Mid-Morning Look: December 22, 2022

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Mid-Morning Look

Thursday, December 22, 2022

Index

Up/Down

%

Last

 

DJ Industrials

-437.69

1.31%

32,938

S&P 500

-62.17

1.60%

3,816

Nasdaq

-242.78

2.27%

10,466

Russell 2000

-29.55

1.66%

1,747

 

 

U.S. stocks slide following stronger than expected GDP growth data for Q3, coming in above consensus and raising fears it will keep the Fed on a trajectory for higher and deeper rate hikes to slow the economy as they continue to bring down inflation. The increase in gross domestic product to 3.2% annual rate, was initially reported at 2.6% and updated to 2.9% last month – not exactly signs of a slowing economy. Inflation data points in the GDP data, core-PCE, came in higher than expected. Cautious commentary on the stock market from one of the most well know hedge fund managers, Appaloosa Management’s David Tepper, said in a CNBC interview this morning “I am leaning short on equities, the risk/reward here doesn’t make any sense.” “The Fed means business and rates will remain high.” The data boosted Treasury yields, while Tepper’s comments sunk equities. Not a pretty picture to start the day as stocks falls further, adding to year-to-date declines. After all eleven S&P sectors closed higher on Wednesday, all eleven started the day in negative territory today.

 

Economic Data

·     Q3 GDP (third estimate) rose +3.2% vs. +2.9% consensus and prior estimate of +2.9 %. In Q2, U.S. GDP slipped 0.6%. US final Q3 GDP deflator +4.4% (consensus +4.3%), prior +4.3%, US Q3 PCE price index +4.3%, prior +4.3%; core PCE +4.7% (est. +4.6%), and Q3 year-on-year PCE price index +6.3% in-line with prior and core PCE +4.9% also in-line with prior

·     Weekly Jobless Claims rose to 216K in latest week from 214K prior but below est. of 222K; the 4-week moving average fell to 221,750 from 228,000 prior; continued claims fell to 1.672M from 1.678M prior and the US insured unemployment rate steady at 1.2%

·     Leading Economic Indicator Index fell far below expectations at -1% (vs. the Street -0.5%)

 

 

Macro

Up/Down

Last

 

WTI Crude

0.01

78.28

Brent

0.34

82.54

Gold

-18.80

1,806.60

EUR/USD

0.000

1.06.04

JPY/USD

-0.20

132.27

10-Year Note

-0.026

3.658%

 

 

Stock GAINERS

·     ALVO +22%; said AVT02, a biosimilar to ABBV’s arthritis drug Humira, said the FDA to decide on approval for its anti-inflammatory drug candidate by April 13, 2023; shares +13%

·     CLF +10%; said it will achieve higher annual fixed prices for steel in the calendar year 2023 and expects significantly lower steelmaking unit costs in 2023 compared to 2022

·     FDX +0.5%; holds gains after yesterday post earnings advance

·     MLKN +5%; Q2 EPS $0.46 vs consensus $0.42 and revenue $1.07B vs consensus $1.04B; guides Q3 EPS $0.40-$0.46 vs consensus $0.43 and revenue $980M-$1.02B vs consensus $1.02B

·     MRTX +4%; said the FDA granted ‘Breakthrough Therapy Designation’ (BTD) to its lead drug adagrasib in combination with cetuximab in advanced colorectal cancer (CRC) patients

·     ORIC +66%: entered a clinical development collaboration for a potential Phase 2 study of ORIC-533 in multiple myeloma with PFE

 

Stock LAGGARDS

·     ALLY -3%; auto loan lenders slide following weaker KMX earnings results (COF as well)

·     AMC -14%; as proposes 1 for 10 reverse stock split and said would raise $110 million in new equity capital through the sale of its preferred stock

·     KMX -8%; following weak results as Q3 EPS $0.24 well below the $0.70 estimate as sales fell -23.7% to $6.5B vs. est. $7.28B; paused share repurchases; combined retail and wholesale unit sales fell by -28%; retail used car unit sales fell -20.8%

·     LRCX -7%; weakness in the semi equipment sector after MU cut 2023 CAPEX to $7.0B-$7.5B from earlier $8B target and from $12B in FY22 (shares of KLAC, AMAT, ASML also lower)

·     MU -4%; Q1 EPS loss (-$0.04) vs. est. loss (-$0.01); Q1 revs $4.09B vs. est. $4.11B; sees Q2 adj gross margin 6%-11% vs. est. 17.8%; sees Q2 adj EPS loss (52-72c) vs. est. (-$0.29); sees Q2 revs $3.6B-$4.0B vs. est. $3.88B; to reduce headcount by 10% during 2023

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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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