Market Review: January 11, 2023

Closing Recap

Wednesday, January 11, 2023





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     For a second straight day U.S. stocks pushed higher, closing at their best levels, and showing no concern ahead of tomorrow’ key inflation report. It’s all about the Consumer Price Index (CPI) (8:30 AM ET), where the consensus est. is for prices to rise +6.5% (overall US CPI YoY in December), down from 7.1% in Nov and the 40-year high of 9.1% last June. The M/M Dec CPI figures est. to be flat while core prices (ex food & energy) are expected to be +5.7% from 6% prior month and m/m to rise +0.3%. Given the reaction in bonds (yields have slipped), the dollar (also down) and stocks (rising), it appears markets are anticipating a “softer” CPI reading, which could be the next catalyst to get the S&P 500 index (SPX) back above its 200-day MA (stands at 3,987). Not much Fed activity today, but the one in headlines was Boston Fed President Susan Collins wo said she’d "lean at this stage" to a 25-basis point rate rise at the next FOMC meeting. Those comments helped markets higher early in the session, as investors await the CPI. For the first time in a while, sentiment has turned Bullish quickly, with bonds and stocks being bought to start the year as the dollar slides and market pundits continue to disregard the Fed, which has stated for a few weeks that the nominal rate appears to be between 5%-5.5%. After a dismal 2022 campaign, technology off to a good start as the Nasdaq 100 (QQQ) approaches its 50-day MA of $276.85 while AAPL posts its first 4-day win streak since July 2021 (7/1-7/8).


Commodities, Currencies & Treasuries

·     Oil prices rise with WTI crude +2.29% or 3.05% to settle at $77.41 per barrel despite the bearish inventory report that showed weekly crude stocks up +19.0M barrels to 439.61 mln, vs forecast of -2.2M barrel draw – marks the third-largest weekly increase since EIA records began in 1982. Most wrote it off to weather-related rather than driven by fundamentals as refining activity continues its slow return after last month’s bomb cyclone.

·     Gold futures rise, up $2.40 to settle at fresh eight-month closing highs of $1,878.90 an ounce with all eyes on the CPI which is expected to come in lower than anticipated than prior month, pushing the dollar lower and precious metals higher. The US dollar was little changed most of the day after starting 2023 to the downside (downtrend since October on lower rate hike fears).

·     Another day, another strong bond auction as Treasury yields slipped. The U.S. Treasury sold $32B in 10-yr notes at a yield of 3.575% vs. 3.58% when issued, with the bid-to-cover at 2.53 (vs. 2.31 prior auction) as primary dealers take 15.06%, directs 17.92% and indirects 67.02% (vs. 59.4% prior auction). The good auction follows a very strong 3-year auction the day prior). The 10-year yield around 3.57% into tomorrow CPI results and the 2-yr around 4.24%.






WTI Crude















10-Year Note





Sector News Breakdown



·     TSLA led strength in overall electric vehicle stocks on the day (LCID, RIVN, FSR)

·     KMX downgraded from Neutral to Underweight citing outperformance of the shares and on back of material downward estimate revisions

·     XPEV downgrade from Overweight to Neutral at JPMorgan saying reopening trade in autos is playing out rapidly and could run out of steam in near term: China auto OEMs and dealers have rebounded collectively by 14% since late

·     ZEV said it sees Q4 revenue lower than expected range due to battery supply issues, demand shifting to 2023 2023, and fast-rising interest rates; expect to get our revenue growth trajectory back on track in 2023; cuts Q4 revs to about $4M vs. est. $15M



·     LEVI downgraded from Buy to Neutral at Citigroup saying in the near to medium term they expect a challenging US backdrop characterized by weaker denim trends to pressure results

·     FRG is considering going private in a management buyout and a group led by CEO Brian Kahn could pay a price of between $30-$35 a share for the co – WSJ

·     VSCO announces new $250 mln share repurchase authorization and said expects Q4 net sales, operating income, and diluted EPS within range of previously communicated guidance

·     Electrolux (ELUXY) swung to an operating loss in Q4 after being hit by higher costs, weaker consumer demand and inventory reductions mainly in North America, while hefty one-off costs also weighed – impacted shares of WHR, BBY (appliance retailers)


Leisure, Gaming & Lodging:

·     Online travel affected by the flight cancellations by the FAA due to technical issues (which were resolved around 9 AM); SABR was downgraded to Underperform at Bank America citing slower 2023 recovery, high leverage & interest rates, headwinds in airline IT. PO $7 from $11; EXPE was upgraded to Outperform at Oppenheimer with $120 tgt after a 48% decline over the last year

·     Lodging REITs: Truist upgraded GLPI shares and downgraded RRR saying they expect softer gaming fundamentals in 2023; albeit only slightly. Overall, Gaming has proven its resiliency time and time again, and they don’t expect 2023 to be much different.


Homebuilders, Building Products, Home Furnishing:

·     Homebuilders TOL, PHM upgraded to Buy from Neutral, LEN upgraded to Neutral from Underperform and NVR named top pick in homebuilders at Bank America saying they are cautious on housing demand especially in Q1, but see a more favorable setup for homebuilder stock performance saying: valuations have already priced in weak demand, mortgage rates have peaked & look to move lower, don’t see material risk to book value

·     BLD, IBP, POOL all upgraded to Buy from Hold in building products and downgraded FBIN, SITE, WTS to Hold from Buy and MAS to Sell from Hold at Deutsche Bank. Said cost deflation could prove a major opportunity for CNM and WMS; Residential new construction volumes and earnings should remain resilient in the year ahead

·     KBH expected to report earnings tonight after the bell in builder space

·     Weekly US MBA mortgage market index rises 1.2% in latest week, the purchase index falls -0.5%, the refinancing index rises 5.1% and the avg 30-yr fixed rate fell to 6.42%



Banks, Brokers, Asset Managers:

·     WFC said the bank is exiting the Correspondent business and plans to reduce the size of its Servicing portfolio to sharpen its focus towards its mortgage business.

·     BX upgraded to Overweight at Wells Fargo saying retail challenges should eventually subside. With BREIT now experiencing redemption requests beyond the 5% quarterly limit, it is a critical juncture for one of the firm’s most important franchises

·     In brokers/exchanges: Morgan Stanley said they prefer Top Pick CBOE as retain preference for defensive exchanges. More selective on brokers, as SCHW benefits most from peak rates in ’23 with ongoing NIM expansion potential. Deutsche Bank said prefer SCHW in brokers, which also remains their top pick for 2023, prefer BX in the alternative asset managers, BK in the trust banks; ICE in the exchanges, and BLK in the traditional asset managers

·     Asset Managers monthly AUM data: CNS preliminary assets under management of $80.4 billion as of December 31, 2022, a decrease of $3.8 billion from assets under management at November 30, 2022


Consumer Finance, Bitcoin, FinTech, Payments:

·     COIN downgrade from Neutral to Underperform at Bank America and cut tgt to $35 from $50 saying after analyzing 4Q crypto transaction volume data and the crypto outlook for 2023 murky at best, they lower 2023 revenue estimates

·     For credit cards (AXP, COF, DFS, SYF), Oppenheimer said they see low probability of soft landing and are adjusting 2023FYE and rollout 2024 to reflect new base case of increased credit losses while rates remain higher for longer, and cuts mid-2024



Biotech & Pharma:

·     AZN said the FDA approved its Airsupra product for the treatment of asthma

·     ETON rises after FDA accepts its response about its methanol poisoning treatment

·     RARE reported encouraging signs of GTX-102 clinical activity and provided details on the safety profile under the amended protocol

·     PROK said the trial design and early analysis of its Renal Autologous Cell Therapy (REACT) study in Type 2 Diabetes with Late Stage 4 Diabetes related chronic kidney disease


Healthcare Services & MedTech movers:

·     AXNX guides Q4 revenue $85.6-86.0M vs consensus $74.6M; FY revs $342M vs street $327M

·     HALO guides 2023 revenue modestly below consensus expectations at $815M-$845M (vs. ~$892M consensus and royalty revenue guidance is $445M-$455M (vs. ~$471M consensus)

·     IART preannounced Q4 sales of $397-398M coming in-line with consensus ($398M), bringing full year sales to the midpoint of prior guidance, and said expects both 4Q and full year adjusted EPS to come above the higher end of prior guidance.

·     ISRG guides Q4 revs $1.66B, below consensus of $1.68B saying worldwide da Vinci procedures grew approximately 18% y/y, while expects worldwide da Vinci procedures to increase approximately 12% to 16% in 2023

·     MASI rises after the International Trade Commission ruled in its favor on its Apple patent dispute. Stifel notes this decision is the first of three critical steps toward final dispute resolution, which, if successful for Masimo, would result in a potential Apple Watch importation ban

·     NOTV 4Q revs $150.5Mm vs est. $153Mm; sees FY23 revs at least $580Mm vs est. $584.7Mm

·     TNDM sees FY22 revenue at ‘approximately’ $805M compared to prior view of $800M-$805M and vs. est. $802.5M

·     XRAY guides FY revs to be above high end of $3.85-3.88B vs est. $3.87B; and EPS to be within $1.90-2.00 ex-items vs est. $1.96


Industrials & Materials


·     Airlines (AAL, ALK, DAL, UAL, JBLU, LUV) were the biggest story of the morning after the Federal Aviation Administration (FAA) said it suffered an outage of its system that alerts pilots and crew to advisories and information for flights, prompting a full grounding of planes until 9:30 AM this morning. Operations across the National Airspace System were affected – grounding was lifted just before 9:00 AM this morning, but not before impacting 3-hours of travel; LUV was downgraded to Neutral from Positive at Susquehanna

·     In freight/trucking: XPO and CHRW both downgraded to Neutral from Overweight at JPMorgan saying they still like the long-term opportunity, but near-term upside constrained by turbid market; RXO downgraded to Hold from Buy at Stifel saying market conditions are likely to remain soft for most of this year, so capital may be better deployed in alternatives with more self-help

·     The Baltic Dry index hits 4-month lows, pressured by weaker demand across vessel segments, falling 53 points, or 4.8%, to 1,043, its lowest level since Sept. 1. Capesize index lost 66 points, or 4.3%, to 1,470, Panamax index fell 63 points, or 5.3%, to 1,126 (has fallen every day in January)


Materials, Metals & Mining

·     In chemicals, CC and EMN upgraded to Buy from Neutral at Bank America while firm also raised LTHM to Buy from Underperform, and DOW and CTVA to Neutral from Underperform while downgraded UNVR and IFF to Underperform from Buy in chemicals. Some key themes for industry this year include negative earnings revision will end by spring 2023, raw material deflation should begin to accrue to downstream chemical businesses as destocking ends and the dollar will shift to a tailwind to forecasts by 3Q23

·     In metals, SCCO upgraded from Underperform to Peer Perform at Wolfe to reflect costs falling on byproduct credits and energy cost relief, on top of a modestly better copper outlook; PAAS upgraded to Outperform at RBC Capital, assuming the successful completion of the proposed transaction to acquire Yamana’s South American asset portfolio

·     In lithium leveraged battery names, Canaccord initiated coverage on ENVX at Buy and $20 tgt and DFLI at Buy and $15 tgt saying Batteries store energy – and, consequently, solve renewables’ intermittency problems, not to mention power future mobility and animate our increasing number of power-hungry devices.

·     In solar, JKS upgraded from Neutral to Buy at Roth Capital and raise tgt from $50 to $70 given the recent UFLPA releases & the expected progress ahead; overall broad-based strength in the solar complex with ENPH, SEDG, FSLR, SPWR, ARRY, SHLS, NOVA all surging



Internet, Media & Telecom

·     In Internet, Cowen reduced ests for AMZN – said surveyed 50 US ad buyers totaling ~$23B in US ad spend in Dec ’22: as result, lower WW Digital ad forecast ~5% annually from ’23-’27 off largely the most bearish ad buyer sentiment in the last 10 years of survey

·     WWEStephanie McMahon has resigned as co-CEO and chairman of the board, the company announced Wednesday. Vince McMahon returns as executive chairman of its board. Nick Khan will continue as CEO, company says

·     WBD upgraded from Neutral to Buy at Guggenheim with $16.50 tgt as see an attractive narrative for the first half of 2023, with the impact of a recently announced domestic affiliate renewals, strong cost controls, and the upcoming launch of a restructured Max product as key catalysts


Hardware & Software movers:

·     AAPL is planning to start using its own custom displays in mobile devices as early as 2024, an effort to reduce its reliance on technology partners like Samsung and LG and bring more components in-house. The company aims to begin by swapping out the display in the highest-end Apple Watches by the end of next year, Bloomberg reported

·     AAPL Barclays reduced ests for DecQ, MarQ and FY23 to account for production issues and weakening demand across hardware categories; estimates DecQ app store declined by 2%, which also puts DecQ consensus estimates for Services at risk

·     AAPL: Shipments of the Apple MacBook will likely drop 40-50% sequentially in the first quarter of 2023, according to sources in the supply chain for the notebook series.’ -Digitimes reported

·     CRM was downgraded from Market Perform to Underperform at Bernstein and cut tgt to $119 from $134 saying pressure has increased for larger margin improvements, while growth has continued to slow, and the company has missed expectations

·     CVLT negatively preannounced F3Q23 (FYE March) results, missing estimate by 4%, primarily due to weakening buying patterns and close rate execution in the last few weeks of December

·     DELL, HPQ shares slide as Citi noted that IDC released preliminary 4Q22 worldwide PC industry unit estimates, indicating units declined 28%YoY (below Citi’s estimate -22%YoY) and worse than the 16%YoY declines in each of 2Q22/3Q22. The 4Q22 decline of 28%YoY compares to +1%YoY in 4Q21 and +27%YoY in 4Q20.

·     KEYS downgraded from Buy to Neutral at Goldman Sachs reflecting the company’s above average exposure to the communications infrastructure market (commercial communications is 45-50% of total company revenue) vs. our broader coverage

·     TEAM rises after Mizuho noted the co announced additional price increases relating to renewals of flagship on-premises products across Server and Data Center

·     Video game stocks slide after Ubisoft (UBSFY) said sees FY operating income loss after game launches disappoint; said worsening macroeconomic conditions, slower than expected trends over holiday season triggered full review of revenue prospects (EA, TTWO slide)



·     Semiconductor tgt changes at Keybanc, trimming ADI to $210 from $220, AMD to $80 from $85, CRUS raised to $110 from $100 and NVDA tgt cut to $220 from $230 saying quarterly supply chain findings are mostly negative and feedback indicates the correction in Asia is worsening as China reopens and is negatively impacting consumption, while end demand softens across most end markets including auto and industrials

·     ACLS sees 4Q EPS above $1.45 vs est. $1.05 and FY EPS above $5.00 vs est. $4.80; sees 4Q revs above $250Mm vs est. $234.5 and prior guide $232-240Mm

·     CRUS advanced after one analyst called it the primary winner for canceling physical buttons and the change to adopt solid-state buttons on the 2H23 high-end iPhone 15 models.

·     ICHR shares fall as the (small-cap semi equipment firm issued a downside pre for Q4 and guided Q1 below the street; sees 4Q revs $300-302Mm vs est. $335Mm, sees 1Q23 revs $210-240Mm vs est. $296.8Mm (LRCX, AMAT among biggest customers)

·     MTSI downgraded to Hold from Buy and tgt cut to $65 from $73 at Craig Hallum

·     OLED shares dipped early after Bloomberg reported that Apple will use in-house microLED display to replace OLED display in some Apple Watch models as soon as 2024

·     PI positively preannounced Q4 results, saying it expects Q4 revs to exceed $76M, topping prior guidance of $71.5M-$73.5M

·     Bank America said they maintain Buy on leading cloud vendors (NVDA, AVGO, MRVL, AMD, CRDO), semicap also indirect beneficiaries of rising complexity as cloud CAPEX tracking +6% YoY in CY23 ahead of earnings, decelerating from +17% YoY in CY22


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.