2023.03.13 3,400 to be the support

According to the Mortgage Bankers Association (MBA), mortgage applications increased 7.4% WoW, and the 30-year fixed-rate mortgages increased to 6.79% from 6.71% during the week, the highest level since November 2022. Mortgage refinancing applications rose 9% WoW but decreased 76% YoY. Compared to last year, the housing inventory has increased, and the speed of home sales is relatively low. According to Manheim data, the used car prices in the US increased 4.3% MoM in February, showing the largest Feb increase since 2009. Per-owned cars rapid price rise again has put pressure on inflation.

The US. Department of Labor announced applications for jobless claims in the US. For the week ending March 4, it rose to 211,000 from 190,000 the previous week, the highest level in nearly 10 weeks, the largest MoM increase since November 2021, also higher than the expected 195,000. Federal Reserve Chairman Jerome Powell emphasized that, with the decline in energy prices and easing of supply chain bottlenecks, US personal consumption expenditure prices have seen a noticeable drop from the peak of 2022 but inflation remains far above the Fed’s long-term target of 2%. Recent employment, consumption and inflation data suggest that the Fed may continue its tight monetary policy. It is likely to impose a 50-basis point rate hike in March, together with recent liquidity issues in the US banking sector. We expect S&P 500 index to further correct and trade between 3,400 points and 4,200 points.

The overall employment data in US has been better than expected. The inflation data shows that the overall consumer confidence in the market is strong, we suggest investors to pay attention to the consumption sector.

Lululemon (LULU.US) is a well-known fashion sports brand from Canada, with a high brand awareness in the fields of yoga, fitness and other sports apparel, occupying a leading position in the sports and leisure wear market. In 3Q22, the company’s revenue was US$1.857 bn, +28% YoY, the gross profit was US$1 bn, +25% YoY, and the net profit was US$255 mn, +36% YoY. The gross profit margin was 55.9%.

Lululemon is a company that has initially focused on the female sports and yoga market, but in recent years has expanded its product offerings to include sportswear such as t-shirts, jackets, hoodies, and sweatshirts for both men and women. In 9M22, the company’s female product revenue increased by 24.3% YoY, while male product revenue increased by 30.2%. The company’s non-female products accounted for 34.8% of the revenue in the third quarter, +2.7% compared with 2021. Based on the company’s strong brand competitiveness, and its innovation and community operations, it is recommended to buy at US$288.0, look at US$323.0, and stop losses at US$271.0.

Ross Department Store (ROST.US) is the largest affordable clothing and home furnishing chain brand in the U.S., providing customers with clothing, accessories, footwear and home fashion products. Rev in 2022 was US$18.7bn, -1.1% YoY, net profit was 1.5bn, -11.8% YoY.

Mgmt has claimed that the company aims to open 100 new stores in 2023, including about 75 Ross Dress for Less stores and about 25 dd’s DISCOUNTS stores. Currently the company operates a total of 1,704 Ross Dress for Less stores and 330 dd’s DISCOUNTS stores in 40 states of the U.S, the District of Columbia and Guam. In the long term, the company expects that Ross Dress for Less will increase to 2,900 stores, and dd’s Discounts will increase to 700 stores. The company’s EPS in 2022 was US$4.38, and mgmt estimated EPS to reach US$4.65-4.95 in 2023E. It is recommended to buy at US$100.0, look at US$113.0, and stop loss at US$94.0.