Tag: nqalert

Today’s Big Picture

Asia-Pacific equity indexes ended today’s session slightly mixed as China’s Shanghai Composite eked out a 0.04% loss and India’s Sensex closed down 0.19% while Hong Kong’s Hang Seng rose 0.10%, Australia’s ASX All Ordinaries gained 0.31%, Taiwan’s TAIEX advanced 0.93% and Japan’s Nikkei was up 1.03%. South Korea’s KOSPI led the way, finishing 1.80% ahead on the day. By mid-day trading, European equity indices are down across the board and U.S. futures point to a weak open later this morning.

We are starting this shortened trading week off with a modest amount of new company news, no earnings reports, and a handful of fresh economic data that shows the Services economy outside the U.S. held up better than expected in June. Given the lack of inflation-related data this week, the June jobs data for the U.S. will likely take up a lot of the market conversation this week, particularly around the speed of the economy and prospects for a recession. That will also make tomorrow’s June Services data for the U.S. and Friday’s June Employment Report worth watching. 

As those reports are issued, we and others will be looking to see what the data does to the Atlanta Fed’s GDPNow model. Last week’s updates pointed to the likelihood the U.S. could be in a recession as GDP expectations for 2Q 2022 were slashed to -2.1% vs. the May 17 reading of +2.5%. That sharp revision shows how quickly the economic landscape changes hammered stocks in June. Questions remain as to whether inflationary pressures have indeed peaked, but even so, efforts to reduce consumer pain continue. According to reports, Chinese tariff relief appears to be back on the table at the White House. Similar to the proposed gas tax holiday, there are questions as to how effective such a move would be in reducing pricing pressures. 

Beyond the U.S., readers will want to keep a close watch on covid cases in China. The number has been on the upswing and led the country to double the number of cities, including those around Shanghai, restricting local movement as of earlier today. According to data published by Nomura, this latest measure affects regions that account for approximately 15% of China’s GDP, up from 10% last week. This is likely to have an impact on supply chain woes, and will have a ripple effect on the U.S. economy as well.

Data Download

International Economy

Last night saw the release of Chinese Services PMI for June which at 54.5, surprised 5.5 points to the upside from estimates of 49.0, showed a big improvement from the previously reported 41.4 and, for the first time since the adoption of Zero Covid policies in February, showed growth in the Chinese service sector.

Japan also released Services PMI yesterday at 54.0 which came in higher than estimates of 52.3 and the previously reported 52.6.

Final June Services PMI for the broad Eurozone was announced this morning at 53, slightly higher than initial estimates along with UK Services PMI which was reported at 54.3, almost a full point higher than preliminary figures.

Norwegian offshore oil and gas workers went on strike over pay today, a move that could cut Norway’s oil output by 15% later this week should the strike escalate as expected. Meanwhile, reports also suggest Russia could temporarily shut down the Nord Stream 1 Pipeline, the European Union’s largest piece of gas import infrastructure, for annual maintenance. 

Domestic Economy

At 10:00 AM ET, we will see the results of MoM May Factory Orders and MoM Durable Orders, both of which are expected to show a 0.50% rise over the previously reported figures.

Markets

While Friday saw the markets rally heading into the holiday weekend, that move didn’t take the sting out of what was one of the worst half-year starts for stocks in 50 years. The Atlanta Fed updated its estimate for Q2 GDP from roughly -1% to -2.1% on Friday and even though that update, if realized, would put us firmly in recession territory (2 consecutive quarters of GDP contraction) the markets responded positively. This could mean that investors are thinking the slowdown we are seeing in the economy could lead the Fed to not be as aggressive in hiking interest rates later this year as was previously thought. 

Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: -14.42%
• S&P 500: -19.74%
• Nasdaq Composite: -28.87% 
• Russell 2000: -23.05%
• Bitcoin (BTC-USD): -58.63%
• Ether (ETH-USD): -70.12%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, no companies are expected to report their latest quarterly results but given we are in the quiet period for companies, readers should be on watch for earnings pre-announcements.

Ford Motor (F) is expected to report its monthly U.S. sales today, and while some will be eyeing its total data there will be those that focus on how its all-electric F-150 Lightning has performed. 

Tesla (TSLA) shared it delivered about 255,000 vehicles in the June quarter, down from about 310,000 in the March quarter but a tad better than the 250,000 consensus estimate. This morning the company confirmed a new software update that enables its vehicles to scan for rough roads, including potholes, to help avoid them damaging the vehicles by adjusting the suspension. Tesla also shared its Model Y has joined the fleet of the Leewood, Kansas police department as a patrol car.

Smart electric scooter company Niu Technologies (NIU) sold 208,857 units in 2Q 2022, including e-motorcycles, e-mopeds, e-bicycles, kick-scooters, and e-bikes, representing a 17.4% YoY drop.

Nokia (NOK) announced it won a five-year deal with Norwegian mobile operator Ice to upgrade and expand its 5G radio network infrastructure nationwide.

InterDigital (IDCC) announced it signed a multi-year, worldwide, non-exclusive, royalty-bearing license with Zebra Technologies (ZBRA) that covers InterDigital’s standard-essential patents related to 4G and 5G wireless, and WiFi technology.

Rocket Lab USA (RKLB) announced it successfully deployed a pathfinding satellite for NASA, setting it on a course to the Moon.

Healthcare Trust of America (HTA) reported that it has signed its highest level of new leases since going public in 2012

Bloomberg reports a consortium backed by KKR (KKR) is emerging as the frontrunner to buy a controlling stake in the towers unit of Deutsche Telekom (DTEGY).

IPOs

As of now, no IPOs are slated to be priced 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 after equities stop trading today. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar. 

On the Horizon

Wednesday, July 6

• Germany: Factory Orders – May
• Eurozone: Retail Sales – May
• US: Weekly MBA Mortgage Applications
• US: S&P Global Services PMI (Final) – June 
• US: ISM Non-Manufacturing Index – June
• US: JOLTS Report – May 
• US: FOMC Meeting Minutes – June 

Thursday, July 7

• Japan: Leading Indicators – May
• Germany: Industrial Production – May
• US: Challenger Job Cuts – June 
• US: Weekly Initial & Continuing Jobless Claims 
• US: Import/Export – May
• US: Weekly EIA Natural Gas Inventories
• US: Weekly EIA Crude Oil Inventories

Friday, July 8

• Japan: Household Spending – May
• Japan: Economy Watcher Current Index – June
• China: Inflation Rate and Producer Price Index – June
• US: Employment Report – June
• US: Consumer Credit – May

Thought for the Day

“The life of the nation is secure only while the nation is honest, truthful, and virtuous.” ~ Frederick Douglass

Disclosures

• Niu Technologies (NIU), Tesla (TSLA)are constituents of the Tematica BITA Cleaner Living Index
• Niu Technologies (NIU), Tesla (TSLA) are constituents of the Tematica BITA Cleaner Living Sustainability Screened Index
• InterDigital (IDCC), Nokia (NOK) are constituents of the Tematica BITA Digital Infrastructure & Connectivity Index

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

Wall Street has endured the most painful first half in more than 50 years. Severe bouts of volatility are expected to continue in the near term amid geopolitical tensions, sky-high inflation and Fed’s aggressive stance. In times of such uncertainty, it’s as important to get rid of fundamentally weak toxic stocks as it is to invest in attractively valued companies possessing fundamental strength.

Generally, toxic stocks are vulnerable to external shocks and are loaded with high levels of debt. Also, the price of toxic stocks is irrationally high. The unjustifiably high price of the toxic stocks is only short-lived as the intrinsic value of these stocks is lower than the current bloated price. The inflated price of the toxic stocks can be ascribed to either an irrational exuberance associated with them or some serious fundamental lacunae in the stock. If you own such stocks for a long period, you are likely to witness huge erosion in your wealth. Zalando SE ZLNDY, Radius Global Infrastructure Inc. RADI, Ormat Technologies ORA and Ligand Pharmaceuticals LGND are a few such toxic stocks.

Investing success hinges upon precise identification of overpriced stocks and fairly priced ones. However, the over-hyped toxic stocks and the correctly priced stocks are mingled in the marketplace in such a way that it becomes very tough to differentiate between them. Investors who can pinpoint the toxic stocks and discard them at the right time are likely to gain.

On the other hand, if you can figure out the toxic stocks correctly, you may gain by resorting to an investing strategy called short selling. This strategy allows you to sell a stock first and then buy it when the price falls. While short selling excels in bear markets, it typically loses money in bull markets. So, picking up toxic stocks and abandoning them at the right time is the key to protect your portfolio from big losses. Profits can be made by short-selling them.

Screening Criteria

Here is a winning strategy that will help you to identify overpriced toxic stocks:

Most recent Debt/Equity Ratio greater than the median industry average: Ahigh debt/equity ratio implies high leverage. High leverage indicates a huge level of repayment that the company has to make in connection with the debt amount.

P/E using 12-month forward EPS estimate greater than 50: A very high forward P/E implies that a stock is highly overvalued.

% Change in F (1) and F (2) Estimate (12 Weeks) less than -5: Negative EPS estimate revision for this fiscal year and the next during the past 12 weeks points to analysts’ pessimism.

Zacks Rank more than or equal to #3 (Hold): We have not considered Buy-rated stocks that generally outperform the market. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Here are four of the 35 toxic stocks that showed up on the screen:

Zalando: Headquartered in Berlin, Zalando is an online fashion retailer. The company offers clothing, sports products, shoes, bags and other accessories for men, women and children. The Zacks Consensus Estimate for ZLNDY’s 2022 earnings and sales implies a year-over-year decline of 73% and 13%, respectively. The estimate for 2022 and 2023 earnings has moved south by a penny in the past seven days. Zalando currently carries a Zacks Rank #4 (Sell) and has a VGM Score of F.

Radius Global: New York-based Radius Global, through its subsidiary AP WIP Investments LLC, is an owner of a growing, diversified portfolio of primarily triple net rental streams from wireless operators and tower companies for properties. The Zacks Consensus Estimate for RADI’s 2022 bottom line is currently pegged at a loss of 7 cents a share. The estimate has deteriorated from earnings of 6 cents a share 60 days ago. The consensus mark for earnings for the next year has also declined 20 cents over the past 60 days. Radius Global currently carries a Zacks Rank #4 and has a VGM Score of F.

Ormat: Nevada-based Ormat company designs, develops, owns and operates clean, environmentally friendly geothermal and recovered energy-based power plants. The Zacks Consensus Estimate for ORA’s 2022 earnings implies a year-over-year decline of 12.2%. The consensus mark for 2022 earnings has moved south by 4 cents over the past seven days. For the next year, the estimate has also declined 6 cents over the same timeframe. Ormat currently carries a Zacks Rank #4 and has a VGM Score of D.

Ligand: Ligand is a biotechnology company focused on the development and licensing of biopharmaceutical assets. This California-based firm’s business model is based on developing or acquiring royalty revenue-generating assets and coupling them with a lean corporate cost structure.The Zacks Consensus Estimate for LGND’s 2022 earnings and sales implies a year-over-year decline of 66% and 40.6%, respectively. The Zacks Consensus Estimate for Ligand’s 2022 earnings has moved south by 34 cents per share over the past 30 days. LGND currently carries a Zacks Rank #4 and has a VGM Score of C.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.

Zacks Names “Single Best Pick to Double”

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.

This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.

Free: See Our Top Stock and 4 Runners Up >>

Click to get this free report

Ligand Pharmaceuticals Incorporated (LGND): Free Stock Analysis Report

Ormat Technologies, Inc. (ORA): Free Stock Analysis Report

Zalando (ZLNDY): Free Stock Analysis Report

Radius Global Infrastructure, Inc. (RADI): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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