Mid-Morning Look: August 01, 2022

Mid-Morning Look

Monday, August 01, 2022






DJ Industrials




S&P 500








Russell 2000






U.S. stocks rebound off lows after dipping initially on geopolitical headlines and weaker data overseas (in China and Japan), as well as seeing some profit taking after the S&P and Nasdaq posted their best monthly returns since 2020 last week. Stocks teetered between gains and losses early before pushing higher on lower inflation expectations after the Prices Paid component from ISM report fell from 78.5 to 60 – the lowest since Aug 2020. Stocks were pressured this morning as House Speaker Nancy Pelosi is still expected to visit Taiwan in a trip to several Asian nations, with meetings scheduled with government officials according to news reports and raising the prospect of increased tensions between the U.S. and China. China had warned last week against a Taiwan visit by Mrs. Pelosi and threatened unspecified countermeasures should the visit take place. Oil prices tumble more than $5 per barrel earlier on China PMI weakness and Libya output hike. Inflation and the Fed interest rate concerns eased last week after the FOMC boosted rates by 75-bps but followed up with more dovish commentary about futures rate hikes – but hang on as over the weekend Fed’s Kashkari emphasized that the FOMC’s priority is to bring inflation back to 2% even if that meant causing a recession. “We are a long way away from achieving an economy that is back at 2% inflation, and that’s where we need to get to,” he explained. US Treasury yields are lower, down around 2.62%, above Friday’s low at 2.641%. A nice recovery this morning, adding to stellar gains in July where all three major U.S. stock indexes recorded their best months of the year. The S&P 500 and Dow Jones Industrial Average rose 9.1% and 6.7% in July, respectively, their largest monthly advances since November 2020. The Nasdaq Composite outperformed as index rose 12.35% in July for its best month since April 2020. Another busy week of earnings, but many of the mega cap names are behind us (but still over 200 S&P 500 companies due to report in next few weeks).


Economic Data

·     ISM U.S. Manufacturing activity index 52.8 in July (lowest since June 2020) vs 53.0 in June but above estimate for 52.1; prices paid index 60.0 in July vs 78.5 in June; new orders index 48.0 in July vs 49.2 in June (lowest since May ’20); employment index 49.9 in July vs 47.3 in June

·     June Construction Spending fell -1.1% m/m to $1,762.3B vs. +0.2% consensus and +0.1% in May (revised up from -0.1%); construction spending climbed 8.3% Y/Y in June.

·     Manufacturing PMI in the United States decreased to 52.20 points in July from 52.70 points in June of 2022. U.S. Manufacturing sector final PMI for July at 52.2 vs flash 52.3 and final June 52.7. S&P global U.S. Manufacturing sector final output index for July at 49.5 vs flash 49.9 and final June 50.2 and final new orders index for July at 48.6 vs flash 48.6 and final June 48.7.







WTI Crude















10-Year Note





Sector Movers Today

·     Media, Internet; BABA said it would work to maintain its New York Stock Exchange listing alongside its Hong Kong listing after the Chinese e-commerce giant was placed on a delisting watch list by U.S authorities; BMBL downgraded to Hold from Buy at Jefferies but rise tgt to $39 from $30 saying while third part data checks show an acceleration in Q2 revenue and downloads for the Bumble App, still sees several reasons to be cautious at current levels; PUBM and TBLA both cut to sector weight at KeyBanc as anticipates disparate 2Q results from the AdTech sector and lower tgt for TTD to $52 while lower estimates across three stocks; SIRI downgraded to Hold at Pivotal Research after reported an in line 2Q result, reiteration of full year financial guidance, and an unsurprising reduction in ‘22 self-pay net additions forecasts

·     Semiconductors; ON shares slide despite beat; Q2 EPS $1.34 vs. est. $1.26 and revs rose 25% y/y to $2.09B vs. est. $2,01B; said Q2 non-GAAP gross margin expansion of 1,130 basis points to 49.7%; sees Q3 EPS $1.25-$1.37 vs. est. $1.27; sees Q3 revs $2.07B-$2.17B, above consensus $2.02B; Reuters reported the U.S. is considering limiting shipments of American chipmaking equipment to memory chip makers in China including Yangtze Memory Technologies, part of a bid to halt China’s semiconductor sector advances and protect U.S. companies; for MU and other memory names, KeyBanc noted 8Gb DRAM pricing declined 11.8% m/m, and 256Gb NAND pricing was down 8.7% m/m. July DRAM contract pricing for 8Gb DDR4 DRAM declined 11.8% m/m, 29.0% y/y, and 13.1% q/q due to weakening mobile and PCs demand

·     Casinos, Gaming, Lodging & Leisure sector; RCL files to sell $900M of senior convertible notes due 2025; Macau gaming bureau reported July gross revenue from games of fortune in the region was down 95.3% year-over-year to 398M patacas, the lowest since records began in 2009 – but Bloomberg notes was better than analyst expectations for a 97% slump but is still 98% lower than pre-pandemic levels; in ride-share industry, LYFT tgt cut to $16 from $28 and UBER to $40 from $50 at Deutsche Bank despite saying the rideshare demand backdrop for both Uber and Lyft remain strong, with intra-quarter checks highlighting robust momentum in mobility trends; in online betting (DKNG, PENN, CZR), for Massachusetts online sports betting: Lawmakers reach deal including some collegiate betting as session ends https://bit.ly/3cYf6Fh

·     Auto sector: NKLA acquired Romeo Power (RMO) in an all-stock transaction with holders of Romeo Power receive 0.1186 of a share of Nikola stock per share of RMO. In roughly $144M deal; NIO reported deliveries rose in July from a year ago to mark a third-straight monthly increase; said July deliveries increased 26.7% to 10,052 vehicles – that comes after a 60.3% increase in July and a 4.7% rise in May; XPEV reported a 43% jump in July deliveries y/y to 11,524 vehicles; LI reported July deliveries that grew 21.3% y/y to 10,422 vehicles



·     BA +4%; reportedly cleared a hurdle with the Federal Aviation Administration that could allow it to resume deliveries of its 787 airliner, according to reports this weekend

·     BLDR +8%; after Q2 adj EPS $6.26 vs. est. $3.05 on revs $6.92B vs. est. $5.54B saying adj EBITDA increased 80% to $1.5 bln driven by core organic growth (32%)

·     CELH +12%; PEP and CELH announce long-term distribution agreement and investment where Pepsi will make a net cash investment of $550M in exchange for convertible preferred stock (8.5% stake) and PepsiCo will also become preferred distribution partner globally for Celsius

·     CYAD +31% after saying the FDA lifted the clinical hold on its early-stage cancer therapy study after the company made changes to eligibility criteria for study

·     EVOP +20%; GPN agreed to acquire smaller rival EVOP for around $4 billion including debt in an all-cash deal valued at $34 per share, a 24% premium to Friday

·     PKI +5%; Q2 adj EPS $2.32 vs. est. $2.02; Q2 revs $1.23B vs. est. $1.2B; raises FY22 adjusted EPS view to $7.80-$7.90 from $6.80-$7.00 (est. $7.33) and raises FY22 revenue view to $4.60B-$4.64B from $4.42B-$4.50B



·     BEAM -3%; disclosed it received a clinical hold on its BEAM-201 IND for the treatment of relapsed/refractory T-cell acute lymphoblastic leukemia. The FDA will provide the company with an official clinical hold letter within 30 days.

·     BMBL -2%; downgraded to Hold from Buy at Jefferies but rise tgt to $39 from $30 saying while third part data checks show an acceleration in Q2 revenue and downloads for the Bumble App

·     JELD -18%; slides after Q2 adj EPS $0.57 misses est. $0.64 on in-line revs at $1.33B while cuts FY22 core revenue view to up 4%-6% from up 7%-10% and guides FY22 adjusted EBITDA $430M-$450M down from prior $520M-$565M view

·     L -5%; posted a drop in Q2 profit despite a rebound in the hotel business as market volatility weighed on the CNA Financial business; Q2 net income fell to $180M from $754M y/y

·     OTIC -75%; on news it will discontinue development of its experimental Tinnitus treatment OTO-313 after it failed a mid-stage study

·     RCL -10%; as files to sell $900M of senior convertible notes due 2025


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.