Early Look

Wednesday, January 11, 2023

U.S. futures extend their push higher, rising into tomorrow’s CPI inflation reading and pushing closer to its 200-day moving average around the 4,000 level. So far in 2023, there has been lots of one-way direction trades which are the reverse of 2022 such as a lower dollar (after rising 10% last year), gold outperforms, energy the worst performing sector (vs. being the best in 2022) and leaders being communications (+6.7% vs. -30%+ in 2022) and discretionary (+4.1% vs. -30%+ in 2022) while overall stocks open the year higher. Markets appear to be “basing” into tomorrow’s CPI, where the consensus estimate is +6.5% (overall US CPI YoY in December), down from 7.1% in November and the 40-year high of 9.1% last June. The M/M Dec CPI figures are expected to be flat (core prices y/y est. +5.7% and m/m to rise +0.3%). DoubleLine Capital chief executive Jeffrey Gundlach said on CNBC last night that right now there’s a gap between where the bond market says interest rates are heading, and where Federal Reserve officials say they’re going — and the so-called bond king says investors should put their faith in markets. Fed officials over the last month have been hawkish following a year that saw 400-bps in interest rate hikes, but investors are anticipating a slowing of rates, a pause, and then a potential pivot by the end of 2023 – despite several Fed members saying a pivot is unlikely – we will see. The job market has remained strong (an area the Fed is closely watching), this despite mass layoffs especially in the technology sector since October: Twitter has laid off 75% of employees, Amazon 17,000 employees, Meta 13% of its workforce, Coinbase 20% of employees, Intel about 20% of employees, and doesn’t include hiring freeze at Apple. In Asian markets, The Nikkei Index rose 270 points to 26,446, the Shanghai Index fell -7 points to 3,161, and the Hang Seng Index gained 104 points to 21,436. In Europe, the German DAX is up 150 points to 14,922, while the FTSE 100 gains 40 points to 7,738.

Market Closing Prices Yesterday

·     The S&P 500 Index gained 27.32 points, or 0.70%, to 3,919.41

·     The Dow Jones Industrial Average rose 187.90 points, or 0.56%, to 33,705.55

·     The Nasdaq Composite jumped 106.98 points, or 1.01%, to 10,742.63

·     The Russell 2000 Index advanced 26.74 points, or 1.49% to 1,822.65

Economic Calendar for Today

·     7:00 AM ET           MBA Mortgage Applications Data

·     10:30 AM ET         Weekly DOE Inventory Data

·     1:00 PM ET            US Treasury to sell $32B in 10-year notes

Earnings Calendar:

·     Earnings Before the Open: none

·     Earnings After the Close: KBH

Other Key Events:

·     JPMorgan 41^st annual Healthcare Conference, 1/8-1/12, in San Francisco, CA

·     ICR 2023 Retail Conference, 1/9-1/12, in Orlando, FL

·     Goldman Sachs European Utilities Investor Relations Day 2023 (virtual)

·     Goldman Sachs 2023 Macro Themes: Currencies & EM (virtual), 1-10/1-12

·     Needham 25^th Annual Growth Conference (virtual), 1/10-1/12

Sector News Breakdown

Consumer

·     Franchise Group (FRG) is considering going private in a management buyout and a group led by CEO Brian Kahn could pay a price of between $30-$35 a share for the owner of retailers including Vitamin Shoppe – WSJ reported https://on.wsj.com/3iud6YB

·     Lightning E-Motors Inc (ZEV) said it sees Q4 revenue lower than expected range due to battery supply issues, demand shifting to 2023 2023, and fast-rising interest rates; expect to get our revenue growth trajectory back on track in 2023; cuts Q4 revs to about $4M vs. est. $15M

·     Masco (MAS) downgraded to Sell from Hold at Deutsche Bank

·     Pool Corp. (POOL) upgraded to Buy from Hold at Deutsche Bank

·     Victoria’s Secret & Co. (VSCO) announces new share repurchase authorization and provides fourth quarter 2022 sales and earnings update; announces new $250 mln share repurchase authorization; expects Q4 net sales, operating income, and diluted EPS within range of previously communicated guidance

Energy, Industrials and Energy

·     In airlines (AAL, JBLU, LUV, DAL, UAL), the U.S. Federal Aviation Administration’s (FAA) system that alerts pilots and other flight personnel about hazards or any changes to airport facility services and relevant procedures was not processing updated information, the civil aviation regulator’s website showed on Wednesday. Flight as of now are all grounded.

·     Air Lease (AL) said as of December 31, 2022, ALC’s fleet was comprised of 417 owned aircraft and 85 managed aircraft, with 398 new aircraft on order from Boeing and Airbus set to deliver through 2028.

Financials

·     Coinbase (COIN) downgraded to Underperform at Bank America

·     Wells Fargo (WFC) said the bank is exiting the Correspondent business and plans to reduce the size of its Servicing portfolio to sharpen its focus towards its mortgage business.

·     Cohen & Steers, Inc. (CNS) preliminary assets under management of $80.4 billion as of December 31, 2022, a decrease of $3.8 billion from assets under management at November 30, 2022.

·     Saratoga Investment (SAR) Q3 adj EPS $0.77 vs. est. $0.62; Q3 NAV per share $28.25; qtrly assets under management was $982.0M, an increase of 48.4% from $661.8M as of Nov ‘21

Healthcare

·     Glaukos (GKOS) announced positive results for a prospective, multi-center clinical trial designed to evaluate the safety of the surgical exchange procedure for iDose(R) TR in subjects who had previously been administered an iDose TR in the Phase 2b clinical trial.

·     Inotiv (NOTV) 4Q revs $150.5Mm vs est. $153Mm; sees FY23 revs at least $580Mm vs est. $584.7Mm

·     Tandem Diabetes (TNDM) sees FY22 revenue at ‘approximately’ $805M compared to prior view of $800M-$805M and vs. est. $802.5M

·     Blend (BLND) announced series of specific initiatives that support its previously communicated plan to accelerate its path to profitability; will cut 28% of onshore employee base

Technology, Media & Telecom

·     Axcelis Technologies (ACLS) sees 4Q EPS above $1.45 vs est. $1.05 and FY EPS above $5.00 vs est. $4.80; sees 4Q revs above $250Mm vs est. $234.5 and prior guide $232-240Mm

·     Ichor Holdings (ICHR) guides Q4 revenue $300M-$302M, below consensus $335M; sees 1Q23 revs $210-240Mm vs est. $296.8Mm

·     Impinj Inc (PI) said it expects Q4 revs to exceed $76M, topping prior guidance of $71.5M-$73.5M

·     STMicroelectronics (STM) downgraded to Sell from Neutral at Goldman Sachs

·     WWE Corp.’s (WWE) Stephanie McMahon has resigned as co-CEO and chairman of the board, the company announced Wednesday. Vince McMahon returns as executive chairman of its board. Nick Khan will continue as CEO, company says