CAPIS Morning Note – 01/20/23: Today Is January Options Expiration. Given the Downside Volatility The Past Two Days, Expect The Unexpected.

Overnight Summary: The S&P 500 closed Thursday lower by -0.76% at 3898.65 from Wednesday lower by -1.58% at 3928.  The overnight high of 3933 was hit at 2:55 a.m. EST. The low was hit at 3911.75 at 5:15 a.m. EST, a range of ~17 points high to low.  At 7:00 a.m. EST, the S&P 500 (mini)…

Overnight Summary: The S&P 500 closed Thursday lower by -0.76% at 3898.65 from Wednesday lower by -1.58% at 3928.  The overnight high of 3933 was hit at 2:55 a.m. EST. The low was hit at 3911.75 at 5:15 a.m. EST, a range of ~17 points high to low.  At 7:00 a.m. EST, the S&P 500 (mini) was lower by -28.75.

Lead Story: Media is overly focused on Netflix earnings report with Debt levels a second story.

Earnings Out After The Close

  • Beats: PPG +0.09, OZK +0.04.
  • Flat: FFIN.
  • Misses: SIVB (0.64), NFLX (0.39), CNXC (0.32).

Unusual Options Activity:

Daily Screen in Erlanger Chartroom that highlights unusual Call and Put Options activity.  It looks for volume outliers relative to the Open interest in Calls or puts.  Usually, the stock price activity reflects the outlier situation (earnings/buyout/announcement), but once in a while, you can uncover stocks prior to a pop or drop.

  

Capital Raises:

  • IPOs Priced or News: None of note.
  • New SPACs launched/News: None of note.
  • Secondaries Priced:
    • AKTS: Pricing of Public Offering of $30.0 Million of Common Stock.. Priced @$2.75.
    • DCPH: Pricing of Public Offering of Common Stock 6,944,445 shares. Priced at $18.
  • Notes Priced of note: None of note.
  • Common Stock filings/Notes:
    • IPDN: Filed Form S-3.. 1,162,790 Shares of Common Stock, par value $0.01 per share.
    • KALA: Form 424B5.. Up to $40,000,000 Common Stock.
    • SONN: Filed Form S-1.. Shares of Common Stock.
    • STAF: Filed Form S-1.. Equity Units and Warrants.
  • Direct Offering: None of note.
  • Selling Shareholders of note: None of note.
  • Private Placement of Public Entity (PIPE):
    • BBAI: Closing of $25 Million Private Placement.
    • CTGO: Private Placement of Common Stock.
  • Mixed Shelf Offerings:
    • NRSN: Filed Form F-3.. $100 million Mixed Shelf.
  • Debt Filing/Notes:
    • NCLH: Announces Upsizing and Pricing of $600,000,000 of Senior Secured Notes.
  • Tender Offer: None of note.
  • Convertible Offering & Notes Filed:
    • EOSE: Several investors made a $13.75 mln investment in convertible senior notes to support the company’s strategic growth initiatives.
    • FARO: Proposed $60 Million Convertible Senior Notes Offering.

Capital Raise Summary From The TradeXchange, bringing traders and investors real time news and Squawk Box, and other sources.

News After The Close:

  • After Hours: 
    • Trading Up: ATRO +13%, NFLX +7%, CMPX +4% of note.
    • Trading Down: JWN -6%, CNXC -5% of note.
  • News After The Close:         
    • Stocks making the biggest moves after hours: NFLX, JWN, COST  (CNBC)
    • Nordstrom (JWN) CEO: “The holiday season was highly promotional & sales were softer than pre-pandemic levels. While we continue to see greater resilience in our higher income cohorts, it is clear that consumers are being more selective with their spending”
    • T-Mobile US (TMUS) continuing investigation relating to a bad actor obtaining data without authorization first identified on January 5; notes malicious activity appears to be fully contained and no evidence pointing to a breach of systems or network.
    • Netflix (NFLX) – missed by $0.39 but not real story as focus on new subs beats guidance, sees earnings down but revenues up in Q1. New CEO as Reed Hastings moves to Executive Chairman. Investors love new subs. (WSJ)
    • Federal Reserve New York President John Williams:
      • Fed Still Faces Challenges With Core Inflation Readings.
      • Still A Lot Of Underlying Demand For Labor.
      • Market Pricing Roughly Consistent With Fed’s Rate Outlook -how High Fed Raises Rates To Hinge On Data.
      • Expects Unemployment To Rise To 4.5% This Year
      • Inflation Still Too High, Fed Has More Work To Do On Rate Rises, Lowering Inflation Will Need Period Of Slower Growth, Softer Job Market — Fed Must Stay The Course Until Inflation Is Brought Back To 2%.
      • The Fed Still Has A Lot Of Space To Run On A Diminishing Balance Sheet.
  • Exchange/Listing/Company Reorg and Personnel News:
    • Ares Capital (ARCC) appoints Jana Markowicz to newly created role of Chief Operating Officer.
    • Autolus Therapeutics (AUTL) announces two changes to the company’s Board of Directors.
    • Bed Bath & Beyond Inc. (BBBY) Receives Notice from NASDAQ Regarding Delayed Quarterly Report. (MarketWatch)
    • DMC Global (BOOM) Announces Appointment of Eric Walter as Chief Financial Officer
    • Flotek (FTK) Announces Leadership Transitions, Marking the Beginning of a New Chapter of Future Growth and Profitability.  Director Harsha V Agadi to become interim CEO.
    • Engine Gaming & Media, Inc. (GAME) Regains Compliance with Nasdaq Listing Requirements.
    • Evercore (EVR) has named Tim LaLonde as its CFO.
    • Gulfport Energy (GPOR) names John Reinhart President, Chief Executive Officer and Director.
    • HEXO Corp. (HEXO) Regains Compliance with Nasdaq Minimum Bid Price Requirement.
    • Latham Group, Inc. (SWIM) Announces Chief Financial Officer Transition.
    • Learn CW Investment Corporation (LCW) Receives Noncompliance Notification from the New York Stock Exchange Due to Failure to Maintain a Minimum of 300 Public Stockholders on a Continuous Basis.
    • Netflix (NFLX) moving sharply higher after hours following earnings and after report that Reed Hastings is giving up CEO title as he moves to Executive Chairman.
    • Avita Medical (RCEL) COO Kathy McGee to leave the organization.
    • Texas Instruments (TXN) selects Haviv Ilan to become its next president and CEO. (MarketWatch)
    • Vivos Therapeutics (VVOS) Regains Compliance with Nasdaq Listing Requirements.
  • Buyback Announcements or News: 
    • Costco (COST) Announces $4 Billion Share Buyback. (MarketWatch)
    • HBAN: Announces $1 Billion share repurchase program.
    • Netflix (NFLX) sees resuming share buyback program in 2023.
    • STT: Announces new authorization to repurchase up to $4.5 billion of common stock during 2023.
  • Stock Splits or News:
    • SIEN: Form 8K.. On January 19, 2023, Sientra, Inc. (the “Company”) effected a 1-for-10 reverse stock split.
  • Dividends Announcements or News:
    • Assurant (AIZ) Board of Directors Declares Quarterly Dividend of $0.70 per Common Share.
    • Costco (COST) Announces Quarterly Cash Dividend.
    • Con Edison (ED) increases quarterly dividend $0.02 to $0.81 per share.
    • PBT declares reduced monthly cash distribution.
    • South Plains Financial, Inc. (SPFI) Announces 8% Increase to Quarterly Cash Dividend.
    • RBB Bancorp (RBB) increases quarterly cash dividend $0.02 to $0.16 per share.
    • SLB Raises Quarterly Cash Dividend To $0.25 Per Share , +43%

What’s Happening This MorningFutures value reflects the change with fair value.

S&P 500 +11, Dow Jones +9,  NASDAQ +78,  and Russell 2000 +1. (as of 7:59 a.m. EST).  Asian markets are higher.  Europe markets are trading higher. VIX Futures are at 21.77 from 20.70 yesterday.  Gold and Silver higher with Copper lower.  WTI Crude Oil and Brent are higher with Natural Gas lower. US 10-year Treasury sees yields at 3.437% from 3.38% yesterday. The U.S. Dollar is higher versus the Euro, higher versus the Pound and higher against the Yen. Bitcoin is at $20,973 from $20,756 yesterday, lower by -0.65%.

Sector Action(1/3/6/12/YTD Updated Weekly with Monday release):  

  • Daily Positive Sectors: Energy, Communication Services of note.
  • Daily Negative Sectors: Industrials, Technology, Consumer Cyclical, Utilities of note.
  • One Month Winners:  Financial, Basic Materials, Energy of note.
  • Three Month Winners: Basic Materials, Industrials, and Financial  of note.
  • Six Month Winners: Industrials, Energy, and Basic Materials of note.
  • Twelve Month Winners: Energy and Utilities of note.
  • Year to Date Winners: Basic Materials, Consumer Cyclical, and Communication Services of note.

U.S. stocks extended a string of losses Thursday as economic data and corporate-earnings reports clouded investors’ views of the health of the economy.  After opening lower, the S&P 500 couldn’t regain much momentum, falling for a third straight day. It dropped 30.01, or 0.8%, to 3898.85. The Dow Jones Industrial Average declined 252.40, or 0.8%, to 33044.56, sliding into negative territory on the year. The technology-heavy Nasdaq Composite Index lost 104.74, or 1%, to 10852.27. (WSJ)

Click here for a video explanation of Erlanger Value Lines.

Upcoming Earnings Of Note: (From Chartroom Softwaresorted by market cap, highest to lowest with most visible names)

  • Friday After the Close: None of note.
  • Monday Before the Open:

Earnings of Note This Morning:

  • Beats: STT +0.11, ALLY +0.08, RF +0.06, HBAN +0.03, SLB +0.03.
  • Flat:  of note.
  • Misses: ERIC (0.70).
  • Still to Report: None of note.

Guidance:

  • Positive Guidance: IDCC of note.
  • Negative Guidance: CNXC, PPG of note.

Erlanger Research Advance/Decline Chart

Gap Ups & Down In Early Pre-Market:

  • Gap Up: ATRO +6%, NFLX +6%, PPG +5%, SGML +4% of note.
  • Gap Down: BBBY -8%, JWN -5%, CNXC -5%, ERIC -4% of note.

Insider Action: No stock sees Insider buying with dumb short selling.  No stock sees Insider buying with smart short sellers.

Rags & MagsRepeated stories from prior days never listed, i.e. “rehashed news”. Sorted by Global, U.S. and stock specific.

  • Stocks making the biggest moves premarket:  NFLX GOOGL JWN PD LLY RL  REGN CRM COST(CNBC)
  • 5 things to know before the stock market opens. (CNBC)
  • 5 Things You Need to Know to Start Your Day. (Bloomberg)
  • Bloomberg Lead Story Google To Cut 12,000 Jobs. 6% of the workforce. (Bloomberg)
  • Bloomberg Most Read StoryTreasury Taps Retirement Funds to Avoid Breaching US Debt limit (Bloomberg)
  • Bank of Japan (BOJ) Governor defends yield curve measures. (CNBC)
  • Former Treasury Secretary Larry Summers warns of 1970s  Crisis if Central Banks stop rate increases. (Bloomberg)
  • Senator Mitch McConnell (R- KY) says US will never default on debt. He is the Senate’s Minority Leader. (Bloomberg)
  • FAA Reports that 1/11 outage was caused by the accidental deletion of critical files. Whoops! (WSJ)
  • Crypto firm Genesis declares bankruptcy. Owes top creditors $3.4 billion which is more than what FTX owes its creditors. (Bloomberg)
  • ChatGPT is the hot topic at Davos replacing crypto. (CNBC)
  • Wayfair (W) cuts 1,750 jobs, stock up 5% in premarket. (MarketWatch)

Moving Average Update:

  • Score pulls back to 40% from 57% and 88% on Tuesday.

Geopolitical: 

  • President’s Public Schedule:
    • The President arrives at the White House, 12:20 a.m. EST
    • The President receives the Presidential Daily Briefing, 9:00 a.m. EST
    • Press Briefing by Press Secretary Karine Jean-Pierre, 1:00 p.m. EST
    • The President welcomes bipartisan mayors attending the U.S. Conference of Mayors Winter Meeting to the White House and delivers remarks celebrating the achievements of the past 18 months, 2:00 p.m. EST
    • The President departs the White House en route Rehoboth Beach, Delaware, 5:25 p.m. EST
    • The President arrives in Rehoboth Beach, Delaware, 6:20 p.m. EST

Economic

  • December Existing Home Sales are due out at 10:00 a.m. EST and expected to come in at 3.96 million from 4.09 in November.
  • Baker Hughes Rig Count 1:00 p.m. EST

Federal Reserve / Treasury Speakers:

  • Federal Reserve Philadelphia President Patrick Harker 9:00 a.m. EST
  • Federal Research Board of Governors Christopher Waller 1:00 p.m. EST
  • With the FOMC announcement coming we do have a Fed blackout period set for January 21 until Feb 2.

M&A ActivityNone of note.

Meeting & Conferences of Note:

  • Sellside Conferences: None of note.
  • Company Meetings: JAGX, LMNL, REVB, SBET
  • Fireside Chat: None of note.
  • Investor/Analyst Day/Calls: BGNE
  • Update: None of note.
  • R&D Day: None of note.
  • Company Event: None of note.
  • Industry Meetings:

Top Tier Sell-side Upgrades & Downgrades:

The recommendations listed below in this “Upgrade/Downgrade” section are compiled from what we believe are Tier I, II and III firms. Recommendations posted are taken from a variety of sources each day and we only post upgrades or significant initiations as well as downgrades to underweight or sell. The purpose of this posting it to make the reader aware of market moving recommendations. None of these recommendations should be interpreted as actual recommendations from CAPIS or its employees.

Today’s Upgrades and Downgrades:

Previous Day’s Upgrades and Downgrades: