Mid-Morning Look: October 04, 2023

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Mid-Morning Look

Wednesday, October 04, 2023





DJ Industrials




S&P 500








Russell 2000






U.S. stocks are mixed, looking strong on the open as a weaker private payroll report from ADP (said U.S. private-sector employment rose by a tepid +89K in September below ests of +150K) raised hopes the Fed could hold rates steady at the November meeting. Treasury yields surged overnight as the 10-yr hit a fresh 16-year high above 4.88% but fell as low as 4.73% this morning after the ADP report. The Nonfarm payroll report for September is the next major catalyst on Friday. Note the S&P 500 index is now down 8 of the last 10-trading weeks, while the Dow Jones Industrial Average and Small Cap Russell 2000 turned negative for the year after yesterday’s pullback. The S&P 500 index (SPX) is also trading just above its 200-day moving average support of roughly 4,200. Energy (XLE) down over 3% as the biggest drag in the S&P given the pullback in oil prices with shares of PSX, OXY, VLO, DVN, SLB, all down over 3%. Early market leaders Discretionary (XLY) and Technology (XLY). Stocks pulled back after the strong open but held overnight lows as markets await more Fed speakers and data this week.


Economic Data

·     Jobs weaker: September ADP Jobs report at 89K, below the 150K consensus and 180K in August (which was revised from +177K). Next jobs data tomorrow in Weekly Jobless Claims then the September Nonfarm Payroll data on Friday.

·     ISM non-manufacturing for Sept 53.6, in-line with consensus and down from the Aug reading of 54.5; business activity index 58.8 vs August 57.3, prices paid index steady at 58.9 in Sept, new orders index 51.8 down from August 57.5 and employment index 53.4 in Sept vs August 54.7.

·     Factory orders rose 1.2% in August vs. est. +0.2%, while orders ex-transportation +1.4% vs July +0.9% (prev +0.8%); factory orders ex-defense +0.8% vs July -2.2%; Aug Durables orders revised to +0.1% from +0.2%; Aug nondurables orders +2.1% vs July +1.5%.

·     S&P Global September final services PMI at 50.1 (vs flash 50.2).






WTI Crude















10-Year Note





Sector Movers Today

·     In Solar: Truist downgraded solar installers RUN and NOVA to Hold from Buy saying following the recent broad-based sell-off in Sustainability equities under renewed investor concerns on a “higher-for-longer” rate environment, they re-evaluate the trade-off of NT headwinds vs. LT value creation. Recommend investors instead buy utility-scale/resi suppliers including ARRY, NXT, SEDG, GNRC (all Buy rated). FTCI said it has been selected by Sandhills Energy to supply its Pioneer 1P solar tracker solution for a 225-megawatt project near Columbus, Nebraska.

·     The energy sector leading lower (APA, OXY, MRO, PXD, VLO, SLB) as WTI crude falls around 3% to $86.70 per barrel as prices remain under pressure from demand fears driven by macroeconomic headwinds (prices down from highs above $95 just 2-weeks ago). Pledges today by Saudi Arabia and Russia to continue crude output cuts to the end of 2023 were offset by demand fears stemming from macroeconomic headwinds.

·     Defense stocks (GD, LMT, NOC, RTX) weaker Kevin McCarthy, a Republican, was voted out (216-to-210 vote) as the Speaker of the US House of Representatives. Hardline Republicans were angered by McCarthy’s willingness to fund Ukraine’s war while arguing that the money could have been better spent to protect the southern border and restore law and order in imploding major US cities. The historic ouster of the speaker has weighed on defense stocks.

·     In Chemicals: LYB was upgraded to Buy at Citigroup and named LIN, APD, PPG new top picks in chemicals preview into Q3 earnings; keeping 3Q23 EPS estimates mostly flat and taking down FY23 EPS 2% on average. Said the prevailing narrative of softer supply and weak primary demand across the broader chemicals space persisted into 3Q23. RPM posted higher Q1 sales, lifted by price increases and strong demand from infrastructure and reshoring projects. In TiO2 sector: Barclays lowered estimates and targets for Titanium Oxide companies following meetings with industry consultant TiPMC and recent conversations with producers. Firm said TROX and CC remain best-positioned to ride out the down-cycle, while thinks KRO has structural headwinds from Chinese exports (CC to $31 from $40, KRO $6 from $7, and TROX $15 from $16).



·     FLR +3%; upgraded from Neutral to Buy at UBS and raised tgt to $47 from $35 as thinks investors underappreciate FLR’s potential as it continues its turnaround.

·     INTC +1%; after announcing plans to do an IPO for its Programmable Solutions Group (PSG) unit from its core businesses.

·     LAC +21%; announced separation to form two separate companies, with the other, Lithium Americas (Argentina) LAAC, which was initiated at TD Cowen with an Outperform rating and $14.

·     RPM +6%; posted higher Q1 sales, lifted by price increases and strong demand from infrastructure and reshoring projects.

·     TSLA +2%; as large cap tech, mega cap helping mkts today (AMZN, GOOGL, MSFT).



·     AAPL ; downgraded to Sector Weight from Overweight at Keybanc on valuation, soft US iPhone sales (citing CC data) and overaggressive int’l growth expectations.

·     ATEN -25%; after guiding Q3 revs to be between $56.5M-$58.5M, below consensus of $74.65M and Q4 revs $70M-$80M saying deals they expected to close at the end of the quarter were delayed into future periods.

·     BGS -13%; downgraded from Neutral to Underweight at Piper and tgt to $8 from $14 saying its US measured retail sales trends are running behind expectations for 3Q23, as measured retail sales declines continue to accelerate.

·     CALM -7%; following Q1 EPS $0.02 vs est. $0.33 on sales $459.3Mm vs est. $479.52Mm; Net average selling price for specialty eggs increased 8.4% quarter-over-quarter, but conventional egg net average selling price per dozen was $1.241 for Q1 compared with $2.368 y/y.

·     GOLD -2%; after saying earlier it will invest nearly $2B to increase copper production at its Lumwana mine in Zambia.

·     HELE -8%; reported top and bottom line beat for Q2 (EPS $1.74/$491.6M vs. est. $1.64/$485M and reiterates full year outlook for this fiscal year but reported a 10% drop in sales in its Beauty & Wellness business dragging company-wide sales down by nearly 6%.

·     PODD -5%; said CFO Wayde McMillan has decided to step down from his role effective Oct 23 and join 3M’s Healthcare business (insulin group down again overall DXCM, TNDM).

·     PSX -4%; among top decliners in the energy sector in the S&P as oil prices tumble; shares of APA, SLB, DVN, OXY, VLO, MRO, MPC all down 3% or more.

·     RUN -4%; Truist downgraded solar installers RUN and NOVA to Hold from Buy.


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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