Mid-Morning Look: April 06, 2022

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Mid-Morning Look

Wednesday, April 06, 2022






DJ Industrials




S&P 500








Russell 2000






U.S. stocks a straight move lower on the open following overnight weakness and after closing near the lows on Tuesday as investors appear spooked into the FOMC Minutes later this afternoon, as the Fed ramps up aggressive rate hike rhetoric. Rising expectations are for the Fed to raise rates by 50-bps in May meeting and possible subsequent meetings given inflation has not slowed. Dow Transports extend losses (down a 6th day), down over -500 points earlier to 14,500, its lowest levels since late March with broad weakness in airlines, truckers, rails and other amid rising recession fears for the U.S. economy. Technology along with consumer discretionary also among the biggest sector losers on recession concerns, coupled with soaring borrowing costs and fuel hurt sentiment. The Treasury selloff has intensified, with the 10-year yield hitting morning highs around 2.66% from 2.554% Tuesday, while the two-year rises to 2.539% ahead of Fed minutes to be released this afternoon. Markets still digesting Brainard’s hawkish comments yesterday along with Harker today. Brainard stressed Tuesday the Fed’s commitment to fighting inflation and hinted the asset portfolio reduction could be faster than expected. Commodity related sectors slip following weak economic data out of China. Coming into today, the S&P had put in nine consecutive days above its 200 DMA (4489), before slipping below this morning. While this can be viewed as encouraging, this is the same number of days it spent above the 200 DMA in early February. Banks are slipping early despite the big bounce in yields, while energy and utilities lead.







WTI Crude















10-Year Note





Sector Movers Today

·     Auto sector; APTV, LEA upgraded to Buy from underperform, ADNT, VC upgraded to Neutral on production volume recovery; Downgrade CRMT to Underperform from Buy, KMX to Neutral from Buy and CAR downgraded to Underperform from Neutral on valuation – notes that >80% of our coverage is rated Buy or Neutral – Despite the cut to their volume forecasts (more significant in 2022E, but also modest for 2023-2025E), continue to believe that the near-term volume pressure is setting up for a more robust capital goods replacement cycle over the mid/long-term; RIVN said it produced 2,553 vehicles at its manufacturing facility in Normal, Illinois in the first quarter and said it delivered 1,227 vehicles in the quarter; auto supplier tgts cut at Morgan Stanley with APTV to $170 from $200, as sees headwinds from inflation, semiconductor shortages, AXL to $14 from $16, expects hit from volatile production schedules and LEA to $160 from $175, as flags output being hurt by indirect impact of commodity costs due to the Russia/Ukraine conflict; Electrek reported that TSLA now expects Gigafactory Shanghai shutdown to extend to at least Friday – missing out on over 24,000 EVs

·     Pharma movers; LLY named a top pick at Morgan Stanley, says it has best product outlook in pharma as assumed with an OW rating and tgt to $364 from $265; said LLY has the most robust new product cycle (and hence growth) outlook in Pharma as over the next 2 years the company could launch five new drugs; JAZZ was downgraded to Neutral at Goldman Sachs post recent outperformance as we feel most of the upside is now captured in its present valuation; in cannabis, TLRY reported a swing to profit in Q3, benefiting from a rise in revenue rising to $151.9M from $123.9M a year ago, benefiting from wellness revenue, which contributed $14.7M; said cannabis revenue rose to $55M from $41.7M

·     Energy stock movers; oil prices were volatile between gains and losses, but majors such as CVX and XOM outperformed rest of energy complex; shares of OXY, HES, EOG, VLO also among leaders; Weekly inventory data showed: the API said weekly crude inventories rose 1.1M barrels, crude inventories at Cushing rose 1.8M barrels, gasoline inventories fell -500K barrels and distillates rose 600K barrels. The EIA said weekly crude stocks up 2.4M barrels in latest week vs forecast of -2.1M bbl draw and inventories of crude in U.S. Strategic petroleum reserve off 3.7Mbarrels to 564.58 mln; gasoline stocks off 2.0M barrels to 236.79M



·     ARRY +6%; reports a beat on the top/bottom line for Q4 w/mixed guidance as Cowen noted the revenue guidance which was above consensus does not include any delays from the AD/CVD case

·     BTAI +5%; after saying the FDA approved its lead drug, IGALMI, for treatment of mild, moderate, or severe agitation associated with schizophrenia or bipolar disorder in adults

·     GOGO +10%; will replace FLOW in the S&P SmallCap 600 effective prior to the opening of trading on Friday, April 8

·     SMPL +3%; 2Q EPS of $0.36 vs Consensus $0.28 and EBITDA of $54M vs $46M, with sales of $297M vs Consensus $275M. North America was +32% and was mostly driven by volume gains and raises FY sales guide

·     TLRY +8%; reported a swing to profit in Q3, benefiting from a rise in revenue rising to $151.9M from $123.9M a year ago, benefiting from wellness revenue, which contributed $14.7M; said cannabis revenue rose to $55M from $41.7M

·     TUFN +43%; will be acquired by Turn/River Capital in an all-cash transaction that values Tufin at ~$570M, with holders to get $13 per share, a 44% premium https://bit.ly/3KdYVj5



·     BABA -4%; weakness in U.S. listed Chinese stocks after softer Caixin PMI data reading overnight fell to 42.0, contraction vs. est. above 49 and from above 50 in Feb

·     CAR -10% after with transport weakness (index falls for a 5th straight session) and downgrade at Bank America to Underperform

·     LNDC -8%; 3Q adj EPS ($0.08) vs est. ($0.01) on revs $53.1Mm vs est. $48.4Mm; reiterates FY 22 guide

·     MRNA -6%; The FDA said on Wednesday that currently available COVID-19 vaccines are not well matched against the BA.2 sub-variant of Omicron, although booster doses help protect against severe outcomes (NVAX, PFE, BNTX, VIR)

·     NCLH -5%; weakness in travel and leisure related stocks WYNN, EXPE, MGM, BKNG as rising fears of a recession in the U.S., coupled with soaring borrowing costs and fuel hurt sentiment

·     SYK -3%; mentioned as a “short” call by SprucePoint saying debt-fueled acquisition roll-up is hitting a wall and no longer producing an attractive ROIC https://bit.ly/3uVOvOx


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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