Morning Preview: September 22, 2022

Early Look

Thursday, September 22, 2022

Futures

Up/Down

%

Last

Dow

63.00

0.21%

30,345

S&P 500

4.25

0.12%

3,808

Nasdaq

7.50

0.07%

11,717

 

 

U.S. equity futures are edging higher after stocks tumbled Wednesday, and the dollar gained as Fed Chair Jerome Powell vowed officials would crush inflation after they raised interest rates by 75 basis points for a third straight time and signaled even more aggressive hikes ahead than investors had expected. The Fed decision, which was unanimous, takes the target range for the benchmark federal funds rate to 3% to 3.25%, the highest level since before the 2008 financial crisis. The dot plot was revised higher across the board, with the key 2023 median dot moving up to 4.625% and majority in favor of hiking above 4.25% this year. The shorter end of the yield curve rose as the Treasury 2-year yields hit highs above 4.1% before slipping (highest since 2007) but the longer end yields declined, widening the inversion gap to near 50bps. The statement also provided some dour economic projections, including weak GDP growth of 0.2%, and unimpressive 1.3% growth next year. The unemployment rate is now expected to rise 0.7% to 4.4% by the close of 2023. In non-Fed news, geopolitical clouds rumbled in the background as Russian President Vladimir Putin ordered 300,000 troops to help turn around his war effort against Ukraine and warned that his threats to use nuclear weapons is “not a bluff,” provoking a strong rebuke from U.S. President Joe Biden. The S&P 500 fell 1.7% today, its 29th decline of the year of between 1% and 2%.

 

In Asian markets, The Nikkei Index fell -159 points to 27,153, the Shanghai Index slipped -8 points to 3,108, and the Hang Seng Index slides nearly -300 points to 18,147. In Europe, the German DAX is down -0.5% to 12,700, while the FTSE 100 is down =0.25% to 7,215. Lots of central bank action this morning after the FOMC 75 bps rate hike yesterday, with the SNB Bank raising rates, the BOJ staying steady but intervenes in FX market and the Bank of England rate decision coming up later.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -66.00 points, or 1.71%, to 3,789.93

·     The Dow Jones Industrial Average fell -522.45 points, or 1.70%, to 30,183.78

·     The Nasdaq Composite tumbled -204.86 points, or 1.79%, to 11,220.19

·     The Russell 2000 Index declined -25.35 points, or 1.42% to 1,762.16

 

Economic Calendar for Today

·     8:30 AM ET           Weekly Jobless Claims…est. 218K

·     8:30 AM EST         Continuing Claims…est. 1.40M

·     8:30 AM ET           Current Account for Q2…est. (-$260.6B)

·     10:00 AM ET         Leading Index M/M for August…est. (-0.1%)

·     10:30 AM ET         Weekly EIA Natural Gas Inventory Data

·     11:00 AM ET         Kansas City Fed manufacturing for September

 

Earnings Calendar:

·     Earnings Before the Open: CVA DRI DYNT FDS FLUX

·     Earnings After the Close: AIR CAMP COST FDX IBEX RSSS

 

Other Key Events:

·     DA Davidson Annual Diversified Industrials & Services Conference, 9/22-9/23 in Nashville

·     Salesforce User Conference: Dreamforce 2022, 9/20-9/22, in San Francisco, CA

·     Sidoti Fall Small Cap Conference (virtual), 9/21-9/22

·     Wells Fargo 5th Annual Consumer Conference, 9/20-9/22, in CA

 

 

Macro

Up/Down

Last

Nymex

0.42

83.34

Brent

0.41

90.24

Gold

1.00

1,676.70

EUR/USD

0.0037

0.9874

JPY/USD

-1.28

142.75

10-Year Note

+0.022

3.534%

 

 

World News

·     The Bank of Japan (BOJ) leaves short-term rate target unchanged at -0.1%, maintains 10Y JGB yield target around zero; decides to end pandemic relief program as scheduled; decision on YCC was unanimous; will take additional steps without hesitation as needed while watching pandemic’s impact; need to be vigilant on financial/FX moves and the impact on economy and prices; core inflation likely to accelerate towards year end and slow thereafter

·     Bank of Japan intervened in the foreign exchange market on Thursday to buy yen for the first time since 1998, in attempt to shore up the battered currency after the Bank of Japan stuck with ultra-low interest rates. The move sent the dollar plunging over 2% to around 140.3 yen, after trading more than 1% higher earlier on the BOJ’s decision to stick to its super-loose policy stance

·     The Swiss National Bank raised interest rates by 75 basis points – its second increase in 15 years – and effectively ending a decade of negative interest rates in Europe. The franc slid against the dollar and euro, while Swiss government bond yields surged

·     The bull-bear spread in the American Association of Individual Investors (AAII) weekly survey was -43.2 vs -19.9 last week. Bulls fall to 17.7% from 26.1%, Neutrals fall to 21.4% from 27.9%, and Bears rise to 60.9% from 46%

·     Goldman Sachs cut China’s 2023 growth forecasts to 4.5% from 5.3%, citing continued adherence to the zero covid policy with any opening unlikely before Q2 2023

 

Sector News Breakdown

Consumer

·     KB Homes (KBH) Q3 EPS $2.86 vs. est. $2.69; Q3 revs rose 26% y/y to $1.84B vs. est. $1.87B; Q3 homes delivered increased 6% to 3,615, qtr-ending backlog value up 9% to $5.26B; sees Q4 housing revenues in the range of $1.95B-$2.05B and average selling price expected to be approximately $503,000

·     Lennar Corp. (LEN) Q3 EPS $5.18 vs. est. $4.88; Q3 revs rose 29% y/y to $8.9B vs. est. $9.0B; Q3 deliveries increased 13% to 17,248 homes, new orders decreased 12% to 14,366 homes; new orders dollar value decreased 11% to $6.7B, backlog of 25,734 homes – consistent with prior year and gross margin on home sales improved 190 basis points to 29.2%

·     Steelcase (SCS) cuts quarterly dividend to 10c from 14.5c; Most backlog of customer orders was about $946 m at Q2 end; 2Q adj EPS $0.21 vs est. $0.13 on revs $863.3Mm vs est. $882.75Mm; guides 3Q adj EPS $0.17-0.21 vs est. $0.23 with revs $825-850Mm vs est. $856.7Mm

·     PlayUp Ltd. is merging with a special purpose acquisition company in a deal that will value the online betting operator at $350 million. The transaction with IG Acquisition Corp. will help fund expansion of the business and is expected to close in the first quarter – Bloomberg

 

Energy, Industrials and Materials

·     BP PLC (BP) said two employees have died after suffering injuries in a fire at its Husky Toledo Refinery in Ohio; said that it had shut down the refinery, which it operates. It owns a 50% stake in the facility

·     Generac (GNRC) positive mention in Barron’s saying shares have been falling sharply this year, and that creates an opportunity for investors to pick up a growth stock at a value-stock price. https://bit.ly/3DPpued

·     HB Fuller (FUL) Q3 adj EPS $1.06 vs. est. $1.05; Q3 revs +13.8% y/y to $$941.2M vs. est. $944.2M; increasing FY22 adj ebitda expectations to a range of $540M-$550M or 16% to 18% growth up from the previously provided range of $530M-$550M; sees FY organic revenue growth in range of 17%-18% excluding the impact of the extra week

·     TOP Ships (TOPS) announced that it has determined to affect a 1-for-20 reverse stock split of the Company’s issued common shares

·     Ideanomics (IDEX) files to sell 151.5M shares of common stock for holders

 

Financials

·     Credit Suisse (CS) has drawn up plans to split its investment bank in three, the Financial Times reported on Thursday, where under proposals to the board, the bank is looking to sell profitable units such as its securitized products business to prevent a damaging capital raise

·     Deutsche Bank (DB) CFO said origination and advisory has had a very difficult year; still at high end of range of 26-27 billion euros revenue in 2022; said Q3 revenue at investment bank in range of 2-2.5 billion euros; would expect origination and advisory business to come back in h2 2023; loan growth continuing in Q3 in corporate and private bank

·     Coinbase (COIN) Tested Group to Speculate on Crypto. The company completed a $100 million transaction before ending the effort. It says that it hasn’t engaged in proprietary trading – WSJ https://on.wsj.com/3fcw2cw

 

Healthcare

·     Eli Lilly (LLY) upgraded to Buy from Neutral at UBS with a price target of $363, up from $335 as now views Eli Lilly as the most attractive name in large cap pharma, with the greatest potential upside to estimates

·     Merck (MRK) announced that the U.S. District Court for the Northern District of West Virginia ruled in favor of the company in a patent infringement suit against Viatris (VTRS) related to sitagliptin, an active ingredient in Januvia, Janumet and Janumet XR

 

Technology, Media & Telecom

·     Accenture (ACN) Q4 EPS $2.60 vs. est. $2.58; Q4 revs $15.42B vs. est. $15.43B; expects FY revenue growth to be in the range of 8% to 11% in local currency. Accenture expects operating margin for the full fiscal year to be in the range of 15.3% to 15.5%; sees FY23 EPS $11.09-$11.41, below consensus $12.00; board approves additional $3B share repurchase plan

·     The U.S. Federal Trade Commission on Wednesday rejected a bid by Amazon.com Inc (AMZN) to quash demands that both Chief Executive Andy Jassy and Executive Chairman Jeff Bezos testify at investigative hearings.

·     Loop Media (LPTV) 2.4M share Secondary priced at $5.00

 

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