Mid-Morning Look: October 05, 2022

Mid-Morning Look

Wednesday, October 05, 2022






DJ Industrials




S&P 500








Russell 2000






U.S. stocks opened lower Wednesday, pulling back after major averages posted their best back-to-back gains since 2020 as Treasury yields resume their upward momentum following a brief few-day dip, and the dollar bounces as investors assess data showing job growth in September. Markets are back to “good news” is “bad news” for markets, as the September ISM Non-Manufacturing data came in above consensus estimates and last month’s figure (56.7 in September, above ests 56.0, and vs 56.9 in August) while the employment figure rose to its best levels since March and new orders topped last month. Unlike yesterday’s lower-than-consensus JOLTS job openings, which kicked up renewed discussion of the potential for moderating macro data to lead to a less-aggressive Fed, today’s better reading provided fuel for argument of staying the course with further aggressive rate hikes. Even a data point showing that prices paid fell to 68.7 (lowest since January 2021) failed to boost sentiment. More tough talk by Fed officials again today as Fed’s Daly said, “we are committed to bringing inflation down, staying course until we are well and truly done.” The yield on the 10-year Treasury note jumped about 10 basis points Wednesday to around 3.72%. Treasury yields spiking on the better ISM data – 10-yr jumps to 3.77%, up 15 bps and 2-yr up 10 bps to 4.2%. Oil prices rise as CNBC reported in Vienna reports OPEC+ partners — including Saudi, Kuwait, UAE — will take 900,000 to 1 million real barrels of oil off the market per day. The US dollar Index (DXY) extends gains to 1.5% at 111.65, Euro drops 1.4% against dollar to 0.9844, and pound plunges nearly 2% to 1.1253 vs greenback.


Economic Data

·     Jobs data in-line – ADP national employment report shows U.S. Employment increased by 208,000 private sector jobs in September, slightly above the 200,000 consensus estimates (prior month was revised higher to 185K from 132K)

·     Aug trade deficit (-$67.40B), mostly in-line with consensus (-$67.7B) and vs July deficit (-$70.46B from prior (-$70.65B); Aug exports -0.3% vs July +0.3%, imports -1.1% vs July -2.8%; U.S. Aug exports $258.92B vs July $259.59B, imports $326.32B vs July $330.04B

·     ISM Non-Manufacturing for October ISM report 56.7 in September (above ests 56.0) and vs 56.9 in August; prices paid index 68.7 in September vs 71.5 in August; new orders index 60.6 in September vs 61.8 in August and employment index 53.0 in September vs 50.2 in August

·     S&P Global September final composite PMI at 49.5 (vs flash 49.3) and S&P global September final services PMI at 49.3 (vs flash 49.2); U.S. Services final prices charged index for September at 57.7 vs flash 58.3 and final August 59.2







WTI Crude















10-Year Note





Sector Movers Today

·     Auto sector: Morgan Stanley upgraded Ford (F) to Overweight (keeps $14 tgt unchanged) while lowers price tgt for GM to $30 saying earnings mean-reversion is moving from a “risk” to a “necessity” as the Fed continues to curb inflation, hitting valuations and sentiment across the auto complex; AZO announces additional stock repurchase authorization of $2.5B; in auto suppliers, Wells Fargo said most Q3 results will likely be in-line with consensus, and expect more than half their coverage to hold guidance with the remainder guiding near the low end of current ranges. BWA, APTV screen best, partially helped by their high China mix; CHPT announced the launch of the CP6000, ChargePoint’s most flexible and serviceable global AC EV charging solution now available for vehicles of all types and sizes.

·     Chemicals & Materials: RPM said it expects to see sales rise further in Q2 after reaching a record in Q1, seeing sales to grow between 9% to 12%, mainly driven by its consumer segment, after Q1 topped views (Q1 adj EPS $1.47 vs. est. $1.33; Q1 revs $1.93B vs. est. $1.89B); RBC Capital lowered estimates and PTs on LYB, DOW, WLK, CE, and VTNR (they had already lowered on companies that pre-announced in Sep, namely OLN, HUN, CC, and EMN); CC downgraded to Hold from Buy at Argus saying it has been hurt by weaker economic conditions, rising input costs, and declining demand for titanium dioxide, which accounts for more than 50% of its business.

·     Bank movers: British finance minister Kwasi Kwarteng is expected to meet major high street banks later this week, Sky News reported on Wednesday, saying Barclays, Lloyds Banking Group and NatWest were among those due to attend. The Sky report said that the meeting was planned for Thursday; in research, MS downgraded to Neutral from Overweight at Atlantic Equities and the firm also downgraded GS to Underweight from Neutral due to declining investment banking activity, falling equity markets and concern that trading estimates remain too optimistic. Mizuho Financial Group’s securities business will acquire around 20% of shares in Rakuten Securities from its parent Rakuten Group for about 80 billion yen ($554 million), business daily Nikkei reported; SIVB downgraded to Equal Weigh at Morgan Stanley as push out estimates for a capital markets/VC rebound, saying that pressures NII as higher cost sweep accounts are moved temporarily onto the balance sheet.



·     AVTR +1%; upgrade from Neutral to Buy at Citigroup with $28 tgt as believe current valuation appropriately accounts for the M&A revenue shortfall and downside risk to core numbers

·     EMR ; Blackstone is in discussions to buy commercial and residential solutions assets from EMR, Bloomberg reported, saying the deal could be valued at $5B-$10B, depending on assets sold

·     LW +2%; reports Q1 adj EPS $0.75 vs. est. $0.50 and sales in-line at $1.13B and reaffirms FY adj EPS to $2.45-$2.85 vs. est. $2.81 and sales $485M-$535M

·     RPM +2%; said it expects to see sales rise further in Q2 after reaching a record in Q1, seeing sales to grow between 9% to 12%, mainly driven by its consumer segment, after Q1 topped views

·     SLB +2%; energy the best performing sector this morning, lifting energy stocks (APA, COP, OXY, XOM) after oil prices jump on expected production cuts by OPEC+



·     AMLX -5%; after files for offering of 6M shares of stock

·     DNA -8%; files $500M mixed securities shelf

·     EIGR -6%; after saying will not submit an (EUA) application of peginterferon lambda for treatment of patients with mild-to-moderate COVID-19

·     HELE -4%; as Q2 EPS/sales top views but lowers FY23 non-GAAP EPS view to $9.00-$9.40 from $9.85-$10.35 and revs to $2.00B-$2.05B from $2.15-$2.20B and announces restructuring plan, sees annualized savings $75M-$85M

·     LUMN -10%; downgraded to Equal Weight from Overweight at Wells Fargo and cut price target to $8 from $12.50, as we see increasing risks to the dividend in the near term

·     SCHN -4%; guides Q4 adj EPS $0.42-$0.47 well below consensus of $0.90; sees Q4 adj EBITDA to be in the range of $38M-$40M

·     SGH -7%; on mixed results as Q4 adj EPS $0.80 vs. est. $0.65; Q4 revs fell -6.4% y/y to $438M vs. consensus $440M; sees Q1 adj EPS $0.60, plus or minus $0.15 vs. est. $0.76 and sees Q1 revenue $425M-$475M vs. consensus $455.91M


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.