TheChek News Flow

After Hours Summary: Weak earnings from SNAP -14.4%, EA -10.9%, MTCH -8.1%, WDC -6.1% are dragging down peers; OI +8.2%, SYK +4%, AMD +1.5% higher on earnings

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: OI +8.2%, MRCY +6% (also initiates review of strategic alternatives; also CFO to step down), SYK +4%, CACC +3.3%, AMD +1.5%, MDLZ +1.2%, EW +0.7%, BXP +0.2%, ASH +0.1%

Companies trading higher in after hours in reaction to news: RIG +5.1% (announces $392 mln contract award), DAR +2.1% (DAR and VLO JV approve sustainable aviation fuel project), CVLG +0.8% (increases share repurchase auth), CVEO +0.6% (wins contract in Australia), FANG +0.6% (files for offering by selling shareholders), VLO +0.2% (DAR and VLO JV approve sustainable aviation fuel project; also increases dividend), AUY +0.1% (AUY and PAAS confirm shareholders approve proposed transaction)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: SNAP -14.4%, EA -10.9% (also stopping development on Apex Mobile Legends and Battlefield Mobile), MTCH -8.1%, HA -7.7%, WDC -6.1%, SMCI -4.6%, JNPR -4%, VREX -3%, CB -0.7%, AMGN -0.5% (also confirms receipt of second request by FTC), HLI -0.3%, VALE -0.3%, RNR -0.2%

Companies trading lower in after hours in reaction to news: TSHA -11.6% (provides an update on the TSHA-120 program), PSTX -8% (Executive Chairman resigns), GRND -3.8% (in sympathy with weak MTCH earnings), PIXY -3.3% (files for $100 mln mixed securities shelf offering), TTWO -2.9% (in sympathy with weak EA earnings), BMBL -2.4% (in sympathy with weak MTCH earnings), MGNI -2.1% (in sympathy with weak SNAP earnings), PINS -2% (in sympathy with weak SNAP earnings), TTD -1.6% (in sympathy with weak SNAP earnings), META -1.3% (in sympathy with weak SNAP earnings), ROKU -1.1% (in sympathy with weak SNAP earnings), FTI -0.9% (awarded a large contract by Aker BP for its Utsira High development), JWN -0.9% (S&P revises JWN outlook to "Negative"), PAAS -0.7% (AUY and PAAS confirm shareholders approve proposed transaction), GOOG -0.6% (in sympathy with weak SNAP earnings), CMCSA -0.5% (ends its free tier open for new customers, according to Tech Crunch), HZNP -0.4% (HZNP and AMGN confirm receipt of second request by FTC), PRTA -0.3% (reports topline Phase 1 study results of PRX005), NFLX -0.2% (in sympathy with weak SNAP earnings)

Closing Stock Market Summary

The stock market closed out January on a decidedly positive note. The main indices recovered all of yesterday's losses, driven by a lingering sense that the Fed may be compelled to pause its rate hikes in the near future following a pleasing Q4 Employment Cost Index and some weaker-than-expected January Chicago PMI and Consumer Confidence data.

This notion fueled a risk-on mentality that had many high-beta stocks continue their monthly outperformance. To that end, the Russell 2000 rose 2.3% versus a 1.5% gain in the S&P 500 and a 1.7% gain in the Nasdaq Composite. The Invesco S&P High Beta ETF (SPHB) also rose 2.3%.

Notably, there was a late surge of buying interest that was attributed to a Wall Street Journal article by Nick Timiraos that suggested today's Employment Cost Index report could increase the possibility of Fed officials agreeing to pause the rate hikes in the near future. The major indices closed at their highs for the day. 

Mega cap stocks, which have steered gains all month, outpaced the main indices today. The Vanguard Mega Cap Growth ETF (MGK) rose 1.6% today and 10.7% in January. 

Today's upside bias in the stock market was also helped along by positive reactions to some notable companies that reported quarterly results. Exxon Mobil (XOM 116.01, +2.45, +2.2%), UPS (UPS 185.23, +8.26, +4.7%), and International Paper (IP 41.82, +4.03, +10.7%) were among the standouts in that regard.

Some other post-earnings report standouts included General Motors (GM 39.32, +3.03, +8.4%) and PulteGroup (PHM 56.89, +4.90, +9.4%), which are helped propel the S&P 500 consumer discretionary sector (+2.2%) towards the top of the leaderboard, along with gains in Amazon.com (AMZN 103.13, +2.58, +2.6%) and Tesla (TSLA 173.22, +6.56, +3.9%).

Aside from consumer discretionary, the top performers were the cyclical materials (+2.2%), real estate (+1.9%), and industrial (+1.7%) sectors. All 11 sectors were able to close with a gain, but the slimmest gains were registered by the defensive-oriented utilities (+0.7%) sector.

Market breadth reflects the broad buying interest behind today's gains. Advancers lead decliners by a greater than 5-to-1 margin at the NYSE and a greater than 3-to-1 margin at the Nasdaq.

Notably, Dow components Caterpillar (CAT 252.29, -9.21, -3.5%) and McDonald's (MCD 267.40, -3.49, -1.3%) went against the grain following their quarterly reports.

• Nasdaq Composite: +10.7% YTD
• Russell 2000: +9.7% YTD
• S&P Midcap 400: +9.1% YTD
• S&P 500: +6.2% YTD
• Dow Jones Industrial Average: +2.8% YTD

Reviewing today's economic data:

• Q4 Employment Cost Index 1.0% (consensus 1.1%); Prior 1.2%
  • The key takeaway from the report is that employment costs moderated in the fourth quarter, which is a step in the right inflation direction as far as the Fed is concerned, although the Fed still won't be content with the idea that the inflation problem has been solved.
• November FHFA Housing Price Index -0.1%; Prior 0.0%
• November S&P Case-Shiller Home Price Index 6.8% ( consensus 6.8%); Prior was revised to 8.7% from 8.6%
• January Chicago PMI 44.3 ( consensus 45.4); Prior was revised to 45.1 from 44.9
• December Consumer Confidence 107.1 ( consensus 108.1); Prior was revised to 109.0 from 108.3
  • The key takeaway from the report is the Conference Board's acknowledgment that a reading below 80.0 for the Expectations Index often signals a recession within the next year.

Ahead of tomorrow's open, Altria (MO), AmerisourceBergen (ABC), Brinker (EAT), Humana (HUM), Johnson Controls (JCI), Peloton (PTON), Scotts Miracle-Gro (SMG), T-Mobile (TMUS), and Waste Management (WM) will headline the earnings reports.

Looking ahead to Wednesday, market participants will receive the following economic data:

• 7:00 ET: Weekly MBA Mortgage Index (prior 7.0%)
• 8:15 ET: January ADP Employment Change ( consensus 170,000; prior 235,000)
• 9:45 ET: Final January IHS Markit Manufacturing PMI (prior 46.8)
• 10:00 ET: December Construction Spending ( consensus 0.0%; prior 0.2%), January ISM Manufacturing Index ( consensus 48.0%; prior 48.4%), and December JOLTS job openings (prior 10.485 mln)
• 10:30 ET: Weekly EIA crude oil inventories (prior 0.533 mln)
• 14:00 ET: February FOMC Rate Decision ( consensus 4.50-4.75%; prior 4.25-4.50%)

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Research Calls

• Upgrades:
  • BAE Systems (BAESY) upgraded to Buy from Neutral at UBS
  • Banco de Sabadell (BNDSF) upgraded to Buy from Neutral at UBS
  • FibroGen (FGEN) upgraded to Outperform from Mkt Perform at William Blair
  • FleetCor (FLT) upgraded to Buy from Neutral at BofA Securities; tgt raised to $240
  • Inter & Co (INTR) upgraded to Buy from Neutral at Goldman; tgt lowered to $4.20
  • LyondellBasell (LYB) upgraded to Overweight from Neutral at Atlantic Equities; tgt $110
  • New Fortress Energy (NFE) upgraded to Buy from Neutral at BTIG Research; tgt $50
  • Societe Television Francaise 1 (TVFCF) upgraded to Equal Weight from Underweight at Barclays
  • Williams Cos (WMB) upgraded to Overweight from Hold at US Capital Advisors; tgt $36
  • WPP plc (WPP) upgraded to Overweight from Equal Weight at Barclays
• Downgrades:
  • Airbus (EADSY) downgraded to Sell from Buy at UBS
  • Bank of America (BAC) downgraded to Neutral from Overweight at Atlantic Equities; tgt $40
  • Crestwood Equity Partners (CEQP) downgraded to Hold from Buy at US Capital Advisors; tgt $29
  • DCP Midstream (DCP) downgraded to Hold from Buy at US Capital Advisors; tgt $42
  • Eastern Bankshares (EBC) downgraded to Underweight from Neutral at JP Morgan; tgt lowered to $15
  • Enerflex (EFXT) downgraded to Sector Perform from Outperform at National Bank Financial
  • Finmeccanica SpA (FINMY) downgraded to Neutral from Buy at UBS
  • HomeStreet (HMST) downgraded to Mkt Perform from Outperform at Keefe Bruyette; tgt lowered to $29
  • Invitae (NVTA) downgraded to Sell from Neutral at Goldman; tgt $2
  • iStar (STAR) downgraded to Mkt Perform from Outperform at Raymond James
  • Legal & General Group (LGGNY) downgraded to Hold from Buy at Berenberg
  • Nokia (NOK) downgraded to Neutral from Buy at UBS
  • Nu Skin (NUS) downgraded to Hold from Buy at Jefferies; tgt lowered to $39
  • Q2 Holdings (QTWO) downgraded to Neutral from Outperform at Robert W. Baird; tgt $32
  • RELX (RELX) downgraded to Equal Weight from Overweight at Barclays
  • Sierra Bancorp (BSRR) downgraded to Market Perform from Outperform at Hovde Group; tgt $24
  • Thales (THLEF) downgraded to Neutral from Buy at UBS
  • Truist (TFC) downgraded to Equal-Weight from Overweight at Stephens; tgt $53
  • Ubisoft (UBSFY) downgraded to Underperform from Buy at Jefferies
• Others:
  • AmerisourceBergen (ABC) resumed with an Outperform at Evercore ISI; tgt $185
  • ARS Pharmaceuticals (SPRY) initiated with an Outperform at Wedbush; tgt $10
  • Compass Therapeutics (CMPX) initiated with a Buy at Jefferies; tgt $8
  • Incyte (INCY) initiated with an Overweight at Piper Sandler; tgt $100
  • Kura Oncology (KURA) initiated with a Buy at Stifel; tgt $25
  • Pacira BioSciences (PCRX) assumed with an Outperform at Wedbush; tgt lowered to $60
  • Syndax Pharmaceuticals (SNDX) initiated with a Buy at Stifel; tgt $37

Gapping down
In reaction to earnings/guidance:

• HLIT -11.4%, ITGR -6% (Q4 and FY23 guidance; to offer $375 mln principal amount of its convertible senior notes), HTLF -5%, PCH -3.8%, NXPI -3.7%, PNR -3.4%, PBI -3%, PFE -2.8%, CAT -2.6%, MDC -2.1%, MCD -1.9%, AQUA -1.2%, GLW -1.1%, OSK -0.8%, CADE -0.7%

Other news:

• BBAI -15.8% (stock offering by selling shareholders)
• MNOV -2.5% (completes enrollment in the Phase 2b clinical trial of MN 166 (ibudilast) in alcohol use disorder)
• DASH -2.2% (announces future stock sales by co-founders)
• ACM -2% (awarded U.S. Navy contract)
• PARA -1.9% (Showtime to merge with Paramount+ according to The Information)
• ADC -1.8% (replacing STOR in S&P MidCap 400)
• TSLA -1.1% (discloses it received requests from the DOJ for documents related to Tesla's Autopilot and FSD features)
• DG -1% (CFO to retire)

Analyst comments:

• NVTA -6.5% (downgraded to Sell from Neutral at Goldman)
• NUS -2% (downgraded to Hold from Buy at Jefferies)
• STAR -1.7% (downgraded to Mkt Perform from Outperform at Raymond James)
• QTWO -1.5% (downgraded to Neutral from Outperform at Robert Baird)

Gapping up
In reaction to earnings/guidance:

• IP +5.5%, SYM +5.4%, SPOT +5.2%, SANM +4.9%, GM +4.6%, ALGM +3.5%, VSCO +3.3%, CSWC +3.1% (also increases dividend), AOS +2.5%, WHR +2.1%, HP +2%, PHM +1.5%, UPS +1.4%, GGG +1.2%, PSX +0.9%

Other news:

• CRK +6.3% (replacing ADC in the S&P SmallCap 600)
• FENC +4.6% (announces PEDMARK (sodium thiosulfate injection) receives Orphan Drug exclusivity from FDA)
• IONS +1.8% (FDA grants olezarsen Fast Track designation for the treatment of familial chylomicronemia syndrome)
• GABC +1.6% (increases quarterly dividend)
• QURE +0.8% (entered into a global licensing agreement for APB-102 to treat superoxide dismutase 1 amyotrophic lateral sclerosis a rare genetic form of ALS)
• ALGT +0.7% (announces management changes; Robert Neal named CFO)

Analyst comments:

• INTR +5.3% (upgraded to Buy from Neutral at Goldman)
• FGEN +2.4% (upgraded to Outperform from Mkt Perform at William Blair)
• NFE +0.7% (upgraded to Buy from Neutral at BTIG Research)

Early premarket gappers

• Gapping up:
  • SYM +7.2%, SANM +7.1%, CRK +6%, GM +5.9%, SPOT +5%, FENC +4%, WHR +3.2%, GRPN +2.8%, ARE +2.3%, HP +2%, CSWC +1.8%, PHM +1.8%, GABC +1.6%, UPS +1.3%, GGG +1.2%, ALGT +0.7%, INVH +0.6%, TECK +0.5%
• Gapping down:
  • BBAI -14.8%, HLIT -12.9%, ITGR -5.6%, HTLF -5%, NXPI -4.6%, PCH -3.8%, CAT -3.1%, DASH -2.8%, XOM -2.8%, PARA -2.7%, MNOV -2.5%, PII -2.5%, MDC -2.1%, ACM -2%, ADC -1.8%, LOGI -1.5%, AAPL -0.8%, COHU -0.8%, ALB -0.7%, CADE -0.7%