Mid-Morning Look: September 16, 2022

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Mid-Morning Look

Friday, September 16, 2022






DJ Industrials




S&P 500








Russell 2000






U.S. stocks opened sharply lower after a FedEx profit warning and as investors worry about rising interest rates in the wake of inflation running hotter than expected in August. The Dow Jones Industrial Average remains on track for worst weekly return in over 2-years while the S&P 500 and Nasdaq were each heading for a weekly decline of more than 5%. Stocks recovered off lows following the University of Michigan Sentiment reading at 10:00, as headline figures were mostly in-line, but markets reacted to the signs of decelerating inflation expectations (1-Year Inflation Expectations: 4.6% vs. previous 4.8% and U.S. Sep. Michigan 5-Year Inflation Expectations: 2.8% vs. est. 2.9%). That data helped push Treasury yields down from morning highs while the dollar eased. Interest rate sensitive sectors seeing some of the strongest moves early on the UoM expectations data – utilities, telecom, towers (dividend paying names) and homebuilders all jumping sharply as well as precious metals on dollar/yields easing. Expect increased volatility today with “Quad-witching” (simultaneous expiration of index futures, index options, stock futures, and stock options) – options expiration totaling $3+ trillion and 3Q22 rebalance Friday for several major market indexes. Surging Treasury yields and its impact on growth stocks has certainly played a roll this week, with the 2-yr hitting 14-years highs above 3.9% (the 2007 highs stand at 3.979%) and the benchmark 10-yr at 3.5%. Futures bets show that traders see a 76% probability that the Federal Reserve will raise interest rates by another 0.75% and possibly 100-bps move. Traders remain nervous that the Fed may “over-tighten” even as the economy slows given the stubbornly high inflation readings.


Economic Data

·     University of Michigan Sentiment data, Sept-P consumers sentiment prelim Sept 59.5 vs. consensus 60.0 and vs final aug 58.2; current conditions index prelim sept 58.9 (consensus 60.8) vs final aug 58.6; consumers expectations index prelim sept 59.9 (consensus 59.7) vs final aug 58.0. The Michigan 1-Year Inflation Expectations: 4.6% vs. previous 4.8% and U.S. Sep. Michigan 5-Year Inflation Expectations: 2.8% vs. est. 2.9%, and previous 2.9%.







WTI Crude















10-Year Note





Sector Movers Today

·     Metals & Materials; AA upgraded at Morgan Stanley to Overweight from Equal Weight along with several other peers (TECK, NEXA, WDH to Overweight and SCCO to EW), noting that value begins to show within Americas metals and mining shares, but cautioning that uncertainty remains; Glencore (GLNCY) is looking to add lithium to the suite of metals it trades, as the raw material is in hot demand due to the rapidly growing production of electric vehicles (EVs), two sources with knowledge of the matter said, Reuters reported

·     Materials & Paper sector: IP and PKG both downgraded to Underperform from Hold at Jefferies, cutting estimates to reflect the “massive inventory glut” in containerboard and said channel checks indicate orders are decelerating sharply and broad-based downtime is being taken, even by the smaller players; in the lithium sector (ALB, LTHM, LAC), Bloomberg noted Lithium prices soar to new record on surging demand to make batteries for EVs. Lithium carbonate prices in China reached 500,500 yuan a ton; SQM sees a “very tight market” for lithium in the years ahead

·     Housing & Building Products: falls early amid surging mortgage rates (topped 6% this week for the 30-year fixed, highest rate since 2008), while earnings next week from LEN and KBH could impact the sector as well. Bank America previews quarters, saying they forecast Lennar’s net orders to decline -22% YoY and KB Home to decline -32% YoY. Note 2 years ago: 30-year mortgage rate was 2.87% & average new home price in the US was $405k – fast forward to today, the 30-yr mortgage rate is 6.02% & average new home price is $547k. Result is$28k increase in down payment (assuming 20% down) and 96% increase in monthly payment (from $1,343 to $2,628).



·     AAOI +31%; announces definitive agreement to sell its Chinese manufacturing facilities and certain assets related to its transceiver business for $150 million

·     FE +2%; as defensive utilities (ETR, LNT) among leaders in the S&P

·     LEN +2%; seeing homebuilders and other interest rate sensitive names rebound after UoM lower inflation expectations data push dollar and yields off highs

·     NEM +2%; gold miners get a little bounce as gold rebounds after lower inflation expectations data in University of Michigan sentiment, pushing yields and the dollar a bit lower

·     SHLS +1%; upgraded to Outperform at Cowen saying following the passage of the IRA bill, they see SHLS as their preferred beneficiary and see the company’s expansion into EV system

·     TXN +1%; raises dividend 8% to $1.24 from $1.15 and announces $15B share buyback program



·     FDX -22%; guides Q1 adj EPS $3.44, below consensus of $5.10 and sees revs $23.2B vs. est. $23.54B; said Q1 operating income at $1.23B below est. $1.74B and withdraws year guidance

·     GE -4%; said supply chain continues to be tough and continues to impair our ability to deliver to our customers; expect Q3 free cash flow to be in line with q2 or slightly better

·     GETY -19%; after regulators made the stock photo firm’s registration effective, enabling the potential sale of shares by existing holders, Bloomberg noted

·     HUN -6%; marks the third chemicals company to lower guidance over the last week (DOW, EMN the other ones), as cuts Q3 adjusted EBITDA view to $260M-$280M from $310M-$355M saying they are feeling the same pressures as others in the industry

·     IP -9%; and PKG both downgraded to Underperform at Jefferies, cutting estimates to reflect the massive inventory glut in containerboard checks indicate orders are decelerating sharply

·     NCR -24%; after ended a process to sell itself and decided to split into two companies. NCR’s board approved a plan to separate NCR into two independent, publicly traded companies

·     UBER -4%; after responding to a cybersecurity breach after a hacker claimed to have gained widespread access to the company’s computer systems


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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