Mid-Morning Look: July 12, 2023

Mid-Morning Look

Wednesday, July 12, 2023

Index

Up/Down

%

Last

 

DJ Industrials

276.77

0.81%

34,538

S&P 500

47.61

1.07%

4,486

Nasdaq

201.21

1.46%

13,961

Russell 2000

19.97

1.04%

1,933

 

 

U.S. stocks posting another broad-based rally as June inflation data continued to move in the right direction after Core CPI rose 0.2% in June, the smallest monthly increase since August 2021 (below est. +0.3%), and core inflation was 4.8% in June (below est. +5%). Headline CPI rose 0.2% in June, bringing the 12-month rate down to 3%, the smallest annual rise March 2021 (below est. +0.3% and +3.1% respectively). Communications, Energy, Financials, Technology, REITs, and Consumer Discretionary sectors are all up over 1% early in the S&P with strong market breadth again. Dow Transports pullback after hitting a fresh 52-week high this morning. Fed futures price 12% for pause and 88% chance for 25bps rate hike in July 26th’s FOMC decision after June CPI data. Price 24% chance for another 25bps hike in Sept 20th’s or Nov 1st’s meeting. Meanwhile, more Fed members weigh in this morning as Richmond Fed’s Barkin said inflation is still too high; demand remains elevated at the same time supply is constrained, process of getting back to balance has been slow; demand seems to be settling down, but still looking to be convinced that will feed through to inflation. Brent oil moved above $80 per barrel for the first time since May and gold bounced as the dollar and Treasury yields tumbled. The S&P 500 (SPX) sets new 52-week highs approaching the 4,500 level, about 15-points away from that level (lifetime high remains at 4,818.62 in January of 2022), Smallcap Russell 2000 now up nearly 4% this week.

 

Economic Data

·     June Consumer Price Index (CPI) headline M/M rose +0.2% vs. est. +0.3% (and prior +0.1%)

·     June CPI Headline Y/Y rises +3.0% vs. est. +3.1% (prior +4.0%).

·     Core CPI for June, ex: Food & Energy M/M rose +0.2% vs. est. +0.3% (prior +0.4%)

·     Core CPI for June Y/Y rose +4.8% vs. est. +5.0% (prior +5.3%)

 

 

Macro

Up/Down

Last

 

WTI Crude

0.84

75.67

Brent

0.68

80.08

Gold

24.50

1,961.50

EUR/USD

0.0096

1.1102

JPY/USD

-1.80

138.57

10-Year Note

-0.101

3.881%

 

 

Sector Movers Today

·     In transports: The Dow Transport Index hit fresh 52-week highs for a second day, moving above 16,000 briefly before pulling back; weakness in airlines (AAL, JBLU, UAL) after airline fares were -8% in CPI data; also note DAL expected to report tomorrow morning. In trucking, RXO downgraded from Peer Perform to Underperform at Wolfe Research noting stock is up 28% YTD, while C23- C24 Consensus EPS estimates have declined 46% and 18% YTD, respectively, as truck brokers broadly face significant pressure on gross profit per load.

·     In Medical Technology: SILK shares tumble after the Centers for Medicare and Medicaid Services (CMS) posted a proposed national coverage determination for percutaneous transluminal angioplasty of the carotid artery concurrent with stenting; prompts downgrade from JPMorgan. ANGO reported mostly in-line Q4 EPS, sales, and margins, but guides 2024 sales in range $328M-$333M, below est. $353M on larger EPS loss. INMD raised Q2 and FY23 rev outlook. IART upgraded to Buy from Hold at Jefferies as views shares as oversold and think 2Q23 updates could provide some clarity on recovery scenarios.

·     In Restaurants: DPZ signs food-delivery deal with UBER whereby the pizza chain will list its menus on the ride-share co’s Eats & Postmaster food delivery apps across 28 of the chain’s markets, including the US, UK & Canada. TD Cowen said they are most constructive on QSR and WING into earnings & most cautious on WEN. BJRI was added to the best ideas list at Wedbush, as continues to view BJRI’s 2023 SSS growth and margin expectations as overly conservative.

 

Stock GAINERS

·     CNK +3%; after B Riley upgraded to Buy from Neutral with $23 tgt just four weeks after firm downgraded.

·     DAKT +33%; after reporting Q4 sales +29.4% y/y to $209.9M vs. $162.2M and said its supply chain and manufacturing capacity are improving.

·     DKNG +5%; upgraded to Buy from Neutral at Bank America (tgt to $35) as accelerating product and revenue momentum are on the cusp of driving an inflection in margins and profitability.

·     DPZ +9%; signs food-delivery deal with UBER whereby the pizza chain will list its menus on the ride-share co’s Eats & Postmaster food delivery apps across 28 of the chain’s markets, including the US, UK & Canada.

·     HLLY +22%; after being upgraded at Bank America to Buy and $6 tgt as sees sales momentum, improved sourcing and to Overweight and $7 tgt at JPMorgan.

·     LPSN +32%; after saying its founder and CEO Robert LoCascio will step down, effective Dec. 31, and will also resign as its board’s chair.

·     RXRX +64%; after saying it received a $50M investment by NVDA, which was executed as a private investment in public equity and said it plans to accelerate development of its AI foundation models for biology and chemistry.

·     SPWR +6%; Raymond James upgraded to Strong Buy with $21 tgt following what they view as the stock’s excessive weakness due to the company’s overweight to the California market.

 

Stock LAGGARDS

·     ACHC -5%; filed an 8-K disclosing that it may need to pay material financial damages relating to a jury decision in New Mexico State District Court.

·     ANGO -1%; reported mostly in-line Q4 EPS, sales, and margins, but guides 2024 sales in range $328M-$333M, below est. $353M on larger EPS loss.

·     CSCO -1%; downgraded from Buy to Neutral at Bank America and reduces its estimates to reflect its concerns over the near-term trends.

·     DAL -1%; weakness in airlines (AAL, JBLU, UAL) after airline fares were -8% in CPI data; also note DAL expected to report tomorrow morning.

·     LCID -9%; said Q2 vehicles delivered 1,404, below est. 1,873 and produced 2,173 vehicles.

·     PIXY -18%; after pricing its $3.1M public offering at $1.50.

·     RDFN -2%; downgraded to underperform at Davidson noting shares are up 260% thus far in CY’23 and up ~47% over the past month, making RDFN the top performing name in DADA’s broader Prop Tech coverage by a wide margin.

·     SILK -21%; after the Centers for Medicare and Medicaid Services (CMS) posted a proposed national coverage determination for percutaneous transluminal angioplasty of the carotid artery concurrent with stenting.

·     UNH -1%; weakness in managed care and Healthcare stocks early.

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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.