Daily Markets: Stocks Look to Recover in End of Week Trading

Today’s Big Picture

Asia-Pacific equity indexes ended today’s session up across the board. Taiwan’s TAIEX gained 0.78%, Australia’s ASX All Ordinaries rose 1.20%, Japan’s Nikkei added 1.27% while China’s Shanghai Composite and Korea’s KOSPI advanced 1.60% and 1.81%, respectively. Leading the way were India’s Sensex, up 2.91% and Hong Kong’s Hang Seng which closed up 2.96%. By mid-day trading, European equity indices are up across the board, and U.S. futures point to a reprieve of sorts with a strong open indicated for later this morning.

With a barren U.S. economic calendar and only a handful of fresh earnings reports this morning, absent some major development elsewhere, investor focus will likely remain on the week’s disappointing retail earnings reports and today’s international economic data. Seasoned investors will recognize that even in a bear market, there can be powerful moves higher. After the tumultuous week for stocks, it would be nice end on a high note. However, ahead of next week’s Flash PMI data for May as well as the latest data for the Fed’s preferred inflation metric, the PCE Price Index, we have to consider the possibility a strong start to today’s U.S. trading could fade late in the day as short-term profits are booked and more defensive positions are put into play. The sobering view is the turbulent market environment is likely to be with us until we have a higher degree of confidence in the Fed’s tightening efforts and its impact on the U.S. economy.

Friends, it’s poised to be a long, hot summer but there could be some wonderful stock bargains to be found along the way. 

Data Download

International Economy

Last night the April YoY CPI data for Japan was released with the top line figure coming in line with expectations at 2.5% more than doubling the previous figure of 1.2%. Core CPI (ex-Fuel and Food) printed at 0.80%, which is the first positive Core CPI print since July 2020. 

German YoY PPI for April was released at 33.5% coming in a little hotter than expectations of 31.4% and also above the previous print of 30.9% as energy costs continue to put pressure on manufacturing.

UK YoY Retail Sales growth for April was released showing a contraction of 4.9%. While stronger than the expectation of a 7.2% contraction approaches levels not seen since January of last year and compares poorly to the previous reading showing 1.3% growth.

10:00 AM ET will see the release of preliminary Eurozone Consumer Confidence for May with expectations of -21.4 compared to the previous reading of -22.0.

Domestic Economy

Count your blessings as no hard or soft U.S. economic data is expected to be published today. Enjoy the break because next week we get the first look at how the manufacturing and services economies fared in the month of May when we receive the Flash PMI reports from S&P Global for the US, UK, Eurozone, and Japan. 

Markets

Growth and earnings prospects were once again in question yesterday following another string of disappointing earnings reports while oil priced zeroed in on $110 per barrel leading to what can be billed as a choppy day of trading. The S&P 500 shed 0.58% while the Nasdaq Composite closed the day down 0.26%. The Dow Jones Industrial Average lost 0.75% on the day while the Russell 2000 added 0.8%. Eight of the 11 S&P 500 sectors closed lower led by consumer staples, information technology, and industrials. Including yesterday’s moves, here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: -13.99%
• S&P 500: -18.16%
• Nasdaq Composite: -27.21% 
• Russell 2000: -20.84%
• Bitcoin (BTC-USD): -36.73%
• Ether (ETH-USD): -46.64%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, Booz Allen Hamilton (BAH), Deere & Co. (DE), and Foot Locker (FL) are expected to report their quarterly results. 

Ross Stores (ROST) came up short relative to consensus expectations for its April quarter with EPS of $0.97 per share while revenue for the quarter fell 4.1% YoY to $4.33 billion vs. the expected $4.54 billion. Comparable store sales for the April quarter declined -7%, and the company sees them falling 4%-6% in the current quarter and 2%-4% for its full fiscal year. That led Ross Stores to guide its current quarter and full year EPS below consensus expectations, sending ROST shares lower in after-market trading last night. 

VF Corp. (VFC) also came up short with its March quarter results with EPS of $0.45 vs. the $0.47 consensus while revenue for the quarter rose 9.4% YoY to $2.82 billion, a smidge below the $2.83 billion consensus. For its full fiscal year, VF sees its top line rising 7% YoY in constant currency, which implies ~$12.67 billion vs. the $12.7 billion consensus. The company now expects revenue to increase at least 7% for the upcoming year, led by low double-digit and mid-single digit gains in North Face and Van

March quarter results from Deckers Outdoor (DECK) handily beat consensus expectations led by revenue that rose 31.1% YoY to $736 million. For its full year, the company sees revenue of $3.45-$3.50 billion vs. the $3.44 billion consensus with EPS of $17.40-18.25 vs. the $18.11 consensus forecast. 

While Applied Materials (AMAT) missed April quarter expectations and issued downside guidance for its July quarter, citing China’s lockdown and supply chain issues, it also shared its order book for 2022 is full. That led the company to share it sees a stronger 2023 vs. 2022 as it sees unconstrained demand for wafer fab equipment at $100+ billion. 

April quarter revenue and EPS topped consensus expectations at cybersecurity company Palo Alto Networks (PAWN) as billings for the quarter rose 40% YoY to $1.8 billion. The company guided its July quarter revenue to $1.53-$1.55 billion vs. $1.39 billion for the April quarter and the $1.53 billion consensus. For the current quarter, Palo Alto targets billings of $2.32-2.35 billion.

Canada is banning China's Huawei Technologies and ZTE Corp. (ZTCOY) from providing 5G as well as 4G) services in the country. Providers who have already installed the gear will also be required to remove it without compensation or reimbursement. 5G machinery must be removed by June 2024, while companies using related 4G equipment must clear them from their networks by the end of 2027.

Yesterday, Boeing (BA) and NASA successfully launched the long-delayed Starliner space capsule on a test flight without astronauts.

IPOs

No new IPOs are expected to start trading this week. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

No companies are expected to report their quarterly results. Investors should remain on watch for companies that pre-announce their March quarter results. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar. 

On the Horizon

Monday, May 23

•  Germany: Ifo Current Assessment, Business Climate & Expectations - May

Tuesday, May 24

• Japan: Markit/JMMA PMI Manufacturing (Preliminary) – May
• Eurozone: S&P Global Markit Composite PMI (Preliminary) – May
• UK: CIPS Manufacturing & Services PMI (Preliminary) - May
• US: S&P Global Composite PMI (Preliminary) – May 
• US: New Home Sales – April 

Wednesday, May 25

• Japan: Leading Index (Final) – March
• Germany: GDP (Final) – 1Q 2022
• Germany: Gfk Consumer Confidence – June
• France: Consumer Confidence - May
• US: Weekly MBA Mortgage Applications
• US: Durable Orders – April
• US: Weekly EIA Crude Oil Inventories 
• US: FOMC May 2022 Meeting Minutes 

Thursday, May 26

• US: Weekly Initial & Continuing Jobless Claims
• US: GDP (Second Preliminary Reading) – 1Q 2022
• US: Pending Home Sales – April
• US: Weekly EIA Natural Gas Inventories

Friday, May 27

• US: Personal Consumption and Income – April 
• US: Michigan Sentiment Index (Final) – May 

Thought for the Day

“Brilliant thinking is rare, but courage is in even shorter supply than genius.” ~ Peter Thiel

Disclosures

• Palo Alto Networks (PAWN) is a constituent of the Foxberry Tematica Research Cybersecurity & Data Privacy Index
• Deere & Co. (DE) is a constituent of the Foxberry Tematica Research Sustainable Future of Food Index

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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