Day Traders Diary

12/19/22

The markets are choppy this Monday after the major averages posted their second straight week of losses for the first time since September as investors weighed recession fears. The Dow Jones Industrial Average shed 15 points, or 0.05%. The S&P 500 is down 13 points while the Nasdaq is down 88 points.

The moves followed another down week for stocks after the Federal Reserve delivered a 50 basis point short-term interest rate hike and signaled higher-for-longer rates. Recession fears mounted as the central bank upped its forecast for future hikes above previous expectations, saying that it now expects to hike rates to 5.1%.

"As we near the end of December, investors are still waiting on that Santa Claus Rally, with stocks coming off back-to-back down weeks for the first time since September," said Chris Larkin, managing director of trading at E*Trade from Morgan Stanley. "Data showing inflation cooling may have given the market a short-lived boost, but the Fed standing firm with Powell driving home the point that rates could remain elevated for quite a while likely grounded some investors."

Stocks are set to round out a dismal monthly performance in December. On Friday, the Dow fell 281.76 points, or 0.85%. The 30-stock index shed 1.66% for the week, bringing its monthly losses to 4.83%. The S&P 500 dropped 1.11% and tumbled 2.08% for the week, upping its monthly declines to 5.58%. The Nasdaq Composite slumped 0.97% on Friday and 2.72% for the week. It's down 6.65% this month.

The National Association of Home Builders survey, which gauges monthly sentiment, is due out Monday.

Investors will also be watching for a few earnings reports due later in the week. FedEx and Nike are both scheduled to report earnings results on Tuesday after market close. As recession fears mount, earnings results will become more of a focus.

"Rates and inflation may have peaked but we see that as a warning sign for profitability, a reality we believe is still underappreciated but can no longer be ignored," wrote Michael Wilson, equity analyst at Morgan Stanley, in a Monday note.

MoffettNathanson downgraded AT&T to underperform from market perform, saying the stock looks overvalued heading into 2023.

"Over the period of AT&T's sharp bounce, free cash flow expectations for the company have only worsened," Craig Moffett wrote. "And while we expect them to provide guidance suggesting that FCF will rise YoY in 2023, we're skeptical about whether it actually will."

Despite two-years of outperformance, Piper Sander is still constructive on the energy space and has named Exxon Mobil

 a top pick among U.S. integrated oil companies."XOM remains the globe's largest refiner, representing ~20% of global earnings, and in particular, has more exposure to US refining than many of its global peers," analyst Ryan Todd wrote in a note Monday.

"We see significant upside to current Street estimates for 2023 refining … our US independent Refiners earnings are ~100% of consensus, and expect positive revisions through 2023 to be a material source of positive revisions for the IOCs."

Todd slightly lowered his price target to $127 from $131, which still implies 21% upside from Friday's close. Exxon Mobil has surged more than 71% so far this year.

These are the stocks that are making the biggest moves in premarket trading Monday.

Aerojet Rocketdyne (AJRD) – Aerojet Rocketdyne rose 2% after it agreed to be bought by rival defense contractor L3Harris Technologies (LHX) for $4.7 billion, or $58 per share in cash. L3Harris fell 1.7%.

Mesa Air Group (MESA) – Mesa shares surged 6.8% in premarket trading after the airline's announced that it is finalizing a deal to run regional flights for United Airlines. It is also ending its partnership with American Airlines (AAL).

Sinclair Broadcast Group (SBGI) – Sinclair fell 4.4% in premarket trading after the New York Post reported that bankruptcy is likely for Sinclair's Diamond Sports Group, which operates 21 regional sports networks.

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