Mid-Morning Look: January 05, 2022

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Mid-Morning Look

Wednesday, January 05, 2022






DJ Industrials




S&P 500








Russell 2000






U.S. stocks are mixed for a third straight day to start the New Year, with the Nasdaq again leading the declines behind weakness in some mega caps and software stocks (CRM, ADBE fall on analyst downgrade), while value stocks seeing strength early. The S&P 500 is flattish approaching the 4,800 level as energy names move higher with oil prices rising and banks again among top leaders as Treasury yields stay steady (10-yr yield 1.655) following a bullish private payroll report this morning as December ADP private payrolls reported at 807K, more than double the 400K estimate. Investors await minutes from the Federal Reserve’s December meeting later today as well as nonfarm payroll data this Friday. The U.S. dollar edges lower which is helping commodity prices in general (metals, gold, energy).


Economic Data

·     ADP private payrolls reported at 807K for December, well above the 400K estimate, while the prior month revised to 505K from 534K

·     U.S. IHS Markit December final composite PMI at 57.0 (vs flash 56.9) and December final services PMI at 57.6 (vs flash 57.5)







WTI Crude















10-Year Note





Sector Movers Today

·     Biotech and Pharma: in research, Bank America upgraded PFE to Buy from Neutral, downgraded AMGN to Neutral from Buy, and downgraded REGN to Underperform from Neutral (cut tgt to $575 from $675); PFE and BNTX sign new global collaboration agreement to develop first MRNA-based shingles vaccine as clinical trials are expected to start in second half of 2022/BNTX will receive $225M upfront and PFE will receive an upfront payment of $25M from BioNTech for its proprietary antigen sequences identified by Pfizer; LGVN announces launch of Phase 2a Lomecel-B trial for Alzheimer’s Disease; EWTX said it had positive results from a study of EDG-5506 in adults with Becker muscular dystrophy; ITCI 9.52M share Secondary priced at $42.00

·     Industrial & Machinery; Barclays said they see agricultural and heavy machinery maker DE to benefit from rising demand for autonomous machinery; in research, EMR was upgraded to Outperform from Sector Perform at RBC Capital saying based on Investment Framework, it is the right time in cycle to own this mid-tier quality Hybrid, while the firm downgraded MMM to Underperform from Sector Perform as the company faces mounting operating and legal challenges in 2022 and downgraded EPAC as expect the shares to lag given ongoing oil & gas headwinds (30% of revenues) and the new CEO’s sweeping business review; GNRC positive mention at Oppenheimer saying they favorably consider the significant pullback in shares in the context of logistics/ cost pressures interplay with current sentiment/rotation drivers

·     Insurance; Evercore downgraded LNC to In-Line after its 2021 outperformance brings its near-term setup looking worse than the average stock and PRU to In-Line as fundamental revenues and organic growth will be limited while they pursue growth businesses and shrink capital intensive ones, while upgrading MET to Outperform as it trades at a discount to these prior two, and also issued upgrades to OP on AEL as it executes its transition from a traditional spread-based annuity writer to an insurer that derives a greater portion of its earnings from capital light fee-based businesses and VOYA as they believe greater emphasis on FCF-based valuations could lead to outperformance if management can hold the line on capital return, and downgraded BHF to In-Line because they see relatively limited near-term organic FCF generation; Piper upgraded AEL to OW as its transition provides several potential catalysts and LNC to OW as its incoming CEO freshens its narratives, and downgraded CNO to N as its Covid net benefit is diminishing while distribution remains challenged; Bank of America downgraded GOCO to Underperform

·     Consumer Staples; BYND meatless chicken will be added to KFC (YUM) menus nationwide starting Monday; Bank of America downgraded Kellogg (K) to Neutral on their forecast of modest EPS growth in 2022 as the company recovers from supply-chain constraints, rising costs, and consumer demand amid higher prices, downgraded EL to N as it trades above its average premium to the Beauty group, downgraded MO to N, initiated UTZ at N with a $19 PT as its valuation leaves its story and elevated leverage less compelling, and lowered their PTs on Buy-rated FRPT to $125 from $196 and UP-rated BYND to $55 from $70 due to a slowing growth rate in the category, uncertainty of the success and gross margin dilution of a full scale MCD rollout, and peer valuations having pulled back; SMPL Q1 adj EPS 43c vs est. 35c on sales $281.3M vs est. $266.3M, raised FY22 sales growth forecast to 12-14% from 8-10%; Wells double-upgraded EPC to OW from UW with a new $55 PT from $41 as they see a dearth of value in staples and its risk-reward is scarce within the sector

·     Utilities; Mizuho downgraded SR to Neutral as they no long see the deep value discount vs peers they saw in September and regulatory developments in their Missouri rate case were more negative than expected to make its current discount fair and NJR to Neutral with few potential upside or downside catalysts in the near-term; UBS lowered Dominion (D) to Neutral as they expect utilities to underperform in 1H22 and are thus narrowing their recommendations to their favorite catalyst-driven names AEP, EXC, OGE, downgraded PNW to Sell due to the challenging AZ regulatory climate, SO to N on increased 2022 regulatory risks, FTS, NRG to N as they see shares being fairly valued now



·     BABA +5%; rises a day after Charlie Munger’s other firm doubled down on an investment in Alibaba for the second consecutive quarter as his Daily Journal disclosed in an SEC filing it ended 2021 with 602,060 ADR’s, buying a net 300,000 ADRs

·     BYND +6%; after YUMs KFC brand said it will launch meatless fried chicken made with Beyond Meat nationwide, adding its meatless chicken to menus starting Monday

·     GRMN +2%; upgraded to Buy from Hold at Deutsche Bank and raise tgt to $160 from $148 saying has increased conviction in its business environment for CY22

·     INSP +8%; after issued prelim 4Q revs $78-78.4Mm vs est. $65.8Mm, says activated 81 new centers in US in 4Q

·     INTC +4%; was upgraded to Outperform at Northland with $62 tgt saying they expect INTC to leverage its SiP capability and optimize its fab resources producing die that is best built on older technology

·     NKLA +9%; is dropping its $2 bln lawsuit against TSLA in relation to patent violations, both cos agreed to withdraw all claims and counterclaims against each other, joint court filing says

·     NUE +6%; early strength in steel and industrial metals with X, FCX rising

·     SONY +3%; said at the CES technology conference it would create a car unit and explore entering the electric-vehicle market



·     ADBE -4%; UBS downgraded shares to Neutral from Buy and cut tgt to $575 from $635 saying they worry that more “front-office/marketing” tech spend was pulled forward in 2020/2021 than most investors think, pressuring Adobe’s growth rate in 2022

·     AMT -5%; along with weakness in CCI after JPMorgan downgraded both tower stocks – AMT was downgraded to Underweight from Neutral at JPMorgan on limited domestic growth and likely equity raise and CCI downgraded to Neutral from OW as shares have met our fair value

·     ANNX -32%; after reported interim data from its ongoing, open-label Phase 2 clinical trial of ANX005 in patients with Huntington’s disease who completed the 24-week treatment period.

·     CRM -5%; downgraded at UBS to Neutral and cut tgt to $265 from $315 saying it seems likely that Salesforce’s organic growth will moderate in 2022

·     ENPH -5%; downgraded to neutral from Buy with lower tgt of $187 from $297 at Bank America

·     ROKU -4%; as Atlantic Equities initiated with an Underweight recommendation and a $136 tgt saying growth in the U.S. has been slowing and do not expect the largest TV OEMs to outsource to Roku

·     SGH -11%; falls on mixed results as Q1 topped views but Q2 net sales $415-455Mm vs est. $426Mm, adj gr margin 24-26% vs est. 24.3%


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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