Mid-Morning Look: January 25, 2022

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Mid-Morning Look

Tuesday, January 25, 2022

Index

Up/Down

%

Last

 

DJ Industrials

-458.10

1.33%

33,906

S&P 500

-83.33

1.89%

4,326

Nasdaq

-279.58

2.02%

13,575

Russell 2000

-59.18

2.91%

1,974

 

 

After posting one of the biggest intraday reversals to finish at the highs on Monday, U.S. stocks are now erasing those gains, extending losses as the Dow drops more than 700 points, the S&P 500 down 2.2% and the Nasdaq falls -2.7% in another morning rout. Selling pressure again broad sector based, though led by a drop in growth stocks ahead of the 2-day Federal Reserve’s policy meeting (results tomorrow) which overshadowed generally upbeat results from blue-chip companies AXP, IBM, VZ and MMM. Fed funds futures traders are pricing in a 25-bps hike in March, in addition to three more rate increases by the end of the year, which markets anticipate the FOMC saying tomorrow. Markets also dealing with geopolitical tensions between the U.S. and Russia over Ukraine have added to uncertainty after about 8,500 American troops were put on heightened alert. The IMF cuts 2022 global economic-growth forecast to 4.4% from 4.9%, cuts 2022 growth forecasts for emerging Asia to 5.9% from 6.3% previously, and China to 4.8% from 5.6%. Will we see another bounce off lower levels like yesterday or more selling pressure? Monday was the first time the Dow had reversed from 1,000 points down to end the day higher, and just the sixth time the Nasdaq has reversed a 4% intraday drop since 1988, Bespoke Investment said. Several Dow components with earnings this morning including JNJ (sales miss), AXP surges on its better results, VZ with modest top/bottom line beat, MMM (EPS beat/revs miss), IBM beat and in-line guide – and MSFT results after the close tonight.

 

Economic Data:

·     January Consumer Confidence index 113.8 tops consensus 111.8 and compared to December revised 115.2 (previous 115.8); the present situation index 148.2 in Jan vs Dec revised 144.8 and the expectations index 90.8 in Jan vs Dec revised 95.4

·     In Housing, CaseShiller November 20-metro area home prices +18.3% from year ago vs revised +18.5% in October; November home prices in 20 metro areas +1.2% seasonally adj vs revised +1.0% in October

·     Richmond Fed Composite manufacturing index +8 in Jan vs +16 in Dec; shipments index +14 in Jan vs +12 in Dec and revenues index +4 in Jan vs +12 in dec

 

 

Macro

Up/Down

Last

 

WTI Crude

0.99

84.30

Brent

0.75

87.02

Gold

1.80

1,843.50

EUR/USD

-0.0052

1.1272

JPY/USD

-0.03

113.89

10-Year Note

0.014

1.749%

 

 

Sector Movers Today

·     Software movers; all eyes on Dow component MSFT with earnings after the close; SNOW was upgraded to Buy at Loop Capital with $370 tgt saying the pullback in the enterprise software sector since its mid-November highs has driven many stocks in the group down 30% or more vs. a 15% decline in the Nasdaq and 23% decline in the broader IGV software index; NEWR was upgraded to Overweight at Morgan Stanley as see the co poised to accelerate revenue in 2022 and sustain 20%+ growth thereafter in the $22Bn observability market; Unity Software (U) said it reached an agreement to acquire Ziva Dynamics for $133M; QTWO, BL, PLAN all downgraded to Sector Weight from at Keybanc as recommend investors focus on disruptive platforms with a multitude of untapped growth vectors like SHOP, GLBE, BILL, COUP, and companies where valuation multiples may be overly discounting highly recursive revenue streams in attractive end markets like AVDX and ALKT

·     Casinos, Gaming, Lodging & Leisure sector; in casinos/gaming, BALY surges after Standard General proposes transaction to acquire all shares not currently owned for $38 per share; in leisure, PII Q4 adj EPS $2.16 vs. est. $2.03 and revs better $2.17B vs. est. $2.13B and guides year EPS and revs above consensus; in towables (WGO, THO, CWH), Bloomberg noted the U.S. shipped a record 600,240 recreational vehicles last year, up 40% from 2020, according to the RV Industry Association’s survey of North American manufacturers – though notes record year dampened by a slip of -0.1% in Dec RV shipments and motorhomes slumped 11%; DESP upgraded to Buy at Citigroup reflecting discounted valuation from the recent pullback despite long-term earnings power that actually improved since pre-pandemic

·     Metals, Industrial & Machinery; GE reported Q4 revenue that missed the average analyst estimate; Q4 EPS $0.92 vs. est. $0.87; Q4 revs $20.3B vs. est. $21.48B; Q4 Industrial organic revenues $19.6B, down 3% and adj industrial profit margin 9%; sees 2022 organic revenues to grow in the high-single-digit range; MMM Q4 adj EPS $2.31 vs est. $2.01 on revenue $8.61B vs est. $8.6B; CR Q4 adj EPS $1.25 vs est. $1.13 on sales $771M ahead of est. $745.7M, sees FY22 adj EPS $7-7.40 on revenue ~$3.3B vs est. $3.36B; STLD Q4 adj EPS $5.78 vs est. $5.72 on in-line sales $5.3B; PCAR Q4 EPS $1.47 vs est. $1.31 on revenue $6.69B that topped est. $5.5B, global truck deliveries increased 17% YoY to 47,600 vs est. 40,100; TRQ rises as RIO and Mongolia settle dispute over Oyu Tolgoi copper mine – prompts analyst upgrades; JCI, CARR, TT upgraded to Positive from Mixed at OTR Global

·     Internet; EBAY said it is expanding its “Authenticity Guarantee” to trading cards sold for $750 or more by mid-2022, and will extend the guarantee to those sold for $250 or more after that – svc also includes handbags sold for $500 or more, watches for $2,000 or more, and sneakers sold for $100 or more; earnings previews coming in ahead of earnings season, with UBS today cautiously optimistic on the online ad names into 4Q saying for TWTR and PINS see downside risk to Street estimates while GOOGL stands out among our ad checks as likely to have a solid 4Q; theinformation reported that PINS has lost at least seven senior executives in roles ranging from creator marketing to corporate development in recent weeks

 

Stock GAINERS

·     AXP +5%; 4Q EPS $2.18 easily tops est. $1.87 on revs $12.15B which was above est. 11.36B saying they reached record levels of card member spending in qtr, says expect to generate elevated levels of rev growth in 2022 in range of 18-20% vs est. +15.4%

·     BALY +22%; surges after Standard General proposes transaction to acquire all shares not currently owned for $38 per share https://bit.ly/3AuI6MJ

·     BNTX +2%; and PFE said they are launching a trial to evaluate an omicron-based COVID-19 vaccine in healthy adults aged 18 to 55

·     CKPT +10%; said a trial of cancer-treatment cosibelimab met its primary endpoint, demonstrating a confirmed objective response rate of 47.4% based on independent central review of 78 patients enrolled in the trial

·     IBM +1%; posted Q4 top and bottom-line beat, but analysts note consensus was noisy given the recent Kyndryl spin; however, 4Q and the 2022 outlook was largely in-line with estimates

·     IPAR +1%; Q4 sales rose 15% to $210.8M vs. est. $162.4M; raises FY21 EPS view to $3.00 from $2.45-$2.65 prior (est. $2.84) and boosts year revs to $975M vs. est. $833.76M

·     TRQ +15%; as RIO and Mongolia settle dispute over Oyu Tolgoi copper mine – prompts analyst upgrades

 

Stock LAGGARDS

·     AJRD -15%; and LMT have been informed by the FTC that the planned purchase of Aerojet will raise antitrust concerns – AJRD said believe it is highly likely that FTC will vote to sue to block deal and expect they will decide before Jan. 27, 2022

·     CRK -10%; increased their proved reserves by 9%, with pre-released Q4 gas production 1,337.3 MMcfpd missed consensus of ~1,400 and CapEx was $160.2M vs est. $132M

·     GE -7%; reported Q4 revenue that missed the average analyst estimate; Q4 EPS $0.92 vs. est. $0.87; Q4 revs $20.3B vs. est. $21.48B; Q4 Industrial organic revenues $19.6B, down 3% and adj industrial profit margin 9%; sees 2022 organic revenues to grow in the high-single-digit range

·     KR -2%; was downgraded to Underweight from Equal Weight at Wells Fargo saying while expect Q4 earnings to exceed consensus once again, the risk/reward for this COVID beneficiary now looks skewed to the downside

·     NVDA -4%; after Bloomberg reported overnight the co is quietly preparing to abandon its purchase of Arm Ltd. from Softbank Group Corp. after making little to no progress in winning approval for the $40 billion chip deal https://on.mktw.net/3qYPKvN

·     PINS -4%; after a report in The Information that the co has lost at least seven senior executives in roles ranging from creator marketing to corporate development in recent weeks

·     RTX -3%; posted mixed Q4 as EPS topped views but sales of $17.04B missed the $17.3B estimate and expects FY EPS in the range of $4.60-$4.80 on revs $68.5B-$69.5B below ests. $4.96/$70B

_________________________________________________________________

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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