Mid-Morning Look: July 05, 2022

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Mid-Morning Look

Tuesday, July 05, 2022






DJ Industrials




S&P 500








Russell 2000






U.S. stocks drop sharply overnight, giving back all of Friday’s gains as the ongoing weakness in global equity markets continue (underlying indexes capped their 11th decline in 13 weeks last Friday) amid fears of an economic slowdown and a recession, impacting stocks, bond, commodity, and currency markets. Stocks have pared losses in the early going, but still decisively negative as market breadth notably weak with decliners leading advancers by a 4 to margin. Stock markets looked promising overnight with gains in Asia on better Caixin Manufacturing data (service PMI data for June at 54.5 vs 41.4 last, and 49.6 expected), but European markets tumbled. All eyes are on the currency market where the Euro dropped below 1.03 to its lowest level vs. the buck since 2003 after a handful of PMI misses. Commodity markets tumble on recession fears as WT crude falls over 5% below $103 per barrel and nat gas prices plunge, while copper hits 17-month lows, weighing heavily on related stocks (XOM, FCX, X, AA). Citigroup said today that crude oil could collapse to $65 per barrel by the end of this year and slump to $45 by end-2023 if a demand-crippling recession hits. On a positive note, AAA‘s average national gas price has declined 21 days in a row in the longest losing streak since April 2020. The other market factor remains treasury yields as the spread between 2- and 10-year yields briefly fell below zero for the first time since June 14, driven by a bigger decline in the 10-year rate than in the 2-year yield. An inversion of the 2s10s spread is considered an indicator of a recession, albeit with a lag. The U.S. dollar index surged to the highest in 20 years. Investors are now waiting for minutes from the Fed’s meeting in June on Wednesday as they brace for another 75-basis point hike at the end of the month.


Economic Data

·     Factory orders for May rise +1.6%, topping the consensus +0.5% and above prior April +0.7% while U.S. May factory orders ex-transportation +1.7% vs April +0.6%

·     Durables Goods orders for May revised to +0.8% from +0.7% and May nondurables orders +2.3% pct vs April +0.9%. U.S. May nondefense cap orders ex-aircraft revised to +0.6% from +0.5%; May shipments unrevised at +0.8%







WTI Crude















10-Year Note





Sector Movers Today

·     Retailers; CROX upgraded to Buy from Hold with $75 tgt on encouraging checks and saying trading at 5x our current year EPS estimate and sporting a 16% FCF yield, they are willing to step in despite the dodgy macro environment; AZO, ORLY are among good buys in auto parts space, according to Barron’s saying auto parts retailers have outpaced the market for much of the pandemic, and current economic uncertainty should keep the group in the fast lane

·     Auto sector; TSLA reported Q2 deliveries of 254,695, with 4% subject to operating lease accounting, and production of 258,580 vehicles; the delivery of 254,695 is 17.9% lower than 1Q22 deliveries of 310,048; Ford (F) June us sales 152,262, up 31.5% Y/Y on strong f-series and SUV mix; f-150 lightning best-selling electric truck in June as EV vehicle sales jump 77%; Lincoln SUV sales up 44%; CVNA tgt cut to $50 from $90 at Wedbush noting shares tumbled -31% last week as investors renewed liquidity concerns since CVNA did not complete a non-prime ABS transaction in 2Q22 that ended on June 30; CHPT filed for mixed shelf of up to $1 bln

·     E&P and Majors; SHEL said it has been selected by QatarEnergy to participate in the North Field East liquefied natural gas expansion project in Qatar. The U.K. energy giant said it will hold a 25% stake in a JV which will own 25% of the project, including four LNG trains with a combined liquefaction capacity of 32 million metric tons a year; NFE said it formed a new liquefied natural gas joint venture with buyout firm APO and sold 11 vessels and storage units to the JV for $2B. New Fortress, which will own 20% of the JV and get $1.1B in proceeds from the LNG infrastructure sale, will also charter ten of the 11 vessels included in the sale for up to 20-yrs; REI to buy Permian assets of privately held Stronghold Energy in deal valued at $465M, with $200M in cash; AR upgraded to buy from hold at Truist Securities saying that a recent selloff in the oil company is an opportune entry point given gas and natural gas liquids are likely to remain strong



·     AIG -3%; weakness in insurance (PRU, LNC, PFG) amid declines yields, which is also hitting banks

·     COWN +21%; TD is considering a deal to acquire COWN according to a report late Friday afternoon from Bloomberg citing people familiar with the matter https://bloom.bg/3Rb95EU

·     CROX +8%; upgraded to Buy from Hold with $75 tgt on encouraging checks and saying trading at 5x our current year EPS estimate and sporting a 16% FCF yield, they are willing to step in despite the dodgy macro environment

·     DYN +11%; said the FDA has lifted clinical hold and cleared its application to start trial of its experimental drug DYNE-251 in patients with DMD

·     LEN +1%, along with BZH as homebuilder benefit from the decline in rates/yields

·     MRNA +4%; outperforms in vaccine space as biotech (XBI) strong



·     FCX -8%; as copper hits 17-month lows – recession fears impacting commodity markets heavily today with oil, nat gas, metals are sharply lower (physical and stocks)

·     HPQ -4%; downgraded to In-Line from Outperform at Evercore/ISI saying PC headwinds could get more severe as PC units in aggregate could end up closer to 300M by year-end (vs. current expectations around 325-330M) and softness could be broader & beyond consumer markets

·     TSLA -3%; said it delivered 254,695 vehicles in the second quarter, down about 18% from the first quarter; Tesla produced 258,580 vehicles in the April-June period.

·     WPP -9%; Bank America reiterates Underperform ratings on all ad agencies and cut tgts 30-35% for WPP, PUB, OMC, IPG, while downgrading JCDecaux to Underperform given high sensitivity to ad growth


Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.

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