Mid-Morning Look: March 03, 2022

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Mid-Morning Look

Thursday, March 03, 2022






DJ Industrials




S&P 500








Russell 2000






U.S. stocks erased overnight gains following a trio of factors that weighed on sentiment. A day after Fed Chairman Powell eased fears of aggressive rate hikes and no escalation of tensions in Ukraine/Russia (commentary at least as war enters second week), markets didn’t like what it heard this morning. First, newswires reported that Russia’s Putin told French PM Macron in a phone call today that if Ukraine neutralization & disarmament cannot be reached diplomatically, he would carry on military operations. Second, comments by Fed President Mester weighed after saying it’s okay to start hikes with 25 bps with more to come but says if by middle of year after rate hikes and balance sheet trimming, we don’t see inflation moving back down, that would signal need to remove accommodation at a faster pace. Third, weaker services data didn’t help mkts either as ISM Services slump to 12-month lows, dropping from 59.9 to 56.5, against expectations of a rise to 61.1, while also shows a plunge in new orders and employment. The factors, all within the first hour of trading weighed heavily on stocks. Also, oil extended its advance to the highest level since 2008 ($116.57 for WTI crude), before turning negative (lows $106.43) on a report that Iran may reach agreement to revive nuclear deal, allowing Iran to export more oil. Stock markets very volatile to start the day which also saw disappointing earnings/guidance from several retailers (AEO, BIG, BJ, BURL – though BBY rises on results) and mixed software earnings.


Economic Data

·     Weekly Jobless Claims fell to 215K from 233K last week and below consensus 225K; the 4-week moving average fell to 230,500 from 236,500 prior week; continuing claims rose to 1.476M from 1.474M last week (est. 1.475M); U.S. insured Unemployment Rate unchanged at 1.1%

·     U.S. Q4 non-farm productivity unrevised at +6.6% vs. est. +6.7%; while non-farm unit labor costs revised to +0.9% vs. estimate and prior reading of +0.3%

·     U.S. IHS Markit February final composite PMI at 55.9 (vs flash 56.0) and U.S. IHS Markit February final services PMI at 56.5 (vs flash 56.7); input prices index for February 75.5 vs flash reading 76.1 and final January 73.2

·     ISM Non-manufacturing for Feb shows PMI 56.5 in February vs 59.9; business activity index 55.1 in February vs 59.9 in January; prices paid index 83.1 in February vs 82.3 in January; new orders index 56.1 in February vs 61.7 in January; employment index 48.5 in February vs 52.3 in January; ISM non-manufacturing PMI index and new orders index at lowest since February 2021

·     Factory Orders for January rose +1.4% to $544.2B vs. +0.5% consensus and +0.7% prior (revised from -0.07%) as Shipments +1.2% to $536.9B and Unfilled Orders +0.9% to $1,283.5B







WTI Crude















10-Year Note





Sector Movers Today

·     Pharma movers; in cannabis, TLRY agreed to buy up to $211M of HEXO senior secured convertible notes held by HT Investments MA LLC as part of a strategic alliance between the two cannabis companies; TNXP said the FDA granted Orphan Drug designation for its drug candidate, TNX-2900, for treatment of Prader-Willi syndrome; AZN said its rare disease group Alexion has closed an exclusive global deal and license agreement with Neurimmune AG to commercialize NI006

·     Defense, Industrial & Machinery; North American Class 8 truck orders fell to 21,100 vehicles in Feb y/y, while rose only 6.6% in Feb m/m, the lowest in three months and the biggest monthly drop since Jan. 31 (shares of CMI, ALSN, NAV, PCAR among names leveraged to class 8 data); HON said it’s reaffirming its 1Q and FY 2022 guidance and upgrades long-term financial framework, including organic growth, margin expansion and long-term segment margin targets; BA secures order for additional mh-47g block ii chinook helicopters from U.S. Army at $195M

·     Semiconductors; INTC downgraded to Underweight and both QRVO and TER downgraded to EW from OW at Morgan Stanley while upgrade GFS saying not really changing bigger picture views materially but trying to rebalance our ratings to be more consistent with our overall In-Line view on the semiconductor industry and make room for more actionable names; WDC cuts Q3 adjusted EPS view to $1.30-$1.60 from prior view of $1.50-$1.80 and vs. consensus $1.50; cuts Q3 revenue view to $4.2B-$4.4B from $4.45B-$4.65B (est. $4.06B); updated its outlook due to the recent chemical contamination issue

·     Casinos, Gaming, Lodging & Leisure sector; DKNG boosted its long-term adjusted ebitda outlook to $2.1 billion; MGM buyback announced a $2B share buyback plan; RSI downgrade from Buy to Hold w/ $10 PT from $19 at Hallum after earnings; BALY downgraded at KeyBanc not as a result of the 4Q21 results/FY22 outlook, but more a function of our evolving view that there is a high hurdle rate for new money into LT-oriented story stocks pending whatever outcome BALY’s board decides



·     BBY +8%; Q4 adj EPS and revenue relatively in-line with consensus, comps -2.3% vs est. -0.9%, raised its dividend to 88c from 70c, said it plans to repurchase $1.5B of stock this year

·     BOX +2%; posted better than expected results & guidance, w/ ~17% Q4 rev growth marking the 4th consecutive qtr of YoY rev growth acceleration and FY23 guidance looks for acceleration in FY23 vs. FY22

·     CF, MO +4%; as price rally for grain prices of late (corn, wheat, soybeans) helping for them – wheat touching record highs recently given the Russian sanctions

·     GOGO +17%; reported strong Q4 results and issued long-term targets as Q4 revenue was $92.3M, up 18.9% Y/Y, fueled by strong growth in both service and equipment revenue

·     KR +9%; Q4 EPS of $0.91 tops est. $0.72 on better sales and Q4 identical-store sales ex-fuel +4% vs. est. +2.62% (down vs. 10.6% y/y) while guides FY adj EPS $3.75-$3.85 above the est. $3.44

·     PSTG +16%; strong quarter and both the Q1 and FY23 outlook were ahead of expectations as continues to land new customers

·     SPLK +8%; beat revenue and EPS targets by large amounts, accelerating revenue to +21% Y/Y (vs. -5% in FY20) – RPO and bookings grew at healthy rates and guided well ahead of 1Q and full-year

·     SQM +7%; reported a Q4 net profit of $321.6M, topping ests of $266.4M and compared with a net profit of $67.0M y/y



·     AEO -13%; Q4 adj EPS and revs matched estimates and said it is taking a cautious view of 2022 while seeing an earnings decline in H1 due to stimulus last year

·     BIG -3%; Q4 adj EPS $1.75 missed est. $1.89 on revs $1.73B vs est. $1.72B with comps -2.3% as the quarter was negatively impacted due to adverse shrink results, and Q1 EPS view $1.10-1.20 is below est. $1.28

·     BJ -12%; posted a wide Q4 comp sales ex-gas of +0.9% vs est. +4.78% though adj EPS 80c topped est. 74c on revs $4.36B vs est. $4.38B, sees EPS flat in FY23 from $3.25

·     BURL -7%; Q4 comp sales rose 6% but missed est. +10.8% increase with adj EPS $2.53 and sales $2.61B also missing expected $3.25 and $2.78B, and did not provide guidance

·     HEAR -16%; as Q4 adj EPS $0.16 vs. est. $0.23; Q4 revs $109.4M vs. est. $108.2M; sees 2022 EPS $0.70-$1.20 vs. est. $1.14; sees 2022 revenue flat, plus or minus 5%, from 2021

·     OKTA -9%; Q4 revenue of $383M, up 63% y/y (consensus $359.9M), and billings grew 91% y/y (normalized billings reflect 71% y/y growth), but shares fell due to the lowered operating margin outlook for FY23

·     SNOW -16%; strong FQ4’22 results with 3% upside on product revenue but shares slip as FY23 product rev guide of 65-67% to $1.88B-$1.9B vs est. $2.01B, due to a $97m headwind from platform improvements and announced definitive agreement to acquire Streamlit

·     VEEV -16%; billings noise and cash flow guidance surprised to the downside, overshadowing better Q4 results

·     WEAV -18%; downgraded by two analysts following 4Q21 results that fell short of expectations, with an initial 2022 outlook that implies a much more pronounced reset to growth/margins than we anticipated


Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.

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