Mid-Morning Look: April 04, 2022

Mid-Morning Look

Monday, April 04, 2022

Index

Up/Down

%

Last

 

DJ Industrials

-8.26

0.02%

34,810

S&P 500

16.24

0.36%

4,562

Nasdaq

155.02

1.09%

14,417

Russell 2000

-8.29

0.40%

2,082

 

 

U.S. stocks are mixed as the S&P and Nasdaq are led higher between broad strength in the technology sector with Internet, semiconductors, IT, Hardware, and Comm Services all leading, but seeing weakness in financials, industrials, materials, and defensive sectors such as utilities, staples, and healthcare. The Dow Jones Industrial Average, Transports and SmallCap Russell 2000 lagging early on recession fears as the Treasury yield curve remains inverted with 2s higher than 10s. Dow Transports are coming off worst week since June 2020 (down over 5%) led by weakness in truckers and airlines, while rails among top decliners early today. Oil prices rebound early along with gold prices, but commodity related stocks are lagging. Not much in way of earnings or economic data, but a few corporate headlines grabbing spotlight, with Tesla CEO Elon musk revealing a 9.2% passive stake in Twitter (TWTR), lifting shares. Relatively quiet out of Ukraine/Russia conflict and no Fed speakers early.

 

Economic Data

·     U.S. Feb Factory orders fell -0.5%, in-line with consensus (lowest number since April 2020) and vs Jan +1.5%; Factory orders ex-transportation +0.4% vs. Jan +1.2%; Feb Durables orders revised to -2.1% from -2.2% and nondurables orders +1.2% vs Jan +1.5%; Feb nondefense cap orders ex-aircraft revised to -0.2% from -0.3%; Feb shipments revised to +0.3% from +0.5%

 

 

Macro

Up/Down

Last

 

WTI Crude

3.12

107.50

Brent

3.48

102.75

Gold

9.90

1,933.60

EUR/USD

-0.0067

1.10986

JPY/USD

0.34

122.83

10-Year Note

0.053

2.428%

 

 

Sector Movers Today

·     MedTech Equipment; DGX downgraded to Neutral at Citigroup and cut tgt to $140 due primarily to concerns around the margin outlook in 2022 and 2023 on the heels of higher internal investments, heightened labor pressures, and potential for reimbursement cuts; BAX downgraded to Sell from Neutral at Goldman Sachs and cut tgt to $77 from $88 saying the co is more exposed to macro headwinds relative to medical technology peers and it one of the least exposed to the developing COVID-19 recovery tailwinds; HOLX downgraded to In Line from Outperform at Evercore/ISI; AVTR downgraded to Neutral at Citigroup as see limited upside to n-t revenue growth and margin expansion, specifically in 1H22 driven by a number of headwinds including lapping strong 1H21 comps, persistent inflation and adjacent pricing

·     Auto sector; TSLA delivered 310,048 vehicles during Q1, a record number of shipments, and up 67.8% from 184,800 vehicles shipped y/y. Shipments also rose about 0.5% from Q4, when the company delivered its previous record of 308,600 vehicles.; Ford (F) said March total US sales of 159,328 units, down -25.6%. Ford (F) takes in record 50,000 f-series retail vehicles orders in March; Ford electrified vehicle sales post record; Ford pro continues strong momentum; Ford bronco family achieves record March sales; Lincoln SUV demand strengthens; in research, NIO upgrade from Neutral to Buy w/ $32 PT (from $46) at UBS saying while its sales volume growth has slowed with aging products, believe its three new model launches slated for 2022; LI PT raise from $47 to $52, reit Top Pick as believe Li Auto has outperformed other new EV makers in China, developing popular products and keeping costs and expenses under control

·     Bank movers; broad weakness in financials (banks, insurance) after cautious comments by JPM CEO; JPM CEO Jamie Dimon warns the bank may lose about $1B on Russia exposure, detailing extent of its potential losses resulting from conflict in Ukraine for first time. Dimon said the U.S. economy is facing unprecedented risks that have him preparing for dramatic upheavals. Dimon warned that the war in Ukraine could collide with rising inflation to slow the pandemic recovery and alter global alliances for decades to come. Dimon warned that the Federal Reserve could move interest rates “significantly higher than the markets expect.” Wells Fargo lowers 2022E-2025E estimates for JPM and MS reflecting a combination of seasonal factors (IB, trading, asset values) and medium-term considerations, incl. non-US exposures and activity levels, higher card loss rates; CME said Q1 overall adv increased 19% and March adv was up 12% year-over-year with record Q1 equity index futures and options adv

·     Utilities & Solar; SPWR upgraded to neutral from underperform at Bank America after analyst day and raise tgt to $23 from $13 saying see 50% EBITDA CAGR through 2025; PPL downgraded to Hold from Buy at Argus as expect PPL to face earnings pressure due to slow growth in its service territories, limited opportunities to expand into faster-growing areas, and uncertainty about the pending acquisition of Narragansett Electric; SRE said its liquefied natural gas (LNG) unit has entered into an agreement with affiliates of TotalEnergies TTEF.PA, Mitsui & Co 8031.T, and Japan LNG Investment LLC to increase the capacity of its Cameron LNG Phase 2 export project in Hackberry, Louisiana; SPI said 2021 net sales rose 17% to $162 million

 

Stock GAINERS

·     BABA %; U.S. listed Chinese stocks rally again (BABA, BIDU, NTES, TCEHY as China confirmed plans to revise confidentiality rules regarding overseas listings in a move that could help Chinese companies avoid being delisted in the U.S.

·     JMIA +20%; after UPS said it plans Africa push with Jumia deal after Jumia has built a distribution network for e-commerce business

·     PERI +11%; guides Q1 revenue to $125M, above estimates of $118.8M

·     SPWR +7%; upgraded to neutral from underperform at Bank America after analyst day and raise tgt to $23 from $13 saying see 50% EBITDA CAGR through 2025

·     TWTR +18%; rises as Elon Musk reports a passive stake of 9.2% as per SEC filing

·     ZBRA +3%; upgraded to Overweight from Neutral at JPMorgan saying margins continue to expand on product mix and scale benefits, coupled with positive impact from accretive acquisitions done over LTM

 

Stock LAGGARDS

·     BAX -3%; downgraded to Sell at Goldman Sachs saying the Co is more exposed to macro headwinds relative to medical technology peers and it one of the least exposed to the developing COVID-19 recovery tailwinds

·     CRIS -37%; shares fall after saying the FDA imposed a partial clinical hold on its TakeAim Leukemia Phase 1/2a study

·     DWAC -10%; after rises as Elon Musk reports a passive stake of 9.2% as per SEC filing – seen as competitive to DWAC potentially if Musk can create policy changes at TWTR; also reports that two executives quit Truth Social

·     MCD -2%; was downgraded to Hold at Kalinowski Research

·     PPL -2%; weakness in general in defensive utility sector after several names hitting 52-week highs last week; PPL downgraded to Hold at Argus

·     SBUX -4%; said that it will suspend its stock repurchasing program, effectively immediately, as Howard Schultz returns to the company as CEO for the third time

·     SJM -3%; broad weakness in defensive consumer staples/food names with BF all down 2% or more early

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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.