TheChek News Flow

After Hours Summary: MU -2.6% falls on earnings; FDA recommends inclusion of Omicron BA.4/5 component for COVID-19 vaccine booster doses

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: ACCD +0.1%

Companies trading higher in after hours in reaction to news: TAK +0.9% (lanadelumab demonstrates positive results in the prevention of HAE Attacks in Phase 3 Trial), SKLZ +0.8% (names new CFO), NVTA +0.8% (PACB and NVTA amend development and commercialization agreement), JBLU +0.4% (JBLU extends tender offer to SAVE to July 29), CBL +0.4% (re-establishes regular quarterly dividend), PACB +0.2% (PACB and NVTA amend development and commercialization agreement)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: MU -2.6%, SJR -0.1%

Companies trading lower in after hours in reaction to news: CLDX -3.6% (presents interim data from Barzolvolimab Phase 1b Study), WDC -3.2% (in sympathy with MU earnings), PCT -2.3% (CEO to resign; current COO promoted to CEO), ACRE -1.6% (files for $1.25 bln mixed securities shelf offering), ERJ -1.3% (signs agreement with Toyota do Brasil in order to run operations more efficiently), EDR -1.2% (LNW amends purchase agreement for sale of OpenBet to EDR), SAVE -1% (JBLU extends tender offer to SAVE to July 29), MRNA -0.8% (FDA recommends inclusion of Omicron BA.4/5 component for COVID-19 vaccine booster doses), LULU -0.6% (files mixed securities shelf offering), PFE -0.5% (FDA recommends inclusion of Omicron BA.4/5 component for COVID-19 vaccine booster doses), EMR -0.4% (acquires Fluxa to complement its software portfolio), INTC -0.4% (Sen McConnell tweets saying there will be no bipartisan USICA as long as Dems pursue a partisan reconciliation bill), JNJ -0.3% (FDA recommends inclusion of Omicron BA.4/5 component for COVID-19 vaccine booster doses), F -0.2% (to recall more than 63,000 Bronco SUVs and Ranger pickup trucks for windshield issue, according to Consumer Reports), BNTX -0.2% (FDA recommends inclusion of Omicron BA.4/5 component for COVID-19 vaccine booster doses), FTCV -0.2% (FTCV and EToro plan to let deadline for merger pass without closing deal, according to The Information), LMT -0.1% (awarded $307 mln Army contract)

Closing Stock Market Summary

The stock market opened with a sell-off mentality today with each of the major indices setting session lows around 10:00 a.m. ET. The three main indices mostly moved higher before running into renewed resistance around 1:00 p.m. ET.

The price action early on was marked by a risk-off tone driven by growth concerns stemming from the following factors: 

• RH, Inc. (RH 213.93, -23.39, -9.9%) cutting its fiscal year net revenue outlook for the second time in a month, citing a "deteriorating macroeconomic environment."
• China reporting weaker-than-expected manufacturing PMI data for June.
• Japan posting its weakest industrial production number since the onset of the pandemic crisis.
• Falling cryptocurrency prices that played into worries about a reduced wealth effect.
• Sweden's Riksbank following suit with an aggressive 50 basis point rate hike in its key policy rate.
• The Personal Income and Spending Report for May showing a 0.4% decline in real personal spending and a still elevated 4.7% year-over-year increase in the core-PCE Price Index.

The risk-off sentiment was showing up in the advance-decline line. Early on, decliners led advancers by a 6-to-1 margin at the NYSE and by a 5-to-1 margin at the Nasdaq. That spread narrowed by the close where decliners led advancers by a roughly 3-to-2 margin at both the NYSE and Nasdaq.

The mega caps were a downside leader today as evidenced by the Vanguard Mega Cap Growth ETF (MGK) (-1.3%) closing behind the S&P 500 (-0.9%). The Invesco S&P 500 Equal Weight ETF (RSP), meanwhile, closed down 0.6%.

The initial turnaround in the market coincided with falling commodity prices and Treasury yields, which were offshoots of the growth concerns that are wrapped up in worries about the Fed raising rates aggressively into a slowdown and raising the risk of a recession. 

Both the 2-yr note yield and the 10-yr note yield settled below 3.00%. The 2-yr note yield fell 14 basis points to 2.93% while the 10-yr note yield fell 12 basis points to 2.97%.

Commodity futures settled lower as well. WTI crude oil futures fell 3.7% to $105.77/bbl. Natural gas futures fell 15.8% to $5.48/mmbtu. Copper futures fell 1.9% to $3.71/lb.

The rebound effort lost steam after 1:00 p.m. ET after Reuters reported that Meta Platforms (META 161.25, -2.69, -1.6%) said in an internal memo that the company expects slower growth in the second half of the year amid "fierce" headwinds.

The only three S&P 500 sectors to close in the green were the utilities (+1.1%), industrials (+0.3%), and real estate (+0.1%) sectors. The top laggards were the energy (-2.0%), communication services (-1.6%), consumer discretionary (-1.5%), and information technology (-1.3%) sectors.

For the quarter, the Dow Jones Industrial Average was down 11.3%, the Nasdaq Composite was down 22.4%, and the S&P 500 was down 16.5%.

Reviewing today's economic data:

• Weekly initial claims for the week ending June 25 decreased by 2,000 to 231,000 (consensus 234,000) while continuing claims for the week ending June 18 decreased by 3,000 to 1.328 million.
  • The key takeaway is that the improving trend in initial claims has basically stalled out, suggesting there is apt to be more bad news than good news in future jobless claims reports.
• Personal income increased 0.5% month-over-month in May (consensus 0.5%) while personal spending rose 0.2% month-over-month ( consensus 0.5%). Real PCE, however, declined 0.4% month-over-month.
• The closely-watched PCE Price Index was up 0.6% month-over-month (consensus 0.7%), which left the year-over-year change at 6.3%. The core PCE Price Index, which excludes food and energy, increased 0.3% month-over-month (Briefing.com consensus 0.4%), dropping the year-over-year change to 4.7% from 4.9% in April.
  • Many will point to the moderation in the core-PCE Price Index as the key takeaway from the report knowing the Fed concentrates on this number. That is a fair conclusion, although one shouldn't overlook the decline in real PCE as another key takeaway that will fuel concerns about the Fed continuing to tighten into a slowing economic environment.
• June Chicago PMI 56 vs. 58.8 Briefing.com consensus; prior 60.3
• Weekly EIA Natural Gas Inventories showed a build of 82 bcf vs a build of 74 bcf last week

Looking ahead to Friday, market participants will receive the ISM Manufacturing Index (consensus 55.0%; prior 56.1%) for June at 10:00 a.m. ET. Additional economic data includes the IHS Markit Manufacturing PMI final reading (prior 52.4) for June at 9:45 a.m. ET and the Construction Spending (Briefing.com consensus 0.4%; prior 0.2%) at the 10:00 a.m. ET.

• Dow Jones Industrial Average: -15.3% YTD
• S&P 500: -20.6% YTD
• S&P 400: -20.2% YTD
• Russell 2000: -23.9% YTD
• Nasdaq Composite: -29.5% YTD