CAPIS Morning Note – 03/23/23: Stocks Attempt A Recovery After Yesterday’s Destruction Post FOMC

Overnight Summary: The S&P 500 closed Wednesday lower by -1.65% at 3936.97 from Tuesday higher by 1.03% at 4003. The overnight high of 4001.50 was hit at 4:50 a.m. EDT. The low was hit at 3966.25 at 4:10 p.m. EDT, a range of ~35 points high to low.  At 7:00 a.m. EDT, the S&P 500 (mini)…

Overnight Summary: The S&P 500 closed Wednesday lower by -1.65% at 3936.97 from Tuesday higher by 1.03% at 4003. The overnight high of 4001.50 was hit at 4:50 a.m. EDT. The low was hit at 3966.25 at 4:10 p.m. EDT, a range of ~35 points high to low.  At 7:00 a.m. EDT, the S&P 500 (mini) was er by  points which is +0.%.

Breaking News: Ford (F) EV unit lost $2 billion in 2022, offset by big profits in fleet and legacy units. (CNBC)

Earnings Out After The Close: 

  • Beats: KBH +0.33, WOR +0.32, CHWY +0.26, MLKN +0.12, SCS +0.08, PHR +0.05 of note.
  • Flat: None of note.
  • Misses: None of note.

Unusual Options Activity:

Daily Screen in Erlanger Chartroom that highlights unusual Call and Put Options activity in the S&P 500.  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:
    • CBL International Limited (BANL) – Announces Pricing of US$13,300,000 Initial Public Offering.
  • New SPACs launched/News: None of note.
  • Secondaries Priced: None of note.
  • Notes Priced of note: None of note.
  • Common Stock filings/Notes:
    • ETNB: Proposed Underwritten Public Offering of Common Stock and Pre-Funded Warrants.. $200Million. (BAC, SVB and Evercore bookmanagers)
    • ZIVO: Filed Form S-1.. Up to 4,761,904 Units Each Unit Consisting of One Share of Common Stock or Pre-Funded Warrants to Purchase Common Stock and One Warrant to Purchase One Share of Common Stock.
  • Direct Offering:
    • ESPR: Closing of $56.7 Million Registered Direct Offering Priced At-The-Market Under Nasdaq Rules.
  • Selling Shareholders of note:
    • EVTL: Filed Form F-3.. 216,013,700 Ordinary Shares Offered by Selling Securityholders 21,889,935 Ordinary Shares Underlying Warrants 4,000,000 Warrants to Purchase Ordinary Shares.
  • Private Placement of Public Entity (PIPE): None of note.
  • Mixed Shelf Offerings:
    • ASMB: Filed Form S-3.. $150,000,000 Mixed Shelf.
    • CG: Filed Form S-3ASR.. Mixed Shelf.
    • PPC: Filed Form S-3ASR.. Mixed Shelf.
  • Debt/Credit Filing and Notes: None of note.
  • Tender Offer: None of note.
  • Convertible Offering & Notes Filed:
    • BBBY: Enters into Agreement to Purchase Series A Convertible Preferred Stock Worth $250 Million.

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: SCS +9%, WOR +7%, ETNB +4% of note.
    • Trading Down: CDTX -9%, COIN -8%, MLKN -4.1% of note.
  • News After The Close:   
    • Stocks making the biggest moves after hours: SCS, COIN (CNBC)
    • Steelcase (SCS) stock jumps 12% as quarterly orders grow on return-to-work trends. (MarketWatch)
    • The FDIC Intends To Announce A Decision On SVB This Weekend. (Spokesperson)
    • SpaceX Plans New Funding With Backing From Saudi, U.A.E. Investors.  Around $74/$79 per share or around $140 billion. (The Information)
    • As of this week, the average used auto loan rate is over 14%. We haven’t seen these numbers in decades. (CarDealershipGuy Tweet)
    • COIN – Coinbase Global Says It Got A Wells Notice From SEC Staff. (WSJ)
    • KBH “As we entered the Spring selling season during the quarter, we began to see an increase in demand. We achieved a sequential improvement in our net orders in both January and February, and net orders have remained strong in the early weeks of March” (MarketWatch)
    • Johnson & Johnson (JNJ): U.S. Court of Appeals for the Third Circuit denies request for a rehearing of the LTL bankruptcy petition, signaling reopening litigation against JNJ regarding talcum powder lawsuits.
    • Veradigm (MDRX) receives Nasdaq notice regarding delayed 10-K.
    • Goldman:
      • Predicts commodities to return 28% over 12 months.
      • Stands by bullish commodity view with oil to advance.
      • Says Chinese demand continues to surge across the commodity complex with oil demand tapping 16 million barrels per day.
    • Rate Hike Expectations:
      • UBS: No Longer Expects Fed To Hike Interest Rate In June -Lowers Terminal Rate Forecast Range To 5%-5.25% (prev 5.25%-5.5%).
      • MS: We Continue To Look For A Final 25bp Increase In May; Rate Cuts To Start In March 2024.
      • BAC: We No Longer Expect A 25bp Rate Hike In June’.
      • JPM: ‘We Continue To Look For One More 25bp Hike In May And An Extended Pause Before The Fed Eases In 2q24’.
      • C: Expects More Than A One Rate Hike In 2023.
  • Exchange/Listing/Company Reorg and Personnel News:
    • Akoustis Technologies (AKTS) appoints Michelle Petock as member of the Board.
    • The Altice USA (ATUS) Board of Directors Announces the Appointment of Alexandre Fonseca as a Director and Chairman of the Board.
    • Brenmiller Energy Ltd. (BNRG) Announces Voluntary Delisting from the Tel Aviv Stock Exchange.
    • Cardlytics (CDLX) seeks new CFO after current one announces resignation. (MarketWatch)
    • Phreesia (PHR) Announces Chief Financial Officer Transition.
    • Sharecare (SHCR) to delay 10-K filing.
    • SIOX Delisted from NASDAQ Effective 3/23/2023.
  • Buyback Announcements or News:
    • KBH: New Stock Repurchase Authorization of $500 Million.
  • Stock Splits or News:
    • PTIX trading 1-4 reverse split.
  • Dividends Announcements or News: 
    • EQR Goes ex div tomorrow for $0.6625.

What’s Happening This Morning: Futures value reflects the change with fair value.

S&P 500 +26, Dow Jones +103,  NASDAQ +142, and Russell 2000 +13. (as of 7:57 a.m. EDT).  Asia lower ex the Kospi and Europe lower. VIX Futures are at 23.05 unchanged from  yesterday.  Gold and Silver higher with Copper lower. WTI Crude Oil and Brent lower with Natural Gas higher. US 10-year Treasury sees yields at 3.477% from 3.585% yesterday. The U.S. Dollar is lower versus the Euro, lower versus the Pound and lower against the Yen. Bitcoin is at $27,720 from $28,143  yesterday, higher by 2.03%.

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

  • Daily Positive Sectors: None of note.
  • Daily Negative Sectors: Real Estate, Financial, Consumer Cyclical, Utilities, Industrials, Energy of note.
  • One Month Winners: None of note.
  • Three Month Winners: Communication Services, Technology, Consumer Cyclical of note.
  • Six Month Winners: Technology, Basic Materials, Industrial of note.
  • Twelve Month Winners: Energy of note.
  • Year to Date Winners: Technology, Communication Services, Consumer Cyclical of note.

U.S. stocks closed sharply lower on Wednesday, giving up earlier gains, after the Federal Reserve raised interest rates by 25 basis points as expected, but talked down the possibility of cuts to rates this year. The Dow Jones Industrial Average tumbled 531 points, or 1.6%, ending near 32,028, while the S&P 500 index shed 1.7% and the Nasdaq Composite Index closed down 1.6%. Fed Chairman Jerome Powell said the U.S. banking system remained resilient after it and regulators rolled out liquidity measures to help shore up confidence in the banking system after the collapse of Silicon Valley Bank and Signature Bank earlier in March but investors were not buying Powell’s rhetoric and sold off stocks into the close.   (MarketWatch – edited by QPI)

Click here for a video explanation of Erlanger Value Lines.

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

  • Thursday After the Close:

  • Friday Before the Open: None of note.

Earnings of Note This Morning:

  • Beats: ACN +0.19, FDS +0.13, DRI +0.10, DOOO +0.10, GIS +0.05, CMC +0.01 of note.
  • Flat: None of note.
  • Misses: None of note.
  • Still to Report: None of note.

Guidance:

  • Positive Guidance: SCS, DOOO, ACN, DRI, GIS of note.
  • Negative Guidance: CNVA, MDRX, MLKN, PHR of note.

Erlanger Research Advance/Decline Chart:

Gap Ups & Down In Early Pre-Market:

  • Gap Up: WOR +7%, SNY +6%, REGN +6%, EVTL +4% of note.
  • Gap Down: COIN -11%, CHWY -5%, CDTX -5%, MLKN -4%, MANU -4% of note.

Insider Action: ENVX, SCWX sees Insider buying with dumb short selling.  BRT sees Insider buying with smart short sellers.

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

  • 5 things to know before the stock market opens. (CNBC)
  • 5 Things You Need to Know to Start Your Day. (Bloomberg) 
  • Bloomberg Lead Story: Wall Street Eases Hiring Freeze in Grab For Credit Suisse Talent.  (Bloomberg)
  • Bloomberg Most Read Story: Ackman Warns of Accelerated Deposit Outflows After Fed Decision.  (Bloomberg)
  • European stocks fall ahead of BOE decision, U.S. futures bounce: Market Wrap. (Bloomberg)
  • Swiss National Bank (SNB) hikes rates by 50 basis points. (CNBC)
  • DealBook: What do Jay Powell and Janet Yellen and do next? Andrew Ross Sorkin article. (NYT)
  • Fitch downgrades First Republic (FRC) amid cash crunch. (Bloomberg)
  • Powell’s Own Guide to Recessions shows Rate Cuts are Coming. (Bloomberg)
  • Citibank CEO Jane Fraser warns mobile money is a “game changer” on bank runs. (CNBC)
  • Rising Drug Shortages a National Security Threat. (NYT)
  • Treasury yields fall as investors weigh Fed decision. (CNBC)
  • Treasury Secretary Yellen’s comments rattled markets not Fed Chair Powell’s say market commentator Jim Cramer. (CNBC)
  • Macro Hedge Funds hit by financial turmoil. (WSJ)
  • TikTok CEO Shou Zi Chew is testifying before the House today over national security concerns. (1440)

Moving Average Update:

  • Score reverses to 40% from 77%.

Geopolitical: 

  • President’s Public Schedule:
    • The President receives the President’s Daily Briefing, 9:00 a.m. EDT
    • The President hosts an anniversary event for the Affordable Care Act; The Vice President attends, 1:00 p.m. EDT
    • The President and The First Lady depart the White House en route to Joint Base Andrews, 4:40 p.m. EDT
    • The President and The First Lady depart Joint Base Andrews en route to Ottawa, Canada, 5:00 p.m. EDT
    • Press Secretary Karine Jean-Pierre and National Security Advisor Jake Sullivan will speak aboard Air Force One en route to Ottawa, Canada, 5:30 p.m. EDT
    • The President and The First Lady arrive in Ottawa, Canada, 6:25 p.m. EDT
    • The President and The First Lady participate in a greet with H.E. T.R.H. Mary Simon, Governor General of Canada and H.E. Whit Fraser, 6:40 p.m. EDT
    • The President and The First Lady participate in a private gathering hosted by Prime Minister Trudeau and Mrs. Sophie Grégoire Trudeau of Canada, 8:25 p.m. EDT

Economic:

  • Initial Jobless Claims 8:30 a.m. EDT
  • Chicago Fed Activity Index 8:30 a.m. EDT
  • Current Account 8:30 a.m. EDT
  • February New Home Sales are due out at 8:30 a.m. EDT and is expected to fall to 650,000 from 670,000.
  • EIA Natural Gas Report 10:30 a.m. EDT
  • KC Mfg Index 11:00 a.m. EDT

Federal Reserve / Treasury Speakers: None of note.

M&A Activity:

  • Carriage Services (CSV) announces acquisition of Greenlawn Funeral Homes.
  • KBR announces that it has acquired Acetica.

Meeting & Conferences of Note:

  • Sellside Conferences:
    • Canaccord Genuity Virtual eCommerce Sustainable Advantage Forum 2023
    • Goldman Sachs European Internet Conference 2023
    • Jefferies Business Services Summit
    • NYSE Energy & Utilities Investor Access Day 2023
      • Previously posted and ongoing conferences:
        • BAC Global Research Global Industrials Conf (03/21/23-03/23/23)
        • Bank of America EMEA Real Estate CEO Conference 2023 (03/22/23-03/24/23)
        • Berenberg UK Corporate Conference 2023 (03/21/23-03/23/23)
        • Credit Suisse Brazil Oil, Gas, Infrastructure & Transportation Conference
        • HSBC 3rd Future Transport Week 2023 (03/22/23-03/23/23)
        • JP Morgan Napa Valley Biotech Forum (03/21/23-03/23/23)
        • Piper Sandler Energy Conference (03/20/23-03/23/23)
        • Sidoti Small-Cap Conference (03/22/23-03/23/23)
        • UBS Engineering, Infrastructure, and Construction Conf

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: