Mid-Morning Look: February 06, 2023

Mid-Morning Look

Monday, February 06, 2023






DJ Industrials




S&P 500








Russell 2000






U.S. stocks open lower, sliding overnight as investors weigh the prospect of further rate hikes by the Fed in response to Friday’s blowout jobs number while rising geopolitical tensions have also played their part after the US shot down a suspected Chinese spy balloon on Saturday. Investors have several reasons to see a short term pullback after the jobs data kinda changed the narrative (for now), about the Fed pausing after another expected 25-bps Mach interest rate hike (and mkt also baking in rate cuts at end of 2023), as the economy stays strong. In addition, while quarterly earnings haven’t been “as bad as feared” as several guests on CNBC have noted, results have been less than stellar, with earnings results and/or guidance form AAPL, AMZN, GOOGL missing late last week. The yield on the 10-year U.S. Treasury note extended gains to more than a month’s high above 3.6%. and the dollar climbs further. Halfway through the earnings of the S&P 500 companies, 69.6% had reported results above expectations as of Friday, according to Refinitiv. US dollar at 3-week high vs euro; euro last down 0.41% to $1.0752. Stocks exhibiting weakness early after brief bounce on open, trading at morning lows.







WTI Crude















10-Year Note





Sector Movers Today

·     MedTech: EW downgraded from Outperform to Market Perform at Raymond James saying they are less confident in the sustainable growth profile. EW’s revenue growth (10% 5-year, 13% 10-year avg.) has separated it from most of its peers and has long supported a premium valuation. IDXX reported 4Q results, with revenue of $828.6M topping ests $820.9M and EPS of $2.05 beats the $1.92 est. with lighter gross margins offset by operating costs; FY2023 guidance bracketed consensus on revs and EPS ($9.27 to $9.75 vs. $9.59 estimate). STAA downgraded from Buy to Neutral at BTIG saying the company is “wed to China and investors are subsequently wed to the undulations of the Chinese economy.”

·     Consumer Staples: In food: TSN missed consensus estimates for quarterly revenue $13.26B vs. est. $13.5B but above $12.93B y/y), hurt by slowing demand for its premium beef and pork cuts; guides FY chicken margin 2-4% (was supposed to do 7%) – shares of PPC move in reaction. In household products: CHD upgraded from Underweight to Neutral at Atlantic Securities saying the company has come through a challenging period, seeing sales decline at key brands and gross margins contract for three consecutive years…but these headwinds will begin to abate in H122. Food & Staples Retail at Wells Fargo – said a volatile start has caused them to adjust as top 5, now PFGC, DG, OLLI, CASY and USFD, our bottom 5 are SFM, KR, UNCI, COST and TGT. In beverages: CELH upgraded to Outperform at Wedbush and raised tgt to $115.

·     Natural gas outlook: Raymond James downgraded BSM to Outperform from Strong Buy and downgraded to AR, CTRA, NFG, SWN to Market Perform coinciding with their decidedly bearish natural gas outlook saying they believe the shift in natural gas prices is justified and that Henry Hub will remain depressed through 2024.



·     AI +11%; In follow through strength from last week, any names related the Artificial Intelligence sector “AI” is seeing massive buy interest with shares of AI, BBAI, SOUN among volatile movers.

·     CTLT +25%; shares jump after Bloomberg reported DHR has expressed takeover interest in the contract manufacturer and overtures made in recent months valued Catalent at “a significant premium,” people familiar with the matter told Bloomberg https://bit.ly/3DHwbOh

·     LSI +10%; as PSA made an $11 billion unsolicited offer for its smaller rival LSI valued at $129 per share, ramping up an effort to buy its smaller rival after an earlier bid was rejected; holders of Life Storage would receive 0.4192 shares of PSA common stock https://on.mktw.net/3X50gOL

·     OMER +25%; rises after receiving a $200M milestone payment from Rayner Surgical Inc. under an asset purchase agreement in which it sold its ophthalmology product Omidria to Rayner.

·     ON +2%%; beat Q4 estimates but guided lower for the current period. Q4 EPS $1.32/$2.1B tops consensus $1.27/$2.08B, announces $3B share repurchase authorization but guides Q1 EPS $1.02-$1.14 below consensus $1.14 and revs $1.87B-$1.97B vs. est. $1.99B.

·     SPOT +2%; upgraded from Neutral to Overweight at Atlantic with $160 tgt based on 1.5x forward 12m revenue, well below historical levels, and supported by DCF work. Wells Fargo also upgraded shares to Overweight ($180 tgt)



·     DDOG -2%; Keybanc downgraded DDOG to Sector Weight, while maintain Overweight ratings within growth on key ideas including GTLB and update price targets for MDB and WDAY saying they expect a meaningful slowdown of software spending growth in 2023.

·     DRRX -10%; announces $10 million registered direct offering of common stock and warrants.

·     ENR -7%; Q1 top and bottom-line miss estimates with EPS $0.72 and revs $785.1M below consensus of $0.75 and $789.4M and EBITDA $145.6M vs consensus $149.7M;/reaffirms FY23.

·     NEM -4%; after reports NEM made a roughly $17 billion offer to acquire global gold miner Australia’s Newcrest Mining, https://on.wsj.com/3YtevOi

·     PLCE -12%; lowers Q4 adjusted EPS view to ($4.02)-($4.41) from $0.50-$0.75 and lowers its Q4 revenue view to $454M-$456M from $460M-$470M saying they now expect to report a net loss in the range of ($52M)-($57M) for the Q4. (shares of CRI fall in reaction).

·     PYPL 3%; downgraded to Market Perform from Outperform at Raymond James following the strong start to the year, coupled with their cautious stance on the 4Q print.

·     RH -7%; released an 8-K late Friday that included an update on FY22 expectations, with revenue trending to the lower end of guidance but margins trending to the higher end of guidance.

·     TSN -6%; missed consensus estimates for quarterly revenue $13.26B vs. est. $13.5B but above $12.93B y/y), hurt by slowing demand for its premium beef and pork cuts; guides FY chicken margin 2-4% (was supposed to do 7%) – shares of PPC move in reaction.


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.