Hammerstone Markets Early Look

Monday, March 14, 2022

 U.S. futures are looking higher ahead of a very busy week for major averages that includes a 2-day FOMC rate meeting decision (25-bps rate hike expected), inflation data (Feb PPI) and retail sales data and of course more developments out of Europe. Stock futures rise along gains in European markets as negotiators from Russia and Ukraine prepared for a fresh round of talks. Later today, the U.S. and China plan to hold their first high-level, in-person talks since Russia’s full invasion of Ukraine. Outside of the war in Ukraine, the FOMC and rate hikes remain a hot topic this week. Given Fed Chairman Powell’s recent testimony to congress supporting a 25-bps hike this meeting, investors will look to the Fed’s outlook on hiking plans for the rest of the year as Russia-Ukraine turmoil and resulting sanctions against Moscow roil markets. Global bond markets tumble, pushing yields higher, with the benchmark 10-year up 8 bps to 2.087% (off 2022 highs above 2.1%). Stocks are looking to bounce back after another dreadful week, where the S&P 500 lost 2.9%, the Nasdaq dropped -3.5% and the Dow lost 2%, falling for five-straight weeks now. Commodity prices also remain volatile with oil prices falling over 4% early back around the $100 per barrel level. Top Russia/Ukraine exports such as wheat, metals, oil have been hit with numerous sanctions from the U.S. and other nations since its invasion of Ukraine about two weeks ago, which has impacted food costs and risen energy prices, with consumers feeling the pinch.

In Asian markets, The Nikkei Index rose 145 points to 25,307, the Shanghai Index dropped -2.6% to 3,223 and the Hang Seng Index tumbled over 1,000 points or roughly 5% to 19,531, dropping below 20,000 marks for the first time since 2016. Meanwhile the Hang Seng Tech Index fell below the 4,000-mark hitting a new all-time low. Asian markets plunged after reports China has partially locked down the cities of Shanghai and Shenzhen for a week as Covid-19 cases rise. In Europe, the German DAX is up 2.8% or over 380 points to move back above 14,000, while the FTSE 100 gains about +0.5% to 7,190.

Market Closing Prices Yesterday

·      The S&P 500 Index dropped -55.21 points, or 1.30%, to 4,204.31

·      The Dow Jones Industrial Average fell -229.88 points, or 0.69%, to 32,944.19

·      The Nasdaq Composite tumbled -286.16 points, or 2.18%, to 12,843.81

·      The Russell 2000 Index declined -32.00 points, or 1.59% to 1,979.67

Economic Calendar for Today

·      No U.S. major economic data

Earnings Calendar:

·      Earnings Before the Open: AVEO, CECE, CORR, FREE, FSTX, JAGX, MTBC, PRTK

·      Earnings After the Close: ACGR, ASUR, COUP, CVGW, DMAC, DMS, ENZ, EVLV, HOFV, HSDT, ID, IDW, LIFE, MTN, PEI

Other Key Events:

·      Deutsche Bank Media, Internet & Telecom Conference, 3/14-3/16, in Florida

·      Mizuho 6th Annual Energy Summit (virtual), 3/14-3/15

·      Roth Annual Conference, 3/14-3/16, in CA

·      China Retail Sales, Industrial Production for February

World News

·      Ukrainian negotiator and presidential adviser Mykhailo Podolyak says Russia is beginning to talk constructively, thinks will achieve results in a matter of days, Russian delegate Leonid Slutsky, feels that progress may grow in the coming days and lead into documents for signing - Reuters

·      NATO’s Secretary-General Jens Stoltenberg says that recent false claims by Russia that Ukraine has chemical and biological weapons could be seen as Russia’s justification to use its own chemical weapons in combat – CNBC

·      Goldman Sachs revised down its year-end target for the S&P 500 index to 4,700 from 4,900 previously due to higher commodity prices hampering consumer demand and economic growth

·      China has partially locked down the cities of Shanghai and Shenzhen for a week as Covid-19 cases rise. Shenzhen is home to major local tech companies and latest restrictions could see further supply chain disruptions - Nikkei

Sector News Breakdown

Consumer

·      Macau casinos tumble overnight as China locks down technology hub Shenzhen as Covid cases jump; watch shares of WYNN, MLCO, LVS, MGM

·      Ford Motor (F) agreed a memorandum of understanding with South Korea's SK On and Turkey's Koc Holding to develop an electric vehicle batter plant in southeastern Europe

·      Tyson Foods (TSN) downgraded to Market Perform from Outperform at BMO Capital

Energy

·      The average U.S. gasoline price has risen 22% in 2-weeks to a record $4.43 a gallon

·      Warren Buffett’s Berkshire Hathaway Corp. (BRK.A) and its subsidiaries boosted their stake in red-hot Occidental Petroleum (OXY) by another $1.5B billion over the past week just as oil prices were peaking, a new filing show. The purchase is in addition to some $3B of OXY stock bought less than two weeks ago – disclosed in an SEC filing

·      Ballard Power Systems (BLDP) GAAP EPS of -$0.15 misses by $0.08, revenue of $36.7M beats by $10.71M; issues FY22 guidance; Adjusted EBITDA was -$25.5M, compared to -$14.5M in Q4 2020; received ~$21.2M of new orders in Q4, and delivered orders valued at $36.7M, resulting in an Order Backlog of ~$93.1M at end-Q4.

·      Equinor (EQNR) is one of the best-kept secrets in the oil and gas industry, according to Barron's noting that the company already is realizing a financial windfall from soaring European gas prices, and if the continent is serious about reducing its exposure to Russian gas in the coming years, the company should benefit.

·      U.K. households face a 38 billion pounds ($50 billion) hit from a surge in electricity and gas costs exacerbated by Russia’s invasion of Ukraine, the Financial Times newspaper reported

Healthcare

·      Calliditas Therapeutics (CALT) has expanded its licensing agreement with Everest Medicines II Limited to extend the territory covered to include South Korea for an upfront payment of $3M as well as additional payments and royalties related to future potential approvals and commercialization of Nefecon in South Korea

·      Ideaya Biosciences (IDYA) signed additional clinical trial collaboration and supply agreements with Pfizer (PFE) to evaluate darovasertib and crizotinib combination therapy in a potential phase 2 trial in patients with metastatic uveal melanoma (MUM) and in a phase 1 study in patients with cMET-driven tumors

Industrials & Materials

·      FMC Corp. (FMC) mentioned positively in Barron’s noting shares have gained 9.2% this year, buoyed by rising crop prices following Russia's invasion of Ukraine and expectations that they will lead to greater profits for the pesticide maker. Normally, these kinds of moves should be "faded," a contrarian strategy that trades against a prevailing trend. But in the case of FMC, rising prices can be the catalyst investors need to take another look at a high-quality specialty-chemical producer that had a difficult 2021.

·      Rio Tinto PLC (RIO) said Monday that it has made a nonbinding proposal to acquire the remaining 49% shareholding in Turquoise Hill Resources Ltd. (TRQ) for $2.7B, the holding company of the Oyu Tolgoi copper-gold project in Mongol

·      Kraton (KRA) announced it will collaborate with SABIC, a chemicals company, to produce ISCC PLUS Certified renewable Styrenic Block Copolymers, or SBC, at Kraton's manufacturing facility in Berre, France

Technology, Media & Telecom

·      Shares of US listed China stocks slide (BABA, BIDU, BILI, JD, NTES, PDD) on rising COVID-19 infections in China and latest tech regulations; Meanwhile, China's cyberspace regulator issued a new set of draft measures aimed at protecting minors, demanding online gaming, livestreaming, audio and video platforms to set up a "youth mode" for minors

·      Foxconn has halted output at is iPhone site in Shenzhen, China

·      Nokia (NOK) upgraded to Outperform from Market Perform at Raymond James

·      JD.com (JD) says its JD Logistics subsidiary agrees to acquire Chinese logistics firm Deppon Logistics for ~9B yuan ($1.42B) to boost its network infrastructure in the country.

·      Volt Information Sciences Inc. (VOLT) has agreed to be acquired by Vega Consulting Inc. for $6 a share, the companies said; Volt, a staffing company, said that the cash deal is expected to close in the second quarter of 2922.

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