Mid-Morning Look

Monday, January 03, 2022

Stocks were choppy early but moving back near their best levels of the morning to start the New Year, looking to build on big 2021 gains. Gold prices tumble to lows down over 1.4% holding $1,800 an ounce as stocks and Treasury yields jumped. Treasury yields rise to start the New Year, as U.S. Treasury 2-year yields hit highest since March 2020, last at 0.795%, Treasury 10-year yields rise to six-week peak, last at 1.6%, and Treasury 5-year yield touches six-week high, last 1.35%. In economic data, construction spending for November rose +0.4% below consensus +0.6%. Among early market leaders, banking names rise as Treasury yields jump (and expected rising rate environment in 2022 from Fed), as well as a further resurgence in semiconductor stocks (AMD, NBDA, etc.) with the Philly semi-index (SOX) rising over 1% after a 41% jump in 2022. TSLA extends gains in an upbeat EV space following a big beat in monthly delivery orders this weekend (NIO, LI also rise on their respective orders). Also seeing a big recovery in “reopen” stocks, with cruise lines, airlines, casinos among early top S&P advancers.

Sector Movers Today

·     Auto sector; big day for electric vehicles (EVs) as monthly figures raise Bull bets; TSLA surges after saying it achieved production of more than 305,000 vehicles and deliveries of over 308,000 vehicles in Q4 vs. 263,422 consensus; in 2021, the company delivered over 936,000 vehicles vs. 499,550 vehicles in 2020; NIO said it delivered 10,489 vehicles in December 2021, 25,034 vehicles in the fourth quarter of 2021, and 91,429 vehicles in 2021 in total; XPEV delivered 16,000 Smart EVs in December 2021. Total deliveries for the fourth quarter 2021 reached 41,751 units, a 222% increase year-over-year, including 21,342 P7 deliveries; LI delivered 14,087 Li ONEs in December 2021, representing a 130.0% YoY increase; took its fourth quarter deliveries to 35,221, up 40.2% QoQ and 143.5% YoY; total deliveries in 2021 increased 177.4% YoY to 90,491

·     Semiconductors; ASML said there has been a fire at a factory it owns in Berlin, Germany, and that it is too early to assess the impact on its operations; Goldman Sachs said TSM will grow at faster pace this year than in 2021 underpinned by price hikes, the ongoing industry upgrade cycle in HPC/5G, and strong demand for cryptocurrency; Piper upgraded WOLF to Overweight from Neutral and upped tgt to $160 from $125 calling it a clear leader in EV semi space, likes ON in EV market as well, likes QCOM due to its participation in the 5G penetration in Android and its position across areas like automotive and IoT; says AVGO should also benefit from the enterprise recovery and continued strength in cloud/hyperscale and up tgt for PI to $100 as a secular grower given its position as a leader in RFID; IIVI upgraded to Outperform at Raymond James based on view regarding its largest product group delivering stronger than expected results

·     Bank movers; Wedbush added CFG to its Best Ideas List given its better position than most peers to generate positive operating leverage in 2022 with its next phase of growth coming from its three recent acquisitions that are expected to be immediately accretive to earnings, and it replaced FITB on its Best Ideas List which remains OW as a large part of its thesis played out with its P/E valuation going from a discount to a well-deserved premium vs regional bank peers; Barclays upgraded PNC, WFC to OW, RF to EW and downgraded USB to EW, HBAN to UW; Citi (C) is among Bank of America’s top 10 quarterly ideas as a Buy

·     FinTech & Payments; BMO upgraded PYPL to Outperform on valuation with a lowered $224 PT from $278 as they believe tax loss selling is done with investors now focused on more normalized 2023 estimates, and they also recommend NVEI, GPN given significant upside to their price targets and Visa (V), MA as core holdings among payment stocks; NU was initiated with OW/Buy ratings at Morgan Stanley ($16 PT), Goldman ($15), Susquehanna ($14), Wolfe ($13), UBS ($12.5), KeyBank ($12) and at Hold by HSBC; Visa (V) is one of Barron’s 10 favorite stocks for 2022

Stock GAINERS

·     BA +4%; among early leaders in the Dow and S&P as investors look for aerospace rebound

·     NVDA +4%; Semiconductors picking up where they left off in 2021 (SOX rose over 41%) as the Philly semi index gains 2% to 4,025 (all-time highs above at 4,054); NVDA up over 4%

·     TSLA +7%; achieved production of more than 305,000 vehicles and deliveries of over 308,000 vehicles in Q4 vs. 263,422 consensus; in 2021, the company delivered over 936,000 vehicles vs. 499,550 vehicles in 2020

·     VIAC +6%; rises along with gains in DISCA and other media names, extending last week gains after a tumultuous 2021 in media

·     WOLF +6%; Piper upgraded to Overweight from Neutral and upped tgt to $160 from $125 calling it a clear leader in EV semi space

Stock LAGGARDS

·     APLT -26%; after saying the FDA decided to hold the submission of marketing application for drug candidate AT-007 for treatment of Galactosemia, pending additional discussions with the agency

·     CNHI -12%; as spanning truck, bus, powertrain and specialty vehicle businesses, Iveco (IVG.MI) completed its spin-off from CNH Industrial on Jan.1

·     EXC -2%; downgraded at Mizuho to Neutral based on uncertainty regarding the Build Back Better (BBB) legislative proposal (also broad weakness in defensive utilities)

·     GIS -2%; as defensive related food stocks (CAG, MKC, SJM, HRL) among early decliners

·     MRNA -7%; as vaccine makers among top decliners to start the year (PFE, BNTX, NVAX)

·     NTRA -5%; and LH also slip as NYT investigation finds that up to 90% of positive results for prenatal genetic tests are incorrect, depending on the genes. https://nyti.ms/3zlWczh