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Panel production utilization to remain low in 1Q23

Display panel makers' production utilization rates are expected to remain at low levels while panel prices will stay stable in the first quarter of 2023, according to industry sources......»»

Category: topSource: digitimesJan 24th, 2023

How Long Until Supply Chains Finally Normalize: Three Things To Watch

How Long Until Supply Chains Finally Normalize: Three Things To Watch Earlier today, Morgan Stanley showed that more than inflation, more than concerns about the historic labor crisis, definitely more than covid, one thing has preoccupied the minds of most management teams this quarter: "supply chain issues", a topic which has seen an explosion of mentions on Q3 earnings calls. But while by now everyone is aware that the global supply-chain shock is truly historic and getting worse by the day, with used car prices rising sharply again and over 30 million tons of cargo waiting outside US ports ahead of the holiday season, few have considered what realistically could normalize these frayed supply chains. To address this topic, in a research report published overnight, Goldman's economists assessed the three key drivers of supply chain normalization and their most likely timing: improved chip supply driven by post-Delta factory restarts (4Q21) and eventually by expanded production capacity (2H22 and 2023); improved US labor supply (4Q21 and 1H22); and the wind-down of US port congestion (2H22). And speaking of used car prices, in the first 15 days of October, the Manheim used vehicle index surged 8.3% due to yet another global supply shock: this time due to Delta-variant factory shutdowns in Southeast Asia and elsewhere. Here, in a rare mea culpa, the Goldman economists admit that while previously they had expected improved microchip availability by 1H22 on the back of normalizing Japanese automotive shipments (post-factory fire) and a US supply response, with these catalysts now behind us — the Naka factory in Japan resumed normal shipments activity in July and US semiconductor plant hours jumped to 73 hours per week in the first half of the year vs. 46 in 2019 — Goldman now expects a "more extended timeline." So with that demonstration of how thoroughly unpredictable the non-linear cascading consequences of such s diffuse, global phenomenon as international production pathways and supply chains are, Goldman proceeds to assess the three key drivers of supply chain normalization listed above, their likely timing, and the key indicators to track progress. We start by reviewing one unique aspect of the global semiconductor industry that sets it apart from most other manufacturing and services industries of today’s economy: outside of Southeast Asian plant shutdowns, both output and capacity utilization have already returned to quite elevated levels. So while the supply of dress shirts and haircuts is likely to rise sharply if demand returns, higher utilization of existing semiconductor capacity is not a viable path toward resolving the chip shortage. Additionally, much needed moderation in US and global goods demand has alleviated (and will continue to alleviate) goods-sector imbalances. As shown in the left panel of the next chart, real retail spending has already normalized in major foreign economies. And while it picked back up domestically in August and September, US goods consumption has nonetheless declined by 5% since March. That said, from the perspective of the key bottlenecks contributing to inflation, demand for consumer electronics, business tech, and other semiconductor-intensive products has remained elevated—both globally and in the US (right chart above). Furthermore, one should hardly expect the increased digitization of society and consumer preferences to reverse post-pandemic: Goldman's equity analysts forecast demand for semiconductor-intensive consumer goods to remain strong in 2022 (smartphones +4% after +12% in 2021, autos +5% after +6%, PCs -12% after +28% cumulatively in 2020 and 2021). So returning to supply constraints, here is a summary of the three key resolution channels in turn (global chip production, US labor supply, reduced port congestion). Channel 1, Step 1: Improved Chip Supply from East Asia Reboot Goldman's expected timeline: 4Q21 Key indicators to watch: Effective Lockdown Indices (ELI) particularly in Malaysia, Vietnam, Mainland China, and Taiwan East Asian industrial production and exports of semiconductors, electrical components, and consumer electronics Automaker commentary on near-term chip availability China industrial policy, with respect to power cuts and the Delta variant Early- and mid-month trade reports (Japan, Taiwan, and Korea) As shown in the next chart, three supply shocks weighed heavily on auto production this year, starting in February with severe winter storms and power outages in the southern United States and followed by a March fire at the Renesas automotive chip factory in Naka, Japan. While the plant was fully rebuilt in Q2 and auto production was set to return to near-normal levels in Q3, the arrival of the Delta variant and “zero covid” policies in some East Asian economies combined to produce another sharp drop in US semiconductor supply. The red line in the same exhibit shows the mid-year stepdown in automotive semiconductor units imported from key East Asian suppliers (data derived from granular Census trade records that include unit counts). Looking ahead, there are several key drivers for optimism, starting with the vaccination-led drop in infection rates (chart below, left and center). As a result, lockdown severity is also now approaching pre-Delta levels in both Malaysia and Vietnam (right panel). Going forward, it's important to track the semiconductor output and trade statistics of these key suppliers, as well as closely watch Chinese output and export data to monitor possible disruptions to chip or consumer goods supplies, for example related to power cuts or covid restrictions. For example, imports of integrated circuits from Vietnam and semiconductor devices and diodes from Malaysia declined 34% year-on-year in August, but Chinese production has so far remained firm. These developments coupled with better near-term production commentary from General Motors and Toyota, would argue for some microchip relief in Q4, and Goldman estimates the removal of this supply bottleneck could return US auto production to or near the 10-11mn SAAR range achieved in late 2020 (vs. 7.8mn in September and 8.6mn in Q3). Increases beyond that pace would likely require additional supply improvements, in part because today’s smart cars utilize more and more automotive systems with microchips and in part because of the continued mix shift towards SUVs and electric vehicles (EVs), both of which are relatively chip-intensive. The next chart plots the ratio of global automotive semiconductor shipments to global vehicle production (both on a unit basis.) The secular increase in chip intensity continued in 2021 and suggests demand for automotive semiconductors will continue to rise even with flattish unit vehicle demand. Channel 1, Step 2: Improved Chip Supply from New Capacity Goldman's expected timeline: 2H22, with a more normal environment in 2023 Key indicators to watch: Global semiconductor shipments, particularly automotive: Microcontroller Units (MCUs), power semiconductor, analog devices GS equity research forecasts for semiconductor capacity growth 2022 auto production forecasts (GS equity research, IHS) US industrial production of computers, communication equipment, and semiconductors Foreign production and US imports of auto and consumer electronics A key step towards easing supply constraints and lowering core goods prices is the build out of global microchip production capacity. But despite the dramatic impact of the chip shortages on US economic output and consumer prices, automotive semiconductor capex only rose back above the 2019 pace in Q3 And with 2-3 quarter lags between equipment capex and chip production—and several-year lead times for new foundries—the rise in capex to above-normal levels in Q4 may not meaningfully boost chip supply until the second half of next year. Reasons for the slow and restrained capex response include the long lead times and high fixed costs of new foundries and the likelihood that downstream industries will shift production away from the semis currently in short supply—many of which are older generation products to begin with. High industry concentration is another factor contributing to restrained capital deployment in the face of very strong near-term demand. With Goldman analysts tracking capacity growth of just 5-10% per year in 2021-22 among the semiconductor industries that supply the auto and consumer electronics sectors, and with consumer demand for these products also likely growing at that horizon and given the rising semiconductor content of motor vehicles, Goldman expects chip supply to remain constrained through at least mid-2022. This reduces the scope for automakers to sustain above-normal production, and restock heavily depleted vehicle inventories. Accordingly, Goldman also expects auto dealer inventories to remain very low through mid-2022. Channel 2: Improved US Labor Supply Goldman's expected timeline: Q421 and 1H22 Key indicators to watch: Payrolls, particularly manufacturing and transportation JOLTS, particularly manufacturing and transportation Industrial production of consumer goods, excluding autos and high tech Supplier deliveries components of ISMs and regional Fed surveys Labor force participation rate Labor shortages are another important bottleneck, but labor supply constraints are expected to ease substantially in coming months for several reasons. First, the September expiration of unemployment insurance benefits will boost Q4 job growth by around 1.0 million according to Goldman economists. Second, workers who have left their jobs because of child care concerns to return to work now that schools have reopened. Third, virus concerns will continue to fade as vaccinations increase further and infection rates fall—this would encourage some of the 2-3 million individuals staying away from the workplace because of health concerns to return to the job market. Taken together, Goldman expects total employment to increase by about 4mn workers by end-2022, a 2.7% boost to non-farm payroll employment. As shown in Exhibit 11, labor demand in these industries is 5.1% and 0.9% above pre-pandemic levels in transportation and manufacturing, respectively. With job openings and wages at new highs for factory and transportation jobs, these labor shortages should ease gradually as the sectors draw workers from lower-paid services industries Channel 3: Unwind of Port Congestion Expected timeline: 1H22 Key indicators to watch: Transportation payrolls, particularly in the marine cargo handling, support activities for transportation, couriers and messengers, and warehousing and storage sectors Ships at anchor and inbound container traffic at US ports Shipments component of the Cass Freight Index US ex-auto manufacturing production US imports of cars and consumer goods Real retail inventories, excluding autos Shipping delays and port congestion are also important bottlenecks for seaborne consumer products like furniture and sporting goods—semiconductors and high-value electronics generally arrive via airfreight. Stranded cargo at the Port of Los Angeles has surged to record highs (left panel of Exhibit 12) due to elevated trade volume—container inflows into US ports are 25% above pre-pandemic levels (see right panel)—and ongoing shortages of transportation-sector labor. We don’t expect significant near-term capacity growth in the goods shipping sector because bottlenecks currently constrain multiple modes of transportation. For example, if ports increased their capacity but the truck-driver shortage is not resolved, total shipping times could remain little changed. Moreover, to the extent transportation companies view shipping demand as temporarily elevated, they are unlikely to boost capacity meaningfully in the near-term. We instead see two other drivers behind an expected easing in shipping and transportation constraints in the first half of 2022. First, demand is seasonally weaker in the fall and winter, bottoming out in February after the Chinese New Year when it is typically about 15-20% below August levels. If port throughput maintains the August not-seasonally-adjusted pace, the seasonal moderation in demand would help clear the backlog. Second, and as discussed in more detail here and in Exhibit 3, we expect US import volumes to normalize somewhat due to waning fiscal stimulus and a consumer rotation back toward services consumption. Inflation and Fed Implications As an aside, since any delays in supply chain normalization means higher prices, Goldman has once again boosted its sequential inflation assumptions for Q4 and early 2022 to reflect these continued upward price pressures, having done so already every month since April. The bank now forecasts year-on-year core PCE inflation of 4.3% at year-end, 3.0% in June 2022, and 2.15% in December 2022 (vs. 4.25%, 2.7% and 2.0% previously). This slower resolution of supply constraints means that year-on-year inflation will be higher in the immediate aftermath of tapering than we had previously expected. While we expect inflation to be on a sharp downward trajectory at that point and to continue falling through the end of the year, this higher-for-longer path increases the risk of an earlier hike in 2022. Tyler Durden Wed, 10/27/2021 - 15:27.....»»

Category: blogSource: zerohedgeOct 27th, 2021

Woodward (WWD) to Post Q1 Earnings: Key Factors to Note

Woodward's (WWD) first-quarter fiscal 2023 performance is likely to have benefited from increased demand for its solutions in aerospace segment. Woodward, Inc WWD is scheduled to report first-quarter fiscal 2023 results on Jan 30.The Zacks Consensus Estimate for revenues is pegged at $605.7 million, suggesting growth of 11.8% from the year-ago quarter’s reported figure. The Zacks Consensus Estimate for earnings is pegged at 60 cents per share, indicating a year-over-year increase of 7.1%.Woodward reported adjusted net earnings of 84 cents per share for the fourth quarter of fiscal 2022, which increased 2.4% year over year and beat the Zacks Consensus Estimate. Net sales moved up 12% year over year to $640 million due to higher sales in the Aerospace and Industrial segment. The top line beat the Zacks Consensus Estimate by 2.2%.Factors to NoteThe company’s performance in the fiscal first quarter is likely to have benefited from strong demand in both business segments.Aerospace segment is expected to have benefited from higher commercial OEM and aftermarket sales resulting from improving passenger traffic and aircraft utilization along with higher OEM production rates.The company expects the power generation market to pick up pace, owing to rising demand for industrial turbo machinery especially in Asia and backup power at data centers. The segment is also likely to have gained from momentum in the global marine market due to increasing ship building rates and higher utilization.However, weakness in defense OEM and aftermarket sales due to lower guided weapons sales is likely to act as a headwind along with depressed natural gas truck production in China.  Global macroeconomic weakness, forex volatility and persistent supply-chain disruptions continue to remain major concerns.Woodward, Inc. Price and EPS Surprise  Woodward, Inc. price-eps-surprise | Woodward, Inc. Quote What Our Model SaysOur proven model predicts an earnings beat for WWD this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.WWD has an Earnings ESP of +21.67% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.Stocks to ConsiderHere are some stocks you may consider as our model shows that these have the right combination of elements to beat on earnings this season.Helmerich & Payne HP has an Earnings ESP of +8.68% and currently sports a Zacks Rank #1. HP is scheduled to report first quarter of fiscal 2023 earnings on Jan 31. You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for Helmerich & Payne’s to-be-reported quarter’s earnings and revenues are pegged at 81 cents per share and $689.3 million, respectively. The company surpassed earnings estimates in the preceding four quarters, delivering an average surprise of 124.2%. Shares of HP have gained 74% in the past year.MSCI Inc MSCI has an Earnings ESP of +0.76% and currently has a Zacks Rank #2. MSCI is scheduled to report fourth quarter 2022 earnings on Jan 31.The Zacks Consensus Estimate for MSCI’s to-be-reported quarter’s earnings and revenues are pegged at $2.71 per share and $565.9 million, respectively. Shares of the company have gained 1.4% in the past year.Super Micro Computer SMCI has an Earnings ESP of +6.78% and presently carries a Zacks Rank #2. SMCI is slated to release second quarter of fiscal 2023 numbers on Jan 31.The Zacks Consensus Estimate for SMCI’s to-be-reported quarter’s earnings and revenues are pegged at $2.95 per share and $1.77 billion, respectively. Shares of the company have gained 89.9% in the past year.Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar. 5 Stocks Set to Double Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%. Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Helmerich & Payne, Inc. (HP): Free Stock Analysis Report MSCI Inc (MSCI): Free Stock Analysis Report Super Micro Computer, Inc. (SMCI): Free Stock Analysis Report Woodward, Inc. (WWD): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksJan 27th, 2023

Sandy Spring Bancorp Reports Fourth Quarter Earnings of $34.0 Million

OLNEY, Md., Jan. 26, 2023 (GLOBE NEWSWIRE) -- Sandy Spring Bancorp, Inc. (Nasdaq-SASR), the parent company of Sandy Spring Bank, reported net income of $34.0 million ($0.76 per diluted common share) for the quarter ended December 31, 2022, compared to net income of $45.4 million ($0.99 per diluted common share) for the fourth quarter of 2021 and $33.6 million ($0.75 per diluted common share) for the third quarter of 2022. Current quarter core earnings were $35.3 million ($0.79 per diluted common share), compared to $46.6 million ($1.02 per diluted common share) for the quarter ended December 31, 2021 and $35.7 million ($0.80 per diluted common share) for the quarter ended September 30, 2022. Core earnings are determined by excluding the after-tax impact of merger, acquisition and disposal expense, the loss on FHLB redemptions, amortization of intangibles, gain or loss on disposal of assets, contingent payment expense and investment securities gains or losses. The primary drivers in the reduction in GAAP earnings and core earnings for the current period compared to the prior year quarter were the increase in the provisioning for credit losses and decline in non-interest income. The provision for credit losses for the current quarter was a charge of $10.8 million compared to a charge of $1.6 million for the fourth quarter of 2021 and a charge of $18.9 million for the third quarter of 2022. "We are in the midst of a challenging economic environment that includes high inflation, an unprecedented interest rate environment, and a greater expectation of recession," said Daniel J. Schrider, Chairman, President and CEO of Sandy Spring Bancorp, Inc. "Despite these challenges, we are strong and remain committed to achieving long-term success for our clients and shareholders. In 2023, we will continue to focus on growing client relationships with an emphasis on core funding." Fourth Quarter Highlights: At December 31, 2022, total assets were $13.8 billion, a 10% increase compared to $12.6 billion at December 31, 2021. Excluding PPP loans, total assets increased 11% year over year. Total loans, excluding PPP loans, increased 16% to $11.4 billion at December 31, 2022 compared to $9.8 billion at December 31, 2021. Excluding PPP loans, total commercial loans grew by $1.2 billion or 15% during the previous twelve months. During this period, the Company generated gross commercial loan production of $3.9 billion, of which $2.5 billion was funded, more than offsetting $1.2 billion in non-PPP commercial loan run-off. Funded commercial loan production during the fourth quarter of 2022 was $341.7 million. Total mortgage loans grew $377.5 million during the twelve months ended December 31, 2022. Deposits increased 3% to $11.0 billion at December 31, 2022 compared to $10.6 billion at December 31, 2021. Brokered time deposits drove a 64% increase in time deposits, which offset the year-over-year declines in all other categories of deposits. Excluding the impact of the increase in brokered time deposits, total deposits declined 4%. Net interest income for the fourth quarter of 2022 grew $1.4 million or 1% compared to the fourth quarter of 2021. While loan growth resulted in interest income increasing $35.2 million, it was substantially offset by the $33.9 million growth in interest expense for the comparative periods. Excluding PPP interest and fees, net interest income increased $10.5 million or 11% for the current quarter compared to the prior year quarter. For the fourth quarter of 2022, the net interest margin was 3.26% compared to 3.51% for the fourth quarter of 2021, and 3.53% for the third quarter of 2022. The decrease in net interest margin for the current quarter compared to the fourth quarter of the prior year and previous quarter was the result of the increase in the rate paid on interest-bearing liabilities outpacing the increase in the yield on interest-earning assets. The overall rate and yield increases were driven by the multiple federal funds rate increases that occurred over the preceding twelve months. Excluding the impact of PPP loan interest and fees and the amortization of fair value marks derived from previous acquisitions, the prior year quarter's net interest margin would have been 3.31% while the current quarter's margin remained at 3.26% and the margin for the prior quarter of the current year would have been 3.50%. The provision for credit losses directly attributable to the funded loan portfolio was $7.9 million for the current quarter compared to the prior year quarter's provision for credit losses of $1.6 million. In addition, to the current quarter's provision for credit losses, the quarterly provision expense contained a provision charge of $2.9 million associated with unfunded loan commitments. Excluding the provision for unfunded commitments, the provision for the current quarter is a reflection of the impact of the deterioration in forecasted economic metrics and the increased probability of a recession. The current quarter's non-interest income decreased by 37% or $8.2 million compared to the prior year quarter. The decrease represents the cumulative result of the impact of the economic environment on mortgage banking activities and wealth management income, the decline in insurance commission income as a result of the disposition of the Company's insurance business during the second quarter of 2022 and lower bank card income due to regulatory restrictions on transaction fees. Non-interest expense for the current quarter decreased $1.8 million or 3% compared to the prior year quarter, driven primarily by decreases of $2.1 million in compensation and benefits expense, $1.0 million in occupancy expense and $0.5 million in other non-interest expense. These decreases were partially offset by increases in various other categories of operating expenses. Reflecting the impact of the increased provisioning for credit losses and the decline in non-interest income, return on average assets ("ROA") for the quarter ended December 31, 2022 was 0.98% and return on average tangible common equity ("ROTCE") was 12.53% compared to 1.41% and 16.07%, respectively, for the fourth quarter of 2021. On a non-GAAP basis, the current quarter's core ROA was 1.02% and core ROTCE was 13.02% compared to core ROA of 1.44% and core ROTCE of 16.49% for the fourth quarter of 2021. For the fourth quarter of 2022, the GAAP efficiency ratio was 53.23% compared to 51.75% for the fourth quarter of 2021, and 50.66% for the third quarter of 2022. The non-GAAP efficiency ratio for the fourth quarter of 2022 was 51.46% compared to 50.17% for the prior year quarter, and 48.18% for the third quarter of 2022. Balance Sheet and Credit Quality Total assets grew 10% to $13.8 billion at December 31, 2022, as compared to $12.6 billion at December 31, 2021. During this period, total loans grew by 14% to $11.4 billion at December 31, 2022, compared to $10.0 billion at December 31, 2021. At December 31, 2022, excluding PPP loans, total assets grew 11% and total loans grew 16% compared to December 31, 2021. Total commercial loans, excluding PPP loans, grew by $1.2 billion or 15% during the past twelve months. During this period, the Company generated commercial gross loan production of $3.9 billion, of which $2.5 billion was funded, offsetting $1.2 billion in non-PPP commercial loan payment activity. During the fourth quarter of 2022, funded commercial loan production was $341.7 million. The growth in the commercial portfolio, excluding PPP loans, occurred in all commercial portfolios led by the $1.0 billion or 24% growth in the investor owned commercial real estate portfolio. Year-over-year the total residential mortgage loan portfolio grew 37%, as a greater number of conventional 1-4 family mortgage and one-year ARM loans were retained to grow the portfolio. Deposits grew 3% during the preceding twelve months as interest-bearing deposits grew 6%, offset by a 3% decline in noninterest-bearing deposits. During the period, time deposits increased 64% driven by brokered deposits while money market accounts decreased 6%, savings accounts decreased 4% and interest-bearing demand accounts declined 11%. Excluding the impact of the increase in brokered deposits, total deposits decreased 4%. The decrease in noninterest-bearing deposits was driven by a decline in deposits maintained by title companies as mortgage activity slowed throughout the year. In addition, borrowings increased by $928.4 million during the period. The tangible common equity ratio decreased to 8.18% of tangible assets at December 31, 2022, compared to 9.21% at December 31, 2021 as common equity was negatively impacted by the $123.4 million increase in the accumulated other comprehensive loss in the investment portfolio that resulted from the rising rate environment and the increase in tangible assets during the past year and, to a lesser extent, the $25.0 million repurchase of common shares during the previous twelve months. At December 31, 2022, the Company had a total risk-based capital ratio of 14.20%, a common equity tier 1 risk-based capital ratio of 10.23%, a tier 1 risk-based capital ratio of 10.23%, and a tier 1 leverage ratio of 9.33%. Non-performing loans include non-accrual loans, accruing loans 90 days or more past due and restructured loans. Credit quality improved at December 31, 2022 compared to December 31, 2021, as the level of non-performing loans to total loans declined to 0.35% compared to 0.49%. These levels of non-performing loans compare to 0.40% for the prior quarter and indicate stable credit quality during a year of significant loan growth and economic uncertainty. At December 31, 2022, non-performing loans totaled $39.4 million, compared to $48.8 million at December 31, 2021, and $44.5 million at September 30, 2022. Loans placed on non-accrual during the current quarter amounted to $5.5 million compared to $0.5 million for the prior year quarter and $4.2 million for the third quarter of 2022. During the current quarter, the Company successfully resolved several large non-accrual relationships for a total pay-off of $9.5 million without incurring any charge-offs. The Company realized net recoveries of $0.1 million for the fourth quarter of 2022, as compared to net charge-offs of $0.4 million for the fourth quarter of 2021 and $0.5 million in recoveries for the third quarter of 2022. At December 31, 2022, the allowance for credit losses was $136.2 million or 1.20% of outstanding loans and 346% of non-performing loans, compared to $128.3 million or 1.14% of outstanding loans and 289% of non-performing loans at the end of the previous quarter and $109.1 million or 1.10% of outstanding loans and 224% of non-performing loans at the end of 2021. The increase in the allowance during the current quarter compared to the previous quarter was primarily due to the impact of forecasted economic factors and an increase in the probability of an economic recession. Income Statement Review Quarterly Results Net income was $34.0 million for the three months ended December 31, 2022 compared to net income of $45.4 million for the prior year quarter. The decline in the comparative quarter earnings was the result of the current quarter's increase in the provision for credit losses compared to the prior year's provision, coupled with a decrease in non-interest income. The decline in non-interest income was the result of the combination of lower mortgage banking income, a decline in wealth management income, reduced insurance commission income due to the impact of the sale of the Company's insurance business in the second quarter of 2022 and lower bank card fees resulting from the implementation of applicable regulations. Non-interest expense decreased 3% primarily as a result of the decline in compensation costs, occupancy costs and other expenses in the current quarter compared to the prior year quarter. Current quarter core earnings were $35.3 million ($0.79 per diluted common share), compared to $46.6 million ($1.02 per diluted common share) for the quarter ended December 31, 2021 and $35.7 million ($0.80 per diluted common share) for the quarter ended September 30, 2022. Net interest income increased $1.4 million for the fourth quarter of 2022 compared to the fourth quarter of 2021. During the past twelve months, loan growth coupled with the rising interest rate environment was primarily responsible for a $35.2 million increase in interest income. This growth in interest income was substantially offset by the $33.9 million growth in interest expense as funding costs have also risen in response to the current year's rising rate environment. During the period, interest and fees on PPP loans declined by $9.1 million. Excluding this decline, net interest income grew 11% in the current year quarter compared to the prior year quarter, driven predominantly by interest income growth in all categories of commercial loans and, to a lesser degree, increases in residential mortgage loans, consumer loans and investment securities income. Interest expense grew due to the rising cost of interest-bearing deposits, primarily time and money market deposits, and the growth and cost of borrowings in the current year period compared to the same period of the prior year. The net interest margin for the fourth quarter of 2022 was 3.26% as compared to 3.51% for the same quarter of the prior year, as the yield on interest-earning assets, which rose 76 basis points, was offset by the 159 basis point rise in the rate paid on interest-bearing liabilities. Excluding the impact of PPP interest and fee income, in addition to the amortization of fair value marks associated with previous acquisitions, the net interest margin for the prior year quarter would have been 3.31% compared to the current quarter's 3.26%. The total provision for credit losses was a charge of $10.8 million for the fourth quarter of 2022 compared to a charge of $1.6 million for the fourth quarter of 2021 and $18.9 million for the previous quarter. The provision for credit losses directly attributable to the funded loan portfolio was $7.9 million for the current quarter compared to the prior year quarter's provision for credit losses of $1.6 million and $14.1 million for the third quarter of 2022. The current quarter's provision expense also contained a charge to the provision of $2.9 million associated with an increase in unfunded loan commitments compared to $4.8 million for the prior quarter. Excluding the provision for unfunded commitments, the provision for the current quarter reflects the impact of the deterioration in forecasted economic metrics coupled with the increased probability of a recession. For the fourth quarter of 2022, non-interest income decreased $8.2 million or 37% compared to the prior year quarter. The decline reflects the cumulative result of the decrease in income from mortgage banking activities reflecting the impact of the economic environment, lower wealth management income driven by market performance, the decline in insurance commission income as a result of the second quarter's disposition of the Company's insurance business, and reduced bank card income due to regulatory restrictions on fee recognition. Non-interest expense decreased $1.8 million or 3% for the fourth quarter of 2022, compared to the prior year quarter, as a result of a decline in compensation and benefits costs, occupancy expense and other non-interest expenses. Compensation and benefits costs during the comparative period was $2.1 million lower as a result of decreases in commission and incentive payments and reduced employee benefit costs, primarily pension and health insurance costs. Occupancy expense declined $1.0 million due to lower depreciation and rental expense as a result of fewer office locations during the preceding twelve months. The impact of these reductions was offset by operating cost increases in most of the remaining categories of non-interest expense. For the fourth quarter of 2022, the GAAP efficiency ratio was 53.23% compared to 51.75% for the fourth quarter of 2021, and 50.66% for the third quarter of 2022. The increase in the GAAP efficiency ratio was primarily the result of the 5% decrease in GAAP revenue compared to the 3% decrease in GAAP non-interest expense during the comparative period. The non-GAAP efficiency ratio was 51.46% for the current quarter as compared to 50.17% for the fourth quarter of 2021, and 48.18% for the third quarter of 2022. The increase in the non-GAAP efficiency ratio (reflecting a decrease in efficiency) from the fourth quarter of the prior year to the current year quarter was primarily the result of the 5% decline in non-GAAP revenue, driven chiefly by the decrease in non-GAAP non-interest income, while non-GAAP expenses declined 2%. ROA for the fourth quarter ended December 31, 2022 was 0.98% and ROTCE was 12.53% compared to 0.99% and 12.10%, respectively, for the third quarter of 2022. On a non-GAAP basis, the current quarter's core ROA was 1.02% and core ROTCE was 13.02% compared to core ROA of 1.05% and core ROTCE of 12.86% for the third quarter of 2022. Year-to-Date Results The Company recorded net income of $166.3 million for the year ended December 31, 2022 compared to net income of $235.1 million for the prior year. Year-to-date earnings declined as a result of the provision for loan losses, which shifted from the significant credit in the prior year to the charge for the current year, the decline in most categories of non-interest income, which was partially mitigated by the impact of the sale of the insurance business, and the flattening of net interest income as the growth in interest expense significantly offset the increase in interest income. Core earnings were $160.3 million for the year ended December 31, 2022 compared to $246.7 million for the prior year. Core earnings for the current year compared to the prior year were reduced primarily as a result of the activity associated with the provision for credit losses, in addition to the decline in mortgage banking income, elimination of insurance agency commissions in the second half of the year and lower other non-interest income. For the year ended December 31, 2022, net interest income increased $2.5 million compared to the prior year as a result of the $45.4 million increase in interest income, despite the $39.9 million reduction in PPP interest and fees, offset by the $42.9 million increase in interest expense. Excluding the impact of interest and fees on PPP loans, tax-equivalent interest income grew 21%, driven by non-PPP commercial loans which increased 22% compared to the prior year. The increase in interest expense was primarily the result of additional interest expense associated with money market and time deposit accounts and, to a lesser degree, FHLB borrowings and the subordinated debt issued in March 2022. The net interest margin declined to 3.44% for the year ended December 31, 2022, compared to 3.56% for the prior year. Excluding the impact of PPP interest and fees and the amortization of the fair value marks, the net interest margin for the year ended December 31, 2022 would have been 3.40% compared to 3.38% for the prior year. The provision for credit losses for the year ended December 31, 2022 amounted to a charge of $34.4 million as compared to a credit of $45.6 million for 2021. The provision for credit losses for the year ended December 31, 2022 was a reflection of the growth in the loan portfolio, coupled with the management's consideration of the potential impact of current recessionary pressures and other portfolio qualitative metrics. The credit to the provision for credit losses for the prior year was a reflection of the net impact of forecasted economic metrics during 2021 and other factors applied in the determination of the allowance. For the year ended December 31, 2022, non-interest income, which included a $16.7 million gain on the disposal of assets, decreased 15% to $87.0 million compared to $102.1 million for 2021. Excluding the gain, non-interest income decreased 31% driven by a 75% decline in income from mortgage banking activities, a 58% decline in insurance commission income, reduced bank card income of 36% and a 43% decline in other income. The decline in income from mortgage banking activities is the result of the rising interest rate environment, which continues to dampen mortgage origination and refinancing activity. Wealth management income declined reflecting volatility and asset value erosion in the marketplace. Insurance commission income declined due to the disposition of the Company's insurance business during the year. Fees from bank cards diminished as a result of regulatory restrictions on fee recognition effective in the second quarter of the current year. Other income declined from the prior year as a result of the decline in credit related fees, the inclusion in 2021 of the impact from the full payoff of a purchased credit deteriorated loan and activity-based vendor incentives. Service charge income grew modestly as a result of increased customer activity. Non-interest expense decreased 1% to $257.3 million for the year ended December 31, 2022, compared to $260.5 million for 2021. Excluding merger, acquisition and disposal expense from the current and prior year periods, the earn-out accrual associated with the performance of the 2020 acquisition of Rembert Pendleton Jackson and the $9.1 million in prepayment penalties on FHLB borrowings that occurred in the prior year, non-interest expense increased 1% year-over-year. The drivers of the increase in non-interest expense were a 2% increase in salaries and benefits and an 8% increase in other expense, excluding the FHLB prepayment penalties and the earn-out expense. The year-over-year increase in salaries and benefits was the result of staffing increases, salary adjustments and other increased benefit costs. The rise in other non-interest expense was driven by increased costs in other various categories of operating expenses. Marketing costs increased 10% as a result of specific initiatives and outside data services increased 14% as a result of transaction volumes, while professional fees and service costs decreased 11% for the period due to a reduction in the utilization of consultant services. Combined occupancy and equipment expense was lower by 4% as a result of lower depreciation and rental expense, which exceeded higher software related expenses. For the year ended December 31, 2022, the GAAP efficiency ratio was 50.05% compared to 49.47% for the same period in 2021. The non-GAAP efficiency ratio for the current year was 49.66% compared to the 46.17% for the prior year. The growth in the current year's non-GAAP efficiency ratio compared to the prior year, indicating a decline in efficiency, was the result of the 5% decrease in non-GAAP revenue combined with the 2% growth in non-GAAP non-interest expense. Explanation of Non-GAAP Financial Measures This news release contains financial information and performance measures determined by methods other than in accordance with generally accepted accounting principles in the United States ("GAAP"). The Company's management believes that the supplemental non-GAAP information provides a better comparison of period-to-period operating performance. Additionally, the Company believes this information is utilized by regulators and market analysts to evaluate a company's financial condition and, therefore, such information is useful to investors. Non-GAAP measures used in this release consist of the following: Tangible common equity and related measures are non-GAAP measures that exclude the impact of goodwill and other intangible assets. The non-GAAP efficiency ratio excludes amortization of intangible assets, loss on FHLB redemption, gain on disposal of assets, contingent payment expense, merger, acquisition and disposal expense and investment securities gains and includes tax-equivalent income. Core earnings and the related measures of core earnings per diluted common share, core return on average assets and core return on average tangible common equity reflect net income exclusive of merger, acquisition and disposal expense, amortization of intangible assets, loss on FHLB redemption, contingent payment expense, gain on disposal of assets and investment securities gains, on a net of tax basis. These disclosures should not be viewed as a substitute for financial results in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Please refer to the non-GAAP Reconciliation tables included with this release for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measure. Conference Call The Company's management will host a conference call to discuss its fourth quarter results today at 2:00 p.m. (ET). A live Webcast of the conference call is available through the Investor Relations section of the Sandy Spring Website at www.sandyspringbank.com. Participants may call 1-844-200-6205. Please use the following access code: 970945. Visitors to the Website are advised to log on 10 minutes ahead of the scheduled start of the call. An internet-based replay will be available on the website until February 9, 2023. A replay of the teleconference will be available through the same time period by calling 1-866-813-9403 under conference call number 813195. About Sandy Spring Bancorp, Inc. Sandy Spring Bancorp, Inc., headquartered in Olney, Maryland, is the holding company for Sandy Spring Bank, a premier community bank in the Greater Washington, D.C. region. With over 50 locations, the bank offers a broad range of commercial and retail banking, mortgage, private banking, and trust services throughout Maryland, Virginia, and Washington, D.C. Through its subsidiaries, Rembert Pendleton Jackson and West Financial Services, Inc., Sandy Spring Bank also offers a comprehensive menu of wealth management services. Category: WebcastSource: Sandy Spring Bancorp, Inc.Code: SASR-E For additional information or questions, please contact:Daniel J. Schrider, Chairman, President & Chief Executive Officer, or Philip J. Mantua, E.V.P. & Chief Financial OfficerSandy Spring Bancorp 17801 Georgia AvenueOlney, Maryland 208321-800-399-5919Email: DSchrider@sandyspringbank.com PMantua@sandyspringbank.com Website: www.sandyspringbank.com  Media Contact:Jen Schell 301-570-8331jschell@sandyspringbank.com  Forward-Looking Statements Sandy Spring Bancorp's forward-looking statements are subject to significant risks and uncertainties that may cause actual results to differ materially from those in such statements. These risks and uncertainties include, but are not limited to, the risks identified in our quarterly and annual reports and the following: changes in general business and economic conditions nationally or in the markets that we serve; changes in consumer and business confidence, investor sentiment, or consumer spending or savings behavior; changes in the level of inflation; changes in the demand for loans, deposits and other financial services that we provide; the possibility that future credit losses may be higher than currently expected; the impact of the interest rate environment on our business, financial condition and results of operations; the impact of compliance with changes in laws, regulations and regulatory interpretations, including changes in income taxes; changes in credit ratings assigned to us or our subsidiaries; the ability to realize benefits and cost savings from, and limit any unexpected liabilities associated with, any business combinations; competitive pressures among financial services companies; the ability to attract, develop and retain qualified employees; our ability to maintain the security of our data processing and information technology systems; the impact of changes in accounting policies, including the introduction of new accounting standards; the impact of judicial or regulatory proceedings; the impact of fiscal and governmental policies of the United States federal government; the impact of health emergencies, epidemics or pandemics; the effects of climate change; and the impact of natural disasters, extreme weather events, military conflict, terrorism or other geopolitical events. Sandy Spring Bancorp provides greater detail regarding some of these factors in its Form 10-K for the year ended December 31, 2021, including in the Risk Factors section of that report, and in its other SEC reports. Sandy Spring Bancorp's forward-looking statements may also be subject to other risks and uncertainties, including those that it may discuss elsewhere in this news release or in its filings with the SEC, accessible on the SEC's Web site at www.sec.gov.  Sandy Spring Bancorp, Inc. and Subsidiaries FINANCIAL HIGHLIGHTS - UNAUDITED     Three Months EndedDecember 31,   %Change   Year EndedDecember 31,   %Change (Dollars in thousands, except per share data)     2022       2021         2022       2021     Results of operations:                         Net interest income   $ 106,643     $ 105,268     1 %   $ 427,004     $ 424,518     1 % Provision/ (credit) for credit losses     10,801       1,585     N/M     34,372       (45,556 )   N/M Non-interest income     14,297       22,536     (37 )     87,019       102,055     (15 ) Non-interest expense     64,375       66,141     (3 )     257,293       260,470     (1 ) Income before income tax expense     45,764       60,078     (24 )     222,358       311,659     (29 ) Net income     33,980       45,404     (25 )     166,299       235,107     (29 )                           Net income attributable to common shareholders   $ 33,866     $ 45,114     (25 )   $ 165,618     $ 233,599     (29 ) Pre-tax pre-provision net income (1)   $ 56,565     $ 61,663     (8 )   $ 256,730     $ 266,103     (4 )                           Return on average assets     0.98 %     1.41 %         1.26 %     1.83 %     Return on average common equity     9.23 %     11.87 %         11.23 %     15.48 %     Return on average tangible common equity (1)     12.53 %     16.07 %         15.24 %     21.01 %     Net interest margin     3.26 %     3.51 %         3.44 %     3.56 %     Efficiency ratio - GAAP basis (2)     53.23 %     51.75 %         50.05 %     49.47 %     Efficiency ratio - Non-GAAP basis (2)     51.46 %     50.17 %         49.66 %     46.17 %                               Per share data:                         Basic net income per common share   $ 0.76     $ 0.99     (23)%   $ 3.69     $ 5.00     (26)% Diluted net income per common share   $ 0.76     $ 0.99     (24 )   $ 3.68     $ 4.98     (26 ) Weighted average diluted common shares     44,828,827       45,655,924     (2 )     45,039,022       46,899,085     (4 ) Dividends declared per share   $ 0.34     $ 0.32     6     $ 1.36     $ 1.28     6   Book value per common share   $ 33.23     $ 33.68     (1 )   $ 33.23     $ 33.68     (1 ) Tangible book value per common share (1)   $ 24.64     $ 24.90     (1 )   $ 24.64     $ 24.90     (1 ) Outstanding common shares     44,657,054       45,118,930     (1 )     44,657,054       45,118,930     (1 )                           Financial condition at period-end:                         Investment securities   $ 1,543,208     $ 1,507,062     2 %   $ 1,543,208     $ 1,507,062     2 % Loans     11,396,706       9,967,091     14       11,396,706       9,967,091     14   Assets     13,833,119       12,590,726     10       13,833,119       12,590,726     10   Deposits     10,953,421       10,624,731     3       10,953,421       10,624,731     3   Stockholders' equity     1,483,768       1,519,679     (2 )     1,483,768       1,519,679     (2 )                           Capital ratios:                         Tier 1 leverage (3)     9.33 %     9.26 %         9.33 %     9.26 %     Common equity tier 1 capital to risk-weighted assets (3)     10.23 %     11.91 %         10.23 %     11.91 %     Tier 1 capital to risk-weighted assets (3)     10.23 %     11.91 %         10.23 %     11.91 %     Total regulatory capital to risk-weighted assets (3)     14.20 %     14.59 %         14.20 %     14.59 %     Tangible common equity to tangible assets (4)     8.18 %     9.21 %         8.18 %     9.21 %     Average equity to average assets     10.61 %     11.87 %         11.20 %     11.85 %                               Credit quality ratios:                         Allowance for credit losses to loans     1.20 %     1.10 %         1.20 %     1.10 %     Non-performing loans to total loans     0.35 %     0.49 %         0.35 %     0.49 %     Non-performing assets to total assets     0.29 %     0.40 %         0.29 %     0.40 %     Allowance for credit losses to non-performing loans     346.15 %     223.61 %         346.15 %     223.61 %     Annualized net charge-offs to average loans (5)     — %     0.01 %         — %     0.11 %     (1) Represents a non-GAAP measure. (2) The efficiency ratio - GAAP basis is non-interest expense divided by net interest income plus non-interest income from the Condensed Consolidated Statements of Income. The traditional efficiency ratio - Non-GAAP basis excludes intangible asset amortization, loss on FHLB redemption, contingent payment expense, and merger, acquisition and disposal expense from non-interest expense; gain on disposal of assets and investment securities gains from non-interest income; and adds the tax-equivalent adjustment to net interest income. See the Reconciliation Table included with these Financial Highlights. (3) Estimated ratio at December 31, 2022. (4) The tangible common equity to tangible assets ratio is a non-GAAP ratio that divides assets excluding intangible assets into stockholders' equity after deducting intangible assets. See the Reconciliation Table included with these Financial Highlights. (5) Calculation utilizes average loans, excluding residential mortgage loans held-for-sale.   Sandy Spring Bancorp, Inc. and Subsidiaries RECONCILIATION TABLE - UNAUDITED (CONTINUED)OPERATING EARNINGS - METRICS     Three Months EndedDecember 31,   Year EndedDecember 31, (Dollars in thousands)     2022       2021       2022       2021   Core earnings (non-GAAP):                 Net income (GAAP)   $         33,980     $         45,404     $         166,299     $         235,107   Plus/ (less) non-GAAP adjustments (net of tax)(1):                 Merger, acquisition and disposal expense             —               —               796               33   Amortization of intangible assets             1,049               1,197               4,333               4,908   Loss on FHLB redemption             —               —               —               6,779   Gain on disposal of assets             —               —               (12,309 )             —   Investment securities (gains)/ losses             293               (26 )             257               (158 ) Contingent payment expense             —               —               929               —   Core earnings (Non-GAAP)   $         35,322     $         46,575     $         160,305     $         246,669                     Core earnings per diluted common share (non-GAAP):                 Weighted average common shares outstanding - diluted (GAAP)             44,828,827               45,655,924               45,039,022               46,899,085                     Earnings per diluted common share (GAAP)   $         0.76     $         0.99     $         3.68     $         4.98   Core earnings per diluted common share (non-GAAP)   $         0.79     $         1.02     $         3.56     $         5.26                     Core return on average assets (non-GAAP):                 Average assets (GAAP)   $         13,769,472     $         12,791,526     $         13,218,824     $         12,818,202                     Return on average assets (GAAP)     0.98 %     1.41 %     1.26 %     1.83 % Core return on average assets (non-GAAP)     1.02 %     1.44 %     1.21 %     1.92 %                   Core return on average tangible common equity (non-GAAP):                 Average total stockholders' equity (GAAP)   $ 1,460,254     $ 1,517,793     $ 1,480,198     $ 1,518,607   Average goodwill     (363,436 )     (370,223 )     (366,244 )     (370,223 ) Average other intangible assets, net     (20,739 )     (26,954 )     (23,009 )     (29,403 ) Average tangible common equity (non-GAAP)   $ 1,076,079     $ 1,120,616     $ 1,090,945     $ 1,118,981                     Return on average tangible common equity (non-GAAP)     12.53 %     16.07 %     15.24 %     21.01 % Core return on average tangible common equity (non-GAAP)     13.02 %     16.49 %     14.69 %     22.04 % (1) Tax adjustments have been determined using the combined marginal federal and state rate of 25.47% and 25.64% for 2022 and 2021, respectively. Sandy Spring Bancorp, Inc. and Subsidiaries RECONCILIATION TABLE - UNAUDITED     Three Months EndedDecember 31,   Year EndedDecember 31, (Dollars in thousands)     2022       2021       2022       2021   Pre-tax pre-provision net income:                 Net income (GAAP)   $ 33,980     $ 45,404     $ 166,299     $ 235,107   Plus/ (less) non-GAAP adjustments:                 Income tax expense     11,784       14,674       56,059       76,552   Provision/ (credit) for credit losses     10,801       1,585       34,372       (45,556 ) Pre-tax pre-provision net income (non-GAAP)   $ 56,565     $ 61,663     $ 256,730     $ 266,103                     Efficiency ratio (GAAP):                 Non-interest expense   $ 64,375     $ 66,141     $ 257,293     $ 260,470                     Net interest income plus non-interest income   $ 120,940     $ 127,804     $ 514,023     $ 526,573                     Efficiency ratio (GAAP)     53.23 %     51.75 %     50.05 %     49.47 %                   Efficiency ratio (Non-GAAP):                 Non-interest expense   $ 64,375     $ 66,141     $ 257,293     $ 260,470   Less non-GAAP adjustments:                 Amortization of intangible assets     1,408       1,609       5,814       6,600   Loss on FHLB redemption     —       —       —       9,117   Merger, acquisition and disposal expense     —       —       1,068       45   Contingent payment expense     —       —       1,247       —   Non-interest expense - as adjusted   $ 62,967     $ 64,532     $ 249,164     $ 244,708                     Net interest income plus non-interest income   $ 120,940     $ 127,804     $ 514,023     $ 526,573   Plus non-GAAP adjustment:                 Tax-equivalent income     1,032       862       3,841       3,703   Less/ (plus) non-GAAP adjustment:                 Investment securities gains/ (losses)     (393 )     34       (345 )     212   Gain on disposal of assets     —       —       16,516       —   Net interest income plus non-interest income - as adjusted   $ 122,365     $ 128,632     $ 501,693     $ 530,064                     Efficiency ratio (Non-GAAP)     51.46 %     50.17 %     49.66 %     46.17 %                   Tangible common equity ratio:                 Total stockholders' equity   $ 1,483,768     $ 1,519,679     $ 1,483,768     $ 1,519,679   Goodwill     (363,436 )     (370,223 )     (363,436 )     (370,223 ) Other intangible assets, net     (19,855 )     (25,920 )     (19,855 )     (25,920 ) Tangible common equity   $ 1,100,477     $ 1,123,536     $ 1,100,477     $ 1,123,536                     Total assets   $ 13,833,119     $ 12,590,726     $ 13,833,119     $ 12,590,726   Goodwill     (363,436 )     (370,223 )     (363,436 )     (370,223 ) Other intangible assets, net     (19,855 )     (25,920 )     (19,855 )     (25,920 ) Tangible assets   $ 13,449,828     $ 12,194,583     $ 13,449,828     $ 12,194,583                     Tangible common equity ratio     8.18 %     9.21 %     8.18 %     9.21 %                   Outstanding common shares     44,657,054       45,118,930       44,657,054       45,118,930   Tangible book value per common share   $ 24.64     $ 24.90     $ 24.64     $ 24.90   Sandy Spring Bancorp, Inc. and SubsidiariesCONDENSED CONSOLIDATED STATEMENTS OF CONDITION - UNAUDITED (Dollars in thousands)   December 31,2022   December 31,2021 Assets         Cash and due from banks   $ 88,152     $ 65,630   Federal funds sold     193       312   Interest-bearing deposits with banks     103,887       354,078   Cash and cash equivalents     192,232       420,020   Residential mortgage loans held for sale (at fair value)     11,706       39,409   Investments held-to-maturity (fair value of $220,123)     259,452       —   Investments available-for-sale (at fair value)     1,214,538       1,465,896   Other investments, at cost     69,218       41,166   Total loans     11,396,706       9,967,091   Less: allowance for credit losses - loans     (136,242 )     (109,145 ) Net loans     11,260,464       9,857,946   Premises and equipment, net     67,070       59,685   Other real estate owned     645       1,034   Accrued interest receivable     41,172       34,349   Goodwill     363,436       370,223   Other intangible assets, net     19,855       25,920   Other assets     333,331       275,078   Total assets   $ 13,833,119     $ 12,590,726             Liabilities         Noninterest-bearing deposits   $ 3,673,300     $ 3,779,630   Interest-bearing deposits     7,280,121       6,845,101   Total deposits     10,953,421       10,624,731   Securities sold under retail repurchase agreements and federal funds purchased     321,967       141,086   Advances from FHLB     550,000       —   Subordinated debt     370,205       172,712   Total borrowings     1,242,172       313,798   Accrued interest payable and other liabilities     153,758       132,518   Total liabilities     12,349,351       11,071,047             Stockholders' equity         Common stock -- par value $1.00; shares authorized 100,000,000; shares issued and outstanding 44,657,054 and 45,118,930 at December 31, 2022 and December 31, 2021, respectively     44,657       45,119   Additional paid in capital     734,273       751,072   Retained earnings     836,789       732,027   Accumulated other comprehensive loss     (131,951 )     (8,539 ) Total stockholders' equity     1,483,768       1,519,679   Total liabilities and stockholders' equity   $ 13,833,119     $ 12,590,726   Sandy Spring Bancorp, Inc. and SubsidiariesCONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED     Three Months EndedDecember 31,   Year EndedDecember 31, (Dollars in thousands, except per share data)     2022       2021     2022       2021   Interest income:                 Interest and fees on loans   $ 135,079     $ 103,589   $ 462,121     $ 423,152   Interest on loans held for sale     234       271     738       1,736   Interest on deposits with banks     1,427       330     2,672       725   Interest and dividends on investment securities:                 Taxable     6,047       3,888     20,519       16,118   Tax-advantaged     2,509       1,992     9,609       8,552   Interest on federal funds sold     4       1     8       1   Total interest income     145,300       110,071     495,667       450,284   Interest Expense:                 Interest on deposits     28,276       2,820     43,854       15,022   Interest on retail repurchase agreements and federal funds purchased     1,697       43     2,929       182   Interest on advances from FHLB     4,759       —     7,825       2,649   Interest on subordinated debt     3,925       1,940     14,055       7,913   Total interest expense     38,657       4,803     68,663       25,766   Net interest income     106,643    .....»»

Category: earningsSource: benzingaJan 26th, 2023

CNB Financial Corporation Reports Full-Year 2022 Earnings Per Share of $3.26 Compared to $3.16 For Full-Year 2021

CLEARFIELD, Pa., Jan. 19, 2023 (GLOBE NEWSWIRE) -- CNB Financial Corporation ("CNB" or the "Corporation") (NASDAQ:CCNE), the parent company of CNB Bank, today announced its earnings for the twelve and three months ended December 31, 2022. Executive Summary Net income available to common shareholders ("earnings") was $58.9 million, or $3.26 per diluted share, for the twelve months ended December 31, 2022, compared to $53.4 million, or $3.16 per diluted share, for the twelve months ended December 31, 2021, reflecting increases of $5.5 million, or 10.3%, and $0.10 per diluted share, or 3.2%. The 2022 full-year earnings per share was partially impacted as a result of the dilutive effect of the Corporation's common stock offering completed in September of 2022, resulting in the issuance of 4,257,446 shares of common stock at $23.50 per share and net proceeds of $94.1 million after deducting the underwriting discount and customary offering expenses. Earnings for the three months ended December 31, 2022 were $14.8 million, or $0.70 per diluted share, compared to $13.6 million, or $0.80 per diluted share, for the three months ended December 31, 2021. The increase in earnings of $1.3 million, or 9.2%, for the three months ended December 31, 2022 compared to the same period in the prior year resulted primarily from growth in commercial loans and year-over-year increases in the balance of investment securities, stable credit quality, and an asset-sensitive balance sheet supporting increased net interest income in the current rising rate environment. The decrease in diluted earnings per share of $0.10, or 12.5%, for the three months ended December 31, 2022 compared to the same period in the prior year is due to the additional shares issued in the common equity capital raise in the third quarter 2022, as discussed above, which had a significant impact on the weighted average number of shares outstanding for the Corporation, in the fourth quarter of 2022. Processing fees on Paycheck Protection Program ("PPP") loans ("PPP-related fees") totaled approximately $1.9 million for the twelve months ended December 31, 2022, compared to $8.7 million for the twelve months ended December 31, 2021. PPP-related fees totaled approximately $19 thousand for the three months ended December 31, 2022, compared to $1.9 million for the three months ended December 31, 2021. At December 31, 2022, remaining deferred PPP-related fees totaled approximately $3 thousand. At December 31, 2022, loans, excluding the impact of (i) syndicated loans, and (ii) PPP loans, net of PPP-related fees (such loans being referred to as the "PPP-related loans"), totaled $4.1 billion, representing an increase of $654.5 million, or 18.9%, from December 31, 2021. This favorable loan growth, which was experienced across the Corporation's footprint, continued to reflect the Corporation's ongoing expansion in the Cleveland and Southwest Virginia regions, as well as new opportunities from its new loan production office in Rochester, New York, combined with growth in the portfolio related to its Private Banking division. For the twelve months ended December 31, 2022, the Corporation's balance sheet reflected an increase in syndicated lending balances of $30.9 million compared to December 31, 2021. The syndicated loan portfolio totaled $156.6 million, or 3.7% of total loans, excluding PPP-related loans, at December 31, 2022, compared to $125.8 million, or 3.5% of total loans, excluding PPP-related loans, at December 31, 2021. At December 31, 2022, total deposits were $4.6 billion, reflecting a decrease of $93.2 million, or 2.0%, from December 31, 2021. The decrease in deposit balances was primarily the result of increased utilization of liquidity by our customers as well as some reductions in excess balances from certain customers with a higher level of interest rate sensitivity. While deposit balances decreased, the total number of deposit households increased by 2.2% from December 31, 2021 to December 31, 2022. At December 31, 2022, short-term borrowings from the Federal Home Bank of Pittsburgh ("FHLB") totaled approximately $132.4 million, compared to no borrowings at December 31, 2021. The increase in short-term borrowings resulted primarily from the fourth quarter growth in loans outpacing the growth in deposit balances for the same period. Total nonperforming assets were approximately $23.5 million, or 0.43% of total assets, as of December 31, 2022, compared to $20.3 million, or 0.38% of total assets, as of December 31, 2021. For the three months ended December 31, 2022, net loan charge-offs were $821 thousand, or 0.08% (annualized) of average total loans and loans held for sale, compared to $456 thousand, or 0.05% (annualized) of average total loans and loans held for sale, during the three months ended December 31, 2021. Pre-provision net revenue ("PPNR"), a non-GAAP measure, was $86.8 million for the twelve months ended December 31, 2022, compared to $76.8 million for the twelve months ended December 31, 2021, reflecting an increase of $10.0 million, or 13.1%.1 PPNR was $22.8 million for the three months ended December 31, 2022, compared to $18.5 million for the three months ended December 31, 2021, reflecting an increase of $4.3 million, or 23.2%.1 The increase in PPNR for the twelve and three months ended December 31, 2022 was primarily driven by growth in loans and expansion of the Corporation's net interest margin. 1 This release contains references to certain financial measures that are not defined under U.S. Generally Accepted Accounting Principles ("GAAP"). Management believes that these non-GAAP measures provide a greater understanding of ongoing operations, enhance comparability of results of operations with prior periods and show the effects of significant gains and charges in the periods presented. A reconciliation of these non-GAAP financial measures is provided in the "Non-GAAP Reconciliations" section. Michael D. Peduzzi, President and CEO, stated, "I am pleased to report that our results for 2022 represent record full-year earnings for the Corporation. Our performance reflects the dedicated, collective efforts of our commercial business development officers, retail office and client service personnel, wealth management and treasury services professionals, and corporate support teams. Our strategy of operating multiple relevant banking brands and divisions across four states efficiently under one bank charter greatly supported our double-digit percentage loan growth and increases in fee-based revenues. Importantly, we maintained our underwriting and pricing discipline reflected by sound asset quality measures and a strong net interest margin. With our business development professionals being strongly connected in the markets across our footprint, and the addition in 2023 of our new women's banking division, Impressia Bank, we believe we remain well-positioned for continued qualitative growth." Other Balance Sheet Highlights As of December 31, 2022, the total balance of investments classified as held-to-maturity was $404.8 million. There were no securities classified as held-to-maturity at December 31, 2021. During 2022, as a result of the Corporation's asset/liability and capital management strategies, securities with a combined amortized cost of $220.8 million and a fair value of $213.7 million were transferred from available-for-sale to held-to-maturity. These held-to-maturity portfolio bonds continue to support liquidity through pledging and can be utilized as collateral against borrowings. In addition to these internal portfolio transfers, some of the investment purchases made by the Corporation during 2022 were also classified as held-to-maturity securities. Book value per common share was $22.39 at December 31, 2022, representing a decrease of 2.0% from $22.85 at December 31, 2021. Tangible book value per common share, a non-GAAP measure, was $20.30 as of December 31, 2022, reflecting an increase of 0.4% from a tangible book value per common share of $20.22 as of December 31, 2021.1 The changes in book value per common share and tangible book value per common share compared to the prior year were mostly due to a $52.1 million increase in accumulated other comprehensive loss primarily from the temporary unrealized valuation changes in the available-for-sale investment portfolio. The after-tax impact of these unrealized losses was substantially, but not completely, offset by a $46.3 million increase in retained earnings. Book value and tangible book value also benefited from the issuance price of the shares added from the previously discussed common equity capital raise completed in September of 2022. In addition, tangible book value per common share benefited from a lower core deposit intangible balance at December 31, 2022. Performance Ratios Annualized return on average equity was 13.86% and 12.45% for the twelve and three months ended December 31, 2022, respectively, compared to 13.39% and 13.17% for the twelve and three months ended December 31, 2021, respectively. Annualized return on average tangible common equity, a non-GAAP measure, was 16.64% and 14.54% for the twelve and three months ended December 31, 2022, respectively, compared to 16.23% and 15.87% for the comparable periods in 2021, respectively.1 While the previously discussed common equity capital raise completed in the third quarter of 2022 significantly enhanced the Corporation's capital position, it also impacted the performance ratios for the twelve and three months ended December 31, 2022 and the related comparison to prior periods. The Corporation's efficiency ratio was 61.32% and 61.87% for the twelve and three months ended December 31, 2022, respectively, compared to 60.26% and 63.68% for the twelve and three months ended December 31, 2021, respectively. The efficiency ratio on a fully tax-equivalent basis, a non-GAAP ratio, was 60.87% and 61.40% for the twelve and three months ended December 31, 2022, respectively, compared to 59.76% and 63.19% for the twelve and three months ended December 31, 2021, respectively.1 The increase for the twelve months ended December 31, 2022 was primarily a result of expected increasing costs associated with the Corporation's expanding franchise investments into the Cleveland and Southwest Virginia markets, coupled with its continued strategic investments in technologies focused on customer sales management and connectivity capabilities. In addition, the fourth quarter of 2021 included approximately $2.3 million in additional personnel costs primarily from higher incentive compensation accruals and certain retirement benefit expenses. Revenue Net interest income combined with non-interest income ("total revenue") was $224.4 million for the twelve months ended December 31, 2022, representing an increase of $31.2 million, or 16.2%, from the twelve months ended December 31, 2021, primarily due to the following: Net interest income of $189.7 million for the twelve months ended December 31, 2022 increased $29.9 million, or 18.7%, from the twelve months ended December 31, 2021, primarily as a result of loan growth throughout 2022 and the benefits of the impact of rising interest rates in 2022 resulting in greater income on variable-rate loans, coupled with net growth in the Corporation's investment portfolio. Included in net interest income were PPP-related fees, which totaled approximately $1.9 million for the twelve months ended December 31, 2022, compared to $8.7 million for the twelve months ended December 31, 2021. Net interest margin was 3.83% and 3.35% for the twelve months ended December 31, 2022 and 2021, respectively. Net interest margin on a fully tax-equivalent basis, a non-GAAP measure, was 3.82% and 3.38% for the twelve months ended December 31, 2022 and 2021, respectively.1 The yield on earning assets of 4.30% for the twelve months ended December 31, 2022 increased 51 basis points from 3.79% for the twelve months ended December 31, 2021, primarily as a result of loan growth, the repricing of variable rate loans, and the Corporation's redeployment of excess cash at the Federal Reserve to investment securities, partially offset by lower PPP-related fees in 2022 compared to 2021. The cost of interest-bearing liabilities increased 10 basis points from 0.52% for the twelve months ended December 31, 2021 to 0.62% for the twelve months ended December 31, 2022, primarily as a result of the Corporation's targeted interest-bearing deposit rate increases. Total revenue was $59.8 million for the three months ended December 31, 2022, representing an increase of $8.9 million, or 17.4%, compared to the three months ended December 31, 2021, primarily due to the following: Net interest income of $50.8 million for the three months ended December 31, 2022 increased $8.8 million, or 20.9%, from the three months ended December 31, 2021, primarily as a result of loan growth and the net benefit of higher interest rates on both variable-rate loans and new loan production. Included in net interest income were PPP-related fees, which totaled approximately $19 thousand for the three months ended December 31, 2022, compared to $1.9 million for the three months ended December 31, 2021. Net interest margin was 4.07% and 3.38% for the three months ended December 31, 2022 and 2021, respectively. Net interest margin on a fully tax-equivalent basis, a non-GAAP measure, was 4.03% and 3.41% for the three months ended December 31, 2022 and 2021, respectively.1 The yield on earning assets of 4.95% for the three months ended December 31, 2022 increased 120 basis points from 3.75% for the three months ended December 31, 2021, primarily as a result of loan growth and the Corporation redeploying excess cash at the Federal Reserve to investment securities. Net interest income also reflected the net benefit of higher interest rates, partially offset by lower PPP-related fees in 2022 compared to 2021. The cost of interest-bearing liabilities increased 77 basis points from 0.43% for the three months ended December 31, 2021 to 1.20% for the three months ended December 31, 2022, primarily as a result of the Corporation's targeted interest-bearing deposit rate increases and short-term borrowings through the FHLB. Total non-interest income was $34.8 million for the twelve months ended December 31, 2022, representing an increase of $1.3 million, or 4.0%, from the same period in 2021. Included in non-interest income for the twelve months ended December 31, 2022 and 2021 was $651 thousand and $783 thousand, respectively, in net realized gains on available-for-sale securities. Non-interest income excluding realized gains on available-for-sale securities, a non-GAAP measure, for the twelve months ended December 31, 2022, increased $1.5 million, or 4.5%, from the same period in 2021.1 During the twelve months ended December 31, 2022, Wealth and Asset Management fees increased $432 thousand, or 6.4%, compared to the twelve months ended December 31, 2021, as the Corporation benefited from an increased number of wealth management relationships. Other notable increases during the twelve months ended December 31, 2022 included increased income from service charges on deposits, other service charges and fees, pass-through income from small business investment companies ("SBICs") and bank owned life insurance mostly due to an $883 thousand gain resulting from death benefit proceeds. These were partially offset by unrealized losses on equity securities and decreased mortgage banking activity. Total non-interest income was $9.0 million for the three months ended December 31, 2022, representing an increase of $83 thousand, or 0.9%, from the same period in 2021. The increase was primarily the result of income from service charges and fees and pass-through income from SBICs, partially offset by decreased mortgage banking activity. Non-Interest Expense For the twelve months ended December 31, 2022, total non-interest expense was $137.6 million, reflecting an increase of $21.2 million, or 18.2%, from the twelve months ended December 31, 2021, primarily as a result of (i) expansion of the Corporation's workforce in its growth regions of Cleveland, Southwest Virginia, and Rochester, (ii) increased investments in technology aimed at enhancing both customer experience and expanding service delivery channels, and (iii) the Corporation's sales management and increased legal and professional expenses. For the three months ended December 31, 2022, total non-interest expense was $37.0 million, reflecting an increase of $4.6 million, or 14.0%, from the three months ended December 31, 2021, primarily as a result of the same expense drivers as discussed above. Income Taxes Income tax expense was $15.0 million, representing a 19.2% effective tax rate, and $13.1 million, representing a 18.5% effective tax rate, for the twelve months ended December 31, 2022 and 2021, respectively. Asset Quality Total nonperforming assets were $23.5 million, or 0.43% of total assets, as of December 31, 2022, compared to $20.3 million, or 0.38% of total assets, as of December 31, 2021. The allowance for credit losses measured as a percentage of total loans was 1.02% as of December 31, 2022, compared to 1.03% as of December 31, 2021. In addition, the allowance for credit losses as a percentage of nonaccrual loans was 207.0% as of December 31, 2022, compared to 193.6% as of December 31, 2021. Provision for credit losses was $8.6 million and $3.0 million for the twelve and three months ended December 31, 2022, respectively, compared to $6.0 million and $814 thousand for the twelve and three months ended December 31, 2021, respectively. Included in the provision for credit losses for the twelve and three months ended December 31, 2022 was $603 thousand expense and a $38 thousand benefit, respectively, related to the allowance for unfunded commitments compared to no accrual towards the allowance for unfunded commitments for the twelve and three months ended December 31, 2021. For the twelve months ended December 31, 2022, net loan charge-offs were $2.1 million, or 0.05% of average total loans including loans held for sale, compared to $2.8 million, or 0.08%, during the twelve months ended December 31, 2021. For the three months ended December 31, 2022, net loan charge-offs were $821 thousand, or 0.08% (annualized) of average total loans including loans held for sale, compared to $456 thousand, or 0.05% (annualized), during the three months ended December 31, 2021. Capital As of December 31, 2022, the Corporation's total shareholders' equity was $530.8 million, representing an increase of $87.9 million, or 19.9%, from December 31, 2021, primarily due to the $94.1 million increase in additional paid in capital as a result of the Corporation's common stock offering and the increase from the Corporation's earnings, partially offset by both common and preferred dividends paid during the year, and a significant increase in accumulated other comprehensive loss during the year resulting primarily from the temporary unrealized reduction in the value of the available-for-sale investment portfolio during the twelve months ended December 31, 2022. Regulatory capital ratios for the Corporation continue to exceed regulatory "well-capitalized" levels as of December 31, 2022. As of December 31, 2022, the Corporation's ratio of common shareholders' equity to total assets was 8.64% compared to 7.23% at December 31, 2021. As of December 31, 2022, the Corporation's ratio of tangible common equity to tangible assets, a non-GAAP measure, was 7.90% compared to 6.45% at December 31, 2021. This increase was the result of the above-noted impacts of the Corporation's common stock offering and an increase in retained earnings, partially offset by an increase in accumulated other comprehensive loss during the twelve months ended December 31, 2022.1 About CNB Financial Corporation CNB Financial Corporation is a financial holding company with consolidated assets of approximately $5.5 billion. CNB Financial Corporation conducts business primarily through its principal subsidiary, CNB Bank. CNB Bank is a full-service bank engaging in a full range of banking activities and services, including trust and wealth management services, for individual, business, governmental, and institutional customers. CNB Bank operations include a private banking division, three loan production offices, one drive-up office, one mobile office and 47 full-service offices in Pennsylvania, Ohio, New York and Virginia. CNB Bank's divisions include ERIEBANK, based in Erie, Pennsylvania, with offices in Northwest Pennsylvania and Northeast Ohio; FCBank, based in Worthington, Ohio, with offices in Central Ohio; BankOnBuffalo, based in Buffalo, New York, with offices in Western New York; Ridge View Bank, with loan production offices in the Southwest Virginia region; and Impressia Bank which will operate in CNB Bank's primary market areas. CNB Bank is headquartered in Clearfield, Pennsylvania, with offices in Central and North Central Pennsylvania. Additional information about CNB Financial Corporation may be found at www.CNBBank.bank.  Forward-Looking Statements This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to CNB's financial condition, liquidity, results of operations, future performance and business. These forward-looking statements are intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those that are not historical facts. Forward-looking statements include statements with respect to beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors (some of which are beyond CNB's control). Forward-looking statements often include the words "believes," "expects," "anticipates," "estimates," "forecasts," "intends," "plans," "targets," "potentially," "probably," "projects," "outlook" or similar expressions or future conditional verbs such as "may," "will," "should," "would" and "could." CNB's actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Such known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from the statements, include, but are not limited to, (i) adverse changes or conditions in capital and financial markets; (ii) changes in interest rates; (iii) the duration and scope of a pandemic, including the ongoing COVID-19 pandemic, and the local, national and global impact of a pandemic;; (iv) changes in general business, industry or economic conditions or competition; (v) changes in any applicable law, rule, regulation, policy, guideline or practice governing or affecting financial holding companies and their subsidiaries or with respect to tax or accounting principles or otherwise; (vi) higher than expected costs or other difficulties related to integration of combined or merged businesses; (vii) the effects of business combinations and other acquisition transactions, including the inability to realize our loan and investment portfolios; (viii) changes in the quality or composition of our loan and investment portfolios; (ix) adequacy of loan loss reserves; (x) increased competition; (xi) loss of certain key officers; (xii) deposit attrition; (xiii) rapidly changing technology; (xiv) unanticipated regulatory or judicial proceedings and liabilities and other costs; (xv) changes in the cost of funds, demand for loan products or demand for financial services; and (xvi) other economic, competitive, governmental or technological factors affecting our operations, markets, products, services and prices. Such developments could have an adverse impact on CNB's financial position and results of operations. For more information about factors that could cause actual results to differ from those discussed in the forward-looking statements, please refer to the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of and the forward-looking statement disclaimers in CNB's annual and quarterly reports filed with the Securities and Exchange Commission. The forward-looking statements are based upon management's beliefs and assumptions and are made as of the date of this press release. CNB undertakes no obligation to publicly update or revise any forward-looking statements included in this press release or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise, except to the extent required by law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this press release might not occur and you should not put undue reliance on any forward-looking statements. Financial Tables The following tables supplement the financial highlights described previously for CNB. All dollars are stated in thousands, except share and per share data.     (unaudited)         Three Months Ended   Twelve Months Ended     December 31,   December 31,       2022       2021     % change     (unaudited)2022       2021     % change Income Statement                         Interest and fees on loans   $ 57,781     $ 40,923     41.2 %   $ 194,149     $ 157,799     23.0 % Processing fees on PPP loans     19       1,920     (99.0)%     1,889       8,737     (78.4)% Interest and dividends on securities and cash and cash equivalents     4,645       3,486     33.2 %     17,700       13,064     35.5 % Interest expense     (11,612 )     (4,270 )   171.9 %     (24,079 )     (19,820 )   21.5 % Net interest income     50,833       42,059     20.9 %     189,659       159,780     18.7 % Provision for credit losses     2,950       814     262.4 %     8,589       6,003     43.1 % Net interest income after provision for credit losses     47,883       41,245     16.1 %     181,070       153,777     17.7 %                           Non-interest income                         Service charges on deposit accounts     1,806       1,806     0.0 %     7,206       6,195     16.3 % Other service charges and fees     943       731     29.0 %     3,196       2,436     31.2 % Wealth and asset management fees     1,716       1,719     (0.2)%     7,172       6,740     6.4 % Net realized gains on available-for-sale securities     0       783     NM     651       783     (16.9)% Net realized and unrealized gains (losses) on equity securities     284       313     (9.3)%     (1,149 )     790     (245.4)% Mortgage banking     172       532     (67.7)%     1,237       3,147     (60.7)% Bank owned life insurance     655       636     3.0 %     3,433       2,638     30.1 % Card processing and interchange income     2,021       1,925     5.0 %     7,797       7,796     0.0 % Other non-interest income     1,410       479     194.4 %     5,223       2,909     79.5 % Total non-interest income     9,007       8,924     0.9 %     34,766       33,434     4.0 % Non-interest expenses                         Salaries and benefits     18,800       17,733     6.0 %     71,460       61,175     16.8 % Net occupancy expense of premises     3,358       3,227     4.1 %     13,298       12,381     7.4 % Technology expense     5,093       3,271     55.7 %     17,041       11,723     45.4 % Advertising expense     1,021       763     33.8 %     2,887       2,081     38.7 % State and local taxes     957       961     (0.4)%     4,078       4,057     0.5 % Legal, professional, and examination fees     1,141       732     55.9 %     4,173       3,517     18.7 % FDIC insurance premiums     654       689     (5.1)%     2,796       2,509     11.4 % Card processing and interchange expenses     1,315       1,020     28.9 %     4,801       3,836     25.2 % Other non-interest expense     4,682       4,069     15.1 %     17,088       15,154     12.8 % Total non-interest expenses     37,021       32,465     14.0 %     137,622       116,433     18.2 %                           Income before income taxes     19,869       17,704     12.2 %     78,214       70,778     10.5 % Income tax expense     3,989       3,075     29.7 %     15,026       13,071     15.0 % Net income     15,880       14,629     8.6 %     63,188       57,707     9.5 % Preferred stock dividends     1,076       1,076     0.0 %     4,302       4,302     0.0 % Net income available to common shareholders   $ 14,804     $ 13,553     9.2 %   $ 58,886     $ 53,405     10.3 %                           Average diluted common shares outstanding     21,092,770       16,823,060           18,019,604       16,820,054                                 Diluted earnings per common share   $ 0.70     $ 0.80     (12.5)%   $ 3.26     $ 3.16     3.2 % Cash dividends per common share   $ 0.175     $ 0.175     0.0 %   $ 0.700     $ 0.685     2.2 % Dividend payout ratio     25 %     22 %         21 %     22 %                                   (unaudited)                 Three Months Ended       Twelve Months Ended         December 31,       December 31,           2022       2021           (unaudited)2022       2021       Average Balances                         Total loans and loans held for sale   $ 4,123,857     $ 3,560,753         $ 3,897,722     $ 3,465,919       Investment securities     787,259       735,926           813,172       675,124       Total earning assets     4,959,490       4,931,292           4,954,547       4,768,040       Total assets     5,311,790       5,240,449           5,284,213       5,058,900       Noninterest-bearing deposits     874,131       787,865           847,793       724,839       Interest-bearing deposits     3,714,040       3,835,434           3,796,642       3,733,327       Shareholders' equity     505,992       440,808           455,748       431,062       Tangible common shareholders' equity (non-GAAP) (1)     404,079       338,798           353,800       329,012                                 Average Yields (annualized)                         Total loans and loans held for sale     5.58 %     4.80 %         5.06 %     4.83 %     Investment securities     1.90 %     1.77 %         1.85 %     1.83 %     Total earning assets     4.95 %     3.75 %         4.30 %     3.79 %     Interest-bearing deposits     1.09 %     0.34 %         0.52 %     0.40 %     Interest-bearing liabilities     1.20 %     0.43 %         0.62 %     0.52 %                               Performance Ratios (annualized)                         Return on average assets     1.19 %     1.11 %         1.20 %     1.14 %     Return on average equity     12.45 %     13.17 %         13.86 %     13.39 %     Return on average tangible common equity (non-GAAP) (1)     14.54 %     15.87 %      .....»»

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Category: topSource: digitimesJan 19th, 2023

Futures Drift Higher After BOJ Reversal, Await PPI And Retail Sales

Futures Drift Higher After BOJ Reversal, Await PPI And Retail Sales US stock-index futures were muted on Wednesday, swinging between gains and losses, as investors initially welcomes a dovish announcement by the BOJ which refrained from further expanding its yield curve control band, then turned to corporate earnings for more clues on the health of corporate America amid growing prospects for a recession. Nasdaq 100 and the S&P 500 futures were up 0.2% as of 7:15 a.m. in New York. Treasury and JGB yields tumbled after the BOJ kept monetary settings unchanged, while the yen first slid against the dollar but then recovered all losses amid expectations the BOJ has only bought a few weeks of time. WTI crude added 1.7% this morning and has been holding above $80 amid optimism around China reopening demand. Dollar is weaker; DXY at 102 helping gold trade back over $1900. Among notable movers in premarket trading, Moderna Inc. climbed 6.7% after saying its vaccine against respiratory syncytial virus infections met targets. IBM dropped 1.9% after Morgan Stanley cut the stock to equal-weight from overweight, saying that it is transitioning out of more defensive IT hardware name. Bank stocks are mixed as investors await the release of key economic data, including the Beige Book and retail sales. Coinbase said it’s halting operations in Japan. Meanwhile, Bank of Montreal has received approval from the Federal Reserve to acquire San Francisco-based Bank of the West. Here are the other notable premarket movers: United Airlines (UAL US) rises 2.6%, boosting carrier peers, after the airline operator’s guidance for the first quarter and 2023 beat analyst estimates. Brokers pointing to strong growth in sales, assuaging any worries over demand taking a hit from an economic slowdown. American Airlines +1.4%, Delta Air +1% GoDaddy (GDDY US) gains 3% after the website domain company was upgraded to outperform from inline at Evercore ISI, with the broker highlighting the firm’s relatively recession- resistant business model and new-product cycle. International Business Machines (IBM US) drops 1.9% after Morgan Stanley cut the stock to equal-weight from overweight, saying that it is transitioning out of more defensive IT hardware names. Skechers (SKX US) slides 2.1% after Morgan Stanley downgraded it to equal-weight on valuation, risk of FY23 guidance missing expectations and as the market shifts to early-cycle names. The broker raised Gap (GPS US) to equal-weight and anticipates a 2023 of two halves for US specialty retail and department stores. SmileDirectClub (SDC US) jumps 13% after the maker of dental aligners projected a narrower Ebitda loss for 2023 and said that it planned to rejig its global workforce and introduce additional cost savings. Jefferies, however, remains cautious on the stock, saying that the company saw a “weak” finish to a tough year. Oatly (OTLY US) gains 6.3% after Mizuho Securities upgrades its rating on the oat drink company to buy from hold, with long-term growth seen still intact. While US stocks have gained in the new year as cooling inflation spurred bets of a softening in the Federal Reserve’s policy, they’ve dramatically underperformed international peers as investors worry that the combination of rising interest rates and slowing consumer demand could trigger an economic contraction. A weaker dollar and optimism around a China reopening have lured investors to non-US stocks. Goldman Sachs strategists said US equity funds have seen outflows in the first two weeks of the year, while Europe has seen inflows — both major trend reversals from 2022. UK inflation as well as a more muted start to the US earnings-reporting season boosted those who believe monetary easing would have to begin this year. The yen dropped as much as 2.6% against the dollar after Japan’s policymakers doubled down on defending their stimulus, defying intense market speculation. The currency later trimmed the losses to 0.7%. Even as investors remain on guard for the central bank to continue large scale bond buying to protect its yield goal, there are doubts about how long it can continue. The yen’s drop proved to be an idiosyncratic trend in the foreign-exchange markets as the dollar fell against all but five of its 31 major peers including the Japanese currency. Meanwhile, Analysts expect fourth-quarter earnings to show a drop of 2.7%, the first year-over-year decline since 2020, according to data from Bloomberg Intelligence. “Given the difficult backdrop, there’s fear among some parts of the market that US earnings forecasts might still be too high for 2023 and that stocks might not be able to sustain their current strength,” said Russ Mould, investment director at AJ Bell. He added that reports from the likes of Procter & Gamble Co., Schlumberger Ltd., Microsoft Corp. and Tesla Inc. “will certainly be ones to watch as their fortunes could have a major influence on market sentiment.” European equity markets are mixed after the BOJ sent the yen spiraling lower by leaving its policy settings unchanged. The Stoxx 600 is up 0.1% with gains in the CAC and FTSE 100 while the DAX trades lower; today's move brought the total Stoxx 600 gains since a Sept. 29 low to more than 19%. If the index closes at 20% or higher, it will join other regional peers in confirming a technical bull market. Tech, travel and miners are the best performing sectors while chemicals and real estate fall.  Here are the notable European movers: Richemont shares gain as much as 2.8% in Europe despite the Cartier owner posting worse-than-expected 3Q sales as investors take the view that disruptions in China caused by a surge in Covid infections may prove temporary. Just Eat Takeaway.com jumps as much as 16% after 4Q Ebitda beat estimates as the food delivery firm said it remains focused on improving profitability. Peers Deliveroo and Delivery Hero rose as much as +5.5% and 6.3% respectively ASM International shares rise as much as 8.7% after 4Q update shows a strong beat on sales that is likely to boost sentiment on the semiconductor-equipment maker, analysts say. ASML shares rise as much as 2.1% in sympathy. Capgemini shares rise as much as 3.5%, hitting highest in just over a month, after Barclays upgrades the IT services firm to overweight on greater resilience in its business mix and on utilization. EQT shares drop as much as 8.4%, the most in more than three months, after the investment firm delivered results which analysts say missed on adjusted Ebitda. Continental shares fall as much as 5% after the German car-parts and tiremaker said late Tuesday that it expects FY22 adjusted free cash flow of €200m, below its outlook range of €600m to €800m. Encavis shares fall as much as 5.3% after Barclays analyst cut the recommendation to underweight from equalweight, Orsted also downgraded. Barclays notes that growth pipeline valuations for the two energy companies have moved significantly above vertically integrated peers. Wise shares drop as much as 5%, extending yesterday’s double-digit losses, after the UK money- transfer firm’s growth slowed and missed analyst expectations. Earlier in the session Asian stocks edged higher as Japanese shares advanced after the Bank of Japan announced no change to its yield curve control policy, countering broader caution ahead of the Lunar New Year holidays. The MSCI Asia Pacific Index erased an earlier loss of as much as 0.7% to rise 0.5%, lifted by communication services and health care shares. Japanese equities jumped as the yen fell after the BOJ kept policy on hold, pushing back against intense market speculation of policy change by ramping up the defense of its stimulus framework. “What has been happening so far is a fairly easy pattern to understand,” said Makoto Furukawa, chief portfolio strategist at Mitsubishi UFJ Morgan Stanley Securities. “I think the pattern of bank stocks rising and exchange-rate-sensitive stocks being hit will continue. Expectations for further revisions to the BOJ’s policy will emerge.” South Korea was among the biggest losers on Thursday, dragged by a loss in Samsung Electronics. Chinese benchmarks were mixed in thin volumes before market closures next week. The MSCI Asian stock benchmark has gained more than 20% from an October low to enter a bull market, outperforming US and European peers. Japanese stocks have underperformed, with the Nikkei down almost 1% in the same span, hurt in part by the BOJ’s December move to widen a band on bond yields. Australian stocks edged higher: the S&P/ASX 200 index rose to close at 7,393.40, as healthcare and technology shares buoyed the benchmark. In New Zealand, the S&P/NZX 50 index rose 0.3% to 11,920.41. The nation’s home sales fell 39% y/y in December, according to the Real Estate Institute of New Zealand. The Bloomberg Dollar Index is down 0.3%, swinging to a loss in European trading as the greenback weakened against all of its Group-of-10 peers apart from the yen; the JPY traded well off its worst levels. EUR gained after ECB’s Villeroy said he was surprised by the sources story suggesting they are considering smaller hikes beyond February. GBP rose after data showed UK core CPI was slightly stronger than expected in December.  Some more details: The yen slumped as much as as 2.6% against the dollar, hitting 131.58, and Japan’s bond yields fell by up to 11bps after the BOJ pushed back against intense market speculation of policy change by ramping up the defense of its stimulus framework. Risk reversals in the front-end rallied in the run-up to the BOJ decision in favor of greenback calls, suggesting that the market was positioning for a no-change decision by the central bank. The move for risk reversals suggests that investors are still looking for bullish yen expressions over the medium-term, and especially after Kuroda’s term ends in April The Swiss franc extended its advance against to 0.9131 per dollar, the strongest level in a year The euro extended an advance against the dollar and bunds reversed opening gains after ECB official Francois Villeroy de Galhau said that guidance from ECB President Christine Lagarde that borrowing costs will continue to be lifted in half-point steps for some time still holds. One trader has placed a large bet using options on German 5-year futures, targeting the yield to rise above 2.40% for maximum profit, up from about 2.13% currently The pound rose against the dollar and traders added to wagers on the BOE’s hiking cycle after UK inflation figures showed month-on-month and core readings came in higher than anticipated in December In rates, Treasuries and JGBs spiked higher overnight after the Bank of Japan kept monetary settings unchanged with no nod to any concession on current policy; 10-year TSY yields fell as much as 8.3bp to 3.465% and were trading at 3.47% last. Gains have been broadly maintained into early US session, with 10-year note futures trading near day’s high. Heavy US economic data slate includes PPI and retail sales, and Treasury auctions 20-year bonds. UK and German government bonds pared earlier advances to trade in the red as Treasury yields were richer by 3bp to 7bp across the curve with gains led by intermediates, flattening 2s10s spread by 4bp on the day; 10-year yields trade around 3.48% with bunds and gilts underperforming by 4bp and 7bp in the sector. Most gains in Treasuries were made during aggressive rally in JGBs after Bank of Japan policy announcement, which left benchmark JGB 10-year richer by around 8bp on the day. US Treasury auctions resume with $12b 20-year bond reopening at 1pm. In commodities, crude futures rose with WTI adding 1.7% to trade near $81.50. Spot gold rises roughly $4 to trade near $1,913/oz To the day ahead now, and data releases from the US include December’s PPI, retail sales and industrial production, whilst from the UK we’ll also get the December CPI release. From central banks, we’ll hear from the ECB’s Villeroy, and the Fed’s Bostic, Harker and Logan. Lastly, the Fed will also be releasing their Beige Book. Market Snapshot S&P 500 futures little changed at 4,012.00 MXAP up 0.5% to 166.79 MXAPJ up 0.3% to 546.45 Nikkei up 2.5% to 26,791.12 Topix up 1.7% to 1,934.93 Hang Seng Index up 0.5% to 21,678.00 Shanghai Composite little changed at 3,224.41 Sensex up 0.6% to 61,049.16 Australia S&P/ASX 200 little changed at 7,393.36 Kospi down 0.5% to 2,368.32 STOXX Europe 600 up 0.1% to 457.14 German 10Y yield little changed at 2.10% Euro up 0.6% to $1.0855 Brent Futures up 1.1% to $86.89/bbl Gold spot up 0.3% to $1,913.84 U.S. Dollar Index down 0.39% to 101.99 Top Overnight News from Bloomberg ECB policymakers are starting to consider a slower pace of interest-rate hikes than President Christine Lagarde indicated in December, according to officials with knowledge of their discussions The BOJ standing pat caught some traders by surprise, but is unlikely to douse speculation that it will normalize policy as inflation in Japan accelerates and Governor Haruhiko Kuroda nears the end of his term China’s top economic official told an audience of international billionaires and bankers that his country’s economy will likely rebound to its pre-pandemic growth trend this year after coronavirus infections passed their peak A more detailed look at global markets courtesy of Newsquawk APAC stocks were positive albeit with price action mostly kept rangebound after the weak lead from Wall Street, while focus overnight centred on the BoJ policy announcement in which the central bank defied the increased speculation for a policy tweak. ASX 200 was flat with strength in the tech and consumer sectors offset by losses in commodity-related stocks. Nikkei 225 was boosted after the BoJ stuck with its ultra-easy policy settings and reaffirmed its dovish guidance. Hang Seng and Shanghai Comp were choppy but with strength in key tech names after China approved licences for 88 new games including titles from Tencent and NetEase in a further sign of an end to its tech crackdown. Top Asian News PBoC injected CNY 133bln via 7-day reverse repos with the rate kept at 2.00% and injects CNY 447bln via 14-day reverse repos with the rate kept at 2.15% for a CNY 515bln net injection. China's NDRC's said the economic development situation this year is still complicated, external environment is turbulent and pressure is still large, but it is confident and capable of promoting the continuous recovery and overall improvement of China's economy, according to Reuters. Hong Kong is expected to end its COVID mask mandate by March or April, according to sources cited by Ming Pao News. European bourses are contained overall, Euro Stoxx 50 +0.1%, as the dovish BoJ fails to provide impetus. US futures are similarly steady ahead of earnings, data and Fed speak, ES +0.1%. Within Europe, sectors are mixed with marked outperformance in Tech after updates from Just Eat and ASM International. Top European News ECB's Villeroy reaffirms that a European recession should be avoided in 2023, will bring inflation back to target around 2024/2025. Lagarde's 50bp guidance remains valid. Will remain at the terminal rate for as long as is necessary; will go to the terminal by summer, not there yet. UK Chancellor Hunt is reportedly planning a "slimmed down" spring budget which will not feature tax cuts within the statement, via The Guardian citing sources which add that there will be tax cuts before the next election, with the autumn statement the most likely point to announce such a change. Germany is reportedly to narrowly avoid a 2023 recession, with price-adj. growth of 0.2%, via Reuters citing source/draft of the economic report; Inflation: 2023 6.0%, 2024 2.8%. Magnitude 7.0 earthquake strikes off Sulawesi, Indonesia; Tsunami waves are possible for coasts located within 300km of Indonesia's quake epicentre, Pacific Tsunami Centre says. Ukraine Latest: Helicopter Crash Kills 18 People Near Kyiv Sweden Boosts Capacity to Send Power South to Ease Supply Crunch French Power Crunch This Winter Now Less Likely, Grid Says Women Are Macron’s Biggest Critics on Pension Reform BASF Drops After €7.3 Billion Russia Writedown Sparks Loss BOJ BoJ kept its policy settings unchanged with rates at -0.10% and YCC maintained to target 10yr JGBs at 0% via unanimous vote, while it kept the yield band and yield target unchanged. BoJ stuck with its forward guidance on interest rates and guidance that it will continue large-scale JGB buying and make nimble responses for each maturity, while it reiterated that it will not hesitate to take additional easing measures as necessary. Furthermore, the BoJ extended the fund operation to support financial lending by one year and the Outlook Report contained cuts to Real GDP growth forecasts and mostly upward revisions to Core CPI estimates, although fiscal 2023 and fiscal 2024 Core CPI forecasts remained below the 2% price goal. BoJ Governor Kuroda (post-meeting press conference) says he is not expecting 10yr JGB yields to continue trading with yields above 0.5%, and there is no need to further expand its bond target band; today's decision is not a change in BoJ's monetary policy. It is still early days since the adjustment to yield bands made in December, BoJ needs more time to assess impact on market functions. YCC is fully sustainable, widening band has made YCC more sustainable. Important for FX rates to move stably, reflecting fundamentals; he has no specific comments on FX levels, noting that currency policy is the jurisdiction of the government. FX Yen yields gains made on the premise of further BoJ YCT adjustment as the Bank holds fire. USD/JPY jumps to 131.57 from the low 128.00 area at one stage, DXY rebounds accordingly to 102.900 before sharp reversal on the back of strength elsewhere in the index. Sterling extends on UK pay gains as services and core inflation top consensus, Cable breaches 1.2300 on the way to 1.2360+ peak. Euro eyes resistance in the high 1.0800 zone as the Dollar recoils and Kiwi approaches 0.6500 and Aussie takes firmer hold of 0.7000 handle PBoC set USD/CNY mid-point at 6.7602 vs exp. 6.7644 (prev. 6.7222) Fixed Income Core benchmarks have picked off the European morning's lows to near unchanged levels, but remain shy of overnight BoJ-inspired peaks. The overnight BoJ derived upside seemingly fizzled out amid ECB's Villeroy dismissing the dovish source reports and hot UK core CPI. Stateside, USTs are holding firmer than their EGB peers ahead of a packed afternoon docket. Commodities Crude benchmarks are bid and have broken out of contained overnight ranges following the latest geopolitical rhetoric, lifting the complex to fresh YTD peaks. WTI Feb’23 and Brent Mar’23 are at the top-end of USD 80.55-81.86/bbl and USD 86.13-87.43/bbl parameters, ranges that mark fresh YTD peaks for the complex, though, the benchmarks remain well within late-2022 extremes. China's NDRC warned iron ore trading companies and iron ore futures companies against price gouging and speculation, while it will step up supervision on iron ore's spot and futures markets, according to Reuters. IEA Oil Market Report: Demand set to increase by 1.9mln BPD to a record of 101.7mln BPD. Spot gold is essentially unchanged and unable to derive much support from the Dollar’s weakness as the overall tone remains a tentative one post-BoJ. Copper prices are bid this morning in the wake of disruption to Glencore’s Antapaccay copper mine in Peru, which is operating at restricted capacity amid anti-government protests, according to Reuters sources. Geopolitics US reportedly sends Ukraine US arms which were stored in Israel, according to NYT. Russian Foreign Minister Lavrov says discussions with Ukraine President Zelenskiy are not possible; ready to respond to Western proposals on Ukraine but have not seen any serious proposals; adds, that they will have to take corresponding military measures if Finland/Sweden were to join NATO. Ukrainian Minister of Internal Affairs has died in a helicopter crash near Kyiv, according to local journalists. Serbian President Vucic says Crimea is Ukraine, and the EU path is the only one for Serbia. US Event Calendar 07:00: Jan. MBA Mortgage Applications 27.9%, prior 1.2% 08:30: Dec. Retail Sales Ex Auto and Gas, est. 0%, prior -0.2% 08:30: Dec. PPI Final Demand MoM, est. -0.1%, prior 0.3%; YoY, est. 6.8%, prior 7.4% PPI Ex Food and Energy MoM, est. 0.1%, prior 0.4%; YoY, est. 5.6%, prior 6.2% 08:30: Dec. Retail Sales Advance MoM, est. -0.9%, prior -0.6% Retail Sales Ex Auto MoM, est. -0.5%, prior -0.2% Retail Sales Control Group, est. -0.3%, prior -0.2% 09:15: Dec. Industrial Production MoM, est. -0.1%, prior -0.2% 09:15: Dec. Capacity Utilization, est. 79.5%, prior 79.7% 09:15: Dec. Manufacturing (SIC) Production, est. -0.2%, prior -0.6% 10:00: Nov. Business Inventories, est. 0.4%, prior 0.3% 10:00: Jan. NAHB Housing Market Index, est. 31, prior 31 14:00: Federal Reserve Releases Beige Book 16:00: Nov. Total Net TIC Flows, prior $179.9b Central Bank speakers 09:00: Fed’s Bostic Makes Welcoming Remarks at Academic Conference 14:00: Fed’s Harker Discusses the Economic Outlook 14:00: Federal Reserve Releases Beige Book 17:00: Fed’s Logan Gives Speech in Austin DB's Jim Reid concludes the overnight wrap The big news overnight is that there is no big news overnight as the BoJ met economists expectation that they wouldn’t change anything on YCC today despite increasing market expectation that they would. The policy does seems unsustainable if current conditions persist though as since the last meeting on December 20th, they've spent $265bn (a whopping 6% of annual GDP!) buying bonds. Indeed, as George Saravelos pointed out yesterday there are some reports suggesting the BoJ may own more than 100% of some benchmark 10yr bonds. So not only has it bought the entire stock, but it has lent it out to short-sellers who have sold it back to the BoJ. Before the meeting our Japanese economists suggested that he does expect the BoJ to abandon YCC by the end of Q2 this year, but more around forces such as the “shunto” spring wage negotiations, a positive output gap and leadership changes at the bank. It is clear from the market reaction that although economists expected no change the market was set up for one as the Yen has slumped -2.54% against the dollar, marking its biggest one-day drop since March 2020, trading at $131.42 as I type. Given this, the Nikkei (+2.45%) is leading gains across the region. Meanwhile, yields on 10yr Government Bonds tumbled well below policy cap, declining around -10bps, to trade at 0.40% following the central bank’s decision (they did dip to 0.36% immediately after). US 10yr Treasuries are -6bps lower on the back of the news. The BOJ did enhance its YCC by expanding its fund-supply market operations by offering funds of up to 10 years against pooled collateral to financial institutions for both fixed- and variable-rate loans. This is hoped to ease pressure on the swaps market and help market function. We will see. The press conference is to come after we go to press, so we'll see if that changes anything. In the rest of Asia, equity markets are lower with the KOSPI (-0.69%) being the biggest underperformer followed by Chinese equities with the CSI (-0.22%) and the Hang Seng (-0.11%) both down whilst the Shanghai Composite (-0.03%) is just below flat. In overnight trading, US stock futures are edging higher with contracts on the S&P 500 (+0.12%) and NADAQ 100 (+0.17%) climbing after a weaker start. Central banks were also driving markets yesterday ahead of the BoJ, with a strong European rally after Bloomberg reported that the ECB might go for a smaller 25bps hike in March following another 50bps move in February. Obviously this is just a report, but if true it would be significant, as it would be a slower pace than President Lagarde implied at the last meeting in December. Indeed, she said that “we should expect to raise interest rates at a 50 basis-point pace for a period of time”, so it would imply that this “period of time” could actually just be one meeting. The article only said that 25bps in March was “gaining support”, but there were some massive market moves in response to its release. Investors immediately adjusted their expectations for ECB policy over the coming months, with the rate priced in by the June meeting down -9.3bps on the day. That led to a significant rally in sovereign bonds too, with yields on 10yr German bunds down -8.4bps, having fallen from 2.14% just before the report came out to an intraday low of 2.06% immediately after. That was echoed across the continent, with yields on 10yr OATs (-10.1bps) and BTPs (-12.6bps) falling by even larger margins, and it left the spread of 10yr Italian yields over bunds at just 180bps, their tightest level since April. This buoyancy was seen amongst European equities as well, which continued their run as one of the top-performing assets of 2023. The STOXX 600 (+0.40%) and the DAX (+0.35%) both surged following the Bloomberg report, which brings their YTD gains to +7.43% and +9.07%, respectively. And for the DAX those gains mean the index is now at its highest level since mid-February, just before Russia’s invasion of Ukraine began. Another factor helping to boost sentiment in Europe was the release of the latest ZEW survey from Germany. That saw a massive upside surprise in the expectations component for January, which came in at an 11-month high of 16.9 (vs. -15.0 expected), thus adding to the growing body of evidence on the brightening outlook in Europe. Over in the US, the picture wasn’t quite as rosy as investors came back from holiday. Indeed, the S&P 500 (-0.20%) ended a run of 4 consecutive gains after weak earnings releases dampened risk appetite, with Goldman Sachs (-6.44%) as the second-worst performer in the entire S&P 500 after their earnings missed expectations. On the other hand, fellow major US bank Morgan Stanley (+5.91%) was the second-best performing S&P 500 member as the company beat expectations and pushed a rosier guidance than its peers. The best performer was Tesla (7.43%) which continues to have a rollercoaster time of it. Around this we also had the latest Empire State manufacturing survey for January, which fell to a new low for this cycle at -32.9 (vs. -8.6 expected). And apart from April and May 2020 at the height of the pandemic, that’s now the lowest reading for the survey since Q1 2009. For US Treasuries there was also a relative underperformance with Europe, with the 10yr yield up +4.4bps to 3.547%. This has reversed overnight on the BoJ news mentioned at the top. The Fed’s next meeting just two weeks from now we start to come firmly into view now, where investors are placing a very high weight on a downshift in the pace of rate hikes to 25bps. It also comes as further posturing takes place ahead of US debt ceiling negotiations. Yesterday, House Speaker McCarthy called on Senate Democrats and the White House to discuss conditions on raising the debt ceiling such as changes to major entitlement programs and discretionary spending, while White House Press Secretary Jean-Pierre remained adamant that the Biden Administration would not be negotiating over the debt ceiling. Treasury Secretary Yellen told lawmakers late last week that the government would need to start using “extraordinary measures” by the end of this week in order to avoid running out of cash. Elsewhere, UK gilts lagged slightly behind the rest of Europe with the 10yr yield “only” down -6.0bps. That followed UK labour market data that showed nominal wage running at +6.4% over the three months ending-November (vs. +6.2% expected). In turn, that led investors to raise the prospects of another 50bps hike from the BoE in February, with the hike priced in up +1.8bps on the day to 44.6bps. In other news, oil prices continued their steady advance over recent days, with Brent crude (+1.73%) nearly closing above $86/bbl for the first time this year. That uptick in energy prices was seen more broadly as well, with European natural gas futures (+7.71%) coming off their 16-month low to close at €59.35 per megawatt-hour. Lastly, at Davos yesterday, European Commission President von der Leyen said in a speech that in order “to keep European industry attractive, there is a need to be competitive with offers and incentives that are currently available outside the European Union”. That follows EU criticism of the recent Inflation Reduction Act in the US, which they consider to unfairly subsidise US firms. Our own European economists put out a note yesterday on the issue (link here) where they write the US legislation is probably more of an additional competitiveness shock to the EU, which could reinforce the energy crisis and the fear that high energy costs could linger for years. They also look at how the US policies might negatively impact the EU over different time horizons. To the day ahead now, and data releases from the US include December’s PPI, retail sales and industrial production, whilst from the UK we’ll also get the December CPI release. From central banks, we’ll hear from the ECB’s Villeroy, and the Fed’s Bostic, Harker and Logan. Lastly, the Fed will also be releasing their Beige Book. Tyler Durden Wed, 01/18/2023 - 08:03.....»»

Category: dealsSource: nytJan 18th, 2023

Treasuries Drift Higher After BOJ Reversal, Await PPI And Retail Sales

Treasuries Drift Higher After BOJ Reversal, Await PPI And Retail Sales US stock-index futures were muted on Wednesday, swinging between gains and losses, as investors initially welcomes a dovish announcement by the BOJ which refrained from further expanding its yield curve control band, then turned to corporate earnings for more clues on the health of corporate America amid growing prospects for a recession. Nasdaq 100 and the S&P 500 futures were up 0.2% as of 7:15 a.m. in New York. Treasury and JGB yields tumbled after the BOJ kept monetary settings unchanged, while the yen first slid against the dollar but then recovered all losses amid expectations the BOJ has only bought a few weeks of time. WTI crude added 1.7% this morning and has been holding above $80 amid optimism around China reopening demand. Dollar is weaker; DXY at 102 helping gold trade back over $1900. Among notable movers in premarket trading, Moderna Inc. climbed 6.7% after saying its vaccine against respiratory syncytial virus infections met targets. IBM dropped 1.9% after Morgan Stanley cut the stock to equal-weight from overweight, saying that it is transitioning out of more defensive IT hardware name. Bank stocks are mixed as investors await the release of key economic data, including the Beige Book and retail sales. Coinbase said it’s halting operations in Japan. Meanwhile, Bank of Montreal has received approval from the Federal Reserve to acquire San Francisco-based Bank of the West. Here are the other notable premarket movers: United Airlines (UAL US) rises 2.6%, boosting carrier peers, after the airline operator’s guidance for the first quarter and 2023 beat analyst estimates. Brokers pointing to strong growth in sales, assuaging any worries over demand taking a hit from an economic slowdown. American Airlines +1.4%, Delta Air +1% GoDaddy (GDDY US) gains 3% after the website domain company was upgraded to outperform from inline at Evercore ISI, with the broker highlighting the firm’s relatively recession- resistant business model and new-product cycle. International Business Machines (IBM US) drops 1.9% after Morgan Stanley cut the stock to equal-weight from overweight, saying that it is transitioning out of more defensive IT hardware names. Skechers (SKX US) slides 2.1% after Morgan Stanley downgraded it to equal-weight on valuation, risk of FY23 guidance missing expectations and as the market shifts to early-cycle names. The broker raised Gap (GPS US) to equal-weight and anticipates a 2023 of two halves for US specialty retail and department stores. SmileDirectClub (SDC US) jumps 13% after the maker of dental aligners projected a narrower Ebitda loss for 2023 and said that it planned to rejig its global workforce and introduce additional cost savings. Jefferies, however, remains cautious on the stock, saying that the company saw a “weak” finish to a tough year. Oatly (OTLY US) gains 6.3% after Mizuho Securities upgrades its rating on the oat drink company to buy from hold, with long-term growth seen still intact. While US stocks have gained in the new year as cooling inflation spurred bets of a softening in the Federal Reserve’s policy, they’ve dramatically underperformed international peers as investors worry that the combination of rising interest rates and slowing consumer demand could trigger an economic contraction. A weaker dollar and optimism around a China reopening have lured investors to non-US stocks. Goldman Sachs strategists said US equity funds have seen outflows in the first two weeks of the year, while Europe has seen inflows — both major trend reversals from 2022. UK inflation as well as a more muted start to the US earnings-reporting season boosted those who believe monetary easing would have to begin this year. The yen dropped as much as 2.6% against the dollar after Japan’s policymakers doubled down on defending their stimulus, defying intense market speculation. The currency later trimmed the losses to 0.7%. Even as investors remain on guard for the central bank to continue large scale bond buying to protect its yield goal, there are doubts about how long it can continue. The yen’s drop proved to be an idiosyncratic trend in the foreign-exchange markets as the dollar fell against all but five of its 31 major peers including the Japanese currency. Meanwhile, Analysts expect fourth-quarter earnings to show a drop of 2.7%, the first year-over-year decline since 2020, according to data from Bloomberg Intelligence. “Given the difficult backdrop, there’s fear among some parts of the market that US earnings forecasts might still be too high for 2023 and that stocks might not be able to sustain their current strength,” said Russ Mould, investment director at AJ Bell. He added that reports from the likes of Procter & Gamble Co., Schlumberger Ltd., Microsoft Corp. and Tesla Inc. “will certainly be ones to watch as their fortunes could have a major influence on market sentiment.” European equity markets are mixed after the BOJ sent the yen spiraling lower by leaving its policy settings unchanged. The Stoxx 600 is up 0.1% with gains in the CAC and FTSE 100 while the DAX trades lower; today's move brought the total Stoxx 600 gains since a Sept. 29 low to more than 19%. If the index closes at 20% or higher, it will join other regional peers in confirming a technical bull market. Tech, travel and miners are the best performing sectors while chemicals and real estate fall.  Here are the notable European movers: Richemont shares gain as much as 2.8% in Europe despite the Cartier owner posting worse-than-expected 3Q sales as investors take the view that disruptions in China caused by a surge in Covid infections may prove temporary. Just Eat Takeaway.com jumps as much as 16% after 4Q Ebitda beat estimates as the food delivery firm said it remains focused on improving profitability. Peers Deliveroo and Delivery Hero rose as much as +5.5% and 6.3% respectively ASM International shares rise as much as 8.7% after 4Q update shows a strong beat on sales that is likely to boost sentiment on the semiconductor-equipment maker, analysts say. ASML shares rise as much as 2.1% in sympathy. Capgemini shares rise as much as 3.5%, hitting highest in just over a month, after Barclays upgrades the IT services firm to overweight on greater resilience in its business mix and on utilization. EQT shares drop as much as 8.4%, the most in more than three months, after the investment firm delivered results which analysts say missed on adjusted Ebitda. Continental shares fall as much as 5% after the German car-parts and tiremaker said late Tuesday that it expects FY22 adjusted free cash flow of €200m, below its outlook range of €600m to €800m. Encavis shares fall as much as 5.3% after Barclays analyst cut the recommendation to underweight from equalweight, Orsted also downgraded. Barclays notes that growth pipeline valuations for the two energy companies have moved significantly above vertically integrated peers. Wise shares drop as much as 5%, extending yesterday’s double-digit losses, after the UK money- transfer firm’s growth slowed and missed analyst expectations. Earlier in the session Asian stocks edged higher as Japanese shares advanced after the Bank of Japan announced no change to its yield curve control policy, countering broader caution ahead of the Lunar New Year holidays. The MSCI Asia Pacific Index erased an earlier loss of as much as 0.7% to rise 0.5%, lifted by communication services and health care shares. Japanese equities jumped as the yen fell after the BOJ kept policy on hold, pushing back against intense market speculation of policy change by ramping up the defense of its stimulus framework. “What has been happening so far is a fairly easy pattern to understand,” said Makoto Furukawa, chief portfolio strategist at Mitsubishi UFJ Morgan Stanley Securities. “I think the pattern of bank stocks rising and exchange-rate-sensitive stocks being hit will continue. Expectations for further revisions to the BOJ’s policy will emerge.” South Korea was among the biggest losers on Thursday, dragged by a loss in Samsung Electronics. Chinese benchmarks were mixed in thin volumes before market closures next week. The MSCI Asian stock benchmark has gained more than 20% from an October low to enter a bull market, outperforming US and European peers. Japanese stocks have underperformed, with the Nikkei down almost 1% in the same span, hurt in part by the BOJ’s December move to widen a band on bond yields. Australian stocks edged higher: the S&P/ASX 200 index rose to close at 7,393.40, as healthcare and technology shares buoyed the benchmark. In New Zealand, the S&P/NZX 50 index rose 0.3% to 11,920.41. The nation’s home sales fell 39% y/y in December, according to the Real Estate Institute of New Zealand. The Bloomberg Dollar Index is down 0.3%, swinging to a loss in European trading as the greenback weakened against all of its Group-of-10 peers apart from the yen; the JPY traded well off its worst levels. EUR gained after ECB’s Villeroy said he was surprised by the sources story suggesting they are considering smaller hikes beyond February. GBP rose after data showed UK core CPI was slightly stronger than expected in December.  Some more details: The yen slumped as much as as 2.6% against the dollar, hitting 131.58, and Japan’s bond yields fell by up to 11bps after the BOJ pushed back against intense market speculation of policy change by ramping up the defense of its stimulus framework. Risk reversals in the front-end rallied in the run-up to the BOJ decision in favor of greenback calls, suggesting that the market was positioning for a no-change decision by the central bank. The move for risk reversals suggests that investors are still looking for bullish yen expressions over the medium-term, and especially after Kuroda’s term ends in April The Swiss franc extended its advance against to 0.9131 per dollar, the strongest level in a year The euro extended an advance against the dollar and bunds reversed opening gains after ECB official Francois Villeroy de Galhau said that guidance from ECB President Christine Lagarde that borrowing costs will continue to be lifted in half-point steps for some time still holds. One trader has placed a large bet using options on German 5-year futures, targeting the yield to rise above 2.40% for maximum profit, up from about 2.13% currently The pound rose against the dollar and traders added to wagers on the BOE’s hiking cycle after UK inflation figures showed month-on-month and core readings came in higher than anticipated in December In rates, Treasuries and JGBs spiked higher overnight after the Bank of Japan kept monetary settings unchanged with no nod to any concession on current policy; 10-year TSY yields fell as much as 8.3bp to 3.465% and were trading at 3.47% last. Gains have been broadly maintained into early US session, with 10-year note futures trading near day’s high. Heavy US economic data slate includes PPI and retail sales, and Treasury auctions 20-year bonds. UK and German government bonds pared earlier advances to trade in the red as Treasury yields were richer by 3bp to 7bp across the curve with gains led by intermediates, flattening 2s10s spread by 4bp on the day; 10-year yields trade around 3.48% with bunds and gilts underperforming by 4bp and 7bp in the sector. Most gains in Treasuries were made during aggressive rally in JGBs after Bank of Japan policy announcement, which left benchmark JGB 10-year richer by around 8bp on the day. US Treasury auctions resume with $12b 20-year bond reopening at 1pm. In commodities, crude futures rose with WTI adding 1.7% to trade near $81.50. Spot gold rises roughly $4 to trade near $1,913/oz To the day ahead now, and data releases from the US include December’s PPI, retail sales and industrial production, whilst from the UK we’ll also get the December CPI release. From central banks, we’ll hear from the ECB’s Villeroy, and the Fed’s Bostic, Harker and Logan. Lastly, the Fed will also be releasing their Beige Book. Market Snapshot S&P 500 futures little changed at 4,012.00 MXAP up 0.5% to 166.79 MXAPJ up 0.3% to 546.45 Nikkei up 2.5% to 26,791.12 Topix up 1.7% to 1,934.93 Hang Seng Index up 0.5% to 21,678.00 Shanghai Composite little changed at 3,224.41 Sensex up 0.6% to 61,049.16 Australia S&P/ASX 200 little changed at 7,393.36 Kospi down 0.5% to 2,368.32 STOXX Europe 600 up 0.1% to 457.14 German 10Y yield little changed at 2.10% Euro up 0.6% to $1.0855 Brent Futures up 1.1% to $86.89/bbl Gold spot up 0.3% to $1,913.84 U.S. Dollar Index down 0.39% to 101.99 Top Overnight News from Bloomberg ECB policymakers are starting to consider a slower pace of interest-rate hikes than President Christine Lagarde indicated in December, according to officials with knowledge of their discussions The BOJ standing pat caught some traders by surprise, but is unlikely to douse speculation that it will normalize policy as inflation in Japan accelerates and Governor Haruhiko Kuroda nears the end of his term China’s top economic official told an audience of international billionaires and bankers that his country’s economy will likely rebound to its pre-pandemic growth trend this year after coronavirus infections passed their peak A more detailed look at global markets courtesy of Newsquawk APAC stocks were positive albeit with price action mostly kept rangebound after the weak lead from Wall Street, while focus overnight centred on the BoJ policy announcement in which the central bank defied the increased speculation for a policy tweak. ASX 200 was flat with strength in the tech and consumer sectors offset by losses in commodity-related stocks. Nikkei 225 was boosted after the BoJ stuck with its ultra-easy policy settings and reaffirmed its dovish guidance. Hang Seng and Shanghai Comp were choppy but with strength in key tech names after China approved licences for 88 new games including titles from Tencent and NetEase in a further sign of an end to its tech crackdown. Top Asian News PBoC injected CNY 133bln via 7-day reverse repos with the rate kept at 2.00% and injects CNY 447bln via 14-day reverse repos with the rate kept at 2.15% for a CNY 515bln net injection. China's NDRC's said the economic development situation this year is still complicated, external environment is turbulent and pressure is still large, but it is confident and capable of promoting the continuous recovery and overall improvement of China's economy, according to Reuters. Hong Kong is expected to end its COVID mask mandate by March or April, according to sources cited by Ming Pao News. European bourses are contained overall, Euro Stoxx 50 +0.1%, as the dovish BoJ fails to provide impetus. US futures are similarly steady ahead of earnings, data and Fed speak, ES +0.1%. Within Europe, sectors are mixed with marked outperformance in Tech after updates from Just Eat and ASM International. Top European News ECB's Villeroy reaffirms that a European recession should be avoided in 2023, will bring inflation back to target around 2024/2025. Lagarde's 50bp guidance remains valid. Will remain at the terminal rate for as long as is necessary; will go to the terminal by summer, not there yet. UK Chancellor Hunt is reportedly planning a "slimmed down" spring budget which will not feature tax cuts within the statement, via The Guardian citing sources which add that there will be tax cuts before the next election, with the autumn statement the most likely point to announce such a change. Germany is reportedly to narrowly avoid a 2023 recession, with price-adj. growth of 0.2%, via Reuters citing source/draft of the economic report; Inflation: 2023 6.0%, 2024 2.8%. Magnitude 7.0 earthquake strikes off Sulawesi, Indonesia; Tsunami waves are possible for coasts located within 300km of Indonesia's quake epicentre, Pacific Tsunami Centre says. Ukraine Latest: Helicopter Crash Kills 18 People Near Kyiv Sweden Boosts Capacity to Send Power South to Ease Supply Crunch French Power Crunch This Winter Now Less Likely, Grid Says Women Are Macron’s Biggest Critics on Pension Reform BASF Drops After €7.3 Billion Russia Writedown Sparks Loss BOJ BoJ kept its policy settings unchanged with rates at -0.10% and YCC maintained to target 10yr JGBs at 0% via unanimous vote, while it kept the yield band and yield target unchanged. BoJ stuck with its forward guidance on interest rates and guidance that it will continue large-scale JGB buying and make nimble responses for each maturity, while it reiterated that it will not hesitate to take additional easing measures as necessary. Furthermore, the BoJ extended the fund operation to support financial lending by one year and the Outlook Report contained cuts to Real GDP growth forecasts and mostly upward revisions to Core CPI estimates, although fiscal 2023 and fiscal 2024 Core CPI forecasts remained below the 2% price goal. BoJ Governor Kuroda (post-meeting press conference) says he is not expecting 10yr JGB yields to continue trading with yields above 0.5%, and there is no need to further expand its bond target band; today's decision is not a change in BoJ's monetary policy. It is still early days since the adjustment to yield bands made in December, BoJ needs more time to assess impact on market functions. YCC is fully sustainable, widening band has made YCC more sustainable. Important for FX rates to move stably, reflecting fundamentals; he has no specific comments on FX levels, noting that currency policy is the jurisdiction of the government. FX Yen yields gains made on the premise of further BoJ YCT adjustment as the Bank holds fire. USD/JPY jumps to 131.57 from the low 128.00 area at one stage, DXY rebounds accordingly to 102.900 before sharp reversal on the back of strength elsewhere in the index. Sterling extends on UK pay gains as services and core inflation top consensus, Cable breaches 1.2300 on the way to 1.2360+ peak. Euro eyes resistance in the high 1.0800 zone as the Dollar recoils and Kiwi approaches 0.6500 and Aussie takes firmer hold of 0.7000 handle PBoC set USD/CNY mid-point at 6.7602 vs exp. 6.7644 (prev. 6.7222) Fixed Income Core benchmarks have picked off the European morning's lows to near unchanged levels, but remain shy of overnight BoJ-inspired peaks. The overnight BoJ derived upside seemingly fizzled out amid ECB's Villeroy dismissing the dovish source reports and hot UK core CPI. Stateside, USTs are holding firmer than their EGB peers ahead of a packed afternoon docket. Commodities Crude benchmarks are bid and have broken out of contained overnight ranges following the latest geopolitical rhetoric, lifting the complex to fresh YTD peaks. WTI Feb’23 and Brent Mar’23 are at the top-end of USD 80.55-81.86/bbl and USD 86.13-87.43/bbl parameters, ranges that mark fresh YTD peaks for the complex, though, the benchmarks remain well within late-2022 extremes. China's NDRC warned iron ore trading companies and iron ore futures companies against price gouging and speculation, while it will step up supervision on iron ore's spot and futures markets, according to Reuters. IEA Oil Market Report: Demand set to increase by 1.9mln BPD to a record of 101.7mln BPD. Spot gold is essentially unchanged and unable to derive much support from the Dollar’s weakness as the overall tone remains a tentative one post-BoJ. Copper prices are bid this morning in the wake of disruption to Glencore’s Antapaccay copper mine in Peru, which is operating at restricted capacity amid anti-government protests, according to Reuters sources. Geopolitics US reportedly sends Ukraine US arms which were stored in Israel, according to NYT. Russian Foreign Minister Lavrov says discussions with Ukraine President Zelenskiy are not possible; ready to respond to Western proposals on Ukraine but have not seen any serious proposals; adds, that they will have to take corresponding military measures if Finland/Sweden were to join NATO. Ukrainian Minister of Internal Affairs has died in a helicopter crash near Kyiv, according to local journalists. Serbian President Vucic says Crimea is Ukraine, and the EU path is the only one for Serbia. US Event Calendar 07:00: Jan. MBA Mortgage Applications 27.9%, prior 1.2% 08:30: Dec. Retail Sales Ex Auto and Gas, est. 0%, prior -0.2% 08:30: Dec. PPI Final Demand MoM, est. -0.1%, prior 0.3%; YoY, est. 6.8%, prior 7.4% PPI Ex Food and Energy MoM, est. 0.1%, prior 0.4%; YoY, est. 5.6%, prior 6.2% 08:30: Dec. Retail Sales Advance MoM, est. -0.9%, prior -0.6% Retail Sales Ex Auto MoM, est. -0.5%, prior -0.2% Retail Sales Control Group, est. -0.3%, prior -0.2% 09:15: Dec. Industrial Production MoM, est. -0.1%, prior -0.2% 09:15: Dec. Capacity Utilization, est. 79.5%, prior 79.7% 09:15: Dec. Manufacturing (SIC) Production, est. -0.2%, prior -0.6% 10:00: Nov. Business Inventories, est. 0.4%, prior 0.3% 10:00: Jan. NAHB Housing Market Index, est. 31, prior 31 14:00: Federal Reserve Releases Beige Book 16:00: Nov. Total Net TIC Flows, prior $179.9b Central Bank speakers 09:00: Fed’s Bostic Makes Welcoming Remarks at Academic Conference 14:00: Fed’s Harker Discusses the Economic Outlook 14:00: Federal Reserve Releases Beige Book 17:00: Fed’s Logan Gives Speech in Austin DB's Jim Reid concludes the overnight wrap The big news overnight is that there is no big news overnight as the BoJ met economists expectation that they wouldn’t change anything on YCC today despite increasing market expectation that they would. The policy does seems unsustainable if current conditions persist though as since the last meeting on December 20th, they've spent $265bn (a whopping 6% of annual GDP!) buying bonds. Indeed, as George Saravelos pointed out yesterday there are some reports suggesting the BoJ may own more than 100% of some benchmark 10yr bonds. So not only has it bought the entire stock, but it has lent it out to short-sellers who have sold it back to the BoJ. Before the meeting our Japanese economists suggested that he does expect the BoJ to abandon YCC by the end of Q2 this year, but more around forces such as the “shunto” spring wage negotiations, a positive output gap and leadership changes at the bank. It is clear from the market reaction that although economists expected no change the market was set up for one as the Yen has slumped -2.54% against the dollar, marking its biggest one-day drop since March 2020, trading at $131.42 as I type. Given this, the Nikkei (+2.45%) is leading gains across the region. Meanwhile, yields on 10yr Government Bonds tumbled well below policy cap, declining around -10bps, to trade at 0.40% following the central bank’s decision (they did dip to 0.36% immediately after). US 10yr Treasuries are -6bps lower on the back of the news. The BOJ did enhance its YCC by expanding its fund-supply market operations by offering funds of up to 10 years against pooled collateral to financial institutions for both fixed- and variable-rate loans. This is hoped to ease pressure on the swaps market and help market function. We will see. The press conference is to come after we go to press, so we'll see if that changes anything. In the rest of Asia, equity markets are lower with the KOSPI (-0.69%) being the biggest underperformer followed by Chinese equities with the CSI (-0.22%) and the Hang Seng (-0.11%) both down whilst the Shanghai Composite (-0.03%) is just below flat. In overnight trading, US stock futures are edging higher with contracts on the S&P 500 (+0.12%) and NADAQ 100 (+0.17%) climbing after a weaker start. Central banks were also driving markets yesterday ahead of the BoJ, with a strong European rally after Bloomberg reported that the ECB might go for a smaller 25bps hike in March following another 50bps move in February. Obviously this is just a report, but if true it would be significant, as it would be a slower pace than President Lagarde implied at the last meeting in December. Indeed, she said that “we should expect to raise interest rates at a 50 basis-point pace for a period of time”, so it would imply that this “period of time” could actually just be one meeting. The article only said that 25bps in March was “gaining support”, but there were some massive market moves in response to its release. Investors immediately adjusted their expectations for ECB policy over the coming months, with the rate priced in by the June meeting down -9.3bps on the day. That led to a significant rally in sovereign bonds too, with yields on 10yr German bunds down -8.4bps, having fallen from 2.14% just before the report came out to an intraday low of 2.06% immediately after. That was echoed across the continent, with yields on 10yr OATs (-10.1bps) and BTPs (-12.6bps) falling by even larger margins, and it left the spread of 10yr Italian yields over bunds at just 180bps, their tightest level since April. This buoyancy was seen amongst European equities as well, which continued their run as one of the top-performing assets of 2023. The STOXX 600 (+0.40%) and the DAX (+0.35%) both surged following the Bloomberg report, which brings their YTD gains to +7.43% and +9.07%, respectively. And for the DAX those gains mean the index is now at its highest level since mid-February, just before Russia’s invasion of Ukraine began. Another factor helping to boost sentiment in Europe was the release of the latest ZEW survey from Germany. That saw a massive upside surprise in the expectations component for January, which came in at an 11-month high of 16.9 (vs. -15.0 expected), thus adding to the growing body of evidence on the brightening outlook in Europe. Over in the US, the picture wasn’t quite as rosy as investors came back from holiday. Indeed, the S&P 500 (-0.20%) ended a run of 4 consecutive gains after weak earnings releases dampened risk appetite, with Goldman Sachs (-6.44%) as the second-worst performer in the entire S&P 500 after their earnings missed expectations. On the other hand, fellow major US bank Morgan Stanley (+5.91%) was the second-best performing S&P 500 member as the company beat expectations and pushed a rosier guidance than its peers. The best performer was Tesla (7.43%) which continues to have a rollercoaster time of it. Around this we also had the latest Empire State manufacturing survey for January, which fell to a new low for this cycle at -32.9 (vs. -8.6 expected). And apart from April and May 2020 at the height of the pandemic, that’s now the lowest reading for the survey since Q1 2009. For US Treasuries there was also a relative underperformance with Europe, with the 10yr yield up +4.4bps to 3.547%. This has reversed overnight on the BoJ news mentioned at the top. The Fed’s next meeting just two weeks from now we start to come firmly into view now, where investors are placing a very high weight on a downshift in the pace of rate hikes to 25bps. It also comes as further posturing takes place ahead of US debt ceiling negotiations. Yesterday, House Speaker McCarthy called on Senate Democrats and the White House to discuss conditions on raising the debt ceiling such as changes to major entitlement programs and discretionary spending, while White House Press Secretary Jean-Pierre remained adamant that the Biden Administration would not be negotiating over the debt ceiling. Treasury Secretary Yellen told lawmakers late last week that the government would need to start using “extraordinary measures” by the end of this week in order to avoid running out of cash. Elsewhere, UK gilts lagged slightly behind the rest of Europe with the 10yr yield “only” down -6.0bps. That followed UK labour market data that showed nominal wage running at +6.4% over the three months ending-November (vs. +6.2% expected). In turn, that led investors to raise the prospects of another 50bps hike from the BoE in February, with the hike priced in up +1.8bps on the day to 44.6bps. In other news, oil prices continued their steady advance over recent days, with Brent crude (+1.73%) nearly closing above $86/bbl for the first time this year. That uptick in energy prices was seen more broadly as well, with European natural gas futures (+7.71%) coming off their 16-month low to close at €59.35 per megawatt-hour. Lastly, at Davos yesterday, European Commission President von der Leyen said in a speech that in order “to keep European industry attractive, there is a need to be competitive with offers and incentives that are currently available outside the European Union”. That follows EU criticism of the recent Inflation Reduction Act in the US, which they consider to unfairly subsidise US firms. Our own European economists put out a note yesterday on the issue (link here) where they write the US legislation is probably more of an additional competitiveness shock to the EU, which could reinforce the energy crisis and the fear that high energy costs could linger for years. They also look at how the US policies might negatively impact the EU over different time horizons. To the day ahead now, and data releases from the US include December’s PPI, retail sales and industrial production, whilst from the UK we’ll also get the December CPI release. From central banks, we’ll hear from the ECB’s Villeroy, and the Fed’s Bostic, Harker and Logan. Lastly, the Fed will also be releasing their Beige Book. Tyler Durden Wed, 01/18/2023 - 08:03.....»»

Category: worldSource: nytJan 18th, 2023

The Renewable Energy Problem That No One Talks About

The Renewable Energy Problem That No One Talks About Authored by Peter Castle via The Epoch Times, An obvious barrier to adopting wind and solar power for electricity supply is their intermittency - when the wind isn’t blowing, and the sun isn’t shining, substitute sources are required. This issue is given much attention by conservative media, as it should. Yet one of the less well-known roadblocks for these renewable technologies is frequency control, even though it becomes a critical concern much sooner. Since the 1890s, electricity networks and devices all around the globe have used alternating current (AC) systems, which means that the flow of electricity in the system is repeatedly changing direction. In Australia, it alternates 50 times a second, that is, at a frequency of 50 Hertz (in the USA, it is 60 Hertz). Supplying electricity at a consistent frequency is very important because appliances and electronics on the network are designed for a specific frequency/voltage input. Therefore, they can be damaged by the wrong electricity supply. As a rule, networks would rather supply no electricity than bad electricity. Automated controls through the electricity system will disconnect the supply if the frequency or voltage is “off-spec.” A technician monitors electricity levels in front of a giant screen showing the eastern German electricity transmission grid in the control centre at Neuenhagen bei Berlin, Germany, on Dec. 17, 2015. (Sean Gallup/Getty Images) South Australians will not soon forget when this happened to the entire state network in 2016. The state-wide blackout started late in the afternoon during some poor weather conditions, and thousands of people had to drive out of the city without any streetlights or traffic signals. There were a range of contributing causes, including gusty winds taking down some transmission lines and a lightning strike on a power station. After those physical causes, automated protection systems took over. Wind turbines disconnected themselves from the network. The system naturally started drawing more load from all remaining supplies, which maxed out the capacity of the interconnector to the rest of the East Coast network, which consequently disconnected. From that point, the shutdowns cascaded throughout the whole network. This all happened in less than a second. The potential for a cascading shutdown can never be entirely eliminated; automated protection systems must make decisions at a speed that prevents any human involvement. Nevertheless, the vulnerability of the whole system can vary, and increasing intermittent renewables contribute to decreasing the system’s stability. Traditional vs Renewable Generators Traditional generators use turbines—steam turbines, open-cycle turbines, and water turbines (hydroelectricity). This equipment is called “synchronous” because the frequency of the electricity they produce is directly linked to the speed that the shafts of the turbines rotate. Because these machines are large and heavy, it takes time and energy to speed them up or slow them down, which means that the frequency of the electricity cannot change too quickly. This is called “inertia.” As you may imagine, solar panels, having no moving parts, do not provide inertia. They match whatever frequency is already in the system; they do not help stabilise it. Wind turbines, though they do have large spinning components, change speed all the time merely due to wind conditions. Hence they are not designed to synchronise with the AC network. So they do not provide inertia either. If a system does not have inertia, then instead of gently responding to a change in load, the frequency can flail about like a cyclist getting speed wobbles (any engine can have the same problem if it doesn’t have a sufficiently heavy flywheel). Sheep graze in front of wind turbines on Lake George on the outskirts of Canberra, Australia, on Sep. 1, 2020. (David Gray/Getty Images) After the 2016 blackout, energy security gained its rightful place as the highest priority for a few glorious and brief weeks. A package of actions was taken by the South Australian government over the next couple of years, including the installation of a large-scale battery (following a promise by Elon Musk to construct it within 100 days or provide it for free), the building of a new diesel power station, and providing incentives for new natural gas exploration and production. Additionally, two synchronous condensers were installed. Synchronous condensers are large, heavy rotating shafts, similar to what is contained in a turbine, but they don’t produce electricity—they just help to stabilise the frequency of the network. In the subsequent years, each of these responses was vindicated. The diesel generator has been used at several critical times. It was also found that the primary value of the large-scale battery was to stabilise the network. Though it stores comparatively little energy, the battery responds rapidly to faults originating anywhere in the east coast network, even in Queensland. It has since been programmed to provide “virtual inertia.” Technology for 100 Percent Renewable Network Is Not Here Yet Advances in technology and network management have meant that renewables can provide more significant and larger portions of supply without unacceptably destabilising the network frequency. Nevertheless, it remains true that almost no system can ever afford to operate on 100 percent renewables without keeping at least a few traditional rotating generators online. Wind and solar generators are often switched off or “curtailed,” even when there are still some gas or coal generators active. The network operator cannot afford to turn off the synchronous generators without losing frequency control. In the Northern Territory, which has a stand-alone electricity network, about 60 MW of solar farms have been constructed and yet have never once been switched on because the system cannot accommodate them. Though the 2016 blackout triggered a suite of improvements to South Australia’s network, energy security still falls dangerously far down the list of priorities for Australian governments. Important actions that support energy security, such as the construction of the Kurri Kurri peaking generator in New South Wales, often face opposition from the media and politicians. Visitors gather to see light installations at Sydney Harbour at the start of the Vivid Sydney festival in Sydney on May 24, 2019. Vivid Sydney is an outdoor cultural festival featuring light installations and projections. (Saeed Khan/AFP via Getty Images) Several times, Australia has come dangerously close to another cascading shutdown. Incidents have occurred in smaller networks but failed to gain national attention—such as the 2019 Alice Springs shutdown, in which the central-Australian network was shut down for several hours merely due to unanticipated cloud cover. A recent example of a near-miss occurred in late November 2022. During a significant weather event, the main transmission line connecting South Australia to the rest of the east coast was broken near Tailem Bend. South Australia’s electricity network became an island. For system stability, several rotating generators had to remain online. Yet the amount of solar energy the state can generate during the day can exceed demand. The network operator needed to curtail more solar generation than they have direct control over. In response, the market operator began phoning behind-the-meter solar power providers and using social media to ask commercial and residential solar panel owners to switch off their panels. Thanks to these phone calls, they managed to turn off about half of South Australia’s solar power and thus prevent another shutdown. The system was highly vulnerable, yet the whole event barely made the evening news. Despite the lack of traction from that news story, the media loudly celebrated a fairly meaningless milestone a month later when the state’s renewables generation was 100 percent of demand for 10 days, which would have been impossible without exporting most of the generation to neighbouring states. It seems that until the lights actually turn out, the decision maker will keep their gaze firmly fixed on the renewable mirage. There are multiple reasons why renewables are not a simple panacea for electricity supply around the world: the weather-dependence problem, the energy storage problem, the end-of-life replacement and recycling problem, the land-area problem, the materials-of-construction and scarcity problem. Now you can add the frequency control problem to your list. Tyler Durden Tue, 01/17/2023 - 22:20.....»»

Category: blogSource: zerohedgeJan 18th, 2023

Top CEOs Give Their Predictions for the Year Ahead

Global leaders in business and policy-making are heading to the Swiss Alps this week for the World Economic Forum’s annual meeting in Davos. TIME will be there too, hosting events and reporting on all the best panel discussions—and parties. On that note, be on the lookout for special editions of the Leadership Brief in your… Global leaders in business and policy-making are heading to the Swiss Alps this week for the World Economic Forum’s annual meeting in Davos. TIME will be there too, hosting events and reporting on all the best panel discussions—and parties. On that note, be on the lookout for special editions of the Leadership Brief in your inbox this week, featuring Davos diaries from Senior Editor Ayesha Javed and Staff Writer Yasmeen Serhan. This week’s Davos confab is sure to be more sobering than most. Chief executives are worried about economic downturn, inflation, COVID-19, geopolitical instability, supply chain disruptions, and labor shortages as major disruptors to their companies’ operations this year, according to a survey released last week by the Conference Board. These pressing issues, and the increasing urgency of addressing—and reacting to—climate change “are converging to shape a unique, uncertain and turbulent decade to come,” according to the World Economic Forum’s own recent survey of leaders. [time-brightcove not-tgx=”true”] TIME Editor Jennifer Duggan delved deeper into some of those concerns, as she recently spoke with CEOs of some of the TIME100 Most Influential Companies of 2022—including Rosalind “Roz” Brewer of Walgreens Boots Alliance, Ben Minicucci of Alaska Airlines, David Velez of Nubank, David Ko of Calm, Mariana Matus of Biobot Analytics, and Christoph Gebald of Climeworks—about confronting challenges in the year ahead. Read their business predictions for the year ahead below. Finally, you can now join that esteemed TIME100 Companies community. The application period for the TIME100 Most Influential Companies of 2023 has officially begun. Apply here! -John Simons, Executive editor (These answers have been condensed and edited for clarity.) How do you see your role as a leader evolving over the coming year? Roz Brewer, CEO of Walgreens: I am a long-time believer that every truly exceptional organization understands that culture needs to be at the center of their success. In 2023 and beyond, connections to companies’ culture and values will be a key driver of motivation for their workforce more than ever. It will become table stakes as we rephrase the corporate environment and the new culture that will be required. As leaders, we will need to listen more not just to our employees, but also be more responsive to the needs of our wider communities. A year or two ago, I didn’t realize how much my day job as CEO would mean to the employees. As the world faces many trials and tribulations, people want to hear from CEOs and other company leaders on certain issues that affect us all. In 2023, the CEO needs to be a very broad-spectrum leader. Delivering shareholder value is paramount. However, I’m realizing more and more that I have to take my position as CEO and make it even more meaningful, not just to this company, but outside of it as well. Christoph Gebald, CEO of Climeworks: We follow the teachings of science and we always try to do our best and do it in a very authentic way. We have core values and I think this is becoming ever more also part of modern business and leadership teachings—that being authentic and also having times of showing vulnerability makes you more accessible to people. Personally I feel this is a very important aspect and particularly in the current macro economic environment. Ben Minicucci CEO of Alaska Airlines: As a leader, one of my top priorities going into 2023 is the mental wellness of our people. The last three years have been extremely stressful so we launched our Care Retreat, a daylong retreat where we bring guest-facing employees and leaders to realign our values. Mental wellbeing isn’t something you can see, but it can have a huge impact on people. For 2023, my focus is on leaning into our value of care and supporting our people, who can in-turn support our guests. Elaine Thompson—APAlaska Airlines President Ben Minicucci in Seattle, on Feb. 13, 2020. Minicucci became CEO in Nov. 2020. Amanda Baldwin, CEO of Supergoop!: What I’ve learned as a CEO of an entrepreneurial business is that change is the only constant, and agility and a willingness to learn and adapt are essential, and energizing. The reality is that one does not know what lies around the next corner, but you can’t lead from a place of fear, you have to lead from a place of being aware of what might happen, being prepared and still pushing ahead. Courtesy of Supergoop!Supergoop! CEO Amanda Baldwin David Vélez, founder and CEO of Nubank: My biggest push as a leader will be to increase pace and quality of execution across the organization while increasing motivation and engagement. This means doubling down on mission communication as well as prioritizing activities and efforts that drive that mission. Do less, remove distractions, and create an environment of focus. David Ko, CEO of Calm: The CEO role has evolved tremendously in the 15 plus years since I stepped into my first C-level position. In the past few years, COVID-19’s impact has required us to reshape our businesses from top to bottom and reevaluate what our teams need from us. As we head into another challenging year globally with economic uncertainty, financial stress and loneliness, more people than ever are relying on us for help. CEOs have to rethink innovation to meet people where they are, with the tools they need in this new world. And, we have to be advocates for new policies, empower our employees, and set a clear vision and purpose for the future. This is where I see myself spending most of my time in 2023. What are the biggest opportunities and challenges you expect in the year ahead? Mariana Matus, CEO and Cofounder of Biobot Analytics: Between the ongoing impacts of climate change, increased global mobility, and greater proximity between humans and animals, public health challenges will only grow more severe and complex in the years to come. The “tripledemic” we currently face – COVID, RSV, the flu – and the stresses it places on our healthcare infrastructure will carry over into 2023. This will be a focus for us over the next year as we add RSV and influenza products to our wastewater intelligence platform. As another example, we recently launched our High Risk Substance platform, which provides unbiased, naturally anonymized data on community use of fentanyl, methamphetamine, cocaine, xylazine, and nicotine. One community we worked with was able to reduce opioid overdoses by about 40% through improved resource allocation and more targeted public health messaging. We are excited to see this work grow in 2023. One of the larger challenges in 2023 and the years ahead will be maintaining high levels of government investment in pandemic preparedness and public health. Typically, funding increases during a crisis and then shrinks when the crisis has passed. However, in order for our country and the rest of the world to better anticipate the next pandemic or biothreat, governments need to invest sustained resources into national and international public health systems that include innovative approaches to disease monitoring, like wastewater intelligence. Brewer: The biggest challenge and opportunity are one and the same: affordable, accessible healthcare in the United States. This is a huge problem to solve for in the U.S. and in the year ahead, there will remain an opportunity to help fill in the gaps and reimagine local healthcare. Healthcare is fragmented and difficult to navigate. Walgreens is changing the healthcare experience, driving better care and outcomes at a lower cost for both patients and the broader healthcare system. We’re bringing together the disconnected parts of the healthcare system to keep patients connected to the care they need, how they need it. Gebald: It’s very often referred to as the biggest challenge humanity ever had, which is the climate crisis. However, of course the current macroeconomic situation is a tricky one. My hope is that climate action will not fall off the table. With an economic slowdown and recession ahead of us, companies will investigate how they spend money and they might need to do some streamlining. Of course, climate action could be one of the aspects a board of a large corporation might consider not the most important thing to achieve at least for short term business targets. Nevertheless, hopefully companies do understand that investing and climate action will make them a more profitable or more competitive firm. Courtesy of ClimeworksClimeworks CEO Crhistoph Gebald Minicucci: The biggest opportunity for us next year is getting back to 2019 capacity levels, followed by growth. We’ve learned a lot in the past three years. We’ve improved our hiring, our operation, secured five labor contracts in 2022 and built a five-part plan for 2023. In terms of challenges, there’s a lot of uncertainty out there—with a war in Ukraine, fuel prices, inflation, and signs pointing to a possible recession. We have a solid plan going into 2023 that is flexible and is one that we’re able to accelerate or decelerate, based on what we see in our environment and economy. Ko: One of the greatest opportunities we have is to continue normalizing mental health conversations and expand access to resources that can help. We’ve seen great strides in the past few years with public figures and younger generations coming forward discussing their mental health journeys openly and honestly. I hope this continues so people feel empowered and comfortable to get the help they need. The average delay between the onset of symptoms of mental health challenges and treatment is 11 years. We have to change this statistic. There are too many people suffering in silence. Courtesy of CalmCalm CEO David Ko The biggest challenge we face in the years ahead is the lack of mental health professionals to support all the people who need help. 122 million people live in areas with a mental health professional shortage, and of the 3,000 counties in the U.S., 60% have no psychiatrists at all. This is where we hope Calm can fill a necessary gap. Calm Health is our newest product, built to offer a digital mental healthcare solution to payors and providers. It will provide mental health screenings, condition-specific clinical mental health programs, medication management, and more to get the right mental health resources to the people that need it. Velez: 2022 has been a year of tremendous growth for Nubank: we registered profit for the first time with record revenues and now have over 70 million customers across Brazil, Mexico and Colombia. Yet, we are still in the early stages of our journey and with huge growth opportunities ahead. In Brazil, around 40% of the adult population is a Nubank customer, but we have the opportunity to grow our market share across different verticals, having expanded our portfolio to many more products in 2021/2022. Mexico and Colombia, together, have the potential to be even bigger than Brazil. Getting to the fair share in every product vertical is the largest growth opportunity we are focused on. The largest challenge will be to appropriately pace this share growth across a number of different products that are more or less dependent on the macroeconomic picture. What economic shifts are you expecting next year and how are you preparing for them? Minicucci: We’re a domestic airline so what happens in the U.S. impacts us. We can pull several levers, including slowing down utilization of aircraft, pushing deliveries of airplanes and decelerating as needed. Alaska has a strong balance sheet and plenty of liquidity, and a mitigation strategy in place if we need to use it next year. Still, our plan is to grow next year and to get through whatever financial downturn we may see. Brewer: It’s likely we will continue to face a period of macroeconomic challenges. Inflation has been running high and while I expect that to subside over time, it is a top concern among many consumers. Additionally, I expect the heightened interest rates and financing costs will continue to put pressure on consumer spending, particularly for larger ticket items. At Walgreens Boots Alliance, we have a resilient business. Our front-end assortment is less dependent on discretionary and large ticket items, unlike big box retailers. And health and wellness will always be a priority as consumers take a more proactive approach to their own health and wellbeing. Consumers are continuing their average spending levels versus one year ago but are doing so by saving less and taking on more debt. Shoppers are also looking for deals, reducing units, and slowly switching to owned brands. Ko: We expect next year’s economic shifts to greatly impact the world’s mental health. Our mission at Calm is to meet everyone on every step of their mental health journey, and that means offering a range of resources for individuals to find the support they need, when they need it. We know a traditional twenty minute meditation session isn’t going to work for everyone, so we are investing in short-form evidence-based content, between three to five minutes, designed to help relieve stress and anxiety in the moment. Whether someone is experiencing a panic attack, difficult emotions, negative thought spirals and more. This year we launched Overcome Stress and Anxiety with Dr. Julie Smith, and will continue to build this library of content next year. Vélez: It is the market expectation that 2023 will be equally—if not more—challenging than this year. The global macroeconomic environment will likely be impacted by inflation and high-interest rates, leading to slower economic growth. But it’s important to remember that the macroeconomic environment has not changed the fundamental and secular factors that have contributed to our growth. Those tailwinds keep strong and we have grown consistently across all business metrics throughout the year. Having IPOed in December 2021, we enter this cycle stronger and well-capitalized. The important point now is to focus on what we can control—our daily performance, our results, the opportunities ahead. As for the things that we can’t control, focus on how to react and be prepared. Entering this environment with a strong capital position, as well as a more efficient structure will definitely help capitalize on potential opportunities that might come up. How will the labor market evolve and what changes should workers expect in the coming year? Alaska: We’re seeing improvements in the labor market compared to what we saw earlier in the pandemic. Our ability to hire and attract new talent has improved and we’re seeing more stability and equilibrium than we’ve seen in the past two years. In 2023, I think we’ll see a balance of employees working in the office and working from home, which has evolved at Alaska Airlines since the start of the pandemic. Our company is all about creating connections and what we know is that our employees still want to connect with one another in person. On the guest front, we’re seeing our customers taking advantage of flexible work-from-home policies, which is helping people balance their quality of life. As one example in the airline industry, we’re seeing that Tuesdays and Wednesdays are no longer slow travel days. Historically Fridays and Sundays were the busiest travel days of the week. Today the peaks have diminished and have spread across the week and that’s because more people are traveling while they’re WFH. Over Thanksgiving, they may start their Thanksgiving break three days earlier and work from their out-of-town family’s home. Vélez: We will see a consolidation of the hybrid model. At Nubank, it has been surprising how quickly the company adapted to remote work during the pandemic, and consequently developed better, more efficient and productive working dynamics. We have created new spaces in our offices that foster integration and more productive face-to-face interactions. Additionally, I think that—more than ever—the labor market will prioritize companies with strong values and culture, that keeps them engaged and foster a strong sense of ownership. Ko: This is the tightest labor market we’ve seen in decades, and it’s uncertain what 2023 will bring, but one thing is clear: businesses have to prioritize the mental health of their workforce. Not just to differentiate themselves from competitors but because companies will play a critical role in mental health moving forward. The U.S. Surgeon General recently released a Framework for Workplace Mental Health and Well‑Being that demonstrates the foundational role employers will play in promoting and protecting the mental health of employees and their families. Brewer: There is a new set of expectations from the global workforce coming out of the pandemic and a new set of prerequisites: flexibility and choice. Remote work is a big part of that—it looks very different depending on what your workforce and the different segments of that population. Strong culture is also key, and shared purpose as the foundation of your employer/employee relationship is also critical in attracting talent......»»

Category: topSource: timeJan 15th, 2023

4 Coal Stocks to Watch From the Challenging Industry

Despite the expected drop in United States coal production volumes, high-quality coal producers like Peabody Energy (BTU), Alliance Resource Partners (ARLP), CONSOL Energy (CEIX) and Warrior Met Coal (HCC) are likely to remain competitive with improving export volumes. The Zacks Coal industry stocks staged a rebound in 2022 courtesy of global demand and surging natural gas prices. However,  in 2023 demand for coal may suffer due to lesser coal utilization in the United States to produce electricity, planned retirement of coal units and utilization of more renewable sources for electricity generation. The ongoing transition, with utility operators steadily phasing out coal units, will adversely impact the coal industry. Then again, the persisting conflict between Russia and Ukraine is creating fresh demand from coal-importing countries. Hence, coal export from the United States is expected to improve in 2023 from the year-ago level.Even in case of a drop in coal production, low-cost coal producers like Peabody Energy Corporation BTU should benefit from their met coal and thermal coal production. With improvement in global steel production Alliance Resource Partners L.P. ARLP , CONSOL Energy CEIX and Warrior Met Col Inc. HCC are expected to gain.About the IndustryThe Zacks Coal industry comprises companies involved in the discovery and mining of coal. Coal is mined by either the opencast or the underground method. The commodity is valued for its energy content and used worldwide to generate electricity, and manufacture steel and cement. Per the U.S. Energy Information Administration (“EIA”) report, the current U.S. estimated recoverable coal reserves are about 252 billion short tons, of which about 58% is underground mineable coal. Given the current production rates, coal resources are likely to last many more years. Five states in the United States contribute nearly 70% of yearly production and 60% of coal production from surface mining. Per EIA, the demand for coal will decline due to the usage of more renewable assets and a gradual shutdown of coal-powered generation units, hurting the prospects of the coal industry.3 Trends Likely to Impact the Coal IndustryNew Emission Policy to Hurt Coal Industry: The improvement in demand for coal is short-lived as the new environmental policy will target 100% carbon pollution-free electricity by 2035, which will significantly lower the demand for coal from the U.S. electricity space. Per EIA, coal-fired electricity generation would drop from 20% in 2022 to 18% in 2023 and further drop to 17% in 2024. Unless utility operators invest heavily in pollution-control measures to reduce emissions from power plants, domestic coal usage would fall significantly. Going forward, coal industry operators are likely to face many difficulties as a number of electric utilities have decided to become carbon neutral by 2050 and completely cut down coal usage. Per EIA, total coal consumption in the United States will drop 12.2% in 2023 to 458.5 MMst and further by 3.2% to 444.1 MMst in 2024.U.S. Coal Production Drops: As per EIA projection, coal production in the United States is expected to drop in 2023 and 2024 after showing an improvement in production volumes in the previous two years. EIA projects U.S. coal production to likely to decline by 11% to about 530 million short tons (MMst) in 2023 and a further 6% to 500 MMst in 2024 was due to an 11% reduction in coal consumption in the electric power sector in 2023 and a further reduction of 3% in 2024. This would hurt coal operators fighting a tough battle with the other sources of energy.Coal to Benefit From Rising Exports: The coal operators can benefit from the expected rise in coal export volumes. Coal, due to its economical prices compared to other energy sources, is still a viable energy option for many crucial industries across the globe. Per EIA, coal export volume may drop by 1.3% in 2023 to 83.3 MMst but would increase by 11.2% to 92.6 MMst in 2024. Steel production requires a lot of high-quality coal, and nearly 70% of global steel production depends on coal. The World Steel Association revised its 2023 steel demand outlook and now expects steel volumes to improve by 1% in 2023 to 1814.7 Mt. This expectation is lower than the prior expectation due to high inflation and rising interest rates globally, which may adversely impact coal export volumes in 2023. However, with the continued recovery in steel production, coal exports are expected to pick up from the end of 2023. Zacks Industry Rank Indicates Dull ProspectsThe Zacks Coal industry is a 10-stock group within the broader Zacks Oil and Energy sector. The industry currently carries a Zacks Industry Rank #232, which places it in the bottom 7% out of 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates strong performance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of the negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are losing confidence in this group’s earnings growth potential. Since September 2022, the industry’s earnings estimates for 2023 have gone down by 24.2%.Before we present a few coal stocks that you may want to consider, let’s take a look at the industry’s recent stock market performance and valuation picture.Industry Outperforms S&P 500 & SectorThe Zacks Coal industry has outperformed the Zacks S&P 500 composite and the Zacks Oil and Gas sector over the past 12 months.The stocks in the coal industry have gained 54.4% compared with the Zacks Oil-Energy sector’s growth of 21.3%. The Zacks S&P 500 composite has declined 16% in the same time frame.One-Year Price Performance Coal Industry's Current ValuationSince coal companies have a lot of debt on their balance sheet, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio.The industry is currently trading at a trailing 12-month EV/EBITDA of 2.45X compared with the Zacks S&P 500 composite’s 12.03X and the sector’s 3.23X.Over the past five years, the industry has traded as high as 7.6X, as low as 2.34X and at the median of 4.8X.Enterprise Value-to EBITDA (EV/EBITDA) Ratio vs S&P 500Enterprise Value-to EBITDA (EV/EBITDA) Ratio vs Sector 4 Coal Industry Stocks to Keep a Close Watch OnPeabody Energy: St Louis, MO-based Peabody Energy engages in the coal mining business and has both thermal and metallurgical operations. In 2021, nearly 26% of the company’s revenues were derived from five customers with whom it still has 17 coal supply agreements (excluding trading and brokerage transactions) expiring at various periods from 2022 to 2026. This assures a steady flow of revenues. The Zacks Consensus Estimate for Peabody Energy’s 2022 earnings and revenues suggests a year-over-year rise of 118% and 34.3%, respectively.  The stock has gained 106.3% over the past year compared with the industry’s rally of 52.8%.Peabody Energy currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Price and Consensus: BTUAlliance Resource Partners L.P.: Tulsa, OK- based Alliance Resource Partners produces and sells coal to utilities and industrial users in the United States. The firm produces coal from seven mining complexes operated by its subsidiaries. ARLP earns royalty income from coal produced by its mining complexes and royalty income from mineral interests it owns in different basins. The firm currently has a Zacks Rank #3. The Zacks Consensus Estimate for 2023 earnings per unit and revenues implies a year-over-year rise of 33.5% and 11%, respectively.  The stock has gained 36.1% over the past year.Price and Consensus: ARLPCONSOL Energy: Canonsburg, PA-based CONSOL Energy, currently has a Zacks Rank of 3, which produces and exports bituminous thermal coal. The company owns and operates the Pennsylvania Mining Complex and the Baltimore Marine Terminal, and controls more than 1 billion tons of undeveloped reserves. The company is consistently operating longwalls and has one of the largest export terminals on the Eastern seaboard. The Zacks Consensus Estimate for 2023 earnings and revenues suggests a year-over-year rise of 157.5% and 35.3%, respectively. The stock has gained 130.6% over the past year.Price and Consensus: CEIXWarrior Met Coal:  Brookwood, AL-based Warrior Met Coal currently has a Zacks Rank #3. The company produces and sells metallurgical coal for metal manufacturers in Europe, South America and Asia. The company is a low-cost producer of high-quality met coal, enjoys a price advantage and has an annual production capacity of over 7 million metric tons of coal.  The Zacks Consensus Estimate for its 2022 earnings and revenues indicates a year-over-year rise of 334.5% and 71.7%, respectively.Price and Consensus: HCC  Just Released: Free Report Reveals Little-Known Strategies to Help Profit from the  $30 Trillion Metaverse Boom It's undeniable. The metaverse is gaining steam every day. Just follow the money. Google. Microsoft. Adobe. Nike. Facebook even rebranded itself as Meta because Mark Zuckerberg believes the metaverse is the next iteration of the internet. The inevitable result? Many investors will get rich as the metaverse evolves. What do they know that you don't? They’re aware of the companies best poised to grow as the metaverse does. And in a new FREE report, Zacks is revealing those stocks to you. This week, you can download, The Metaverse - What is it? And How to Profit with These 5 Pioneering Stocks. It reveals specific stocks set to skyrocket as this emerging technology develops and expands. Don't miss your chance to access it for free with no obligation.>>Show me how I could profit from the metaverse!Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Peabody Energy Corporation (BTU): Free Stock Analysis Report Alliance Resource Partners, L.P. (ARLP): Free Stock Analysis Report Warrior Met Coal (HCC): Free Stock Analysis Report Consol Energy Inc. (CEIX): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksJan 14th, 2023

Futures Rise Ahead Of Inflation Data As China Reopening Lifts Sentiment Again

Futures Rise Ahead Of Inflation Data As China Reopening Lifts Sentiment Again US equity futures were set to rise for a second day as upbeat sentiment ahead of tomorrow's key CPI print - which JPM gives 85% odds of pushing stocks at least 1.5% higher - lifted global markets despite a freak outage of key FAA advisory system this morning led to a nationwide ground halt for all domestic flights (until at least 9am) pre. Contracts on the S&P 500 and Nasdaq 100 ticked up 0.1% as of 7:15am ET while Europe’s Stoxx 600 Index rose 0.8%. The FTSE 100 climbed within striking distance of a record high; Asian equities were supported by China lifting Covid restrictions. Among the top corporate news, Credit Suisse weighs cutting by half the bonus pool for 2022 after a turbulent year and Apple plans to start using its own custom displays in mobile devices as early as next year. Treasury yields dropped and the dollar gained for the second day in a row. Among US premarket movers, airline stocks slipped in New York premarket as the failure of a key pilot notification system operated by the Federal Aviation Administration disrupted air travel. American Airlines Group Inc. fell 1.1% and United Airlines Holdings Inc. was down 0.6%. Delta Air Lines Inc. fell 0.8% as the FAA ordered a ground halt of all flights until at least 9am. Bed Bath & Beyond surged again and were on course for a third day of gains. World Wrestling Entertainment rose as much as 5.3%, extending a rally sparked by speculation that the company may sell itself. Chairwoman and co-CEO Stephanie McMahon announced she’s resigning from the company. Here are some other notable premarket movers: US biotech Prokidney surges 34% after early data from a mid-stage trial of its cell therapy for chronic kidney disease. Jefferies said the treatment has multi-billion dollar potential. CarMax falls 4.8% after JPMorgan cut its recommendation on the used-car retailer to underweight from neutral, citing unfavorable risk-reward following recent outperformance. JinkoSolar Holding ADRs rise 1.9% after Roth Capital upgrades the solar panel maker to buy, saying US policy improvements point to a stronger outlook. Levi Strauss drops 1.5% as Citi downgrades to neutral from buy to reflect what it describes as a challenging US backdrop in the near to medium term. Keep an eye on PTC and Autodesk as Berenberg begins coverage of both US design software companies with buy ratings, and initiates AspenTech at hold, saying all three have the potential to continue outperforming the industry in terms of growth. Data and analytics providers could be in focus as Redburn says they will have a significant opportunity to capitalize on growing and increasingly complex risk factors in financial markets. The broker has buy ratings on MSCI (MSCI US), S&P (SPGI US) and London Stock Exchange (LSEG LN), though initiates Verisk (VRSK US) at sell and cuts Morningstar (MORN US) to neutral. The gains of US stocks since the start of 2023 has surprised many (very bearish) strategists who believe that much of the advance is conditional on inflation easing, which would allow the Federal Reserve to slow the pace of rate hikes. And while hawkish comments on Monday by San Francisco and Atlanta Fed presidents put a chill on the rally, a lack of subsequent reinforcement by Chair Powell led to a sharp rally on Tuesday. The next test for the market comes on Thursday with the US inflation report which will determine if the Fed hikes by 25bps or 50bps on Feb 1, and it’s widely believed that a lower-than-expected reading would trigger further gains.  Investors are also closely watching technical levels as the S&P 500 Index nears its 200-day moving average. “Tomorrow’s CPI event risk could be a decider where the S&P 500 can either break above its 200-day moving average, the 4,000 level and the downtrend line, or we head back to 3800,” says Gurmit Kapoor, a cross-asset sales trader at Aurel BGC. While Powell didn’t directly comment on the Fed’s next steps at a forum in Stockholm, he did say that “restoring price stability when inflation is high can require measures that are not popular in the short term as we raise rates to slow the economy.” Fed Governor Michelle Bowman said the central bank has more work to do to curb inflation, noting that further tightening is needed. “We do expect an inflection in central bank policy later on this year,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “More risk-tolerant investors can look to anticipate this turn by phasing into markets, seeking early winners from a global improvement in sentiment, and identifying beneficiaries from China’s reopening. “However, we don’t believe we have yet reached the inflection point in policy or economic growth, and as we enter 2023 we continue to favor a defensive tilt when adding exposure in both equity and fixed-income markets,” he said. “The prospect of a less cloudy economic outlook in both Europe and the US after recession risks in both regions eased back, combined with the reopening of the Chinese economy, is providing strong support toward risk appetite from investors,” said Pierre Veyret, a technical analyst at ActivTrades. “The lack of clear hints from Fed Chairman Jerome Powell yesterday also contributed to keeping the bullish trading stance alive, and most traders will now look toward tomorrow’s US inflation print for further clues.” In Europe, real-estate and mining stocks led a 0.4% gain in the Stoxx Europe 600 Index amid subsiding inflation worries. Miners were boosted by optimism China’s economic reopening will spur demand for metals. Among the top corporate news, Credit Suisse weighs cutting by half the bonus pool for 2022 after a turbulent year. Here are some of the biggest European movers on Wednesday: Vestas shares jump as much as 5.6%, the most in a month, after being raised to buy at Jefferies, which says an inflection point has been reached for wind-turbine manufacturers JD Sports shares jump as much as 6.5%, reaching April highs, after the sports retailer said it sees headline pre-tax profit toward the top end of current market expectations TeamViewer shares gain as much as 7.3% after the software company reported preliminary 4Q billings. RBC says the firm posted “a surprisingly stronger- than-expected finish to the year” Corbion rises as much as 11%, reaching an almost 11-month high, after Barclays upgrades to overweight in note on “renewed conviction” following the Dutch ingredients maker’s CMD Bang & Olufsen rises as much as 4.5% on better-than-expected 2Q results. Nordnet says “B&O does what it can and maybe even a little more” despite a challenging environment Grafton shares rise as much as 4.7% after it predicted its profit will be at the top end of analysts’ forecasts. Investec expects 2022 underlying consensus profit to edge up Direct Line shares slump 30%, pulling peers down with it, after saying it no longer expects to pay a final dividend; news that is likely to be a “major shock” to the market, Jefferies says Adyen declines as much as 3.4% after BofA cuts the stock to neutral, saying risks of further slowdown in e-commerce sales and margin compressions are not properly accounted for Maersk shares fall as much as 4.1%, the most since November, after Goldman Sachs cut its recommendation to sell, anticipating a “great unwind” in air and sea freight markets Eurofins Scientific declines as much as 4.9% and is among the worst performers on France’s SBF 120 index after two brokers cut their recommendations for the French laboratory group Earlier in the session, Asia’s equity benchmark resumed its advance, led by gains in key regional markets including Japan, South Korea and Hong Kong.  The MSCI Asia Pacific Index climbed as much as 0.9% to the highest level in almost five months before paring about half of its gain. Tencent and Alibaba were the top contributors, with tech and communication services among the major sectoral boosters. “A lot of traders and investors see the US being closer to peak inflation — if we have not already passed that point. Then that as a corollary also indicates an end to global central bank rate hike cycles,” said Justin Tang, head of Asian research at United First Partners.  Though Chinese shares dropped on Wednesday, with liquor giant Kweichow Moutai among the decliners, investor sentiment remains bullish amid further signs of fading regulatory risks in the tech sector as well as more support coming for property developers. The dramatic recovery in Chinese equities, with a gauge of mainland companies listed in Hong Kong up more than 40% in about two months, helped the broad Asian benchmark enter a bull market this week. The key gauge is outperforming US peers so far in 2023 boosted by optimism over China’s reopening and a weakening dollar. “In general the Chinese markets have been a pretty tough place to invest for almost five years now. So that recovery we’ve seen from below, there’s still a lot of value, support in the marketplace,” David Perrett, co-head of Asian equities at M&G Investment Management, said in an interview with Bloomberg TV In FX, the Bloomberg dollar gauge rose, after hovering near a seven-month low and the greenback was mixed against its Group-of-10 peers, though most currencies traded in relatively narrow ranges. The euro traded in a narrow $1.0726-1.0757 range The Australian dollar led G-10 gains after solid inflation and retail sales prints for November reinforced expectations for a quarter-percentage-point interest rate hike at the Reserve Bank’s first meeting of the year next month. CPI advanced 7.4% seasonally adjusted from a year earlier, up from 6.9% in October and exceeding economists’ median estimate. Core prices, or the trimmed-mean gauge, climbed to 5.6% in November compared with a forecast 5.5%. Retail sales beat most estimates. The yen was sandwiched between large options expiring on Wednesday. Japan’s 30-year bonds gained after an auction of this tenor met resilient demand and the central bank announced unscheduled debt purchases. The Egyptian pound plunged 5% against the US dollar on Wednesday, after the International Monetary Fund said authorities were showing commitment to a flexible exchange rate. In rates, treasury yields trimmed their advance from the previous session as yields shed up to 6bps as the curve bull-flattened and with the rate on 10-year debt slipping to below 3.58% as investors remained focused on the price outlook for the US. UK spreads flatter, leading core European rates higher with 2s10s, 5s30s tighter by 5.5bp and 2.5bp on the day; Bunds also bull-flattened and outperformed Treasuries as money markets eased ECB tightening bets before a German 10-year bond sale. Focus is also on scheduled ECB speeches. Japan’s 30-year bonds gained after an auction of this tenor met resilient demand and the central bank announced unscheduled debt purchases. In commodities, oil reversed an earlier decline as traders weighed the outlook for stronger Chinese demand against a reported build in US crude stockpiles. Optimism over demand from China was evident in the iron ore market, with the steel-making ingredient rallying above $120 a ton in Singapore. Copper rose above $9,000 a ton for the first time since June, fueled by hopes of increased consumption by the world’s top user of the metal. Looking to the day ahead now, it's a quiet day and data releases include US Mortgage applications. Otherwise, central bank speakers include the ECB’s Holzmann, Villeroy and De Cos. Market Snapshot S&P 500 futures up 0.2% to 3,948.50 MXAP up 0.5% to 162.36 MXAPJ up 0.3% to 535.96 Nikkei up 1.0% to 26,446.00 Topix up 1.1% to 1,901.25 Hang Seng Index up 0.5% to 21,436.05 Shanghai Composite down 0.2% to 3,161.84 Sensex little changed at 60,124.03 Australia S&P/ASX 200 up 0.9% to 7,195.34 Kospi up 0.3% to 2,359.53 STOXX Europe 600 up 0.5% to 448.06 German 10Y yield little changed at 2.25% Euro up 0.1% to $1.0746 Brent Futures up 0.8% to $80.75/bbl Brent Futures up 0.8% to $80.76/bbl Gold spot up 0.5% to $1,885.60 U.S. Dollar Index little changed at 103.25 Top Overnight News from Bloomberg The collective hive mind of Wall Street is backing a view that the euro rally is just getting started. With energy prices tumbling and calls for a region-wide recession falling to the wayside, a clear narrative is emerging that the worst of the economic damage is over and European assets are cheap In Germany, Italy and Spain — three of the currency bloc’s top four economies — anxiety at inflation over the next year is close to or below the average since the euro was introduced in 1999, European Commission data show Only a slowdown in core inflation can alter the ECB’s resolve to raise interest rates, according to Governing Council member Robert Holzmann The ECB needs to be pragmatic as it raises interest rates in the coming months to get to a level by the summer that is sufficiently high to bring inflation back toward 2%, Governing Council member Francois Villeroy de Galhau said The French economy continued to grow at the end of 2022 and should avoid a contraction in the first weeks of the year despite headwinds from surging energy prices, a Bank of France survey showed China shouldn’t bail out the debt that local governments take off their balance sheets so as to discourage them from allowing hidden liabilities to snowball out of control, according to former Finance Minister Lou Jiwei Japan’s Finance Ministry will likely issue sovereign bonds to fund decarbonization efforts from the latter half of fiscal year 2023 after assessing investor needs, Michio Saito, a senior official at the ministry, says in a TV Tokyo interview A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks initially tracked the advances on Wall Street after Fed Chair Powell refrained from any major policy rhetoric and as participants looked ahead to upcoming US CPI data with hopes of softening price growth. ASX 200 tested the 7,200 level to the upside with the index led by outperformance in the mining and materials sectors, while participants also digested better-than-expected Retail Sales and a pickup in monthly inflation metrics. Nikkei 225 gained as earnings trickled in with outperformance in Yaskawa Electric after growth in its top and bottom lines, while there was encouragement from news that Fast Retailing will boost wages by as much as 40%. Hang Seng and Shanghai Comp were firmer for a bulk of the session after the PBoC pledged support measures including for the property sector and boosted its short-term liquidity efforts ahead of next week’s Lunar New Year celebrations, although gains were capped in the mainland after the recent mixed loans and aggregate financing data. Top Asian News PBoC injected CNY 65bln via 7-day reverse repos with the rate kept at 2.00% and it injected CNY 22bln via 14-day reverse repos with the rate kept at 2.15% for a CNY 71bln net daily injection. Analysts noted there is room for China to cut RRR and interest rates this year, while analysts also see room for a rate cut in the property sector, according to China Securities Journal. BoJ offered to buy JPY 100bln in 1-3yr JGBs, JPY 100bln in 3-5yr JGBs, JPY 300bln in 5yr-10yr JGBs, JPY 200bln in 10yr-25yr JGBs and JPY 50bln in 25yr+ JGBs, while it also offered to buy an unlimited amount of JGBs at a fixed rate with maturities of 1yr-3yr and 3yr-5yr in an unscheduled announcement. Stocks Climb Amid Optimism Over Inflation, China: Markets Wrap Egypt Pound Plunges 5% in Test of Shift to Currency Flexibility Russia to Restart FX Operations in Yuan Under Fiscal Rule Philippine Finance Chief Sees Rate Hike Cycle Nearing End European bourses are firmer across the board, Euro Stoxx 50 +0.8%, with an easing in yields seemingly spurring a modest extension of opening gains. Sectors are primarily in the green, though Insurance names are pressured in sympathy with Direct Line while Retail-related stocks are supported after updates from the likes of JD Sports. US futures posting marginal gains, ES +0.2%, with the US docket particularly thin ex-supply ahead of Thursday's CPI. US FAA has reported a system equipment outage, all flights nationwide have been grounded, according to a source familiar with the situation, cited by NBC Washington reporter. Top European News ECB's Villeroy says they will need to be pragmatic on speed of hikes, will have to raise rates more in the coming months. Should aim to reach the terminal rate by the summer. Domestic inflation is likely to peak in H1, will avoid hard landing scenario. ECB's Holzmann says rates will need to rise significantly further to reach levels that are sufficiently restrictive to ensure a timely return of inflation to target. Inflation is expected to subside but risks remain to the upside. There are no signs of de-anchored market expectations. Activist Coast Capital Sells Vodafone Stake Within a Year Russia to Sell Yuan From Wealth Fund as Oil Price Hits Budget Ukraine Latest: Zelenskiy Says Russian War Won’t Turn to WWIII Direct Line Shares Tumble as Insurer Cuts Dividend on Claims FX DXY forms a foothold on 103.000 handle within a tight band post-Powell and pre-US CPI. Aussie outperforms on perky inflation metrics, strong retail sales data and gains in iron ore prices, AUD/USD holds near 0.6900 and AUD/NZD rebounds from around 1.0800 to top 1.0850. Euro retains grasp of 1.0700 handle, but Sterling sags around 1.2150 axis and Yen weakens after closing below a Fib to circa 132.75 and away from decent option expiries at 132.50. PBoC set USD/CNY mid-point at 6.7756 vs exp. 6.7776 (prev. 6.7611) Fixed Income Core benchmarks continued to gain momentum throughout the morning with little clear sign of concession pre-supply and perhaps deriving some support from ECB remarks. However, the rally has run out of steam with a sub-par German outing aiding the pullback, with Bunds and Gilts now sub 137.00 and 103.00 respectively. Stateside, USTs have been following suit and it remains to be seen if the looming 10yr supply will influence broader action, an auction which follows Tuesday's strong 3yr. UK DMO is to launch a new conventional Gilt maturing October 2053 in the week commencing January 23rd. Commodities WTI and Brent have experienced a firmer start to the mid-week session, with the benchmarks posting upside of around USD 0.30/bbl within relatively narrow ranges that keeps the complex within WTD and recent parameters US and allies are reportedly preparing the next round of sanctions on Russian oil, via WSJ; intending to cap the sales price of Russian exports of refined petroleum products. Russian Kremlin, on possible losses from oil price caps, says there have been hardly any cases of the caps yet. Chinese Commerce Ministry will continue to impose anti-subsidy tariffs on dried distillers grains with solubles (DDGS) imported from the US. Standout mover has been LME Copper which eclipsed the USD 9k mark in an extension of yesterday’s price action after fairly contained/rangebound APAC trade for base metals. Spot gold is modestly firmer and resides towards the top-end of a USD 1872-1886/oz range, which is a fresh multi-month high leaving the figure itself as resistance before the May 2022 USD 1909/oz peak. Geopolitics Russia's ambassador to the US commented that the US training of Ukrainian troops on Patriot systems confirms Washington's de facto participation in the conflict and that the US administration's goal is to inflict the most damage on Russia on the battlefield by the hands of Ukrainians, according to Reuters. Russian Kremlin says there is a positive dynamic in the military situation around Ukrainian town of Soledar Putin is open to discussions on Ukraine. Russian Rights Commissioner says important ceasefire proposals have been made during her meeting with Turkish and Ukrainian colleagues in Turkey, via Reuters. Russia and Iran are working on a new shipping corridor to bypass sanctions and are looking to work with India, according to Nikkei. ] US Event Calendar 07:00: Jan. MBA Mortgage Applications 1.2%, prior -10.3% DB's Jim Reid concludes the overnight wrap Morning from Helsinki where snow is on the ground. This is the start of a whistle stop 4 countries in 2 days 2023 outlook tour. I've been coming here around this week every year for about the last 25, apart from the last 2 due to Covid. So it's nice to have the old routine back. In the past I've landed in wild snow storms, seen the temperature hit -20c, seen piles and piles of snow, and yet everything always runs. Impressive! This year it's all fairly calm with the temperature just above zero. Markets have also been relatively quiet over the last 24 hours as we await tomorrow's all important US CPI print. There was some speculation that remarks from Fed Chair Powell could inject some volatility into proceedings but overall markets turned steadily higher after his lack of commentary on the policy outlook at his panel in Stockholm. Looking through the various moves yesterday, some of the biggest came from longer-dated core sovereign bond yields. For instance, yields on 10yr Treasuries were up +8.7bps to 3.619%, marking their biggest daily increase so far this year, and taking yields up to their highest level since the weak ISM services release last Friday. We have given back -3bps of that climb in Asia as I type. The rise yesterday though came as investors took out some of the dovish expectations for the Fed they’d been pricing over recent days, with the futures-implied rate for end-2023 up by +2.0bps on the day to 4.459%. Separately, we also heard from the Treasury Department that they were increasing the size of their T-bill auctions. It comes with many expecting that they’ll soon announce extraordinary measures in order to avoid exceeding the statutory cap imposed by the debt ceiling. Sticking with the US Treasury Department, it was reported yesterday that Treasury Secretary Yellen has agreed to remain in her post after having been asked to by President Biden last month. This is a confirmation of Secretary Yellen’s own professed wished from back in November when she said she intended to stay through the entirety of Biden’s first term. This means at least one part of the upcoming debt ceiling negotiations will have some stability. Bloomberg reported that the Biden administration was preparing to turnover some cabinet-level positions now that the midterms are over. Over in Europe it was a similar story, with yields on 10yr bunds (+8.0bps) seeing the largest increase on the day, along with smaller increases for OATs (+7.0bps) and BTPs (+3.6bps). And as in the US, the moves occurred with investors taking out some of the dovishness priced for the ECB, which got further support after the ECB’s Schnabel said that “interest rates will still have to rise significantly” and that “inflation will not subside by itself”. When it comes to the Fed, we did hear from Chair Powell yesterday, but despite the anticipation he didn’t comment on the policy outlook. He was speaking on a panel on central bank independence, and stuck to that topic by defending the merits of an independent monetary policy. Interestingly, he acknowledged that “restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy.” Otherwise, he explicitly said that the Fed should “stick to our statutory goals and authorities”, and said that they would not be a “climate policymaker”. With little to go off from Powell, the focus will now turn to tomorrow’s US CPI release for December. With Powell not taking a hawkish tone, equities drifted higher after Europe logged off. The S&P 500 ticked +0.70% higher, with both the NASDAQ (+1.01%) and the Dow Jones (+0.56%) also rising. The rally had a distinct risk-on tone with communications (+1.29%) and consumer discretionary (+1.26%) names outperforming while defensives like staples (-0.16%) and utilities (+0.04%) lagged. Having closed beforehand and catching up to the US reversal late Monday, European equities pulled back with the STOXX 600 down -0.59% on the day. Asian markets are stronger this morning. As I type, the Nikkei (+1.02%) is leading gains followed by the Hang Seng (+1.01%), the KOSPI (+0.40%), the CSI (+0.22%) and the Shanghai Composite (+0.20%). Outside of Asia, stock futures in the US are fluctuating with contracts on the S&P 500 (+0.04%) just above flat while those on the NASDAQ 100 (-0.05%) are trading fractionally lower. Meanwhile, European futures tied to the DAX (+0.55%) are catching back up. Early morning data showed that inflationary pressures are yet to ease in Australia as CPI advanced +7.3% y/y in November (v/s +7.2% expected), up from a surprise pullback to +6.9% in October. The latest inflation reading is at its highest level in 30 years with housing costs being the main contributor to the annual increase. Separately, retail sales rebounded +1.4% m/m in November, buoyed by consumer appetite for Black Friday sales despite rising interest rates and high inflation. Market expectations were for a +0.6% gain as against October’s upwardly revised +0.4% rise. The Australian dollar (+0.39%) nudged higher against the dollar, trading at $0.69 on the prospect of more interest rate hikes by the Reserve Bank of Australia (RBA). In commodity news, copper prices are trading at the highest level since June inching towards $9,000 a ton as China’s exit from the Zero Covid policy enhanced the demand outlook of the commodity. Elsewhere yesterday, the French government outlined a plan that would see the country’s retirement age rise to 64 by 2030, up from 62 at present. Moves to reform the pension system have long been an ambition of President Macron’s, but a previous attempt in his first term was postponed during the Covid-19 pandemic, and there remains opposition from trade unions and some other political parties. Macron’s party no longer has an absolute majority in parliament either, but they have made some concessions to the conservative Les Républicains to try and secure their votes. In other news, the World Bank released their latest round of economic projections yesterday, with their global growth projection for 2023 now at +1.7%, marking a downgrade from their +3.0% forecast back in June. Those downgrades were mainly driven by the advanced economies, where growth is now seen at just +0.5% (vs. +2.2% in June), but the forecasts for emerging market and developing economies were also lowered, with this year’s growth now seen at +3.4% (vs. +4.2% in June). Finally, there wasn’t a great deal of other data yesterday. One release in the US was the NFIB’s small business optimism index, which fell more than expected to 89.8 in December (vs. 91.5 expected). That’s the second-lowest reading in over a decade. Elsewhere, French industrial production grew by a faster-than-expected +2.0% in November (vs. +0.8% expected). To the day ahead now, and data releases include Italian retail sales for November. Otherwise, central bank speakers include the ECB’s Holzmann, Villeroy and De Cos. Tyler Durden Wed, 01/11/2023 - 08:04.....»»

Category: worldSource: nytJan 11th, 2023

3 Instruments Stocks Set to Gain From Industrial Digitization

The growing importance of energy efficiency, adoption of industrial automation and optimum utilization of resources should drive the Zacks Instruments - Control industry. Thermon (THR), Transcat (TRNS) and Allied Motion (AMOT) are well-positioned to gain from the evolving market dynamics. The Zacks Instruments – Control industry is likely to benefit from the increasing demand for state-of-the-art technology that replaces obsolete industrial control systems with automated products. In addition, a focus on energy-efficient production processes and integrated software systems is likely to be conducive to growth.However, supply chain disruptions and commodity price inflation are likely to hurt the process automation and instrumentation market. Nevertheless, Thermon Group Holdings, Inc. THR, Transcat, Inc. TRNS and Allied Motion Technologies, Inc. AMOT are likely to gain from precedence to energy efficiency and cost reduction, digitized technologies, adoption of industrial automation and optimum utilization of resources.Industry DescriptionThe Zacks Instruments – Control industry comprises manufacturers of precision and specialty motion control components and systems used in a wide range of industries. These companies deliver sophisticated flow measurement, control and communication solutions for air, water and other forms of gas and liquid used for commercial and residential purposes. The companies offer an array of products for fuel, combustion, fluid, actuation, electronic applications, energy control and optimization, particularly for the process industry. Some industry players offer heating, ventilation and air conditioning products. These include water heaters and electric heating systems for under-floor radiant applications for boiler manufacturers and alternative energy control packages. Few firms provide water reuse products, consisting of drainage and rainwater harvesting solutions.What's Shaping the Future of Instruments - Control IndustryGreater Emphasis on Digitized Technologies: The industry’s growth is largely driven by an emphasis on digitized technologies such as the Industrial Internet of Things. The demand for process automation and instrumentation products is dependent on manufacturing activities. Moreover, the demand for safety automation systems and multivariable pressure transmitters is likely to provide significant growth opportunities. The use of process instrumentation equipment offers a host of benefits, including improvement in the quality of the product and emission reduction. So, the increase in adoption of technology across various industries and growing regulation and compliance will continue to be major growth drivers. In addition, field instruments play a significant role in process control by measuring the key elements such as temperature, pressure, flow and level in process industries such as chemicals, mining and pharmaceuticals. A differentiated product offering gives greater opportunities for companies to strengthen their market position.Supply Chain Woes Persist: The industry players are facing significant supply chain challenges, resulting in stretched lead times and higher material costs. Lockdown restrictions continue to affect markets, customers and suppliers. While the companies are focused on improving their operating performance, an inability to obtain adequate supplies of raw materials and product parts at favorable prices could hurt their businesses. Though market uncertainties seem to have eased to some extent, these firms continue to closely monitor supply chain issues and inflation. They remain focused on long-term strategic priorities while addressing lingering near-term disruptions.Focus on Process Automation: Increasing focus on adopting automation across all industry verticals and spending more on new technologies is expected to drive growth over the next few years. North America is expected to continue dominating the market in terms of adopting automation. Rising infrastructural investments in the energy and power sector, increasing demand for food and beverages, and favorable government policies are aiding the growth. The pharmaceutical industry's process automation and instrumentation market are also growing due to low-cost factors and a changing regulatory environment. Focus on high-quality equipment indicates increasing buyer maturity and willingness to partner with process control industry players.Incessant Inflationary Pressure: Material cost inflation, resulting from incessant inflationary pressures, has affected margins in the near term. Transportation cost is also on the rise. With firms being unable to pass on the entire increase in raw material prices to customers due to stiff competition, profitability is mostly on the wane. The companies largely operate in markets that are susceptible to high competitive pressures and are under constant threat by low-cost suppliers, primarily based in China. Due to an international footprint, these firms are further exposed to foreign exchange fluctuations that affect their cash flows. Growth depends on their capability to develop technologically-advanced products that meet appropriate industry standards.Zacks Industry Rank Indicates Bright ProspectsThe Zacks Instruments – Control industry is housed within the broader Zacks Computer and Technology sector. It currently has a Zacks Industry Rank #68, which places it in the top 27% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bullish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.Before we present a few instruments control stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock market performance and valuation picture.Industry Outperforms Sector, S&P 500The Zacks Instruments – Control industry has outperformed the broader Zacks Computer and Technology sector and the S&P 500 composite in the past year.The industry has lost 18.9% compared with the S&P 500 and sector’s decline of 19.8% and 34%, respectively.One-Year Price PerformanceIndustry's Current ValuationThe Enterprise Value-to-EBITDA (EV/EBITDA) ratio is commonly used for valuing instruments control stocks. The industry has a trailing 12-month EV/EBITDA of 11.31X compared with the S&P 500’s 11.49X. It is above the sector’s trailing 12-month EV/EBITDA of 8.31X.Over the past five years, the industry has traded as high as 17.47X, as low as 6.72X, with a median of 11.79X, as the chart below shows.Trailing 12-Month Enterprise Value-to EBITDA (EV/EBITDA) Ratio3 Instruments Control Stocks to Keep an EyeThermon: Headquartered in Austin, TX, Thermon provides engineered industrial process heating solutions for process industries worldwide. Its products include air heaters, boilers, controlling and monitoring solutions, heat tracing systems, thermostats, gas-fired blowers and gas heating accessories that comprise regulators, valves and battery cables. The buyout of Powerblanket has augmented Thermon's exposure to growing industrial and commercial end markets through its freeze protection, temperature control and flow assurance solutions. It has also enabled it to expand into adjacent product lines and increase access to diversified end markets. The Zacks Consensus Estimate for its current-year earnings has been revised 9.8% upward over the past year, while that for the next year is up 46.6% since May 2022. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Price and Consensus: THRTranscat: Headquartered in Rochester, NY, Transcat is a leading provider of accredited calibration, repair, inspection and laboratory instrument services. It is focused on providing best-in-class products to pharmaceutical, biotechnology, medical device and other FDA-regulated businesses, aerospace and defense, and energy and utilities. The buyouts of Complete Calibrations provide Transcat with a local calibration presence to support the robust and growing life science market in Ireland, while the acquisition of Cleveland, OH-based e2b Calibration will likely help it strengthen its presence across the United States and Canada. It delivered an earnings surprise of 12.4%, on average, in the trailing four quarters and currently carries a Zacks Rank #2 (Buy).Price and Consensus: TRNSAllied Motion Technologies: Headquartered in Amherst, NY, Allied Motion manufactures precision and specialty-controlled motion products and solutions for the global market. The company is known for its expertise in electromagnetic, mechanical and electronic motion technology. Its major served markets include Vehicle, Medical, Aerospace and Defense and Industrial. The company is focused on being the controlled motion solutions leader in target markets by leveraging its technology to develop integrated precision solutions. The consensus estimate for current-year earnings has been up 35.3% since May 2022. It carries a Zacks Rank #3 (Hold).Price and Consensus: AMOT (Chart 5) 5 Stocks Set to Double Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%. Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Thermon Group Holdings, Inc. (THR): Free Stock Analysis Report Transcat, Inc. (TRNS): Free Stock Analysis Report Allied Motion Technologies, Inc. (AMOT): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksJan 9th, 2023

Investing Mistakes During A Recession

As worries grew about the Federal Reserve and other central banks being willing to bring on a recession to control inflation, stock prices plunged on December 16, 2022. This is the second straight week that the Standard & Poor’s 500 has lost 1.4%. It fell by 407 points, or 1.2%, on the Dow Jones industrial […] As worries grew about the Federal Reserve and other central banks being willing to bring on a recession to control inflation, stock prices plunged on December 16, 2022. This is the second straight week that the Standard & Poor’s 500 has lost 1.4%. It fell by 407 points, or 1.2%, on the Dow Jones industrial average to 32,796 points and by 1% on the Nasdaq composite. Investors’ hopes for interest rate cuts next year were dashed as well when the Fed raised its forecast for how high interest rates will ultimately go. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Series in PDF Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2022 hedge fund letters, conferences and more   Find A Qualified Financial Advisor Finding a qualified financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you're ready to be matched with local advisors that can help you achieve your financial goals, get started now. Inflation, while down from its highest levels in decades, remains painfully high. As a result, the Fed has kept raising interest rates to slow economic growth to maintain its aggressive attack on prices. The danger, however, is that too much braking could send an already sluggish economy into recession. The risk was highlighted by S&P Global. According to the report, inflation slowed business activity this month. Even with the sharp drop, inflation pressures have eased. But, if history is any indication, the future isn’t looking too bright. According to Fed forecasts, inflation will slow next year due to rising unemployment. Despite this, the Fed’s own projections show prices still rising at an unacceptable rate by year-end 2023, with inflation at 3.5%. Why’s that concerning? Inflation has been running at 3.7% or higher during every recession since 1960 except the pandemic-induced downturn of 2020. It was only in 1974 that inflation was higher than 2.7% when the recession ended. While we don’t have a crystal ball to predict the future, it wouldn’t hurt to prepare for a possible downturn. And, one area to focus on is avoiding the following investing mistakes during a recession. Immediately selling your holdings when they begin to fall. When the economy is in recession, the stock market becomes highly volatile. As a result, you might be tempted to cut your losses when you see all your investments tank on the trading screen. However, when investments fail, you should not unload them. Why? Well, here are three reasons why you should hold onto your investments. If you sell during a downturn, you could lose money. As a result of a market downturn, stock prices decline. The prices of investments were likely higher when the market was booming, so you likely paid more for them. In other words, if you sell during a downturn, you might end up losing money on your investments. Remember that you will never lose money unless you sell, no matter what the market does. The only way to lock in your losses is to sell when prices are lower, even if your investments decrease in value. In short, a good way to avoid losing money is to hold onto your stocks until the price recovers. There is no way to predict the market. If you want to maximize your returns, you should buy stocks at their lowest prices when the market bottoms out, and sell when the market peaks. The strategy is called timing the market, and while it sounds smart, executing it successfully is extremely challenging. There is no way that anyone can accurately predict what will happen in the stock market, not even the best investors. Even a small error in timing can result in a lot of losses in the stock market. As an example, consider the 2020 market crash during the early stages of the COVID-19 pandemic. In just a few weeks, the S&P 500 lost more than one-third of its value. By selling your investments shortly after prices started to fall, you would have not only locked in your losses but also locked in higher profits. Also, you could have missed the near-immediate recovery of the market. By timing the market, you might buy during high prices, sell during their lowest, and rebuy during high prices. When you hold onto your investments through the rough patches, though, you’re more likely to come out on top. A healthy company should see its price rebound. Stock markets are volatile, but companies with strong, healthy balance sheets have a better chance of bouncing back. It is important to understand a company’s underlying business fundamentals in order to determine its strength. Asking the following questions can help you determine this: In its industry, does it have a competitive advantage? Are its leaders capable of making good business decisions during challenging times? Is it financially healthy? In the long run, your investments should rebound after periods of volatility if you invest in solid companies. In times of market turmoil, it’s best to hold onto your investments and ride out the storm. Strictly limiting investing amid volatility. While some investors sell when the market dips, others don’t invest at all. In fact, according to a recent survey from Allianz Life, 65% of investors keep “more money than they should” out of the stock market. “We’re more fixated on what we could potentially lose on paper than what opportunities pass us by that we never capitalize upon,” said Josh Reidinger, CEO of Waverly Advisors in Birmingham, Alabama, which ranked No. 59 on the FA 100 list. If you stay away from the stock market, you might miss out on some of the best returns. As a matter of fact, over the past 20 years, the top 10 performing days occurred after big stock market declines in 2008 and 2020, during the beginning of the Covid-19 pandemic, according to Morgan Asset Management. “History does not repeat itself,” Reidinger said. “But it’s a pretty good indicator of where we are going.” Buying stocks at their lowest points Stocks might be at their absolute lowest when you’re investing during a period of economic instability. Again, it’s possible to miss out on some profitable opportunities if you try to time the market that way. In a recession, it’s best to invest consistently at regular intervals. The only thing that matters is if that stock goes up in value eventually, not if you buy it at its lowest point. A recession can present a number of challenges when it comes to investing. However, knowing what mistakes to avoid can save you from having to live with regrets in the future. Not understanding what you are investing in. During recessions, Pamela Capalad, a financial planner at Brunch & Budget, says investors are tempted to invest in new, trendy investments. “Avoid anything that you didn’t understand before the recession,” she says. For instance, if you are unfamiliar with cryptocurrency and desperate to invest in it, now might be a bad time. Capalad says, “Ultimately, it goes back to: Do you understand what you’re investing in? Do you understand why you’re investing in crypto? Do you understand how crypto works?” “Crypto was one of the first things to take a dive when there was any hint of recession because crypto is currently all speculation,” she adds. “It’s really easy to ride a trend, especially when it’s going up.” Investing without diversification. Putting all your eggs in one basket isn’t a good idea. In general, investing in only a handful of stocks can be risky. The risk is even higher during a recession. However, by diversifying your capital across several assets, you’ll be able to mitigate losses if one or a few of your bets don’t work. In a recession, exchange-traded funds (ETFs) give you exposure to a diverse group of high-quality stocks through index-tracking ETFs, helping you avoid these mistakes. There are 2 basic types of indexes: A market index such as the S&P 500 is a measure of the overall market. An index which tracks a much more targeted subset of the overall market, such as small-cap growth stocks or large-cap value stocks. A bond index, a commodity index, and a currency index are also available. ETFs based on indexes seek to replicate the return of the market or subset of the market they aim to replicate, less their fees. The ETF market price will differ from the fund’s net asset value, so index ETFs do not track the underlying index perfectly. Generally, indexes based on subsets of the market compete with broader indexes based on the entire market. A small-cap index, for example, is typically compared to a broader index on the entire market by investors. What are the best ETFs to buy for a recession? Some suggestions include: Schwab U.S. Dividend Equity ETF (SCHD) SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) iShares 0-3 Month Treasury Bond (SGOV) Vanguard Consumer Staples ETF (VDC) Vanguard Utilities Index Fund ETF (VPU) Health Care Select Sector SPDR Fund (XLV) Vanguard S&P 500 ETF (VOO) Checking your portfolio 24/7. Making investment decisions based on the market’s movements and constantly fretting over your portfolio’s value during a downturn is unlikely to be profitable. Continually checking indicates worry, which could lead to emotional decisions. You should check your portfolio once a week if you can. Occasionally, big down days follow big up days. In addition, if you participate in a workplace retirement plan like a 401(k), you’re likely adopting the practice of dollar-cost averaging. In this method, investments (typically mutual funds) are consistently purchased over time. With this strategy, you buy fewer shares when prices are high and more shares when prices are low. You listen to the “experts.” There’s no way Mad Money, Squawk Box, and Closing Bell along with their panel of supposedly “expert” money managers are going to predict when this recession will end. No offense. But, it’s all for entertainment. You may think that I’m being too harsh here. However, lead author Nicola Gennaioli examined stock prices, dividends, and data over the past 35 years to compare them with recommendations made by market experts. In his study, his team found that investing in the 10 percent of stocks most recommended by experts yielded, on average, a three percent return. In contrast, investors who invested in the ten percent of stocks least recommended by experts earned 15 percent returns on average! Not safeguarding your retirement. “Building an investment plan is like formulating a diet plan – totally dependent on your goal,” writes Sanjay Sehgal in a previous Due article. “When you visit your dietician for instance, one of the first questions asked is about your goal – Do you want to lose weight, build muscle, or you wish to celebrate food?” “But moderation, as any good dietician will tell you is the key; it’s only when everything you need is in your plate, in the right quantities, that you can achieve your goal, as well as enjoy each bite and every taste,” he adds. “A dietician’s plan begins from this understanding. “Investments also need planning, and this planning should be based upon your risk-taking ability and your life goals.” Consequently, we should plan our investments based on a post-pandemic financial horizon that will differ from anything we know. This now involves recession-proofing your retirement investments by following these steps: Take care of your health. Occasionally, there are pandemics, recessions, depressions, or high inflation rates. As a result, during a crisis, you would have a better chance of thinking clearly, taking action, and even protecting yourself against other risks. Have an emergency fund. An emergency fund should be equal to 6 months’ worth of income. In the event that you lose your job and unemployment is high, that is not going to save your life. But you will have some options and options for adjusting. Live within your means. Adapt your living expenses to match your retirement income. By living within your means during the good times, you will be less likely to go into debt when gas prices go up and more able to adjust spending in other areas. Stay in the market. There is always a risk associated with investing in the stock market. In exchange, you typically get higher returns over time than you would from savings accounts, fixed deposits, etc. Occasionally, the market dips, and your portfolio may suffer, but it will pass. Invest for the long term. What if your investments drop 15% as a result of a drop in the market? You won’t lose anything if you don’t sell. You will have plenty of opportunities to sell high in the long run, since the market is cyclical. Buying during a down market may end up paying off later on. Diversify your investments. Diversification reduces your portfolio’s market risk. Regardless of what the market does, diversification keeps a portfolio healthy. The market may fluctuate, but a portion of your portfolio may respond positively and offset some negative effects. Cash is where you stay. As a result of this mistake, panic selling is compounded. After a market downturn, stock prices often rebound strongly, showing how bailing out can cost you when the market turns around. To be fair, holding cash makes sense if you have short-term spending needs or are building an emergency fund. When your long-term financial goals are decades away, it makes no sense to hold a large position in it as part of your investment portfolio. It is advisable for investors who have excess cash because they sold during the market slide, or for any other reason, to close the gap and invest. It is possible to get back into the market gradually by buying set amounts of stock at regular intervals (say, monthly) using dollar-cost averaging. In many cases, dollar-cost averaging can make it easier for fearful investors to move out of cash, since they won’t have to worry about putting lots of money into the market, only to see it sell off again. As a result, if the market recovers, they will be glad they already put some of their money back to work rather than leaving all of it on the bench. You don’t consult an investment professional before making a large investment. As humans, we all make mistakes. And, occasionally, we make these mistakes because we all let our emotions get the best of us. In the end, though, you’ll get into trouble when you make decisions based on feelings rather than facts. How can you keep things in perspective and make sure your investments are on track? Consult a professional for investment advice. When you have a pro on your side, you’re more likely to stay focused on your long-term goals and stay as cool as a cucumber. FAQs What is a recession? After a period of growth, a recession is typically defined as two consecutive quarters of declining GDP (gross domestic product). According to the National Bureau of Economic Research (NBER), a recession is “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production and wholesale-retail sales.” What causes recessions? Many things have led to recessions in the past, but economic imbalances are typically the cause. For instance, the 2008 recession was caused by excess debt in the housing market. Unexpected shocks can also lead to job cuts, like the COVID-19 pandemic. Economic growth, earnings and stock prices are all put under pressure when unemployment rises. An economy can be thrown into a vicious cycle by these factors. In the long run, recessions are necessary to clear out excesses before the next boom. How does a recession affect the stock market? Although recessions are hard to predict, it’s still smart to think about how they might affect your portfolio. Historically, bear markets (market declines of 20% or more) and recessions (economic declines) have often overlapped, with equity markets leading the economic cycle by 6 to 7 months on the way down and back up. Even so, market timing moves can backfire, like moving an entire portfolio to cash. It’s often the late stages of an economic cycle or right after a market bottom that yield the best returns. In down markets, dollar cost averaging, where investors invest equal amounts at regular intervals, can help. Investors can buy more shares at lower prices while staying positioned for when the market recovers. How long do recessions last? Since 1854, the average recession has lasted 17 months, according to the NBER. Generally, recessions in the U.S. have lasted about 10 months since World War II, with recessions typically lasting much shorter. However, a recession can last much longer than that. For example, the Great Recession of 2007 – 2009 lasted 18 months. Conversely, it can last only a short time. The COVID-19 recession of 2020, for instance, lasted for only two months.. What should you do to prepare for a recession? Before and during a recession, investors should remain calm. It’s especially true during times of economic and market stress that emotions can sabotage investment returns. Although recessions can’t be predicted, it’s important to maintain a long-term mindset. Ensure your portfolio is designed to be balanced so that you can take advantage of growth periods before they happen while remaining resilient during volatile periods. Article by Albert Costill, Due About the Author Albert Costill graduated from Rowan University with a History degree. He has been a senior finance writer for Due since 2015. His financial advice has been featured in Money Magazine, Fool, The Street, Forbes, CNBC and MarketWatch. He loves to give personal finance advice to millennials......»»

Category: blogSource: valuewalkJan 3rd, 2023

Chinese OLED makers to decelerate capacity expansion

China-based OLED panel makers' production capacity as a percentage of the global total will see slower growth as utilization of their existing lines has decreased to low levels, prompting them to decelerate capacity expansions, according to The Elec......»»

Category: topSource: digitimesDec 26th, 2022

2 Manufacturing Stocks with Strong Growth Potential in 2023

The manufacturing industry is expected to grow even if there's a recession next year, and some segments within it are expected to grow strongly. According to the December 2022 Semiannual Economic Forecast recently issued by the Institute for Supply Management (ISM), growth expectations of 5.5% for 2023 are down from the 6.5% rate estimated six months ago and well below the 9.2% rate for 2022. The numbers are based on a survey of purchasing and supply chain executives, which is however not a homogeneous group.Therefore, some segments are expected to do much better than others (45% of respondents are looking for 14.9% growth, 43% flattish growth and the remaining 12% expecting a 10.3% decline on average). Thus, there are segments within manufacturing that should have a stellar year, recession or not.Significantly, the ISM expects raw material price increases to decelerate to 2% from 11.4% in 2022. This should be a huge relief for players, as labor issues persist. Manufacturing employment is expected to increase 3.9%.Working conditions in the manufacturing industry aren’t great compared to other industries, which is why it has lost more people during the “great resignation”. Consequently, today the industry is severely short staffed with employees making demands for higher pay, a better working environment, work-life balance, flexible hours, etc. About a quarter of the workforce are also aged 55 and above, which along with the technical skills required for the job means that labor will remain a top concern/focus area in the next few years.However, technology adoption, including factory automation, robotics and increased use of Industrial IoT (IIoT) devices are expected to bring efficiencies, cost control, deeper insights into operations and customer relationship management by facilitating in-depth information gathering, monitoring equipment and process efficacy, early diagnosis of problems, as well as a predictive approach to analytics. AI is expected to wring further efficiencies. This is a multi-year trend that has been ongoing over the last five years and is expected to continue over at least the next three.A lot of innovation is also happening in the supply chain, with larger players increasingly absorbing middlemen on both the sourcing and supply sides. This helps in two ways, by eliminating some cost, building direct relationships with suppliers and customers, better pricing and better control. The benefits of this model are not lost on smaller players, so changes may be expected to continue.Manufacturers have been building capacity all through this year at an average rate of 12%, something that will continue in 2023, albeit at a much slower rate of 2.6%, according to the ISM report. Despite these additions, 2022 utilization remains quite high at 88.4%.From the above, we can come to a few conclusions:First, there are pockets of considerable strength within the manufacturing segment although the overall market can appear sluggish in 2023.Second, while labor and raw material cost will continue to increase next year, the rate of increase will come down sharply. Therefore, players with pricing power will benefit disproportionately.Third, technology will continue to play a big role in increasing efficiencies (which is the need of the hour). Therefore, investments will continue.With that in mind, let’s jump to a couple of stocks that are looking very good right now. Both are members of the Zacks Manufacturing - Construction and Mining industry, which is in the top 2% of Zacks-ranked industries.H&E Equipment Services, Inc. HEESBaton Rouge, Louisiana-based H&E Equipment Services is an integrated equipment services company. It operates in five segments: Equipment Rentals, Used Equipment Sales, New Equipment Sales, Parts Sales, and Repair and Maintenance Services. H&E Equipment targets industrial and commercial companies, construction contractors, manufacturers, public utilities, municipalities, maintenance contractors and other industrial customers.The Zacks Rank #1 (Strong Buy) stock has Value, Growth and Momentum scores of B, A and B, respectively. Its estimates continue to rise even when the markets expect doom and gloom next year. In the last 60 days, the 2022 estimate is up 48 cents (17.3%) while the 2023 estimate is up 64 cents (19.8%).Analysts expect 2023 revenue and earnings growth of 13.1% and 19.0%, respectively. But the current pace of estimate revisions indicate that growth will ultimately be much stronger. The surprise history (41.7% average surprise in last four quarters) shows that analyst estimates tend to be conservative.Analysts have also set their target prices quite high, the average representing 19% upside from the current price of $44.92.Terex Corporation TEXTerex manufactures and sells aerial work platforms and materials processing machinery worldwide. Its products are used in construction, infrastructure and recycling projects; quarrying and mining, and material handling applications; maintenance applications to lift equipment or material; and landscaping and biomass production industries.The Zacks Rank #2 (Buy) stock has Value, Growth and Momentum scores of B, B and D, respectively. In the last 60 days, its 2022 estimates have increased 14 cents (3.5%) and 2023 estimates 22 cents (4.8%). Revenue and earnings are expected to grow a respective 5.4% and 16.8% in 2023. The surprise history is good with the previous four quarter average surprise coming to 36.7%.The average target price represents 14% upside from the current level of $43.64.Price Performance Year-to-DateImage Source: Zacks Investment Research Zacks Top 10 Stocks for 2023 In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2023? From inception in 2012 through November, the Zacks Top 10 Stocks portfolio has tripled the market, gaining an impressive +884.5% versus the S&P 500’s +287.4%. Now our Director of Research is combing through 4,000 companies covered by the Zacks Rank to handpick the best 10 tickers to buy and hold. Don’t miss your chance to get in on these stocks when they’re released on January 3.Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Terex Corporation (TEX): Free Stock Analysis Report H&E Equipment Services, Inc. (HEES): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksDec 22nd, 2022

Grid Bottlenecks Could Derail Europe"s Renewable Energy Boom

Grid Bottlenecks Could Derail Europe's Renewable Energy Boom Authored by Rystad Energy via OilPrice.com, Europe’s renewable energy industry is booming. If Europe is to remain a leader in renewable energy, the region will have to invest more into its grid. Grid bottlenecks could derail Europe’s green energy boom.  Europe’s energy transition ambitions face several challenges, but a major impediment to bringing new renewable power online is insufficient grid capacity. Rystad Energy’s current base case forecast has Europe adding as much as 530 gigawatts (GW) of solar PV and onshore and offshore wind between 2022 and 2030, more than 66 GW per year on average. Furthermore, the share of solar and wind combined as a share of total installed capacity surpassed 10% in 2010 and more than tripled in 2021, reaching 34%, according to Rystad Energy research. Growth is not expected to slow down anytime soon, as European countries are planning huge additions of renewables over the next few years. If Europe is to remain a leader in the energy transition, a huge amount of grid capacity will need to be developed, both to integrate new generation capacity into respective countries’ power mixes and to better connect European countries so that electricity can flow in the most optimal way. The staggering amount of new solar and wind capacity expected to come online in Europe in the coming years means that grid interconnectivity will be the bottleneck to both the more efficient use of energy sources as well as overall slower decarbonization of the power sector as more fossil fuels need to be used to compensate. Historically, this has been much less of an issue as Europe’s power system has been dominated by four large sources – coal, gas, nuclear and hydropower – all with varying degrees of dispatchability but none considered intermittent. With the pace of renewable energy development substantially exceeding the speed of grid upgrades and expansion projects in parts of Europe, policymakers and the power sector will need to carefully examine if a country’s development plans for new generation capacity match its development plans for both internal and cross-border transmission capacity. The timelines for new projects are very long and some countries in Europe are already curtailing renewable power that could be used elsewhere – for instance, Germany curtailed about 10.2 terawatt-hours (TWh) of wind power in 2017, the highest of any European country to date. The yearly average is around 5% of variable renewable energy curtailed, highlighting how bottlenecks are already an issue. “Europe’s increasingly connected power grid is one of the first globally to take on substantial amounts of renewable and intermittent power. Moving power around the continent to minimize the use of carbon-emitting fuels will only be possible if the grid is upgraded. This will not be simple, quick, or cheap, but it will reduce greenhouse gas emissions and increase energy security. The race is now on to see if grid upgrades can match the staggering levels of new renewables set to come online in the next decade,” says Fabian Rønningen, senior analyst, power markets at Rystad Energy. Europe’s grid will need to connect northern winds and southern sunshine The existing capacity base and future capacity will be spread unequally between European countries, with the likes of the North Sea emerging as another European energy hub with hundreds of GW of capacity planned to come online in the coming decades. For a future energy system, in which Europe’s energy sources are utilized optimally, both policymakers and industry will have to think differently about grid development, compared to the status quo. Most of the new capacity that will come online in Europe in the coming decades will be solar and wind, with such resources varying significantly across the continent. Southern parts of Europe have better solar conditions than the north, while wind resources are highest in the northern and eastern regions of the continent, as well as all coastal and offshore areas. This means that Europe’s future energy system could have a much higher degree of electricity flows between countries than we see today, despite Europe already being considered well interconnected. Case study: Spain   Spain has emerged as one of the European leaders when it comes to both solar and wind development, and currently has one of the largest renewables pipelines in Europe. Spain has the most economic solar potential of the large European countries due to its sizeable landmass and high yearly solar irradiation, while it has also been a pioneer in the European wind industry. Furthermore, due to its relatively weak coupling to the rest of continental Europe, Spain provides an excellent example of how internal European grid bottlenecks could hamper Europe’s energy transition. Although grid development within Spain is expected to grow rapidly over the coming decade, only three high-voltage interconnectors to France are currently planned, two of which are not expected to come online before 2027. This is just one example of potential bottlenecks Europe could face over the next decade, as hundreds of GW of solar and wind power come online, while the development of supporting grid infrastructure lags, especially cross-border interconnections. Policymakers need to ascertain whether grid development plans are in line with ambitious renewable energy targets to ensure transmission capacity does not constrain the energy transition. Installed capacity from renewable energy sources in Spain will more than double by 2030 in Rystad Energy’s current base case forecast. While installed capacity from non-renewable energy sources will drop from 54 GW in 2022 to 34 GW by 2030, capacity from renewable energy sources will grow from 64 GW to 151 GW. Solar will drive most of the growth in renewables, primarily driven by developments in central Spain. Expansion plans for transformer capacity are set to keep up with these ambitious growth targets in installed capacity. Spain’s transmission system operator (TSO), Red Electrica, has mapped out detailed plans for upgrades and expansions to its transmission network. Towards the end of this decade, these plans could see transformer capacity grow by more than 220% compared to 2022 levels. Although these upgrades to the network are planned across Spain, most capacity looks set to be added in southern and central Spain, particularly in communities such as Andalucia and Castilla y Leon (Figure 4). These are also the regions where most of the planned solar and wind capacity will come online in the next few years. The last time a high-voltage interconnector between Spain and France went operational was in 2015. In subsequent years, the countries acknowledged the mutual benefits of further integrating their power grids by projecting three other high-voltage direct current connectors across their shared border. One of the projects is a 400-kilometer link that will run between the Cubnezais substation (near Bordeaux, France) and the Gatika substation (near Bilbao, Spain), known as the Bay of Biscay project. The interconnector will mainly be laid subsea in the Atlantic Ocean with the rest buried underground, and will be the first submarine interconnector between Spain and France. The project has total transmission capacity of 2 GW and will lift total interconnection capacity between the two countries to 5 GW. The project is currently expected to be completed by 2027. Additionally, the countries are investing in reinforcements to existing interconnectors. When it comes to the use of France-Spain interconnectors, power has mainly flowed into Spain. Spain has been a substantial net importer of French electricity every year since 2016, with 12.4 TWh of net yearly imports at peak in 2017. This year will show a significant change with Spain a net exporter to France every month in 2022 except for February, amid a large shortfall in French nuclear generation. From 2016 to 2022, Spain was a large net importer of cheap French nuclear power, while in 2022 Spain had the flexibility to increase mainly gas-fired power generation to support French consumers amid the energy crisis. This further highlights the benefits of increased interconnectivity for both countries. Furthermore, Spain is currently one of the largest generators of renewable power in Europe and has an impressive pipeline of renewable energy projects, while a substantial proportion of electricity exported to France so far in 2022 has been solar and wind. Unlike Spain, France has not planned to increase the share of renewable energy sources in its power mix to the same extent. The situation with nuclear power in France is expected to improve in 2023, which will also benefit Spain. With more interconnectors between France and Spain, the two can rely on each other during periods when their power production is low. Given the abundant renewable energy power that will be produced in Spain, France will then be able to import clean, renewable energy when the sun shines and the wind blows. On the other hand, Spain will be able to import stable and dispatchable energy from France’s nuclear reactors to fill the intermittency gaps when the weather is less favorable. In other words, expanding high-voltage connections between the two power grids will benefit both countries and the wider European region. This begs the question: is enough interconnector capacity being developed in Spain and France compared to the pace of renewable installations? The timelines of the interconnector projects are very long, as shown by the Bay of Biscay project, which is expected to take 10 years from initial consultations started in 2017 until it is expected online in 2027. As an illustration, 5 GW of transmission capacity will be able to interchange roughly 40 TWh per year if used at very high utilization factors – a substantial amount, but relatively small compared to total power demand in both countries. Both countries' power demand is also expected to increase rapidly after 2025, as the electrification of their economies continues. Furthermore, the Spain-France example is just one of many. Many of the same questions will arise in other parts of Europe, especially as the North Sea is emerging as another European energy hub with hundreds of gigawatts of capacity planned to come online in the coming decades. Therefore, both policymakers and the power sector should carefully examine if a country’s development plans for new generation capacity match with its development plans for both internal and cross-border transmission capacity. The timelines for new projects are very long and Europe simply cannot afford grid bottlenecks halting its energy transition plans. Tyler Durden Thu, 12/22/2022 - 06:30.....»»

Category: dealsSource: nytDec 22nd, 2022

2 Stand-Outs as Uncertainties Loom Over Semiconductors

While secular growth prospects for the Semiconductor - General industry remain bright, the macroeconomic outlook continues to deteriorate. STM and SUOPY stand out as exceptions. Companies in the Semiconductor – General industry are at the forefront of the ongoing technological revolution based on HPC, AI, automated driving, IoT and so forth. These semiconductors also enable the cloud to function and help analyze the data into actionable insights that can be used by companies to operate more efficiently.  The pandemic led companies to ramp up technology investments in order to stay operational when it was unsafe for us to go to work or meet people. But this brought forward several years of investments, weakening the near-term outlook. With the financial tightening increasing the possibility of a recession in 2023, it has become notable harder to predict the impact on this industry.Additionally, supply chains are adjusting to increase reliability, build some inventory, reduce dependence on China, and onshore projects with national security implications. All these factors are contributing to increased uncertainty and as a result, the valuation is also looking rich. Longer-term trends continue to favor strong growth due to auto electrification, structural changes in industrial automation, data center strength, and increased adoption of the cloud, AI, IoT, etc. Despite these concerns, STMicroelectronics and Sumco Corp. may be worth considering.About the IndustryThe companies grouped under the Semiconductor – General category produce a broad range of semiconductor devices, both integrated and discrete, like microprocessors, graphics processors, embedded processors, chipsets, motherboards, wireless and wired connectivity products, DLPs and analog, serving multiple end markets. It includes companies like NVIDIA, Texas Instruments, Intel and STMicroelectronics.According to the latest data from the Semiconductor Industry Association (SIA), global semiconductor sales growth in the third quarter of 2022 declined 3% from the prior year, reaching $141 billion. Gartner forecasts semiconductor revenue to grow about 4% this year before declining 3.6% in the next. While macro concerns are impacting near-term performance, the long-term outlook is solid.Major Themes Shaping the IndustryThe long-term outlook for the industry remains robust because of its being on the building-block side of technology, which makes it crucial for the proliferation of the Internet and the ongoing digitization of every aspect of life. The short-term outlook appears bleak however. The pandemic has accelerated the move toward digitization, but it has created a lot of imbalances in demand and supply. The smartphone market for example (a primary application of semiconductors) is seeing issues on both the demand and the supply sides. Demand is affected by inflation while supply is affected by not only inflation but also geo-political tensions, China shutdowns and ongoing supply chain constraints. The other major chip consumer is the PC market, where the consumer and education segments remain soft following two years of very strong growth. With global economies engaged in financial tightening, there is the concern that demand could weaken significantly over the next year or so.  The good news is that some of the weakness in these traditional markets is being made good by strength in emerging areas like AI and machine learning, IoT, and automotive. ReportLinker expects the AI chip market to grow at a CAGR of 29.9% between 2022 and 2030. Driven by Internet connectivity across the developed and developing worlds and supportive technology such as sensor networks and AI adoption, the IoT market is also expected to grow steadily over the next few years. Future Market Insights expects the market to grow at a 5.3% CAGR between 2022 and 2032. Mordor Intelligence expects a stronger 14.7% CAGR between 2022 and 2027. Automotive electronics is another area of evolving needs with increasing electronics (including ADAS), safety enhancements and transition to electrified power trains being important drivers. Grand View Research estimates a 10.7% CAGR through 2025, which it attributes to awareness regarding energy-efficient lighting systems, as well as increasing sales of luxury vehicles that come fitted with navigation and infotainment systems. Automation and robotics, with increasing adoption across industrial operations, are other areas of growth. These strong end markets will drive continued demand for semiconductor components for years to come.Semiconductor supply chains are adjusting. Semiconductor supply chains have become increasingly efficient over the years. While this has brought down cost, the just-in-time model has made the supply chains relatively unreliable in case of external disruptions, as happened during the pandemic, or when China imposed its zero tolerance COVID shutdowns. This, along with the recently-imposed restraints on dealing with China has led semiconductor companies to diversify their supply chains and reduce their dependence on China. This is an ongoing process that will take several years. In the meantime, there is a growing concern that all the most important leading-edge chips are currently made in Taiwan, a country that China threatens to annex all the time. Since this has national security implications, there is an ongoing drive to onshore manufacturing. The $52 billion infusion from the CHIPS Act will help.Zacks Industry Rank Indicates Uncertain ProspectsThe Zacks Semiconductor-General industry is a stock group within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #90, which places it in the top 36% of the nearly 250 Zacks-classified industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates that near-term prospects aren’t too bright. Our research shows that the bottom 50% of the Zacks-ranked industries underperforms the top 50% by a factor of 1:2.An industry’s positioning in the top 50% of Zacks-ranked industries is normally because the earnings outlook for the constituent companies in aggregate is relatively strong. The opposite is true for stocks in the bottom 50% of industries. In this case, the aggregate earnings estimate for 2022 is down 27.8% from the year-ago level. The aggregate earnings estimate for 2023 is down 32.2% from last year. The numbers have deteriorated significantly since July.Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.Industry Lags on Stock Market PerformanceTracking the performance of the Zacks Semiconductor – General Industry over the past year shows that the industry has traded below than both the broader Zacks Computer and Technology Sector and the S&P 500 index since April of this year. As of now, it trails both the industry and the S&P 500.The industry lost 36.0% of its value over the past year compared to the 33.1% loss of the broader sector and the 17.2% loss of the S&P 500 index.One-Year Price PerformanceImage Source: Zacks Investment ResearchIndustry's Current ValuationOn the basis of forward 12-month price-to-earnings (P/E) ratio, which is a commonly used multiple for valuing semiconductor companies, we see that the industry is currently trading at 27.24X, which is above its median level of 23.47X over the past year. However, the S&P 500 trades at 17.15X while the sector trades at 20.23X. Therefore, the industry appears overvalued in all respects.Forward 12 Month Price-to-Earnings (P/E) RatioImage Source: Zacks Investment Research2 Stocks Worth Considering STMicroelectronics N.V. (STM): The company designs, develops, manufactures and markets a broad range of semiconductor integrated circuits and discrete devices used in a wide variety of microelectronic applications, including telecommunications systems, computer systems, consumer products, automotive products and industrial automation and control systems.STMicroelectronics is seeing strong demand across all segments with particular strength in the automotive and B2B industrial markets. Backlog is solid and covers six to eight quarters of planned capacity and the book-to-bill remains above 1. Therefore, demand is extremely strong and utilization is 100%.The strength in auto is coming from the ongoing electrification and digitalization, increased semiconductor content in legacy auto and replenishment across the automotive supply chain. Demand is currently stronger than available and planned capacity through 2023.Factory automation and infrastructure investment will continue in the industrial market, which is the other significant end market for STMicroelectronics. The increase in semiconductor content, digitalization of devices and systems, energy management and power efficiency improvements, and building and home control are the biggest drivers.The pricing strength that STM is seeing this year may not continue next year but mix is expected to remain a positive contributor to margins.STM beat the Zacks Consensus Estimate by 11.5% in the last quarter. In the last 60 days, the current year EPS estimate of this Zacks Rank #2 (Buy) stock increased 13 cents (3.4%).The shares of the company are down 21.6% over the past year, despite the spike after very strong third-quarter results.Price & Consensus: STMImage Source: Zacks Investment Research Sumco Corp. SUOPY: Tokyo-based Sumco manufactures and sells silicon wafers for the semiconductor industry primarily in Japan, the U.S., China, Taiwan and Korea.Consistent with industrywide trends, #3 (Hold) ranked Sumco is seeing strength in automotive, industrial and data center markets and softness in PC and consumer markets. As a result, management has said that 300mm and 200mm production will continue as planned while production for 150mm wafers will continue to be moderated in line with consumer market demand.At any rate, demand for state-of-the-art wafers is expected to remain strong. Therefore, capital investment will also continue as planned last year in new plant buildings, and in utility and manufacturing equipment. Additionally, AI-enabled productivity improvements will continue. Geopolitical conditions, US-China tensions and financial tightening in economies across the world have not had a material impact on results so far. But that situation can change quickly since semiconductor supply chains are still very efficient with relatively short lead times.There is no change in the Zacks Consensus Estimate for 2022 and 2023 in the last 90 days.The Zacks Rank #3 stock is down 11.4% in the past year.Price: SUOPYImage Source: Zacks Investment Research Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report STMicroelectronics N.V. (STM): Free Stock Analysis Report SUMCO (SUOPY): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksDec 20th, 2022

Hologic"s (HOLX) Panther Utilization Rises, Supply Issue Ails

Hologic (HOLX) registers procedural volumes return in GYN Surgical as well as acceleration from its new business lines. Hologic’s HOLX progress in the domestic and international markets, a strong pipeline of products and continued solid performance of the Molecular Diagnostics segment bolster confidence. Yet, supply-chain hurdles, chip shortage issues and severe FX impact deter growth. The stock currently carries a Zacks Rank #3 (Hold).Over the past year, Hologic has outperformed its industry. The stock has lost 1.8% compared with the industry’s 24.4% decline.Hologic delivered better-than-expected earnings for the fourth quarter of fiscal 2022. Both the company’s molecular diagnostics and surgical businesses grew strong in the quarter.Hologic’s global molecular diagnostics franchise grew 17% at CER, excluding revenues from COVID tests. This upside reflected the high utilization of the company’s expanded Panther installed base. The uptick in the molecular diagnostics business was broad-based and fueled by a combination of legacy and newer assays in the portfolio.Hologic, Inc. Price Hologic, Inc. price | Hologic, Inc. QuoteThe legacy STI business contributed growth in dollars while the newer assays, including the vaginitis panel, Amgen and the company’s virology portfolio lifted the growth rate. As for Panther placements, at the end of the fiscal fourth quarter, the company had nearly 3,250 Panthers placed globally. This favorably compares to the pre-COVID level as the company exited fiscal 2019 with about 1,700 Panthers in the field.Revenues at the GYN Surgical business rose 9% year over year organically and over 11%, including the Bolder acquisition. As anticipated, the COVID pressure on surgical business abated in the quarter, and the company registered procedural volumes return as well as acceleration from its new business lines. The major growth drivers of fiscal Q4 were MyoSure Fluent as well as Bolder and Acessa.Hologic currently expects the Surgical arm to deliver low double-digit growth in fiscal 2023. Similar to the last two quarters of fiscal 2022, the company believes MyoSure and Fluent along with Acessa and Bolder to continue to act as major contributors.On the flip side, in the fourth quarter of fiscal 2022, Hologic witnessed a decline in reported revenues compared to the year-ago fiscal period. The decline in the top line can be attributed to lower COVID assay sales and supply-chain challenges in the Breast Health business. Revenues in the Breast Health segment fell on a year-over-year basis due to the persistent shortage of semiconductor chips.Escalating operating costs and the contraction of both margins are worrying. In the fiscal fourth quarter, the company-provided adjusted gross margin contracted 690 basis points (bps) to 62.5%.According to the company, the decrease in the gross margin was primarily due to a year-over-year decline in COVID assay sales and lower capital equipment sales due to supply-chain challenges related to semiconductor chip shortages, which impacted its Breast Health business. The company’s adjusted operating margin was 27.9%, down 1460 bps.We also remain worried about the significant challenges Hologic faces owing to unfavorable foreign currency impact that has been affecting the company’s overall performance in the past few quarters.Key PicksA few better-ranked stocks in the broader medical space are ShockWave Medical, Inc. SWAV, Orthofix Medical Inc. OFIX and Merit Medical System MMSI.ShockWave Medical, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 33.1% for 2023. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.ShockWave Medical has outperformed its industry in the past year. SWAV has gained 35% against the industry’s 32.6% fall in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Merit Medical, currently carrying a Zacks Rank of 2, reported third-quarter 2022 adjusted EPS of 64 cents, which beat the Zacks Consensus Estimate by 20.8%. Revenues of $287.2 million outpaced the consensus mark by 5.2%.Merit Medical has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average being 25.4%.Orthofix Medical currently sporting a Zacks Rank of 1, reported third-quarter 2022 adjusted EPS of 13 cents, which beat the Zacks Consensus Estimate by a stupendous 550%. Revenues of $114 million outpaced the consensus mark by 2.7%.Orthofix Medical has an estimated next-year growth rate of 58.97%. OFIX’s earnings surpassed estimates in the trailing three quarters and missed in one, the average being 129.1%. Free Report Reveals How You Could Profit from the Growing Electric Vehicle Industry Globally, electric car sales continue their remarkable growth even after breaking records in 2021. High gas prices have fueled his demand, but so has evolving EV comfort, features and technology. So, the fervor for EVs will be around long after gas prices normalize. Not only are manufacturers seeing record-high profits, but producers of EV-related technology are raking in the dough as well. Do you know how to cash in?  If not, we have the perfect report for you – and it’s FREE! Today, don't miss your chance to download Zacks' top 5 stocks for the electric vehicle revolution at no cost and with no obligation.>>Send me my free report on the top 5 EV stocksWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report ORTHOFIX MEDICAL INC. (OFIX): Free Stock Analysis Report Hologic, Inc. (HOLX): Free Stock Analysis Report Merit Medical Systems, Inc. (MMSI): Free Stock Analysis Report ShockWave Medical, Inc. (SWAV): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksDec 13th, 2022

Kevin McCarthy"s oversight agenda will be "a recurring skit on SNL" if he makes MAGA cheerleaders Marjorie Taylor Greene and Lauren Boebert investigators: GOP strategists

Adding Reps. Greene and Boebert to his oversight crusade may help Kevin McCarthy score some political points, but strategists say he'll regret it. House Minority Leader Kevin McCarthy (top); Republican Rep. Lauren Boebert of Colorado (bottom left); Republican Rep. Marjorie Taylor Greene of Georgia (bottom right)Getty images House Minority Leader Kevin McCarthy has teed up a slew of investigations for the 118th Congress. Reps. Marjorie Taylor Greene and Lauren Boebert want in on the GOP oversight blitz. Neither of them "has demonstrated a capacity for leading an investigation," a GOP strategist said. Passing out plum committee assignments may get House Minority Leader Kevin McCarthy the votes he needs to realize his dream of becoming speaker, but some Republicans are worried about it backfiring on the party if the California lawmaker puts loose cannons like Reps. Marjorie Taylor Greene and Lauren Boebert in charge of his planned oversight blitz. Jason C. Roe, a former House aide and now GOP strategist, said placing Greene, of Georgia, or Boebert, of Colorado, on the House Oversight Committee in the 118th Congress — something Oversight Committee ranking member James Comer has said is already under discussion — would be "a disaster." —Lauren Boebert (@laurenboebert) November 17, 2022 "It might feed the MAGA crowd's political bloodthirst. But it will be a recurring skit on SNL and continue to poison Republicans with independents," Roe told Insider of the likely political blowback of assigning avid conspiracy theorists to work through the laundry list of investigations McCarthy has compiled over the past two years. A unnamed GOP lawmaker currently assigned to the oversight panel sounded similarly alarmed, telling The Washington Post that "if you want to be taken seriously, you have to treat the issue seriously.""The question is: Can Comer control some of the potential new members — like the woman from Georgia — that care less about substance and more about their Twitter profile?" the Oversight Committee member said of the need to keep congressional probes above board. Boebert and Greene did not immediately respond to requests for comment about their preferred committee assignments or their investigatory priorities for the coming year. McCarthy's office has repeatedly told Insider that the House GOP steering committee, which McCarthy leads, will handle assignments for the next Congress "at the appropriate time." Once House Republicans officially take control of the chamber on January 3, McCarthy and Comer plan to unleash the majority power's investigative powers on President Joe Biden, his scandal-plagued son Hunter Biden, outgoing Speaker Nancy Pelosi, Attorney General Merrick Garland, FBI director Chris Wray, and other perceived political enemies. Aaron Cutler, a former House GOP leadership aide and now partner at Hogan Lovells, urged House Republicans to avoid "focusing on the wrong things," and to cut bait if needed. That entails "knowing when to let something go or let it sort of peter out, as opposed to devoting lots of time and resources" to lost causes, Cutler said. Proving that Republicans are seriousLiz Mair, a former Republican National Committee aide and now public relations consultant, said picking the right investigative targets could help House Republicans spur interest in the other chamber. Mair estimates that Minority Leader Mitch McConnell and Sen. Ron Johnson would be the likeliest allies — assuming things are handled properly. Johnson serves as ranking member on the Senate Homeland Security and Governmental Affairs Committee Permanent Subcommittee on Investigations."I think Mitch would be supportive of looking at what happened with the Afghanistan withdrawal, some of the wasteful spending, some energy production stuff, and IRS politicization," she wrote in an email. She added that if rabid partisanship leads to good governance, even if by accident, that might still be worth it. "It is possible for people who want to do this stuff mainly for political reasons to actually put some genuine points on the board that aren't related to administration gigs or launchpads for bigger, better campaigns themselves," Mair told Insider.  Cutler, for his part, said he saw the potential for bipartisan and cross-chamber collaboration on China-related issues like supply chain problems, Uyghur labor abuse, and national security concerns. He said he could see a promised COVID-19 origins probe, which is expected to skewer retiring White House medical advisor Dr. Anthony Fauci, being a House-only project.  Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, speaks during a press briefing at the White House, Tuesday, November 22, 2022, in Washington.Patrick Semansky/AP PhotoWhether they catch on in the Democratic-controlled Senate or not, Cutler said House GOP leaders need to produce more than a slew of investigations if they hope to remain in power past 2024. "Leader McCarthy will also need to chart a policy path that sends a strong message to the American people that Republicans are serious about governing and leading," Cutler told Insider. Some of the legislative wins Cutler said he'd like to see the GOP notch in the new year include dealing with the debt ceiling, fully funding the government, reauthorizing the expiring Federal Aviation Administration and Farm Bill agreements, putting some guardrails in place for cryptocurrency, and "maybe some housing finance reform."  Dedicating the next election cycle to just beating up Hunter Biden rather than fulfilling campaign promises to fix the economy, southern border, and crime would ultimately doom the party, Roe warned."There needs to be a focus on issues that matter to Americans on a daily basis, not the pursuit of past injustices," he said, adding that "Republicans run the risk of alienating independents if they are merely defined by their investigations in the 2024 election." Keeping everyone busyCutler predicted that House leaders would ensure that any oversight efforts are conducted in a "serious and thoughtful" manner. "That said, there is the real prospect for overreach — both by virtue of the topics involved and some of the lawmakers that may want to become involved," he said. Tossing Greene and Boebert into the mix might seem automatically disqualifying, Mair said — unless distracting them with unfettered Biden bashing frees up McCarthy elsewhere."I don't think either of those members has demonstrated a capacity for leading an investigation," Mair said. "But it could be a great way to bog them down with something that gets them the headlines they want on a single issue and keeps them from causing problems in other areas."Rep. Lauren Boebert (R-CO), Rep. Matt Gaetz (R-FL) and Rep. Marjorie Taylor Greene (R-GA) attend a House Judiciary Committee hearing with testimony from U.S. Attorney General Merrick Garland at the U.S. Capitol on October 21, 2021 in Washington, DC.Michael Reynolds-Pool/Getty ImagesGiven that some sort of spectacle is probably unavoidable at this point, Roe urged House Republicans to tread carefully. "Any high-profile hearings will become a clickbait platform, so we can expect plenty of performative questioning," Roe said of the allure of controlling the spotlight. He added that putting in the time and effort to conduct a rock-solid investigation "could be a launching pad for lots of political ambitions." Producing an unimpeachable report might help others climb the ladder, Mair said. But she's fairly certain it won't do much for McCarthy's future.  "Kevin McCarthy has about the worst job in America right now. And I wouldn't put any money on him surviving until 2024 — no matter what he does," Mair said.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderDec 12th, 2022

Key Events In The Last Full Week Of The Year: All Eyes On CPI And The Fed

Key Events In The Last Full Week Of The Year: All Eyes On CPI And The Fed In keeping with the holiday spirit, and while previewing the main events of the week, the last full trading week of 2022, DB's Jim Reid writes that if he were to return to the spirit of financial market Christmases past, "this week would be about a client Xmas lunch Monday, client Xmas lunch Tuesday, team Xmas drinks Wednesday, firmwide office party on Thursday and mince pies on the trading floor on Friday." Like a decadent Craig David song. Instead it will be UK monthly GDP on Monday, a huge US CPI print on Tuesday, we will be watching UK CPI and the FOMC on Wednesday, and on Thursday (ECB and BoE meetings) and Friday (global flash PMIs) and Saturday, we chill on Sunday "but not watching the World Cup final as England are cruelly out." Reviewing the main highlights in more detail now. The Fed, the ECB and the BoE are all expected to downshift the pace of rate hikes to 50bps this week from 75bps at their last meetings. But first, US CPI... Given the very close proximity to the FOMC it clearly has the ability to change the tone of the message, the statement and the dot plots but is highly unlikely to change the headline 50bps hike. DB economists expect a softer print than consensus with +0.21% unrounded on headline (vs. +0.44% previously and +0.3% consensus) and +0.29% on core (vs. +0.27%, +0.3% consensus). This would leave headline dropping from 7.7% to 7.2% (7.3% consensus) and from 6.3% to 6.1% for core. So a big day for financial markets. In terms of more granularity around the Fed the following day, the dots will be fascinating. The likely 50bps hike will add to the 375bps seen so far this year but make a step down from a run of four successive 75bps moves. Economists think the recent Fedspeak justifies an increase in the median terminal dot to 4.9% but that there are compelling reasons for this to go to 5.1% - inline with the some more hawkish views for the terminal rate. This is due to financial conditions easing of late and no obvious near term signs that the labor market is slowing (aside from the mass tech sector layoffs of course). So all this will make February’s FOMC market pricing very interesting after the meeting. Economists also think the Fed will want to keep 50bps for the Feb meeting on the table but would at this stage prefer downshifting to 25bps. A 4.9% terminal dot might not give them as much optionality to do this as 5.1% would. Over in Europe, a separate DB economist team is calling for a +50bps hike and a hawkish communications strategy but do not rule out one more +75bps hike before the downshift happens. They expect the decision and messaging to be in line with their expectations of a 3% terminal rate, with no rate cuts before the middle of 2024 and c.20% balance sheet contraction by the end of next year, mainly via TLTRO repayments. The third major downshift will come from the BoE, also on Thursday. DB expects the central bank to hike by +50bps after last month's +75bps increase, the only one in the current hiking cycle so far, taking the Bank Rate to 3.5%. He also expects the decision to be accompanied by dovish messaging amidst concerns over potential over-tightening. The risks of sticky inflation and wage pressures, among other factors, are expected to lead to a 4.5% terminal rate by May of next year (+50bps in February and +25bps in March and May). But growth concerns pose downside risks to the expectations. After the major central bank decisions, we will get the flash PMIs for the US, Japan and Europe on Friday with US retail sales, industrial production the day before. Potentially adding to the volatility by the end of the week, will be triple witching on Friday when a record $3.7 trillion in options is set to expire. The other highlights are in the usual day-by-day calendar of events at the end but UK CPI on Wednesday might be another focus after the YoY October CPI reading showed 11.1%, a multi-decade high. One thing to watch today are surging short-term electricity prices in Europe, especially in the UK as sub-freezing temperatures and low winds lead to a fairly extreme near-term supply/demand imbalance. Day-by-day calendar of events Monday December 12 Data: US November monthly budget statement, UK October monthly GDP, industrial and manufacturing production, index of services, construction output, trade balance, Japan November machine tool orders Earnings: Oracle Tuesday December 13 Data: US November CPI, NFIB small business optimism, UK November payroll employees monthly change, October average weekly earnings, unemployment rate, Japan October core machine orders, Q4 Tankan large and small manufacturing index, Germany December ZEW survey, October current account balance, Eurozone December ZEW survey, Italy October industrial production, France Q3 total payrolls Central banks: BoE's financial stability report Wednesday December 14 Data: US November import price index, UK November RPI, CPI, October house price index, Japan November trade balance, October capacity utilization, Italy Q3 unemployment rate, Eurozone October industrial production, Canada October manufacturing sales Central banks: Fed's decision Earnings: Inditex Thursday December 15 Data: US December Philadelphia Fed business outlook, Empire manufacturing index, November retail sales, industrial and manufacturing production, capacity utilization, October business inventories, initial jobless claims, China November industrial production, retail sales, property investment, Japan October Tertiary industry index, Germany November wholesale price index, Italy October general government debt, France December business and manufacturing confidence, EU27 November new car registrations, Canada November housing starts, existing home sales Central banks: BoE decision, ECB decision Earnings: Adobe Friday December 16 Data: US, UK, Japan, Germany, France, Eurozone December PMIs, UK December GfK consumer confidence, November retail sales, Italy and Eurozone October trade balance, Canada October wholesale trade sales Central banks: ECB's Holzmann speaks Earnings: Accenture * * * Finally, looking at just the US, Goldman notes that the key economic data releases this week are the CPI report on Tuesday, and the retail sales and Philly Fed manufacturing index reports on Thursday. The December FOMC meeting is this week, with the release of the statement at 2:00 PM ET on Wednesday, followed by Chair Powell’s press conference at 2:30 PM. Monday, December 12 There are no major economic data releases scheduled. Tuesday, December 13 06:00 AM NFIB small business optimism, November (consensus 90.5, last 91.3) 08:30 AM CPI (mom), November (GS +0.20%, consensus +0.3%, last +0.4%); Core CPI (mom), November (GS +0.28%, consensus +0.3%, last +0.3%); CPI (yoy), November (GS +7.21%, consensus +7.3%, last +7.7%); Core CPI (yoy), November (GS +6.03%, consensus +6.1%, last +6.3%): We estimate a 0.28% increase in November core CPI (mom sa), which would lower the year-on-year rate by three tenths to 6.0%. Our forecast reflects a 3% decline in the used car category on the back of falling auction prices, as well a 1% drop in apparel prices reflecting increased holiday promotionality. We also assume a 1% pullback in hotel prices following last month’s jump. We assume a further moderation in new car inflation (+0.2% mom) as rebounding incentives offset the impact of price increases on 2023 models. We do not expect a rebound in the monthly pace of shelter inflation (we forecast rent +0.64% and OER +0.62%) as weakness in new rentals offsets the continued upward pressure on renewing leases. On the positive side, we assume a 2% rebound in airfares (mom sa). We also assume another gain in the car insurance category, as carriers push through price increases to offset higher repair and replacement costs. We estimate a 0.20% rise in headline CPI, reflecting lower gasoline but higher food prices. Wednesday, December 14 08:30 AM Import price index, November (consensus -0.5%, last -0.2%): Export price index, November (consensus -0.5%, last -0.3%) 02:00 PM FOMC statement, December 13-14 meeting: As discussed in our FOMC preview, aside from a widely expected 50bp rate hike, the main event at the December FOMC meeting is likely to be an increase in the projected peak for the funds rate in 2023. We expect the median dot to rise 50bp to a new peak of 5-5.25%, in line with our own forecast for Fed policy next year as we continue to expect three 25bp hikes in 2023 to a peak of 5-5.25%, though the risks are tilted toward 50bp in February. Aside from the increase in the terminal rate, we do not expect major changes at the December meeting. Thursday, December 15 08:30 AM Empire State manufacturing survey, December (consensus -0.5, last +4.5) 08:30 AM Retail sales, November (GS -0.4%, consensus -0.2%, last +1.3%); Retail sales ex-auto, November (GS -0.3%, consensus +0.2%, last +1.3%); Retail sales ex-auto & gas, November (GS -0.2%, consensus +0.1%, last +0.9%); Core retail sales, November (GS -0.2%, consensus -0.1%, last +0.7%): We estimate core retail sales declined 0.2% in November (ex-autos, gasoline, and building materials; mom sa) following the 0.7% rise in October. Our forecast reflects lackluster online spending growth during Black Friday weekend and Cyber Monday. We also believe the spending strength in October creates a high hurdle for incremental spending growth, especially because October spending benefitted from stimulus checks in California. We estimate a 0.4% decline in headline retail sales, reflecting a pullback in auto sales and gasoline prices. 08:30 AM Philadelphia Fed manufacturing index, December (GS -12.4, consensus -10.0, last -19.4): We estimate that the Philadelphia Fed manufacturing index rebounded seven points to -12.4 in December, remaining in contractionary territory due to weak European and East Asian industrial trends. 08:30 AM Initial jobless claims, week ended December 10 (GS 235k, consensus 232k, last 230k);  Continuing jobless claims, week ended December 3 (consensus 1,650k, last 1,671k): We estimate initial jobless claims increased to 235k in the week ended December 10. 09:15 AM Industrial production, November (GS flat, consensus +0.1%, last -0.1%); Manufacturing production, November (GS -0.1%, consensus -0.2%, last +0.1%); Capacity utilization, November (GS 79.7%, consensus 79.8%, last 79.9%): We estimate industrial production was flat in November, as strong electric utilities production is offset by weak auto production. We estimate capacity utilization edged down to 79.7%. 10:00 AM Business inventories, October (consensus +0.4%, last +0.4%) Friday, December 16 09:45 AM S&P Global US manufacturing PMI, December preliminary (consensus 47.9, last 47.7); S&P Global US services PMI, December preliminary (consensus 46.5, last 46.2) 12:00 PM San Francisco Fed President Daly (FOMC non-voter) speaks: San Francisco Fed President Mary Daly will discuss the economic outlook during a moderated discussion hosted by the American Enterprise Institute. A Q&A with audience is expected. Discussing the monetary policy outlook on November 21, Daly said, “Now we’re at a point where we are less clear on the destination. And so being more judicious in the pace to me seems like an appropriate thing to consider. But I don’t want to call it even because we have more information coming in…As we make decisions about further rate adjustments, it will be important to remain conscious of this gap between the federal funds rate and the tightening in financial markets. Ignoring it raises the chances of tightening too much.” She added, “Labor markets remain solid but are showing early signs of cooling. Job openings are down about 10 percent from their March high and job growth is slowing from its rapid pace last year.” Source: DB, Goldman, BofA Tyler Durden Mon, 12/12/2022 - 09:55.....»»

Category: worldSource: nytDec 12th, 2022