Market Review: January 05, 2023

Closing Recap

Thursday, January 05, 2023





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Stocks stumbled on Thursday amid strong payroll figures as ADP employment beat estimates and jobless claims fell to a three-and-a-half month low, once again spooking investors about the pace and terminal levels of future rate hikes. Now all eyes on tomorrows December Nonfarm payroll report where ests are for +200K nonfarm and +180K private payrolls, with unemployment est. at +3.7% and wages to grow +0.4% m/m (after +0.6% prior). Normally “dovish” Neel Kashkari of the Fed yesterday stated his forecast that rates could climb to 5.4% and pause there, while the market’s implied terminal rate was only about 4.95%. Today’s data has pushed terminal rates just north of 5%, with the obvious counter-effect on equities. Ironically, normally “hawkish” Fed President Bullard came in with a “kick-save” early afternoon for stock markets saying inflation is going to moderate in 2023. While the comments are not terribly surprising as recent data points has already shown a deceleration in prices, the timing came as the S&P (SPX) was again testing the 3,800 level which it has held the last month and gave stocks a bounce. Market action a complete reversal from yesterday’s action, with Energy the top S&P sector leader up over 1.8%, while breadth was more than 3:2 decliners leading advancers (yesterday Energy was only decliner with Breadth favoring advancers 4:1).

·     St. Louis Federal Reserve President James Bullard said Thursday the New Year could finally bring some welcome relief on the inflation front. Those comments helped bounce markets off their afternoon lows as the well known “hawk” said the FOMC has taken aggressive action during 2022, with ongoing increases in the policy rate planned for 2023, and this has returned inflation expectations to a level consistent with the Fed’s 2% inflation target. 

·     Oil rebounded over 1% after posting the biggest two-day loss for the start of a year in three decades (down -9%) with the shutdown of a U.S. fuel pipeline providing support, though economic concerns capped gains. Crypto assets resume downward trend after sharp bounce on Wednesday, as SI shares slid over -30% on company update and COIN tumbles on an analyst downgrade. Gold prices slide after a 4-session advance to highest levels since June. Natural gas prices fall over -10% after weekly inventory data and continued downside momentum


Economic Data:

·     Private employment increased by 235,000 jobs last month, the ADP National Employment report showed well above the expectation of 150,000 jobs added (ahead of non-farm payroll report)

·     Weekly Jobless Claims fell to 204K in latest week, better than the 225k estimate and prior week revised to 223k from 225k; the 4-week moving average fell to 213,750 from 220,500; number of Americans filing new claims for unemployment benefits dropped to a three-month low last week of 1.694M from 1.718M prior, while layoffs fell 43% in December

·     November International Trade in Goods and Services deficit shrink -2% to (-$61.50B) vs. (-$73.0B) expected and (-$77.80B) in October (revised from -$78.20B) which reflected a decrease in the goods deficit of $15.3B to $84.1B and an increase in the services surplus of $1.0B to $22.5B. Exports were $251.90B vs. $256.90B prior and Imports $313.4B vs. $334.80B prior

·     U.S. S&P Global December final composite PMI at 45.0 (vs flash 44.6) and S&P global December final services PMI at 44.7 (vs flash 44.4)


Commodities, currencies & Treasuries

·     Oil bounced slightly, with WTI crude rising 1.14% to $73.67 per barrel after posting the biggest two-day loss for the start of a year in three decades (down over -9%) with the shutdown of a U.S. fuel pipeline providing support, though economic concerns capped gains. Natural gas futures fell -10% to $3.725 mln btus as warmer weather forecasts impact demand.

·     Gold prices fall, snapping a 4-day win streak, as futures slip -$18.40 or 1% to settle at $1,804.60 an ounce, pulling back from recent 6-month highs. The rebound in the dollar and overall broad-based selling weighed on prices

·     The U.S. dollar has been choppy to start the year, rising sharply on Tuesday, paring gains Wednesday and rebounded today back around the 105 level for the dollar index (DXY), on rising expectations the Fed will stay the course and boost interest rates more than the Street is currently forecasting/expecting. The euro dropped back around the 105 level.






WTI Crude















10-Year Note





Sector News Breakdown


·     BBBY tumbles after saying there is substantial doubt about its ability to continue as a going concern and continues to consider all alternatives, including restructuring or refinancing debt, reducing, or delaying business activities and selling assets

·     AMZN announced an additional 8k headcount cut in January, after 10k were announced in November

·     UBS downgraded both GPS and VSCO to Sell from Neutral as anticipate macro forces and share loss causing both to deliver weak growth and miss Street earnings expectations

·     TPR downgraded from Outperform to Market Perform at Bernstein saying demand for affordable luxury and premium brands is likely to soften in 2023

·     Piper with several changes, downgrading JWN, RVLV, BIRD to Neutral from Overweight in the global lifestyle brands, retail space with top ideas TGT and OXM; Piper also downgraded WWW to Neutral from OW with top picks for 2023 being DECK, ONON, and CROX – taking a more cautious stance on the consumer in the 2H as consumers spend down excess savings

·     HELE Q3 Non-GAAP EPS of $2.75 beat by $0.15. though GAAP EPS of $2.15, vs. prior year $3.10 while organic sales were down -18.5% in the qtr


Auto sector:

·     TSLA delivered fewer cars made in China last month than in November. Data from the China Air Passenger Car Association Tesla delivered 55,796 in December, down from more than 100,000 in November and 21% lower than a year earlier

·     Ford Motor (F) December total U.S. Vehicle sales 179,279, up 3.2% and December 2022 total U.S. EVs sales 7,823 units, up 223%

·     Volvo (VLVLY) its car sales grew in December but fell for the full year due to lockdowns in China; sales grew 13% year-on-year in December to 72,663 cars, a slight acceleration from November, but that 2022 sales fell 12% to 615,121 cars.

·     KMX downgraded from Buy to Hold at Argus saying in the near term, they believe used vehicle retailers like Car-Max will struggle with their rapidly depreciating inventory and are unlikely to buy as many vehicles. All other things equal, less inventory will lead to lower sales and margins

·     EVGO and AMZN partner to enable EV drivers to locate and pay for charging with Alexa

·     Financing a vehicle is growing more expensive than ever for consumers, according to car shopping experts at Edmunds. 15.7% of new car buyers had a monthly payment of more than $1,000 last quarter – marking a record high for the industry – compared to 10.5% in Q4 of 2021 and 6.7% in Q4 of 2020.


Housing & Building Products:

·     Cowen with home improvement outlook saying HD is their top pick and give the edge to WSM over RH in Cowen’s 2023 Home Improvement & Furniture Themes & Outlook. Said take a more cautious outlook on both sectors but think home improvement will outperform given its lower discretionary bent. Key proprietary work in this report includes scenario analyses on both industries, deep dive into furniture PCE analysis as we break down unit and pricing trends

·     AZEK downgrade from Buy to Neutral at UBS with $24 tgt and lower FY23e-FY26e adj. EBITDA estimates


Consumer Staples & Restaurants:

·     STZ posts Q3 EPS $2.83 vs. est. $2.89 and cut FY23 EPS guide ex-Canopy from $11.20-$11.60 to $11-$11.20 while reported beer depletions of 5.7% in the qtr (we were at 6.5% and est. was 7.2%) – sales climbed 5% to $2.44 billion in the quarter

·     CAG hit 6-year highs after Q2 profit and sales topped expectations and boosted its full-year outlook, as raised prices helped offset a decline in volume; sales grew 8.3% to $3.31 billion, above consensus of $3.28 billion and organic sales increased 8.6% even as volume fell 8.4%, and guided FY EPS view to $2.60-$2.70 vs. est. $2.47

·     LW Q2 EPS and revenues topped consensus handily and raised FY23 adjusted EPS view to $3.75-$4.00 from $2.45-$2.85 and revs view to $4.8B-$4.9B from $4.7B-$4.8B (est. $4.73B)

·     IPAR said it sees FY net sales $1.08B vs. prior view $1.03B (est. $1.03B) and guides FY EPS $3.60 above prior $3.40 and same consensus; also raises 2023 outlook

·     USFD was upgraded to Overweight from Equal Weight at Barclay’s with a price target of $43, up from $34 noting a new CEO was named, the board is united, and opportunities for market share and margin gains are "large," while the stock’s valuation is "compelling

·     NOMD downgrade from Outperform to Neutral w/ $20 PT (from $25) @ CSFB – European consumers have proven much more elastic to higher prices than U.S. consumers. Nomad competes in frozen foods categories that lower-income consumers use as basic staples (e.g., frozen fish, frozen peas) for inexpensive meal solutions.

·     WEN downgrade from Outperform to Perform at Oppenheimer noting shares have gained +40% since a 13D filing on 5/24/22 by Trian Management (vs S&P’s -2.2%), and their updated analysis suggests the stock’s risk/reward and valuation are now balanced – QSR, DRI, MCD 2023 top picks

·     DIN said Applebee’s President John Cywinski is leaving to become CEO at another restaurant



·     Weekly inventory data from the EIA showed: crude inventories rose 1.7 million barrels in the week to Dec. 30, vs. est. for 1.2M barrel build; crude stocks at the Cushing, Oklahoma, delivery hub rose 244,000 barrels; gasoline stocks fell 346,000 in the week and distillate stockpiles, which include diesel and heating oil, fell 1.4 million in the week

·     MGY guided 4Q22 production to 73-74 MBoe/d, citing a delay in bringing an eight-well pad on-line and winter weather – 5.8% below prior guidance and 9.8% below 3Q22

·     In refiners, DK downgraded to UW from OW at Wells Fargo saying for the industry they are positive US refining but less bullish than they were for 2022. PSX and PBF are our top large-cap and mid-cap picks

·     DK announced the 2023 capital spending budget of approximately $350 million on a consolidated basis

·     In solar, SEDG today CFO said U.S. Solar growth expected to decelerate in 2023, Asia, Europe solar markets to surge; shares underperformed in solar, holding just above its 200-day MA support around $280 – ENPH all lower



·     Goldman Sachs out with 2023 regional banks outlook saying while doesn’t think stocks in the group are “as cheap” as they appear and doesn’t see a clear catalyst to drive upside, is tactically bullish on names that can: 1) manage the NII peak 2) protect downside from rate cuts. Top picks include FITB, RF, CFG and TFC and he remains constructive on HBAN

·     FRC was upgraded from Neutral to Buy at Goldman Sachs with a PT of $142, or ~15% upside to shares after shares fell ~41% in 2022 with the valuation reflecting concerns around further margin compression and its ability to efficiently fund the balance sheet

·     TW December 2022 total trading volume of $21.2 trillion and average daily volume of $1.02 trillion December 2022 adv up 11.6% y/y; Q4 ADV down -4.1% y/y and Full Year 2022 ADV up +9.9% y/y

·     MKTX announced monthly trading volume for December. Strong December with 27% increase in total credit average daily volume ("ADV") to $10.6 billion. Record 22.8% (+140 bps) composite corporate bond estimated market share,2 up from 21.4%. 26% increase in U.S. high-grade ADV to $5.1 billion with estimated market share of 23.4%

·     CME and CBOE both upgraded from Neutral to Outperform at Credit Suisse due to the firm’s defensive growth prospects and potential for volume forecasts to exceed investor expectations in 2023. Over the course of 2023, industry options volumes could expand owing to elevated uncertainty around potentially slower economic growth

·     In insurance, RGA upgrade from In Line to Outperform at Evercore/ISI saying recent checks on CDC mortality data in the US and COVID statistics globally suggest mortality trends remain favorable in 4Q; and believe recent results and outlooks from its major life reinsurance competitors (mainly European) are constructive

·     ESNT downgrade from Buy to Neutral at Goldman Sachs saying with mortgage rates having moved higher, purchase volume will likely be lower and don’t see there being material share gains given the pricing / attractiveness of returns


Bitcoin, Finance, FinTech & Payments:

·     SI tumbles as much as 46% after the crypto bank provided Q4 prelim results saying deposits at the bank plunged by $8.1 billion from the end of September to the end of December, and revealed that it was forced to sell off $5.2 billion in debt securities to accommodate lower deposit levels and maintain liquidity – has laid off 40% of its staff or around 200 employees

·     COIN was downgraded from Outperform to Market Perform at Cowen and slash tgt to $36 from $74 and reducing 2023 revenue and adj. EBITDA estimates below Street – warns potential SEC enforcement action is elevated post-FTX with regulatory certainty unlikely until 2024

·     CACC adds to yesterday weakness, falling another 7% after tumbling -11.6% Wednesday after being sued by the U.S. Consumer Financial Protection Bureau and New York AG

·     AXP, COF both downgraded to Underweight from Equal Weight at Stephens

·     ALLY was downgraded to Underperform from Buy at Bank America and cut tgt to $26 from $35 saying macro factors are having an outsized impact on fundamentals, which are likely to get worse before they get better


Pharma & Biotech movers:

·     NVCR surges after saying a study evaluating the safety and efficacy of Tumor Treating Fields in stage 4 non-small cell lung cancer met its primary endpoint, demonstrating a statistically significant and clinically meaningful improvement in overall survival

·     TAK reports positive Phase 3 data for clotting disorder candidate

·     BIIB said that it separated research and development into two functions that report directly to new CEO Christopher Viehbacher (note for BIIB, approach lecanemab accelerated approval PDUFA on Jan 6th)

·     MORannounce FY23 guidance for US sales $80-95M which suggests flat to declining Monjuvi sales and is ~25% below consensus

·     YMAB announces restructuring, extending cash runway into 1Q26 and reprioritizes pipeline efforts while 2023 Danyelza guidance falls short of ests ($60-$65M vs. cons: $70.3M) – shares were downgraded at Cowen

·     NTLA preannounces and initiate global pivotal trials for NTLA-2001 for transthyretin (ATTR) amyloidosis and NTLA-2002 for hereditary angioedema (HAE)

·     PSNL guides prelim 4Q results modestly ahead driven by MVP upside with 4Q revs $16.7M (~$65M for FY22) exceeding FY22 guidance of ~$63-64M

·     LTRN said the FDA granted orphan drug designation to its LP-284 mantle cell lymphoma treatment.


Healthcare Services & MedTech Equipment:

·     WBA slides as posted Q1 EPS $1.16 vs. $1.14 on revs $33.4B vs. est. $33.0B and adjusts FY23 outlook, notes increased clarity into its long-term growth algorithm

·     DHR downgraded at Credit Suisse as Covid vaccine demand dwindles

·     ZBH said it has reached a definitive agreement to acquire Embody, Inc., a privately-held medical device company focused on soft tissue healing, for $155M at closing and up to an additional $120M subject to achieving future regulatory and commercial milestones in 3-years


Transports, Industrials & Materials

·     ACT said monthly preliminary Class 8 for Dec was 30,300 units – compared to preliminary November Class 8 net order figures of 33,000 units. Recall October Class 8 orders came in at a strong 42.5K units following 53K in September (CMI, PCAR, ALSN)

·     Cowen said they are generally cautious into the print on machinery and transportation OEM stocks, namely CAT, CMI, WAB, and GBX – largely due to sentiment, estimates, and, in some cases, valuations rising over the last month, while guidance should reflect some conservatism due to macro uncertainty

·     DAL upgraded from Hold to Buy at Argus and boosting EPS estimates as expect demand for leisure travel to remain strong in 2023 and look for business travel to surpass 2019 levels


Metals & Materials:

·     RPM slides as Q2 revs fall short of consensus and said expects Q3 sales to increase in low single digit to mid-single digit percentage range vs prior-year results (shares of SHW fell in reaction)

·     OLN upgraded to Overweight from Equal Weight at Barclays and up tgt to $65 saying chlor-alkali supply/demand remains relatively tight, and the company’s shareholder remunerations "remain healthy and clearly-defined”

·     NEM and other gold miners slip as gold snaps 4-session winning streak


Internet, Media & Telecom

·     WBD shares jumped following CFO comments at a conference today

·     TMUS pre-released postpaid phone net additions of 927k were in-line with our estimate but ahead of recent consensus updates. Total postpaid net adds of 1,843k beat the Street at 1,754k. Said that it added 6.4M total postpaid customers in 2022, which exceeded expectations, and added 2M new high speed Internet customers during the year

·     CMCSA and CHTR both upgraded to Buy at Truist with target prices of $50 and $550, respectively noting they were the two worst performing large-cap stocks in their coverage universe in 2022, but believe efforts to stem the erosion are proving successful

·     IPG upgraded to Neutral at Bank America saying 2023 should be a game of two halves for media and internet, favoring "quality compounders" in the first half

·     MGNI and CRTO announces preferred relationship to extend retailer audiences into CTV



·     WDC has restarted merger talks with Japan’s Kioxia, Bloomberg reported

·     Auto chip makers ON, ADI, MCHP saw weakness late day following presentations at CES

·     QCOM and CRM to Help Automakers Build Data-Driven and Connected Customer Experiences


Software movers:

·     ORCL, TEAM, DOCU, CHKP upgraded to Buy at Jefferies saying: ORCL is a tactical pick for investors as the firm reaccelerates growth and focuses on expense scrutiny. For TEAM, we believe the market has already discounted medium-term growth prospects and we remain bullish on the LT fundamental oppty ahead. We believe in the new mgmt team for DOCU and trust their ability to drive top line growth. CHKP offers a Persistent low-grower and high margin play which has the potential to accelerate revenue in a tough ’23.

·     DBX, PLTR, CRWD, VRNS all downgraded to Hold in software at Jefferies saying: for DBX, note high exposure to SMBs and freelancers, which may cause increased exposure in an economic downturn. On PLTR, thought we still believe in the LT biz, we point out that the gov’t biz has lagged recently, and NT upside is likely capped. For the security names, we believe that while security took on greater importance with WFA creating a more distributed network, it is not immune to macro and landing new logos will be tougher in CY23. On CRWD, we believe that growth should moderate, and 16% industry growth forecasts might prove too optimistic. On VRNS, we note that not only is the macro worsening, but the company is also transitioning to a 4-6Y SaaS biz model transition, making estimate upside difficult

·     FIVN, VRNT, VERX, SHOP all downgraded to Hold at Jefferies as expect macro headwinds to limit NT growth and for longer sales cycles & tighter budgets to weigh on new business in 2023. For FIVN, believe slowing growth will limit room to run higher in the NT. View the company favorably, but will wait on the sidelines. For VRNT, we see a reasonable valuation, but believe slowing revenue and EPS growth will make it difficult for shares to move higher. We do not see material upside to fundamentals for VERX as its key end-market drivers continue to slow. For SHOP, we believe a slowdown in e-commerce, combined with the company’s massive CAPEX cycle will limit material upside beyond our PT

·     OpenAI, the research lab behind the viral ChatGPT chatbot, is in talks to sell existing shares in a tender offer that would value the company at around $29 billion, according to people familiar with the matter – WSJ reported. OpenAI Was Valued at About $14 Billion In a 2021 Tender Offer

·     PANW shares hitting fresh 52-week lows today

·     ADBE said consumers spent total of $211.7B online from Nov. 1 to Dec. 31, growing 3.5% y/y and this holiday season, 47% of online sales came through smartphones (up from 43% in 2021)


Hardware, Components & Services:

·     DELL plans to stop using China-made chips by 2024 and has told suppliers to reduce the amount of other made-in-China components in its products amid concerns over U.S.-Beijing tensions, Nikkei reported

·     DELL, HPQ: Digitimes reported inventory adjustments for PCs have been slow despite best efforts by distributors and brand vendors, due to sluggish consumer demand in China, Europe, and the US, according to industry sources


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.