Mid-Morning Look: December 08, 2022

Mid-Morning Look

Thursday, December 08, 2022

Index

Up/Down

%

Last

 

DJ Industrials

260.80

0.78%

33,858

S&P 500

33.81

0.86%

3,967

Nasdaq

130.88

1.19%

11,089

Russell 2000

22.49

1.24%

1,829

 

 

U.S. stocks are looking to snap their 5-day losing streak, with major averages bouncing ahead of key inflation data tomorrow morning (Nov PPI, with CPI next week) but concerns remain ahead of the FOMC interest rate policy meeting next Wednesday. The U.S. central bank is widely expected to increase rates by an additional 50-bps. Oil prices jump on reports the Keystone Oil Pipeline is shut down following leak in Nebraska – TC Energy says system shut after oil released into a creek. More headlines out of Asia also boosting sentiment after Hong Kong rallied on reopening hopes as Covid easing continues. Shares of commodity related stocks seeing a nice recovery today on headlines. Sector strength broad-based early with all eleven S&P sectors higher, led by Materials, Industrials, Technology, and REITs all up over 1%. In economic data, weekly Jobless Claims rose to 230,000 in latest leek vs. est. 230,000 and 226,000 prior; the 4-week moving avg rose to 230,000 from 229,000 prior week; continued claims rose to 1.671M from 1.609M prior week. Treasury yields edge higher while the dollar dips.

 

 

Macro

Up/Down

Last

 

WTI Crude

1.03

73.03

Brent

0.63

77.80

Gold

8.20

1,806.40

EUR/USD

0.0038

1.0543

JPY/USD

-0.27

136.35

10-Year Note

0.05

3.458%

 

 

Sector Movers Today

·     E&P and Majors: CVX said it increased its 2023 capital spending budget by a double-digit percentage from this year to $17 billion, as inflation drives up energy production costs and the firm pours cash into low-carbon fuel projects; XOM said it will lift spending next year to $23 billion-$25 billion, the top end of its guidance, and expand investments to curb carbon emissions while expanded its share-buyback program to $50 billion through 2024; SHEL injected nearly $1.5 billion into its British energy retail business this year to help it weather huge volatility in power prices that caused the collapse of several rival UK power utilities; RIG announces $1.04B in contract awards for two ultra-deepwater drill ships

·     Consumer Staples: HSY upgraded from Neutral to Buy and up tgt to $269 from $244 as believe Hershey will remain in a beat and raise cycle through 2025 and believe HSY can achieve 4% OSG and 9% EPS growth over the LT, which is above the Street’s 3% and 7% expectations; MDLZ downgraded to Neutral at UBS as believe macro headwinds will likely cap earnings growth in 2023 including FX, low double-digit inflation, and increasing interest expense; SOVO downgrade to Neutral at UBS as continue to believe there is upside to consensus estimates but margin est. is well below the Street; NAPA reported 1Q23 adj. EBITDA of $35.7mm, ahead of consensus of $31mm; COKE doubles quarter dividend to 50c per share

·     Retailers: GME Q3 revs of $1.19B misses the $1.34B estimate on larger EPS loss of (-$0.31), while Q3 expenses as a percentage of revenue came in at 32.7%, down from 34.1% in the prior quarter; WWW said it started cutting jobs earlier this week and plans to either divest or license its Keds shoe brand as well as its Wolverine Leathers business; RENT raised full-year 2022 revenue and earnings margin forecasts, signaling strong demand for affordable fashion and announces a restructuring plan, which involved laying off about 24% of corporate employees; EXPR posted Q3 EPS loss that missed consensus and sales of $434.1M down from $472M y/y but shares rise after enters into strategic partnership WHP Global which takes 7.4% stake; OXM better earnings and guide – 3Q adj EPS $1.46 vs est. $1.22 on revs $313Mm vs est. $303.4Mm; in sporting good, SPWH Q3 top and bottom line slightly above views, but Q3 comp sales fell (-15%) and guides Q4 revs $370M-$385M below est. $401M (follows better ASO results day prior)

·     Aerospace & Defense; The Pentagon awarded $9 billion worth of cloud computing contracts to GOOGL, AMZN, MSFT and ORCL as the Joint Warfighting Cloud Capability (JWCC) is the multi-cloud successor to the Joint Enterprise Defense Infrastructure (JEDI). The separate contracts, which carry a notional top line of $9 billion, run until 2028; in research, Citigroup initiated coverage of the Defense sector, with Buys on LDOS ($130 tgt) GD ($298 tgt) LMT ($546 tgt) SAIC ($141 tgt) and BA ($222 tgt) assumed Buy as expect the return of great power competition to drive US and European defense budgets higher, providing a lock on growth this decade; in commercial aerospace, Cowen named RTX and TDG top aftermarket picks; BA and HWM OE recovery plays

 

Stock GAINERS

·     CIEN +18%; posts higher-than-expected quarterly revenue at $971M, easily topping the $850M estimate and guided Q1 revs $910M-$990M v. est. $871M (ANET, FFIV, INFN rise in reaction)

·     DXCM +5%; G7 receives FDA clearance: the most accurate continuous glucose monitoring system cleared in the U.S. and expects to initiate a US launch of DexCom G7 in early 2023

·     EXPR +53%; posted Q3 EPS loss that missed consensus and sales of $434.1M down from $472M y/y but shares rise after enters strategic partnership WHP Global which takes 7.4% stake

·     HCP +5%; reported a strong F3Q23 print with 52% revenue growth beating expectations by $14.2M ($11.6M beat last Q) driven by healthy NDRR 134% and strength in the company’s expand and extend sales motions including a third customer reaching $10M of ARR

·     RENT +15%; raised full-year 2022 revenue and earnings margin forecasts and announces a restructuring plan, which involved laying off about 24% of corporate employees

·     TRDA +18%; announced a deal with VRTX that aims to develop treatments for myotonic dystrophy type 1, as Vertex will pay Entrada an upfront payment of $224 million and make an equity investment of $26 million

·     WYNN +4%; as casinos rally behind bounce in China related strength after Hong Kong rallied on reopening hopes as Covid easing continues (boost to Macau casinos) – BABA, BIDU and other US listed China stocks saw big gains

 

Stock LAGGARDS

·     CANO -20%; slides after Bloomberg reported shareholder Third Point sells Cano stake as medical provider’s cash dwindles

·     CUTR -8%; after pricing $100 million of 4% convertible senior notes due 2029

·     DSGN -43%; after reported results from early-stage drug trial for inherited nerve disorder

·     GEF -3%; posts a top and bottom line miss as Q4 EPS adj EPS $1.83 vs. est. $1.94; Q4 sales $1.49B vs. est. $1.58B; Adjusted EBITDA of $218.7M rose $7.4M; Total debt decreased by $309.5M

·     RVMD -12%; announced that SNY has provided notice to terminate its development and commercialization collaboration on SHP2 inhibitor RMC-4630 – RVMD will regain global rights to the molecule

·     SBGI -7%; downgraded to Underweight from Neutral at JPMorgan and cuts tgt to $16 from $25 while lowers 2023, 2024 estimates, saying to reflect more challenged outlook for advertising and distribution revenue

·     SHOP -1%; initiated Sell and $30 tgt at UBS as projections for PCE on goods suggests that consensus estimates for GMV, and revenue are not de-risked for a recession in 1H’23

·     SPWH -3%; Q3 top and bottom line slightly above views, but Q3 comp sales fell (-15%) and guides Q4 revs $370M-$385M below est. $401M (follows better ASO results day prior)

·     VRNT -1%; mixed Q3 results as revenue came in slightly below consensus as the FX headwind persisted & macro pressures resulted in elongated sales cycles but outperformed expectations on the bottom line

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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.