Traders Market Weekly: Embrace the Chaos in 2023

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  • #49638
    Truman
    Participant

    All week – Data reports that traders with be watching for are latest pricing updates on paper and containerboard.
    All week – Futures contracts that expire during the week include the January contract for crude oil and various Treasury contracts. The expirations can lead to more volatility.

    Monday – December 19

    Volatility watch

    Options trading volume has moved higher on Sea Limited (SE) and Zoom Video Communications (ZM) over the last week.

    Short interest has pushed up on Blink Charging (BLNK) again.

    Rocket Lab (RKLB) with the company’s first-ever mission from U.S. soil scheduled to launch from NASA’s Wallops Island facility in Virginia on December 18. While the California-based company has been launching small satellites to orbit from New Zealand since 2018, a successful U.S. launch could attract more attention to the stock.

    Investors will also be watching Tesla (TSLA) closely to see if the electric vehicle stock can find a bottom following its 62% YTD slide.

    Earnings watch – Notable companies due to report include Heico (HEI) and Steelcase (SCS).

    #49639
    Truman
    Participant

    Box office – Cinema names will be on watch with weekend numbers for Avatar: The Way of Water (DIS) expected to impress.

    The sequel to the all-time cinema box office champion from 13 years ago could be key for AMC Entertainment (AMC); Cineworld (OTCPK:CNNWQ), Cinemark (CNK), IMAX (IMAX), Marcus (MCS), Reading International (RDI), Cineplex (CGX:CA), and National CineMedia (NCMI).

    #49640
    Truman
    Participant

    Tuesday – December 20

    Earnings watch – Notable companies due to report include Nike (NKE), General Mills (GIS), FedEx (FDX), and Blackberry (BB).

    All day – The results of the European antitrust review of the planned Broadcom (AVGO) acquisition of VMware (VMW) is expected to be announced.

    All day – Arcus Biosciences (RCUS) and Gilead Sciences (GILD) will present details on Phase 2 data on Domvanalimab at ASCO plenary Series.

    5:00 p.m. Nike (NKE) will hold its earnings call. Companies that have a very high trading correlation with Nike include Under Armour (UAA), Foot Locker (FL), Skechers (SKX), Lululemon (LULU), as well as Starbucks (SBUX) due to the China connection.

    5:30 a.m. FedEx (FDX) will hold its earnings call and provide guidance that could impact sentiment on UPS (UPS). Norfolk Southern (NSC) and Southwest Airlines (LUV) also have a surprisingly high trading correlation with FedEx.

    #49641
    Truman
    Participant

    Wednesday – December 21

    Earnings watch – Notable companies due to report include Micron Technology (MU) and Toro Company (TTC). Carnival (CCL) will also report with option trading implying a double-digit share price swing.

    All day – The IPO lockup period expires for a block of shares of Loop Media (LPTV). Shares of LPTV trade almost 20% above the level the IPO was priced at.

    9:00 a.m. The November existing home sales report is expected to show a drop to 4.20M units vs. 4.43M for October. The housing market is being impacted by affordability challenges.

    #49642
    Truman
    Participant

    Thursday – December 22

    Earnings watch – Notable companies due to report include Paychex (PAYX) and CarMax (KMX). Options trading implies a double-digit share price swing for Limoneira (LMNR) after its earnings report arrives.

    #49643
    Truman
    Participant

    Friday – December 23

    All day – The FDA action date on Coherus BioSciences’ (CHRS) toripalimab arrives. Phase 2 interim analysis released previously noted encouraging clinical activity with no specific data. The stock has rallied in the past off toripalimab developments.

    All day – Mullen Automotive (MULN) shareholders will vote on the proposed increase in the aggregate number of authorized shares of common stock to 5B from 1.75B. Mullen is also asking shareholders to approve an up to 1-for-25 reverse stock split and an amendment to facilitate the issuance of $150B in convertible notes and up to $190Min convertible preferred stock.

    All day – Shareholders with Viveon Health Acquisition (VHAQ) will meet to vote on taking aesthetics company Suneva public in a SPAC deal.

    8:30 a.m. The durable goods order release for November is expected to show a 0.8% decline compared to the 1.1% gain in October. A decrease in aircraft orders from Boeing (BA) is expected to be a factor.

    #49644
    Truman
    Participant

    Avatar: The Way of Water (NYSE:DIS) has grossed $134M in its North American opening – one of the year’s top debuts, and set to launch a multi-week recovery from some box-office doldrums.

    That $134M tied with The Batman (WBD) for fifth-best opening domestically of 2022 (and Sunday night receipts will move the new Avatar up there). It also added $301M overseas for a global first-weekend total of $435M and counting, the third-biggest opening of the COVID-19 pandemic era.

    While giving some breathing room for movies, the new Avatar’s opening take did come in a bit behind expectations for at least $150M – though some long legs will really determine its importance in the coming few months.

    And it will be counting on a long successful run. It cost hundreds of millions of dollar just to make it, let alone market it – and director James Cameron says it will need to be one of the top three grossers all-time just to break even.

    Some 62% of Avatar 2’s ticket sales came from premium formats, including IMAX (NYSE:IMAX), which claimed its second-biggest weekend ever and best December opening with $48.8M.

    Meanwhile Sunday night ticket sales will likely decide a tight race for No. 2, though those films’ audiences were largely take over by Avatar 2. Black Panther: Wakanda Forever (DIS) was set to lose its five-week grip on No. 1 by falling to No. 3 with $5.4M, while Christmas action/comedy Violent Night (CMCSA) looked set to hold on to No. 2 with $5.6M.

    Rounding out the top five were Strange World (DIS), with $2.2M, and The Menu (DIS), with $1.7M. No other film cleared $1M at the weekend box office.

    #49645
    Truman
    Participant

    Citi contrarian bull and bear stock calls for 2023

    For 2023 in assets, contrarians will likely be “short both oil (USO) (BNO) and gold (GLD), and long EM (EEM) (VWO) and DM equities,” Buckland said. “They would be sellers of the US$ (DXY).”

    In stocks, contrarians “are currently long Growth, bearish Value and prefer cyclical to defensive sectors. They will likely be bullish on US equities (SPY) (QQQ) (IWM), especially Tech stocks (XLK) (XLC), and bearish Energy (XLE). Within EM, they will likely buy anything China-related (MCHI).”

    The bull contrarian stock picks for 2023:

    Meta (NASDAQ:META), year to date performance -65%
    PayPal (PYPL), -65%
    Tesla (TSLA), -62%
    AMD (AMD), -57%
    Netflix (NFLX), -51%
    Salesforce (CRM), -50%
    Intel (INTC), -50%
    Amazon (AMZN), -49%
    Micron (MU) -46%
    Edwards Lifesciences (EW), -43%

    The bearish contrarian stock picks for 2023:

    Occidental Petroleum (NYSE:OXY), +99%
    Marathon Petroleum (MPC), +65%
    Exxon Mobil (XOM), +64%
    SLB (SLB), +54%
    ConocoPhillips (COP), +53%
    Valero (VLO), +52%
    McKesson (MCK), +48%
    Chevron (CVX), +41%
    Daiichi Sankyo (OTCPK:DSKYF), +35%
    Glencore (OTCPK:GLCNF), +29%

    #49646
    Truman
    Participant

    Wedbush 2023 Picks

    “We believe overall the tech sector will be up roughly 20% in 2023 from current levels with Big Tech, software, and semis leading the charge despite the macro and Fed wild cards abound,” analyst Dan ives wrote in a note to clients.

    In coming up with themes for next year, Ives noted that it’s likely to be a “choppy, yet bullish tech tape” for companies that are well positioned, as the Federal Reserve starts to slow down interest rate hikes, but weakness in the global economy continues.

    Apple (NASDAQ:AAPL) is still the firm’s top pick heading into 2023, even as the company has dealt with supply chain disruptions stemming from China’s zero-COVID policies. As the country moves away from that strategy, it’s possible that Apple (AAPL) will get its supply chain back on trackd and the demand for its highly popular iPhone 14 Pro and iPhone 14 Pro Max gets fulfilled.

    There looks to be early signs of that, as investment firm UBS recently said there was evidence of improving iPhone 14 wait times in both of Apple’s (AAPL) key markets, the U.S. and China.

    Ives also noted that other areas of tech spending should be relatively strong in 2023, including the cloud, software and cyber security, even as a great number of Wall Street models have already factored in “a very uncertain macro [environment] over the next 6 to 9 months,” Ives explained.

    In cloud computing, Ives highlighted Microsoft (NASDAQ:MSFT) and Salesforce (NYSE:CRM) as being well positioned going into 2023, even as both companies have recently laid off employees on worries of slowing growth.

    Palo Alto Networks (PANW), CyberArk (CYBR), CheckPoint (CHKP) and Zscaler (ZS) were highlighted as the top cyber security names.

    Ziff Davis (ZD), NICE (NICE), Alight (ALIT) and Planet Labs (PL) were highlighted as some “under the radar” stocks that fit the “growth as a reasonable price” mantra.

    Ives also said that he expects M&A activity to rise next year, as valuations have come, the Fed is nearing the end of its rate hikes and growth could remain resilient, even in the face of a weaker global economy.

    As such, companies like Cerence (CRNC), Varonis (VRNS), Tenable (TENB), Progress Software (PRGS) and Qualys (QLYS) could be acquisition targets.

    #49647
    Truman
    Participant

    L3Harris close to deal to buy Aerojet Rocketdyne for $4.7B

    L3Harris Technologies Inc. (NYSE:LHX) is close to agreeing to a deal to buy rocket maker Aerojet Rocketdyne (NYSE:AJRD) for $4.7 billion.

    L3Harris (LHX) outbid General Electric (GE) in a sales process for Aerojet, agreeing to pay $58 a share, according to a Reuters report on Saturday, which cited people familiar. An agreement may be announced a soon as Monday. The deal represents a 5.7% premium to Aerojet’s (AJRD) Friday closing price and a 36% premium to when Dealrepoter first discussed talks with strategic buyers on Aug. 23.

    Dealreporter said earlier this month that defense contractor L3Harris (LHX) was among the potential suitors that was performing due diligence on Aerojet (AJRD). Aerojet (AJRD) makes engines for rockets such as NASA’s Space Launch System that will carry people back to the moon.

    General Electric (GE), Veritas Capital and Textron (TXT) were also said to be interested in buying Aerojet, Reuters reporter last month.

    A potential Aerojet (AJRD) sale comes after FTC filed a lawsuit in late January to block Lockheed Martin’s (LMT) $4.4 billion purchase of Aerojet (AJRD) due to antitrust concerns. Lockheed terminated the deal in February.

    #49648
    Truman
    Participant

    Almost 40% of cryptos listed on CoinGecko in 2021 are now ‘dead coins’

    More than 8K cryptocurrencies were listed on pricing site CoinGecko during the 2021 bull market, though over 3.3K of them, or nearly 40%, have since been deactivated and delisted amid one of the worst downturns the industry has ever seen.

    That’s 2.5x higher than the amount of tokens listed in 2020 that ended up failing, aka “dead coins,” and 3.5x higher than the year-to-date figure, Julia Ng, who leads Growth Marketing at CoinGecko, wrote in a study published Nov. 29.

    The global crypto market cap stood at only $866.4B after peaking at around $3T in November 2021, according to CoinMarketCap data. The sharp decline in the value of cryptos in a short period of time doesn’t necessarily reflect any fundamental or structural change to the blockchain ecosystem took effect, just as the stock market’s performance doesn’t always reflect the health of the economy.

    Bitcoin (BTC-USD), which is seen as a key gauge for the cryptoverse and broader risk tolerance, changed hands at $17.8K as of Wednesday afternoon, down substantially from its November 2021 all-time high of $68.9K. That’s a more than 70% peak-to-trough drop. Many major tokens mirrored BTC’s volatile path as seen in this chart.

    Based on CoinGecko’s methodology, cryptos may be taken off the site due to a shortage in trading activity within the last two months. A token might also get removed if projects are revealed to be a scam, or if projects request to be deactivated.

    “Excluding the anomaly year of 2021, an average of 947 cryptocurrencies listed are dead and end up failing in the last five years, between 2018 to 2022,” Ng noted.

    #49660
    Truman
    Participant

    Equity indices in the Asia-Pacific region began the week on a lower note.

    —Equity Markets—

    Japan’s Nikkei: -1.1%
    Hong Kong’s Hang Seng: -0.5%
    China’s Shanghai Composite: -1.9%
    India’s Sensex: +0.8%
    South Korea’s Kospi: -0.3%
    Australia’s ASX All Ordinaries: -0.2%

    #49661
    Truman
    Participant

    There was speculation that the Bank of Japan and the Japanese government will revise their objective, opening the door to a modification of the BoJ’s ultra-loose monetary policy. However, Japan’s chief cabinet secretary pushed back against the speculation. Japan is reportedly planning a JPY114 trln budget for FY23/24.
    South Korea’s Finance Minister Choo said that the South Korean economy is slowing more rapidly than expected and that the slowdown will be at its worst pace in the first half of 2023.
    New Zealand’s Q4 Westpac Consumer Sentiment 75.6 (last 87.6)

    #49662
    Truman
    Participant

    Major European indices trade in the green after the release of a better than expected ifo Business Climate Index from Germany.

    —Equity Markets—

    STOXX Europe 600: +0.5%
    Germany’s DAX: +0.3%
    U.K.’s FTSE 100: +0.5%
    France’s CAC 40: +0.4%
    Italy’s FTSE MIB: +0.3%
    Spain’s IBEX 35: +0.5%

    #49663
    Truman
    Participant

    Ifo economists said that a silver lining has been observed and that the likelihood of a recession has decreased. EU politicians are still trying to agree on a proper level for a gas price cap. Three European Central Bank policymakers spoke about the high likelihood of another 50-bps rate hike in February and the potential for more hikes after that. Bank of France expects the French economy to grow 0.3% in 2023.
    Eurozone’s Q3 wages 2.1% yr/yr (last 3.2%), Q3 Labor Cost Index 2.9% yr/yr (last 3.8%), and October Construction Output 1.27% m/m (last 0.45%)
    Germany’s December ifo Business Climate Index 88.6 (expected 87.4; last 86.4). December Current Assessment 94.4 (expected 93.5; last 93.2) and Business Expectations 83.2 (expected 82.0; last 80.2)
    U.K.’s December CBI Industrial Trends Orders -6 (expected -9; last -5)

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