Mid-Morning Look: September 06, 2023

Mid-Morning Look

Wednesday, September 06, 2023






DJ Industrials




S&P 500








Russell 2000






U.S. stocks under pressure, led by sharp declines in Consumer Discretionary, Technology, and interest rate sensitive sectors as Treasury yields resume their upward momentum (10-yr hit highs of 4.3%) along with the dollar (DXY hits 1105, best level in 6-months) after stronger ISM Services data for August. Concerns about sticky inflation are keeping investors on edge, ahead of the Federal Reserve’s report on the U.S. economy (Fed Beige Book at 2:00 PM), which could help provide hints to the bank’s future interest rate path. NYMEX crude futures slip after having risen for 7-straight days while rising crude prices have been weighing on airlines and transports (three airlines UAL, LUV, ALK flagged higher fuel costs in Q3). The Russell 2000 Smallcap index little changed after a -2% decline Tuesday as the tech heavy Nasdaq leads decliners today down about -1%. Several Wall Street conferences are taking place today and tomorrow, potentially impacting several sectors as guidance is provided.


Economic Data

·     ISM U.S. non-manufacturing sector shows PMI 54.5 in August above consensus 52.5 and vs 52.7 in July as non-manufacturing business activity index 57.3 in August vs 57.1 in July, prices paid index 58.9 in August vs 56.8 in July, new orders index 57.5 in August vs 55.0 in July and the employment index 54.7 in August vs 50.7 in July,

·     The U.S. international trade deficit widened -2% in July to $65B, the Commerce Department said vs. expected deficit would widen to a seasonally adjusted $68 billion from the initial estimate of a deficit of $65.5 billion in June. The trade gap in June was revised down to $63.7 billion.

·     U.S. July exports +1.6% vs June 0.0%, imports +1.7% vs June -1.0%; U.S. July exports $251.66 bln vs June $247.74 bln, imports $316.68 bln vs June $311.46 bln; U.S. July capital goods imports $71.68 bln vs June imports $69.45 bln.

·     U.S. S&P Global August final services PMI at 50.5 (vs flash 51.0) and U.S. S&P Global August final composite PMI at 50.2 (vs flash 50.4).







WTI Crude















10-Year Note





Sector Movers Today

·     In Airlines sector: several major U.S. airlines warned of higher fuel costs in Q3 due to a jump in crude prices in monthly updates: 1) ALK tightens revenue growth guidance to 1% to 2%, from flat to 3% and cuts adjusted pre-tax margin forecast for the quarter to 10% to 12%, down from prior outlook of 14% to 16% on rising fuel cost per gallon; 2) UAL said it now expects fuel cost to be between $2.95 to $3.05 per gallon and expects capacity, operating revenue and cost per available seat mile, excluding fuel, in Q3 to be consistent with the earlier guidance; 3) LUV narrowed its Q3 outlook for revenue per available seat mile (RASM) downward, to fall by 5% to 7%, compared with previous guidance for a drop of 3% to 7% and raised fuel cost outlook.

·     In Pipelines/MPLS: ENB shares fell after buying three separate natural gas distribution companies from Dominion (D) in deal comprised of $9.4B of cash consideration and $4.6B of assumed debt; Citigroup downgraded PAA and PAGP to Neutral from Buy following the stock’s YTD outperformance (>20% vs its Midstream coverage) saying the stock still offers a compelling FCF yield; however, a lack of obvious catalysts could limit further upside from here. CQP was downgraded to Neutral from Buy at UBS after the ~18% rally since mid-June bottom.

·     In Solar and Alternative Power: FSLR was upgraded to equal weight from underweight at Morgan Stanley saying the current valuation premium appears somewhat overdone, without a clear and high-conviction catalyst to the downside. STEM was downgraded to equal weight from overweight at Morgan Stanley as sees an elevated likelihood of risk to the downside in a stock where there is uncertainty around the company’s path to profitability. Morgan said its top pick in group was BE; raised tgts for AMPS, ARRY and cut for ENPH, MAXN, SHLS, SEDG, SPWR, NOVA. AES, CPK, D, ES, FE, NEE among utilities making new 52-week lows today as higher yield weigh on dividend paying sectors (10-yr hit highs of 4.3% after ISM data before paring gains).



·     ACI +2%; after reports C&S Wholesale Grocers, with the backing of Softbank Group, nears deal to acquire stores that Kroger and Albertsons are looking to sell. Note both grocers are looking to sell stores to obtain regulatory approvals for their $25 billion merger https://tinyurl.com/28z75x56

·     AVAV +17%; after reporting a strong beat-and-raise with a large increase in backlog as Q1 adj EPS $1.00 vs est. $0.26, gross margin 43%, on revs $152.3Mm vs est. $128.5Mm, adj EBITDA $37Mm vs est. $18.58Mm; guides FY revs $645-675Mm vs est. $655.88Mm.

·     DAKT +18%; after posting a big sales jump in the recently ended quarter ($235M vs. $171.9M y/y), citing rebounding demand from high schools ahead of football season as well as from the live-events industry.

·     DXCM +3%; after Jefferies noted the company updated its investor deck showing CGM use increases in T2 diabetics with GLP-1 therapy initiation.

·     GTLB +6%; reported a strong 2Q w/ rev growth of 38% above Street at 29%, and FY24 growth guide was raised from 28% to 31% and noted customer spending activity appears to be stabilizing.

·     NXGN +14%; confirms recent reports to be acquired by Thoma Bravo for $23.95 per share, in deal valued at about $1.61B https://tinyurl.com/5n6mefur

·     ROKU +8%; said to cut costs with restructuring charge of $45-65M cutting 10% or workforce; guides Q3 revs (ex-restructuring) $835-$875M vs. est. $828M and adj EBITDA -$40M to -$20M.



·     AAPL -3%; after the WSJ reported China ordered officials at central government agencies not to use Apple’s iPhones and other foreign-branded devices for work or bring them into the office, people familiar with the matter said – WSJ https://tinyurl.com/mt4jnbcc 

·     AMC -19%; after saying it may, through sales agents, offer and sell from time to time up to 40 mln shares of Class A common stock.

·     ASAN -11%; reported mixed quarter as revenue growth decelerated another ~600 bps and FY24 guidance was raised by less than Q2’s beat but made progress towards sustainable positive FCF generation by 2024 (raised year EPS, narrowed revs).

·     OSTK -18%; after saying that Bed Bath & Beyond sales have seen a mid-teen% drop so far in the third quarter, including a low double-digit percentage decline since the business’ new website was launched on Aug. 1.

·     PLAB -10%; after Q3 results missed consensus; reported Q3 EPS $0.51/$224.2M below the consensus $0.52/$230M saying they experienced temporary demand slowdown in some end markets and guided Q4 revenue in the range of $222M-$232M vs. est. $231M.

·     SQ -1%; downgraded to Neutral from Buy at UBS and cut its PT to $65 from $102 on expectations that Square GPV growth and Cash App gross profit growth will continue to slow.

·     TSLA -3%; for worst mover in S&P, pulling back below its 50-day MA of $256.40.


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.