Mid-Morning Look: December 05, 2022

Mid-Morning Look

Monday, December 05, 2022






DJ Industrials




S&P 500








Russell 2000






Wall Street’s main indexes opened lower on Monday, with the S&P down for the 6th time in last 7-days – but still up over that stretch due to +3.09% gain last Wednesday post Fed Chair Powell comments. Bloomberg noted that the S&P 500 is on course for its biggest Q4 gain since 1999 as signs of a cooling in U.S. inflation have led to a pullback in bond yields. However, investors have expressed a more cautious stance ahead of the FOMC next week and inflation data this week after mixed economic data. Asia was generally higher w/ another big rally in China, as the Hang Seng soared 451-bps on various reopening headlines. Morgan Stanley strategist Michael Wilson is returning to the bear camp, said “we are now sellers again,” as he expects the S&P 500 to resume declines after the index crossed above its 200-day moving average last week, saying the downtrend since the beginning of the year remains intact. The call marks a shift in Wilson’s view as recently as last week, when he said the tactical recovery could continue into December before coming under pressure from weaker corporate earnings next year. The S&P 500 battles again with its key 200-day moving average (roughly 4,050), before slipping back below this morning after the stronger ISM services data. Oil prices gained after OPEC+ nations held their output targets steady and G7 price cap on Russian crude came into force. Treasury yield curve rising, with 10-yr up about 9 bps to 3.60% and 2-yr up 5 bps to 4.33% as strong data backs more Fed rate hikes. Reminder the Fed currently in its “blackout period” until the FOMC meets on December 15th.


Economic Data

·     S&P Global November final composite PMI at 46.4 (vs flash 46.3) and U.S. S&P global November final services PMI at 46.2 (vs flash 46.1)

·     ISM report on U.S. Non-manufacturing sector shows PMI 56.5 in November vs 54.4 in October; business activity index 64.7 in November vs 55.7 in October; prices paid index 70.0 in November vs 70.7 in October; new orders index 56.0 in November vs 56.5 in October; and employment index 51.5 in November vs 49.1 in October

·     Factory Orders for October rose +1% to $556.6B vs. +0.7% consensus and +0.3% prior; factory orders (excluding transportation): +0.8% to $463.8B vs. +0.2% prior; shipments rose +0.7% to $554.8B, up nineteen of the last twenty months and inventories rose +0.5% to $805.3B







WTI Crude















10-Year Note





Sector Movers Today

·     Hardware, Components & Services: AAPL has accelerated plans to shift some of its production outside China, the WSJ reported https://on.wsj.com/3P3u8Zr ; Also for AAPL, 9to5 Mac said Apple’s AR/VR headset may be facing another round of delays, although it’s still expected sometime in 2023; Foxconn said November revenue totaled 551.1 billion new Taiwan dollars ($14.7 billion), down more than 29% versus October and over 11% lower compared to Nov. 2021; NTAP downgraded to Hold at Loop Capital as macro has moved its presence into storage, both on premise and in the Cloud (Hyperscalers)

·     E&P and Majors: oil prices jump as China Covid restriction ease further, raising hopes for increased demand; in research, JPMorgan upgraded MUR to Overweight and CPE to Neutral, while downgraded LPI to Underweight noting E&P stocks outperformed the broader market by a wide margin in 2022, the second consecutive year of significant outperformance relative to the S&P 500 but see a much trickier set up going into 2023

·     Utilities & Solar: DQ downgraded to Neutral from Buy at Goldman Sachs saying due to capacity expansion in the industry, poly prices started to decrease in November 2022, which may weigh on Daqo’s margin and believe the stock is fairly valued; CSIQ signs 256 mw module supply contract for the first two largest solar projects with private PPAs in South Africa as construction started in October 2022, and commercial operation is planned for Q1’24; SEDG tgt raised to $360 from $309 at Cowen saying is well positioned to benefit from secular solar demand driven by policy and higher electricity rates, and shares trade at over a 40% discount to ENPH on 2023 EPS

·     Restaurants: SBUX downgraded to Hold from Buy making a risk/reward and valuation call on the shares, saying “there is not much more to it than that”; DPZ upgraded to Buy from Neutral with $460 tgt at BTIG as believes the company’s margins have bottomed and are set to rebound in 2023 due to higher menu pricing and organic improvements in driver availability; DIN said it is expanding its stable of eatery brands with an agreement to buy fast-casual restaurant chain Fuzzy’s Taco Shop from private-equity firm NRD Capital Management for $80M in cash



·     ALGM +4%; after S&P announced to add to the S&P MidCap 400, effective 12/19

·     CS +5%; attracts Saudi Crown Prince WSJ reports saying could invest $500M https://on.wsj.com/3FtkGLM

·     MGM +2%; upgraded to Buy with $50 tgt (from $40) at Truist saying while the macro presents some uncertainty into 2023 (like 2022), think the event calendar could drive relative outperformance for Strip focused MGM

·     MLCO +2%; casinos extend recent advance, esp. US listed shares of casino operators with presence in Macau after easing of COVID-19 restrictions in China (WYNN, LVS, MGM)

·     MSOS +8%; continued recent strength in cannabis sector

·     UAL +2%; in airlines, Morgan Stanley upgraded UAL to Overweight, DAL new To Pick, and downgraded ALGT to Equal weight



·     HZNP -4%; after JNJ’s Janssen confirmed today that it does not intend to make an offer for Horizon this weekend

·     RXT -9%; after reports of security incident that took out email services for some customers

·     SLG -3%; cuts annual dividend by 12.9% to $3.25 per share, affirms FY22 FFO and guides FY23 FFO $5.30-$5.60, below est. $6.12; weighs on REIT sector

·     TOPS -60%; announced today pricing of a public offering of 6.8M units at a price of $2.00 per unit

·     TSLA -5%; plans to cut Dec Model Y output at its Shanghai plant by more than 20% vs. Nov, two sources told Reuters. Reuters later reported, citing tesla China, that media report of December output cut at its Shanghai plant untrue

·     VERV -16%; received a clinical hold letter from FDA that outlined information required to resolve clinical hold on verve-101

·     VFC -7%; announces CEO transition and revising its FY23 outlook largely to reflect impact of weaker than anticipated consumer demand across its categories – now expects total revenue growth in 2H’23 to be modestly lower than previously outlined


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.