Mid-Morning Look: October 24, 2022

Mid-Morning Look

Monday, October 24, 2022






DJ Industrials




S&P 500








Russell 2000






A mixed start to the week for US equities! Energy shares, Consumer Staples/Foods, Transports, Financials, and Healthcare Services among the early S&P leaders. U.S. stocks opened higher following a pullback in Treasury yields (10-yr low 4.12% overnight) after rising a 12th straight week last Friday, while the UK settled on a new Prime Minister easing concerns in the region, and as investors brace for the busiest week of earnings with over 150 S&P components expected to report this week. However, markets have quickly reversed, with the Nasdaq falling as much as -1.25% and the S&P erasing gains as yields quickly rebound (10-yr highs 4.28% vs. 15-yr highs 4.34% last week), tech sells off ahead of AAPL, META, MSFT, AMZN, GOOGL earnings results this week. Tensions with China may ramp up as President Xi Jinping’s new leadership team elected a third term (US listed Chinese stocks crushed early). The benchmark S&P 500 is up nearly 5% from its Oct. 12 closing low for the year. Despite the recent rebound, the index is down 21% so far in 2022, on track for its biggest decline since 2008. Europe Stoxx 600 extends gains, rising to highest levels in a month after Rishi Sunak will be Britain’s next prime minister after his rivals quit the race. Sunak, the 42-year-old former finance minister, will become Britain’s third prime minister in less than two months. Wall Street’s three main indexes rallied on Friday after a report said the U.S. central bank will likely debate on a smaller interest rate hike in December, spurring expectations that it may be poised to dial down its ultra-hawkish stance on fighting surging inflation. U.S. flash S&P Global PMIs were all weak and in contractionary territory below 50 in October.







WTI Crude















10-Year Note





Sector Movers Today

·     Semiconductors: several semi’s downgraded at Barclay’s ahead of earnings, cutting QRVO to EW from OW (tgt to $90 from $120), ADI to EW from OW (tgt to $140 from $180), and NXPI to EW from OW (tgt to $140 from $200), SLAB downgraded to Underweight from EW (tgt to $95 from $140) citing pricing and said consumer exposure are large headwinds; while upgraded TXN from underweight to EW saying it should be a primary beneficiary of the Chips Act and a more muted 2022 due to supply constraints should lead to a smaller EPS correction; at JPMorgan, WOLF upgraded to Overweight and raised tgt to $160 from $130 ahead of investor event, which they believes will reinforce the capacity ramp key to delivering on the bull thesis on the shares; TSM suspended production of advanced silicon for Chinese startup Biren Technology to ensure compliance with U.S. regulations, Bloomberg reported this weekend

·     Utilities & Solar: EONGY downgraded to Market-Perform due to earnings headwinds from energy retail risks and higher refinancing costs at Bernstein; GPRE downgraded to a Market Perform rating at BMO Capital as a lower ethanol margin environment and potential delay in margin contribution from Ultra-High Protein may pressure EBITDA below consensus; SO downgraded to Underperform from Neutral at Bank America and MDU downgraded to Underperform from Neutral at Bofa as well with a price target of $26, down from $30 citing the stock’s recent outperformance relative to the sector at a time when its peer valuations have struggled as it prepares to spin off its Knife River construction materials business

·     Media, Internet; US listed China stocks BABA, BIDU, JD, PDD, NTES and others tumble after the Hang Seng tumbled over 6% or 1,000 points overnight as investors dumped Chinese assets after Xi Jinping’s new leadership team raised fears growth will be sacrificed for ideology-driven policies; META downgraded to Neutral from Buy at Bank America and cut tgt to $150 from $196 ahead of earnings as checks have suggested stability in Meta 3Qad spend and Snap’s 3Q revs were +2% q/q – so we think 3Q will be in-line (on higher ad loads), with EBITDA upside on cost cuts; for ETSY, UBS said survey of 126 sellers suggests trends may have gotten modestly worse in the past three months, which does not surprise them as core Etsy GMS declined in 1H

·     Consumer Staples & Restaurants: KO, KMB, KDP, MO, CL, CHD, NWL among consumer staples set to report earnings this week) – RBC said in beverages, expect strong underlying results at KO with topline upside (particularly in the US) driven by increased mobility and strong pricing, but we believe FX will drive guidance at the low end of the range, like PG. We also expect solid KDP results on packaged beverage strength and limited currency impact. In HPC, we expect potential topline upside at CL but lower guidance on FX; TTCF downgrade to Market Perform at Cowen and cut tgt to $4.5 from $10 noting slowing sequential sales despite distribution gains; BYND launched the Beyond Steak, launching at Kroger and Walmart, stores nation-wide



·     MYOV +8%; after Japan’s Sumitovant Biopharma is acquiring the remaining 48% stake in the company for $1.7B, which it currently does not own to take the London-based women’s health company private https://bit.ly/3gFe7fm

·     PCVX +76%; after topline results from the Phase 1/2 clinical proof-of-concept study evaluating 24-valent pneumococcal conjugate vaccine (PCV) candidate VAX-24 indicate the vaccine met primary safety and tolerability objectives

·     RF +4%; strength early in regional banks KEY, CFG, ZION, FITB

·     TDOC +3%; upgraded to Neutral from Sell at Guggenheim saying at current levels, think the risk/reward is more balanced with the stock pricing in our street-low estimates

·     XAIR +2%; announces positive data for inhaled nitric oxide (NO) to treat COVID-19 with LungFit® PRO in a poster presentation



·     ALPN -8%; said it has voluntarily ended enrollment in a pair of studies of its davoceticept drug candidate following the death of a second patient in one of the studies

·     BABA -19%; along with sharp declines in US listed China stocks overall BIDU, BILI, JD, NIO, NTES, PDD, TCEHY, XPEV, among others and the Hang Seng tumbled over 6% or 1,000 points as investors dumped Chinese assets after President Xi confirmed an unprecedented 3rd term, indicating there will not be any imminent policy changes

·     META -3%; ahead of earnings this week; downgraded to Neutral from Buy at Bank America and cut tgt to $150 from $196 ahead of earnings as checks have suggested stability in Meta 3Qad spend and Snap’s 3Q revs were +2% q/q

·     TCDA -93%; after saying a trial testing veverimer, its chronic kidney disease treatment, failed to meet its primary endpoint

·     TSLA -6%; after the electric-car maker cut starter prices for its Model 3 and Model Y cars by as much as 9% in China, reversing a trend of increases amid signs of softening demand

·     WYNN -6%; casinos with exposure to China’s Macau region (MLCO, WYNN, LVS) hit hard, along with other US listed Chinese stocks as investors dumped Chinese assets after President Xi confirmed an unprecedented 3rd term


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.