Mid-Morning Look: September 30, 2022

Mid-Morning Look

Friday, September 30, 2022






DJ Industrials




S&P 500








Russell 2000






U.S. stocks bouncing early but remain on track for a 3rd straight week of losses, with the Nasdaq down 6 of last 7-weeks. Weaker growth data (Chicago PMI) calls into question the pace of interest rate increases by the Fed, though earlier PCE inflation data came in “hotter” so who knows at this point. Regardless, the Fed mantra on rates since the Jackson Hole meeting has been “higher for longer” and no pivot expected still until 2024 which has disappointed markets. Sports apparel retailer and Dow component Nike (NKE) tumbles after issuing bloated inventory figures and lower margins, putting a dent in retail stocks (UA, DKS); cruise line CCL tumbles on wider EPS loss and revs miss and cautious outlook, while semi-chip player MU issues a much lower revenue outlook and lower cap-ex view, which is hitting semi equipment stocks (AMAT, LRCX, KLAC). Not a pretty picture to end a brutal month (major averages all down 7% or more MTD). Treasury yields tick lower, and the dollar is flat after hitting 20-yr highs this week. Oil slips and gold inches higher early.


All in all, investors will be happy to put the month of September behind them as the Dow Jones Industrial Average is set to close out with the worst one-month performance since the Covid-19 selloff of March 2020, with all three major indexes seeing the largest declines in the first nine months of the year since 2002. The Core Personal Consumption Expenditures Price Index, a measure of inflation that the Fed tracks, rose 0.6% month over month for August, a tick above the expected 0.5% (backward looking data, but still not a favorable reading), while Core PCE Y/Y also above views. 


Economic Data

·     Inflation data this morning not what Fed wants to see: U.S. Aug. Core PCE Price Index MoM rose a larger +0.6% vs. est. +0.5% and above previous +0.1% while Aug. Core PCE Price Index YoY +4.9%, above est. +4.7% (prior 4.7%). The Aug overall PCE price index +0.3% vs. July (-0.1%) and on a YoY basis, overall PCE prices rose +6.2% vs. July +6.4%

·     Aug. Personal Spending MoM +0.4% topping the +0.2% estimate and vs. prior month -0.2% while Aug personal income rose +0.3%, in-line with consensus; Aug real consumer spending +0.1% vs. July (-0.1%)

·     Sept. Chicago PMI data weak; reported at 45.7, below the consensus est. 51.8, contraction, and lowest level since June 2020 – hadn’t been under 50 since that same time

·     University of Michigan surveys of consumers sentiment final sept 58.6 (consensus 59.5) vs preliminary sept 59.5 and final aug 58.2; current conditions index final sept 59.7 vs prelim sept 58.9 and final aug 58.6 and consumers expectations index final sept 58.0 vs prelim sept 59.9 and final aug 58.0; the 1-year inflation outlook final September 4.7% vs prelim 4.6% and final August 4.8% and 5-year inflation outlook final September 2.7% vs prelim 2.8% and final August 2.9%







WTI Crude















10-Year Note





Sector Movers Today

·     Transports: in trucking, JBHT and SNDR downgraded from Overweight to Sector Weight at Keybanc saying are incrementally cautious as checks indicate freight activity was seasonally weak through late-September, with limited indication of holiday demand to-date. Further, with imports decelerating, inventories normalizing and spot below contract rates, now see volume and pricing weakness into 2023 (preference for quality KNX, ODFL and out-of-bounds multiples (HUBG, XPO) while cautious on WERN. Susquehanna said for air cargo (FDX, UPS, XPO) Aug sample of Asia air cargo volume was down 13% Y/Y and down 7% on a three-year stack basis. Europe was also down, though a more moderate -6% Y/Y with a slightly worse -8% vs. Aug ‘19

·     Insurance: for TRV, ALL, WRB, CB, RE, RNR – Hurricane Ian made Florida landfall (and now approaching South Carolina), marking the first major hurricane to make landfall since Hurricane Ida in 2021. Current industry loss estimates range from $10b-$30b+ according to Morgan Stanley and think individual company exposures are manageable. While total insured losses for FY22should be < $100b, we still expect strong reinsurance pricing into 2023; VOYA upgraded to Overweight from Neutral at Piper calling it an inflation net beneficiary and says with over-indexing to government, education & healthcare, we believe insulates VOYA relative to peers

·     Pharma movers: AMLX gets FDA approval of Relyvrio for the treatment of amyotrophic lateral sclerosis. Amylyx did not immediately disclose how much it will charge for the drug, to be sold as Relyvrio; ICPT announces REVERSE Phase 3 study of Obeticholic Acid (OCA) in Compensated Cirrhosis due to Nash did not meet its primary endpoint – remains on track to resubmit new drug application (NDA) for OCA in its lead indication of fibrosis due to Nash by year end based on its positive Phase 3 REGENERATE study; BMRN resubmits Biologics License Application (BLA) for Valoctocogene Roxaparvovec AAV gene therapy for severe hemophilia A to the FDA



·     AEM +1%; upgraded to Buy at Citigroup, while cut tgt to $50 from $72 as updated gold models ahead of the Q3 results to reflect updated price forecasts from Citi’s commodity team

·     CRL +4%; upgraded to Buy from Hold at Jefferies as believe scarce NHP supply for preclinical studies is driving most of CRL’s DSA pricing, revenue, and backlog growth.

·     GNRC +2%; initiated at Outperform and $229 at Cowen as see attractive entry as valuation – the stock currently trades at 13.5x NTM P/E which is in-line with its pre-2H20 historical average

·     MU +1%; despite guided next qtr 1Q adj EPS $0.04 +/- $0.10 vs est. $0.64 and revs $4.25B +/- $250Mm vs est. $5.6B and said taking decisive steps to reduce supply growth including a nearly 50% wafer fab equipment cut vs last year – FQ4 inventory grew ~$1B Q/Q

·     WDC +2%; among better outperformers in chip space after MU results



·     BA -2%; the Federal Aviation Administration told Boeing it has not completed key work needed to certify the 737 MAX 7 by December, according to a letter from the FAA seen by Reuters.

·     CCL -16%; sees net loss, breakeven to slightly negative adjusted EBITDA in Q4, after posting larger Q3 EP loss (-$0.65) vs. (-$0.13) and revs of $4.31B miss ests. $5.07B and that advance bookings for 2023 slightly above historical avg (shares of RCL, NCLH move in sympathy)

·     CENX -13%; downgraded to Underperform at Wolfe as the earnings outlook has deteriorated with lower aluminum prices and higher power costs

·     ICPT -19%; announces REVERSE Phase 3 study of Obeticholic Acid (OCA) in Compensated Cirrhosis due to Nash did not meet its primary endpoint

·     NKE -11%; reported choppy Q1 results and provided a downbeat outlook, with EPS of $0.93 was about in-line with consensus, but gross margin of -220bps was about double the YoY decline and guided year gross margin down 200-250bps vs. down 0-50bps prior

·     RCII 16%; cuts Q3 EPS view to $0.85-$0.95 below prior view of $1.05-$1.25 (estimate $1.14) and cuts Q3 revenue view to $1B-$1.02B from $1B-$1.055B (est. $1.03B)

·     UA -5%; along with weakness in sports names like DKS after NKE NA inventory was up 65% YoY


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.