Mid-Morning Look: July 06, 2023

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Mid-Morning Look

Thursday, July 06, 2023






DJ Industrials




S&P 500








Russell 2000






U.S. stocks are falling on broad based selling pressure, the first meaningful stock market pullback in weeks as Treasury yields spike, pushed higher after strong labor market data raises bets on further rate hikes by the Fed. The 2-Year Treasury yield is back over 5% (highest since 2007) and the 10-Year is back over 4% with big moves in yields across the curve as investors now see a nearly 95% chance of a 25-basis-point hike in July after last month’s pause, according to CME‘s FedWatch tool and rate futures raise odds of November hike to 46% post-data vs 36% the day before. The Fed has been hawkish for months, but yields have been calm and stocks surging on no fear the Fed will follow through. But given the ADP data today, and better ISM Services data (ahead of the nonfarm payrolls on Friday), investors are taking some profits as the S&P 500 (SPX) drops back below 4,400. The Smallcap Russell 2000 underperforms, down over 2%, given sharp declines in Financials and Energy. NYSE breadth firmly favors decliners early on, with more than 10:1 ratio. Gold prices -0.85% at $1,910 an ounce given the strong ADP jobs report, bounce in Treasury yields. All eleven S&P sectors are in the red, with biggest drops in Consumer Discretionary, Energy, REITs, Utilities, and Materials.


Economic Data

·     The June ADP private payrolls report showed a jump of +497K new jobs, well above the consensus for +228K and vs. +267K in May (revised from +278K). The report comes a day before the monthly Nonfarm payroll report Friday at 8:30 AM

·     Weekly Jobless Claims rose to 248K vs. 236K the prior week (est. 245K) as the 4-week moving average fell to 253,250 from 256,750 prior week and continued claims fell to 1.720M from 1.733M prior and insured unemployment rate unchanged at 1.2% in latest week.

·     The International Trade in Goods and Services deficit for May narrowed to (-$69.0B) from (-$74.4B) in April and compared to (-$69.0B) estimate. This reflected a decrease in the goods deficit of $4.8B to $91.3B and an increase in the services surplus of $0.7B to $22.3B. Exports for May were $247.10B vs. $249.00B and Imports were $316.10B vs. $323.60B.

·     ISM non-manufacturing for May shows PMI 53.9 in June, up from 50.3 in May and vs. 51.0 estimate while business activity index 59.2 in June vs 51.5 in May, prices paid index 54.1 in June vs 56.2 in May, new orders index 55.5 in June vs 52.9 in May, and employment index 53.1 in June vs 49.2 in May.

·     US JOLTS Job Openings Actual 9.824M below consensus 9.885M and prior 10.103M.

·     S&P Global June final composite PMI at 53.2 (vs flash 53.0) and S&P Global June final services PMI at 54.4 (vs flash 54.1).







WTI Crude















10-Year Note





Sector Movers Today

·     In Solar: CSIQ upgraded from Neutral to Buy at UBS and raise tgt to $50 saying the firms SOTP analysis indicates the value of CSIQ’s holdings in CSI Solar A-Shares is likely underappreciated by the market and firm sees upside potential driven by a narrowing of the valuation Gap. Susquehanna updates ests into Q2 for ENPH, NOVA, RUN, SEDG, SPWR saying recent industry checks and conversations with installers and equipment providers suggest softening demand across the U.S. market. Overall, remains Positive on the longer-term prospects for the solar sector but are tempering its growth expectations, and thus, lower price targets across the board.

·     In Housing: In roofing: BECN ($85 tgt) and OC ($135 tgt) ests and tgt raised at Truist citing notable 2Q23 storm damage that will help shipments; a much more benign downturn in consumer spending on durable goods that will result in limited price pressure than it originally thought. In Building Materials: JP Morgan downgraded VMC & MLM to Neutral from Overweight and cut the ratings on SUM & EXP to Underweight from Neutral, lowering its expectations for the sector given limited room for upside after the recent rally (+15% 1M and +33% YTD), which has left valuations stretched and trading above their 5Y + 1SD average.

·     In Autos: BMO Capital noted U.S. light vehicle SAAR was 15.7mm, slightly below ests of 15.8mm, but continues the strong year-to-date growth trend. The firm views this as positive for auto parts companies as new vehicle supply continues to improve and despite aggressive rate hikes by the Fed, vehicle demand has not really weakened so far. Separately in suppliers, Bank America upgraded shares of APTV and BWA to Buy from Neutral. Ford (F) said Q2 total U.S. vehicles sales 531,662 units vs 483,688 units​ as Mustang Mach-E sales pace quickened at Q2-end with sales in June up 110% vs. last June and overall EV sales were up 35.5% in June.



·     BWA +1%; Bank America upgraded shares of auto suppliers APTV and BWA to Buy from Neutral, taking a more constructive view on suppliers given improving industry dynamics.

·     CRBU +37%; after saying PFE made a $25M equity investment in the company by purchasing 4,690,431 of common shares at a price of $5.33/share.

·     GENI +10%; said it was extending an exclusive partnership with the NFL to distribute live game data and statistics to media and betting markets until the 2027-28 season; also gains the exclusive rights to distribute the NFL’s watch and bet live video feeds to sportsbooks.

·     KDP +1%; upgraded from Equal Weight to Overweight at Morgan Stanley with $36 tgt saying they are using an opportune entry point after pronounced stock underperformance.

·     SG +12%; upgraded from Neutral to Buy at Bank America and raised tgt to $17 from $9 citing increasing foot traffic, prospect that same-store sales growth will see sustained momentum, and long-term plans to automate operations.



·     AFRM -14%; downgraded from Neutral to Underweight at Piper with $11 tgt saying they expect persistently higher rates to pressure operating margins as AFRM needs to hold more loans on balance sheet.

·     APLD -20%; mentioned negatively by two short sellers today (BearCave and Wolfpack).

·     ASLN -27%; after released new data from a clinical study of eblasakimab, an atopic dermatitis treatment.

·     CCL -4%; seeing pullback in some of the most recent winners in June on profit taking.

·     CMA -4%; broad-based weakness in regional banks with the KRE -3%.

·     XOM -2%; after saying lower natural gas prices and refining margins will reduce Q2 earnings by about $4 billion compared with the previous three months.


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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