Mid-Morning Look: July 06, 2022

Mid-Morning Look

Wednesday, July 06, 2022






DJ Industrials




S&P 500








Russell 2000






U.S. stocks choppy early, moving between gains and losses ahead of the Federal Reserve FOMC Minutes from last month’s meeting at 2:00 PM. Recall the Fed raised rates by 75-bps in June and expectations remain for hikes of 50-75 bps later this month as they try and slow inflation. Comments will be scrutinized for insights into the state of the economy and the central bank’s efforts to tame inflation through interest-rate increases. Treasury yields bounce though the U.S. 2- & 10-year yield curve remains inverted, widening by 4 bps (2-yr 2.90% and 2-yr 2.86%). Oil prices reverse their overnight bounce, with WTI crude down another 3% below $96 per barrel, after tumbling 9% Tuesday as recession fears weigh heavily on commodity prices. Stocks have edged up in recent days, as some investors shifted their views about the aggressiveness of central bank tightening as economic growth and consumer sentiment weakened…but the S&P 500 is still in a bear market and closed -20.1% from its latest peak Tuesday. Euro extends 20-year losses, drops as much as 1% to $1.0162 vs. the dollar as approaches parity. Overall stock news slower than normal into earnings season start next week.







WTI Crude















10-Year Note





Economic Data

·     ISM report on U.S. Non-manufacturing sector shows PMI 55.3 in June vs 55.9 in May (lowest since May 2020); non-manufacturing business activity index 56.1 in June vs 54.5 in May; prices paid index 80.1 in June vs 82.1 in May, new orders index 55.6 in June vs 57.6 in May; employment index 47.4 in June vs 50.2 in May (lowest since July 2020)

·     S&P Global June final composite PMI at 52.3 (vs flash 51.2); S&P global June final services PMI at 52.7 (vs flash 51.6); and S&P Composite PMI Final Actual 52.3 (Forecast 51.2, Previous 51.2)


Sector Movers Today

·     Retailers; for mattress retailers, Wedbush lowered price tgts for TPX from $34 to $27, SNBR moves from $50 to $33 and PRPL remains at $3.60 saying even though buy-side expectations are low and valuations appear attractive, they do not see a sustained move higher for these stocks until there is evidence that demand trends have bottomed; VSTO acquired Fox Racing, a global icon in performance motocross, mountain bike and lifestyle gear for $540M; OSTK ests lowered at Guggenheim to reflect weaker trends observed in Q2 based on supplier checks and our various data trackers; Wells Fargo said CPRI, TPR, and BBWI remain Top Picks as they remain selective in retail, while also acknowledging that our outlook for off-price is beginning to improve as well

·     Biotech movers; Biotech bounce continues as trades to highest levels since April 21st and up more than 30% from June lows (XBI); BIIB/Eisai announced last night that the US FDA has accepted its BLA for lecanemab under the accelerated pathway, with the application receiving a January 6th, 2023 PDUFA; SRPT said its investigational gene therapy SRP-9001 for Duchenne Muscular Dystrophy demonstrates significant functional improvements across multiple studies; VERU announces New England Journal of Medicine Evidence publication of phase 3 clinical trial results demonstrating that sabizabulin treatment significantly reduced deaths in high-risk hospitalized covid-19 patients

·     Transports: in rails, NSC tgt to $235 from $260, UNP tgt to $220 from $235, and CSX tgt to $31 from $35 at Citigroup saying freight volume in the second quarter was below expectations. Expects freight volume to be under incremental pressure which could continue into 2023 caused by a decelerating macro environment and service constraints; in Brazilian airlines, AZUL and GOL both downgraded at Barclay’s on the back of higher jet fuel prices, unfavorable competitive dynamics, and higher risk aversion

·     Healthcare Services; hospital providers HCA and UHS both downgrade to Underperform at BMO Capital (HCA tgt to $160 from $233 and UHS to $90 from $133) citing simultaneous pressures on the top and bottom lines that combine to reduce earnings growth this year, and likely next, and to a greater degree than currently implied in stock prices for the downgrade; in virtual health space, TDOC receives positive comments by Bank America saying near-term fundamentals continue to improve as BetterHelp MAUs in June grew an impressive 38% y/y and 2% m/m



·     KZIA +5%; said regulators designated its treatment for childhood brain cancer as an orphan drug

·     MERC +11%; upgraded to Outperform at Credit Suisse as believe Mercer faces many positives that range from commodity prices (pulp, lumber, and power), generally favorable FX rates (EUR/USD and USD/CAD) along with a rather attractive valuation

·     MO ; the U.S. FDA has temporarily stayed an order that banned e-cigarette maker Juul from selling its products while the order is appealed

·     RFP +64%; as Canadian paper and packaging company Paper Excellence said it will buy RFP in a deal valued at about $2.7 bln, through its U.S. unit Domtar, paying $20.50 per share

·     RIVN +9%; said that Q2 production levels were in line with expectations and the company expects to deliver on its forecast of producing 25,000 electric vehicles this year

·     RKT +7%; upgraded to Overweight from Equal Weight at Wells Fargo saying while the residential mortgage market remains extremely challenging, they see RKT as a beneficiary of the dislocation

·     TDOC +3%; after positive comments by Bank America saying near-term fundamentals continue to improve as BetterHelp MAUs in June grew an impressive 38% y/y and 2% m/m



·     AMTI -24%; after the company said its lead candidate AMT-101 failed to outperform in combination with ABBV’s blockbuster drug Humira in a Phase 2 trial for ulcerative colitis

·     DASH -9%; along with weakness in UBER (parent of Uber Eats) after AMZN agreed to take a 2% stake in Just Eat Takeaway.com’s U.S. food delivery business GrubHub and will offer its Prime members access to the service for one year

·     KRNT -32%; as guides Q3 revs $56.4M-$59.4M vs. est. $91.4M; says entered period where some customers are working through excess capacity built through 2-yr pandemic, expect to continue for near-term

·     NCLH -6%; announced it will no longer require guests to complete pre-cruise COVID-19 testing unless required by local regulations

·     RADA -12%; said it’s withdrawing its full-year 2022 revenue guidance in light of its pending merger with Leonardo DRS/guides Q2 revenue to about $22.5M below the $36M estimate

·     XOM -2%; oil prices resume downward momentum in recession fears, dragging down several energy stocks in the process (FANG, HES, APA, EOG)


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.