Mid-Morning Look: October 03, 2022

Mid-Morning Look

Monday, October 03, 2022






DJ Industrials




S&P 500








Russell 2000






U.S. stocks surging to start Q4 following a dreadful Q3 (and year-to-date), with major averages looking to snap their current 3-week losing streak as central banks around the world continue their aggressive rate hike cycle to slow record high inflation. No major inflation reports this week after higher PCE data last Friday disappointed, but the monthly jobs report on Friday will give markets a glimpse whether the Fed cycle has slowed the pace of hirings. Macro picture still the dominant market force (rates, inflation, commodities) as UK’s Prime Minister Liz Truss dropped a plan to cut taxes for the country’s highest earners just 10 days after announcing it, while European manufacturing PMIs printed mainly softer. In emerging markets, the Brazil Elections are heading to a run-off of Bolsonaro and Lula (Oct 30th). Energy stocks early leaders as oil prices rise by more than $4 as OPEC+ considers reducing output by more than 1 million barrels per day (bpd). OPEC+ will consider cutting output by more than 1 million barrels a day, according to delegates, when it meets in person on Wednesday for the first time in more than two years. Meanwhile weaker economic data boost stocks to highs this morning, as the ISM manufacturing figure and construction spending miss estimates – raising hopes that signs of a slowing economy will slow the pace of rate Hikes by Fed (back to bad data good for markets and good data bad). Focus will soon turn to earnings with financials, banks kicking things off the next few weeks. Treasuries are rallying as well with the 10-year yield down 15-bps to 3.65% and 2yr yield -13-bps to 4.08%. Global yields fell after the U.K.’s new chancellor said the government is abandoning a plan to ax country’s top tax rate.


Economic Data

·     S&P global Sept. Manufacturing PMI at 52 vs 51.5 prior; S&P global U.S. Manufacturing sector final output index for September at 50.6 vs flash 49.5 and final August 49.3 and Sector final output prices index for September at 64.1 vs flash 63.5 and final August 62.9

·     ISM U.S. Manufacturing activity index 50.9 in September (lowest since May 2020), down from 52.8 in August and below estimates of 52.0; prices paid index 51.7 in September vs 52.5 in August, new orders index 47.1 in September vs 51.3 in August (also lowest since May 2020), employment index 48.7 in September vs 54.2 in August

·     U.S. Construction Spending fell (-0.7%) vs. est. (-0.3%) to $1.781 trln, vs July (-0.6%); Aug private construction spending -0.6%, public spending -0.8%







WTI Crude















10-Year Note





Sector Movers Today

·     Retailers: Cowen said for UAA, BURL, ADDYY, BIRD, HBI, PVH, SKX, FIGS they are most cautious on Q3/Q4 guidance vs highest conviction in LULU, DECK, TJX and DKS guidance and models as see increasing risk to growth and consensus projections as well as a rapidly changing valuation environment; FXLV confirms receipt of unsolicited proposal from Kennedy Lewis Investment Management LP at a price per share equal to $4.00 in cash; NKE downgraded to Hold at Argus which reflects concerns about the co’s high inventory, which rose by 44%, to $9.7B, in fiscal 1Q23

·     Casinos, Gaming, Lodging & Leisure sector: Macau’s gross gaming revenue (GGR) came in at MOP2.96bn in Sep, +35% mom or -87% vs. pre-COVID Sep 2019 level and was down 49.6% year-over-year to 2.962B patacas (shares of WYNN, LVS, MLCO active); in leisure, THO downgraded to Hold from Buy and lower ests at Argus as it is now facing pressure from rising costs and supply-chain issues, and plans to reduce production this year to reflect current retail demand; NCLH said it was removing all COVID-19 testing, vaccination and masking requirements from its health and safety protocols

·     Bank movers: in research, WFC upgraded to Buy at Goldman Sachs on underappreciated earnings growth from solid revenue upside and efficiency improvement (rates and loan growth driven NII, and further idiosyncratic expense rationalization) and believe WFC will have less downside credit risk in the event of a recession relative to peers. The firm downgraded Citigroup (C) to Neutral on higher capital requirements and earnings downside risks and cut tgt to $47 from $54; CS shares fell to record lows on concern of its financial health despite recent efforts by the Swiss bank to reassure staff, investors, and clients about its financial health.

·     Semiconductors; INTC filed for an initial public offering (IPO) of its self-driving technology business, Mobileye Global Inc. The company didn’t give an expected size for its IPO; IDCC raises Q3 revenue view to $112M-$115M from $96M-$100M (est. $98.83M) as includes approximately $100M of recurring revenue and reflects continuing success in the core smartphone licensing program as well as new licensing agreements. This weekend, the SIA monthly data in August followed up a weaker July with a slight beat – Total industry sales decreased -4.0% on a YoY basis in August (primarily on weak memory sales), after decreasing -1.8% YoY in July. August makes the second straight negative YoY month for the industry since the end of 2019. Memory fell -36.7% YoY while non-memory rose 11.4% YoY.



·     BOX +7%; upgraded to Overweight at Morgan Stanley citing solid relative macro positioning w/ compelling ROI and value in Box Suites, strong execution, a more favorable competitive landscape

·     CALA +20%; said the FDA granted fast-track designation for the company’s investigational treatment for adults with unresectable or metastatic squamous non-small cell lung cancer.

·     CF +4%; RBC Capital upgraded CF to Outperform as believe should benefit from a favorable nitrogen market outlook and attractive energy spreads between the US and international markets that may persist long-term

·     IDCC +14%; raises Q3 revenue view to $112M-$115M from $96M-$100M (est. $98.83M) as includes approximately $100M of recurring revenue

·     MRO +7%; big gains in energy sector given spike in oil prices ahead of OPEC+ meetings, expectations for production cuts to boost prices (PXD, APA, DVN, etc. rise)

·     MYOV +33%; said a special committee of its board rejected a $22.75/share offer from Sumitovant Biopharma to buy the remaining shares of the biopharma company it doesn’t already own https://bit.ly/3RAaKTw

·     VSAT +43%; as LHX announced the signing of a definitive agreement to acquire VSAT’s Tactical Data Links product line for approximately $1.96 billion, subject to customary adjustments



·     APRN -36%; said prelim net rev down “primarily due to a shift in the timing of an anticipated bulk sale of approximately $15 million to an enterprise customer, that had been expected in 3Q”; sees Q3 revs $109M-$112M vs. est. $130M

·     CALM -3%; announced that its Board of Directors has named Sherman L. Miller President and Chief Executive Officer of the Company, effective immediately.

·     CLNN -30%; said topline results demonstrating survival signal for CNM-Au8 in Healey ALS Platform Trial – primary endpoint of adjusted ALSFRS-R and secondary endpoints of CAFS and SVC were not met at 24 weeks

·     LTHM -3%; downgraded to Underperform from Neutral at Bank America and cut tgt to $27 from $31, while raises ALB tgt to $332 from $262 and stays neutral in lithium space

·     TSLA -7%; 3Q deliveries came in below consensus, which company attributed to transit/logistics challenges – 3Q22 vehicle deliveries of ~344k (up 35% q/q and up 42% y/y), was below consensus roughly 365K-371K, and announced production of about 366k vehicles


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.