Mid-Morning Look: January 07, 2022

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Mid-Morning Look

Friday, January 07, 2022






DJ Industrials




S&P 500








Russell 2000






U.S. stocks markets searching for direction early, rebounding initially after a few days of weakness amid a more apparent “hawkish” Fed when it comes to rates, as Treasury yields have inched higher every day to start the New Year (10-year tops 1.77% at highs this morning), but markets have been fading since. The December jobs report disappoints on the topline, with fewer jobs created than economists expected, while unemployment dipped to 3.9% (as more people left the workforce), and wages surged MoM and YoY (inflation fears). Fed funds futures imply 90% chance of Fed hike at March meeting in even after the weaker jobs report. Oil prices reverse off earlier highs, but still on track for weekly gains. Earnings season around the corner with big banks kicking things off next Friday with JPM, WFC, Citi among them. Omicron fears remain, but have been easing as reopen sectors (cruise, travel, restaurant, leisure) been among early 2022 sector leaders. In a stunning stat, one tweet noted that the technical definition of a bear market is drop of more than 20% from highs. Currently out of 2628 Nasdaq stocks that trade volume over 100k ,1873 are down more than 20% which is 71%. The S&P 500 trying to hold its 50-day MA support of roughly 4,672 which it broke briefly Thursday before bouncing, currently near lows of morning.


Economic Data

·     Headline Jobs data for December disappoints, unemployment rate under 4%, wages jump MoM and YoY: U.S. December Nonfarm payrolls +199K, well below est. +400K, while Nov revised up to 249K from 210K and Oct revised up to 648K from 546K; U.S. December factory jobs +26K below est. 35K and Nov revised up to 35K; private payrolls rose 211K below the 365K est.; the unemployment rate drops to 3.9% from 4.2% prior month; average hourly earnings jump +0.6%, topping the +0.4% estimate and YoY rise 4.7% vs. est. 4.2%







WTI Crude















10-Year Note





Sector Movers Today

·     Semiconductors; Samsung (SSNLF) prelim 4Q21 results came in below expectation, with OP falling 13% QoQ to KRW13.8tn vs. KRW15.2tn Street as a one-time special bonus of around KRW1.0tn was the main reason for the lower OP; STM said it ended Q421 with net revenues above the outlook range and gross margin at or slightly above the high-end of the outlook range, primarily due to better than anticipated operations in an ongoing dynamic market; SIMO said it sees sequential Q4 revenue growth in the upper half of its original guidance of 0%-5% and non-GAAP margin in the upper half of its original 48.5%-50.5% guidance range; in research, Citigroup downgraded TXN to Hold from Buy and cut tgt to $187 from $222 as believe its margins will decline due to increasing depreciation and the acquisition of a fab, while added NVDA to Citi’s catalyst watch list post CES saying mgmt commented strong holiday gaming season, solid data center demand trends, and gaming/networking foundry supply to improve in 2H this year

·     Utilities & Solar; BMO raised their target on XEL to $74 from $72 and reit OP as they roll their valuation year to 2024 and after the company’s settlement with Colorado to raise rates earlier this week; Evercore upgraded FE to Outperform as it still presents an inexpensive opportunity that has not yet fully realized the benefits of transitioning to a purely regulated electric utility with more constructive regulation than not as a result of many disruptions; JPMorgan said current valuation for utilities continue to screen attractive vs historical levels and they upgrade PEG to OW while downgrading DTE to N and AWK, Emera (EMRAF) to UW

·     MedTech Equipment; QDEL guides Q4 revs $633M-$637M vs. est. $465.7M; guides year revs $1.695B-$1.699B vs. est. $1.53B; for ABT, as many as 1 million unused Covid-19 rapid test kits expired in a Florida warehouse last month, a top state official said; DXCM was upgraded to Buy at Guggenheim saying shares are down 26% since 11/1 as the stock has sold off along with other growth assets amid the recent rise in interest rates and creates an attractive setup; MDT was downgraded from Overweight to Equal-weight at Morgan Stanley as remains positive l-t, but key pipeline product delays and headwinds in CY21 push out topline contributions; Credit Suisse downgraded CLOV to Underperform predicated on the company continuing to need to raise capital moving forward, a lack of clarity on significantly improving their medical loss ratio (MLR) to reduce cash burn, and an overall re-rating across the tech-enabled MCO sector,

·     Pipelines: Morgan Stanley downgraded MMP, DTM to UW and HESM to EW given their full valuations, EPD to EW despite its attractive valuation as more limited incremental return of capital via buybacks appears likely to favor outperformance elsewhere, upgraded ENLC to EW as recent return of capital announcement suggests a potential repeatable catalyst exists given excess FCF, and resumed coverage on ET at OW as its valuation screens the most attractively within their coverage with the lowest EV/EBITDA and highest FCF yield before dividends

·     Aerospace & Defense; AIN, HEI, HXL, SPR, TDG, and WWD all upgraded to Buy at Truist saying after remaining on the sidelines for nearly 2.5 years we are upgrading our view of the comm’l aero sector and upgrade six names to BUY. SPR upgrade from Hold to Buy w/ $76 PT (from $39) as boast the most favorable risk/reward profile among our upgrades; TDG upgrade from Hold to Buy w/ $786 PT (from $600) calling it arguably one of the best value creators in the industrial complex, WWD upgrade from Hold to Buy w/ $143 PT (from $110) as believe will gradually see a return to its status as one of the premier suppliers in the industry



·     CZR +3%; another rally in reopen related sectors with gaming, cruise lines (RCL), lodging (HST), travel (BKNG) among early S&P leaders; gaming names (DKNG, CZR) another boost as news yest can launch mobile sports betting in New York this Saturday

·     DISCA +11%; upgraded to Buy from Neutral at Bank America and raise tgt to $45 from $34 as see several areas for potential rev. and cost synergies and are bullish on the potential of a combined HBO Max/discovery+ DTC service

·     DCT +8%; EPS beat of $0.04 (est. $0.01), revenue growth of 25% (est. 17%), up from growth of 21% last quarter, subscription revenue growth of 28% (est. 24%), down from 35% last quarter, and SaaS ARR growth of 40% (est. 35%)

·     GME +10%; after the WSJ reported the company is launching a division to develop a marketplace for nonfungible tokens and establish cryptocurrency partnerships, having hired more than 20 people to run the unit https://on.wsj.com/3HLK0er 

·     QDEL +1%; as guides Q4 revs $633M-$637M vs. est. $465.7M; guides year revs $1.695B-$1.699B vs. est. $1.53B



·     CHWY -7%; downgraded to Neutral at Piper and lowering our PT to $55 (1.8x 2023E EV/S) as the 2022 outlook appears to have headwinds from both a sales and margin standpoint.

·     HUM -3%; extends yesterday declines a day after lowered its net membership growth estimate for individual Medicare Advantage products for the year to 150K-200K from prior 325K-375K

·     ROKU -4%; announced today that Scott Rosenberg, Senior Vice President and General Manager of Platform Business, plans to step down sometime in the spring of 2022. Rosenberg joined Roku in 2012 as Vice President, Advertising, and Business Development

·     SBUX -2%; downgraded to sector perform from outperform at RBC Capital, saying risk-reward is more balanced and sees less upside in shares in the near-term while Oppenheimer also downgraded saying the Street already underwrites outsized margin and EPS growth in ’23

·     TMUS -4%; after issues mixed sub numbers for Q4, while KeyBanc noted commentary around heightened Sprint churn in 2022 and higher CAPEX in 2022 leaves them cautious, given consensus expectations remain too aggressive

·     TXN -3%; Citigroup downgraded TXN to Hold from Buy and cut tgt to $187 from $222 as believe its margins will decline due to increasing depreciation and the acquisition of a fab


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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