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News competition bill gets a lifeline
The daily average of new COVID-19 cases was 53,019 on Monday, about 28% higher than it was two weeks ago, according to a New York Times tracker. About 35,000 people in the U.S. are currently hospitalized with COVID infections, and 261 people died on Monday
STOXX Europe 600: -0.4%
Germany's DAX: -0.3%
U.K.'s FTSE 100: -0.5%
France's CAC 40: -0.2%
Italy's FTSE MIB: -0.4%
Spain's IBEX 35: -0.3%
Robinhood Markets CEO Vlad Tenev CNBC interview (9.67)
Mr. Tenev said:
Retirement account will be geared towards needs of people that have multiple sources of income or work in gig economy.
Cryptocurrencies are here to stay.
There are pros and cons to being a public company.
He is just watching the FTX situation unfold, he doesn't have more information than the media.
Upgrades
Wells Fargo upgraded PennyMac Financial (PFSI) to Overweight from Equal Weight with a price target of $75, up from $54, as the firm believes the backdrop for the mortgage industry has turned more favorable. Inflation is an important factor for interest rates, and mortgage rates have already improved -104bps from the peak after the softer CPI data. Kaye expects further improvement as inflation pressures abate. While the winter months will be challenging especially from a seasonality perspective, the firm thinks the worst is behind the industry. The risk is that the firm is early and that the interest rate drop reverses or remains stubbornly high, the firm adds.
JP Morgan upgraded Barclays (BCS) to Overweight from Neutral. The firm reshuffled preferences on U.K. bank stocks heading into 2023, saying risks look evenly balanced for the sector, with concerns about net interest margins peaking in the second half of the year, offset by defensive attractions for larger U.K. banks. The firm notes Barclays has the most favorable risk/reward among U.K. domestic lenders and is now the top pick.
Morgan Stanley upgraded JP Morgan (JPM) to Overweight from Underweight with a price target of $153, up from $126. The firm notes the bank's operating leverage is inflecting positively in 2023, driven by revenues up 10% year-over-year and expenses up 9%. The firm thinks the risks around JPMorgan's operating leverage skew to the upside and says progress is being made on capital.
Downgrades
Deutsche Bank downgraded General Mills (GIS) to Hold from Buy with an unchanged price target of $88. The firm cites valuation for the downgrade. While the firm continues to believe General Mills operates from a position of relative advantage, the firm also sees current market expectations well-aligned with this view.
Morgan Stanley downgraded BNY Mellon (BK) to Underweight from Equal Weight with a $42 price target. The firm sees risk of continued deposit outflows.
Stifel downgraded Edwards Lifesciences (EW) to Hold from Buy with a price target of $75, down from $95. The firm notes the stock is down 43% year-to-date and already reflects some slower-than-expected U.S. TAVR growth and a slower TAVR market. The firm's downgrade follows conversations with ten implanting physicians asserting that until a new TAVR indication is approved, growth will be limited due to patient population aging. The firm further warns that TAVR growth rates may be-base lower for longer than consensus is estimating.
Others
Bernstein initiated coverage of Kroger (KR) with an Outperform rating and $58 price target. The firm is cautiously bullish on the U.S. hardlines / broadlines retail sector. Long-term fundamentals remain sound, and both the grocery and home improvement subsectors are surprisingly well-insulated from e-commerce encroachment. The firm believes COVID impacts have actually enhanced the long-term outlook for the group. Recent share pullbacks, and the general macro uncertainty, have created some potentially compelling entry points. With turbulence comes opportunity, writes the firm.
Citi initiated coverage of Xponential Fitness (XPOF) with a Buy rating and $29 price target. The firm notes the company has carved out a defensible and profitable position as the industry leader in the boutique fitness space. The firm says Xponential's asset-light franchise model allows for quick scaling of the business, with recurring revenues buffering the downside in the event of a recession.
UBS initiated coverage of United Therapeutics (UTHR) with a Buy rating and $320 price target. The firm sees the company's Tyvaso as a foundational therapy for Pulmonary Arterial Hypertension, and the firm believes that Tyvaso's transition into newly launched dry powder inhaler format and expansion into PH-Interstitial Lung Disease fuels growth. The firm adds that United Therapeutics' Remodulin also has the potential to relatively stabilize going forward, helped by newly relaunched Remunity pump and competitor supply constraints.
Cowen initiated coverage of Iqvia (IQV) with an Outperform rating and $251 price target. The firm sees multiple drivers of multiple expansion and share price outperformance for Iqvia, including an expanding total addressable market, better appreciation of its TAS segment, increased capital deployment, and a more defensive/resilient performance in more recessionary environments. The firm believes concerns for weaker biotech funding and macro headwinds are overdone.
Elon Musk Hires iPhone Hacker, Tesla Rival To Fix Twitter's Search
insideevs.com
JPMorgan Chase CEO Jamie Dimon CNBC interview: ?A mild to more pronounced recession is likely ahead; Cryptocurrency is a complete side show and the financial media spends way too much time talking about it (131.37)
Mr. Dimon said:
US economy is strong and consumer is spending 10% more than last year.
A mild to more pronounced recession is likely ahead.
Inflation is eroding consumer savings and spending power, which could derail the economy.
Cryptocurrency is a complete side show and the financial media spends way too much time talking about it. Cryptocurrency tokens are like "pet rocks."
Cryptocurrency is used for illegal activities and he questioned why this is allowed to continue.
He thinks Fed will raise rates to 5% and keep them there for 3-6 months.
He is not worried about what strong dollar does to multinationals.
This is not the same inflation situation as the 1970s.
The company is supporting the big oil companies.
There will be a high percentage of energy coming from oil and gas for decades.
S&P 500 futures are 0.2% below fair value; the Nasdaq 100 futures are in-line with fair value; and the DJIA futures are 0.2% below fair value
Key factors driving the futures market:
Sense of reserve after yesterday's weak showing
Technical support efforts with the S&P 500 trading just below 4,000
Reserve Bank of Australia raises policy rate by 25 basis points to 3.10%, as expected, and points to likely need for more tightening
Cash-out requests increasing at real-estate funds, according to The Wall Street Journal
Senate runoff election in Georgia being held today
JPMorgan Chase (JPM) CEO Jamie Dimon in CNBC interview says he thinks mild to more pronounced recession likely ahead; says crypto tokens like "pet rocks"
PepsiCo (PEP) planning to layoff hundreds of workers at its North American snacks and beverage division headquarters, according to The Wall Street Journal
Brokerage research calls of note:
Upgrades: BCS, EL, GE, JPM, PKI, ATVI, PFSI
Downgrades: BK, SAM, EW, EQH, FLO, KMB, KYMR, LYG, NGD, CAG, GIS, RCL
WTI crude futures -1.2% to $75.99/bbl; nat gas futures -1.5% to $5.50/mmbtu; copper futures +0.4% to $3.81/lb.
2-yr note yield unchanged at 4.38% and 10-yr note yield -3 bps to 3.57%
The U.S. Dollar Index -0.3% to 105.02
Today's economic data: October Trade Balance at 8:30 a.m. ET
Lyft price target lowered to $15 from $25 at BTIG
BTIG analyst Jake Fuller lowered the firm's price target on Lyft to $15 from $25 but keeps a Buy rating on the shares. The analyst notes that while the company's October was "strong", he is also seeing below-seasonal trend in November and a moderation in sales growth quarter-to-date. Fuller is also updating his model to better reflect rising insurance costs and the impact of recent cost cuts, with the net result being a reduction in EBITDA from $707M to $608M. Longer term, the analyst remains positive on the stock, stating that Lyft should emerge from the pandemic on stronger footing with a clear path to profitability that may not yet be fully reflected in consensus profit expectations.
Cashing in on chips
Taiwan Semiconductor Manufacturing (NYSE:TSM) is set to make history with one of the largest foreign investments in the United States. The company will announce plans today to build its second chip plant in Arizona, increasing its investment in the state to $40B. The event will be attended by President Biden, as well as CEOs who will benefit from the increase in American chip production, like Apple's (NASDAQ:AAPL) CEO Tim Cook, Micron's (NASDAQ:MU) Sanjay Mehrotra and Nvidia's (NASDAQ:NVDA) Jensen Huang.
Cutting edge: TSMC previously disclosed a $12B investment plan to build its first factory in Arizona that was slated to manufacture 5-nanometer chips (and later changed to 4-nanometers) with mass production expected in 2024. Construction on the second site that will make 3-nanometer chips (the tiniest "die shrink" available today) will start in the coming year, with production set to begin in 2026. Once the plants come online, they are expected to deliver enough chips to meet U.S. annual demand of 600K wafers per year, according to Ronnie Chatterji, White House Coordinator for CHIPS Implementation at the National Economic Council.
"It's the foundation of our personal electronics, and also the future of quantum computing and AI," Chatterji declared. "That's the definition of supply chain resilience. We won't have to rely on anyone else to make the chips we need." Warren Buffett recently took a major position in TSMC in a bet that the world cannot do without silicon.
Go deeper: The passage of the CHIPS and Science Act in early August helped provide certainty to companies like TSMC to expand their footprint in the U.S. The bill included $52B in loans, grants and other incentives, as well as billions in tax credits to support domestic semiconductor production. Washington has been worried about reliance on microchips made in Taiwan for years, but the dependence became more apparent during the pandemic, when supply chain issues affected everything from cars and electronics to healthcare equipment and advanced weapons systems. (4 comments)
View from the top
Things aren't looking so bright for the U.S. economy as American CEOs laid out their outlook in the latest index from the Business Roundtable. The CEO Economic Outlook Survey, which measures conditions over the next six months, declined 11 points from last quarter to 73, continuing a downward trend that has taken shape over the past year. The index even dipped below its long-run average of 84 since Q3 of 2020, though it remains above the expansion or contraction threshold of 50.
What it means: CEOs see slower hiring, softer sales and decreased capital investment in the near-term, but the economy isn't facing a critical crisis or full-scale recession. 2023 will likely see a growth slowdown as the Fed pumps the brakes to rein in inflation, though it won't be accompanied by widespread unemployment or systematic consequences.
"To strengthen the economy, Business Roundtable urges Congress and the Administration to undertake pro-growth policies, including restoring full and immediate expensing of American R&D investments this session and reforming the permitting system to expedite energy infrastructure projects," said Business Roundtable CEO Joshua Bolten. "We urge U.S. policymakers to position America for the strongest economic recovery possible," added GM (GM) CEO Mary Barra, who chairs the Business Roundtable. "Sound policy action in the short term will yield long-term economic benefits and lay a solid foundation for our growth and competitiveness."
Other stats: 49% of the 142 Business Roundtable CEOs identified labor costs as their top cost pressure, followed by 15% who flagged material costs and 14% who mentioned supply chain disruptions. Other leading pressures were associated with energy and regulatory costs.
New lows
Another shakeup at Salesforce (CRM) is continuing to shake up the stock. Stewart Butterfield, the head of Slack, will leave the messaging and communications company that Salesforce acquired for $27B in August 2021. His departure follows another high-profile exit last week, which saw Salesforce co-CEO Bret Taylor - who is credited as the architect of the Slack deal - leave the company to return to his "entrepreneurial roots."
Fine print: Butterfield said in a statement that his exodus had "nothing to do with Bret [Taylor's] departure," and that his leaving the cloud business software company had "been in the works for several months!" "As hackneyed as it might sound, I really am going to spend more time with my family (as well as work on some personal projects, focus on health and generally put time into those things which [are] harder to do when one is leading a large organization)."
Don't forget that Gavin Patterson, Salesforce president and strategy chief, recently said he would leave the firm in January, while Mark Nelson, president and CEO of Salesforce’s Tableau product, tweeted last Thursday that it was his last day on the job.
Outlook: Executives jumping ship isn't the only thing worrying investors. Salesforce last week reported Q3 revenue growth of 14%, marking its slowest expansion since its IPO in 2004 (and declined to provide guidance for the next fiscal year). The stock tanked on the news, which came along with Taylor's resignation, while shares yesterday slumped another 7.3% to $134 to mark their lowest level since the pandemic selloff in March 2020. (22 comments)
New(s) threat
A bill known as the Journalism Competition and Preservation Act is gaining traction in Congress that could enable "final offer" arbitration, sometimes called "baseball arbitration," for the remuneration of online content. Smaller publishers argue that it would level the playing field by allowing news organizations to band together for a larger share of the advertising revenue pie, though Big Tech feels quite the opposite. In fact, Facebook-owner Meta (NASDAQ:META) has even threatened to remove news content from its U.S. platform, in a case that resembles warnings seen Down Under after similar legislation passed in Australia last year.
Quote: "If Congress passes an ill-considered journalism bill as part of national security legislation, we will be forced to consider removing news from our platform altogether rather than submit to government-mandated negotiations that unfairly disregard any value we provide to news outlets through increased traffic and subscriptions," tweeted Meta spokesperson Andy Stone.
"The Journalism Competition and Preservation Act fails to recognize the key fact: publishers and broadcasters put their content on our platform themselves because it benefits their bottom line - not the other way around. No company should be forced to pay for content users don't want to see and that's not creating a meaningful source of revenue. Put simply: the government creating a cartel-like entity which requires one private company to subsidize other private entities is a terrible precedent for all American businesses."
How did things end in Australia? Facebook went through with a threat by banning news from its website in March 2021, but reversed the decision several days later by brokering a deal with the government. Among the amendments was a clause stipulating that digital platforms and news groups would be required to mediate for two months before subjecting them to mandatory arbitration. The government would also take into account existing commercial agreements and give digital platforms a month's notice before reaching any final decision on the law's application. (7 comments)
Poll Results
Thanks to everyone who participated in Wall Street Breakfast's 'Survey Monday.' The poll garnered close to 700 responses and showed a sizable bullish outlook for oil. 73.4% of the replies see the next stop for U.S. West Texas Intermediate at $90, compared to 26.6% who think the crude oil benchmark will first hit $70.
Today's Markets
In Asia, Japan +0.2%. Hong Kong -0.4%. China flat. India -0.3%.
In Europe, at midday, London -0.3%. Paris -0.2%. Frankfurt -0.2%.
Futures at 6:30, Dow -0.1%. S&P flat. Nasdaq +0.1%. Crude -1.1% to $76.03. Gold +0.4% to $1788.40. Bitcoin -2% to $16,955.
Ten-year Treasury Yield -3 bps to 3.57%
Today's Economic Calendar
8:30 Goods and Services Trade
Companies reporting earnings today »
What else is happening...
ISM Services Index unexpectedly turns higher in November.
Exxon (XOM) lifts base pay for CEO Woods, other top executives.
California's Newsom proposes legislation to hit oil company profits.
SCOTUS declines Centripetal's appeal in Cisco (CSCO) patent case.
Block (SQ) tumbles 7% as rising yields and costs hit fintechs.
Antisemitism controversy: Nike (NKE) cuts ties with Kyrie Irving.
Layoffs spreading? PepsiCo (PEP) plans to cut hundreds of jobs - WSJ.
Herbalife (HLF) tumbles 10% AH on proposed $250M private offering.
Natural gas sinks on forecasts for milder weather across the U.S.
Gapping down
In reaction to earnings/guidance:
CONN -1%
Other news:
MRTX -17% (Presents Late-Breaking Results Evaluating Concurrent Adagrasib and Pembrolizumab)
SI -12% (issues FTX-related letter)
HLF -10.8% (proposed $250 mln offering of convertible notes)
PSTX -4.1% (to Present Early Data from Phase 1 Trials of P-MUC1C-ALLO1 and P-BCMA-ALLO1 at ESMO Immuno-Oncology 2022 Annual Congress)
BIVI -4% (announces positive NE3107 results; filed prospectus supplement to increase shares of Class A common stock)
AXON -2.2% (to offer $500 mln convertible notes in private offering)
Analyst comments:
RCL -2.2% (downgraded to Underweight from Overweight at JP Morgan)
CAG -1.9% (downgraded to Sell from Hold at Deutsche Bank)
GIS -1.1% (downgraded to Hold from Buy at Deutsche Bank)
Warner Bros. Discovery (WBD) and Amazon (AMZN) announced that HBO Max is once again available on Prime Video Channels in the U.S. Prime customers can sign up for HBO Max for $14.99 per month. Subscribers will have access to 15,000 hours of curated premium content. Additionally, subscribers will have access to the expanded content offering that will be available in Warner Bros. Discovery's enhanced streaming service when it launches next year.
View, Inc. (VIEW) announced that BentallGreenOak has deployed the Smart Building Cloud across 45 properties spanning 12 million square feet in their Canadian portfolio, with plans for future expansion to approximately 115 properties in total. The deployment is part of a deepening partnership between the two companies to accelerate the digital transformation of real estate.
FMC (FMC) and Micropep Technologies (Micropep), a global leader in micropeptide technology, announced a strategic collaboration to develop biological solutions to control destructive herbicide-resistant weeds that reduce crop yields.
GTLB +18%, SUMO +9.6%, SIG +6.9%, KDP +0.8% (guidance)
Other news:
VVNT +32% (NRG Energy (NRG) to acquire Vivint for $12 per share or $2.8 bln in an all-cash transaction)
EDIT +9.4% (safety and efficacy data from the first two patients treated in the RUBY Trial of EDIT-301)
CENX +3.9% (moving higher after US and EU weigh new tariffs on Chinese steel and aluminum according to Bloomberg)
ZLAB +3.6% (Presents Late-Breaking Results Evaluating Concurrent Adagrasib and Pembrolizumab)
LILM +3.5% (releases Q3 Business Update)
LQDA +3.3% (collaborating with Sandoz and Mainbridge Health Partners)
MNOV +2.8% (Results from Secondary Analysis of Phase 2 Trial of MN-166 (ibudilast) Published in The American Journal of Drug and Alcohol Abuse)
AA +1.7% (moving higher after US and EU weigh new tariffs on Chinese steel and aluminum according to Bloomberg)
EBS +1.7% (receives FDA acceptance and Priority Review of Supplemental NDA for over-the-counter NARCAN)
NWSA +1.5% (News Corp. Special Committee provides update on exploration of combination with Fox (FOX))
BHR +1.4% (reports November 2022 RevPAR)
GME +1% (begins round of layoffs according to Axios)
Analyst comments:
PFSI +1.2% (upgraded to Overweight from Equal Weight at Wells Fargo)
ATVI +0.5% (upgraded to Buy from Hold at Edward Jones)
Top increases in stock option open interest $LAZR $VALE $COIN $ACRE $ARI $CHPT $AMZN $AAPL $UAL $GME
Upgrades:
Activision Blizzard (ATVI) upgraded to Buy from Hold at Edward Jones
PennyMac (PFSI) upgraded to Overweight from Equal Weight at Wells Fargo; tgt raised to $75
Downgrades:
Conagra (CAG) downgraded to Sell from Hold at Deutsche Bank; tgt raised to $34
General Mills (GIS) downgraded to Hold from Buy at Deutsche Bank; tgt $88
Royal Caribbean (RCL) downgraded to Underweight from Overweight at JP Morgan; tgt lowered to $47
Others:
Albertsons (ACI) initiated with a Outperform at Bernstein; tgt $26
Home Depot (HD) initiated with a Mkt Perform at Bernstein; tgt $337
Kroger (KR) initiated with an Outperform at Bernstein; tgt $58
Lowe's (LOW) initiated with a Mkt Perform at Bernstein; tgt $237
Norwegian Cruise Line (NCLH) assumed with an Overweight at JP Morgan; tgt lowered to $30
Target (TGT) initiated with an Outperform at Bernstein; tgt $190
United Therapeutics (UTHR) initiated with a Buy at UBS; tgt $320
Valvoline (VVV) initiated with an Outperform at RBC Capital Mkts; tgt $39
Walmart (WMT) initiated with a Mkt Perform at Bernstein; tgt $159
Xponential Fitness (XPOF) initiated with a Buy at Citigroup; tgt $29
“MORGAN STANLEY: “.. the downtrend from the beginning of the year remains in place, and in light of our team’s sharply negative outlook for earnings next year, they see risk-reward here as poor, and they recommend taking profits before the Bear returns in earnest.” [Huberty] $SPX”
Lululemon price target raised to $438 from $345 at Raymond James
Raymond James analyst Rick Patel raised the firm's price target on Lululemon to $438 from $345 and keeps a Strong Buy rating on the shares, telling investors that he remains "bullish" into fiscal Q3 results due on December 8 and believes Q4-to-date is off to a good start. His weekly channel checks found that Lululemon didn't have broad-based promotions in Q3 or so far in Q4 the way other apparel brands and retailers had, Patel noted.
Daqo New Energy Corp. (DQ) announced that its Phase 5B polysilicon expansion project in Inner Mongolia is expected to increase the Company's annual polysilicon production capacity by 100,000 MT to a total of 305,000 MT by the end of 2023.
Ambarella, Inc. (AMBA) announced the world's first centralized 4D imaging radar architecture, which allows both central processing of raw radar data and deep, low-level fusion with other sensor inputs—including cameras, lidar and ultrasonics. This breakthrough architecture provides greater environmental perception and safer path planning in AI-based ADAS and L2+ to L5 autonomous driving systems, as well as autonomous robotics.
Wabtec Corporation's (WAB) DistanceMaster solution took a major step toward improving braking performance for transit rail operators with the certification of the company's adaptive wheel slide protection technology. The solution addresses the wheel and rail adhesion bottleneck enabling transit systems to improve efficiency and increase network capacity. The company obtained the conformity certifications and the Interoperability Constituent certification (as required by Technical Specifications for Interoperability) from RINA following extensive tests in laboratory and operational environments. Wabtec conducted the laboratory tests at Deutsche Bahn Systemtechnik's accredited lab in Minden, Germany. The company also worked with Eurailtest, an accredited laboratory, to test the adaptive wheel slide protection technology in an operational environment on an SNCF Regiolis train.
AutoZone beats by $2.17, beats on revs; Q1 domestic comps +5.6% (2526.92)
Reports Q1 (Nov) earnings of $27.45 per share, $2.17 better than the S&P Capital IQ Consensus of $25.28; revenues rose 8.6% year/year to $3.99 bln vs the $3.87 bln S&P Capital IQ Consensus.
Domestic same store sales, or sales for stores open at least one year, increased 5.6% for the quarter.
For the quarter, gross profit, as a percentage of sales, was 50.1%, a decrease of 242 basis points versus the prior year. The decrease in gross margin was driven by a 203 basis point ($81 million) non-cash LIFO charge driven primarily by rising freight costs, with the remaining deleverage primarily from accelerated growth in our Commercial business. Operating expenses, as a percentage of sales, were flat to last year at 31.9%.
CEO/CFO adds to MODG; notable sales -- CTO active in APP
Buyers:
BX Director bought 20,000 shares at $82.37 - $85.12 worth ~$1.67 mln.
GIII CEO bought 250,000 shares at $12.13 - $13.04 worth ~$3.1 mln.
GOCO 10% owner bought 51,290 shares at $11.00 - $12.78 worth ~$601K.
MODG President/CEO and EVP CFO bought a total of 20,000 shares at $21.2999 -$21.88 worth ~$432K.
MODV Director bought 90,743 shares at $74.91 - $76.50 worth ~$6.9 mln.
NUVB Director bought 250,000 shares at $1.805 - $2.00 worth ~$484K.
Sellers:
APP Chief Technology Officer and Director (2) sold a total of 771,281 shares at $13.89 - $14.165 worth ~$10.87 mln.
ARE EVP - Finance & Treasurer sold 3,316 shares at $154.00 worth ~$511K.
CDNS Director sold 7,550 shares at $174.63 - $176.59 worth ~$1.3 mln.
CPNG Director sold 373,436 shares at $20.00 - $20.02 worth ~$7.5 mln.
DCOM Director-by-Deputization sold 36,728 shares at $36.03 - $36.35 worth ~$1.3 mln.
FHI Vice Chairman sold 32,853 shares at $37.68 - $38.61 worth ~$1.25 mln.
LNW Director sold 20,000 shares at $64.00 - $65.50 worth ~$1.29 mln.
RCL Director sold 1,317,977 shares at $60.2354 - $61.2345 worth ~$80 mln.
RPRX 10% owner/Director sold 362,766 shares at $43.80 - $44.20 worth ~$15.98 mln.
RS President and Exec. VP COO sold a total of 15,747 shares at $213.08 - $214.88 worth ~$3.4 mln.
TSMC Raises Arizona Chip Investment to $40 Billion as Biden Visits
premarket gappers
Gapping up:
VVNT +31.6%, GTLB +18.1%, BIVI +14.6%, EBS +8.9%, SUMO +8.6%, ZLAB +3.6%, LQDA +3.3%, MNOV +2.8%, CENX +2.1%, NWSA +1.5%, BHR +1.4%, GME +1.3%, AMCX +1.3%, STNG +1.2%, FOX +1.2%, HOOD +0.8%, AA +0.8%, QTRX +0.8%, DRS +0.6%, CBOE +0.6%
Gapping down:
MRTX -10.5%, HLF -9.8%, PSTX -4.1%, LSCC -3.9%, CONN -3.7%, AXON -2.2%, FNKO -0.9%, SI -0.7%, META -0.5%
Will the Fed 'raise and hold' rates? Traders bet they will not
Taiwan Semiconductor Manufacturing Co. plans to build a second semiconductor factory in Arizona and increase its investment there to $40 billion , the White House said ahead of a visit by President Biden .
TSMC, the world's largest contract chip maker, is stepping up its plans for U.S. manufacturing with encouragement from the Biden administration and likely financial support from U.S. taxpayers, reflecting Washington's concerns about reliance on Asia for critical chip making.
Under a previously disclosed $12 billion investment plan, TSMC is already building its first factory in Arizona .
In advance of Mr. Biden's visit to the plant on Tuesday, the White House released details of a second factory planned for the site, saying construction would start in the coming year and production would begin in 2026.
The second factory, first reported by The Wall Street Journal, will make chips with 3-nanometer technology, equal to the tiniest and fastest chips available today, and TSMC's total investment in Arizona will expand to $40 billion , the White House said. It didn't say how many years the investment would cover.
The guest list for Tuesday's ceremony, marking the initial installation of equipment at the first factory, includes the chief executives of two major TSMC customers, Tim Cook of Apple Inc. and Jensen Huang of graphics-chip company Nvidia Corp.
TSMC's bet on making cutting-edge chips in the U.S. comes after Washington agreed to provide semiconductor makers with lucrative incentives under legislation passed this year.
TSMC recently started making 3-nanometer chips in Taiwan . By 2026, those chips would likely be at least two generations behind the leading edge.
A nanometer is one-billionth of a meter. The number of nanometers is a rough guide to how much processing power is packed into the chip's small space, with a lower number indicating a more advanced chip.
The White House said the first TSMC factory in Arizona , which originally was supposed to produce 5-nanometer chips, would also produce 4-nanometer chips. That factory is expected to start mass production in 2024.
TSMC executives have said they plan to keep the most advanced manufacturing in Taiwan .
In a letter to the Commerce Department last month, TSMC said it was primarily relying on its own capital supplemented by U.S. incentive funds for building the complex in Arizona . It didn't specify how much money it might get from the government. The company also described challenges at the Arizona site such as unexpected construction snags.
European stock markets are slightly lower in opening trade, after a mixed close across Asia, where the Hang Seng corrected some of its recent gains and the ASX was hit by a "hawkish hike" from the RBA. Unexpectedly strong U.S. services data yesterday had fuelled rate hike bets yesterday and left Wall Street with steep losses at the close, but U.S. futures are managing slight gains at the moment. U.S. Treasury yields are slightly higher, with the 10-year at 3.579% at the moment. The 10-year Gilt rate is also higher, after stronger than expected BRC retail sales numbers, but Bunds have already pared earlier losses and the German 10-year rate is down -0.9 bp at 1.86%, despite strong German orders data. ECB chief economist Lane said he is confident that inflation is near its peak, which has left markets pricing out the risk of a 75 bp hike at the upcoming meeting. Australia's 10-year yield moved up 3.0 bp after the RBA delivered a 25 bp hike and said that more tightening is underway. The DXY dollar index is at 105.160, USD-JPY has lifted to 136.88, EUR-USD is just under the 1.05 mark and cable at 1.22. The front end WTI contract meanwhile is trading at USD 77.43 per barrel.
$EL Estee Lauder upgraded to Buy from Hold at Deutsche Bank target raised from $209 to $266
?FSR -- Fisker reports CEO and CFO purchased 33,700 shares of common stock; price not disclosed
Textron Inc (TXT) announced that Bell Textron Inc., a Textron company, has been awarded the development contract for the U.S. Army's Future Long-Range Assault Aircraft program. The award is based on Bell's V-280 Valor tiltrotor that was developed and tested as part of the Joint Multi-Role Technology Demonstrator program that began in 2013. The V-280 progressed through design, manufacturing, and more than three years of rigorous flight testing that provided extensive data validating the technical and operational advantages of the aircraft for the long-range assault mission.
Driven Brands Holdings Inc. (DRVN) reported that it will be migrating its glass servicing offering to the Auto Glass Now brand beginning in January 2023. Since entering the U.S. glass business less than a year ago, Driven Brands has grown to approximately 175 locations and over 700 mobile units through a series of acquisitions and a growing pipeline of greenfield openings and ten acquisitions, including the acquisition of Discount Auto Glass that closed today.
In a joint announcement, TuSimple (TSP) and Navistar announced an end to their co-development under the 2020 Joint Development Agreement. The decision to end the development agreement does not preclude the companies from working together in the future.
Following its decision earlier this year to exit the Russian market, Owens Corning (OC) announced that it has completed the sale of its operations in the country to Umatex, a Russia-based producer of carbon fiber and fiber-based items. The transaction includes two manufacturing operations: a Composites manufacturing plant in Gous-Khroustalny and an Insulation manufacturing plant in Tver/Izoplit. For the nine months ended September 30, 2022, net sales in Russia were approximately $85 million.
KKR (KKR) announced that it has agreed to acquire Clinisupplies, a market leader in continence care products in the UK, from Healthium. Clinisupplies' management team will continue to hold a minority position. Financial details of the transaction were not disclosed.
SPY trying to get back over that $400 hump
Tesla says Shanghai plant output cut reports 'untrue,' Reuters says
Tesla China said that media reports claiming its factory in Shanghai would lower December output of its Model Y were "untrue," Reuters' Zhang Yan and Brenda Goh report
Fitch says world growth forecasts cut again as inflation fight intensifies (400.45 -6.43)
"World GDP forecasts for 2023 have been revised down again as central banks intensify their fight against inflation and the outlook for China's property market deteriorates, says Fitch Ratings in its latest Global Economic Outlook (GEO) report published today.
Fitch now expects world GDP to grow by 1.4% in 2023, revised down from 1.7% in the September 2022 GEO. Fitch has lowered its forecast for US 2023 growth to 0.2%, from 0.5%, as the pace of monetary policy tightening increases."
option action
Bullish Call Activity:
CWH Dec 26 calls are seeing interest with the underlying stock down 7% (volume: 2090, open int: 0, implied vol: ~68%, prev day implied vol: 43%). 1500 contracts traded in a single transaction. Co is expected to report earnings late February.
CRWD Dec 131 calls are seeing interest with the underlying stock down 5% (volume: 2450, open int: 380, implied vol: ~60%, prev day implied vol: 46%). Co is expected to report earnings early March.
CVS Dec 103 calls (volume: 5950, open int: 90, implied vol: ~22%, prev day implied vol: 17%). Co is testing remote prescription filling system, according to WSJ. Co is confirmed to report earnings February 8 before the open.
Bearish Put Activity:
ACRE Feb23 10 puts (volume: 20.2K, open int: 0, implied vol: ~49%, prev day implied vol: 34%). Co is expected to report earnings mid-February.
BX Feb23 70 puts (volume: 11.2K, open int: 130, implied vol: ~55%, prev day implied vol: 53%). Co is scheduled to present at a Goldman Finance conference on Wednesday. Co is expected to report earnings late January
U.S. FED ACCEPTS $2.093 TRLN IN OVERNIGHT REVERSE REPO BIDS, AWARDS AT 3.80% TO 97 BIDDERS -NY FED
NYSE market internals summary
Volume is above average for this time of day. Breadth is mixed with issues and volume bearish while new highs to new lows are bullish (positive divergence). Advancing Issues: 520 / Declining Issues: 2598 -- for a ratio of 0.2 to 1. Advancing Volume: 236,156,000 / Declining Volume: 1,848,784,000 -- for a ratio of 0.1 to 1. New 52-Week Highs: 47 / New 52-Week Lows: 43.
Junk bonds have beat investment-grade debt since midyear
High-yield credit has recently rallied, but the setup for junk bonds doesn't look promising, according to Morgan Stanley's wealth-management division.
"While the drop in U.S. Treasury rates on optimism about inflation and the pace of Federal Reserve hikes should benefit credit, the outperformance of high yield appears outsized versus historical patterns," said Lisa Shalett , chief investment officer at Morgan Stanley Wealth Management, in a note Monday. "The recent risk-on bear market rally has taken high yield credit up along with stocks, with high yield outperforming the higher-quality and lower-beta investment grade index since midyear."
High-yield debt's outperformance of investment-grade bonds historically has followed the Conference Board Leading Economic Index for the U.S. , according to the note. Shalett highlighted a chart in the report suggesting that high-yield is "getting ahead of itself."
"Most recently, with economic data exhibiting a slowdown, leading indicators have hooked negative, with recession odds rising materially," said Shalett. "Typically, this has not been the setting for high yield to outperform."
The Conference Board said last month that the U.S. leading economic index fell 0.8% in October, marking an eighth straight monthly decline.
Meanwhile, the iShares iBoxx $ High Yield Corporate Bond ETF has gained 5.4% on a total return basis since the end of June through Friday, beating the iShares iBoxx $ Investment Grade Corporate Bond ETF's 1.2% return, FactSet data show. High-yield debt is rated below investment grade, or in so-called junk territory.
U.S. stocks also have rallied since midyear, with the S&P 500 index up 8.4% based on FactSet's total return data through Friday.
But both stocks and bonds are down so far in 2022, after tumbling amid fears over the Fed's aggressive monetary policy aimed at fighting high inflation.
This year, the S&P 500 has dropped 13.3% on a total return basis through Friday, while the iShares iBoxx $ High Yield Corporate Bond ETF was down 9.1% and the iShares iBoxx $ Investment Grade Corporate Bond ETF tanked 15.1% over the same period, according to FactSet data.
Investors tend to worry about riskier high-yield debt in an economic downturn as some junk-graded corporate borrowers may struggle to meet their debt obligations as earnings fall.
"We would upgrade in quality and find alternative sources of safer default-adjusted yields in the investment grade universe," said Shalett.
Shares of the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) were down around 0.7% in early afternoon trading Monday, while the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) fell 1%, according to FactSet data, at last check.
The Fed has been trying to cool the U.S. economy without tipping it into a recession.
The U.S. stock market was trading sharply lower Monday, as investors weighed fresh economic data showing activity in the services sector was stronger than expected in November. The S&P 500 was down 1.6% in early afternoon trading, while the Dow Jones Industrial Average fell 1.2% and the technology-heavy Nasdaq Composite dropped 1.7%, FactSet data show, at last check.
Some of todays most active stock options $AAPL $TSLA $CHPT $COIN $BBBY $LAZR $NVDA $AMZN $F $NU
The videogame retailer's shares have fallen 29% this year. Analysts are looking for a narrowing loss when it reports third-quarter results on Wednesday.
Meme-stock darling GameStop Corp. reports its third-quarter results after the market closes on Wednesday, with analysts looking for a narrowing loss from the videogame retailer.
GameStop (GME), like its fellow meme stock AMC Entertainment Holdings Inc. (AMC), was a major beneficiary of the meme- stock buying frenzy in January 2021 , which sent the struggling company's shares skyrocketing to dizzying heights. Between January and March 2021 , GameStop's stock price rose more than 1,200% and the company's market cap surpassed $17 billion .
But GameStop's stock has fallen 29.3% this year, outpacing the S&P 500's decline of 15.5%, and the company's market cap is now around $8.4 billion . AMC's stock is down 52.3% in 2022.
Analysts surveyed by FactSet are looking for GameStop to report a net loss of $94 million , or 29 cents a share, compared with a net loss of $105 million , or $1.39 cents a share, in the prior year's quarter. Analysts are looking for third-quarter revenue of $1.4 billion , compared with $1.3 billion in the same period last year.
Also read:GameStop stock soared, then fell all the way back down, in biggest price reversal since May. But why?
Of three analysts surveyed by FactSet, one has a hold rating and two have a sell rating for GameStop .
In September, GameStop's stock surged after the company reported a narrower-than-expected loss and announced a partnership with cryptocurrency exchange FTX. Last month, FTX, which was once the world's third-largest crypto exchange, filed for bankruptcy following a dramatic collapse that sent shockwaves through the crypto industry.
On Nov. 11 , GameStop tweeted that it was winding down its relationship and pilot partnership to market gift cards with FTX and that it would provide refunds to affected customers.
GameStop's second-quarter results marked the company's sixth consecutive quarterly loss.
Now read:AMC stock spikes up in volatile trading, other meme stocks also rally
While the heady days of early 2021 are far in the rearview mirror, GameStop's stock still reflects meme-stock trends. Earlier this year, GameStop enjoyed its longest winning streak in over a decade, boosted in part by a bullish post on the WallStreetBets subreddit.
GameStop also rallied alongside fellow meme stocks AMC, AMC Preferred Equity Units and Bed Bath & Beyond Inc. (BBBY) last week, bucking weakness in the broader stock market.
But critics have questioned GameStop's fundamentals. Independent equity-research firm New Constructs added GameStop to its list of "zombie" stocks in August and has highlighted the company's cash burn as an issue.
GameStop ended its most recent quarter with cash and equivalents of $908.9 million . The company also said it ended the quarter with no debt other than a low-interest loan related to the French government's response to the pandemic.
Also read:Carl Icahn shorting GameStop , report says
Last month, Bloomberg reported that billionaire investor Carl Icahn is shorting GameStop . Citing people familiar with the matter, Bloomberg reported that Icahn began shorting GameStop in January 2021 , around the height of the meme-stock frenzy, and still holds a large position.
Icahn has not yet responded to a request for comment from MarketWatch.
Selling pressure drops S&P 500 below 200-day moving average
The new week has started with the major indices running into some selling pressure after a huge run already this quarter. To wit: entering today, the Dow Jones Industrial Average was up 19.9% since the end of September.
Some proximate catalysts for the weak beginning include:
A Wall Street Journal article from Nick Timiraos that suggests Fed officials could take the benchmark rate in 2023 higher than the 5.00% currently expected by the market due in part to "brisk wage growth."
A stronger-than-expected ISM Non-Manufacturing Index for November (56.5% vs 54.4% prior) that bolstered the view that the Fed is apt to keep rates higher for longer.
An uptick in Treasury yields. The 2-yr note is up 6 bps to 4.35% and the 10-yr note is up 7 bps to 3.57%.
Some softness in several mega-cap stocks, but some acute weakness in Tesla (TSLA 185.30, -9.56, -4.9%) even though it has refuted press reports that it is planning an output cut of at least 20% for the Model Y at its Shanghai plant in December.
Initial selling activity dropped the S&P 500 below key support at its 200-day moving average (4,045). It remains stuck under that key technical level, weighed down by a lack of leadership.
All 11 S&P 500 sectors are lower with losses ranging from 0.4% (communication services ) to 2.1% (consumer discretionary).
Cyclical sectors are among the weakest areas despite news over the weekend that major cities in China have relaxed their COVID testing requirements for using public transportation and buying certain medicines. The energy sector (-1.3%) is among those weak spots even though OPEC+ agreed to maintain its production cut target of 2 million barrels per day from November until the end of 2023. Separately, the EU and its allies agreed to a $60.00 per barrel price cap on Russian oil.
The financial (-1.7%), materials (-1.4%), and industrial (-1.3) sectors are other underperformers. The cyclical skew is presumably a reflection of concerns that the Fed is going to overtighten and trigger a deeper economic setback.
The Dow Jones Industrial Average is down 0.7%; the S&P 500 is down 1.1%; the Nasdaq Composite is down 1.2%; and the Russell 2000 is down 1.7%.
Tesla (TSLA 186.55, -8.31, -4.3%): falling into the lower half of its range from Wednesday. Reuters reported that production of the Model Y at the company's plant in Shanghai will be down 20% m/m.
Target (TGT 158.39, -5.77, -3.5%): falling back below its 50-day moving average (159.48).
Ralph Lauren (RL 112.11, -3.45, -3.0%): falling from its best level since late April.
Lowe's (LOW 208.66, -6.18, -2.9%): falling into the lower half of its range from Wednesday with its 200-day moving average (198.92) looming below.
CarMax (KMX 68.38, -1.21, -1.7%): slipping toward its 50-day moving average (66.00).
Chipotle Mexican Grill (CMG 1580.00, -24.88, -1.6%): deepening last week's pullback from its best level since late September.
NIKE (NKE 110.89, -1.31, -1.2%): finding resistance near its 200-day moving average (111.86).
Starbucks (SBUX 103.79, -1.26, -1.2%): falling from its best level since early January. Stock was downgraded to Hold from Buy with a $106 target at Deutsche Bank.
Amazon (AMZN 93.06, -1.07, -1.1%): slipping toward last week's low (91.44).
TJX (TJX 79.61, -00.59, -0.7%): hit a two-week low before narrowing its loss.
Las Vegas Sands (LVS 47.77, -0.19, -0.4%): hit its best level since July 2021 before turning negative.
Yum Brands (YUM 130.69, +1.01, +0.8%): rising to its best level since early February.
Micron price target raised to $60 from $56 at Lynx
Lynx analysts KC Rajkumar and Jahanara Nissar raised the firm's price target on Micron to $60 from $56, calling their outlook "a contrary call to the Street's dour view" and telling investors that they would accumulate shares at current levels. Memory fundamentals led semis on the way down and "perhaps memory leads semis on the way up," contend the pair, who said they are "seeing the semblance of demand in the DRAM market" for the first time this year based on their checks.
The stock market kicked off the week on a downbeat note. Market participants might be looking to take some money off the table after a big run in a short amount recently. The S&P 500 took out its 200-day moving average (4045) and continues to fall.
Selling is broad in nature. The S&P 500 and Vanguard Mega Cap Growth ETF (MGK) are down 1.2% and the Invesco S&P 500 is down 1.5%.
Declining issues lead advancing issues by a greater than 4-to-1 margin at the NYSE and a greater than 2-to-1 margin at the Nasdaq.
The final IHS Markit Services PMI reading for November came in at 46.2 after the last reading of 46.1.
Just in, the ISM Non-Manufacturing Index for November increased to 56.5% (Briefing.com consensus 53.5%) from 54.4% in October.
Factory orders for manufactured goods increased 1.0% on October (Briefing.com consensus 0.7%) following a 0.3% increase in September.
Upgrades:
AENA (ANNSF) upgraded to Overweight from Underweight at Morgan Stanley
Cie de Saint-Gobain (CODYY) upgraded to Buy from Hold at Jefferies
MGM Resorts (MGM) upgraded to Buy from Hold at Truist; tgt raised to $50
Murphy Oil (MUR) upgraded to Overweight from Neutral at JP Morgan; tgt $56
Novartis AG (NVS) upgraded to Buy from Hold at Stifel
Porsche (POAHY) upgraded to Buy from Hold at HSBC Securities
Ritchie Bros. (RBA) upgraded to Sector Outperform from Sector Perform at Scotiabank; tgt raised to $65
United Airlines (UAL) upgraded to Overweight from Equal-Weight at Morgan Stanley; tgt $67
Downgrades:
Adecco S.A. (AHEXY) downgraded to Underweight from Equal-Weight at Morgan Stanley
Burberry plc (BURBY) downgraded to Reduce from Hold at HSBC Securities
CIBC (CM) downgraded to Sector Perform from Outperform at RBC Capital Mkts
Commerce Bancshares (CBSH) initiated with an Equal-Weight at Morgan Stanley; tgt $74
Danone (DANOY) downgraded to Mkt Perform from Outperform at Bernstein
Hyatt Hotels (H) initiated with an Overweight at Morgan Stanley; tgt $136
Imperial Oil (IMO) downgraded to Underweight from Neutral at JP Morgan
Laredo Petroleum (LPI) downgraded to Underweight from Neutral at JP Morgan; tgt $69
Liberty Global (LBTYA) downgraded to Neutral from Buy at BofA Securities
NetApp (NTAP) downgraded to Hold from Buy at Loop Capital
Orion Office REIT (ONL) assumed with a Buy at EF Hutton; tgt lowered to $13
Sachem Capital (SACH) assumed with a at EF Hutton; tgt lowered to $5
Signature Bank (SBNY) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt lowered to $152
Silvergate Capital (SI) downgraded to Underweight from Equal-Weight at Morgan Stanley; tgt $24
Spire (SR) downgraded to Neutral from Overweight at JP Morgan; tgt $69
SVB Financial Group (SIVB) downgraded to Underweight from Equal-Weight at Morgan Stanley; tgt lowered to $186
Terex (TEX) downgraded to Hold from Buy at Deutsche Bank; tgt $46
Unilever PLC (UL) downgraded to Mkt Perform from Outperform at Bernstein
Wabash Natl (WNC) downgraded to Hold from Buy at Vertical Research; tgt $27
Others:
Chinook Therapeutics (KDNY) initiated with an Overweight at Wells Fargo; tgt $30
Community Financial (TCFC) resumed with an Overweight at Piper Sandler; tgt $53
Denali Therapeutics (DNLI) initiated with an Outperform at Cowen
F&G Annuities & Life (FG) initiated with a Neutral at Credit Suisse; tgt $22
JetBlue Airways (JBLU) initiated with a Neutral at Citigroup; tgt $9
OPAL Fuels (OPAL) initiated with a Buy at UBS; tgt $13
Primis Financial (FRST) initiated with a Neutral at Piper Sandler; tgt $13
Rent-A-Center (RCII) initiated with a Buy at Craig Hallum; tgt $40
RXO, Inc. (RXO) initiated with a Mkt Perform at Raymond James
Sunstone Hotel (SHO) initiated with an Underweight at Morgan Stanley; tgt $10
Synovus (SNV) initiated with an Equal-Weight at Morgan Stanley; tgt $44
Travere Therapeutics (TVTX) initiated with an Overweight at Wells Fargo; tgt $28
United Therapeutics (UTHR) initiated with a Sell at Goldman; tgt $230
Valley National (VLY) initiated with an Equal-Weight at Morgan Stanley; tgt $14
Webster Financial (WBS) initiated with an Overweight at Morgan Stanley; tgt $70
WesBanco Inc (WSBC) resumed with a Neutral at Piper Sandler; tgt $41
Wyndham Hotels & Resorts (WH) initiated with an Overweight at Morgan Stanley; tgt $87
Xenia Hotels (XHR) initiated with an Underweight at Morgan Stanley; tgt $13
Zions Bancorp (ZION) initiated with an Equal-Weight at Morgan Stanley; tgt $65
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FOSL | jimmybob | 02/14/2012 09:54:12 AM |
FOSL and SODA ~ WATCH!!! | jimmybob | 02/14/2012 09:50:52 AM |
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