Mid-Morning Look

Friday, March 31, 2023

U.S. stocks adding to weekly, monthly, and quarterly gains, strong across the board as for the 3rd straight day all eleven S&P sectors open in positive territory with Consumer Discretionary (XLY) and REITs (XLRE) leaders up around 1% while Utilities (XLU) and Energy (XLE) lagging. The Fed’s favored inflation data point, core PCE, showed a slowdown YoY for March vs. expectations but likely isn’t enough to change the Fed’s tightening path, with futures still pointing to a 50/50 chance for a 25-bps rate hike in May. Financials starting to see some weakness, with the Regional Bank ETF (KRE) falling to lows. The Nasdaq just entered a fresh bull market this week, as it officially closed 20% above its December low on Wednesday, as mega cap tech remains the market leader (AAPL, AMZN, META, GOOGL, NVDA, TSLA). U.S. 10-year Treasury yields fell to a session low of 3.51% after the data. The benchmark S&P 500 has gained nearly 6% so far in the first quarter, with the technology sector up about 20% while the financials index is set for its worst quarter since June. Markets continue to benefit from stabilization in banking sector and notion Fed of pivot due to tightening in financial conditions. However, latest Fed speak has leaned hawkish with more speakers ahead today. Narrow trading range since the open, but markets holding onto positive gains with S&P futures (Spuz) at 4,100.

Economic Data

·     Personal Income M/M for March rises +0.3% vs. est. +0.2% (prior +2%); Personal Spending M/M for March rises +0.2% vs. est. +0.3% (prior +1.8%). Feb personal saving rate +4.6% vs Jan +4.4%.

·     PCE Price Index M/M for Feb rises +0.3% vs. Jan +0.6% and PCE Price Index Y/Y for Feb rose +5.0% vs. +5.3% prior in January.

·     U.S. Feb. Core PCE Price Index (MoM) rose +0.3% vs. est. +0.4% (prior +0.5%) and on a Y/Y basis, Core PCE Price Index rose +4.6% vs. est. +4.7% (prior +4.7%).

·     Chicago PMI for March reported at 43.8 vs. 43.4 consensus and 43.6 in February; marked the seventh straight month of contraction in Chicago’s manufacturing sector.

·     University of Michigan Sentiment final March 62.0 vs. consensus 63.2 (prelim March 63.4); current conditions index final March 66.3 vs prelim March 66.4 and expectations index final March 59.2 vs prelim March 61.5.

·     The UoM 1-yr inflation expectations reported at 3.6% vs. est. 3.8% and previous 3.8%; while the 5-10 Year Inflation seen at 2.9% vs. est. 2.8%.

Stock GAINERS

·     AAP +2%; upgraded to Equal weight from Underweight at Barclay’s following the stock’s significant pullback year-to-date; reward now skews more balanced.

·     BRZE +11%; reported good F4Q results with mixed FY2024 guidance. Positively, total revenue, subscription revenue, and operating margins came in above consensus, and the business is benefiting from vendor consolidation.

·     GRPN +11%; after announces CEO transition as Kedar Deshpande, CEO and director has stepped down; Appoints Dusan Senkypl as interim CEO, effective immediately.

·     MCB +24%; after co issues a financial update to investors after market on Thursday, noting that “liquidity remains strong” (shares fell -28% on Thursday).

·     RUM +5%; after earnings results as MAU/ARPU +142%/180% y/y & +13%/61% q/q, driving revenue +579% y/y & +82% q/q, 46%.

Stock LAGGARDS

·     CSSE -40%; after 4.69 share secondary priced at $2.30 (vs. $3.20 closing price).

·     GNRC -5%; downgraded to Underperform from Neutral at Bank America and cut tgt to $91 from $141 saying the company’s ambitious FY23 guidance seems increasingly out of reach to them.

·     MU -3%; shares slipped after China Cyberspace regulator (CAC) said to implement cybersecurity review on micron’s products in China.

·     NKLA -12%; 89.3M share Spot Secondary (29.9M shares in public offering, 59.4M shares to hedge fund Antara Capital L.P. in concurrent registered direct offering for $100M raise) priced at $1.12.