Early Look

Monday, January 23, 2023

U.S. futures are down slightly after a big spike on Friday, closing at the highs with the Fed blackout underway & earnings picking up this week. Large cap earnings coming from Microsoft (MSFT), Tesla Inc. (TSLA) and Johnson & Johnson (JNJ) headlining the first busy earnings week of 2023, along with telecom companies AT&T Inc. (T) and Verizon (VZ) as well as Dow components Visa Inc. (V) and American Express Co. (AXP) in financials. The Nasdaq 100 (QQQ) rose for third week, longest streak since August, while for the week, the S&P 500 index fell 0.-67%, the Dow lost -2.71%, and the broader Nasdaq Composite gained 0.55%. Bitcoin prices rose for the 16th time in the last 17-trading days on Friday, topping $22K to its best levels since September and over $23K this weekend for first time in a year. Asian markets are closed for the Lunar New Year holiday. In Europe, the German DAX is up 14 points to 15,047, while the FTSE 100 gains 25 points to 7,795. The euro has had a strong start to the week, boosted by hawkish remarks from ECB policymakers Knot and Rehn over the weekend. The single currency is up 0.25% versus the US dollar while the Japanese yen is the weakest among the G-10’s. Inflationary concerns rising? Copper rose 4.10 cents per pound, or 0.97% to $4.2485 last week, up 5-straight weeks to highest settlement since June 2022; crude oil back at 2-month highs as China reopen continues to lift commodities. National average price of gasoline is now $3.38/gal, or about 30 cents higher than a month ago (seeing spikes in prices given China reopen and sliding dollar – inflationary).

Market Closing Prices Yesterday

·     The S&P 500 Index gained 73.76 points, or 1.89%, to 3,972.61.

·     The Dow Jones Industrial Average rose 330.93 points, or 1.00%, to 33,375.49.

·     The Nasdaq Composite surged 288.17 points, or 2.66%, to 11,140.43.

·     The Russell 2000 Index advanced 30.99 points, or 1.69% to 1,867.23.

Economic Calendar for Today

·     10:00 AM ET         Leading Index M/M for December

Earnings Calendar:

·     Earnings Before the Open: BKR BMRC BOH SYF

·     Earnings After the Close: BBCP BRO CFB EFSC FNB GSBC HOPE IBTX NBTB RBB SFBS SMBK TRST UMPQ ZION

World News

·     Bitcoin rallied to its highest levels since August ahead of celebrations for the Lunar New Year holiday throughout Asia, surging at the start of the weekend for a second straight time. The largest cryptocurrency rose as much as 2.1% to $22,786, the highest level since Aug. 18

·     ECB’s Knot said the ECB is set to raise interest rates by 50bps in both Feb and Mar; expect us not to be done by then with more steps following in May and June; Knot also told La Stampa it was too early to say if the ECB could slow down pace of hikes by summer; there would be a time where we could step down to 25bps from 50bps hikes but we’re far from there

·     On Jan. 22, new postage rates went into effect as the cost for sending a 1-ounce letter via first-class domestic increases by $0.03 to $.63 and the cost for mailing a postcard goes up by $0.04 to $.48, according to the U.S. Postal Service. The last rate increases occurred just six months ago. At that time, the cost for sending a 1-ounce letter went up by $0.02 to $.60.

Sector News Breakdown

Consumer

·     Levi Strauss (LEVI) downgraded to Neutral from Overweight at JPMorgan

·     Skechers (SKX) upgraded to Outperform from Market Perform at Cowen

·     Tapestry (TPR) downgraded to Equal Weight from Overweight at Barclays

·     Wayfair (W) upgraded to Buy from Underperform at Bank America and raise tgt to $65 from $30.

Energy, Industrials and Materials

·     US Treasury Secretary Janet Yellen expressed confidence at the weekend that restrictions on Russian sales of crude can be expanded to refined petroleum products in February, while acknowledging that the task will be more complicated.

·     FirstEnergy (FE) downgraded to Underperform from Neutral at Bank America

Financials

·     Big banks including Wells Fargo (WFC), JPMorgan (JPM), and Bank America (BAC) are teaming up to launch a digital wallet that will be linked with customers’ debit and credit cards, the WSJ reported, competing with PayPal (PYPL) and Apple Pay (AAPL) https://on.wsj.com/3R14Wne

·     Synchrony (SYF) Q4 EPS $1.26 vs. est. $1.12; Q4 CET1 capital ratio 12.8%; Q4 tangible book value per share $22.24; provisions for credit losses were $1.2B vs $561M last year; Net interest income in Q4 jumped 7% to $4.1 bln, driven by higher interest rates and fees on loans; net income, however, reduced in Q4 to $577M vs. $813M y/y.

Healthcare

·     Abbott Laboratories (ABT) said it’s cooperating with the Justice Department in a probe involving the contamination of formula at one of the company’s plants last year.

·     IDEAYA (IDYA) announces Darovasertib Phase 2 Initiation in Neoadjuvant and adjuvant uveal melanoma and guidance for clinical data update in metastatic uveal melanoma.

·     Pliant Therapeutics Inc. (PLRX) shares jump pre mkt as reported positive interim data from a Phase 2a study of its lead product candidate in the chronic lung disease idiopathic pulmonary fibrosis; said the highest dose group of bexotegrast met its primary and secondary endpoints.

·     Proterra (PTRA) to reduce workforce by about 300, or about 25%

Technology, Media & Telecom

·     Activist investor Elliott Management Corp. has made a multibillion-dollar investment in Salesforce Inc., (CRM), according to people familiar with the matter, adding to the pressures facing the business-software provider, WSJ https://on.wsj.com/3wkMZGK

·     AMD (AMD), Skyworks (SWKS) and Qualcomm (QCOM) upgraded at Barclays, while Applied Materials (AMAT) downgraded saying they are more positive on semiconductor companies with data center, PC, and handset exposure, but remains negative on semiconductor capital equipment stocks; also downgraded KLAC Corp. (KLAC) and upgraded Seagate (STX)

·     Auto supplier ZF Friedrichshafen AG and Wolfspeed Inc. (WOLF) plan to build a more than $2B wafer factory in Germany’s Saarland to make chips for electric vehicles and other applications – Handelsblatt reports.

·     Western Digital (WDC) and Kioxia Holdings are advancing in discussions about a potential merger with a rough structure including a dual listing in Japan being possible parts of the deal, Bloomberg reported late Friday.

·     Spotify (SPOT) rises after Bloomberg reported that the music streaming company is said to be planning job cuts as soon as this week, amid layoffs in the broader tech industry.