Mid-Morning Look: October 06, 2023

Mid-Morning Look

Friday, October 06, 2023





DJ Industrials




S&P 500








Russell 2000






U.S. stock futures tumbled before the market open as the September jobs report showed the U.S. added 336k jobs last month, almost “double” the figure that economists expected, raising expectations the Fed will raise rates in November to offset the strong economy and fears of inflation creeping higher again. At last glance, stocks have bounced back, but are still on track for weekly losses. Treasury yields spiked to fresh 16-year highs above 4.89% on the data while the dollar bounced. Two-year note yields rose as high as 5.151%, holding below the 5.202% level hit on Sept. 21, which was the highest since July 2006. Despite the sharp pullback in futures (Spuz), we only traded as low as 4,242.25 this morning, still above its 200-day MA support around 4,230 and was still above Wednesday’s low of 4,235.50 (and have now pared losses even more). Getting deeper into the strong headline monthly jobs data: Nick Timiraos of the WSJ tweets “average hourly earnings in Sept posted its mildest monthly increase since Feb 2022 and its smallest year-over-year gain since June 2021. The index of aggregate weekly payrolls for private-sector workers, which combines hiring, wages, and hours, ticked down in September”. Charlie Bilello tweets “total jobs in the US increased 2.1% over the last year, the lowest YoY growth rate since March 2021. Labor market continues to loosen, slowly moving back to normal.” The jobs data, as expected, is the top story today, but worth noting next week sees the start of earnings season (PEP, DAL, DPZ, UNH and big banks JPM, WFC, C report) as well as key inflation data (PPI and CPI on 10/11 and 10/12 respectively). Technology, Communications and Healthcare sectors turning green while REITs, utilities, Discretionary and Staples the big losers.


Economic Data

·     September Nonfarm Payrolls increased 336,000, well above the est. 170,000 and Private Payrolls added 263,000 vs. est. 160,000. Manufacturing Payrolls 17K vs. est. 5K. The unemployment rate steady at 3.8% vs. est. to fall to 3.7%. September average hourly earnings for all private workers +0.2% from the prior month (below consensus +0.3%) and on a Y/Y basis rose 4.2% vs. est. 4.3%. Data for August was also revised higher to show 227,000 U.S. jobs vs prior reported 187,000.






WTI Crude















10-Year Note





Sector Movers Today

·     In Refiners: few Wall Street firms get more cautious as Mizuho lowered prices targets on VLO, PSX, PBF, DINO, DK, and MPC as sees an increase in earnings QoQ, driven primarily by sequentially higher crack spreads and utilization, though partially offset by capture headwinds and models EBITDA ~3% below consensus with notable ‘misses’ from VLO, PSX and MPC, and ‘beat’ from PBF. Raymond James said they are nudging down 3Q23 estimates — though by a narrow enough margin to call its prior views ‘close enough.’ Said headwinds to capture rates are widespread: (1) narrowing light-heavy diffs (a tailwind in 2Q to a headwind in 3Q), (2) lower secondary products margins, (3) regional dislocations and (4) rising backwardation/timing issues.

·     In Food & Beverage: PEP to kick off earnings next week, while overall sector has been weak given the impact of weight loss drugs Ozempic and Wegovy. The food sector has been crushed in recent days/weeks, CAG, CPB, MDLZ, KHC as well as beverage names KO, PEP, TAP and others. Rising rates impacting spending for consumers is a big theme for retail, food, restaurants. Big box retailers today also hammered with WMT, TGT, COST all weak as well as discount DLTR, DG.

·     In Banks & Brokers: another volatile sector given the spike in Treasury yields and rising rate expectations; earnings season upon us with next Friday kick off for JPM, Citi, PNC, WFC earnings results; COLB was upgraded to Neutral at UBS saying the primary reason is a shift in how it is viewing “core” earnings. FRHC shares fell after CNBC reported the Kazakh financial firm that’s been targeted by short sellers, is now under scrutiny by the Justice Department and federal regulators, https://tinyurl.com/ss8xt535



·     APLS +4%; was upgraded to Overweight from Neutral at JPMorgan and raised tgt to $81 from $60 saying the 3Q Syfovre beat underscores a return to growth for the product.

·     ELF +2%; was upgraded to buy from Hold at Jefferies saying it sees a buying opportunity following the recent valuation pullback in the cosmetics company.

·     OSTK +7%; after insider buy (Director Marcus Lemonis makes another insider buy – late y’day Lemonis Marcus (DIR) Bought (B) 31.8k shares @ $15.67).

·     PXD +9%; after the WSJ reported overnight XOM is closing in on a deal to buy the E&P company in a takeover that could be worth roughly $60 billion https://tinyurl.com/mp3ck3uu

·     SHLS +2%; upgraded at Piper to overweight from neutral following the pullback in shares.

·     SIMO +2%; said Q3 sequential revenue growth is expected to be slightly above the high-end of its original guidance range of 15% to 20%.



·     AEHR -14%; shares tumbled after the company kept its full-year guidance unchanged as it posted higher profit in the fiscal first quarter.

·     AES -6%; was downgraded to neutral from Buy at UBS due to rising interest rates and earnings deceleration at the infrastructure segment driven by coal shutdowns.

·     FRHC -5%; after CNBC reported the Kazakh financial firm that’s been targeted by short sellers, is now under scrutiny by the Justice Department and federal regulators, https://tinyurl.com/ss8xt535

·     LEVI -2%; posted mixed Q3 as EPS beat by a penny but revs $1.51B miss est. $1.54B and said expects FY adj EPS at low end of its range and lowered its FY23 revenue view to “flat to up 1%” vs. prior forecast of up 1.5%-2.5%.

·     PHG -9%; after the FDA said it is unsatisfied with the status of the company’s recall of devices to treat sleep apnea and asked for additional testing.

·     PIXY -212; after announced sale of ~2.3M shares at $1.10 is ~15% discount to yesterday close.

·     TSLA -2%; cut prices of its Model 3 compact sedan and Model Y SUV in the U.S. by about 2.7% to 4.2% to boost demand; Model 3 sedan down by $1,250 to $38,990, while prices of the Model Y long-range variant were cut by $2,000 to $48,490.


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.