Hammerstone Markets Early Look

By admin | 04/11/2022

Early Look

Monday, April 11, 2022

U.S. futures are looking lower ahead of a busy week of economic data, including both the CPI and PPI inflation reports this holiday shortened week and the start of earnings season Thursday when big banks kick things off. S&P futures drop -0.5% to 4,462, back below its 200-day MA of 4,487. The yield on the benchmark 10-year U.S. Treasury yield rose above 2.77% on Monday after ending Friday at 2.71%, trading around the highest levels since the end of 2018 and beginning of 2019. The surging yields pressured shares of growth stocks last week. The U.S. dollar index (DXY) touches above the 100-level before paring gains to around 99.65, with more massive gains vs. the Japanese Yen while oil is lower below $96, down 2.48% after last week IEA global release of crude, US SPR release, ongoing Chinese lockdown, and a stronger dollar, all weighing on prices. In Asian markets, The Nikkei Index dropped -0.6% to 26,821, the Shanghai Index slid -2.6% to 3,167 and the Hang Seng Index tumbled -663 points or over 3% to 21,208. In Europe, the German DAX is down -0.4% to 14,225, while the FTSE 100 slips about -0.2% to 7,655. The U.S. Treasury will issue $100B across 3yr, 10yr and 30yr this week, starting off with $46B of 3yr notes today. Earlier, 10yr yields hit 2.7798% for the first time since 2019. Bitcoin prices fall nearly 4% to $41,430. No U.S. economic data today while Fed speakers today include Bostic, Bowman, Evans, and Waller.

Stocks are coming off a wild week of volatility as the S&P 500 index fell 1.26%, the Dow lost 0.27%, and the Nasdaq shed 3.86%, with some major support levels breached/tested several times late in the week. The Nasdaq 100 (QQQ) ended the day just below its 50-day MA of $349.50 (down -3.6% this week) and the SPUZ ends the day just below its 200-day MA of 4,486. Surging Treasury yields added to market anxiety as the  30-year yield rose 0.32 bps this week to 2.745% this week, the largest one-week yield gain since Friday, March 13, 2020, the benchmark 10-yr hit its highest yield since Tuesday, March 5, 2019, rising 33 bps on the week to 2.713% up for six consecutive trading days and the 2-yr yield gained 8.8 bps to 2.518%, up for five consecutive weeks and up over 100 bps in 5-weeks on rising rate hike expectations. The Treasury curve continued to steepen Friday following declines sparked by the Federal Reserve’s plan for aggressive monetary-policy tightening. The U.S. dollar gained for a seventh day on Friday, while commodities saw a broad rally as the Russia’s war in Ukraine escalates. Some market concerns heading into the start of earnings season later this week as according to FactSet, the estimated earnings growth rate for the S&P 500 in Q1 is 4.5%, which would be lowest growth rate since Q4 2020.

Market Closing Prices Yesterday

• The S&P 500 Index dropped -11.93 points, or 0.27%, to 4,488.28
• The Dow Jones Industrial Average rose 137.55 points, or 0.40%, to 34,721.12
• The Nasdaq Composite tumbled -186.30 points, or 1.34%, to 13,711.00
• The Russell 2000 Index declined -15.24 points, or 0.76% to 1,994.56

Economic Calendar for Today

• No Major Economic Data Released

Other Key Events:

• American Association for Cancer Research (AACR) Annual meeting 4/8-4/13
• Needham Annual Healthcare Conference (virtual), 4/11-4/14

World News

• China March CPI higher: flat m/m vs -0.1% consensus while 1.5% y/y vs 1.2% consensus; China March PPI higher: 8.3% y/y vs 7.9% consensus
• First-round French election results showed President Emmanuel Macron with a greater lead than polls had suggested over far-right challenger Marine Le Pen; with ~ 97% of votes counted Macron had 27.35% of vote with Le Pen on 23.97% & Melenchon on 21.7% as per BBC
• Finland & Sweden are set to join NATO as soon as summer, Finland is expected to apply in June with Sweden following; US officials said membership for both Nordic countries was a topic of conversation and multiple sessions during last week’s Foreign Minister talks – Times
• China auto sales plunged in March as the country’s curbs to rein in COVID-19 outbreaks took their toll, while TSLA was among automakers feeling the pain of limits on production

Sector News Breakdown

Consumer

• JetBlue Airways Corp. (JBLU) this weekend said it would reduce flights in May and throughout the summer due to staffing limitations, after canceling more than 300 flights over the weekend. Alaska Air Group Inc. (ALK) last week said it would trim spring flying to catch up on pilot training. Meanwhile, other carriers including American Airlines Group Inc. say they are prepared for the summer surge after a monthslong hiring spree.
• Nio (NIO) suspended production on Saturday after China’s measures to contain the recent surge of COVID-19 cases disrupted operations at its suppliers. “Due to the impact of this Nio has had to halt car production.” NIO has also increased prices for three of its model and battery rental service BaaS (Battery as a Service)
• Hyzon Motors (HYZN) to supply 18 of its fuel cell electric trucks to Hylane GmbH, a unit of motor insurer DEVK Versicherung as deliveries expected to begin in late 2022
• China auto sales plunged in March as the country’s curbs to rein in COVID-19 outbreaks took their toll, while TSLA was among automakers feeling the pain of limits on production. TSLA sales tumbled 11.7% in March from a year earlier to 2.23 mln vehicles – its first decline in three months, according to the China Association of Automobile Manufacturers

Energy, Industrials and Materials

• Schlumberger (SLB) upgraded to Overweight and tgt raised to $55 from $43 at Piper amid higher OFS estimate; also upgraded shares of ChampionX (CHX)
• Shell Plc (SHEL) and TotalEnergies SE (TTE) will be at the forefront of European efforts to pivot away from Russia and toward renewable energy, according to Barron’s; notes both stocks are cheap with Shell trading at 6.4x projected 2022 earnings while Total trades at just 4.8x
• Star Bulk Carriers (SBLK) files to sell 33.2M shares of common stock for holders
• The average U.S. price of a gallon of regular-grade gasoline dropped 10 cents over the past two weeks to $4.27 per gallon

Healthcare

• Affimed N.V. (AFMD) rises after the co updated on a Phase 1/2 study of AFM13 precomplexed with cord blood-derived natural killer cells in lymphoma; Affimed said the data showed a 100% objective response rate and improvement in the rate of complete responses from 38% to 62% after a second cycle in 13 patients were treated at the recommended phase 2 dose.
• Veru’s (VERU) novel COVID-19 drug candidate reduces deaths by 55% in hospitalized patients in interim analysis of phase 3 study; independent data monitoring committee halts study early for overwhelming efficacy; to meet with FDA to seek emergency use authorization
• Pfizer (PFE)/BioNTech (BNTX) and Moderna (MRNA) are expected to dominate the global vaccine market this year with a combined market share of 88%, projected to generate $36.4B and $18.7B in sales, down by 15% and 27% from previous estimates, respectively as per Airfinity. Oxford/AstraZeneca (AZN) and Johnson & Johnson (JNJ), which used a traditional method to develop their COVID-19 shots, are estimated to generate $3B and $2.87B in sales, respectively and Novavax (NVAX) vaccine stands at $2.74B, down ~41% y/y https://bit.ly/37uK853
• BioCryst (BCRX) downgraded to Neutral from Buy at Bank America with a $14 price target
• BeiGene (BGNE) IRC Determines BRUKINSA demonstrates superior overall response rate versus ibrutinib in final response analysis of ALPINE Trial in CLL

Technology, Media & Telecom

• Elon Musk decided not to join Twitter Inc.’s (TWTR) board of directors, Chief Executive Parag Agrawal said, a sharp reversal that cast new uncertainty over the relationship between the social-media platform and its largest shareholder. The move comes after Musk revealed a 9.2% stake in Twitter that was made public last Monday
• Thoma Bravo is set to acquire SailPoint (SAIL) for $6.9B, or $62.25 a share, The Financial Times’ reported, citing two people with direct knowledge of the details. The deal is expected to be announced on Monday morning. https://on.ft.com/3LY0X7d
• AT&T Inc. (T) CEO John Stankey says inflation could prompt the wireless and broadband company to raise prices for some core services while it continues to cut costs after getting out of the media business – WSJ. The company on Friday completed the planned separation of its film-and-TV empire into a new publicly traded company called Warner Bros. Discovery. AT&T shareholders will get a 71% stake in the new entity, which will be led by Discovery Inc.’s David Zaslav.

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