Mid-Morning Look: October 18, 2022

Mid-Morning Look

Tuesday, October 18, 2022






DJ Industrials




S&P 500








Russell 2000





U.S. stocks looking for its second straight advance amid increasing volume, improving market breadth, and upward momentum as investors remain hopeful into earnings this week for big tech, financials, and consumer. A good start to the trading day follows broad based gains on Monday as liquidity crisis fears abate in the UK given the 180-change in tax policy, while bank earnings to start the quarter are better-than-feared. Of note on Wall Street, a few interesting strategy comments from big banks maybe juicing markets a bit as long-time bear Mike Wilson of Morgan Stanley yesterday turned short term bullish saying “this is a good spot to cover some shorts and let this bear breathe” and expects a rally that could send the S&P as high as 4,150 potentially. Today, a Bank America October Global Fund Manager Survey FMS said: “screams macro capitulation, investor capitulation, start of policy capitulation noting cash levels 6.3% = highest since April’01, investors now 3sd UW equities – tasty morsels for another bear rally (so long as UST yields stay 40pps from lows; note huge 87% expect inflation to fall; CIOs message to CEOs: reduce debt 60%, increase CAPEX 17%, increase buybacks/dividends 17%. So, comments (at least for short-term) indicating there could be a near-term “squeeze” in the face of an aggressive interest rate policy ramp by the Federal Reserve (a 4th 75-bps hike expected at the November meeting). Signs the rate hikes are impacting demand seen in the NAHB Housing Market index today, plunging 8 points to lowest levels in 1-years amid the surge in mortgage rates. Stocks holding gains thus far, with major averages up over 4% to start the week and now posting solid gains for month of October (still 2-weeks left though!). Oil prices slide to lows down nearly 3%, gold is weaker as the dollar rises.


Economic Data

·     Industrial Production for Sept rose +0.4% vs. est. +0.1% and above Aug (-0.1%) as mining output +0.6%, utilities output -0.3%. Capacity Utilization rate 80.3% vs est. 80%. U.S. Sept manufacturing output +0.4% vs. est. +0.2%

·     October NAHB Housing market index dropped 8 points to 38 versus 46 in September (previous 46) and the 43 estimate (lowest since 2012) as confidence among U.S. single-family homebuilders fell for the 10th straight month. Soaring mortgage rates and bottlenecks for building materials made new housing less affordable for many first-time buyers.







WTI Crude















10-Year Note





Sector Movers Today

·     Aerospace & Defense: WSJ reported the FAA has asked BA to launch a review of its safety paperwork for the 737 MAX 7, another setback for the plane maker’s push to win approval for the jet before a year-end legal deadline; in earnings, LMT Q3 adj EPS $6.87 tops $6.72 estimate on revs $16.6B vs. est. $16.66B while still sees FY EPS about $21.55 vs. est. $21.77; ahead of earnings, KeyBanc said 2022-2025 commercial aero OEM production recovery growth thesis (>15% CAGR from ~20%) is directionally intact, driving our view of staying the course on ATI, HAYN, and HWM, although we reduce price targets and estimates

·     Bank movers: GS the latest bank/broker with good results as Q3 EPS $8.25 tops consensus $7.69 on better revs of $11.98B (still down -12% y/y) vs. est. $11.41B while also confirmed a broad reshuffling in how it is organized – investment banking revenue fell 57% to $1.58 billion; Q3 trading revenue $6.2B; Q3 FICC sales and trading revenue $3.53B; SBNY Q3 EPS $5.57 beats $5.40 estimate but driven by lower tax rate – Morgan Stanley notes stripping out tax benefit associated with sustainable finance lending, EPS missed vs Cons driven by lower NII (-34c vs est.) and NIM miss (2.38% vs 2.46% est.); TFC Q3 adj EPS $1.24, in-line with consensus and revs $5.85B vs. est. $5.93B; STT Q3 adj EPS $1.82 above $1.78 est. but down from $1.96 y/y as revs down -1% y/y to $2.96B, in-line with ests while net interest income (NII) rises 36% y/y to $660M

·     Transports: MATX guided Q3 EPS $6.67-$6.79 below est. $7.67; sees Q3 operating income for ocean transportation to be $310M-$35M as achieved lower y/y Q3 consolidated operating income, saw lower demand for expedited ocean services in the transpacific trade lane; XPO sees 3Q revs approx $3.04B vs est. $3.09B and adj EBITDA $348-352Mm vs est. $341.2Mm; MRTN Q3 EPS $0.32 vs. est. $0.33; Q3 revs rose 29.1% y/y to $324.45M vs. est. $321.41M; railroad data showed (CSX, NSC, UNP), Total traffic +3.1% y/y, accelerating versus +0.4% YoY last week. Intermodal volumes were +3.7% YoY, accelerating from +0.8% YoY last week.

·     Paper/Containerboard: IP and PKG downgraded to Sell at Deutsche Bank and keep WRK at Hold saying given weakening demand and upcoming capacity additions, they anticipate containerboard prices will fall by $100 per ton in total over the next year. This would bring domestic kraftliner prices down to $835 per ton for a 10.7% reduction from current levels at $935. Morgan Stanley updated SEE, BERY and ATR Estimates and tgts which primarily reflects weaker growth assumptions across food and protective segments reflective of a weak macro; marking to market FX assumptions; lower 2H22 margins due to energy and supply chain headwinds, partially offset by higher prices and seasonality benefits and higher interest expense to reflect rate increases.



·     AKUS +87%; to be acquired by LLY for $12.50/shr in cash + CVR worth up to $3.00/shr in transaction valued at approximately $487M plus a contingent value right for amount up to about $610M https://bit.ly/3yLSD6I

·     AR +8%; to replace Alleghany in S&P 400 at open on 10/20

·     AVEO +38%; agreed to be acquired by South Korea’s LG Chem Ltd. for about $566M; LG Chem said it would pay $15 a share in cash for AVEO https://on.mktw.net/3VzJLL2 ;

·     CL +2%; after CNBC’s David Faber reported Dan Loeb’s Third Point took a stake in co

·     CRM +6%; on a report that activist Starboard Value has taken a “significant” stake in the company https://bit.ly/3TwvVaE

·     FUBO +7%; posts prelim Q3 revenue as well as North American paid subscriber growth, which exceeds its previously issued outlook and said it will close its Fubo Gaming unit and cease operation of Fubo Sportsbook effective immediately

·     GS +6%; latest bank/broker with good results as Q3 EPS $8.25 tops consensus $7.69 on better revs of $11.98B (still down -12% y/y) vs. est. $11.41B while also confirmed a broad reshuffling in how it is organized

·     TGT +5%; assumed and upgraded to Buy at Jefferies as subdued valuation and improvements in supply chain and inventory positioning support their bullish stance



·     CONN -16%; after withdraws previous fiscal year 2023 financial guidance and said it expects 3Q revenue to be down 21% to 23%.

·     HAS -1%; Q3 adj EPS $1.42 vs. est. $1.52; Q3 revs $1.68B fell -15% y/y vs. est. $1.68B; reiterates full-year guidance of flat to slightly down revenue in constant currency

·     JNJ -0.5%; declines despite quarterly beat and reaffirmed guidance

·     MRNA -1%; as vaccine names edging lower early – NVAX, BNTX

·     SI -14%; shares tumble after Q3 EPS miss (Q3 EPS $1.28 vs. est. $1.38) as U.S. dollar transfers on the Silvergate Exchange Network (SEN) slowed more than expected on a sequential basis


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.