Mid-Morning Look: April 03, 2023

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Mid-Morning Look

Monday, April 03, 2023






DJ Industrials




S&P 500








Russell 2000






U.S. stocks open the week mixed as the S&P 500 (SPX) holds the 4,100 level as strength in energy offset early tech weakness, while the Dow rises and Nasdaq slips – but overall market breadth very strong (nearly 2:1 advancers leading). The story this weekend was the spike in oil prices after a surprise announcement by OPEC+ to cut more production jolted markets. Global markets made a shaky start to the second quarter of 2023 as OPEC+’s announced an unexpected crude oil production cut of about 1.15 million barrels a day starting in May. If oil prices rise significantly and stay elevated, that could complicate the inflation picture while slowing economic growth. The Dow Jones Industrial Average outperformed broader averages led behind CVX (energy strength) and UNH in managed care after CMS released proposed Medicare Hospice provider rate updates for FY2024 at +2.8%, reflecting a +$720 million projected increase in overall payments. Electric Vehicles also in the spotlight amid monthly delivery orders totals from TSLA, RIVN, NIO, LI, XPEV. Lastly, lots of M&A news ahead of this holiday shortened week (markets closed Friday for Good Friday), with WWE/EDR, LSI/EXR, HSKA, and TECK headlines (details below for all). The U.S. dollar and Treasury yields stumble following weaker ISM manufacturing data and fears of a slowing economy on energy price hikes.


Economic Data

·     ISM manufacturing activity slumped to the lowest level in nearly three years in March, as PMI falls to 46.3 last month, the lowest reading since May 2020, from 47.7 in February and below ests 47.5. It was the fifth straight month that the PMI remained below the 50 thresholds, which indicates contraction in manufacturing. ISM new orders sub-index fell to 44.3 last month from 47.0 in February; supplier deliveries slipped to 44.8 from 45.2 in February.

·     Feb construction spending fell (-0.1%) vs. consensus for an unchanged reading; Feb private construction spending unchanged, public spending (-0.2%).

·     March PMI Manufacturing Index: 49.2 vs. 49.3 consensus and 47.3 in February.







WTI Crude















10-Year Note





Sector Movers Today

·     Autos: All about monthly delivery and production numbers in the electric vehicle sector today: TSLA delivered 422,875 vehicles, up 36% y/y, but compared with analyst expectations for 430,008 vehicles, according to Refinitiv data. TSLA said Q1 production was 440,808 units; produced 421,371 Model 3 and Y vehicles in Q1 and delivered 412,180. RIVN Q1 Deliveries total 7,946 vehicles, production of 9,395 vehicles. Both are 7% lower than Q4 2022 levels. In Chinese EV monthly updates: LI said it delivered 20,823 vehicles in March 2023, an increase of 88.7%; Q1 deliveries to 52,584, up 65.8% y/y; cumulative deliveries of Li auto vehicles reached 309,918 as of end of March. NIO delivered 10,378 vehicles in March, +3.94% from 9,985 a year ago but -14.6% from 12,157 in February; delivered 31,041 vehicles in the first quarter, slightly above the lower end of its previous guidance range of 31K-33K; XPEV delivered 7,002 vehicles in March, up 16.51% from 6,010 in February, but down 54.57% from 15,414 y/y.

·     In medical equipment: HSKA rises after the co entered into a definitive agreement with Mars, which will acquire the provider of advanced veterinary diagnostic and specialty products for $120.00 per share. In research, Citigroup posts 1Q23 Preview saying easy comps, better macro for the sector as open a Positive Catalyst Watch on EW and ZBH, a Negative Catalyst Watch on MDT and upgraded SILK to Buy from Neutral, while reiterate Top Picks on DXCM and SYK, but remove it from PEN given the stock’s 25% YTD appreciation.

·     In Life Science Tools & Diagnostics Preview at Citigroup: upgrade DGX from Sell to Neutral saying their negative call has mostly played out and heading into 1Q23 earnings season in Life Sciences, Diagnostics, and CROs they see an increased level of investor focus on visibility into 2H23 given most of the guidance within their coverage universe remains back-half weighted and dependent on several variables to hit numbers. Overall, in Tools they prefer to own names with cleaner FY23 setups, citing BRKR and PKI as preferred names for the prints. In Diagnostics and CROs our preferred names are EXAS and ICLR, respectively.

·     In semiconductor research: INTC was upgraded to Market Perform from Underperform at Bernstein and upped tgt to $30 from $20 saying while Intel’s situation still looks poor, the Co’s medium-term set-up is finally getting better. At Citigroup, the firm downgraded ENTG, WOLF to Neutral from Buy noting the semi-equipment group is +34% vs SP500 +13% since early 4Q22 and they continue to believe the group bottomed in October last year. That said, we believe the easy money has been made and remain long on top picks AMAT and components (top picks AEIS).



·     APLS +16%; after Bloomberg reported the co is said to attract takeover interest according to Bloomberg; larger drugmakers are eyeing $7.6 billion company: https://bit.ly/40yXNij ; shares of ISEE rise in sympathy as its peer eye disease drug developer Apellis draws takeover interest.

·     CVX +4%; leads the Dow/energy stocks higher as the price of oil jumped following OPEC+’s surprise announcement of a surprise production cut over the weekend.

·     HSKA +19%; after the co announced they have entered into a definitive agreement with Mars, which will acquire the provider of advanced veterinary diagnostic and specialty products for $120.00 per share. https://on.mktw.net/3ZANUiG

·     LSI +2%; EXR will combine with LSI in a $12.4B deal; according to executives, Life Storage stockholders are set to receive 0.8950 of an Extra Space share for each share they own, or $145.82 https://bloom.bg/3ZBa6Jx

·     M +6%; citing a favorable risk/reward setup noting on valuation, M is trading at 2x our FY24 EBITDA, which stands ~50% below the Department Stores/Mall-based Specialty average.

·     PPG +4%; raises Q1 adj EPS view to $1.52-$1.58vs. est. $1.18 saying sales volume performance was led by aerospace and automotive original equipment manufacturer coatings businesses.

·     TECK +17%; shares jumped after saying it received and unanimously rejected an unsolicited and opportunistic acquisition proposal from GLNCY. https://on.mktw.net/3JZRZam

·     UNH +3%; along with HUM and others after CMS released proposed Medicare Hospice provider rate updates for FY2024 at +2.8%, reflecting a +$720M projected increase in overall payments, a slight increase from FY2023 proposed Hospice rates of +2.7% but below the final update of +3.8%.

·     WYNN +4%; along with strength in MGM, LVS after Gross gaming revenue reached 12.7 billion patacas ($1.6 billion), which marked the best month for Macau casinos since January 2020.



·     ADP -2%; and PAYX both downgraded to Underperform from Neutral at Bank America saying expectations of rising unemployment and lower rates could be a dual headwind.

·     ASND -37%; after the FDA said it has found deficiencies in the company’s new drug application for TransCon PTH, its candidate for the treatment of hypoparathyroidism.

·     MQ -3%; downgrade to Equal Weight at Morgan Stanley and cut tgt to $4.50 from $8 saying the co is working through a multitude of headwinds over the next ~12 months, including SQ contract renewal, non-SQ stagnation, gross profit growth uncertainty, and path to profitability.

·     SSYS -4%; as Stratasys board unanimously rejects Nano Dimension (NNDM) revised unsolicited proposal of $19.55/share.

·     TSLA -5%; delivered 422,875 vehicles, up 36% y/y, but compared with analyst expectations for 430,008 vehicles, according to Refinitiv data.

·     WWE -4%; as Endeavor Group Holdings Inc. (EDR agreed to combine with WWE to form a new, publicly listed company to trade under the symbol TKO, with a combined enterprise value of $21.4 billion. https://on.mktw.net/3K8oNOA


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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