Market Review: January 03, 2023

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Closing Recap

Tuesday, January 03, 2023





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     After what looked like a strong start to the 2023 stock campaign, early gains were quickly erased, led by new 52-week lows for AAPL dragging down other large cap tech names while energy was the biggest sector decliner, falling over 3.5% led behind APA, HES, EQT, MRO, DVN after being the lone S&P sector higher in 2022 (+57%). Stocks finished lower but rebounded off their worst levels as the S&P 500 once again held 3,800, a key support over the last few weeks heading into the monthly jobs report on Friday and inflation data next week. Rising interest rates, inflation, recession fears, the Russia-Ukraine war, and rising concerns over COVID cases in China remain walls of worry for US investors.

·     Not helping markets today: 1) coming into 2023 (following a brutal 2022 where the S&P 500 fell -19.4%, the Dow -8.7% and the Nasdaq fell -33.1%), among the biggest Bull cases mentioned by media/strategists is that they are bullish because everyone else is bearish! Note earlier Bank America in its “Sell Side Indicator by Savita Subramanian – Wall Street is bearish. This is bullish” – pretty much summed it up. That has also been the reasoning behind many managers on CNBC over the last few months. 2) The other bullish case: many on CNBC saying they don’t believe the Fed will raise rates and Fed fund futures are forecasting a cut later this year. A direct callout on Friday from Jeremy Siegel calling for massive rate cuts by end of the year. 3) Investor Michael Burry of "The Big Short" fame has issued a gloomy warning for the U.S. economy: A recession and another inflation spike are almost certainly in the cards in 2023.

·     Market stats: 1) CNBC noted since 1945, S&P posts a negative year 27% of the time – but the following year is positive 81% of the time with an average YTD gain of 14.2%. 2) In 2022, the Dow Jones Industrial Average beat the S&P 500 by the most in any year since Standard & Poor’s created the benchmark in 1957: Dow: -8.8% in 2022 and S&P: -19.4%. 3) Note the S&P 500 has fallen 4-straight weeks. One tweet noted since ’08 happened 12 times. 9/12 times market was up the next week. Last time it was down 4 weeks in a row, streak continued to 7 straight down weeks in Apr. ’22. Only previous 7-week losing streak was in ’11. 4) The last time the S&P 500 closed at an all-time high was one year ago today, on January 3, 2022.



·     WTI crude oil falls around 4% to settle at $76.93 per barrel and Brent crude settles at $82.10 per barrel, down -$3.81, 4.43%. Natural gas prices fell as much as -11% to lowest levels since February below $4.00 mln Btus on forecasts for warmer-than-normal weather and lower heating demand in January than previously expected. The other factor remains uncertainty for the market remains when Freeport LNG will restart its liquefied natural gas (LNG) export plant in Texas. After several delays from October to November to December, Freeport expects the facility to return in the second half of January, pending regulatory approvals (has been shut since June). Gold prices rise $19.90 or 1.1% to settle at $1,846.10 an ounce, highest since mid-June as outperforms despite the dollar bounce.


Currencies & Treasuries

·     The U.S. dollar jumped to start the year, with the dollar index (DXY) rising 1% above 104.60 ahead of the Federal Reserve December meeting minutes, while the euro slumped after softer German CPI data. Strong jobs data remains, clouding the picture of a Fed rate hike pause, despite decelerating inflation data the last few months off 40-year highs. The highly anticipated December jobs report is due Friday, and December CPI next week. Treasury yields dipped from Friday’s closing levels, with the 10-year down around 3.77% ahead of jobs data later this week. Note the 10-yr yield has not closed above 4% in about 2-months.


Economic Data:

·     S&P Global December final manufacturing PMI at 46.2 (vs flash 46.2)

·     Construction Spending for November rose +0.2% vs. est. (-0.4%) to $1.808 trln, vs Oct (-0.2%); Nov private construction spending +0.3% pct, public spending (-0.1%)






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers: TPR remains a top pick at Bank America given its sustainable pricing power, solid capital return plan and low multiple (firm also announced other top picks for Q1 in various sectors including GTLS, DPZ, EMR, GS, HUM, NVR, PG, SWN and Underperform on WHR); Piper out with our 2023 Beauty & Wellness outlook, as upgrade COTY to Overweight from Neutral while for sector view China, Travel Retail, and trade down as key themes to watch in 2023, and naming EL, ELF and SKIN as our top ideas; at Guggenheim, DG replaces PFGC as new Best Idea, bump PT from $270 to $275, maintains Buy

·     Auto sector: monthly delivery data released in the electric vehicle sector, with TSLA disappointing as delivered 405,278 vehicles to customers in the last three months, short of the roughly 420K forecast, while Q4 production of 439,701 vehicles, was up +4%; in China EV space, NIO said it delivered 15,815 vehicles in December, representing an increase of 50.8% y/y and delivered 40,052 vehicles in Q4, representing an increase of 60.0% y/y; XPEV said it delivered 11,292 Smart EVs to customers in December, representing a 94% increase m/m; LI said it delivered 21,233 vehicles in December 2022, representing an increase of 50.7% y/y and total deliveries in 2022 increased by 47.2% year over year to 133,246

·     Consumer Staples: RBC Capital downgraded REYN (as shares at price Target), COOK (expecting further EPS reductions), and MDLZ (also at price Target) all to Sector Perform from Outperform saying they are most cautious on the Packaged Food sector given current valuations and discomfort with pricing making up over 100% of top line growth; in beverages, Wells Fargo said they are well below Street EPS on TAP as see too much risk to EPS and downgrade to Underweight; also at Wells, they initiate MDLZ at overweight tgt $75, GIS Equal weight tgt $88, KHC Equal Weight tgt $43 and HSY underweight tgt $220 in food space. Firm also said for Staples: 2023 preview, believe EPS may prove resilient, we would own multinationals, like KO on EPS upside and MDLZ for relative value vs growth, Own relative value KDP stand out, Growth they like MNST, Recovery names CHD, Cautious on EPS ramp stories CLX

·     Casinos, Gaming, Lodging & Leisure sector: in casinos (WYNN, LVS, MLCO, MGM), gross gaming revenue in Macau fell 56% y/y in December to 3.48B patacas ($433M) to slightly miss the consensus estimate for a 57% drop as per Bloomberg – but December tally was up 16% from the GGR Mark for November with traffic trends improved on a sequential basis. In research, WYNN upgraded to Overweight from Equal Weight at Wells Fargo and raise PT to $101 from $74 saying it has a viable path to recapturing most/all its 2019 VIP EBITDA, despite the absence of junkets, through direct VIP/premium mass play, among other catalysts



·     Energy stock movers: Oil and natural gas prices fall to start the year. A warmer-than-expected start to winter across large parts of the world is rapidly easing fears of a natural gas crisis that had been predicted to trigger outages and add to pressure on power bills. Forecasts point to temperatures above seasonal norms for most of Europe in the next two weeks, while the US expects better weather through mid-January. It’ll be more comfortable too across much of China — the world’s biggest gas importer — over the next 10 days. Shares of natural gas producers AR, CHK, EQT, CTRA, RRC, SWN decline the most on natural gas decline.

·     E&P and Majors: Eni (E), EQNR both upgraded in European Integrated Energy at Bernstein as expect the European Integrated to make it three consecutive years of outperformance in 2023, backed by a still unfolding commodity super-cycle that will build throughout the year; TRGP said it will buy the remaining stake in its Grand Prix NGL Pipeline that it does not already own, for $1.05 billion in cash from Blackstone Inc’s energy unit; WHD said it is acquiring FlexSteel on a cash-free, debt-free basis, for total upfront consideration of approximately $621 million, subject to customary purchase price adjustments; PBR shares fall as much as -10% after Brazil’s new president removed the oil company from a list of state-controlled companies set to go private

·     Utilities & Solar; Early Friday evening, the North Carolina Utilities Commission (NCUC) issued an order for DUK’s Carbon Plan in accordance with NC House Bill 951 (HB951). The mandate of the bill requires DUK to achieve a 70% reduction in carbon emissions from 2005 levels by 2030 and carbon neutrality by 2050. In research, EIX upgraded to Buy from Neutral at UBS as expect an improving California regulatory environment and progress made on wildfire mitigation and claims resolution will act as catalysts which lead to the stock’s outperformance; PCG downgraded from Buy to Neutral at UBS noting the stock has risen 34% over the last 12 months and 7% over the last 1 month versus +0% and -2% for the XLU; ETR downgraded to Neutral at Bank America primarily due to unfavorable developments at the meeting of the Louisiana Public Service Commission in December



·     Bank movers: Two analysts kick off the year with outlooks as Barclays said despite a slowing economy and possible recession, large-cap U.S. banks can overcome hurdles and grow earnings in 2023. Barclays upgraded KEY to Equal Weight and downgraded MTB to Equal Weight after making several target changes in the group. Wedbush said they remain cautious on the bank group heading into 2023 given mounting headwinds saying the inflation genie is out of the bottle and the Fed is scrambling to get it back in by continuing its rate hiking crusade. Wedbush upgraded MTB to Outperform as view it as a defensive haven from a credit quality standpoint and downgraded CFG to Neutral mostly based on our expectation for increasing credit costs in a recessionary environment.

·     Private Equity/Alt managers: BX shares rose after its real estate fund receives $4 bln investment from University of California; Keefe Bruyette with several ratings changes in the private equity sector, downgrading APO to Market Perform from Outperform with a $77 price target as recommends a cautious approach to the alternative managers in 2023. Also downgraded OWL and CG while KKR is top pick

·     FinTech & Payments: PYPL upgraded to Buy from Hold at Truist as sees resurgent growth in e-commerce business, supporting revenue growth in PYPL (raised tgt to $95 from $75); in consumer finance, ALLY and COF downgraded to Equal Weight from Overweight at Barclays



·     Biotech movers: GILD was downgraded to Sector Perform OP at RBC Capital as expect continued good operational execution, but believe it will take time to gain more definitive visibility on the next sets of meaningful potential drivers; Guggenheim said RXDX is our best idea for 2023 and CLDX, EYPT, and RETA are Top Picks for 2023 in Immunology/Neurology-focused coverage, while upgraded ACAD to Buy from Neutral and downgraded SAGE to Neutral from Buy. Firm also said they expect key 1H23 potential catalysts from several companies, including ACAD, ANAB, ARGX, AXSM, CLDX, IMVT, PHAT, RETA, and RXDX in oncology, Guggenheim said ACLX, BGNE, COGT, KYMR, and RAIN are top picks for 2023 and upgraded ADAP to Buy from Neutral with a $5 PT and downgraded FATE to Neutral from Buy

·     Healthcare Services: California revised its 5-year Medi-Cal contract award published 8/25/22 with Cowen noting the most significant change is that CNC will lose only half its LA County enrollment to MOH instead of the entire contract (says change should impact CNC annualized EPS by +3%/(-8%), respectively); CVS downgraded from Outperform to In Line at Evercore/ISI and cut tgt to $100 from $120 citing highly competitive AEP, an unclear outlook regarding 2024 operating profit, and valuation; Evercore/ISI also downgraded HCAT from Outperform to In Line; CI was downgraded to EW from OW in Managed Care at Wells Fargo saying the outlook for the group is now more balanced than it was for 2021 / 2022 and favor companies they perceive to have differentiated growth stories (ELV, UNH, HUM); in Healthcare facilities, Wells Fargo said they think pacing and magnitude of improvement in labor market for 2023 remains an area of low visibility, think risk/reward is fully balanced here as they upgraded UHS to equal weight


Industrials & Materials

·     Aerospace & Defense: SpaceX is raising $750 million in a new round of funding that values the rocket and satellite company at $137 billion from investors, including Andreessen Horowitz, CNBC reported late Monday; Cowen raised its price tgt to $285 from $260 on GD and moved it to its #2 A&D Pick saying despite a slowing economy, GD’s Q3 guide for 2023-24 indicates 148 and 170 deliveries, respectively and implies 16-19% program cycle gains at Gulfstream

·     Metals & Materials: in lithium space, said it amended its agreement with TSLA to supply the electric vehicle maker with spodumene concentrate, or SC6, from North American Lithium. Piedmont will now deliver about 125,000 metric tons of SC6 to Tesla, starting in the second half of 2023 through the end of 2025; NGLOY was downgraded to Market Perform at Bernstein as the firm updated its Platinum Group Metals (PGM) view; in steel sector, KeyBanc noted data from the World Steel Association showed overall global crude steel production was down ~5% m/m, driven by a ~7% output decline in China, while RoW output declined by a more modest ~4%.


Technology, Media & Telecom

·     Media, Internet: estimated weekend North America (NA) box office revs come in at $98.7 (-31.4% YoY); DIS “Avatar: The Way of Water once again claimed the top spot w/ $63.4M in revs ($421.6M to date) – Disney’s Avatar movie has now taken in about $1.38B in global ticket sales; in research, LGF downgrade to Underperform at Wolfe, concerned about a deceleration in content spend; SHOP launched a new service aimed at big retailers that will allow them to select tools and services the Canadian tech giant offers and integrate it with their own online platform; TMUS downgraded to Peer Perform at Wolfe citing concern about slowing industry subscriber growth, fading Sprint churn benefits, and long-term capital needs for home Internet

·     Semiconductors: in memory (MU), KeyBanc noted inSpectrum released its memory contract pricing for the month of December. 8Gb DRAM pricing was down 5.3% m/m, 19.0% q/ q, and 256Gb NAND pricing was down 13.0% m/m, 34.1% q/q. December DRAM contract pricing for 8Gb DDR4 DRAM was down 5.3% m/m, 42.9% y/y, and 19.0% q/q; ACMR reaffirms 2022 revenue outlook and provides initial outlook for 2023 revenue; IDCC rises after signed an HEVC and VVC patent license with LG Electronics and increases share buyback authorization to $400 million

·     Software & Hardware, Components & Services: for AAPL, Nikkei reports that, in response to weak demand, Apple is cutting Q1 orders for AirPods, Apple Watch, MacBooks; a manager at SMIC tells the Nikkei that co’s are hoping that the COVID surge will peak next month, so that things will start to return to normal in March; INFA downgraded to Neutral at UBS and lower tgt to $18 from $24 as reflect on the accelerating mix shift to cloud from self-managed contracts that does not seem to be adequately reflected in Street estimates


Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.

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