Early Look

Tuesday, January 17, 2023

Futures	Up/Down	%	Last
Dow	-63.00	0.18%	34,353
S&P 500	-10.25	0.26%	4,007
Nasdaq	-47.50	0.41%	11,560

 

 

U.S. futures are looking modestly lower coming back from the 3-day holiday weekend break, with attention turning to the increased volume of quarterly earnings, with big banks and a handful of tech names expected to report this week. The hot start for U.S. stocks in 2023 continued last week as the S&P rose 2.7%, the Dow rose 2.0% and the Nasdaq rose 4.8% (its biggest weekly pct gain since Nov 11) and hits highest closing level since mid-December above 11K. So far in 2023, the S&P 500 has risen 4.2%, the Dow 3.5% and Nasdaq up 5.9%. The S&P 500 closed at 3999, just above its 200-DMA and the Nasdaq closed a tick or two above its 100-DMA. The last six days have been one giant short squeeze with ‘most shorted’ stocks surging in an almost unbroken buying panic (beaten up 2022 losers, Bitcoin related names). So what else has happened the first two-weeks of the season?

 

-The CBOE Volatility Index (VIX) hit its lowest level since January 2022 – no fear at all

-Big bets continue to roll in against the US dollar, which suffered its worst week in 2 months and is down over 3% since the payrolls data while the 10-year Treasury yield is down over 18-bps from the payrolls report – all on beliefs the Fed won’t maintain its 5% nominal rate call.

-Oil prices jumped a 7th straight day Friday, the longest streak of gains since Dec 2021.

-Gold prices up 5-straight days to best levels since April 2022 above $1,925 late last week.

-Bitcoin rose a 10^th straight day on Friday, (and 12 of last 13), topping $19,000 (with its best run since Oct 2021), but over the weekend topped $21,000, its first move above since November. After dropping from just above record highs of $67,500 to a low near $15,000, a 77 % loss from the peak to the low, Bitcoin has spent about 13 months going mostly sideways until this last week.

 

Bets remains the Fed may soon be done raising rates after having boosted seven times in 2022, up 425 bps during that stretch to a range of 4.25%-4.5% heading into the February meeting. Morgan Stanley’s Mike Wilson, who has been bearish on markets for some time, noted this weekend that “with both buy and sell side consensus so aligned-i.e., weak first half, better second half – everyone is starting to wonder how this view could be wrong. We think it’s in the magnitude of the move lower led by much weaker earnings and a Fed committed to fighting inflation, making 3,900 an easy sale.”

 

Market Closing Prices Yesterday

·     The S&P 500 Index gained 15.92 points, or 0.40%, to 3,999.09

·     The Dow Jones Industrial Average rose 78.05 points, or 0.33%, to 34,302.61

·     The Nasdaq Composite jumped 78.05 points, or 0.71%, to 11,079.16

·     The Russell 2000 Index advanced 10.97 points, or 0.58% to 1,887.03

 

Economic Calendar for Today

·     7:45 AM ET         ICSC Weekly Retail Sales

·     8:30 AM ET          Empire Fed manufacturing for January

·     3:00 PM ET          Fed’s Williams Gives Welcoming Remarks

 

Earnings Calendar:

·     Earnings Before the Open: CFG FBK GNTY GS MBWM MS SBNY SI

·     Earnings After the Close: FULT HWC IBKR PNFP PRGS UAL UCBI

 

 

Macro	Up/Down	Last
Nymex	0.33	80.19
Brent	0.90	85.36
Gold	-10.70	1,911.00
EUR/USD	0.0003	1.0819
JPY/USD	0.37	128.91
10-Year Note	+0.048	3.559%

 

 

World News

·     In Asian markets, The Nikkei Index rose 316 points to 26,138, the Shanghai Index dipped -3 points to 3,224, and the Hang Seng Index fell -169 points to 21,577. In Europe, the German DAX is down -0.15% to 15,115, while the FTSE 100 fell -0.2% to 7,840.

·     Chinese GDP (Y/Y) Q4 rose +2.9% vs. est. +1.6% and previous +3.9%; GDP (Q/Q) Q4 flat vs. est. (-1.1%) and previous +3.9% and YTD (Y/Y) Q4 rose +3.0% vs. est. +2.7% and previous +3.0%

·     Chinese Industrial Production (Y/Y) rose +1.3% vs. est. +0.1% and previous +2.2%

·     China’s population falls by 0.85mn in 2022, the first time in over 60 years. China recorded 9.56mn births and 10.41mn deaths in 2022, vs 10.62mn births and 10.14mn deaths in 2021.

·     The ZEW economic research institute said that its index of economic expectations for Germany rose to 16.9 in January from minus 23.3 in December, its fourth consecutive monthly increase.

 

Sector News Breakdown

Consumer

·     Alibaba (BABA): Meme-stock investor Ryan Cohen has amassed a stake in Alibaba Group Holdings and is now actively pushing the Chinese e-commerce giant to expand its share buyback program, media outlets reported late on Monday https://on.mktw.net/3ZHJCHt

·     Xpeng Inc. (XPEV) has cut prices for most of its vehicles by around 10%, joining other auto makers in lowering prices as competition heats up in the EV sector; XPEV said it will slash prices for multiple versions of its P7, P5 and G3i models by 20,000 yuan (US$2,970) to CNY36,000 yuan

·     Church & Dwight (CHD) upgraded to Overweight from Equal Weight at Morgan Stanley

·     Wendy’s (WEN) downgraded to Hold from Buy at Deutsche Bank

·     Wayfair (W) and Kroger (KR) upgraded to equal-weight from underweight at Morgan Stanley; National Vision (EYE) downgraded to equal-weight from overweight in hardline, broadline and food retail coverage

 

Financials

·     Silvergate Capital Corp. (SI) Q4 EPS $0.48 vs. est. $0.81; Q4 results show digital asset customers were 1,620 at Dec 31, 2022, compared to 1,677 at September 30, 2022, and 1,381 at December 31, 2021; average digital asset customer deposits were $7.3 bln during Q4; has reduced headcount by about 200 employees, or 40%; estimates aggregate costs associated with reduction in force of approximately $8.1M

·     Signature Bank (SBNY) Q4 EPS $4.65 vs. est. $4.89; qtrly net interest income reached $638.7 million up $102.8 million, or 19.2% y/y; Q4 credit loss provision was $42.76M

·     Synchrony Financial (SYF) reported charge-offs for December of 2.32%; December net charge-offs 2.32% and delinquencies 1.79%

·     Citizens Financial (CFG) Q4 underlying EPS $1.32 vs. est. $1.31; Q4 CET1 capital ratio 10%; Q4 provision for credit losses $132M; Q4 adj adjusted net income $685 million

·     Global Payments (GPN) upgraded to overweight at Morgan Stanley, saying fintech and payments sector offers increasingly compelling valuations from a more favorable backdrop

·     Wells Fargo & Co. (WFC) downgraded to neutral from buy at Jefferies and lowered its price target to $46 from $49, after the bank provided its fourth-quarter results

 

Healthcare

·     Biogen Inc. (BIIB) partner Eisai Co. (ESLAY) applied for marketing authorization in Japan for the Alzheimer’s disease treatment lecanemab

·     Pfizer (PFE) downgraded to equal weight from overweight at Wells Fargo, which sees an earnings downgrade cycle on the horizon for the pharma giant.

·     Angion Biomedica (ANGN) has entered a definitive deal to merge with privately held Elicio Therapeutics in an all-stock transaction, the companies said in a joint statement Tuesday.

 

Technology, Media & Telecom

·     Endava (DAVA) mentioned positively in Barron’s saying despite a 42% decline over the past 12 months, the company is well positioned in 2023. While the software slump is worrisome, companies are always looking to get more efficient by cutting costs and replacing antiquated software with newer technology.

·     Bandwidth (BAND), DigitalOcean (DOCN) and RingCentral (RNG) downgraded to neutral at Piper as it tweaks its cloud automation software ratings, with Nice (NICE) upgraded to overweight and Nutanix (NTNX) its top pick.