Mid-Morning Look: January 18, 2023

Mid-Morning Look

Wednesday, January 18, 2023






DJ Industrials




S&P 500








Russell 2000






U.S. stocks are looking to add to their January rally, with the Nasdaq rising as much as 1% above 11,200, while the S&P 500 (SPX) rises above the 4,000 level, holding above its 200-day MA (now 3,975) after another economic data point (PPI) showed a further deceleration in inflation. Data also showed weakness in the consumer with retail sales missing estimates and industrial production falling short of consensus. Retail sales fell -1.1% in December as consumers spent less on vehicles, gasoline, and furniture. Treasury prices surged, as the U.S. 10-year yield falls below 3.40%, down -13.3 bps to lowest since September on rising bets the Fed will pause rate hikes soon (25 bps hike still expected in February). Handful of earnings results moving stocks early with JBHT missing (but shares trade higher), while UAL beats and raises (though shares pare gains). Technology leading again as the Nasdaq tries to extend its winning streak to 8-days. PPI for December came in at -0.5% MoM vs. estimates of -0.1%. The YoY change is now at 6.2%, its lowest level since March 2021 and nearly half the peak of 11.7% seen in March 2022. The US dollar index (DXY) slides -0.55% below the 102 level, weakest since last June. Markets choppy early, holding above key levels, but breadth still strong (3:1 advancers led decliners). WTI oil jumps 2.5% to session-high $82.20; would be highest closing price since mid-November. Bitcoin +0.45% at $21,400, on track for 12th-straight day of gains.


Economic Data

·     Inflation continues to ease as the December Producer Price Index (PPI) for final demand fell (-0.5%) m/m vs. est. for (-0.1%) and Nov +0.2% while on a y/y basis rises +6.2% vs. est. +6.8% and Nov reading of +7.4%. Core PPI data, excluding food and energy showed a rise of +0.1% m/m, in-line with estimates and rose +5.5% y/y vs. est. +5.6% and Nov reading of +6.2%

·     Retail Sales Advance for December fell (-1.1%) m/m vs. est. (-0.8%) and Retail Sales Ex Auto rose +1.1% in Dec vs. est. (-0.4%); Retail Sales Ex Auto and Gas fell (-0.7%) vs. est. unchanged

·     U.S. Dec industrial output fell (-0.7%) vs. est. (-0.1%) and vs. Nov (-0.6%); and Capacity Utilization rate 78.8%, down from Nov 79.4% and consensus 79.6%

·     U.S. January NAHB Housing market index 35 versus 31 in December; index of current single-family home sales 40 versus 36 in December; index of home sales over next six months 37 versus 35 in December and index of prospective buyers 23 versus 20 in December







WTI Crude















10-Year Note





Sector Movers Today

·     Software: PRGS reported mixed Q and weaker FY 2023 guide which does not include MarkLogic acquisition which will add to cross sell opportunities; Citigroup upgraded CHKP to Neutral, names DDOG Negative Catalyst Watch, SPLK a Positive Catalyst Watch – DDOG neg watch based on perceived estimate risk that is likely to impose near-term multiple compression. TEAM are fresh pair trade ideas in systems software. Says muted, decelerating CIO Survey data validates our stance of 2023 as a year of dichotomy in software; Citigroup said INTU, WK, and MNDY top picks for CY23 in application software; PEGA is upgraded to Buy/High Risk (+enterprise automation); BL is downgraded to Sell (elevated M&A premium, estimate risk); and new pair trades of WK and PEGA as adjusting estimates and TPs as part of our broader CY23 Back Office Software outlook

·     Transports: In airlines, UAL leads airlines higher as 4Q adj EPS $2.46 vs est. $2.10 on revs $12.4B vs est. $12.23B, adj EBIT mgn 11.2%, achieved 9.1% pre-tax mgn ahead of schedule in 4Q; sees Q1 adj EPS $0.50-$1.00 above consensus $0.25 and revs up ~50% y/y vs. est. $11.32B; In truckers, JBHT reported Q4 EPS $1.92 below consensus of $2.46 and revs of $3.65B misses the $3.84B estimate saying revs miss was primarily driven by a -27% decline in volume in Integrated Capacity Solutions and a -1% decline in volume in Intermodal

·     MedTech: NTRA upgraded in Diagnostics & Clinical Labs at Raymond James while downgrade shares of EXAS ; Citigroup said DXCM, PEN, and SYK remain top picks in MedTech, with a positive catalyst watch on SILK, while downgrade NVRO to Neutral from Buy given the CEO retirement and highlight takeaways from our PEN fieldtrip. Said while we do not think any of the current macro struggles related to staffing, patient volumes, inflation, FX, or supply chain will abate immediately, remain cautiously optimistic and hope for easing results.

·     Retailers: BGFV Q4 comps -13.2%, net sales $238.3Mm vs est. $244.7Mm; now sees 4Q EPS $0.07-0.08 vs est. $0.13; total merch inventories +9.6% y/y; SKX downgraded it to equal weight at Morgan Stanley on valuation, risk of FY23 guidance missing expectations and as the market shifts to early-cycle names; GPS upgraded to equal weight at Morgan Stanley and anticipates a 2023 of two halves for US specialty retail and department stores; LEVI downgraded to Neutral from Buy at Bank America with a price Target of $17, down from $19 citing a more cautious North America outlook for the downgrade; YETI downgrade Outperform to Market Perform at Cowen as data regarding brand level e-com traffic trends is moderating into FY23 with DTC a key top-line and margin driver; PRTY files for bankruptcy to restructure piling debt



·     JBHT +5%; despite reporting Q4 EPS $1.92 below consensus of $2.46 and revs of $3.65B misses the $3.84B estimate saying revs miss was primarily driven by a -27% decline in volume in Integrated Capacity Solutions and a -1% decline in volume in Intermodal; more upbeat outlook

·     MRNA +8%; after saying its vaccine against the respiratory syncytial virus, or RSV was 83.7% effective in a late-stage trial at preventing at least two symptoms in adults aged 60 and older

·     NVAX +8%; adding to late day gains Tuesday after its COVID-19 vaccine has been added to the Department of Veterans Affairs National Acquisition Center drug catalog

·     OTLY +7%; upgraded to Buy from neutral at Mizuho and raised price tgt to $6 from $2.50 and adjust estimates higher as view 1/3/23’s manufacturing agreement as positive

·     RDN +5%; expects its mortgage insurance subsidiary Radian Guaranty to begin paying recurring ordinary dividends, with 2023 ordinary dividends projected to be between $300 to $400 million

·     TDOC +2%; announces restructuring plan including 6% reduction in workforce; increased focus to protect margins in a slower growth environment

·     UAL +2%; 4Q adj EPS $2.46 vs est. $2.10 on revs $12.4B vs est. $12.23B, adj EBIT mgn 11.2%, achieved 9.1% pre-tax mgn ahead of schedule in 4Q; sees Q1 adj EPS $0.50-$1.00 above consensus $0.25 and revs up ~50% y/y vs. est. $11.32B.



·     CHGG -11%; downgraded to Hold at Needham saying analysis of FY22 growth trends across Chegg Services subs, ARPU, and Busuu suggests the FY23 consensus estimate of 9.2% y/y Chegg Services rev growth is too high

·     FULC -7%; as 9.615M share Spot Secondary priced at $13.00

·     FUV -60%; after sells 4 mln shares and warrants to buy up to another 4 mln shares at $3, 51% discount to stock’s last close

·     KHC -3%; along with weakness in other food stocks early (LW, HRL)

·     PNC -5%; Q4 EPS of $3.49 misses the consensus of $3.95 while revs $5.76B top est. $5.71B; reports Q4 tangible book value per share $72.12 and Q4 CET1 ratio 9.1%

·     PYPL -1%; downgraded to Underperform with $75 tgt at SMBC Nikko as continue to believe that pulling back significantly on investment will erode PYPL’s LT growth prospects

·     SCHW -4%; Q4 adj EPS $1.07 misses the est. $1.09; Daily Avg Trades were 5.39M vs. est. 5.5M and total client assets fell -13.3% vs. est. -12.5%


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.