Mid-Morning Look: October 19, 2023

Mid-Morning Look

Thursday, October 19, 2023





DJ Industrials




S&P 500








Russell 2000






U.S. stocks are generally weaker following a sharp down day on Wednesday, with NYSE breadth showing decliners leading advancers as only a handful of large tech names are helping boost the Nasdaq early. Treasury yields set new decade high levels as the 10-year came within whiskers of 5%, and the 2-yr yield (best reflects s-t rate expectations) rose to 17-yr peak at 5.25%, while investors keep eyes on headlines out the Middle East turmoil. Big negative sessions overnight in Europe and Asia tracking the weakness in U.S. markets yesterday. Focus today turns back to Fed speakers (Chairman Powell speaking later) and corporate earnings with NFLX beat/strong subs/guidance boosting shares. TSLA missed in the auto space, weighing on electric vehicles. Economic data mixed as jobless claims show more resiliency in the jobs market but existing home sales fall to lowest levels since 2019 and Philly manufacturing was weaker. Powell is scheduled to speak at 12 p.m. ET, while other Fed officials including Chicago Fed President Austan Goolsbee, Atlanta’s Raphael Bostic and Philadelphia’s Patrick Harker will speak later in the day. Communications (helped by NFLX), Industrials, and tech leading higher while Discretionary (due to TSLA), healthcare, and REITs the biggest laggard.


Economic Data

·     Weekly Jobless Claims fell to 198M in the latest week from 211K prior (vs. est. 212K); the 4-week moving average fell to 205,750 from 206,750 prior; continued claims rose to 1.734 mln oct 7 week (est. 1.710M) from 1.705M prior week; insured unemployment rate unchanged at 1.2%.

·     The Philadelphia Fed factory index for October fell -9.0 vs. est. -7.0; employment index at 4.0 vs -5.7; the new orders index at 4.4 vs -10.2; future index at 9.2 vs 11.1; priced-received at 14.6 vs 14.8 and the prices-paid index 23.1 vs 25.7.

·     Existing Home Sales for Sept sunk to lowest levels since 2010 at 3.96M unit rate, down -2,0% below consensus 3.89M and below Aug 4.04M. Sept inventory of homes for sale 1.13 mln units, 3.4 months’ worth and median home price for existing homes $394,300, +2.8% y/y.

·     Sept leading economic indicators (LEI) -0.7% (consensus -0.4%).






WTI Crude















10-Year Note





Sector Movers Today

·     Several retail research changes today: BBY was upgraded to Buy from Neutral at Goldman Sachs as it sees the potential for a positive demand inflection to drive upside, primarily through multiple expansion. FL was downgraded to Sell from Neutral at Goldman Sachs as the repositioning of the Champs Sports brand will likely continue to weigh on the comp. GOOS downgraded by two Wall Street analyst; cut to Market Perform at TD Cowen and tgt to $15 and Wells Fargo also downgraded to EW from OW. KTB was upgraded to Buy from Neutral at Goldman Sachs and PTON was downgraded to Underperform from Neutral at Bank America and cut tgt to $4.15.

·     Metals: AA trades to fresh 52-week lows after larger than expected Q3 EPS loss and said a decline in raw material and production costs wasn’t enough to offset lower average realized pricing for alumina and aluminum; In steel space, STLD 3Q23 EPS of $3.47 beats slightly, ended 3Q23 with liquidity ~$3.7B, did not provide numeric guidance for 4Q23. In copper, FCX Q3 EPS beats, helped by higher copper production and sales volumes as avg copper prices were up about 8% y/y.

·     In Solar: more weakness amid much caution on Wall Street overall into earnings, with several lowered price targets this week: FSLR was upgraded to OW at JP Morgan as believes the recent pullback tilts risk-reward favorably for a company that has the best visibility into medium-term growth prospects owing to a backlog that stretches into later this decade. Wells Fargo said they remain cautious on residential solar names (ENPH, NOVA, RUN, SEDG, SPWR) after surveying 100 US resi solar installers which suggests Q3 trends were worse than Q2.



·     LVS +5%; swung to a Q3 profit amid a continued recovery in travel and tourism spending in Macao and Singapore while revs jumped to $2.8B from $1.01B y/y (est. $2.72B) and announced its board authorize $2B share buyback plan.

·     NFLX +15%; after Q3 results, posting global streaming net paid adds 8.76 vs est. 6.139 and sees Q4 paid net adds like Q3 after Q3 EPS/revs topped consensus; said plans to immediately raise prices for its basic plan in the U.S.

·     PTCT +12%; announces Evrysdi royalty agreement with Royalty Pharma for up to $1.5B; PTCT to receive $1B in upfront cash for about 67% of outstanding royalties.

·     SUM +9%; received a $38 a share bid after it agreed to a deal with Cementos Argos last month. https://tinyurl.com/yc73wyk2

·     T +6%; raised guidance for free cash flow to ~$16.5B, up from its prior forecast of $16B after posting mobile subscriber gains and profit for Q3 that topped consensus; said added 468K net monthly bill-paying wireless phone subscribers in Q3, above est. 398K.

·     TSM +4%; posted better results as Q3 EPS $1.29 vs. est. $1.17; Q3 revs $17.28B vs. est. $17.07B; sees Q4 revenue $18.8B-$19.6B vs. est. $18.65B; says gross profit margin is expected to be between 51.5% and 53.5%

·     UNP +6%; Q3 EPS $2.51 tops est. $2.41 though revs fell -10% y/t to $5.94B missing ests $5.96B; said it saw reduced fuel surcharge revenue, lower volumes, and business mix, partially offset by core pricing gains; Q3 operating ratio 63.4%, up 350 bps y/y.



·     BX -4%; shares slid as Q3 distributable earnings fell more than expected due to a decline in asset sales in its real estate business.

·     CCI 4%; falls to lowest levels in 6-years after forecasts FY24 site rental revenue of $6.37B (est. $6.28B) and posted Q3 rev miss of $1.58B vs. est. $1.7B saying the slowdown in spending by telecoms past few quarters has hit demand for cell tower site development services.

·     DFS -5%; after reported Q3 profit of $2.59 missing estimates for $3.19 with Q3 net interest margin (NIM) 11% vs. 11.1% q/q and net interest income (NII) +17% y/y to $3.32B; and boosted provision for credit losses $1.70B vs. $773M y/y.

·     GOOS -9%; downgraded to Market Perform at TD Cowen and tgt to $15 as watches cautious economic news in China & Europe and lack visibility into margin expansion if sales miss expectations. Wells Fargo also downgraded to EW from OW.

·     RTO -15%; warned of weakness in its biggest market North America, citing near-term market uncertainty as forecasts annual adj. operating margin of 18.5%-19% for N.A vs previous guidance of about 19.5%; notes the region accounted for nearly half of its revenue in 2022 (shares of pest control company in the U.S. ROL dropped in sympathy).

·     TSLA -8%; missed the top and bottom line for Q3 while reported a gross margin of 17.9% (vs. est. 18%), compared with 25.1% a year earlier; said Cybertruck deliveries are confirmed to start at the end of Nov, but Musk was cautious on the ramp and near-term profit contribution of the vehicle.

·     VMW -7%; after a report that Beijing is weighing holding up U.S. chipmaker AVGO’s $69 bln purchase of the cloud computing company. The Financial Times reported China’s State Administration of Market Regulation has not signed off on the deal and is likely to delay approving after the White House unveiled tougher chip controls. https://tinyurl.com/27pn2pee


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.