The Morning Call: We Are Not There Yet

U.S. equity markets continued to sell-off yesterday as investors digested hotter than expected inflation readings. The S&P 500 and Dow fell over 1% with the Nasdaq shedding over 3%. Since we made our “Take the Money” call less than a month ago on April 18 the S&P 500 has tumbled over 10% and the Nasdaq close to 15%. Thats the benefit of independent research.

All eyes are on the PPI data this morning. Core PPI came in 0.4% higher m/m in April, less than forecasts of 0.6%, and putting it up 8.8% y/y. Prior m/m reading was 1.2%. Headline PPI was 0.5% higher m/m, in line with estimates, and putting it up 11.0% y/y. Prior m/m reading was 1.6%.

The premarket is indicating another rough day for markets. Treasury yields have come off the boil with the 10Y yield right back down to ~1.83%. The VIX has been over 30 all week and is up another 4% this morning. The USD is continuing to strengthen and break 52-week highs with the DXY ~104. It’s getting closer and closer to par with the GBP. The Yuan is crashing. Crypo is also crashing with BTC falling below its $30k support level and LUNA coin collapsing 98% overnight. WTI is still over and showing support at $100/bbl. Gold is in the mid-$1,800s.?

Remember that markets bottom out before the actual economy. It’s usually the bottom when all the bulls have turned negative. Inflation is too high and will stay at elevated levels for a prolonged period of time. Don’t try to catch falling knives. Don’t fight the Fed. Wait for significant signs both fundamentally and technically before jumping back in. We are not there yet.?

Earnings/Company Updates

• Disney?shares are down over 4% in the premarket after posting revenue of $19.25 billion missing consensus of $20.05 billion and EPS of $1.08 missing consensus of $1.19. Revenue was lower than expected due to Covid closures taking a toll on parks in Asia and a $1 billion hit resulting from early termination of some licensing agreements to put content on its streaming platform. It wasn’t all bad though as Disney+ subscriptions rose to 137.7 million beating consensus of 135 million. (CNBC)
• Rivian?shares are up over 3% in the premarket after posting loss per share of -$1.43 slightly missing consensus of -$1.44 but demand remained high with reservations for its R1-series truck increasing from 83k to 90k. The company also reiterated that it still expects to make 25k vehicles this year as production ramps up. (CNBC)
• Beyond Meat?shares are tumbling over 25% in the premarket after posting weaker-than-expected top and bottom lines with revenue coming in at $109.5 million missing consensus of $112.3 million and loss per share of -$1.58 missing consensus of -$1.01. The company’s plant-based jerky weighed heavily on margins with gross margin collapsing from 0.2% to 30.2% but executives stated that jerky production should be much more efficient by H2/22. Management reiterated revenue guidance of $560 million to $620 million for 2022. (CNBC)
• Six Flags?shares are up over 5% after posting better-than-expected revenue that surged 70% and loss per share of -$0.76 beating consensus of -$1.04 thanks to higher prices and volume of park visitors as Covid worries subside. (SeekingAlpha)

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Economic Data

• Initial Jobless Claims?rose by 1k from 202k to 203k, missing forecasts of 195k, and taking the 4-week average from 189k to 193k.?Continuing Claims?fell from 1,387k to 1,343k, beating forecasts of 1,380k.
• FOMC Member Daly Speaks?today at 3:00pm ET.

Take the Money.

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