Mid-Morning Look: March 20, 2023

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Mid-Morning Look

Monday, March 20, 2023

Index

Up/Down

%

Last

 

DJ Industrials

301.55

0.95%

32,163

S&P 500

21.22

0.54%

3,937

Nasdaq

-9.17

0.08%

11,621

Russell 2000

21.56

1.25%

1,747

 

 

U.S. stocks bouncing early as the S&P 500 (SPX) once again moves back above its 200-day MA (currently stands at 3,935), a key technical level (and magnet the last 2-weeks) ahead of the 2-day FOMC policy meeting which starts tomorrow and concludes Wednesday. Rate hike expectations have tumbled in recent days given the turmoil in the banking sector, with small chances of a 25-bps hike Wednesday and futures showing rate cuts as soon as mid-year, with a much lower terminal rate outlook. This has propped U.S. stock markets higher in recent days as investors see the “Fed put” back in play. Several developments in the banking sector over the weekend provide some solid footing for the sector after sharp declines last week. 1) including UBS’ proposed $3.2B takeover of Credit Suisse, 2) coordinated action by central banks to boost liquidity in U.S. dollar swap arrangements, 3) Federal Deposit Insurance Corporation entered into a purchase and assumption agreement for substantially all deposits and certain loan portfolios of Signature Bridge Bank by Flagstar Bank, a wholly owned subsidiary of New York Community Bancorp (NYCB). Regional banks among biggest leaders in the S&P early while last week leaders such as crypto and mega cap tech (MSFT, AMZN, NFLX, NVDA, AMD) seeing weakness early in profit taking and rotation into other sectors.

 

 

Macro

Up/Down

Last

 

WTI Crude

-1.04

65.70

Brent

-1.01

71.96

Gold

1.60

1,975.10

EUR/USD

0.0051

1.0717

JPY/USD

-0.17

131.62

10-Year Note

0.058

3.455%

 

 

Sector Movers Today

·     In Regional banks: FRC was downgraded again by S&P, days after the ratings firm cut the lender to junk; long-term issuer credit rating to B+ from BB+. Friday evening, PACW provided a week-end update, including 1) available cash of >$10.8B at 3/17, exceeding total $’s of uninsured deposits, 2) elevated net deposit outflows, concentrated in venture occurred early in week but slowed throughout with fluctuations substantially stabilizing at weeks end, and 3) insured deposits are >62% of total at 3/16. Venture is ~25% of deposits at 3/16. Shares of regional banks among early leaders in the S&P (ZION, FITB, CMA, USB, KEY, RF).

·     In chemicals: CF to acquire Ammonia Production complex in Louisiana for $1.68 Billion; in research, Keybanc lowered DOW tgt to $44 from $51 as continue to view plastics recycling as a major growth area for chemicals, as well as the upstream Waste Management industry. In lithium space (ALB, LTHM, LAC, SQM), IBD reported Lithium price declines steepened in China Monday, with battery-grade lithium carbonate prices seeing their biggest-one day drop of the year, a new report says. The average price of battery-grade lithium carbonate fell by RMB 12,500 per ton ($1,814 per ton) from last Friday to RMB 312,500 per ton Monday.

·     In metals: CLF and U.S. Steel (X) both upgraded from Underperform to Peer Perform at Wolfe Research after a recent drop in share value, which contrasts with sharply higher sheet steel prices in recent weeks; says channel checks continue to see pricing resilience through Q2, driven largely by light supply. Last week, the price of gold surged 6% higher on the back of increased volatility in broader markets, primarily from contagion in the U.S. and global banking sectors. Gold continues to demonstrate its role as a lower risk asset in times of heightened uncertainty. strength again in gold miners (NEM, AEM, AUY, HMY, GOLD) as the price of gold topped $2,000 an ounce earlier this morning before paring gains.

 

Stock GAINERS

·     FL +2%; issued weaker-than-expected FY23 guidance ($3.35-$3.65 vs. $4.11) following stronger-than-expected Q4 results (EPS $0.97 vs. est. $0.51; Q4 sales fell -0.3% y/y to $2.33B vs. est. $2.16B) and same-store sales rose 4.2%, boosted by increased traffic.

·     FLT +5%; struck an agreement with activist shareholder D. E. Shaw Group to refresh its board and consider separating parts of its business.

·     FRG +9%; announced that it has received an unsolicited non-binding proposal, which is subject to certain conditions, to acquire all the outstanding shares of the common stock of the Company for a price of $30.00 per share in cash.

·     HMY +2%; strength again in gold miners (NEM, AEM, GOLD) as the price of gold topped $2,000 an ounce earlier this morning before paring gains.

·     NYCB +38%; after its Flagstar unit acquired Signature Bank’s (SBNY) deposits and some of its loans after a $38 billion purchase from the FDIC ($25B in cash and $3B in loans). The purchase includes $34bn in deposits. NYCB upgraded to Outperform from Neutral at Wedbush

·     WRK +4%; upgraded to Buy at Citigroup; says Friday after market close, P&PW indicated March Containerboard prices were flat, a surprise to them as they expected a -$10-20/ton decline.

·     X +4%; and CLF both upgraded from Underperform to Peer Perform at Wolfe Research after a recent drop in share value, which contrasts with sharply higher sheet steel prices in recent weeks.

 

Stock LAGGARDS

·     AMD -4%; pullback in mega cap tech stocks; profit taking after group led mkts higher last week.

·     BBBY -15%; said late Friday it is planning a reverse stock split – late Friday said will ask investors to vote on proposed 1-for-5 to 1-for-10 split.

·     FRC -13%; was downgraded again by S&P, days after the ratings firm cut the lender to junk; long-term issuer credit rating to B+ from BB+.

·     PDD -14%; reported Q4 revenue of 39.82 billion yuan ($5.79 billion) for the quarter ended Dec. 31, up 46% year-on-year, but this fell short of estimates for 41.01 billion yuan.

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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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