Mid-Morning Look: December 01, 2022

Mid-Morning Look

Thursday, December 01, 2022






DJ Industrials




S&P 500








Russell 2000






What a wild couple of days returning from the Thanksgiving Day holiday week, with major U.S. stock averages opening higher after economic data showed a mild easing in inflation (PCE results) and solid consumer spending in October, adding to yesterday’s big gains on hopes of a likely downshift in the Fed’s aggressive rate hike policy – but prices have since reversed to the downside. Stocks surged Wednesday, with the S&P 500 moving above its 200-day moving average of 4,050 for the first time since April after Fed Chair Powell said it makes sense to moderate pace of interest rate hikes and that the time to moderate pace of rate hikes may come as soon as December meeting. Recent weakness in the U.S. dollar index (DXY), down about -1% today, after falling over 4% in November below 105) off the Sept 28th 20-year highs of 114.78, also providing a boost for stocks. Treasury yields fall, with the 10-yr to 3.6%. Several retailers tumble following earnings or guidance with declines in BIG, DG, DLTH, GIII, LE and VSCO. Huge day of economic data (see below) and comes ahead of tomorrow’s monthly nonfarm payroll report. Will stocks continue the upward momentum follow-thru on slowing rate hopes? Or will an impending recession, continued weaker economic data (ISM today, Chicago PMI yesterday) and slowing earnings/guidance from companies’ pressure stocks in the final month of the year?


Economic Data

·     US PCE Deflator (M/M) for Oct rises +0.3% vs. est. +0.4% (prior +0.3%) and PCE Deflator (Y/Y) Oct rises an in-line +6.0% vs. prior +6.2%; US PCE Core Deflator (M/M) for Oct +0.2% vs. est. +0.3% and below previous +0.5% while PCE Core Deflator (Y/Y) in-line at +5%

·     Weekly Jobless Claims fell to 225K from 241K prior week and below est. 235K; the 4-week moving average rose to 228,750 from 227,000 prior week; continued claims jump to 1.608M (first move above 1.6M since February) from 1.551M prior week; insured unemployment rate at 1.1%

·     Oct. Personal income rises 0.7% m/m vs. est. +0.4% and real personal spending rises 0.5% m/m vs. est. 0.5%; Personal spending rises +0.8% m/m vs. +0.8% expected

·     ISM U.S. Manufacturing activity index 49.0 in November, first time below 50 since May 2020, below 50.2 in October; prices paid index 43.0 in November vs 46.6 in Oct; new orders index 47.2 in November vs 49.2 in Oct and employment index 48.4 in November vs 50.0 in Oct

·     U.S. Construction Spending for Oct fell -0.3%, in-line with consensus vs Sept +0.1%; Oct private construction spending -0.5%, public spending +0.6%







WTI Crude















10-Year Note





Sector Movers Today

·     Auto sector: NSANY CEO says 2023 will ‘not be easy year’ for global auto sector, supply chain issues will persist; TTM reported vehicle sales for November of 75,478 units vs. 62,192 y/y; NIO reported deliveries for November rose 41% y/y to 14,178 vs. 10,059 m/m; LI reported vehicle deliveries for November rose 11% y/y to 15,034 units vs. 13,485; XPEV reported vehicle deliveries for November of 5,811 units, down -63% y/y vs. 15,613; for EV sector, Morgan Stanley said they think FY23 is shaping up to be a disappointing year for EVs. A combination of slowing demand and rising supply can have an adverse impact on returns across the EV value chain; FREY 13.5M share Spot Secondary priced at $11.50

·     Retailers: GIII shares fall after cutting its fiscal-year profit forecast to $2.90-$3.00, below consensus $3.58 with revs slightly above views – announced staggered license expirations for Calvin Klein and Tommy Hilfiger; PVH reports top and bottom line Q3 beat & guides FY revs high end previous range EPS $8.25 vs est. $7.89; COST reported net sales of $19.17B for the retail month of November, which included Black Friday, an increase of 5.7% from $18.13B last year; BKE reported net sales for November of $117.9M vs. $117.3M y/y; LZB reported Q2 EPS and sales above Street expectations, with pricing and surcharges helping sales, and favorable channel mix helping margins, while written same-store sales declined 10%; DBI falls after FY forecast cut, weak Q3; VSCO slips as sees Q4 net sales to decrease in the high-single digit range, compared to expectations of a 6.8% fall; DLTH slides on earnings; LE reported a surprise Q3 loss and revenue that declined, while also cutting guidance for the year

·     FinTech and Consumer Finance: in research, Morgan Stanley downgraded ALLY, COF and SYF to Underweight from Equal Weight and upgrade NAVI to Equal Weight from Underweight saying they are entering 2023 with a cautious view on Consumer Credit as expect higher credit losses, driven by a consumer cash flow squeeze from high inflation, rising unemployment, less excess savings; STNE upgrade from Sell to Neutral at Goldman Sachs and up tgt to $11 PT following better than expected 3Q22 results and downgraded PAGS to Sell from Neutral with lower $9 tgt following weaker than expected 3Q22 results

·     Hardware, Components & Services: Bank America noted for AAPL that Global App Store rev in F1Q23 QTD declined to $4.4bn (-3% y/y through Nov 29th), with total downloads up 3% y/y. For the month of Nov (as of Nov 29th), China App Store rev declined 4% y/y vs. prior year of +2% y/y growth; NTNX shares rallied after Bloomberg reported HPE has held talks with the co in recent months about a potential takeover https://bit.ly/3H5pk3M ; for APH and TEL, UBS said connector price trends have re-accelerated in November, tracking +3.3% vs. October and marking the strongest m/m improvement since February; Cowen said they see the shift towards safe, green, and connected vehicles having a profound impact on semiconductors, sensors, and battery materials and said key beneficiaries for: APTV , and MBLY, VC, CHPT, ENVX; BOX delivered Q3 results highlighted by a record operating margin of 24.0% with in-line revs; PSTG double digit growth and large margin beat as mgmt highlighted it continues to expect storage to outgrow GDP and overall IT spend in CY23



·     FIVE +14%; beat Q3 sales and profit estimates and raises full-year 2022 sales and profit forecasts on strong demand for discounted products

·     NTNX +2%; shares rallied after Bloomberg reported HPE has held talks with the co in recent months about a potential takeover https://bit.ly/3H5pk3M

·     OKTA +22%; shares jump on a solid FY3Q print and FY4Q guide but warned material weakening of conditions – reported better-than-expected F3Q results with revenue +37% y/y vs. Street +32% and FY23 guidance raised +1% to +41% y/y

·     PVH +8%; reports top and bottom line Q3 beat & guides FY revs high end previous range EPS $8.25 vs est. $7.89

·     SPLK +14%; after boosting its 2023 total revenue forecast to between $3.46B-$3.49B from prior $3.35B-$3.4B and beats Q3 revenue and profit estimates



·     ATUS -4%; said it has decided to keep its regional internet and cable business, Suddenlink Communications, after a strategic review

·     BX -8%; agreed to sell its 49.9% stake in two Las Vegas hotels (MGM Grand Las Vegas and the Mandalay Bay) to VICI in a deal that values the properties at $5.5 billion

·     CRM -7%; delivered disappointing results as quarter was fine (revenue/ cRPO in-line), deteriorating macro led to a F4Q cRPO growth guide of just 7% YoY (10% cc), and announced the resignation of Co-CEO and Vice Chairman Bret Taylor

·     DG -8%; cuts FY22 EPS growth view to 7%-8% from 12%-14%, and sees FY22 net sales growth of approximately 11% after Q3 EPS missed views

·     ESTC -10%; tumbles after cutting its revenue forecast for the year

·     FREY -11%; as 13.5M share Spot Secondary priced at $11.50

·     GIII 41%; reported mixed results, beating on top line, but missing on EPS, and lowered FY EPS guidance; announced staggered license expirations for Calvin Klein and Tommy Hilfiger

·     LE -23%; reported a surprise Q3 loss and revenue that declined, as increased transportation costs hurt margins and as inventories jumped, while also cutting guidance for the year

·     OGS -13%; downgraded to Sell from neutral at Guggenheim and cut tgt to $64 after the co released lower than expected 2023 guidance and a disappointing roll forward of its five-year plan after yesterday’s close, cutting LT growth guidance rate

·     SHLS -13%; CEO Jason Whitaker to step down while the company announces 20M share offering of Class A common stock


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.