Mid-Morning Look: October 06, 2022

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Mid-Morning Look

Thursday, October 06, 2022






DJ Industrials




S&P 500








Russell 2000






U.S. stocks rebound initially following overnight weakness, getting a boost ahead of tomorrows nonfarm payroll report for September after a few data points showed weakening payroll figures today and ahead of a slew of Fed speakers today (Evans, Mester, Waller, Cook). However, prices quickly reversed to the downside, taking out overnight lows as the dollar jumps and Treasury yields spike yet again after a brief pullback this week. The Fed continues to set the bar low for a Fed “pivot” and stay the course of “higher” and “faster” regarding interest rate hikes to slow inflation. We saw last night the first modestly dovish comments from a Fed speaker as Fed’s Bostic emphasized the lag between policy tightening and economic changes (says inflation the last part to react), but overall, the message from the Fed remains “hawkish”. Weaker economic data this morning as jobless claims rise, and Challenger layoffs rise 46% from last month – ahead of tomorrows nonfarm payroll report. Markets also await the start of earnings season, unofficially kicking off next Friday starting with the big banks. Much like yesterday morning, energy the only S&P sector in the green, while utilities the biggest sector decliner (-2%).


Economic Data

·     Challenger layoff data showed U.S.-based employers announced 29,989 cuts in September, a 46.4% increase from the 20,485 cuts announced in August. It is 67.6% higher than the 17,898 cuts announced in the same month last year

·     Weekly Jobless Claims rose to 219K in latest week from 193K prior, and above consensus 203K; the 4-week moving average rose to 206,500 from 206,250 prior; continued claims rose to 1.361M from 1.346 mln prior week and US insured unemployment rate rose to 1.0% from 0.9%







WTI Crude















10-Year Note





Sector Movers Today

·     Auto sector: Ford (F) said it was raising the price of its F-150 Lightning Pro for the 2023-year model by nearly 11% to $51,974 compared to $46,974 earlier; in auto dealers, JPMorgan upgraded shares of GPI and SAH, while downgraded AN saying the setup for franchise dealers into 3Q22 earnings is the most negative they have encountered since the pandemic, fueled further by KMX results – they expect results to come in-line with consensus on net with the highest upside at GPI, followed by PAG, and least at LAD and NIO price targets were trimmed by Mizuho in the wake of the EV’s announcing production and delivery numbers

·     Consumer Staples: in beverages, STZ reported Q3 results above consensus with EPS/revs $3.17/$2.66B vs. est. $2.81/$2.51B and raised the lower end of FY23 comp basis EPS outlook to between $11.20-$11.60 from prior $11.20-$11.50; in food, MKC Q3 adj EPS $0.69 above ests and revs in-line at $1.6B while reaffirms year profit and sales outlook; CAG Q1 adj EPS $0.57 vs. est. $0.52 as sales rose 9.5% y/y to $2.9B above ests $2.84B, benefiting from price hikes even as consumer demand wanes – co said higher average selling prices boosted organic sales by 14.3%, offsetting a 4.6% decline in sales volumes

·     REITs: BMO Capital updated models across REIT coverage to incorporate the recent meaningful move higher in rates, reducing earnings (’23 AFFO -2.1%), NAVs (-11.4%) & DCFs (-12.5%) and in stock specific news, said continue to generally favor higher-quality names as per top pick list, which include: HST, IRT, PSA, REG, VTR (adding: VTR removing DLR, WELL) while downgraded EQR and GMRE to Market Perform; Credit Suisse lowered tgts and ests in data center REITs EQIX (to $571 from $716) and DLR (to $98 from $146) while RBC Capital also lowered tgts for DLR (to $122 from $151) and EQIX (to $668 from $820)

·     Energy stock movers: energy was the broad outperformer this week as oil prices jumped 10% the first 3-days of the week on OPEC+ production cut headlines; in news today, SHEL said refining margins look to drop to $15 a barrel compared with $28 a barrel in the previous three months, and indicative margins for chemicals dropped to negative $27 per tonne versus a positive $86 in Q2; in research, OII downgraded to MP from OP at Raymond James and tgt to $10 from $15 as believe OII is more of a defensive name given the diversified nature of its businesses; Barclay’s upgraded FTI to overweight in equipment and RIG to Overweight in drilling (tgt raised to $5) while downgraded shares of CHK, OII and WHD



·     COMP +15%; after Business Insider reported Vista Equity Partners is considering a deal to take Compass private; though Bloomberg reported Compass denied reports of takeover interest https://bit.ly/3CfAJtW

·     COST +2%; reported total and U.S. core September comp growth of 8.6% and 8.0%, respectively, compared to consensus of 7.2% and 7.3%

·     PINS +4%; upgraded to Buy from Neutral at Goldman Sachs and raised tgt to $31 from $24 saying they see a more positive risk/reward skew at current levels

·     PRVB +26%; said it has entered into a co-promotion agreement with SNY ahead of the anticipated U.S. launch of Provention’s diabetes drug candidate teplizumab

·     TTWO +4%; upgraded to Buy from Neutral at Goldman Sachs and raise tgt to $165 from $131 saying the building long term industry themes should emerge in 2023/2024



·     ANGO -16%; posted Q1 EPS and revs slightly below consensus estimates while reaffirms its year outlooks

·     DLR -4%; data center REIT ests and tgts cut today: Credit Suisse lowered tgts and ests in data center REITs EQIX (to $571 from $716) and DLR (to $98 from $146) while RBC Capital also lowered tgts for DLR (to $122 from $151) and EQIX (to $668 from $820)

·     IP -2%; along with weakness in PKG, WRK as Fastmarkets RISI reported U.S. average Old Corrugated Containers (OCC) pricing for October at $38 per ton represents a 51% decline m/m and a 77% decline y/y and said since July, prices have collapsed and declined 70%.

·     ITGR -9%; reduced its full-year 2022 outlook for revenue, operating income, and EPS due to supply-chain challenge

·     MT -5%; downgraded to Neutral at UBS noting the co has accelerated the rate of blast furnace closures in Europe ahead of expectations, while cost inflation has been far higher than expected

·     RSG -4%; Deutsche Bank said views declining OCC pricing for October clear negative for Waste group given lowered revenue from the sale of recycled fiber (WCN, WM also weak).

·     SHEL -5%; after saying refining margins look to drop to $15 a barrel compared with $28 a barrel in the previous three months, and indicative margins for chemicals dropped to negative $27 per tonne versus a positive $86 in Q2

·     SI -8%; double downgrade to Underweight from Overweight at Wells Fargo and cut tgt to $70 from $115 saying the growth outlook for SI as a pure-play crypto banking solution is significantly limited in the current environment

·     SMTC -9%; announced proposed private offering of $250M notes


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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