Mid-Morning Look: October 19, 2022

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Mid-Morning Look

Wednesday, October 19, 2022






DJ Industrials




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Russell 2000






U.S. markets choppy early as another jump in Treasury yields and rising interest rate hike expectations from the Fed continue to overshadow a good start to earnings season thus far. Treasurys sell off, sending yields higher, as the US housing market shows signs of a slowdown. The two-year hit highs of 4.537%, a level not seen since July 2007, and the 10-year reaches 4.123%, a new high since December 2007 (and on track to rise for a 12th consecutive week – longest streak since 1980). The move in bonds offset stellar subscriber numbers for NFLX in tech, better results from ASML in semis, brighter outlook for UAL in transports, solid numbers for PG in consumer, and a beat for ISRG in MedTech. It wasn’t all roses this morning as GNRC and a European pool company Fluidra (which hit US comps LESL, POOL), companies that benefitted greatly from the pandemic offered much lower guidance. Banks were generally better today in earnings outside of a few hiccups (MTB big miss). Markets with much to digest – but also much coming – with the Fed policy meeting and mid-term elections in early November (though get a handful of inflation data points next week before then) and of course earnings! 


Economic Data

·     U.S. housing starts for September declined (-8.1%) to 1.439M, weaker than forecast, after bouncing 13.7% to 1.566M in August from 1.377M in July which was the lowest going back to August 2020. Most of the slump was in the multifamily sector where starts tumbled -13.2% after August’s 32.1% surge. Single family starts dropped -4.7% following the 4.0% increase prior







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10-Year Note





Sector Movers Today

·     Auto sector: auto dealer LAD the latest to issue weak results (recall KMX warning a few weeks back that sunk the industry) as Q3 EPS of $11.08 missed the $11.84 estimate as revs missed views as well as gross margin 18% vs. 19.3% y/y (AN, PAG, SAH, CVNA move in reaction); ALLY said in its results that Q3 consumer auto originations were $12.3B, below $12.85B estimate (watch CACC, LAD, PAG, AN, CVNA auto retailer AAP downgraded to In Line from Outperform at Evercore as their reduced industry growth outlook and lingering share loss is likely to constrain upside; Used car prices per Manheim are tanking; year/year rate (-10.4%) is worst since GFC; max drawdown during pandemic (-9.1%) has now been surpassed; in auto suppliers preview, Deutsche Bank said ALV, APTV, BWA, and VC are favored auto supplier names into the print and see potential earnings downside risk from smaller subset of suppliers including DAN and AXL

·     Consumer Staples: PG Q1 core EPS $1.57 vs. est. $1.54 and Q1 revs $20.6B vs. est. $20.33B; sees FY23 EPS ‘towards the low end’ of guidance range and reduced its guidance for FY23 all-in sales to be down three percent to down one percent versus the prior fiscal year and maintained its outlook for organic sales growth in the range of 3%-5%; Nestle (NSRGY) posted its strongest nine-month sales growth in 14 years and raised its full-year guidance as it was able to pass on price increases without losing many cash strapped customers; OLPX tumbles as guides prelim 3q adj net $71.3M-$73.3M below est. $91.9M; sees FY adj EBITDA $425M-$431M, from prior $504M-$526M; lowers FY adj net $303M-$307M; SAM downgraded from Outperform to In Line at Evercore ISI with $330 tgt as believe that estimates for FY23 are too high and that the stock may need some time for investors to regain confidence

·     Casinos, Gaming, Lodging & Leisure sector: in casinos (MLCO, WYNN, LVS, MGM), Bloomberg noted Macau VIP sector gaming revenue fell 81% in Q3 from a year earlier to 1.16 billion patacas ($142.9 million), citing data from the city’s gaming inspection and coordination bureau – this was the lowest since at least 1Q 2005 and – VIP revenue -42% q/q – 3Q total gaming revenue -70% y/y to 5.55 billion patacas; in leisure, PII downgraded to Neutral from Buy at Citigroup saying checks suggest a retail environment substantially worse than previously anticipated, and while the near-term earnings impact is likely muted, this condenses the inventory replenishment opportunity; in towable, WGO says it expects uncertain market conditions to persist in FY23 though posted Q3 top/bottom line beat; Fluidra (FLUIF shares fall as the pool and wellness co cut its sales forecast for the year and slashed its EBITDA view for the full year to above EU500m, well below prior estimates of EU600M-EU630M (shares of US comps POOL, LESL, PNR weak)

·     Transports: adding to an already strong run of gains for Dow Transports (came into the day up 6 of last 7 sessions), as airline UAL posted an EPS and rev beat for Q3 (EPS $2.81 vs est. $2.28 on revs $12.9B vs est. $12.75B) and forecasts Q4 EPS of $2.00-$2.25, more than double the $0.98 estimate citing strong demand (lifts DAL, JBLU, LUV, AAL shares early); SAVE shareholders set to approve $3.8B JBLU deal according to Bloomberg after the carriers agreed in July to combine under JetBlue in cash sale; in truckers, JBHT topped expectations, with intermodal pricing holding as costs moderated, combined with favorable dedicated fleet growth and margins



·     ASML +3%; posted Q3 sales and profit above expectations and record new bookings (Q3 net profit of 1.7B euros vs. est. 1.4B euros and sales of $5.8B euros vs. est. $5.41B)

·     IBKR +5%; EPS beat of $1.08 vs. $0.96 on better revs helped by higher NII on higher yields on cash and margin balances and lower int expense

·     ISRG +12%; posted Q3 EPS and revenue beats as qtrly worldwide Da VINCI procedures grew approx 20% vs 3Q21 and raises FY22 procedure growth view to 17%-18% from 14%-16.5%

·     NFLX +13%; after posting better-than-expected subscriber growth for Q3 at 2.41M new net subscribers, topping its prior forecast of 1M for the quarter while guiding Q4 subscribers to up 4.5M new adds and beat on both the top and bottom line for Q3 EPS/revs

·     PG +2%; Q1 core EPS $1.57 vs. est. $1.54 and Q1 revs $20.6B vs. est. $20.33B; sees FY23 EPS ‘towards the low end’ of guidance range

·     TRV +3%; Q3 core EPS $2.20 tops consensus $1.60 on better revs of $9.3B vs. est. $8.98B; Q3 core income fell to $526M from $655M y/y hurt by hurricane-related claims and lower returns on its investments – posted record net written premiums growth of 10% to $9.02 billion in the quarter

·     UAL +6%; 3Q adj EPS $2.81 vs est. $2.28 on revs $12.9B vs est. $12.75B; says now expects 4Q adj op margin above 2019 for first time, and forecasts Q4 EPS of $2.00-$2.25, more than double the $0.98 estimate

·     ZYME +13%; after announcing exclusive license agreement w/ JAZZ to develop and commercialize zanidatamab in all geographies not previously licensed to BeiGene



·     ABT -7%; Q3 EPS of $1.15 topped the $0.94 estimate while sales fell -4.7% y/y to $10.4B, driven by declining sales in its nutrition business but was above the $9.67B est.

·     ALLY -5%; Q3 adj EPS $1.12 missed the $1.68 Street estimate and revs $2.02B below the $2.16B estimate, reporting a day after the CFO announced her departure

·     GNRC -19%; cuts full-year 2022 net sales growth guidance range to 22 to 24% as compared to the prior year and down from its prior view of up 36%-50%, which includes approximately 5%-7% net impact from acquisitions and foreign currency; guides prelim Q3 Ebitda $184M vs. est. $308M

·     MTB -11%; shares slide as Q3 EPS of $3.53, broadly misses consensus estimates of $4.04 while Q3 provision for credit losses was $115M vs. a $20M provision y/y

·     OLPX -50%; guides prelim 3q adj net $71.3M-$73.3M below est. $91.9M; sees FY adj EBITDA $425M-$431M, from prior $504M-$526M; lowers FY adj net $303M-$307M

·     PTCT -7%; said enrollment in its ongoing mid-stage study testing its experimental treatment in patients with Huntington’s disease has been paused in the U.S. by the FDA, requesting more data

·     WGO -11%; says it expects uncertain market conditions to persist in FY23 though posted Q3 top/bottom line beat


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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