Mid-Morning Look: October 14, 2022

Mid-Morning Look

Friday, October 14, 2022






DJ Industrials




S&P 500








Russell 2000






U.S. stocks opened higher following news out of Europe as Russian President Putin toned down his commentary on Ukraine war, while UK PM Truss fired her Treasury chief Kwasi Kwarteng after tax plan fiasco three weeks ago – but following the 4th biggest reversal for the Nasdaq and 5th largest for the S&P 500 to the upside in its history on Thursday, investors sold the opening rally. Stock losses accelerated after the University of Michigan 1-yr inflation expectations rises to 5.1% from 4.7%, the first increase since March and the 5-yr prelim October 2.9% vs final September 2.7% (again, inflation data points raise concern of a longer/more aggressive rate hike cycle by the Fed, crimping economic activity and growth). One of the few sectors higher early are financials, led behind better-than-expected earnings/comments from JPM, Citi, WFC, as shares of all moving higher, though MS declines on top/bottom line miss. Treasury yields spike following inflation data – 10-yr hit highs above 3.99% (off earlier lows 3.85%), while the U.S. dollar hits highs above 148 against the Japanese yen (32-yr highs). U.S. retail sales flat in September; import prices fall again. Oil prices extend losses as well, falling over $3 on the session as economic growth fears hitting markets again. Not a good start for US equities after yesterday’s historic rebound. More Fed speak today as well expressing caution (nothing new here).


Economic Data

·     Retail Sales unchanged in Sept vs. est. for +0.2% increase (Aug revised to +0.4% from +0.3%) while retail sales ex-autos +0.1% vs. est. (-0.1%) and Aug revised up to (-0.1%) from (-0.3%); Sept gasoline sales -1.4% vs Aug -5.2% and cars/parts sales -0.4% vs Aug +2.8%

·     Import Prices for Sept fall (-1.2%) vs. est. decline (-1.1%), while Sept export prices fell (-0.8%) vs. est. (-1.0%); Sept non-petroleum import prices -0.5%; U.S. Sept year-over-year import prices +6.05%, export prices +9.5%

·     University of Michigan Surveys of Consumers Sentiment Oct-P reported at 59.8 vs. est. 59.0 and vs final Sept 58.6; current conditions index prelim Oct 65.3 vs. Sept-F 59.7 and expectations index prelim Oct 56.2 vs. Sept-F 58.0.

·     University of Michigan 1-yr inflation expectations rise to 5.1% from 4.7%, rise for first time since March and the 5-yr prelim October 2.9% vs final September 2.7%







WTI Crude















10-Year Note





Sector Movers Today

·     Aerospace & Defense: NOC downgrade to Neutral at JPMorgan saying valuation may not matter for long periods but what stood out in preparing for Q3 earnings was NOC’s pronounced premium to both the group; RKLB selected to build solar panels for NASA’s cadre mobile robot program as will supply solar panels that will power NASA’s mobile robots as part of cadre program; Goldman Sachs with A&D earnings preview as says BA, TXT, and TDG favorite names into earnings and least favorite names for the day of earnings are WWD, LHX and LMT saying supply chain bottlenecks remain a hurdle but expect incremental clarity on forward delivery rates

·     Pharma movers: ABBV Catalyst Driven Idea, reit Overweight w/ $185 PT at Morgan Stanley; ATRA said the Committee for Medicinal Products for Human Use of the European Medicines Agency has adopted a positive opinion recommending the European Commission approve Ebvallo tabelecleucel; RETA announced that the FDA does not plan to hold any advisory committee prior to the upcoming Feb-28 PDUFA for its treatment of Friedrich’s ataxi; HRMY upgrade to Buy and up tgt to $61 at Jefferies saying DCF relative valuation metrics indicate the stock is undervalued at current levels

·     Housing & Building Products: Credit Suisse downgrades TREX to underperform from neutral and takes price tgt to $43 from $65 and AZEK downgraded to neutral from outperform and tgt cut to $18 from $29 in deck building names; in other building product/home improvement changes, CSFB also downgraded FBHS, JELD, and SWK to Neutral from Outperform

·     Paper & Packaging: AMBP downgraded to SP (from OP) at RBC Capital and lowers PT to $5 from $7 as believe investor sentiment will remain negative on the beverage can manufacture sector, for AMBP given its FX exposure, EMEA exposure, beverage category mix and net leverage of ~4.5x. Overall in packaging, previews 3Q22, lowering ests and PT’s as look towards H2/FY23, IRI data has softened, and we expect moderating raw material cost pressures offset by higher energy, labor/ logistics cost and FX headwinds. Favorite names this season are GPK and SLGN.



·     DAL +2%; upgraded to Outperform at Cowen saying the mix of air traffic passengers is shifting with higher yielding business and international passengers making up a greater share

·     JPM +1%; Q3 adj EPS $3.12 tops est. $2.878 and revs $33.49B above est. $32.35B – Equities sales & trading rev $2.30B, vs. est. $2.48B; Fees were down 47% y/y at JPMorgan’s investment bank; Net interest income climbed 34% to $17.6 billion

·     NTNX +17%; after the WSJ reported the company is exploring a sale after receiving takeover interest. The company is expected to Target private-equity and industry players https://on.wsj.com/3CsNS2O

·     UNH +2%; Q3 adj EPS $5.79 tops consensus $5.42 and revs $80.89B above est. $80.5B; said the total people served domestically by UnitedHealthcare has grown by approximately 850,000 in 2022, raises FY adj EPS $21.85-$22.05, up from prior $21.40-$21.90, estimate $21.88

·     WFC +2%; Q3 revs $19.51B tops est. $18.81B; but EPS of $0.85 missed the $1.09 est.; Net interest margin 2.83% vs. estimate 2.68% and net interest income (NII) $12.10B, estimate $11.64B – New car loans dropped 41% at Wells Fargo, while late payments climbed

·     WLK +3%; will join the S&P MidCap 400 on Oct. 18, S&P Dow Jones Indices said late Thursday – will replace MLKN, which is moving to the S&P Small Cap 600



·     ACI -5%; big M&A deal in the supermarket sector as the 2nd largest grocer (KR) by mkt share in the US to acquire the 4th largest (ACI) – (WMT biggest and COST rd) in a deal valued at nearly $25B, with KR holders to receive $34.10 a share (ACI closed Thursday at $28.63) as the transaction is expected to close in early 2024, subject to regulatory clearance https://on.mktw.net/3VspNSs

·     BYND -2%; cuts FY22 revenue view to $400M-$425M from $470M-$520M (est. $494.55M) and guides Q3 revenue $82M below consensus $117.11M; sees $27M in cash operating expense savings in next 12 months; to reduce workforce by approximately 200 employees

·     FIGS -9%; downgraded to Equal Weight from Overweight at Barclays and cut tgt to $9 from $15 citing the current weakening demand backdrop, increasing acquisition costs + potential for slowing sales growth

·     FRC -13%; after mixed quarterly results as EPS beat but revs missed

·     MS -4%; disappoints as profit falls 3rd straight quarter as EPS $1.47 vs. est. $1.52 and revs fell -12% y/y to $13B below the $13.3B est.; Investment banking revenue, including fees from mergers and acquisitions, fell 55% – ROE weighed in at 14.6%, down from 19.6% a year earlier

·     MOS -6%; weakness in agricultural chemicals (CF, NTR as well) after Russian leader saying there were no plans for a further military mobilization in Russia and says no need for massive strikes on Ukraine now (note names have rallied on supply issues in recent months)

·     NOC -4%; downgrade to Neutral at JPMorgan saying valuation may not matter for long periods but in preparing for Q3 earnings said NOC’s pronounced premium to both the group

·     PLUG -5%; said it sees 2022 revenue 5%-10% lower than $900M-$925M guidance (est. $912.61M) as revenue impact reflects some larger projects potentially being completed in 2023 instead of 2022 due to timing and broader supply chain issues


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.