After Hours Report

It was a trend-down day for the stock market following the big run we've had in recent weeks. Entering today, the Dow Jones Industrial Average was up 19.9% this quarter, the S&P Midcap 400 was up 16.8%, the Russell 2000 was up 13.7%, the S&P 500 was up 13.6%, and the Nasdaq Composite was up 8.4%.

Those gains were partially predicated on the notion that the Fed may be apt to soften its approach, a view that was presumably aided by Fed Chair Powell's speech last week.

Buyer enthusiasm was dampened today, however, by an article in The Wall Street Journal from Nick Timiraos, who some believe is a preferred source to float the Fed's thinking. Mr. Timiraos suggested that wage inflation could ultimately compel the Fed in 2023 to take its benchmark rate higher than the 5.00% the market currently expects.

Accordingly, market participants were distracted today by the thought that the market may have overreacted to Mr. Powell's speech. In turn, there were festering concerns that the Fed might overtighten and trigger a deeper economic setback, which overshadowed reports discussing relaxed COVID restrictions in China.

The fed funds futures market is pricing in a 64.1% probability of the terminal rate hitting 5.00-5.25% by mid-2023 compared to a 46.9% probability on Friday, according to the CME FedWatch Tool. 

Other factors that helped to rein in some of the market's rebound energy included:

• A stronger-than-expected ISM Non-Manufacturing Index for November (56.5% vs 54.4% prior) that bolstered the view that the Fed is apt to keep rates higher for longer.
• An uptick in Treasury yields. The 2-yr note rose nine basis points to 4.38% and the 10-yr note rose nine basis points to 3.60%.
• Notable strength in the U.S. Dollar Index, up 0.8% to 105.33.
• Softness in mega-cap stocks, but some acute weakness in Tesla (TSLA 182.45, -12.41, 6.4%) even though it refuted press reports that it is planning an output cut of at least 20% for the Model Y at its Shanghai plant in December.

The broad-based selling that ensued saw the S&P 500 breach support at its 200-day moving average (4,045) and close just a whisker below the 4,000 level. 

All 11 S&P 500 sectors sported losses that ranged from 0.6% (utilities) to 3.0% (consumer discretionary). The latter was weighed down by Tesla and Amazon.com (AMZN 91.01, -3.12, -3.3.%), but also by V.F. Corp (VFC 29.51, -3.71, -11.2%) after the company lowered its EPS guidance for FY23 due to soft demand, particularly in North America.

Along with consumer discretionary, other cyclical sectors like financials (-2.5%) and energy (-2.5%) suffered the biggest losses.

Energy complex futures closed with decent losses today even though OPEC+ agreed to maintain its production cut target of 2 million barrels per day from November until the end of 2023. Separately, the EU and its allies agreed to a $60.00 per barrel price cap on Russian oil. WTI crude oil futures fell 3.5% today to $77.32/bbl and natural gas futures fell 10.4% to $5.62/mmbtu.

• Dow Jones Industrial Average: -6.6% YTD
• S&P Midcap 400: -11.7% YTD
• Russell 2000: -18.1% YTD
• S&P 500: -16.1% YTD
• Nasdaq Composite: -28.2% YTD 

Reviewing today's economic data:

• The ISM Non-Manufacturing Index for November increased to 56.5% (Briefing.com consensus 53.5%) from 54.4% in October. The dividing line between expansion and contraction is 50.0%. The November reading marks the 30th straight month of growth for the services sector.
  • The key takeaway from the report is that business activity for the non-manufacturing sector, which comprises the largest swath of U.S. economic activity, strengthened in November, aiding the view that the Fed will keep rates higher for longer.
• Factory orders for manufactured goods increased 1.0% month-over-month in October (Briefing.com consensus 0.7%) following an unrevised 0.3% increase in September. Shipments of manufactured goods jumped 0.7% after increasing 0.3% in September.
  • The key takeaway from the report is the quick rebound seen in business spending, evidenced by the 0.6% increase in nondefense capital goods orders excluding aircraft, and the sizable jump in shipments of nondefense capital goods excluding aircraft (+1.5%) that will compute favorably for Q4 GDP forecasts.
• The final IHS Markit Services PMI reading for November came in at 46.2 after the last reading of 46.1.

Tuesday's economic data is limited to the October Trade Balance (Briefing.com consensus -$77.2 billion; prior -$73.3 billion) at 8:30 a.m. ET.

Overseas: 

• Europe: DAX -0.6%, FTSE +0.2%, CAC -0.7%
• Asia: Nikkei +0.2%, Hang Seng +4.5%, Shanghai +1.8%

Commodities: 

• Crude Oil -2.81 @ 77.32
• Nat Gas -0.65 @ 5.62
• Gold -29.50 @ 1779.60
• Silver -0.91 @ 22.38
• Copper -0.07 @ 3.78

After-Hours Spotlight:

• Alcoa (AA) and Century Aluminum (CENX) are moving noticeably higher on reports that the US and EU are weighing new tariffs on Chinese steel and aluminum, according to Bloomberg... AA up 0.8%; CENX up 2.0%
• GameStop (GME) up meaningfully higher after beginning a round of layoffs, according to Axios... GME up 1.5%
• GitLab (GTLB) beats by $0.05, beats on revs; guides Q4 EPS above consensus, revs in-line... GTLB up 21.0%
• Herbalife Nutrition (HLF) announces $250 mln proposed offering of convertible notes... HLF down 10.9%
• PepsiCo (PEP) ticking higher as company plans to lay off hundreds of workers at its North American snacks and beverage division headquarters, according to the Wall Street Journal... PEP up 0.2%
• Sumo Logic (SUMO) beats by $0.11, beats on revs; guides Q4 EPS above consensus, revs above consensus... SUMO up 11.0%

Fair Value for Tuesday, December 6th:

• S&P 500: 4,003
• Nasdaq 100: 11,797
• DJIA: 33,985

For a full rundown of today's market and after hours developments, see Live In Play

• Earnings/Guidance (Full Earnings Calendar):
  • ArcBest (ARCB) reports prelim November 2022 consolidated revenues decreased approximately 2% on a per day basis compared to November 2021
  • Grindr (GRND) reports Q3 results; revs rise 32% yr/yr
  • Old Dominion Freight Line (ODFL) Provides Update for Fourth Quarter 2022
  • Science Applications (SAIC) beats by $0.17, beats on revs; guides FY23 EPS in-line, revs above consensus
  • SL Green Realty (SLG) reduced the annual ordinary dividend on SL Green’s common stock and units of its operating partnership by 12.9%, to $3.25/share; provides FY22/FY23 FFO guidance
  • V.F. Corp (VFC) lowers FY23 EPS guidance
• General News:
  • Russia says it will not comply with EU/G7 oil price cap for Russian oil, according to the New York Times
  • EU agrees on $60/barrel level of price cap
  • OPEC+ reaffirms existing oil output policy
  • Shanghai and Hangzhou ease coronavirus restrictions, according to Bloomberg
  • EU sanctions on seaborne Russian oil go into effect today
  • House Minority Leader Kevin McCarthy (R-CA) is working out deal with White House to remove military coronavirus vaccine mandate in order to pass defense authorization bill, according to the Washington Post
  • Sam Bankman-Fried says he cannot account for money that was sent to Alameda Research, according to the Wall Street Journal
  • EU nations lowered gas demand by 25% even as temperatures decreased, according to FT
  • Senate Majority leader Chuck Schumer (D-NY) wants to attach cannabis banking reform to other legislation that is more likely to pass, according to Barron's
  • EU-US joint statement of the trade and technology council
  • ABB Ltd (ABB): DoJ and ABB come to agreement; ABB to pay $315 mln to resolve FCPA violations stemming from bribery of high-ranking officials in South African energy company
  • ABM Industries (ABM) increases quarterly dividend to $0.22 from $0.195/share
  • Alexandria RE (ARE) declares cash dividend of $1.21 per common share for 4q22, an increase of 3 cents over 3q22
  • Allegion (ALLE) has elected Kirk S. Hachigian as its next chairman, effective Jan. 1, 2023
  • Alphabet (GOOG): New Zealand wants Google and Meta (META) to pay for news, according to Reuters
  • Amcor (AMCR) announces a five-year deal with ExxonMobil (XOM) to purchase certified-circular polyethylene material in support of its target to achieve 30% recycled material across its portfolio by 2030
  • American Axle (AXL) promotes Michael Lynch to COO, he previously was President of the co's Driveline Business Unit
  • Apple (AAPL) making plans to start shifting production out of China and to India or Vietnam, according to the Wall Street Journal
  • Athira Pharma (ATHA) presents data highlighting the potential therapeutic benefits of ATH-1105 in a preclinical mouse model of amyotrophic lateral sclerosis
  • Aurora Cannabis (ACB) repurchases ~$103 million principal amount of convertible notes
  • Axalta Coating Systems (AXTA) signed a multi-year agreement with Steer Automotive Group, the UK’s largest independently owned vehicle repair organization
  • Axsome Therapeutics (AXSM) files mixed securities shelf offering
  • Biogen (BIIB) receives EMA acceptance of Tofersen Marketing Authorization Application
  • Blink Charging (BLNK) signs a distribution agreement with ZOOZ Power for the distribution, sale, and deployment of ZOOZ’s Kinetic Power Booster, the ZOOZTER
  • Boeing (BA) delivers first two O3b mPOWER satellites to SES
  • CalAmp (CAMP) appoints Jikun Kim as CFO, effective January 9, 2023
  • Century Casinos (CNTY) Provides Updates on Projects in Caruthersville, Missouri
  • Concord Acquisition Corp (CND) says is will redeem all outstanding shares effective Dec. 20, 2022 after news the company will not complete initial business combination (shares halted)
  • Concord Acquisition Corp (CND) and Circle mutually agree to terminate proposed business combination
  • Coupa Software (COUP): Shareholder HMI Capital Management sends letter to COUP mgmt, says would support valuation of $95/share in deal
  • Copart (CPRT) appoints Leah Stearns as CFO
  • Credit Suisse (CS): Crown Prince Mohammed bin Salman could invest $500 mln into Credit Suisse, according to the Wall Street Journal
  • CVS (CVS) testing remote prescription filling system, according to the Wall Street Journal
  • Delta (DAL) offers pilots pay increases, according to Reuters
  • Denali Therapeutics (DNLI) announces DNL343 interim phase 1b Data in ALS and entry into the HEALEY ALS platform trial
  • Deutsche Bank (DB) mulling return to trading mortgage securities, according to Bloomberg
  • Diana Shipping (DSX) announces that, through a separate wholly-owned subsidiary, it has taken delivery of the m/v DSI Pegasus
  • Duke Energy (DUK) responding to outages in Moore County; Vandalism on Saturday night disabled equipment at two substations About 45,000 customers are without power
  • Embraer SA (ERJ): Airline Binter purchases five E195-E2 aircraft, according to Aviation24.be
  • Establishment Labs (ESTA) names Paul Rodio as COO
  • EZCORP (EZPW) increases investment in Florida and Caribbean
  • Fortuna (FSM) increases Sunbird Resource and identifies new regional prospects at Séguéla, Côte d´Ivoire
  • Foxconn (HNHPF) expects plant impacted by coronavirus to return to full output late this year, according to Reuters
  • General Motors (GM): BrightDrop expands to Canada, adds DHL Express to customer portfolio and begins production at the country’s first large-scale EV plant
  • Gilead Sciences' (GILD) study of GS-3583 terminated following "internal safety assessment of the molecule"
  • Hertz Global (HTZ) announces the settlement of 364 pending claims relating to vehicle theft reporting, bringing resolution to more than 95% of its pending theft reporting claims
  • HilleVax (HLVX) announces positive immunogenicity results for run-in cohort of NEST-IN1 phase 2b clinical trial of HIL-214 norovirus vaccine candidate
  • IDEAYA Biosciences (IDYA) receives Fast Track Designation for Darovasertib combination therapy with Crizotinib
  • IDT Corp (IDT): National Retail Solutions launches B2B marketplace
  • Intercontinental Exchange (ICE) reports November 2022 trading volume and related revenue statistics
  • Ionis Pharma (IONS): EMA accepts marketing authorization application for review of tofersen
  • Karyopharm Therapeutics (KPTI) announces $165 mln private placement
  • KORE Group (KORE) announces that it has established a go to market alliance with Google Cloud to bring IoT capabilities to global businesses
  • Lilium GmbH (LILM) expands into UK market with eVolare, signs binding contract including pre-delivery payment for up to 20 aircraft
  • Live Nation (LYV): Taylor Swift fans file lawsuit against Ticket Master for presale ticket issues, according to Verge
  • MarineMaxn (HZO) announces the acquisition of Midcoast Construction Enterprises; financial terms were not disclosed
  • MarketAxess (MKTX) announces monthly volume statistics for November 2022
  • MaxCyte (MXCT) signs strategic platform license with Curamys to enable cell & gene therapies for the treatment of rare intractable diseases
  • Microsoft (MSFT) President Brad Smith says the company offered Sony (SONY) a 10-year contract to keep Call of Duty on Playstation, according to WSJ
  • Microsoft (MSFT) to increase XBox first party game prices to $70 from $60, according to Verge
  • New Found (NFGC) Reports Several High-grade Intercepts From Keats North Including 117 g/t Au Over 2.00m, 36.5 g/t Au Over 2.15m & 20.8 g/t Au Over 2.00m
  • NIKE (NKE) parts ways with Kyrie Irving after suspending the relationship on Nov. 4, according to The Athletic
  • Nkarta (NKTX) announces updated clinical data on Anti-CD19 allogeneic CAR-NK cell therapy NKX019 for patients with relapsed or refractory non-hodgkin lymphoma
  • Novartis AG's (NVS) Pluvicto shows statistically significant and clinically meaningful radiographic progression-free survival benefit in patients with PSMA
  • Patterson-UTI (PTEN) reports drilling activity for November 2022
  • Pfizer (PFE) and BioNTech (BNTX) submit application to U.S. FDA for emergency use authorization of Omicron BA.4/BA.5-adapted bivalent COVID-19 vaccine in children under 5 years
  • Pfizer (PFE) will invest $750 mln in Michigan plant, according to CBS News
  • Pinterest (PINS) aiming to slow hiring for remainder of the year and has cut the recruiting team, according to The Information
  • PNM Resources (PNM) increases its annual dividend 5.8% to $1.47/share
  • PotlatchDeltic (PCH) declares $0.95 special dividend and increases quarterly dividend 2.3% to $0.45 from $0.44/share
  • Rackspace Technology (RXT) discloses "hosted exchange disruption"
  • Riot Blockchain (RIOT) announces november 2022 production and operations updates
  • Rush Enterprises (RUSHA) authorizes a new stock repurchase program up to an aggregate of $150 mln
  • Salesforce's (CRM) Slack unit CEO Stewart Butterfield to depart early next year, according to Business Insider
  • Salisbury Bancorp (SAL) will merge with and into NBT Bancorp (NBTB); will host a conference call at 11 a.m. ET
  • Sigma Lithium (SGML) achieves project expansion and financing milestones; secures $100 million debt financing
  • Sorrento Therapeutics (SRNE) provides update on arbitration before the American Arbitration Association against NantCell and Immunotherapy NANTibod
  • Sorrento Therapeutics (SRNE) announces the results of a Phase II NK/T-cell lymphoma study of IMC-001, a PD-L1 monoclonal antibody licensed to ImmuneOncia Therapeutics
  • Syndax Pharmaceuticals (SNDX) and Incyte Announce Axatilimab Phase 1/2 Data in Patients with Chronic Graft-Versus-Host Disease Published in the Journal of Clinical Oncology
  • Syndax Pharmaceuticals (SNDX) announces that the U.S. Food and Drug Administration has granted Breakthrough Therapy Designation for revumenib for the treatment of adult and pediatric patients with relapsed or refractory acute leukemia harboring a KMT2A rearrangement
  • Tango Therapeutics (TNGX) receives FDA orphan designation for treatment of malignant glioma
  • Tesla (TSLA) will have 20% lower Model Y output at Shanghai plant in December, according to Reuters
  • TherapeuticsMD (TXMD) agrees to license its products to Mayne Pharma
  • Toyota Motor (TM) wants to work towards 50% EV sales by 2030, according to Electrek
  • TPI Composites (TPIC) discloses it committed to a restructuring plan in order to rebalance the organization and optimize its global manufacturing footprint
  • Tradeweb Markets (TW) reports total November 2022 trading volume of $23.2 trillion and average daily volume of $1.13 trillion; announces $300 million share repurchase program
  • Universal Display (OLED) announces the signing of long-term OLED material supply and license agreements with Samsung Display Co.
  • Vale S.A. (VALE) issues update on contribution claim
  • Verve Therapeutics (VERV) received a clinical hold letter from the FDA that outlined the information required to resolve the clinical hold, including additional preclinical data
  • Vodafone PLC (VOD) CEO steps down; appoints Margherita Della Valle as interim CEO
  • Volkswagen AG (VWAGY) restarts halted production at China plants, according to Bloomberg
  • Warner Music Group (WMG) partners with Roku to launch three FAST channels exclusively on The Roku Channel
  • WeWork (WE): Vikas Parekh of SoftBank Investment Advisers appointed to Board of Directors
  • Xponential Fitness (XPOF) signs a Master Franchise Agreement in Japan for Rumble and AKT

(see Upgrades/Downgrades calendar for full list):

• Upgrades:
  • Comcast (CMCSA) upgraded to Equal Weight from Underweight at Wells Fargo; tgt raised to $38
• Downgrades:
  • Allegiant Travel (ALGT) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt lowered to $115
• Others:
  • Ameris Bancorp (ABCB) resumed with an Overweight at Piper Sandler; tgt $62
  • Atlantic Union Bankshares (AUB) resumed with an Overweight at Piper Sandler; tgt $42
  • Carter Bank & Trust (CARE) resumed with a Neutral at Piper Sandler; tgt $19
  • Community Financial (TCFC) resumed with an Overweight at Piper Sandler; tgt $53
  • Eagle Bancorp (EGBN) resumed with a Neutral at Piper Sandler; tgt $50
  • First Comm Banc (FCBC) resumed with an Underweight at Piper Sandler; tgt $37
  • FVCBankcorp (FVCB) resumed with an Overweight at Piper Sandler; tgt $22
  • Sandy Spring Banc (SASR) resumed with a Neutral at Piper Sandler; tgt $39
  • Shore Bancshares (SHBI) resumed with an Overweight at Piper Sandler; tgt $22
  • Southern First Bancshares (SFST) initiated with a Neutral at Piper Sandler; tgt $51
  • United Bankshares (UBSI) resumed with a Neutral at Piper Sandler; tgt $45

Upcoming Events:

• Econ data (Tuesday):
  • 8:30 ET: October Trade Balance (Briefing.com consensus -$77.20 bln; prior -$73.30 bln)
• Earnings:
  • Monday (Dec. 5)
    • Pre-Market:  SAIC
    • After-Hours: GTLB SUMO
  • Tuesday (Dec. 6)
    • Pre-Market: AZO CONN BASE SIG
    • After-Hours:  AVAV CASY PLAY GWRE MDB S SWBI CXM SFIX TOL ZUO
  • Wednesday (Dec. 7)
    • Pre-Market: ASO BF.B CPB LOVE OLLI THO UNFI
    • After-Hours: AI DSGX GME GEF HCP OXM SPWH VRNT
  • Thursday (Dec. 8)
    • Pre-Market: CIEN GMS MOMO KFY MANU
    • After-Hours:  AVGO CHWY COO COST DOCU DOMO LULU PHR RH CURV MTN
  • Friday (Dec. 9)
    • Pre-Market: LI
    • After-Hours: None