Mid-Morning Look: October 18, 2023

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Mid-Morning Look

Wednesday, October 18, 2023





DJ Industrials




S&P 500








Russell 2000






Escalating Middle East tensions, stubbornly high Treasury yields and mixed quarterly results in key S&P sectors pressuring U.S. stocks to start the trading day. Stocks are broadly lower as growing tensions in the Middle East dented risk sentiment, while U.S. President Joe Biden arrived in Israel, pledged solidarity in its war against Hamas and backed its account that a blast that killed huge numbers of Palestinians at a Gaza hospital appeared to have been caused not by Israel but by its foes. Demand for safe-haven assets sent gold prices to a more than one-month high, up over 1%, while the U.S. dollar also rises. Treasury yields continue to march higher with the 10-year approaching 4.9% at highs after data showed U.S. single-family homebuilding rebounded sharply in September. In sector news, Philly semi-index (SOX) -2% at 3,400 lows (yesterday low was 3,393.49), falling a 2nd day after the White House tightened restrictions on China’s ability to buy advanced semiconductors. Dow Transports fell as much as -400 points behind the weakness in UAL and JBHT post earnings, back below its 200-day MA support of 14,830. Energy was the early S&P sector leader behind the bounce in oil and Consumer Staples’ rise helped by PG results. Gold rose to a more than one-month peak around $1,970 an ounce as the escalating conflict in the Middle East sent investors flocking towards the safe-haven metal. Focus today will be on a handful of Fed speakers, the Fed Beige Book, and earnings results after the close from tesla, Netflix, and a handful of other key drivers.


Economic Data

·     Housing Starts for September rose +7.0% to 1.358M vs. 1.394M expected and 1.269M prior (revised from 1.283M) while Building permits declined -4.4% to 1.473M vs. 1.450M expected and 1.541M prior (revised from 1.543M).






WTI Crude















10-Year Note





Sector Movers Today

·     In Chemicals: at Bank America, DOW both upgraded to Neutral from Underperform, HUN upgraded to Buy and WLK cut to Underperform in PetChem saying petrochemical sentiment index bottomed in July but has not yet flipped to a bullish outlook. In Downstream Chemicals, given more potential upside in the upstream names, trimmed valuation multiples on ECL, SHW and cut SHW to Underperform due to potentially weak demand in housing starts, turnover, and remodeling. With the outlook for lithium challenged, take more selective view and downgrading ALB to Underperform. Lower tgts in some ag chemical names.

·     In Trading & Exchanges: IBKR reported better than expected core earnings ($1.55 vs $1.51 consensus) driven by lower expenses (compensation) but talked down forward LT account growth prospects (from +30% to +20%) even though one of the two large introducing broker wins started in 3Q23. NDAQ flat earnings for Q3 but said its operating revenue rose more steeply than had been expected. ICE shares active after Bloomberg reported that the SEC meets on banning exchange volume-based pricing deals.

·     Several bank earnings: MS top and bottom-line beats (but profit fell y/y), boosted by better-than-expected trading revenue 3Q net revs $13.3B, vs. est. $13.2B; Q3 NII $1.98B vs. est. $2.06B; wealth management net rev $6.40B vs. est. $6.58B; Q3 FICC sales & trading revs $1.95B vs. $1.83B; Q3 sales & trading rev $2.51B vs. $2.41B; Investment-banking revenue dropped 27% to $938M. CBSH Q3 core EPS missed by $0.02 on fees/expenses, though core NII a touch better as deposit mix shift slowed and ramp in IBD costs moderated. CFG slips after Q3 EPS missed by $0.06 driven by in-line NII, a $0.07 miss on core fees, more than offsetting a less than $0.01 beat on core expenses and guide weaker. HWC Q3 EPS $1.12 vs est. $1.04 on NII 272.1Mm vs est. $273.17; CET1 capital ratio 12.04%, total deposits $30.3B +1% seq. USB posted $0.02 EPS beat driven by in-line NII, a $0.01 beat on core fees, and a $0.02 beat on core expenses while provisions of $515M were a miss, as was Q$ guidance. Trust banks: NTRS falls as Q3 EPS missed by $0.02 driven by trust fees, NII, and provision expense, partially offset by lower expenses; Provision for credit losses $14.0M vs. $0.5M y/y. STT reported a top and bottom-line miss.



·     ABT +3%; posted a better-than-expected Q3 profit on better sales ($10.14B vs. est. $9.8B) and raised its earnings guidance for the full year to $4.42-$4.46 from $4.30-$4.50 prior.

·     ARDX +13%; said it the FDA approved tenapanor, marketed under the brand name Xphozah, for control of serum phosphorus in patients with chronic kidney disease on dialysis.

·     DXCM +5%; rebound in beaten up insulin/diabetes stocks PODD, TNDM as well.

·     ELV +3%; Q3 adj EPS $8.99 vs. est. $8.44; Q3 revs rose 7.2% y/y to $42.5B vs. est. $42.62B; Membership rose to 47.3 million; benefit expense ratio, improved by 40 bps to 86.8% due to premium rate adjustments.

·     FND +2%; will replace VICR in the S&P MidCap 400, and Vicor will replace CIR in the S&P SmallCap 600. KKR is acquiring CIRCOR International in a transaction expected to close on October 18.

·     FRLN +14%; as 57.9% stakeholder Syncona and affiliates proposed to acquire the remaining shares of FRLN that are not currently owned by Syncona for an upfront of $5 per ADR.

·     PG +2%; Q1 net sales of $21.87B topped the $21.58B estimate on better profit and gross margin improved 460 bps to 52% as prices rose 7% in quarter; said expects volumes to improve sequentially, despite a drop in pricing benefits in the next two quarters.

·     SPR +25%; and BA have signed a new pact to strengthen the two companies’ relationship after problems with Spirit’s fuselages used in Boeing’s 737 MAX jets weighed on production; SPR provided lower guidance amid impact from Boeing 737 Max.



·     ALB -8%; downgraded to Underperform at Bank America as expects to see a period of earnings and margin pressure across the value chain.

·     ASML -4%; warned of flat sales in 2024 as customers conserve cash; said it expects 2024 to be a “transition year” with revs similar to 2023; reported Q3 earnings of 1.9B euros, in line with analyst expectations, and repeated its forecast for full year sales growth of about 30%.

·     AZN -5%; after a new cancer medicine being developed by the drugmaker and Daiichi Sankyo seemed to fall short of investors’ expectations – Jefferies says the worse-than-expected results from the lung study outweigh the in-line results from the breast cancer trial.

·     IBKR -5%; reported better than expected core earnings ($1.55 vs $1.51 consensus) driven by lower expenses (compensation) but talked down forward LT account growth prospects (from +30% to +20%).

·     JBHT -6%; reported downside 3Q adjusted EPS, as total revenue declined 18% YoY, Intermodal margins were 100bps lower than expected.

·     MS -6%; falling to fresh 52-week lows after earnings results.

·     SQM -5%; downgraded to Underperform at Bank America and lowered its 2023 and 2024 EBITDA estimates by 17% and 43%, respectively, following 20%-50% cuts in lithium price assumptions made by the firm’s commodities team for 2023-2025.

·     UAL -8%; reported strong 3Q23 results, with adj EPS of $3.65, 8% ahead of consensus but guide for 4Q EPS is 20% below consensus and rev guide for 4Q is ahead of expectations.


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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