Mid-Morning Look

Tuesday, March 21, 2023

U.S. stocks climb as bank confidence improved following reports last night that the U.S. Treasury Department is looking into whether the federal regulators can insure banking deposits beyond the current $250K FDIC cap. Markets again showing no concern into tomorrow’s FOMC rate decision (2-day meeting starts today – results tomorrow at 2:00 PM ET), where Fed options on the table appear either a 25-bps hike (currently seen as most likely outcome) or a pause on rates due to the recent liquidity needed in the banking system following two large failures and contagion fears that have roiled regional banks. Defensive sectors such as utilities, REITs, or precious metals among the biggest drags in the S&P 500 early. Financials and Energy the biggest gainers in the S&P (boosting the Russell 2000 as well), while the Dow gets a boost from AXP, GS, JPM. The volatility in Treasury yields (the 2-yr) has been more volatile than it was after the Lehman bankruptcy, Bespoke Investment noted. Today the 2-yr jumped another 25-bps to 4.175% (off recent highs of 5.09% and off recent lows below 3.78%). The Nasdaq jumps to its highest levels since February 8^th as investors load up on high growth sectors given recent Fed moves to provide liquidity to markets. Lone piece of economic data showed median existing-home prices in February fell from year-ago levels for the first time since 2012, but sales picked up overall.

Economic Data

·     Existing Home Sales for February rose 14.5% to 4.58 mln unit rate, easily topping consensus of 4.20 mln and above Jan 4.00 mln; the national median home price for existing homes $363,000, -0.2% y/y and inventory of homes for sale 980,000 units, 2.6 months’ worth.

Sector Movers Today

·     Banks among early S&P leaders after reports the U.S. Treasury Department is looking into whether the federal regulators can insure banking deposits beyond the current $250K FDIC cap. FRC more volatility after reports late Monday showed JPM CEO Dimon in talks with CEO’s of other big banks about fresh efforts to stabilize FRC as talks have focused on how the industry could arrange for an investment that would boost the bank’s capital; A sale or outside capital injection are also among the options. NYCB was upgraded to Buy by DA Davidson saying the acquisition of certain assets and liabilities of Signature Bridge Bank would accelerate its transformation to a more commercial bank. Regional banks among the top gainers in the S&P early.

·     Internet: META upgraded to Overweight from Equal Weight at Morgan Stanley and tgt raised to $250 from $190 citing structural pivot focusing on efficiency and ROIC, improving revenue and engagements trends, surging Reels monetization and 3 further revenue call options. GOOGL suspended PDD’s main Chinese shopping app Pinduoduo after discovering malware in unsanctioned versions of the software. WIX upgraded to overweight from neutral at Piper saying it is now favoring growth software stocks over value ones, while downgraded GDDY to neutral from overweight.

Stock GAINERS

·     BB +3%; said it agreed to sell about 32,000 non-core patents and patent applications to Malikie Innovations Ltd., a newly formed subsidiary of Key Patent Innovations Ltd., for up to $900 million.

·     CSIQ +12%; Q4 EPS $1.11 vs. est. $0.76 and revs rose 29% y/y to $1.97B vs. est. $1.93B; reports 68% increase in solar module shipments year-over-year to 6.4 GW; sees Q1 revenue $1.6B-$1.8B vs. est. $1.95B; sees year revs $8.5B-$9.5B vs. est. $9.88B.

·     HOG +4%; upgraded to Overweight from Equal Weight at Morgan Stanley on confidence in the Hardwire strategy, ‘containment’ of electrification risks and attractive valuation.

·     META +2%; upgraded to Overweight from Equal Weight at Morgan Stanley and tgt raised to $250 from $190 citing structural pivot focusing on efficiency and ROIC, improving revenue and engagements trends, surging Reels monetization.

·     NYCB +6%; upgraded to Buy at Davidson saying the acquisition of certain assets and liabilities of Signature Bridge Bank would accelerate its transformation to a more commercial bank.

·     ONON +23%; reported extremely strong 4Q22 results, with revenues growing 92% (well above guidance of low-40’s growth) and adjusted EBITDA of $62M vs. guidance $44.5M) as grew across channels and geographies.

·     USX +298%; as KNX agrees to acquire USX for $6.15 per share in deal valued at approximately $808M in trucking sector.

Stock LAGGARDS

·     AG -23%; said it is taking action to reduce overall costs by reducing investments, suspending all mining activities temporarily, and reducing its workforce at Jerritt Canyon.

·     ALT -50%; after saying that its obesity drug helped reduce weight by 10.7% on average in a mid-stage trial but concerns over the safety of the drug pressured shares.

·     CTRN -12%; as reports a fall in Q4 revenue as consumers cut discretionary spending, while margins were weaker as well and guides full-year total sales in the range of negative low single-digits to positive low single-digits as compared to fiscal 2022.

·     KRTX -9%; files $400M offering of common stock.

·     NEM -3%; as the gold miner among top decliners in the S&P given broader stocks surging and rotation back out of haven assets with gold prices sliding.