Mid-Morning Look: March 01, 2023

Mid-Morning Look

Wednesday, March 01, 2023






DJ Industrials




S&P 500








Russell 2000






U.S. stocks opened flattish to up slightly, getting a boost from Asian and European markets overnight after stronger China PMI data showed growth in the region. However, stocks turned lower following a 10:00 AM data and Fed speaker “dump” that showed weaker manufacturing totals (see below) while inflation data points to no decline (prices paid jumped). In Europe, Germany showed a spike in consumer prices overnight, topping consensus and prior month. The China Caixin manufacturing PMI measure saw a return to expansion in February rising to 51.6 from 49.2 prior. Official China manufacturing PMI also surprised on the upside rising to 52.6 from 50.6 and Non-Mfg. PMI up at 56.3 from 54.4. Cautious Fed speakers also weighing on market sentiment with Atlanta Fed President Raphael Bostic saying the Fed needs to raise short-term interest rates to between 5% and 5.25% and hold there “well into 2024”. He lays out his conditions for pausing rate increases in a new essay. Meanwhile Minnesota Fed President Kashkari said that he is “open-minded” on either a 25-basis point or a 50-basis point rate hike at the U.S. central bank’s next meeting, adding that rates may ultimately need to go higher than the 5.4% level he had thought in December would be adequate. Following today’s economic data (ISM, Construction Spending, S&P Global Manufacturing as well as the stronger China PMI data and German CPI) U.S. short-term interest-rate futures fall, pricing in Fed policy rate rising to 5.5%-5.75% range by September (and ECB expectations rise for higher rate hikes). The 10-year yield hits 4% for the first time since the Fall of 2022 before pulling back and the dollar pared losses. Energy the S&P top leader early along with Materials while Staples, REITs, Utilities and Discretionary the biggest drags in the S&P.


Economic Data

·     U.S. ISM manufacturing contracted for a fourth straight month in February, little changed at a reading of 47.7 last month from 47.4 in January and vs. the consensus view of 48.0. Orders for key manufactured capital goods rose by the most in five months in January (to 47.0 from 42.5) while shipments of those so-called core goods rebounded. Prices paid by manufacturers rebounding to 51.3 in February from 44.5 in January.

·     S&P Global February final manufacturing PMI at 47.3 (vs flash 47.8), the 5th straight reading of under 50 (contractions/expansion level).

·     Construction spending for January falls (-0.1%) vs. est. +0.2% to $1.826 trln, vs Dec -0.7%; Jan private construction spending unchanged, public spending (-0.6%).







WTI Crude















10-Year Note





Sector Movers Today

·     In consumer staples: in tobacco, PM upgraded from Neutral to Buy at UBS and raise tgt to $116 driven by an acceleration of HTU shipment growth in mature markets, an expanding value-mainstream heated tobacco offering and Swedish Match’s accretive growth and margin profile; in products, PG upgraded to Buy at UBS and raise tgt to $163 noting it has been the worst performing stock across their HPC coverage universe YTD; in food, BGS after Co forecasts 2023 profit above estimates; GO posts Q4 beat but lower guidance; in beverages, MNST reported a 480 bps 4Q organic sales miss and 9% EPS miss, which was a disappointment, with US org sales growth of only +2.3%, well below the +11.4% consensus.

·     In autos: TSLA hosted its Investor Day today; RIVN narrowed its quarterly loss but missed revenue expectations ($663M vs. est. $742M) and guided for production of 50,000 vehicles in 2023, below some views; XPEV reported vehicle deliveries for February of 6,010 units, rising 15% m/m; LI reported vehicle deliveries for February of 16,620 units vs. 8,414 y/y. in EV charging, BLNK Q4 revs $22.6M vs. est. $19.3M; says operating expenses rose 67% y/y to $34.2M; sees FY23 revs $100M-$110M vs. est. $91.6M. NIO falls early on earnings and deliveries.

·     Retailers: ROST reported 4Q EPS of $1.31 above $1.23 est. due to stronger sales and lower incentive costs; comps inflected to +1% and introduced F23 guidance of flat comps (vs -4% in F22), OM of 10.3-10.7%, and EPS of $4.65-4.95 (vs. est. $4.93); KSS slides as Q4 EPS loss of (-$2.49) vs estimates for gain, gross margins fell by 1,016 basis points (markdowns and higher costs) and forecast annual sales and profit below estimates (sales +2%-4% vs. est. +0.7%); URBN mixed Q4 results with EPS miss and sales beat; Discount retailer DLTR guides full-year EPS between $6.30-$6.80, below consensus of $7.78 and says it expects gross and operating margins to decline in the first half of FY2023 (DLTR 3-year stacked comp +16%, Family Dollar +17%, well below Walmart +24%, Target +32% & Kroger +21%); KTB upgraded to Buy at Stifel which reflects evidence of standout brand momentum, mkt share gains in both denim and non-denim styles.



·     BABA +3%; as U.S. listed Chinese stocks (BIDU, PDD, NTES, JD) advance after strong PMI numbers from China; the Caixin Manufacturing PMI measure saw a return to expansion in February, rising to 51.6 from 49.2 prior and Non-Mfg. PMI hits highest since April 2012 at 56.3.

·     DUOL +16%; as Q4 meaningful momentum across engagement metrics (DAUs +61% y/y) and guidance came in materially above expectations.

·     DY +16%; Q4 EPS $0.83 vs. est. $0.13; Q4 revs $917.5M vs. est. $814.2M; expects contract revenues for the quarter ending April 29, 2023, to increase mid- to high-single digit.

·     FSLR +12%; reported in-line 4Q results and 2023 guidance that came in above consensus which highlights ongoing operational momentum and margin expansion trajectory after 2022 struggles.

·     MMM +3%; said the U.S. Department of Defense’s records show that the “vast majority” of claimants in Combat Arms earplug litigation have normal hearing under accepted standards. The DoD records are for more than 175,000 plaintiffs.

·     RETA +175%; after the FDA approved its treatment for Friedreich’s ataxia. The drug, omaveloxolone, is now called Skyclarys and has been approved to treat adults 16 and older with the degenerative disease.

·     SRPT +23%; after the FDA said they will not hold advisory committee for investigational gene therapy, SRP-9001, to treat DMD – grants priority review and will decide approval 5/29.



·     AMBA -6%; reported in line F4Q (Jan) results and guided F1Q (Apr) meaningfully below expectations, as the inventory correction particularly within IoT worsens while there were no significant new CV3 announcements.

·     FHN -14%; after TD Bank said it doesn’t expect it will receive regulatory in time to complete its $13.4 billion acquisition by May 27. TD can’t provide a new close date at this time, according to a 10-K filing on Wednesday.

·     FIGS -23%; after sales guidance fell short of consensus expectations – posted beat on top and bottom line for Q4 but sees FY23 revenue mid-single digit growth vs. est. $560.64M and guides FY23 adj EBITDA margin 11%-12%.

·     LOW -5%; Q4 adj EPS $2.28 vs. est. $2.21; Q4 sales rose 5.2% y/y to $22.45B vs. est. $22.73B; forecast full-year sales below market expectations as sees FY total sales of $88B-$90B vs. est. $90.8B and EPS $13.60-$14.00 vs. est. $13.79.

·     MQ -22%; shares slide following a softer-than-expected ’23 guide (expected gross profit growth in the “low 20’s” vs the prior 29% modeled by the Street, though SQ’s renewal will be in focus.

·     NVAX -25%; after warning it may not have enough cash flow to last more than a year as losses come in more than double what Wall Street expected.

·     RIVN -14%; narrowed its quarterly loss but missed revenue expectations ($663M vs. est. $742M) and guided for production of 50,000 vehicles in 2023, below some views.



·     American Water (AWK) 11.0M share Spot Secondary priced at $135.50.

·     BrightSpire Capital (BRSP) 30.4M share Spot Secondary priced at $6.00.

·     EngageSmart (ESMT) says public offering of 8.0 mln common shares priced at $19.00/share.

·     PowerSchool (PWSC) 8.7M share Spot Secondary priced at $21.00.

·     2seventy Bio (TSVT) 10.87M share Spot Secondary priced at $11.50.


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.