Mid-Morning Look: October 26, 2023

Mid-Morning Look

Thursday, October 26, 2023






DJ Industrials




S&P 500








Russell 2000






U.S. stocks are down for the 6th time in last 7-days for the S&P, while the tech heavy Nasdaq underperforms with earnings/guidance concerns taking its toll on large cap names as GOOGL extends yesterdays near -10% decline after slowing cloud rev growth and META falls -4% after better results but warned of slowing ad rev concerns. Small caps are seeing a modest bounce after tumbling this month. The tech-heavy index entered a correction Wednesday, closing more than 10% from its July high. Economic data plentiful this morning as faster-than-expected economic growth (GDP) added to concerns that the economy is running hot, rising at a seasonally-and inflation-adjusted 4.9% annual rate and topping economists’ estimate of 4.7%. In central bank news, the European Central Bank snapped a 15-month streak of rate hikes by keeping borrowing costs on hold at a record high (4.5%), echoing the recent actions of the Federal and BoE. The FOMC is expected to keep interest rates on hold at 5.25%-5.50% at its upcoming meeting but is viewed as unlikely to soften its hawkish bias. Treasury yields slip with the 10-year down at 4.91% (off high 4.99%). Dow Transports extended losses to 13,700, lowest levels since early June, down 6 of last 7 days (like SPX), dragged lower today by UPS lower forecast in package delivery and LUV earnings. More big-name earnings tonight with AMZN, INTC, Ford among others. Treasury yields on the lows, dollar rises, gold and oil prices lower to start.


Bernstein strategy notes this morning, for the 29% of S&P 500 companies that have reported Q3 results so far, earnings are up +11% – but without the contributions of the ‘Magnificent 7’ stocks, index EPS growth would drop to -8.6%. The Japanese yen weakened to hit a fresh one-year low of 150.77 per dollar in Asia and was not far off the 32-year low of 151.94 it touched in October last year, which led to Japanese authorities intervening in the currency market. the yen is last at 150.43 on day (up 12.5% last 6-months and YTD +14.75% vs. the Buck)


Economic Data

·     Q3 Gross domestic product (GDP), a measure of all goods and services produced in the U.S., rose at a 4.9% annualized pace, up from the 2.1% pace in Q2 and above the economists’ expectations for a 4.7% acceleration. U.S. advance Q3 PCE price index ex-food/energy/housing rose +1.8% vs Q2 +3.1% and advance Q3 PCE services price index ex-energy/housing +3.6% vs Q2 +3.5%.

·     Weekly Jobless Claims rose to 210K in the latest week vs. est. 208K and prior week 200K; the 4-week moving average rose to 207,500 from 206,250 prior; continued claims rose to 1.790M from 1.727M prior week and Us insured unemployment rate unchanged at 1.2%.

·     Durable goods orders advanced 4.7% in September to $297.2B, compared with the 1.7% increase expected and the 0.1% decline (revised from +0.2%) in August. September Retail Inventories (Advance) +0.9% to $800.7B vs. +0.5% prior. On a Y/Y basis, retail inventories grew 5.6% in Sept.

·     Wholesale Inventories 0.0% M/M to $900.6B vs. 0.1% consensus, compares with -0.1% in August.

·     September Advance International Trade in Goods posts a deficit of (-$85.78B) vs. (-$86.20B) consensus and (-$84.27B in August).

·     Sept Pending Home sales index rose +1.1% vs. consensus -1.8%; Sept Pending Home sales -11.0% from Sept 2022.







WTI Crude















10-Year Note





Sector Movers Today

·     In Toy retailers: MAT shares declined despite a top and bottom-line quarterly beat thanks to success of its “Barbie” movie as sales rose 9% y/y to $1.92B (est. $1.84B) and raised its year EPS view – did note sales of its American Girl segment, however, dropped 13%. HAS tumbles on guidance as expects 2023 revenue to tumble 13% to 15% compared to a prior forecast of a 3% to 6% decline after Q3 revenue declined 10% y/y to $1.50B 9vs. est. $1.64b)

·     In Semiconductors: KLAC reported F1Q24 EPS that was 6% above consensus on revenue that was 1% above, and it guided F2Q EPS 6% above consensus on revenue that is 2% above. MXL tumbles as missed 3Q ests and guided 4Q23 well below expectations as heavy channel inventory digestion in the Broadband and Connectivity segments clouds near-term visibility. STM Q3 sales and gross margin beat expectations and its CEO gave upbeat comments on automotive demand next year; did warn Q4 revs would fall -3% y/y due to weaker demand from some industrial clients, particularly in China. TER Revenue and non-GAAP EPS came in at the upper end of the guidance range, modestly above ours/cons. estimates on sequential growth in semi test and robotics; Q4 guidance is below consensus with revenue expected to decline 5% QQ at the mid-point.

·     Payment sector was crushed on Wednesday, Mizuho said Europe’s Worldline’s warning of a “macroeconomic deterioration” in core geographies like Germany hurt the entire FinTech sector pre-market. Mizuho views the worries as overblown for the following reasons: Visa specifically did not call out a recession in its initial FY24 guide, which it provided yesterday. Firm also said stocks like AFRM and SQ have little to no exposure to Germany & Europe. Goldman Sachs weighed in as well saying underperformance in US payments stocks Wednesday reflects flight to quality away from acquirers amidst concerns around slowing trends in Europe. Goldman highlights GLBE, RSKD, NVEI and FIS as most directly exposed to weaker European trends.

·     In Industrials: CARR Q3 EPS topped consensus by $0.10 and raised FY23 adj eps forecast from $2.55-$2.65 to about $2.70 and reported 5% yoy increase in Q3 sales and 3% yoy increase organic sales; LII raises FY23 adjusted EPS view to $17.25-$17.75 from $15.50-$16.00 and upped its FY23 revenue view to up 5% from up 2%-4%, consensus $4.81B; FTV downgraded from Buy to Neutral at Bank America after weaker Q3 core revenue growth of 2.5% y/y and organic volumes declined (1.7)% y/y with a 4.2% benefit from pricing. HON 3Q EPS $2.27 beat est. but sales missed at $9.21B vs. est. $9.24B, missed segment EBIT by 1% in qtr and narrowed year outlook.



·     EDR +21%; the talent agency and sports company run by Ari Emanuel, said Wednesday it would start exploring strategic alternatives for the company, which could mean a potential sale. https://tinyurl.com/bp62hxdx

·     F +1%; and United Auto Workers (UAW) union negotiators reached a tentative labor deal after a six-week strike, UAW President Shawn Fain said, agreeing on a 4-1/2-year contract that would provide a record pay boost. The union is still in striking GM and Stellantis.

·     FLEX +8%; said it is spinning out its remaining 51% stake in NXT in an exchange worth roughly $6 a share; and following generally strong Q2 results, Flex guided Q3 revs $6.7B at midpoint, or down ~10% q/q and $1.3B below Street, on incremental weakness.

·     MRK +3%; beat consensus on top and bottom line, with sales beats in Keytruda and Vax portfolio (ex-Gardasil), raised its topline guidance and lowered EPS guidance after recent ADC deal.

·     NOVA +16%; posted a top and bottom line miss for Q3 (larger EPS loss), but shares rebounded as company backs FY23 adj Ebitda outlook.

·     NOW +5%; reported a quarterly bounce in revenue on strong subscription sales up 27% to $2.2B and an aggressive push into AI and overall revs rose 25% to $2.2B y/y and noted 83 new transactions worth more than $1 million in net new annual contract value.

·     ORLY +4%; reported 3Q results ahead of consensus expectations on the top and bottom lines, Q3 comps of +8.7% were ahead of consensus’ +5.6%, operating margins of 21.3% (+20 bps y/y) were slightly ahead of consensus.

·     PI +30%; soars as Q3 adj EPS $0.00 vs est. ($0.10) on revs $65.005Mm vs est. $64.75Mm, adj gr mgn 50.5%, adj EBITDA $300k vs est. ($2.665)Mm; guides Q4 revs $65.5-68.5Mm vs est. $65.97Mm, adj EBITDA ($0.9)Mm – $0.7Mm vs est. ($1.733)Mm.



·     ALGN -23%; after Q3 EPS and revs fell short of consensus saying people are cutting back on dental and orthodontic visits, prompting them to guide Q4 revs $920-940Mm below est. $1.02B.

·     CMCSA -7%; mixed Q3 results as loses 18K broadband customers vs. est. +3.6K; said overall revs $30.12B beat est. $29.6B but ad revs fell -8.4% y/y.

·     EW -7%; delivered in-line results for Q3 sales/EPS, but its TAVR business missed despite posting double-digit ex-FX sales growth in US/Int’l and Q4 guide now implies FY23 guide to be at the low-end of the range.

·     HTZ -12%; shares tumble as Q3 adj EPS $0.70 misses the $0.77 estimate while revs rose 8.3% y/y to $2.7B, in-line with consensus and net income margin of 23% was the same y/y.

·     MXL -17%; as missed 3Q ests and guided 4Q23 well below expectations as heavy channel inventory digestion in the Broadband and Connectivity segments clouds near-term visibility.

·     UPS -5%; Q3 adj EPS $1.57 vs. est. $1.52; Q3 revs $21.06B vs. est. $21.45B; maintains CAPEX spending at about $5.3B; but cuts FY23 revenue view to $91.3B-$92.3B from about $93B and below consensus $92.76B.

·     WHR -11%; lowers FY23 adjusted EPS view to about $16.00 from $16.00-$18.00 prior and cuts FY23 cash provided by operating activities view to approximately $1.1B from $1.4B and cut its fs free cash flow estimate.


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.