Mid-Morning Look: June 29, 2023

Auto PostDaily Market Report

Mid-Morning Look

Thursday, June 29, 2023

Index

Up/Down

%

Last

 

DJ Industrials

193.02

0.57%

34,045

S&P 500

4.68

0.11%

4,381

Nasdaq

-33.62

0.25%

13,558

Russell 2000

23.69

1.27%

1,882

 

 

U.S. stocks opened to the upside and held gains after better-than-expected Q1 GDP data and improved jobless claims, raising the narrative of a “soft landing” for the US economy vs. recession fears. However, the better results also led to Treasury weakness, subsequently lifted Treasury yields to highest levels in a few weeks on bets of additional rate hikes by the Fed in coming months as the economy remains resilient and inflation stubbornly high. Shorter term 2-yr yield spiked +16 bps to 4.88%, the 3-yr +17 bps at 4.50% and benchmark 10-yr +14 bps to 3.85% and gold to around $1,905 an ounce before paring losses. US 5-Year tips yield tops 2% for first time since 2008. Note with two trading days left in June and the second quarter, the Dow, the S&P 500, and the Nasdaq are all tracking for solid monthly and quarterly gains and all positive year to date, led by Nasdaq up 29% YTD). Financials leading market gains after the Federal Reserve said all 23 banks that went through their “stress test” showed projected losses of $541 bln in stress test but maintain capital ratios well above required levels. Industrials and Materials also showing strength along with Energy. Technology early weakness amid spike in yields.

 

Economic Data

·     U.S. Q1 GDP rises a greater +2.0% vs. +1.4% consensus and the previous estimate of 1.3% and 2.6% in Q4 2022 and Personal Consumption Q1 +4.2% vs. est. 3.8% and 3.8% prior.

·     Inflation reads from GDP: PCE price index for Q1 +4.1% vs. +4.2% consensus and prior estimate of +4.2%, while Core PCE price index: +4.9% vs. +5.0% expected and +5.0% previous estimate.

·     Weekly Jobless Claims fell to 239K in latest week below consensus 265K as the 4-week moving average rose to 257,500 from 256,000 prior; continued claims fell to 1.742M from 1.761M prior week (from prior 1.759 mln) and US insured unemployment rate unchanged at 1.2%.

·     Pending Home Sales for May dropped (-2.7%) M/M to 76.5 vs. (-0.6%) consensus and 0.0% in April. On a Y/Y basis, pending sales fell (-22.2%).

 

 

Macro

Up/Down

Last

 

WTI Crude

0.85

70.41

Brent

0.69

74.72

Gold

-7.00

1,915.20

EUR/USD

-0.0022

1.0887

JPY/USD

0.20

144.66

10-Year Note

0.144

3.856%

 

 

Sector Movers Today

·     Financials leading market gains after the Federal Reserve said all 23 banks that went through their “stress test” showed projected losses of $541 bln in stress test but maintain capital ratios well above required levels. Fed says banks saw capital decline 2.3% points in test to 10.1%, smaller decline than 2022 test. Big banks BAC, GS, JPM, C, WFC higher early and some big gains in the regional bank names as well MTB, HBAN, CMA.

·     In Metals: another downdraft in gold miners early (AEM, NEM, GOLD) as gold drops to $1,900 an ounce as the dollar and Treasury yields jumped following stronger economic data. In steel sector, WOR Q4 adjusted EPS of $2.74 vs. Street’s $1.87 as capitalized on favorable steel price-cost across its platform, positively arbitraging the upshot in carbon sheet steel substrate volatility during C1H23 according to Keybanc (notes adjusted EBITDA was >$200M vs. their $141M).

·     In Electric vehicles: FREY upgraded to OW at Morgan Stanley following their inaugural CMD in NYC featuring several material milestones, including manufacturing batteries at CQP, early discussions to diversify battery tech. WBX shares rose after saying its Pulsar Plus electric-vehicle charger will be available at COST stores nationwide starting in July. Cathie Wood’s ARK Invest Management firm sold 28,368 shares of TSLA stock Wednesday worth $7.27 million based on Wednesday’s closing price of 256.24, according to ARK’s daily trade updates.

·     In Credit Cards: Visa (V) said it has signed a definitive agreement to acquire Pismo, a cloud-native issuer processing and core banking platform with operations in Latin America, Asia Pacific, and Europe, for $1 billion in cash; AXP, COF, DFS: Bank America notes weekly total card spending per household was -2.0% y/y in the week ending Jun 24, and total card spending ex gas fell to -0.1% y/y in the week ending Jun 24, while retail spending ex auto was even lower at -4.2%.

 

Stock GAINERS

·     BB +11%; as narrowed its Q1 loss to $11M from $181M loss y/y as adj EPS topped views and revs rose to $373M from $168M prior and above est. $161M as IoT revenue was $45M while cybersecurity revenue was $93M.

·     FREY +18%; upgraded to Overweight at Morgan Stanley following their inaugural CMD in NYC featuring several material milestones, including manufacturing batteries at CQP, early discussions to diversify battery tech.

·     GBX +24%; after Q3 results easily beat (EPS $1.02 on revs $1.04B vs. est. $0.60/$899.2M) and raises FY revenue to $3.8B-$3.9B from prior $3.4B-$3.7B and boosts delivery outlook to 25,000 to 26,000, saw 23,000 to 25,000; raises dividend by 11%.

·     JOBY +25%; as welcomes $100M investment as it expands partnership w/SK Telecom (comes a day after rising 40% after U.S. aviation regulator gave nod for flight testing of its electric air taxi, taking it step closer to securing approvals for commercial operations).

·     OSTK +15%; said revs are tracking down in the low-20%’s YoY (~inline w/ cons) w/ profitability “under pressure” due to a “highly competitive promotional and marketing environment within a challenging economic backdrop”; despite this, OSTK still anticipates delivering positive adj EBITDA (cons +$6.8M); in addition, confirms it will buy Bed Bath & Beyond IP for $21.5M.

·     OXY +1%; Berkshire Hathaway bought 2.1M shares in recent days, lifting its stake to just over 25%, according to a filing late Wednesday; BRKA now owns 224.1M shares.

·     RNXT +36%; announces new positive interim phase iii data demonstrating RenovoGem delays cancer progression by eight months in locally advanced pancreatic cancer.

·     SGTX +526%; after LLY agreed to acquire the nano-cap biotech for $14.92 per share, in a deal valued at about $35M https://tinyurl.com/y2e4syut

·     WOR +9%; Q4 adjusted EPS of $2.74 vs. Street’s $1.87 as capitalized on favorable steel price-cost across its platform.

 

Stock LAGGARDS

·     ALVO -7%; said the FDA declined to approve co’s second marketing application for AVT02, a biosimilar to ABBV’s arthritis drug Humira noting certain deficiencies.

·     BTAI -57%; said it’s investigating data integrity at one of the clinical trial sites of its study for the treatment of Alzheimer’s disease- related agitation, after it found a principal investigator fabricated email correspondence.

·     LNN -2%; after big Q3 EPS miss ($1.53/$164.6M below consensus $2.15/$208.4M) saying general economic uncertainty has negatively impacted farmer sentiment, tempering order activity (watch shares of DE, AGCO).

·     MSM -2%; Q3 EPS $1.74 vs. est. $1.75; Q3 revs $1.05B vs. est. $1.02B; said expect to achieve double-digit ads growth for FY; sees FY adj. Operating margin 12.7%, lower end of prior 12.7% to 13.3% range after Q3 GMs of 40.7% vs. 41.6% est.

·     MU -4%; reported a smaller-than-expected quarterly loss and provided a better-than-feared forecast, while Piper upgraded shares to neutral based on improving end-market inventory conditions with a potential improvement in volumes and pricing in 2H23.

_________________________________________________________________

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.

Live Trading

Open an Account

Paper Trading

Register