Mid-Morning Look: May 02, 2023

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Mid-Morning Look

Tuesday, May 02, 2023






DJ Industrials




S&P 500








Russell 2000






U.S. stocks opened down slightly, but losses quickly accelerated as a day after JPMorgan acquired assets of First Republic (FRC) after the regional bank went into receivership of the FDIC this weekend, fears are growing as to what bank could potentially be next? The sweetheart deal given to JPM yesterday (co said will generate a one-time gain of $2.6 billion and expects over $500 million in profit per year from the acquisition), likely gives no big bank impetus to step in and help a struggling bank, able to buy assets cheaply and with protection from the gov’t, is not a good situation for SMID banks. Big time weakness this morning in regionals with PACW, MCB, VLY, ZION, CMA, KEY, CFR, NYCB, WAL among those seeing double digit % declines and pushing sentiment lower. The FOMC also began its two-day policy meeting today, with the market staying very much homed in on what appears to be a final 25bps hike, lifting the target range to 5.00-5.25% – the highest since Q3 2007. Overnight, Australia’s Central bank surprised markets by raising its cash rate 25 basis points when traders had looked for an extended pause, saying inflation was way too high and warned that even further tightening may be needed. A handful of companies are moving higher on results, but several decimated after lower outlooks (details below). Bonds seeing heavy inflows this morning as yields tumble, with the 10-yr down 13-bps to 3.44% and the 2-yr yield down -15-bps to move back below 4% while gold prices rise. Meanwhile concerns about the U.S. debt ceiling timebomb also quickly approaches. Energy was the biggest loser early down over 4% with roll in oil on recession fears, followed by financials, materials, and communications all down 2%.


Economic Data

·     U.S. job openings fell to 9.59M in March from 9.97M

·     March factory orders rose +0.9% vs. consensus +1.1% and vs. Feb -1.1%; factory orders ex-transportation -0.7% vs Feb -0.7% and orders ex-defense +1.0% vs Feb -1.0%; U.S. March inventories/shipments ratio 1.48 months’ worth vs Feb 1.49 months.







WTI Crude















10-Year Note





Sector Movers Today

·     Regional bank weakness continues, with the KRE falling to lowest levels since November 2020 as fear concerns remain about the health of the banking systems after FRC marked the second biggest bank failure ever yesterday when its assets were acquired by JPM (FRC, SIVB, SBNY mark the 2nd, 3rd, and 4th biggest bank failures ever, all happening the last 2-months). Shares of ZION, VLY, PACW, MCB, KEY all tumbled early and adding to Monday weakness. WD downgraded at JMP due to increasingly strained U.S. financial and commercial real estate markets, largely from aggressive Fed monetary policy, which has contributed to three regional bank failures. TROW shares slip following Q1 results in asset managers, joins BEN weakness the day prior.

·     In PC Sector: Morgan Stanley upgraded DELL (top pick), Lenovo and Quanta to OW and Asustek, HPQ to Hold saying “the worst of the PC downcycle is likely behind us” and expects DELL to o/p alongside the rebound in the PC market; on HPQ, positive on PC exposure but cautious on print biz as well as the co’s back-end loaded FY23 and slowing cap returns. In cloud networking solutions: ANET shares slide as reported 1Q23 results that exceeded consensus estimates and better Q2 guide but only raised guidance for FY23 revenue growth by 100bps to 26%, which implies a sharper deceleration in F2H23 revenues; said sees reduced customer visibility or orders of below 6 months from its Cloud Titans customers.

·     In casinos: MGM beat and raise LV EBITDA beats at $836m vs consensus $783m while China also beat $169 vs consensus $73m; JMP Securities said growth was impressive across MGM Resorts three segments, with Las Vegas increasing revenue 22% on a same-store basis, regional gaming +10% YoY, and Macau returning to normalcy. The company reported 1Q23 EBITDAR at +8% vs. consensus, with Las Vegas +7%, regional gaming +5%, and Macau +91%. PENN upgraded at RothMKM to Buy from Neutral, anticipating that better-than-expected property margins in the first quarter will prompt investors to reevaluate their 2023 projections.



·     MAR +4%; 1Q ad EPS $2.09 vs est. $1.84 on revs $5.615B vs est. $5.409B, adj EBITDA $1.098B vs est. $996.48Mm; guides 2Q worldwide RevPAR growth +10-12%; sees FY worldwide RevPAR growth +10-15% and adj EPS $7.97-8.42 vs est. $7.74.

·     NLS +7%; raises 2024 rev view to $286.6M vs. est. $273M.

·     NXPI +3%; reported a strong MarQ at $3.12B/$3.19 (consensus: $3.00B/$3.02) with GMs at 58.2% (consensus: 58%). NXPI guided to a better JunQ top line to $3.2B (~6% above consensus of $3.03B), and up 3% q/q.

·     PFE +1% as Q1 profit topped ests and said it expects 2023 to be a low point for COVID product sales, before potentially returning to growth in 2024.

·     STAG +7%; to replace Axon in S&P 400 at open on 5/4

·     TAP +7%; strength in beverages as sales rose 6% to $2.35B above est. $2.23B, benefiting from price hikes and resilient demand for its beer brands.

·     UBER +8%; strong 2Q profit guide with adj EBITDA $800-850M vs expects $750-800M and bookings $33-34B ahead of expects $32-33B, 1Q GBs smack inline at $31.4B (vs expects $31-31.5B) and EBITDA $761M ahead of expects $730M.



·     ANET -11%; shares slide as reported 1Q23 results that exceeded consensus estimates and better Q2 guide but only raised guidance for FY23 revenue growth by 100bps to 26%, which implies a sharper deceleration in F2H23 revenues.

·     BP -8%; Q1 profit was $5B but shares slipped after saying it would repurchase $1.75 billion worth of shares over the next three months, down from $2.75 billion in the previous three.

·     CHGG -47%; sharply cut its outlook citing ChatGPT negatively impacting the growth of its homework-help services.

·     CYH -42%; as Q1 adj EPS loss (-$0.43) vs. est. loss (-$0.16), adj Ebitda $335M misses $376M est. and revs $3.1B vs. est. $3.09B; reaffirmed annual earnings guidance for 2023.

·     IEP -16%; declines after “short” report from Hindenburg Research saying they expect Icahn Enterprises to eventually cut or eliminate dividend entirely, barring a turnaround in performance.

·     INCY -4%; Q1 adj EPS $0.37 misses $0.75 est. and sales $808.67M miss $857.52M est.; 1Q JAKAFI $580.0M vs consensus $614.7M citing higher discounting due to Medicare coverage gap and 340B orders and inventory issues.

·     MASI -4%; after a judge declared a mistrial in trade secrets trial against AAPL over the Apple Watch. U.S. District Judge James Selna declared a mistrial late Monday after a jury failed to reach a unanimous decision.

·     PACW -28%; regional bank weakness continues, with the KRE falling to lowest levels since November 2020 as fear concerns remain about the health of the banking systems (regional banks crushed across the board on fears of more following the way of FRC, SIVB, SBNY).

·     TREE -20%; sees FY revs $760M-$800M, down from prior $935M-$985M and sees 2q adj. EBITDA $17M to $22M, below est. $23.6M sending shares lower.

·     TVTX -24%; announced that the DUPLEX study for Filspari in focal segmental glomerulosclerosis failed to meet the primary efficacy endpoints of eGFR total slope or eGFR chronic slope.

·     ZBRA -11% as guidance weighs on sentiment as expects second quarter 2023 net sales to decrease between 9% and 11% compared to the prior year.


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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