Mid-Morning Look

Wednesday, January 19, 2022

U.S. stocks looking at a modest rebound after both the S&P and Nasdaq dropped below key technical levels in yesterday’s sell-off, with the S&P 500 battling around the 4,600 level (above the 100-day MA 4,575) and as the Nasdaq ended down nearly 10% from its Nov. 19 record close, finishing below its 200-day moving average for the first time since April 21, 2020. The Nasdaq rises as much as 1% Wednesday before paring gains, as investors look to snap up heavily beaten tech stocks while financials extend recent declines after mixed earnings results (USB, CFG, STT sliding post earnings – follows a drop in GS yesterday on weaker quarterly results). The yield on the benchmark 10-year hits highs above 1.9% overnight but has since slipped back to 1.85%. Economic data came in stronger, with December Housing Starts and Building Permits both topping estimates, but housing starts and building product names lower amid rising rates and cautious analyst comments into Fed hike cycle. Energy names stay strong as oil prices rise to fresh 7-year highs above $86 per barrel. Precious metals also surging, with gold popping 1.3% to $1,835 an ounce.

Economic Data

·     Housing Starts MoM for December coming in at 1.702M, rising 1.4% vs. est. +1.65Mm and Building Permits MoM rise 9.1% to 1.873M vs. est. 1.70M; November Housing Starts were revised to 1.678 mln units from prior 1.679 mln units; December single-family starts -2.3% to 1.172 mln unit rate; multifamily +10.6% to 530,000-unit rate

Sector Movers Today

·     Bank movers; BAC Q4 EPS $0.82 vs. est. $0.76 on Q4 revs $22.1B vs. est. $22.23B, Trading revenue excluding DVA $2.93B, FICC trading revenue excluding DVA $1.57B and Equities trading revenue excluding DVA $1.37B; MS Q4 adj EPS $2.08 vs est. $2 on revs $14.52B vs est. $14.44B, net interest income $2.09B vs est. $1.92B, equities trading revs $2.86B vs est. $2.5B; USB Q4 missed consensus with EPS $1.07 vs est. $1.10 on revs $5.68B vs est. $5.75B; STT Q4 adj EPS $2 beat est. $1.88 on revs $3.05B vs est. $3B, AUM $4.14T was higher than expected $3.98T, and announced planned retirement of President and CEO; CFG Q4 EPS $1.26 vs. est. $1.13 on revs $1.72B vs. est. $1.66B, NII $1.1B was stable reflecting 3% growth in interest-earning assets, largely offset by lower net interest margin; CMA Q4 EPS $1.66 vs est. $1.58, non-interest income $289M vs est. $271.8M; CBSH Q4 EPS in-line 94c on revs $355.4M vs est. $353.46M, net interest decreased 3% from Q3; CNXC Q4 EPS $2.99 topped est. $2.71 on in-line revs $1.46B, sees Q1 revs $1.51-1.54B ahead of est. $1.5B and FY revs $6.45-6.6B above est. $6.16B; FULT Q4 EPS 37c matched consensus and net interest income $165.6M fell $5.7M from Q3; HWC Q4 EPS $1.55 beat est. $1.36, core loan growth $652.5M offset impact of $404.3M in PPP loan forgiveness, deposits increased $1.3B and the stock was upped to Buy at Truist with a new $70 PT from $50 after the results; IBKR Q4 adj EPS 83c vs est. 82c on revs $683M that slightly topped est. $672M and KBW upgraded it Outperform; PNFP Q4 EPS $1.70 vs est. $1.58 on revs $339.5M vs est. $335.5M; BOKF, UCBI, OFG Q4 EPS missed consensus; SBNY 2.1M share Secondary priced at $352.00; PB authorized a 4.6M share buyback program over the next year

·     Consumer Finance; SOFI received OCC and Federal Reserve approval for a national bank charter provided the new entity does “not engage in any crypto-asset activities or services” and was separately initiated at Outperform with a $20 PT at Wedbush; MA and Visa (V) active after retailers ask regulators to examine fees; JPMorgan’s very bullish outlook in consumer finance is moderating as higher rates are a headwind for mortgage originators, though elevated asset prices is great for lenders with asset-backed loans, such as auto finance companies and mortgage insurers, and they double-upgraded RKT to OW from UW as their top trade into the Q4 print, upgraded OPRT to OW, downgraded ALLY to N, and double-downgraded HMPT to UW from OW

·     Consumer Staples; PG beats market expectations for Q2 sales at $21b vs. est. $20.34B, as Q2 sales at PG’s fabric & home care division, which includes brands like Tide and Mr. Clean, rose 7% and co raises FY organic sales forecast to between 4%-5% from prior range of 2%-4%; UTZ downgraded to Equal weight from OW at Stephens and trim tgt to $18 from $23 as company appears set up to deliver lower than consensus EBITDA numbers in Q4 as margins pressures continue to linger; MKC downgraded to Neutral at Credit Suisse primarily because the stock has almost reached their target price of $100

·     Retailers; European high-end retailers with better comments as Burberry (BURBY) said it expects to beat profit expectations after its full-price sales accelerated in the third quarter, driven by a strong performance in outerwear and leather goods, while Richemont’s sales grew 32% in the last three months of 2021, adding to signs of strong jewelry demand; BBW upgrade from Buy to Conviction Buy with $93 tgt at Goldman Sachs after recent stock underperformance (-20% YTD vs S&P -5%), as believe there is upside potential to current consensus estimates given the expected rollout of the company’s loyalty program to the entire chain in mid-2022; for WHR, Raymond James noted AHAM’s 4Q report showed that U.S. wholesale major appliance industry unit shipments were roughly flat on a y/y basis, suggesting limited (if any) sequential improvements of late in daily throughput productivity

Stock GAINERS

·     ASML +2%; posted increased sales and net profit for Q4 but warned that sales for Q1 of 2022 will be lower due to the delayed recognition of shipments; said the recognition of around 2 billion euros ($2.27 billion) of first-quarter shipments will be delayed into later quarters

·     FREY +7%; signs mutual supply agreement with U.S. industrial conglomerate HON

·     GOLD +3%; Barrick said its Q4 production rose 10% sequentially, helped by strong performance from its Carlin and Cortez mines in Nevada as reported total preliminary gold output of 1.20 million ounces in the quarter ended Dec. 31, from 1.09 million ounces a quarter ago

·     LPTX +8%; reported positive data from a Phase 2a study of DKN-01, its most advanced clinical candidate, in combination with BGNE’s tislelizumab

·     PG +3%; beats market expectations for Q2 sales at $21b vs. est. $20.34B, and co raises FY organic sales forecast to between 4%-5% from prior range of 2%-4%

·     SOFI +13%; received OCC and Federal Reserve approval for a national bank charter provided the new entity does “not engage in any crypto-asset activities or services” and was separately initiated at Outperform with a $20 PT at Wedbush

·     UNH +2%; posts Q4 top and bottom-line beat (Q4 adj EPS $4.48 vs. est. $4.31 on revs $73.7B vs. est. $72.75B) as quarterly profit rose 84%, helped partly by growth in its Optum unit

·     ZGNX +67%; UCB has agreed to buy the co. in a deal worth up to about $1.9 billion; UCB will launch a tender offer on all outstanding Zogenix shares for $26 in cash https://bit.ly/3rsH4gd

Stock LAGGARDS

·     ADS -4%; as the co is losing one of its biggest credit-card accounts, BJ’s, as it is moving its co-branded credit cards to COF citing people familiar with the matter. https://on.wsj.com/3FDswiL

·     F -3%; giving back recent gains; overnight said it will record an $8.2B gain on its investment in Rivian when it reports earnings next month

·     LEN -2%; weakness in homebuilders and building products on rising yields/rates; Keybanc downgraded shares of IBP, BLD, DHI, to Sector Weight from OW and downgraded LEN, TOL, KBH to Underweight in homebuilding/building product sector on rising tightening cycle

·     MKC -1%; downgraded to Neutral at Credit Suisse primarily because the stock has almost reached their target price of $100

·     OESX -17%; now anticipates FY 2022 revenue of approximately $130M, as compared to its prior expectation of at least $150M due to customer delays on several larger LED lighting and controls projects

·     STT -3%; Q4 adj EPS $2 beat est. $1.88 on revs $3.05B vs est. $3B, AUM $4.14T was higher than expected $3.98T, and announced planned retirement of President and CEO

·     USB -6%; missed consensus with EPS $1.07 vs est. $1.10 on revs $5.68B vs est. $5.75B