Mid-Morning Look: January 05, 2023

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Mid-Morning Look

Thursday, January 05, 2023

Index

Up/Down

%

Last

 

DJ Industrials

-320.62

0.96%

32,949

S&P 500

-38.18

0.99%

3,814

Nasdaq

-117.89

1.13%

10,340

Russell 2000

-17.38

0.98%

1,755

 

 

U.S. stocks rolled early after ADP employment beat estimates and jobless claims fell to a three-and-a-half month low, once again spooking investors about the pace and terminal levels of future rate hikes. Jobless claims data tends to be noisy during the holidays period, but it is interesting to note 30 of the 53 states and US territories reported lower claims in the last week. The Fed’s Neel Kashkari yesterday stated his forecast that rates could climb to 5.4% and pause there, while the market’s implied terminal rate was only about 4.95%. Today’s data has pushed terminal rates just north of 5%, with the obvious counter-effect on equities. The S&P 500 and NASDAQ had slipped by more than 1% by 10am. As rate hike expectations rise, recession sentiment expectations also continue to climb. According to a JP Morgan survey, most firms now anticipate and recession during 2023. Ten-year treasury yields jumped back above 3.75% on the employment data, while gold gave up some recent gains with about a 1% early slide. Oil rebounded over 1% after posting the biggest two-day loss for the start of a year in three decades (down -9%) with the shutdown of a U.S. fuel pipeline providing support, though economic concerns capped gains. Crypto assets resume downward trend after sharp bounce on Wednesday, as SI shares slid over -30% on company update and COIN tumbles on an analyst downgrade. Gold prices slide after a 4-session advance to highest levels since June. Natural gas prices fall over -10% after weekly inventory data and continued downside momentum.

 

Economic Data

·     Private employment increased by 235,000 jobs last month, the ADP National Employment report showed well above the expectation of 150,000 jobs added (ahead of non-farm payroll report)

·     Weekly Jobless Claims fell to 204K in latest week, better than the 225k estimate and prior week revised to 223k from 225k; the 4-week moving average fell to 213,750 from 220,500; number of Americans filing new claims for unemployment benefits dropped to a three-month low last week of 1.694M from 1.718M prior, while layoffs fell 43% in December

·     November International Trade in Goods and Services deficit shrink -2% to (-$61.50B) vs. (-$73.0B) expected and (-$77.80B) in October (revised from -$78.20B) which reflected a decrease in the goods deficit of $15.3B to $84.1B and an increase in the services surplus of $1.0B to $22.5B. Exports were $251.90B vs. $256.90B prior and Imports $313.4B vs. $334.80B prior

 

 

Macro

Up/Down

Last

 

WTI Crude

0.62

73.461

Brent

0.48

78.32

Gold

-28.20

1,830.80

EUR/USD

-0.0078

1.0522

JPY/USD

1.35

133.98

10-Year Note

0.06

3.769%

 

 

Sector Movers Today

·     Pharma & Biotech movers: NVCR surges after saying a study evaluating the safety and efficacy of Tumor Treating Fields in stage 4 non-small cell lung cancer met its primary endpoint, demonstrating a statistically significant and clinically meaningful improvement in overall survival; TAK reports positive Phase 3 data for clotting disorder candidate; BIIB said that it separated research and development into two functions that report directly to new CEO Christopher Viehbacher (note for BIIB, approach lecanemab accelerated approval PDUFA on Jan 6th); MOR announce FY23 guidance for US sales $80-95M which suggests flat to declining Monjuvi sales and is ~25% below consensus

·     Autos: TSLA delivered fewer cars made in China last month than in November. Data from the China Air Passenger Car Association Tesla delivered 55,796 in December, down from more than 100,000 in November and 21% lower than a year earlier; Ford Motor (F) December total U.S. Vehicle sales 179,279, up 3.2% and December 2022 total U.S. EVs sales 7,823 units, up 223%; Volvo (VLVLY) its car sales grew in December but fell for the full year due to lockdowns in China; sales grew 13% year-on-year in December to 72,663 cars, a slight acceleration from November, but that 2022 sales fell 12% to 615,121 cars; KMX downgraded from Buy to Hold at Argus saying in the near term, they believe used vehicle retailers like Car-Max will struggle with their rapidly depreciating inventory and are unlikely to buy as many vehicles. All other things equal, less inventory will lead to lower sales and margins; EVGO and AMZN partner to enable EV drivers to locate and pay for charging with Alexa

·     Retail: BBBY tumbles after saying there is substantial doubt about its ability to continue as a going concern and continues to consider all alternatives, including restructuring or refinancing debt, reducing, or delaying business activities and selling assets; AMZN announced an additional 8k headcount cut in January, after 10k were announced in November; UBS downgraded both GPS and VSCO to Sell from Neutral as anticipate macro forces and share loss causing both to deliver weak growth and miss Street earnings expectations; TPR downgraded from Outperform to Market Perform at Bernstein saying demand for affordable luxury and premium brands is likely to soften in 2023; Piper with several changes, downgrading JWN, RVLV, BIRD to Neutral from Overweight in the global lifestyle brands, retail space with top ideas TGT and OXM; Piper also downgraded WWW to Neutral from OW with top picks for 2023 being DECK, ONON, and CROX – taking a more cautious stance on the consumer in the 2H as consumers spend down excess savings; HELE Q3 Non-GAAP EPS of $2.75 beat by $0.15. though GAAP EPS of $2.15, vs. prior year $3.10 while organic sales were down -18.5% in the qtr

 

Stock GAINERS

·     CAG +1%; hit 6-year highs after Q2 profit and sales topped expectations and boosted its full-year outlook, as raised prices helped offset a decline in volume

·     IPG +2%; upgraded to Neutral at Bank America saying 2023 should be a game of two halves for media and internet, favoring “quality compounders” in the first half

·     LW +9%; after Q2 EPS and revenues topped consensus handily and raised FY23 adjusted EPS view to $3.75-$4.00 from $2.45-$2.85 and revs view to $4.8B-$4.9B from $4.7B-$4.8B (est. $4.73B)

·     NVCR +51%; after saying a study evaluating the safety and efficacy of Tumor Treating Fields in stage 4 non-small cell lung cancer met its primary endpoint, demonstrating a statistically significant and clinically meaningful improvement in overall survival

·     TMUS +2%; preannounced postpaid net customer additions of 1.8M, roughly in line w/ cons (1.77M), and postpaid phone net adds of 927K, also roughly in line w/ cons (920K)

·     WDC +4%; has restarted merger talks with Japan’s Kioxia, Bloomberg reported https://bit.ly/3InmtnB

 

Stock LAGGARDS

·     BBBY -22%; after saying there is substantial doubt about its ability to continue as a going concern and continues to consider all alternatives, including restructuring or refinancing debt, reducing, or delaying business activities and selling assets

·     CACC -10%; adds to yesterday weakness, falling another 7% after tumbling -11.6% Wednesday after being sued by the U.S. Consumer Financial Protection Bureau and New York AG

·     COIN -12%; downgraded from Outperform to Market Perform at Cowen and slash tgt to $36 from $74 and reducing 2023 revenue and adj. EBITDA estimates below Street

·     SI 47%; after the crypto bank provided Q4 prelim results saying deposits at the bank plunged by $8.1 billion from the end of September to the end of December, and revealed that it was forced to sell off $5.2 billion in debt securities

·     STZ -5%; posts Q3 EPS $2.83 vs. est. $2.89 and cut FY23 EPS guide ex-Canopy from $11.20-$11.60 to $11-$11.20 while reported beer depletions of 5.7% in the qtr (

·     VSCO -9%; UBS downgraded both GPS and VSCO to Sell from Neutral as anticipate macro forces and share loss causing GPS and VSCO to deliver weak growth and miss Street earnings expectations

·     WBA -4%; posted Q1 EPS $1.16 vs. $1.14 on revs $33.4B vs. est. $33.0B and adjusts FY23 outlook, notes increased clarity into its long-term growth algorithm

·     YMAB -7%; announces restructuring, extending cash runway into 1Q26 and reprioritizes pipeline efforts while 2023 Danyelza guidance falls short of ests ($60-$65M vs. cons: $70.3M) – shares were downgraded at Cowen

_________________________________________________________________

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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