Mid-Morning Look
Tuesday, January 11, 2022
Index |
Up/Down |
% |
Last |
|
||
DJ Industrials |
-169.74 |
0.47% |
35,899 |
|||
S&P 500 |
-10.99 |
0.24% |
4,659 |
|||
Nasdaq |
21.74 |
0.14% |
14,964 |
|||
Russell 2000 |
2.78 |
0.13% |
2,173 |
|||
U.S. stocks are mixed early as the tech heavy Nasdaq Composite extends yesterday’s massive upside reversal (ended higher yesterday after falling as much as -2.7% at one point Monday), moving back around the 15,000 level after declining nearly 10% the first few days of 2022 on fears that rising interest rates will impact growth. Remarks this morning from several Fed speakers (George, Mester, Bostic) reflect the Fed’s recent turn towards inflation fighting, a shift cemented at a December meeting where officials accelerated plans to raise interest rates and begin to pull back on their holdings of U.S. Treasury bonds and mortgage-backed securities (MBS) accumulated during the pandemic. That stance has turned Treasury yields higher across the curve, with the 10-year hitting near 2-year highs above 1.8% this week along with a spike in shorter-term yields with the 2-year near 0.9%. Large cap tech among early leaders while interest rate sensitive names and cyclicals are pulling back. Retail and healthcare stocks very active a second day amid several pre-announcements ahead of presentations at the JPMorgan Healthcare conference and ICR Exchange retail agenda this week. Fed Chairman Powell currently speaking before the Senate Banking Committee for consideration for a second four-year term as head of the Fed.
Fed comments today remain on upside to interest rates:
· The Federal Reserve may need to raise interest rates at least three times this year, starting with a rate increase at the March meeting, to respond to a tight labor market and inflation that is persistently high and broader based, Cleveland Fed President Loretta Mester said.
· The U.S. Federal Reserve should begin to reduce its holdings of U.S. Treasury bonds and mortgage-backed securities accumulated during the pandemic in the not-too-distant future, Kansas City Fed President Esther George said on Tuesday, the latest policymaker to urge a swifter runoff of its balance sheet than during the last tightening cycle
· High inflation and a strong recovery will require the Federal Reserve to raise interest rates at least three times this year, beginning as soon as March, and warrant a rapid rundown of Fed asset holdings to draw excess cash out of the financial system, Atlanta Fed Pres Raphael Bostic said
Macro |
Up/Down |
Last |
|
||
WTI Crude |
1.34 |
79.56 |
|||
Brent |
1.19 |
82.09 |
|||
Gold |
9.00 |
1,808.00 |
|||
EUR/USD |
0.0009 |
1.1335 |
|||
JPY/USD |
0.26 |
115.45 |
|||
10-Year Note |
-0.012 |
1.768% |
|||
Sector Movers Today
· Consumer Staples; ACI raised its year guidance EPS ($2.90-$2.95 from $2.50-$2.60) and sales growth (to decline -0.8%-1.2% from prior view of -2.5%-3.5% decline) after the company posted better-than-expected third-quarter results; REYN downgraded to Neutral from Buy, price target $35 at Citigroup; CHEF guides year sales view to $2.1B-$2.2B vs. est. $2.0B and sees FY 2022 adjusted EBITDA between $99 million and $111 million; MO, PM continue to remain buy rated at Stifel and maintain positive outlook for tobacco stocks in front of 4Q21 earnings driven by the strong growth they forecast for the coming year and the upside potential to our estimates; KMB downgraded to Neutral from Outperform, price target $148 at BNP Paribas; WW was downgraded from Buy to Hold w/ $18 PT at Craig Hallum
· Auto sector; TSLA tgt raised to $1,300 from $1,200 at Morgan Stanley and remain Overweight saying Q4 deliveries were 20% above his forecast, and that the message to investors on Tesla is as straightforward as it is easy to ignore; RIVN slipped after reported that its chief operating officer left the company last month as it ramped up production; VLDR has signed a five-year sales pact for its lidar sensors with QinetiQ Inc.; FREY signed a Head of Terms agreement for pursuing a JV with the ambition to establish an LFP cathode plant in the Nordic region; Truist said five favorite stocks for 2022 across the Automotive and Transportation sectors include ABG, ACVA and IAA on the auto side which were overly punished in 2021 and on the Transportation side view ATSG and GXO are best in class
· MedTech Equipment; DHR said Q4 ore revenue growth is expected to be above the company’s previously announced guidance; ILMN forecast robust 2022 sales and announcing four partnership deals as sees year 2022 revs about $5.15B-45.24B topping the $4.9B estimate as announced partnerships with Boehringer Ingelheim, Nashville Biosciences, Agendia NV and UNH’s Optum; VRAY upgraded to Buy at Briley after preannounced 4Q21 and FY21 results that included total 4Q21 revenue of ~$20M primarily from three new revenue units; FLDM surges after prelim q4, and FY rev exceeds prior guidance
· Retailers; AEO raises 2023 financial targets, taking operating income to $800 million reflecting outstanding execution on real power; and expects record Q4 revenue with growth in mid-to-high teens compared to q4 2020; ANF guides Q4 net sales +4-6% y/y and 0%-(2%) vs 2019 as prior outlook of +3% to +5% to 2019 was impacted by additional unexpected and uncontrollable inventory receipt delays; BBW raises FY21 revenue view to $408M-$412M from $390M-$400M (est. $393.48M); BIG shares slide after lower guidance as sees Q4 EPS $1.80-$1.95, below prior view $2.05-$2.20, following suit of fellow discount retailer FIVE yesterday with its weaker outlook; DLTH reported FY4Q weeks 1-9 revenue up 6.4% (Retail +37.8%, Direct -5.4%) and reiterated the FY21 outlook for revenue, adj. EBITDA, and EPS; URBN said holiday net sales rose 14.6% vs. same period in 2019; ADDYY upgraded to Outperform and Puma both top ideas – and we view recent share price weakness as an attractive entry point in retail; SHOO upgraded to Buy at Loop Capital with upside to $50 as increasingly optimistic near-term
· Metals & Materials; AA downgraded to Hold from Buy at Deutsche Bank while raise tgt to $65 from $60 following the stock’s 105% increase since the upgrade to Buy 10 months ago, as sees Alcoa’s risk/reward as more balanced; LAC upgraded to overweight and up tgt to $41 from $32 at Piper in lithium space; Wolfe research with several downgraded in metals sector as downgraded CLF to Peer Perform from Outperform and trim tgt to $23, STLD downgrade to Underperform from Peer Perform and tgt to $60 from $66, TX downgrade to Underperform and trim Target to $45 from $46, U.S. Steel (X) downgrade to Underperform and cut Target to $24 and NUE downgrade to Underperform from Peer Perform and cut our price Target to $102 from $110
Stock GAINERS
· ACCD +12%; as Q3 revenue and adjusted EBITDA came in well ahead of consensus ests as a stronger than expected achievement of performance fees led to a pull-forward of revenue that was $4.5mm ahead of consensus expectations.
· AMD +2%; upgraded to Overweight with $155 tgt at KeyBanc as raise ests saying its poised to benefit from robust high teens cloud data center growth in 2022 and should meaningfully outpace industry growth
· BBW +3%; raises FY21 revenue view to $408M-$412M from $390M-$400M (est. $393.48M)
· CRL +6%; as guides FY22 EPS $11.50-$11.75 above consensus $11.46 and said it sees FY22 revenue up 13%-15% vs. consensus $3.92B
· CVS +1%; raised its full year 2021 GAAP diluted earnings per share guidance range to $5.87 to $5.92 from $5.50 to $5.61
· ILMN 6%; forecast robust 2022 sales and announcing four partnership deals as sees year 2022 revs about $5.15B-45.24B topping the $4.9B estimate as announced partnerships with Boehringer Ingelheim, Nashville Biosciences, Agendia NV and UNH’s Optum
· JNPR +3%; upgraded to Buy from Underperform at Bank America and raise tgt to $40 noting in the last two quarters, orders grew by over 50%, and approx. 15% on a normalized basis in 3Q
· LVS +5%; upgraded to Overweight from Neutral at JPMorgan and up year-end 2022 price Target to $48, offering attractive 30% upside from current levels as like the risk-reward at current levels, with downside, they think, of $2 to $34
· SHAK +14%; guides Q4 revs $203.3M vs. est. $197.9M and prelim 4q comp sales +20.8%, above est. +17.0%
Stock LAGGARDS
· ACI -10%; raised its year guidance EPS ($2.90-$2.95 from $2.50-$2.60) and sales growth (to decline -0.8%-1.2% from prior view of -2.5%-3.5% decline) after posted better-than-expected Q3 results – but said Q3 margins were hurt by increased product costs/higher supply chain costs
· BIG 5%; shares slide after lower guidance as sees Q4 EPS $1.80-$1.95, below prior view $2.05-$2.20, following suit of fellow discount retailer FIVE yesterday with its weaker outlook
· CAT -1%; early weakness in industrials, with URI, PCAR, GWW, WAB, all down over 1%
· IBM -3%; downgraded to Sell from Neutral at UBS and cut tgt to $124 from $136 saying near-term risk to Q4 operating estimates and an elevated valuation leaves the shares vulnerable
· PACB -8% after ILMN said that it will develop the DNA technology it had sought from the failed acquisition of PacBio and issues weaker Q4 revs
· REG -2%; KIM, FRT, AMT all down over 2% early, seeing early weakness in REITs as yields rise
· SHOP ; downgraded to Neutral from Overweight at Atlantic Equities
· UHS -3%; said has more employees on sidelines than ever before in pandemic; hopes to see significant decline in Covid rates by early Feb
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.