Mid-Morning Look

Thursday, March 09, 2023

U.S. stocks getting an early boost following a rise in jobless claims as “bad news is good news” for stock markets hoping the Fed will slow the pace of rate hikes going forward. S&P futures rise back to its 50-day moving averages (roughly 4,014) into the February jobs report tomorrow (before fading), being closely watch by Wall Street (estimates 205K). S&P 500 (SPX) 50-day MA lower at 4,000 (note futures contract rolls on Monday, will be wide discrepancy in price between SPX and /ES at that point). Note chances of a 0.5% hike on March 22 are hovering around 75% according to latest futures outlook, but tomorrow’s nonfarm payrolls and CPI data Tuesday will likely move the odds. Markets lack of fear into key economic data points, or recent jump in shorter-term Treasury yields and dollar. Sectors mixed with financials a stand-out to the downside after SIVB tumbles on capital raise/slashing NIM target, while SCHW slides on stock offering, SI weighs on crypto space/banks after announced last night it will wind down operations and liquidate its crypto-friendly bank (SBNY slides in reaction), while big banks extend downtrend. Outside of nonfarm payrolls tomorrow, Bank of Japan central bank meeting tonight. Last night, China inflation data showed deceleration. Treasury yields pullback this morning, along with the US dollar, but everything can change tomorrow with jobs data. Markets also await official release of White House budget today which is expected to include: a 25% minimum tax on billionaires and would nearly double the capital gains tax rate for investment to 39.6% from 20%, while raising income levies on corporations and wealthy Americans.

Economic Data

·     Weekly jobless claims rose to 211K in latest week vs. est. 195K and 190K last week; the 4-week moving avg rose to 197K from 193K; continued claims rose to 1.718M in latest week from 1.649M prior week (es.t 1.659M) and insured unemployment rate rose to 1.2%.

·     U.S. based employers’ job cuts hit 77,770 in February, highest YTD since 2009; U.S. based employers’ job cuts in February down 24% from January; technology cos cut most jobs in February with 21,387, 28% of all cuts for the month.

Sector Movers Today

·     In retail: BJ Q4 Comps better at 9.8% vs est. 8%, EPS beat, with FY EPS guide of flat, comps to increase 4% to 5% y/y and membership fee income to increase 5% to 6% y/y. BBW said its revenue exceeded estimates in Q4 and declared a special cash dividend. DLTH rises as posts mixed Q4 results, but FY guidance tops views. DTC rises after better Q4 results as revs rise 11.8% y/y to $197.2M vs. est. $156.4M on better earnings, though rev forecast for year misses mid-point ($520M-$540M vs. est. $538M). FOSL Q4 EPS loss (-$0.18) as sales fell -17% y/y to $499.1M; Q4 gross margins 47.2% vs. 50.1% y/y; sees FY23 worldwide net sales to decline about 5% to net sales growth of 1% and expects full year 2023 adjusted operating income margin in range of about 0% to 3%. GCO Q4 results mixed (EPS beat, revs miss), but guidance pressures shares as see FY24 adjusted EPS $5.10-$5.90, below consensus $6.83.

·     In leisure: In ride hailing/food delivery: UBER is exploring whether to spin off its Uber Freight logistics unit in a sale or as a separate publicly traded firm, Bloomberg News reported on Wednesday night. In lodging: HLT was upgraded to Overweight at Barclays and up tgt to $168 from $151 saying it has “underappreciated” net unit growth prospects in a slowing macro backdrop, while firm downgraded Hyatt (H) to EW from OW after strong share price performance. In gaming REITS: KeyBanc upgraded VICI to Overweight, and downgraded GLPI to Sector Weight saying they see potential for an improving internal growth outlook for VICI materializing given a higher inflationary backdrop, as well as potential for a higher level of accretive investment activity—both could put upward pressure on 2023 and 2024 estimates, which should lead to relative outperformance vs. GLPI and Triple Net Lease REIT peers.

·     Internet & Media: US listed Chinese stocks extend losses; BABA falls a 6th straight day; JD slips after results. ETSY double- downgraded to underperform from buy at Jefferies citing the stock’s premium valuation and troubling buyer trends that could put pressure on growth. META tgt raised to $235 from $220 at Oppenheimer on higher advertising estimates as AI investments are beginning to drive improved targeting and SKAN 4.0 reaches critical mass. TTD downgraded to Sell from Hold at Benchmark which reflects untenable ’23 buyside expectations; unhealthy non-CTV growth with recent checks indicating ‘23E US digital ad spend flat-to-down 5%; data/signal loss risk over the next 18 mos. from Apple and Google.

Stock GAINERS

·     ASAN +27%; as EPS and revs beat with Q1 EPS above consensus, revs in-line; guides FY24 EPS above consensus, revs in-line – but shares surged after the CEO announced plans to buy 30M shares, leading shares higher.

·     BJ +4%; Q4 Comps better at 9.8% vs est. 8%, EPS beat, with FY EPS guide of flat, comps to increase 4% to 5% y/y and membership fee income to increase 5% to 6% y/y.

·     DTC +24%; after better Q4 results as revs rise 11.8% y/y to $197.2M vs. est. $156.4M on better earnings, though rev forecast for year misses mid-point ($520M-$540M vs. est. $538M).

·     FIGS +7%; after filing showed CEO Catherine Spear buys 790,000 shares between 3/7-3/8 at $6.30, valued at $4.9M.

·     GE +8%; reaffirmed 2023 guidance while offering a long-term growth outlook for its aviation business for the first time; maintained 2023 guidance for revenue growth in the high single digits.

·     VLO +3%; as refiners (PSX, MPC) leading gains in the energy sector early; group biggest outperformer in the S&P behind technology.

Stock LAGGARDS

·     ARHS -14%; on guidance as sees FY 2023 net revs of $1.24B-$1.3B vs. est. $1.38B and sees 2023 net income of $95M-$110M vs. est. $120.7M.

·     ETSY -3%; downgraded to underperform from buy at Jefferies citing the stock’s premium valuation and troubling buyer trends that could put pressure on growth.

·     MDB -5%; mixed Qtr with the revenues and operating income coming in above Street expectations and guide, but the guide for next quarter and year came in below Street.

·     MEI -8%; cuts FY23 EPS guidance to $2.50-$2.60 from $2.70-$2.90 after missing Q4 top and bottom-line results and cuts FY23 revs to $1.155B-$1.180B from $1.170B-$1.200B.

·     OPRX -7%; after reported mixed 4Q results, with sales modestly shy of expectations, but GMs and EPS topping consensus forecasts; management introduced 2023 guidance that was shy of expectations.

·     PTON -2%; after the ITC banned imports of video-streaming fitness devices made by Peloton Interactive Inc and iFit Inc after a judge found they infringed DISH patents.

·     SBNY -5%; declines in sympathy with Silvergate (SI) wind down of operations, investors fearful of other crypto banks; SIVB has its SigNet network.

·     SI -38%; announced last night it will wind down operations and liquidate its crypto-friendly bank in an orderly manner as plan includes full repayment of all deposits.

·     SIVB -36%; files to sell $1.25B of common stock, $500M of depositary shares; said It expects NIM will fall to between 1.45-1.55% this year, below its forecast for 1.75-1.85%; also liquidated most of its securities portfolio, raising $21 billion, which it plans to re-invest in shorter-term debt (big declines in regional banks FRC, ZION, NTRS, KEY).