60% decline would bring you back to 2019 levels; a 70% decline would bring you back to 2017 levels.

Events Calendar for Today

·     8:30 AM ET                  Import Prices MoM for December…est. 0.3%

·     8:30 AM ET                  Export Prices MoM for December…est. 0.3%

·     8:30 AM ET                  Retail Sales MoM for December…est. unchanged

·     8:30 AM ET                  Retail Sales Less Autos MoM for December…est. 0.2%

·     9:15 AM ET                  Industrial Production MoM for December…est. 0.3%

·     9:15 AM ET                  Capacity Utilization for December…est. 77.0%

·     10:00 AM ET                Business inventories MoM for November…est. 1.3%

·     10:00 AM ET                University of Michigan Confidence, Jan-P…est. 70.0

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

 

Earnings Calendar:

·     Earnings Before the Open: BLK, C, FRC, JPM, WFC

 

Other Key Events:

·     Jefferies 2022 Software Bus Tour (virtual), 1/10-1/14

·     Needham 24^th Annual Growth Conference (virtual), 1/10-1/14

·     UBS Greater China Conference (virtual), 1/11-1/14

·     China House prices YoY for December

 

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -67.10 points, or 1.42%, to 4,659.25

·     The Dow Jones Industrial Average fell -175.05 points, or 0.48%, to 36,115.27

·     The Nasdaq Composite slumped -381.58 points, or 2.51%, to 14,806.81

·     The Russell 2000 Index declined -16.62 points, or 0.76% to 2,159.44

 

 

Macro	Up/Down	Last
Nymex	0.89	83.01
Brent	0.96	85.43
Gold	-1.75	1,820.75
EUR/USD	-0.0001	1.1454
JPY/USD	-0.22	113.98
10-Year Note	+0.038	1.747%

 

 

World News

·     China Dec. trade balance $94.46 bln vs. est. $73.95 bln; China Dec. imports rise 19.95% y/y in dollar terms vs. est. 27.8% and exports rise 20.9% y/y in dollar terms vs. est. 20.3%

·     Fed’s Daly: Raising rates in March is quite reasonable, its misguided to say how many rate hikes will be needed, that will depend on data, inflation is north of Fed’s 2% target, labor market is roaring except for labor force participation, ending bond purchases earlier than planned wouldn’t be worth the potential market dislocations, doesn’t want to raise rates while still buying bonds, expecting inflation to stay high for most of this year but it will moderate, could start reducing B/S after 1 or 2 hikes but certainly by year end

 

Sector News Breakdown

Consumer

·     Boston Beer (SAM) shares fall -7%; cuts FY21 EPS view to ($1.00) to $1.00 from $2.00-$6.00 saying they now estimates that shipment growth for the Company’s products and gross margins will be below guidance primarily a result of more aggressive wholesaler inventory reduction than expected, primarily affecting Truly; sees FY21 depletions increase 21%-22% (watch shares of BUD, TAP, STZ, DEO in potential sympathy in the beer sector)

·     U.S. casino operators Las Vegas Sands (LVS), Melco (MLCO), MGM Resorts (MGM) and Wynn Resorts (WYNN) shares jump after Macau’s government announced that the number of new casino operators allowed to function in the world’s largest gambling hub would be limited to six with an operating period of up to 10 years. Current licenses of Wynn Macau, MGM China, Melco, and others are all due to expire this year. The announcement puts an end to concerns that the government would change the current status quo for the number of operators in Macau

·     Domino’s (DPZ) downgraded to equal-weight from overweight at Morgan Stanley, while Chipotle (CMG) is upgraded to overweight from equal-weight amid a “mixed” view on restaurant stocks into 2022.

·     Ford Motor Company (F) reported year-over-year growth of 3.7% in Greater China in 2021, with sales exceeding 624,000 units

·     Honda Motor (HMC) and South Korea’s LG Energy plan to build a battery-making joint venture project in the U.S. that could cost as much as 4T won, or nearly $3.5B – Reuters

·     Good Times Restaurants Inc (GTIM) YoY same store sales for q1 ended dec 28, 2021 down 2.5% for good times brand, up 24.0% for bad daddy’s brand

 

Energy, Industrials and Materials

·     Old Dominion Freight Line (ODFL) will join the NASDAQ-100 Index, prior to market open on Monday, January 24, 2022, replacing Peloton (PTON) in the NASDAQ-100 Index

·     Albemarle Corporation (ALB) signed a joint development agreement to explore the use of 6K’s patented UniMelt advanced, sustainable materials production platform to develop novel lithium battery materials through potentially disruptive manufacturing processes.

·     Canadian National (CNI) upgraded to Buy from Hold at Deutsche Bank

·     Volvo (VLVLY) said that it launched an upgraded version of its Volvo VNR Electric with up to 85% increased range and faster charging; now has an operational range of up to 440 kilometers and increased energy storage of up to 565 kilowatt-hours on the back of an improved battery design.

 

Financials

·     JPMorgan (JPM) Q4 EPS $3.33 vs. est. $3.01; Q4 revs $29.3B and managed revenue $30.3B vs. est. $29.9B; Return on equity 16%, vs. estimate 13.9%; Provision for credit losses was net benefit of $1.3 bln as provision for credit losses reflect net reserve release of $1.8 bln driven by more balanced outlook due to resilience in macroeconomic environment

·     Wells Fargo (WFC) Q4 EPS $1.38 vs. est. $1.13; Q4 revs $20.86B vs. est. $18.85B; Total average loans $875.0 billion; total avg. deposits $1.47 trillion; common equity Tier 1 ratio 11.4%

·     Blackrock (BLK) Q4 adj EPS $10.42 vs. est. $10.15; Q4 revs $5.11B vs. est. $5.17B; Q4 AUM $10.01T, up 15% y/y vs $8.68 trillion reported at q4 2020 end; says remain confident in our ability to continue generating differentiated organic growth over long-term; raises dividend 18%

·     Spirit Realty (SRC) 8.2M share Spot Secondary priced at $47.60

·     defi SOLUTIONS announced the expansion of its partnership with Open Lending (LPRO)

 

Healthcare

·     Corvus Pharmaceuticals’ (CRVS) partner Angel Pharmaceuticals has treated the first patient in its Phase 1/1b clinical trial of Corvus’ small molecule ITK inhibitor CPI-818 for the treatment of relapsed/refractory T-cell lymphomas (TCL) in China

·     LumiraDx (LMDX) announces that results from ongoing testing and monitoring of COVID-19 variants show its SARS-CoV-2 Antigen test detects the Omicron Variant.

 

Technology, Media & Telecom

·     SAP AG (SAP) announces EUR 1B share repurchase program; said targets FY22 non-IFRS cloud revenue at constant currencies between EUR11.55 billion and EUR11.85 billion, 5% ahead of consensus; posted 4Q operating profit of EUR2.47 billion, around 2% ahead of consensus and revs of EUR7.98 billion above consensus EUR7.75 billion

·     Corning (GLW) downgraded to Hold from Buy at Deutsche Bank

·     Cognizant (CTSH) downgraded to Neutral from Buy at Citi

·     Disney (DIS) downgraded to Neutral from Buy at Guggenheim

·     Sirius XM (SIRI) downgraded to Underweight from Neutral at JPMorgan

·     Apple (AAPL) price tgt raised at Piper Sandler to $200 saying that Apple’s set-up for 2022 is favorable as its venture into healthcare and automotive markets are the next catalysts to drive the stock to a $4 trillion market cap and beyond

·     MagnaChip Semiconductor (MX) launches 11 new generation high-voltage 600V super junction metal oxide semiconductor field effect transistors for wide range of consumer products and industrial applications

·     Pros Holdings (PROS) raises FY21 revenue view to $250.4M-$250.9M vs. est. $250.28M; raises Q4 adjusted EPS view to (19c)-(18c) from (24c)-(22c) and ups Q4 revenue view to $64M-$64.5M from $63M-$64M (est. $63.51M)