5/27/2022 4:06:09 PM
U.S. stock indexes finally held onto some momentum this week snapping what had been a painful 7-week losing streak. Bond yields retreated, and more importantly stayed lower as investors’ focus seemed to shift away from inflation and the prospects for aggressive Federal Reserve tightening towards worries about the outlook for global economic growth. That narrative was largely rooted in commentary from the Fed’s Bostic who on Monday acknowledged it could make sense to pause rate hikes in September if the data warranted. It was further reinforced by the US economic data. May Richmond Fed Manufacturing data came in dramatically lower, printing its lowest negative reading since May of 2020, while US housing data continued to show real deterioration. Friday’s core PCE data fell back below 5%, as expected, offering hope that one of the Fed’s key inflation gauges may have peaked.
Severely oversold conditions, the month end and a holiday-shortened calendar likely contributed to a setup that afforded a base in equity prices. Stock investors may have also been heartened by a continued decline in the dollar which extended a retreat from the two-decade highs seen earlier this month. WTI crude prices moved out to the highest levels since mid-March heading into next week’s OPEC+ meeting where producers are expected to adhere to the current output path. Bitcoin saw its correlation to higher beta equities falter as it, and crypto assets in general, noticeably lagged the rebound in stock markets. US Treasury yields finished the week at better than 1-month lows after the 2-year broke below 2.5% and the 10-year neared 2.7%. For the week, the S&P was up 6.6%, the DJIA gained 6.2%, and the Nasdaq rose 6.8%.
In corporate news this week, Snap dropped over 20% after warning its Q2 results would come in under the low end of its prior outlook and that the company intended to slow its hiring. Nvidia shares lost ground after reporting muted revenue guidance, anticipating a $500M hit from COVID lockdowns in China and the war in Ukraine. Macy’s bucked the larger retailer trend, along with Nordstrom, by posting a beat on its top and bottom line while raising profit guidance, as it noted consumer shopping behaviors shifted to more occasion-based apparel. Similarly strong earnings from Dollar Tree, Dollar General, and Williams Sonoma helped lift investor sentiment. However, Best Buy joined the list of retailers who cut their outlook for the year, with the electronics giant noting negative trends have continued into Q2.
JetBlue and Southwest raised their guidance, noting higher than expected summer ticket sales for vacations and business travel. Homebuilder Toll Brothers shares jumped after posting big profits and revenue beats, helped by strength in pricing. Volkswagen CEO Herbert Diess said he was seeing ‘clear improvement’ in semiconductor supplies and expects the automaker's global production can recover during the rest of this year.
Broadcom announced plans to acquire cloud computing giant VMware for $61B, as it continues to move into the enterprise software space. Wendy’s shares popped after its largest shareholder Trian said it was exploring a potential transaction to enhance shareholder value. Twitter rebounded after a filing from prospective purchaser Elon Musk in which he committed to provide an additional $6.3B in equity financing for the acquisition, seemingly contradicting his prior tweets that the deal was on hold.
SUN 5/22
(AU) Australia Labour coalition wins 72 seats in Parliament to 52 of the Liberal coalition; Anthony Albanese to become PM on Monday, May 23rd
AMZN Reportedly wants to shed 'at least' 10 million square feet of space in the NY area; Considers options to sublet the space or end warehouse leases amid cooling online sales - press
(EU) European Center for Disease Prevention and Control said to be urging EU member states to plan for monkeypox jabs - FT
(BE) Belgium introduces compulsory 21-day quarantine for monkeypox patients (first country to do so) after fourth case has been confirmed in the country - press
(CN) Shanghai's Jingan district will require all shops to shut, residents to stay at home and mass testing conducted over May 22-24th - press
(IN) India govt reportedly considers to spend additional INR2T (~$26B) to fight inflation - press
VMW Broadcom said to be in talks to acquire the co. in cash and stock deal upwards of $50B; potential terms not disclosed - US financial press
MON 5/23
(US) President Biden: Recession is not inevitable; Confirms US is considering reducing the current tariffs on China; Wants OPEC to raise oil production - comments from Tokyo
(CN) China National Health Commission (NHC) official Zhenglong: COVID situation in steady decline recently
*(DE) GERMANY MAY IFO BUSINESS CLIMATE SURVEY: 93.0 V 91.4E
(EU) EU Commission confirms to extend EU debt-rule suspension into 2023; Proposes to reinstate limits in 2024
*(EU) ECB CHIEF LAGARDE: LIKELY IN A POSITION TO EXIT NEGATIVE INTEREST RATES BY END OF Q3 2022 - Blog post
XPEV Reports Q1 (CNY) -0.90 v -0.44 y/y, Rev 7.45B v 2.95B y/y
JPM Raises FY22 NII $56B+ (prior $53B+) v $44.5B y/y; Affirms FY22 Adj expense $77B (prior $77B) v $71B y/y; Notes credit outlook remains positive - investor day slides
DPW.DE CEO: Volume of air and sea freight out of China in April was reduced but has improved in May
(US) US reportedly mulls emergency diesel reserve release to ease prices - CNN
*(IS) ISRAEL CENTRAL BANK (BOI) RAISES BASE RATE BY 40BPS TO 0.75%; MORE-THAN-EXPECTED
MRNA FDA spokesperson: June 15th will be new meeting date for EUA request for vaccine for children six months to five years old - press
(FR) ECB’s Villeroy (neutral, France): Euro area growth resilient, main problem short term is inflation
(DE) Germany Econ Min Habeck: Hopeful EU will agree Russian oil embargo within days
(US) NY Fed takes $2.05T in RRP program at 0.80%; 94 participating and accepted counterparties (new record high, first time hitting $2T)
(TR) Turkey President Erdogan: To cease talking to Greece PM Mitsotakis
ALB Raises FY22 $12.30-15.00 v $11.11e (prior $9.25-12.25), Rev $5.8-6.2B v $5.52Be (prior $5.2-5.6B), adj EBITDA $2.2-2.5B (prior $1.7-2.0B)
(CN) China Vice Premier Sun Chunlan urged officials in Beijing to take quicker moves to deal with COVID - Xinhua
ABNB Confirms will suspend China ops on July 30th; China customers may still book overseas afterwards
(HK) Hong Kong Chief Exec Lam: Unlikely to lift quarantine in my term
TUES 5/24
(EU) ECB chief Lagarde: It was a good rime to share outlook how to end negative rates; We are clearly now at a turning point - Davos interview
*(FR) FRANCE MAY PRELIMINARY MANUFACTURING PMI: 54.5 V 55.2E (18th month of expansion but lowest reading since Oct 2021)
*(DE) GERMANY MAY PRELIMINARY MANUFACTURING PMI: 54.7 V 54.0E (23rd month of expansion)
*(EU) EURO ZONE MAY PRELIMINARY MANUFACTURING PMI: 54.4 V 54.7E (23rd month of expansion but lowest reading since Nov 2020)
(FR) ECB’s Villeroy (neutral, France): ECB is in process of normalizing and maintaining accommodative stance; Sees ECB at neutral rate between 1% and 2% some time in 2023
*(UK) MAY PRELIMINARY MANUFACTURING PMI: 54.6 V 55.0E (24th month of expansion)
(EU) NATO Sec Gen Stoltenberg: We have to sit down with Turkey and address its concerns regarding Finland and Sweden NATO membership; Confident talks will succeed
BBY Reports Q1 $1.57 v $1.60e, Rev $10.7B v $10.4Be; Cuts outlook, notes negative trends have continued into Q2
ANF Reports Q1 -$0.27 v +$0.08e, Rev $813M v $802Me; Cuts FY22 outlook; Expects higher costs to remain a headwind through 'at least end-2022'
(EU) ECB's Holzmann (Austria, hawk): Ending 2022 year with positive rates is extremely important; 50bps rate hike in July would be appropriate
(HU) Hungary PM Orban refuses to discuss Russia oil embargo at EU summit on May 30-31st - FT
(SA) Saudi Foreign Min Farhan: Our country has done what it can on oil; Can do nothing more to cool elevated Px; Does not see immediate global oil shortage
*(US) MAY PRELIMINARY S&P/MARKIT MANUFACTURING PMI: 57.5 V 57.7E
*(US) MAY RICHMOND FED MANUFACTURING INDEX: -9 V 10E (last negative reading Sep 2021)
*(US) APR NEW HOME SALES: 591K V 750KE (lowest since Apr 2020)
(EU) EU Commission President Von der Leyen: Confirms do not expect to see a Russia oil ban decision reached at the EU summit on May 30-31st
(US) NY Fed takes $1.99T in RRP program at 0.80%; 92 participating and accepted counterparties
(US) SEC Commission official: Significant issues remain in reaching agreement with China regarding audit inspections - press
(RU) US Treasury confirms it will let general license that had allowed Russia to pay US bondholders to expire at 12:00ET on Weds, May 25th
INTU Reports Q3 $7.65 v $7.60e, Rev $5.63B v $5.52Be; Raises FY outlook
JWN Reports Q1 -$0.06 v -$0.08e, Rev $3.57B v $3.33Be; Affirms & authorizes new $500M share repurchase program (15% of market cap)
(US) Fourteen elementary school students and one teacher killed in Uvalde, Texas school shooting - CNN, citing TX Gov Abbott
WEN Trian Fund Management (19.2% holder) spoke with board about potential transaction to enhance shareholder value - 13D/A filing
*(NZ) RESERVE BANK OF NEW ZEALAND (RBNZ) RAISES OFFICIAL CASH RATE (OCR) BY 50BPS TO 2.00%; AS EXPECTED; Raises the rate path outlook
WEDS 5/25
AAPL Reportedly the iPhone development schedule has been impacted due to China lockdowns; Development of at least one of Apple's new iPhones 14 still remains in the engineering verification test stage - Nikkei
OCDO.UK Trading update: Cuts FY22 retail Rev growth to 'low single digit' (prior Rev 10%); Guides EBITDA margin 'low single digit'; Notes trading environment has deteriorated since Mar 2022, as has been widely reported in industry data
(RU) Russia reportedly could allow corridor for Ukraine ships with food; Insists Ukraine must de-mine ports for grain ship corridor - Russian press
MKS.UK CEO: Consumer outlook is worse for autumn and for H2 2022 comparing with H1 - post earnings comments
(EU) ECB Financial Stability Review: Sees risk of sharp corrections in asset markets if the economic outlook deteriorates as a result of Ukraine war or inflation turns out to be much higher than expected
(CN) Reportedly Beijing City health Chief Yu Luming to be removed from position - press
(UK) Sue Gray report on COVID lockdown violations published; Report finds Downing Street meeting was not a business meeting; Multiple examples of lack of respect and poor treatment of security and cleaning staff
(RU) Russia Finance Ministry: Confirms to continue servicing USD debts in Rubles (RUB); To continue servicing its foreign debts
(IN) India said to have no immediate plan to lift wheat export ban - press
Venture Global reportedly to build $13B LNG plant, pipelines on US Louisiana Gulf Coast - press
(US) Atlanta Fed GDPNow: Cuts Q2 GDP forecast to 1.8% from 2.4%
(US) Fed's George (FOMC voter, hawk) to retire in Jan 2023
(US) Fed’s Brainard (vice chair): Fed taking strong actions that will reduce inflation
(RU) Russia approves gas shipments to Gazprom Germany from Yamal LNG line for the next 90 days - Russian press
(US) NY Fed takes $1.996T in RRP program at 0.80%; 94 participating and accepted counterparties
(US) Association of American Railroads weekly rail traffic report for week ending May 21st: 507K total units, -4.1% y/y
*(US) FOMC MAY MEETING MINUTES: MOST FED OFFICIALS BACK 50BPS HIKE AT NEXT COUPLE MEETINGS; ALL OFFICIALS SUPPORT PLAN TO BEGIN SHRINKING BALANCE SHEET
VOW3.DE CEO Herbert Diess: Seeing "clear improvement" in semiconductor supplies and expects the automaker's global production can recover during the rest of this year - press
WSM Reports Q1 $3.50 v $2.99e, Rev $1.89B v $1.83Be
(CN) China Auto Industry Body CPCA: 3-week May Car Retail Sales -16% y/y; Sales from May 16th to Date +47% y/y
THURS 5/26
992.HK Reports Q4 Net $412M v $260M y/y, Rev $16.7B v $15.6B y/y
M Reports Q1 $1.08 v $0.82e, Rev $5.35B v $5.35Be; Raises guidance
VMW Confirms to be acquired by Broadcom for either $142.50/shr in cash or 0.2520 shares of AVGO stock in deal valued at ~$61B; 40-day "go-shop"
JBLU Raises Q2 Revenue at or above high-end of previous guidance (prior 11% – 16%), capacity 2-3% v 0-3%; Seeing June rev up meaningfully 20% compared to May and April - filing
(UK) Chancellor of the Exchequer (Fin Min) Sunak outlines details of support package and windfall tax on energy company profits
DLTR Reports Q1 $2.37 v $1.99e, Rev $6.90B v $6.74Be
*(US) INITIAL JOBLESS CLAIMS: 210K V 215KE; CONTINUING CLAIMS: 1.35M V 1.31ME
*(US) Q1 PRELIMINARY GDP ANNUALIZED Q/Q: -1.5% V -1.3%E; PERSONAL CONSUMPTION: 3.1% V 2.8%E
*(US) Q1 PRELIMINARY GDP PRICE INDEX: 8.1% V 8.0%E; CORE PCE Q/Q: 5.1% V 5.2%E
OPEC+ said to adhere to policy at June 2nd meeting; To raise July output by 432Kbpd - press
(US) Nevada reports Apr casino gaming Rev $1.13B, +8.6% y/y; Las Vegas strip Rev $593M, +22.8% y/y
*(US) APR PENDING HOME SALES M/M: -3.9% V -2.0%E; Y/Y: -11.5% V -8.0%E
(CN) Sec of State Blinken: Under President Xi China has become more repressive at home; US is determined to avoid a new Cold War
COST Reports Q3 $3.04 v $3.00e, Rev $55.6B v $51.8Be
005930.KR To reduce smartphone production due to weak demand; may cut 2022 smartphone output target by 10% - Korea press
(JP) Bank of Japan (BOJ) Gov Kuroda: Unless energy prices drop sharply, core CPI likely to remain ~2.0% for ~1-year
FRI 5/27
3333.HK Plans to finalise offshore debt repayment plan by July and sign agreement with creditors by December - press
TM Cuts global production 6% to ~800K in June from 850K prior, due to Shanghai lockdowns
*(US) APR PRELIMINARY WHOLESALE INVENTORIES M/M: 2.1% V 2.0%E
*(US) APR PERSONAL INCOME: 0.4% V 0.5%E; PERSONAL SPENDING: 0.9% V 0.8%E
*(US) APR PCE DEFLATOR M/M: 0.2% V 0.2%E; Y/Y: 6.3% V 6.2%E
(US) MAY FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 58.4 V 59.1E
(US) Atlanta Fed GDPNow: Raises Q2 GDP forecast to 1.9% from 1.8%
(US) Apr Dallas Fed Trimmed Mean PCE +3.0% v +3.0% m/m
