CAPIS Morning Note – 05/23/23: Stocks Modestly Lower As Debt Ceiling Talks Continue, Bond Yields Climb.

Overnight Summary: The S&P 500 closed Monday at 4192.63 higher by 0.02% from Friday at 4191.98 lower by -0.14%. The overnight high of 4222.75 was hit at 9:50 a.m. EDT. The low was hit at 4197.25 at 6:05 a.m. EDT, a range of ~25 points high to low which is a mid-vol night.  At 7:20…

Overnight Summary: The S&P 500 closed Monday at 4192.63 higher by 0.02% from Friday at 4191.98 lower by -0.14%. The overnight high of 4222.75 was hit at 9:50 a.m. EDT. The low was hit at 4197.25 at 6:05 a.m. EDT, a range of ~25 points high to low which is a mid-vol night.  At 7:20 a.m. EDT, the current price was 4199 which is -0.14% and -6 points. The 10-day average of the overnight range is 20.70 from 20.20.

Breaking News: Denver Nuggets beat the Los Angeles Lakers in a close game down to the last shot and swept the series 4-0, sending the Nuggets to their first NBA Finals. (NYT)

Earnings Out After The Close: 

  • Beats: ZM +0.17, NDSN +0.14, CSWC +0.03 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: None of note.
  • New SPACs launched/News:
    • Genesis Growth Tech Acquisition Corp. (GGAA) announces business combination agreement with NextTrip.
    • Signal Hill Acquisition Corp. (SGHL) Announces Liquidation.
  • Secondaries Priced:
    • AGRX: Pricing of $7.5 Million Public Offering. Priced @$3.9551.
    • GH: Prices offering of 12.5 mln shares of common stock at $28.00 per share.
    • ICVX: Announces registered direct offering of 8,369,754 shares of its common stock at $8.10 per share.
  • Notes Priced of note:
    • AMT: Prices Senior Notes Offering.
    • BGCP: Pricing Of $350 Million Of 8.000% Senior Notes.
    • PGR: Prices $500 Million of Senior Notes.
  • Common Stock filings/Notes:
    • ARDS: Filed Form S-1.. $3,000,000 Common Stock.
    • EFC: Increases the authorized number of shares of its common stock from 100,000,000 to 200,000,000 shares.
    • CABA: Announces Closing of $100 Million Public Offering of Common Stock, Including Full Exercise of Option to Purchase Additional Shares.
    • FATH: Filed Form RW.
    • GH: Proposed Public Offering of Common Stock.. $250.0 million. (JPM, GS, TD and SVB Bookmanagers) (MarketWatch)
    • RNR: Announces Public Offering of 6,300,000 Common Shares.
    • US Foods (USFD) Announces Secondary Public Offering of Common Stock and Concurrent $150 million Share Repurchase.
  • Direct Offering:
    • ICVX: Announces $67.8 Million Registered Direct Offering of Common Stock.
  • Selling Shareholders of note:
    • RYAN: Offering of Class A Common Stock by Selling Stockholders. 9,000,000 shares. (BCS Underwriter)
  • Private Placement of Public Entity (PIPE):
    • NAVB: Investors Purchase $1.1 Million in Preferred Shares at Market.
  • Mixed Shelf Offerings:
    • BLTE: Filed Form F-3.. $300Million Mixed Shelf.
    • GH: Form S-34ASR Filed — Mixed Shelf Offering.
    • SWN: Files mixed shelf securities offering.
  • Debt/Credit Filing and Notes:
    • LFCR: Enters into $150.0 Million in New Financing, Repays its Outstanding Term Loans and Signs New Supply Agreement to Expand HA Fermentation Capacity with Existing Long-Term CustomerNew $150 million credit arrangements include six-year credit agreement and equipment sale and leaseback to replace existing term loan.
    • STX: Announces Offering of Senior Unsecured Notes.
  • Tender Offer: None of note.
  • Convertible Offering & Notes Filed: None of note.

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: None of note.
    • Trading Down: GH -7% of note.
  • News After The Close:
    • President Biden, House Speaker McCarthy Hold ‘Productive’ Meeting but No Debt-Ceiling Deal Yet. (WSJ)
    • JP Morgan CEO (JPM) Jamie Dimon warns that souring commercial real estate loans could threaten some banks. (CNBC)
    • White House and GOP Agree To Cut Excess Covid Funding As Talks Progress. (Fox Sources)
    • Goldman Sachs “By June 8-9 we estimate [cash and extraordinary measures] would drop under $30bn, which is the minimum balance the Treasury has used in the past to project the debt limit deadline” (Goldman)
    • Morgan Stanley’s Mike Wilson: “Rather than a short squeeze, the market was driven by the biggest winners as more market participants convinced themselves the next bull market may have begun and they can’t afford to miss it. In short, we believe this rally will prove to be a head fake like last summer’s.”
    • Nordson (NDSN) stock rises after adhesive maker posts higher quarterly sales. (MarketWatch)
    • Disney (DIS) Begins Third Round Of Expected Layoffs, Cutting More Than 2,500 Additional Jobs. (CNN)
    • General Dynamics (GD) awarded $736 million U.S. Navy contract modification.
  • Exchange/Listing/Company Reorg and Personnel News:
    • Akebia Therapeutics (AKBA) regains Nasdaq compliance.
    • AST SpaceMobile (ASTS) Set to Join the Russell 2000® and Russell 3000® Indexes
    • F45 (FXLV) Receives NYSE Notice of Non-Compliance with NYSE Trading Share Price Listing Rule.
    • GeneDx (WGS) Regains Compliance with Nasdaq Minimum Bid Price Requirement.
    • Harmonic (HLIT) Appoints Walter Jankovic as Chief Financial Officer.
    • HUYA approves appointment of Songtao Lin as Chairman.
    • Jianzhi Education Technology Group Company Limited (JZ) Receives Notification from Nasdaq Regarding Delayed Form 20-F Filing.
    • Kaspien Holdings Inc. (KSPN) Announces Voluntary Delisting from The Nasdaq Capital Market.
    • Medalist Diversified REIT, Inc. (MDRR) Regains Compliance With Nasdaq Minimum Bid Price Requirement.
    • Pennant Group (PNTG) appoints Lynette Walbom as CFO.
    • Protalix BioTherapeutics (PLX) set to join Russell 3000® Index
    • Ra Medical Systems (RMED) Announces Delayed 10-Q Filing.
    • Vipshop (VIPS) appointed Mr. Mark Wang as its chief financial officer.
  • Buyback Announcements or News:
    • Bar Harbor Bankshares (BHB) Announces Stock Repurchase Plan.
    • Brookfield (BN) extends class a share buyback by one year to May 2024.  Gets TSX OK to Buy Back Up to 10% of Public Float of A Shares.
    • FlexShopper, Inc. (FPAY) Announces Share Repurchase Program.
    • TEGNA Inc. (TGNA) Announces $300 Million Accelerated Share Repurchase Agreement and Increases Regular Quarterly Dividend by 20% Following Termination of Merger Agreement with Standard General. (see Dividened) (MarketWatch)
    • US Foods (USFD) (See secondary offering above).
  • Stock Splits or News: 
    • Evolve (SNMP) Announces a 1-for-30 Reverse Split.
    • Lordstown Motors Corp. (RIDE) Announces 1:15 Reverse Stock Split.
    • RNAZ trading r/s price.
  • Dividends Announcements or News: 
    • Allstate (ALL) Returns Cash to Shareholders through Dividends
    • TEGNA Inc. (TGNA) Increases Regular Quarterly Dividend by 20% Following Termination of Merger Agreement with Standard General.

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

S&P 500 -11, Dow Jones -77,  NASDAQ -34, and Russell 2000 -2. (as of 7:55 a.m. EDT).  Asia is lower ex the Kospi and Europe is lower ex the FTSE. VIX Futures are at 19.60 from 19.75 yesterday.  Gold, Silver and Copper lower from yesterday. WTI Crude Oil and Brent Crude Oil higher with Natural Gas lower from yesterday. US 10-year Treasury sees yields at 3.75% from 3.667% yesterday. The U.S. Dollar is higher versus the Euro, higher versus the Pound and lower against the Yen. Bitcoin is at $27,315 from $26,801 yesterday, higher by 1.74%.

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

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

Stocks traded mixed in a tight range and bond yields rose Monday while traders awaited news from the debt-ceiling negotiations and chewed over the latest remarks from Federal Reserve officials, including from one who said he favored additional interest-rate increases.  The tech-heavy Nasdaq Composite rose 0.5% to a new 2023 high, while the S&P 500 ticked 0.02% higher. The NASDAQ Composite and S&P 500 are now up on the year 22% and 9.2%, respectively. The Dow Jones Industrial Average shed 0.4%, or about 140 points, to leave it up just 0.4% this year. (WSJ – edited by QPI)

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

  • Tuesday After the Close: 

  • Wednesday Before the Open:

Earnings of Note This Morning:

  • Beats: AZO +2.65, KC +1.14, VIPS +0.85, LOW +0.22, DKS +0.19, DAVA +0.06 of note.
  • Flat: BJ of note.
  • Misses: IHS (0.21) of note.
  • Still to Report: WSM of note.

Guidance:

  • Positive Guidance: ZM, VIPS of note.
  • Negative Guidance: NDSN, LOW, KC, DAVA of note.

Erlanger Research Advance/Decline Chart:

Gap Ups & Down In Early Pre-Market:

  • Gap Up: LFCR +12%, ICVX +10%, GGAA +8%, TRVI +5% of note.
  • Gap Down: GH -8% of note.

Insider Action: GM, EVA sees Insider buying with dumb short selling.  ORCC 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.

  • Stock making the biggest moves in the pre-market: YELP, AZO, LOW, DKS, ZM, CVX, BJ (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: Saudi Energy Minister Tells Oil Speculators To Watch Out. (Bloomberg)
  • Bloomberg  Most Shared Story: The Man Who Spends $2 Million a Year to Look 18 Is Swapping Blood With His Father And Son. (Bloomberg)
  • Treasury yields climb with debt deal elusive: Market Wrap. (Bloomberg)
  • Pasta prices have surged, 17.5% in March and 16.5% in April, in Italy, prompting crisis meetings and calls for a strike. (CNBC)
  • Autozone (AZO) beat on estimates but missed on sales and is 3% lower. (MarketWatch)
  • Hilton (HLT) and Marriott (MAR) square off on extended stay battle. (WSJ)

Moving Average Update:

  • Score inches back to 85% from 88%.

Geopolitical: 

  • President’s Public Schedule:
    • The President and The Vice President have lunch, 12:15 p.m. EDT
    • The President receives the Presidential Daily Briefing; The Vice President attends, 1:00 p.m. EDT
    • Press Briefing by Press Secretary Karine Jean-Pierre, 2:30 p.m. EDT

Economic:

  • Redbook Sales 8:55 a.m. EDT
  • PMI Composite 9:45 a.m. EDT
  • April New Home Sales are due out at 10:00 a.m. EDT and are expected to fall to 660,000 from 683,000.
  • Richmond Fed Mfg Index 10:00 a.m. EDT
  • API Crude Oil Data 4:30 p.m. EDT

Federal Reserve / Treasury Speakers:

  • Federal Reserve Bank of Dallas Lorie Logan 9:00 a.m. EDT

M&A Activity:

  • AIG to Sell Validus Re to RenaissanceRe (RNR). $2.985 Billion Acquisition. (MarketWatch)
  • Brown & Brown, Inc. (BRO) enters into agreement to acquire Kentro Capital Limited d/b/a Nexus Underwriting and Xenia Broking.
  • Core & Main (CNM) Signs Agreement to Acquire Foster Supply.
  • Shutterstock (SSTK) to Acquire GIPHY, the World’s Largest GIF Library and Search Engine, $53 million of net cash.

Meeting & Conferences of Note:

  • Sellside Conferences:
    • Benchmark Healthcare House Call Conference
    • Berenberg Conference USA 2023 (05/23/23-05/25/23)
    • Berenberg European Conference (05/23/23-05/24/23)
    • Credit Suisse HALO Investment Summit
    • Gartner Marketing Symposium/Xpo
    • Jefferies Virtual Renewables & Clean Energy Conference 2023 (05/23/23-05/24/23)
    • JP Morgan European Materials Conference 2023
    • Morgan Stanley Inaugural Luxury Conference 2023
    • Truist Securities Financial Services Conference
    • UBS 24th Annual Financial Institutions Conference 2023 (05/23/23-05/24/23)
    • UBS Spring Biotech Conference
    • UBS Global Healthcare Conference 2023
    • UBS Quantitative Investing Conference
    • Wells Fargo Energy Conference (05/23/23-05/24/23)
    • Wolfe Research Transportation and Industrials Conf (05/23/23-05/25/23)
        • Previously posted and ongoing conferences:
          • Oppenheimer 24th Annual Israeli Conference 2023 (05/21/23-05/23/23)
          • Goldman Sachs Eighth Annual Leveraged Finance and Credit Conference 2023 (05/22/23-05/24/23)
          • JP Morgan 51st Annual TMT Global Technology Media and Communications Conference 2023 (05/22/23-05/24/23)
          • Morgan Stanley 8th Annual Sustainable Futures Conference 2023 (05/22/23-05/23/23)
          • Barclays Leveraged Finance Conference

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: