Early Look

Monday, March 7, 2022

Futures	Up/Down	%	Last
Dow	-476.00	1.42%	33,107
S&P 500	-62.25	1.44%	4,265
Nasdaq	-213.50	1.54%	13,626

 

 

Stocks and U.S. equity futures plunge overnight, while havens including sovereign bonds rose, amid fears of an inflation shock in the world economy as oil soared on the prospect of a ban on Russian crude supplies. S&P 500 contracts fell 1.6%, while those for the Nasdaq 100 some 2% and Asian stock markets were on course for a bear market — a drop of more than 20% from a February 2021 peak. Russia’s offensive into the country continued into its second week Monday as Vladimir Putin offered so-called “humanitarian corridors” to transport an estimated 1.5 million refugees from pulverized cities in the eastern region of Ukraine. The offer was dismissed as ‘immoral’ by Kyiv, however, as officials warned it could be a precursor to an all-out assault on the capital later this week. Brent oil hit $139 a barrel, and West Texas Intermediate $130 a barrel, before trimming some of the rally. The declines add to last week losses where the S&P fell 1.27%, the Dow lost 1.30%, the Nasdaq shed 2.78%. Nasdaq 100 index closes 1.4% lower, down 2.5% for the week. Having surged 18% in wild early action, Brent crude was last quoted around $128, which follows a 21% surge in Brent crude last week, which will further pressure U.S. stocks leveraged to energy including travel, and leisure activities.

 

Rates dipped, with the 10-year Treasury yield down 11 basis points to 1.74% and the 2-year down about 5 basis points to 1.49%. European stock markets also fell sharply, as the euro is at its lowest level against the greenback since May 2020. Grains, metals, and energy have surged on concerns of supply disruptions due to the invasion and sanctions on Russia while palladium and copper hit all-time highs. Gold prices top the $2,000 an ounce mark, rising over 1.8% in a flight to safety. Meanwhile, the Federal Reserve and other central banks face the tricky task of tightening monetary policy to contain the cost of living without upending economic expansion or roiling risky assets.

 

In Asian markets, The Nikkei Index tumbled -2.9% to 25,221, the Shanghai Index dropped -2.1% to 3,372, and the Hang Seng Index plunged -3.8% or 847 points to 21,057. In Europe, the German DAX is down over 400 points or 3.3% to 12,650, while the FTSE 100 is down over -1.5% to 6,875. Bitcoin and other cryptocurrencies fall as Russia’s invasion of Ukraine weighs on market sentiment.

Market Closing Prices Yesterday

·     The S&P 500 Index slumped -34.62 points, or 0.79%, to 4,328.87

·     The Dow Jones Industrial Average fell -179.86 points, or 0.53%, to 33,614.80

·     The Nasdaq Composite dropped -197.38 points, or 1.41%, to 13,837.83

·     The Russell 2000 Index declined -31.51 points, or 1.5% to 2,000.90

 

Economic Calendar for Today

·     3:00 PM ET        Consumer Credit for January

 

Earnings Calendar:

·     Earnings Before the Open: AMR, CIEN, EGRX, IMXI, KVHI, SQSP

·     Earnings After the Close: AVDX, CLAR, DRXX, EARN, IDT, IPI, LFMD, ROCC, TDUP

 

Other Key Events:

·     Citigroup Global Property CEO Conference, 3/6-3/9, in Hollywood, FL

·     Cowen 42^nd Annual Healthcare Conference, 3/7-3/9, in Boston, MA

·     JMP Securities Technology Conference, 3/7-3/8, in San Francisco, CA

·     JPMorgan Global Emerging Markets Corporate Conference, 3/7-3/9, in Miami, FL

·     JPMorgan Gaming, Lodging, Restaurant & Leisure, 3/6-3/8, in Las Vegas, NV

·     Morgan Stanley Technology, Media & Telecom Conference, 3/7-3/10, in San Francisco, CA

·     Raymond James Annual Institutional Investors Conference, 3/6-3/9, in Orlando, FL

 

 

Macro	Up/Down	Last
Nymex	6.85	122.53
Brent	6.54	124.65
Gold	36.30	2,002.90
EUR/USD	-0.0095	1.0833
JPY/USD	0.23	115.05
10-Year Note	+0.015	1.738%

 

 

World News

·     China set economic growth target of 5.5% for 2022, lowest in 3 decades, but was higher than the widely expected growth of 5% or slightly higher and much higher than 4.8% IMF expectations. Some indicators were unchanged y/y w/inflation target set at around 3%, but fiscal deficit is now expected to be around 2.8% down from 3.2%

·     Secretary of State Antony Blinken said Sunday the U.S. and its allies are looking at a coordinated embargo following Russia’s invasion of Ukraine, while ensuring appropriate global supply

·     Russia announced new “humanitarian corridors” on Monday to transport Ukrainians trapped under its bombardment – to Russia itself and its ally Belarus, a move immediately denounced by Kyiv as an immoral stunt.

 

Sector News Breakdown

Consumer

·     Bed Bath & Beyond Inc. (BBBY) said it “regularly reviews all paths to create shareholder value,” and that it plans talks with billionaire investor Ryan Cohen about his ideas for the houseware’s retailer. The WSJ on Sunday reported that Mr. Cohen, the co-founder of online pet-products retailer Chewy Inc., had taken a 9.8% stake in Bed Bath & Beyond and is pushing the company to streamline its strategy and explore strategic alternatives.

·     DoorDash (DASH) is said to have held talks about a potential takeover of Deliveroo last summer, though a deal never came to fruition, according to a Sunday Times report. A combination would have created a food-delivery firm with 4 billion pounds ($5.2B) in sales https://bit.ly/3CgPjAV

·     Rising gas prices will spark a push for even more electric vehicles, according to Barron’s citing Gary Black, who runs the Future Fund Active ETF, saying Tesla (TSLA) will have a 20% share of all EV penetration worldwide as estimates its market cap will balloon to $4 trillion by 2030

 

Energy, Industrials and Materials

·     Oasis Petroleum (OAS) and Whiting Petroleum (WLL) are said close to a merger between the rival North Dakota shale drillers according to the WSJ as the combined companies would be valued at about $6B. https://bit.ly/3KguYhK

·     Carl Icahn exited a big bet on Occidental Petroleum Corp. (OXY), selling the last of what was once a roughly 10% stake in the oil-and-gas producer as its shares surge. Mr. Icahn, who had been cutting the position, in recent days sold the remainder of it https://on.wsj.com/3HMaSdU

·     Chesapeake Energy (CHK), EQT (EQT) and Coterra Energy (CTRA) could be standouts and among stocks to play rally in natural gas accord to Barron’s as the invasion of Ukraine-and Europe’s reliance on Russian energy-spotlights the strategic importance of American natural gas, and it also opens another opportunity for U.S. producers, whose stock prices do not adequately reflect the growing global demand for gas

·     Natural gas liquid producer Antero Resources (AR) should get a bump from higher prices of propane and butane, according to Barron’s says. Arun Jayaram, an analyst at JPMorgan, has an overweight rating on the shares.

·     Silgan Holdings (SLGN) announces $300M share repurchase program

·     U.S. Steel (X) upgraded to Equal Weight from Underweight at Morgan Stanley and raise tgt to $31 from $21.

 

Financials

·     JPMorgan Chase (JPM) files $150B mixed securities shelf

·     AvalonBay Communities (AVB) announced that Same Store Residential rental revenue for the two months ended February 28, 2022, increased 7.3% over the prior year period

·     Invitation Homes (INVH) announces $300M joint venture with Rockpoint

·     WeWork (WE) said late Friday in a statement “The company has no plans to issue additional equity at this time. Our liquidity at the end of the third quarter stands at $2.3 billion”

·     Visa (V) is suspending its Russia operations saying “effective immediately, Visa will work with its clients and partners within Russia to cease all Visa transactions over the coming days. Once complete, all transactions initiated with Visa cards issued in Russia will no longer work outside the country. MasterCard (MA) MasterCard also announced that they have also decided to suspend our network services in Russia.

 

Healthcare

·     Bluebird Bio (BLUE) is in trouble: Its cash is running low, STAT’s Adam Feuerstein writes, and there’s concern the business won’t stay afloat after this year. The company’s market value has tanked 96% from a high of $11 billion to around $350 million today, even though two of its gene therapies are under FDA review.

·     Bristol Myers Squibb’s (BMY) said the FDA approved Opdivo (nivolumab) in combination with platinum-doublet chemotherapy for adult patients with resectable non-small cell lung cancer (NSCLC) in the neoadjuvant setting

·     KalVista Pharmaceuticals (KALV) announced the initiation of the Phase 3 KONFIDENT clinical trial evaluating the efficacy and safety of KVD900 as the first potential oral, on-demand therapy for hereditary angioedema attacks

 

Technology, Media & Telecom

·     Apple (AAPL) is scheduled to host its first product event of 2022 on Tuesday, March 8, and the company is expected to launch a slew of new devices, including its first low-cost iPhone with 5G connectivity. We could even see a new Mac running on Apple’s excellent M1 chip – Yahoo

·     Squarespace (SQSP) Q4 revs rose 20% y/y to $207.4M vs. est. $205.4M; sees Q1 revs $203M-$205M vs. est. $216.8M; sees year revs up 10%-12% y/y or $862M-$878M vs. est. $934.6M

·     Cloud stocks have become a haven in tech according to Barron’s saying among its favorites: Microsoft (MSFT), Amazon.com (AMZN), Alphabet (GOOGL), Cisco Systems, (CSCO), Arista Networks (ANET) and Snowflake (SNOW). Article notes many of them struggling to meet the challenge to sustain pandemic-era boosts, including Zoom Video (ZM), Peloton (PTON), Shopify (SHOP) and Chegg (CHGG). But cloud computing is here to stay and is even gaining strength.