Mid-Morning Look: January 06, 2023

Mid-Morning Look

Friday, January 06, 2023






DJ Industrials




S&P 500








Russell 2000






U.S. stocks bouncing in another volatile trading day, with major headlines including key payroll data, services data, and a handful of Fed speakers on the agenda, likely to push markets all over the place today. Thus far though, despite all the “whippy” moves in stocks, the S&P remains in the 3,800-3,900 range for roughly a month now. Stock markets jumped after the December jobs report showed wage costs coming down while jobs are staying plentiful. The economy added 223,000 jobs in December, while the unemployment rate fell back to a half-century low of 3.5%. Meanwhile, average hourly earnings rose 0.3% after 0.4% in the prior month which lowered the y/y increase in wages to 4.6% from 4.8% in November. Still a handful of Fed speakers later today might shake things up with Bostic and Cook at 11:15, Barkin at 12:15 PM and Bostic again at 3:30 PM. U.S. Treasury yields slipped 10-bps after data showed wages rose less than expected in December even though the economy created more jobs than anticipated, affirming the belief that the Federal Reserve could be nearing a pause in its rate-hiking cycle. Treasury yields fell further on the ISM data, with the 10-yr yield hitting new lows down 7.5bps to 3.65%. Macro headlines leading the broader market move, with healthcare lagging and more than 2% gains for Materials, Energy, Industrials, and Staples. Strong start out of the date so far.


Economic Data

·     December nonfarm payrolls reported at +223K vs. est. +200K (prior revised to 256K from 263K; Private payrolls rose +220K vs. est. +180K (prior revised to 202K from 221K); Manufacturing payrolls rose +8K vs. est. +10K; Unemployment rate falls to 3.5% vs. est. at 3.7%; Average Hourly earnings rose +0.3% vs. est. +0.4% (and prior revised to +0.4% from +0.6%); Labor force participation 62.3% vs. prior 62.1%

·     U.S. services industry (ISM Non-Manufacturing) activity contracted for the first time in more than 2-1/2 years (May 2020) in December falling to 49.6 last month from 56.5 in November and below est. 55.0. New orders fell to 45.2 from 56.0 in November (lowest since May ’20), prices paid by services industries fell to 67.6 from 70 (Jan ’21 lows) supplier deliveries fell to 48.5 from 53.8 in November; and employment fell to 49.8 from 51.5 in November

·     Factory orders for November fell (-1.8%), more than the expected consensus (-0.8% vs Oct +0.4%; factory orders ex-transportation (-0.8%) vs Oct +0.1% (prev +0.8%); U.S. Nov Durables orders unrevised at (-2.1%); Nov inventories/shipments ratio 1.47 months’ worth vs oct 1.46 months







WTI Crude















10-Year Note





Sector Movers Today

·     Solar: RUN, NOVA, FSLR upgraded to Overweight, SPWR upgrade to Equal Weight; BE downgrade to Equal Weight, and BLDP downgrade to Underweight at Wells Fargo saying they are positive on the clean energy sector for 2023. Says while continued Fed tightening in early 2023 will likely act as a near-term headwind, the fundamental and regulatory backdrop is much improved in 2023 and beyond.

·     Banking sector: Deutsche Bank cautious on the bank group reflecting ongoing macro risks and likely weakening bank fundamentals–including peaking net interest margins/NIMs, a likely slowdown in loan growth, rising credit costs, continued cost pressures, limited excess capital to support buybacks and likely sluggish capital markets revenues. BAC and JPM downgraded from Buy to Hold at Deutsche Bank reflecting a cautious view on banks overall and as BAC/JPM are more exposed to areas that will likely be weak (credit card and capital markets) than regionals. In Large regionals they cut TFC to Hold and upgraded PNC which reflects view that it will remain among the most defensive in the bank group given strong credit underwriting, strong capital allocation decisions and consistently solid cost control

·     Consumer Staples: Mizuho said top picks are KHC (large cap value), MDLZ (large cap growth), SMPL (SMID growth) and are most cautious on HAIN and BYND; Danone (DANOY) downgraded to Underweight from Equal Weight at Morgan Stanley; KRUS posts 1Q23 EPS loss of $0.21 fell below consensus loss of $0.18 reflecting softer comps and restaurant margins partially offset by lower G&A; DPZ named top pick at Bank America in Restaurants while expect 1H23 to be like 2022 for the sector (high inflation and pricing boosting comps/margins), with trends reversing in 2H; TAP upgraded Market Perform to Outperform at Cowen saying after a decade of revenue declines, they view TAP now on much firmer footing to deliver solid revenue growth; STZ downgrade Outperform to Market Perform at Cowen and slash tgt to $200 from $275 on growing concerns over downtrading, in both the above-premium beer segment, as well as wine; HSY downgraded from Outperform to In Line at Evercore saying valuation premium reflects sustainable growth with a lower risk profile but see potentially less EPS upside potential in 2023 driven by increased elasticity and less gross margin potential



·     AUPH +7%; said it expects its Q4 revenue to be $28.4M, up from year-ago sales of $23.4M; net product revenue accounts for most of its Q4 sales at $28.3M

·     CTMX +50%; as announced a research collaboration agreement with MRNA and gave an update on a phase 2 study for its CX-2029 treatment

·     COST +6%; Dec comps better at +6.4% (ex-gas) and traffic improved from +3.4% in Nov to +4.6% in Dec. Foods strong +LDD/+MSD

·     FCX +5%; as materials top S&P sector, broad strength in metals and mining early (STLD, NUE)

·     FSLR +4%; RUN, NOVA, FSLR upgraded to Overweight, SPWR upgrade to Equal Weight; BE downgrade to Equal Weight at Wells Fargo

·     LEN +1%; strength in housing and trades at best levels since last February

·     WWE +18%; after founder Vince McMahon is trying to return as Executive Chairman to lead the firm through its upcoming media rights negotiations and a parallel review of strategic alternatives



·     ATAI -44%; said it may explore steps including strategic partnership options after its Phase 2a trial of PCN-101 (R-ketamine) for treatment-resistant depression missed its primary endpoint

·     BBBY -17%; after the WSJ reported late yesterday the home furnishings retailer began preparing for a bankruptcy filing

·     FATE -60%; said it had terminated its collaboration and option agreement with JNJ’s Janssen, with all collaboration activities set to be wound down in Q1 2023, prompting several analyst downgrades and pushing shares lower – said will reduce operating expenses

·     GBX -14%; slips on EPS miss as Q1 adj EPS $0.05 vs. est. $0.50 while Q1 revs $766.5M topped est. $747.08M; new railcar backlog of 28,300 units with an estimated value of $3.4B as of Nov 30

·     GRPH -40%; announced a voluntary pause of its phase 1/2 CEDAR study evaluating lead program nula-cel given a serious adverse event in the first patient dosed

·     NIO -11%, along with weakness in other Chinese electric vehicle makers LI, XPEV on reports TSLA to cut its prices in China for the second time, stoking expectations of a wider price war

·     NVCR -4%; downgrade from Neutral to Underweight at Piper and cut tgt to $38 from $42

·     SI -9%; more analyst downgrades as Bank America cuts to underperform saying sees 35% more downside and JPM cuts to Neutral with $14 tgt after crypto bank Q4 metrics Thursday

·     TSLA -3%; on reports to cut its prices in China for the second time in less than three months for its best-selling Model Y and Model 3 cars in Japan, South Korea, and Australia


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.