Stocks rallied yesterday, as the Fed hiked rates by .75% and it was received well by markets. The S&P added 1.4% while the Nasdaq soared 2.5%. Asia stocks closed mixed overnight while Europe indexes are solidly in the red this morning. U.S. futures are pointing to a rough open, down 1.8% as I write this, the Dollar and Oil are lower while Yields and Gold are higher.
And my rant from yesterday if you missed it: https://www.optionmillionaires.com/jb-pre-market-rant-june-15th-2022/
As Yogi Berra would say, it is 'DeJaVu all over again'. In May the Fed hiked rates .50%, stocks reversed early losses and closed markedly higher that day. Yesterday the Fed hiked rates .75%, the market chopped between losses and gains before rallying into the end of the day to close markedly higher. After the May hike the gains were given back the next day... and looks like that will be the case today. Some of the pullback can be attributed to the Swiss National Bank which unexpectedly hiked their rates despite low inflation in the country. The Fed raised their inflation expectations and also expects to raise rates as high as 3.8% in 2023. The Fed went from saying inflation was transitory to saying it's going to get worse into years end. Of course some can be attributed to unforeseen catalysts like the war in Ukraine that has Oil and agriculture costs soaring. The next big data point will likely be the PCE on June 30th, which is the Feds preferred gauge of inflation. Tough to see any strong, sustained rallies until some of the data starts pointing to a top in inflation.
Of course, the current news cycle is going bonkers. Reading any front cover would make you think we are in the Great Depression already, or heading there. Like I have said over the last week or so, hard to think we have a nasty crash coming unless there is some black swan default or issue out there.
That $372 area or so on the SPY looks like support for now. Under that I may look for some TZA calls as another hedge as the low $360s may come into tomorrow. Otherwise, could be a nice bouncing point today:
DUST reversed late day highs of $18.54 to close a at $17.54 after markets bounced. Still holding my speculative calls as a hedge and may actually look to add some into July as another hedge. If the market finds more pressure over the coming days, it will pull down all asset classes, including Gold with a possible test and break below that $1775 handle:
BPT struggled to hold gains yesterday and closed down at 22.70. Still think high dividend names will hold up well on any tape. As long as Oil stays in the $105+ level, BPT should be trading north of $25 and possibly $30+ in the coming weeks but will remain volatile. Almost looks like a bull flag setting up:
I was tempted to add calls after the Fed statement yesterday on names like U, ROKU, SPOT, ect. U was the one I was most interested in and almost pulled the trigger on some $39 lotto calls but thankfully passed. This morning it is gapping lower on a Sell rating from Benchmark and a PT drop from Jefferies. Crazy how far the stock has dropped and only now getting a sell rating:
Not going to get calls at the open, but will wait for dust to settle and then maybe add some later dated strikes:
ROKU also had a stellar session yesterday but premiums were high and made the risk/reward difficult. Will be watching this one as well and may actually look for some buyout lotto calls into July or even August:
CME had a solid session as well yesterday but will need a big move between today and tomorrow for the rest of my calls to come back to life. Still like this one as a rising rates play and may look at later dated strikes as well.
Here are the analyst changes of note for today:
| Unity Software price target lowered to $36 from $40 at Jefferies |
| Jefferies analyst Andrew Uerkwitz lowered the firm's price target on Unity Software to $36 from $40 and keeps a Hold rating on the shares as he is lowering AdTech estimates across the board based on his checks of increasing likelihood of macro pressures causing headwinds in the back half of 2022. A pullback in consumer spending may be lower on the gaming ad networks given the relative cost-effectiveness of games versus other forms of entertainment, but they will still be impacted, Uerkwitz sai |
| Roblox price target lowered to $28 from $30 at MKM Partners |
| MKM Partners analyst Eric Handler lowered the firm's price target on Roblox to $28 from $30 and keeps a Neutral rating on the shares. The analyst is citing "disappointing" May metrics that were highlighted by weaker than-expected DAUs and increased FX headwinds, also cutting his FY22 EBITDA view for the company to $263.4M from $315.5M and FY23 view to $225.3M from $306.2M |
| Arthur J. Gallagher price target lowered to $211 from $214 at Jefferies |
| Jefferies analyst Yaron Kinar lowered the firm's price target on Arthur J. Gallagher to $211 from $214 and keeps a Buy rating on the shares. Management commentary during the June investor meeting was largely in-line with the Q1 earnings call, but he has lowered his 2022 EPS estimate by 1% to reflect a greater foreign exchange drag and a tweak in his organic growth estimates, Kinar tells investors |
| Snowflake has 'multi-billion growth potential,' says Piper Sandler |
| Piper Sandler analyst Brent Bracelin says that based on customer conversations at Snowflake's user event, the primary investor pushback and fear that a consumption driven model coupled with cost optimization efforts could materially erode growth potential proved to be an overly bearish view. He recommends large-cap growth investors take advantage of the "cost optimization overhang" and continue adding to positions in Snowflake. The company has "multi-billion growth potential, great leadership, great technology, and a disciplined operating model that is profitable and generates positive free cash flow," Bracelin tells investors in a research note. He maintains an Overweight rating on the name with a $165 price target |
| Roblox price target lowered to $25 from $27 at Morgan Stanley |
| Morgan Stanley analyst Brian Nowak lowered the firm's price target on Roblox to $25 from $27 and keeps an Equal Weight rating on the shares after the company reported "mixed" May metrics. Noting that Roblox just reported its "slowest bookings growth" year-to-date, Nowak lowered his FY22 and FY23 bookings forecasts by 2% each |
| B. Riley adds WideOpenWest to '25 Picks for 2022' list, removes DigitalBridge |
| B. Riley analyst Daniel Day added WideOpenWest (WOW) to the firm's "25 Picks for 2022" list with the shares having fallen back to pre-takeout report levels. He removed DigitalBridge (DBRG) from the list. The analyst sees an "especially attractive near-term risk/reward profile." His base case is a take-private transaction between $24 and $29 per share, or a 35%-65% premium to the current price. Day recommends a tactical swap out of DigitalBridge into WideOpenWest and reiterates a Buy rating on the latter with a $26.50 price target |
| Alphabet price target lowered to $2,650 from $3,600 at UBS |
| UBS analyst Lloyd Walmsley lowered the firm's price target on Alphabet to $2,650 from $3,600 but keeps a Buy rating on the shares as part of a broader research note on U.S. Online Advertising names. The analyst points to deteriorating ad checks seen as early as last month and further cites increasing macro risk and FX moves justifying his "significantly below consensus" estimates. Google is the best insulated company fundamentally but not without the risk to its numbers and the multiple, Walmsley add |
And here is what I am watching today: U, WOW, CME, DUST, ROKU, JDST, POOL, SPOT, BPT, WYNN, ICE, LOVE, and HSKA.
Let's have a great day!
-JB