Monday, April 18, 2022
U.S. stock futures are looking lower, with the S&P 500 down about -0.4% to 4,370 (overnight high 4,390 and lo 4,355.50) as traders return from the 3-day holiday weekend after the S&P dropped -2.1% last week, its 2nd straight weekly decline on rising Treasury yields, inflation and rate hike expectations by the Fed. Investors continue to weigh the prospect of faster policy tightening by the Federal Reserve, signaling a bearish start to the week. Goldman Sachs said today in a note that the Fed’s signaling on rates, which will likely deliver another seven or eight rate hikes this year, has boosted the odds of a near-term recession to around 35%. Meanwhile, U.S. natural gas prices surged to the highest intraday level in over 13 years as robust demand tests drillers’ ability to expand supplies. Last week the S&P finished week down 2.1%, and Nasdaq 100 loses 3% (both 2nd straight week down). In Asian markets, The Nikkei Index dropped -293 points or over 1% to 26,799, the Shanghai Index dipped about -0.5% to 3,195, and in Hong Kong, the Hang Seng Index was closed. In Europe, stock markets remain closed for holiday (reopen tomorrow). Asian markets dip after China reported annual Q2 GDP of 4.8%, which topped expectations, but was still far from the goal of 5.5% growth. Gold prices hit their highest levels in since mid-March, nearing $2,000 an ounce as rising inflation fears and the uncertainty surrounding the Russia-Ukraine conflict dampens risk sentiment and drives investors towards the safety of the yellow metal. Bitcoin prices are tumbling, down 3.5% below $39,000 and Ethereum declines 4% to $2,900.
Market Closing Prices Yesterday
- The S&P 500 Index dropped -54.00 points, or 1.21%, to 4,392.59
- The Dow Jones Industrial Average fell -113.36 points, or 0.33%, to 34,451.23
- The Nasdaq Composite tumbled -292.51 points, or 2.14%, to 13,351.08
- The Russell 2000 Index declined -20.12 points, or 0.99% to 2,004.98
Economic Calendar for Today
- 10:00 AM ET NAHB Housing Market Index for April
- Earnings Before the Open: BAC, BK, GNTY, SCHW, SNDA, SYF
- Earnings After the Close: CFB, ELS, ENSV, FBK, FNB, HOPE, JBHT, LAKE, NBHC, PNFP, SFBS
- Goldman Sachs said history suggests that the Fed faces a hard task tightening policy enough to cool inflation without causing a recession, puts the odds of a contraction at about 35% over the next 2 years
- China Q1 2022 GDP beats estimates at 4.8% y/y (4.4% was the expected); China saw a faster-than-expected GDP growth in the first quarter, data released by the National Bureau of Statistics showed Monday, despite parts of the country being hit by Covid lockdowns in March.
- China March 2022 Industrial production beats rising +5.0% y/y (expected 4.5%), while monthly retail sales miss.
- Empire State Manufacturing Index jumped +24.60 vs. 2 consensus and -11.8 prior; new orders index climbed thirty-six points to 25.1, and the shipments index rose forty-two points to 34.5
- March Industrial Production rose +0.9% m/m vs. +0.4% expected and +0.9% prior, while Capacity Utilization was +78.3% vs. +77.8% consensus and +77.7% prior
- China’s central bank cut the amount of cash banks must hold in reserve, as the People’s Bank of China (PBoC) lowered the reserve requirement ratio for most banks by 25 basis points and for smaller banks by 50 basis points
- North Korea fired two short-range projectiles toward the east sea of the Korean Peninsula, as South Korea and the U.S. prepare for a military drill starting Monday. The missiles were launched at around 6 p.m. Saturday and flew about 110 kilometers (62 miles) at an altitude of 25 km
Sector News Breakdown
- Didi Global Inc. (DIDI) shares fall -20%; will hold an extraordinary general meeting on May 23 to vote on delisting its shares from the New York Stock Exchange – Bloomberg
- Rivian Automotive Inc. (RIVN) CEO is warning that the auto industry could soon face a looming shortage of battery supplies for electric vehicles — a challenge that he says could surpass the current computer-chip shortage. Car companies are trying to lock up limited supplies of raw materials like cobalt, lithium and nickel that are key to battery making – WSJ
- Mullen Automotive (MULN) said it company’s plans to begin EV battery pack production at California facility
Energy, Industrials and Materials
- Southwest Gas (SWX) announced that because of the receipt of an indication of interest well above Carl Icahn’s $82.50 per share offer, the Southwest Gas board has authorized the review of a full range of strategic alternatives to maximize stockholder value
- Utility stocks normally suffer when bond yields are rising, which typically occurs when the economy is strengthening, but the current round of higher yields has helped utility shares, and Barron’s believes their run-up is not over. Today’s higher yields are a result of the Fed trying to slow economic growth, which is scaring investors into utilities
- WTI crude for May delivery rose +2.6% Thursday to settle at a two-week high $106.95 per barrel while June Brent crude ended +2.7% to $111.70/bbl, capping respective weekly gains of 8.8% and 8.7%. U.S. natural rose to $7.30/MMBtu on Thursday, capping a 16% surge for the week, the highest for a front-month contract since October 2008.
- Bank of America’s (BAC) delinquency rate for March slipped to 0.93% from 0.95% in February; net charge-off rate of 1.38% increased from 1.26% in February and compared with 3.17% in the year-ago month
- Citibank (C) credit card net charge-off for March increased to 1.23% from 1.12% in February, still below 2.49% in March 2021; delinquency rate of 0.87% edged up from 0.85% in February and compared with 1.26% in the same month a year ago.
- Discover Financial Services (DFS) credit card delinquency rate 1.09% at March end vs 1.10% at February end; credit card charge-off rate 1.08% at March end vs 1.20% at February end
- JPMorgan Chase’s (JPM) March credit card delinquency rate of 0.71% was little changed from 0.72% in February and stays well below the 0.89% rate in March 2021; net charge-off rate of 1.09% in March 2022, rose slightly from 1.04% in February and compares with 2.03% y/y
- Progressive (PGR) downgraded to Underweight from Neutral at Piper Sandler
- Synchrony Financial (SYF) Q4 EPS $1.73 vs. est. $1.54; Q4 revs $3.38B vs. est. $3.61B; says board approved incremental $2.8B share repurchase authorization; Q4 net interest income $3,789M
- TG Therapeutics Inc. (TGTX) shares down -24% after saying late Friday it is pulling its Ukoniq lymphoma treatment from the market after a study showed a possible increased risk of death in patients taking the drug; also said it is withdrawing its application seeking FDA approval of Ukoniq in combo with ublituximab for the treatment of adults with chronic lymphocytic leukemia and small lymphocytic lymphoma.
- Biogen (BIIB) upgraded to Overweight from Equal Weight at Wells Fargo with a price target of $265 from $235 as believes the company’s base-business may be worth more than what Street thinks and sees value at $180-$200/share in sum-of-the-parts scenario
- Progyny Inc. (PGNY), which sells companies infertility care plans for its employees, is profitable and growing fast, according to Barron’s; says although the stock struggled during the height of pandemic, the decline in Covid-19 cases and loosening restrictions presents investors with a buying opportunity.
Industrials & Materials
- FedEx Corp.’s (FDX) mentioned positively in Barron’s noting its share price has changed little over the past five years, badly trailing the S&P 500, but with a new CEO set to take over for founder Fred Smith on June 1, and with a focus on improving its ground business, the company could catch up to rival UPS
Technology, Media & Telecom
- Twitter (TWTR) announced late Friday that its board of directors has unanimously adopted a limited duration shareholder rights plan following an unsolicited, non-binding proposal to acquire Twitter.
- Twitter Inc. (TWTR) founder Jack Dorsey’s first tweet was converted to a nonfungible token last year and sold for $2.9 million. Now, it may be resold for less than $14,000, a reflection of a maturing NFT market. Sina Estavi, CEO of Malaysia-based blockchain company Bridge Oracle, paid $2.9 million last March for the NFT, a digital certificate that says he owns Mr. Dorsey’s tweet, which reads “just setting up my twttr.” – WSJ https://on.wsj.com/3uOIvZ8
- Intel (INTC) is considering expanding its outsourced backend operations to include PC-use chipsets, and Powertech Technology is expected to become the first Taiwan-based OSAT to win the deal, potentially in the second half of 2023 at the earliest – Digitimes
- Qualcomm (QCOM) downgraded to Neutral from Outperform at SMBC Nikko, lowering estimates, and lowering price target from $215 to $155 as struggle to find many positive catalysts in the next 6-12 months
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