Early Look

Monday, October 2, 2023

U.S. futures look to rebound after falling sharply last week on rising rate hike expectations, but shares are flat despite US lawmakers being able to avert a government shutdown. The S&P finished September with a -4.8% decline, the Nasdaq fell -5.8%, the Dow dropped -3.5% and the Smallcap Russell 2000 dropped -6% in September. The U.S. government avoided a shutdown in last ditch effort this weekend. Congress acted swiftly Saturday to avert a government funding gap and push Washington’s spending fights until later this fall. After one last delay Saturday evening over the issue of funding for Ukraine, the final vote came in the Senate with an overwhelmingly bipartisan tally of 88-9. The House version of funding efforts, which keeps the lights on for the government for another 45 days at 2023 spending levels, passed 335-91. Lawmakers now have until November 17 for another compromise before the next deadline approaches. Then an even steeper fiscal deadline awaits Washington on Jan. 1, 2024, when this summer’s debt ceiling deal stipulates that discretionary government spending will be cut by 1% if no overall budget deal in place. Treasury yields start the week higher with the 10-yr yield up 6 bps to 4.633% and the dollar higher as gold slips and oil rips. Most of the Asian region was off today with national holidays in Australia, India, China, and South Korea among others as the Nikkei Index fell -97 points to 31,759, the Shanghai Index was closed at 3,110, and the Hang Seng Index was also closed at 17,809. In Europe, the German DAX is down -28 points to 15,357, while the FTSE 100 drops -29 points to 7,578. Bitcoin prices jumped over 5% to $28,300, more than 6-week highs.

Market Closing Prices Yesterday

·     The S&P 500 Index dipped -11.65 points, or 0.27%, to 4,288.05.

·     The Dow Jones Industrial Average fell -158.84 points, or 0.47%, to 33,507.50.

·     The Nasdaq Composite gained 18.05 points, or 0.14%, to 13,219.32.

·     The Russell 2000 Index declined -9.21 points, or 0.51% to 1,785.10.

Economic Calendar for Today

·     9:45 AM ET                  S&P Global Manufacturing PMI, Sept-F

·     10:00 AM ET                Construction Spending M/M for August

·     10:00 AM ET                ISM Manufacturing PMI for September

·     10:00 AM ET                Fed’s Powell and Harker Participate in Roundtable Discussion

·     1:30 PM ET                   Fed’s Williams Moderates Discussion on Climate Risk

·     7:30 PM ET                   Fed’s Mester Speaks on Economic Outlook

Other Key Events:

·     Chardan 7th Annual Genetic Medicines Conference, 10/2-10.3, in New York

·     Deutsche Bank 31st Annual Leveraged Finance Conference, 10/2-10/4, in Scottsdale, AZ

World News

·     China Sep Caixin Manufacturing PMI at 50.6 vs 51.2 consensus; China Sep Caixin Services PMI 50.2 vs 51.8 previous. China Sep Official Manufacturing PMI 50.2 vs 50 consensus; China Sep Official Non-Manufacturing PMI 51.7 vs 51 previous.

·     In Japan, the Q3 Tankan Survey showed a beat for large enterprises at 9 vs the expected 6, showing an improvement for the second straight quarter and to its highest level since Q2 2022.

Sector News Breakdown

Consumer

·     Tesla (TSLA) released an updated version of its Model Y in China, with minor changes to the vehicle’s exterior and interior. The changes include a new wheel design, according to a post by Tesla’s official WeChat account. The starting price in China for the Model Y, the company’s global best-seller, was unchanged at 263,900 yuan ($36,146).

·     Li Auto (LI) said it delivered 36,060 vehicles in September 2023, representing an increase of 212.7% y/y and setting a new monthly record; it brought its Q3 deliveries to 105,108, up 296.3% y/y; cumulative deliveries of Li Auto vehicles in 2023 reached 244,225 as of the end of Sept.

·     Nio Inc. (NIO) said it delivered 15,641 vehicles in September 2023, increasing by 43.8% y/y; the deliveries consisted of 11,504 premium smart electric SUVs, and 4,137 premium smart electric sedans; delivered 55,432 vehicles in Q3 up 75.4% y/y.

·     XPeng (XPEV) said in Sept had deliveries of 15,310 Smart EVs, representing a 12% increase over the prior month and a 81% increase y/r; G6 deliveries reached 8,132 units in September, which brought cumulative G6 deliveries to 19,381 units; total Smart EV deliveries for the third quarter of 2023 reached 40,008 units, a quarter-over-quarter increase of 72%.

·     Clorox (CLX) upgraded to Buy from Neutral at DA Davidson.

Energy, Industrials and Materials

·     OPEC+ will hold a virtual JMMC meeting on Wednesday.

·     U.S. oil futures posted a climb of nearly 9% in September, but gasoline prices at the pump have declined. The average U.S. price for a gallon of regular gasoline was at $3.793 on Friday, down 5.3c from a week ago, and about a penny less than a month ago, according to GasBuddy.

·     FedEx (FDX) upgraded to Positive from Neutral at Susquehanna.

·     Norfolk Southern (NSC) downgraded to Neutral from Buy at Bank America.

·     SolarEdge (SEDG) downgraded to Equal Weight from Overweight at Barclays.

·     U.S. Steel (X) upgraded to Overweight from Equal Weight at Morgan Stanley.

Financials

·     Wells Fargo & Company (WFC) announced late Friday it has sold to a group of leading investors approximately $2 billion of private equity investments in certain Norwest Equity Partners and Norwest Mezzanine Partners funds.

·     Federal student loan payments return this month for more than 40 million Americans with the end of the pandemic pause. After a more than 3-year break from payments, there could be a messy return for borrowers who collectively owe more than $1 trillion in loan debt.

Healthcare

·     SmileDirectClub (SDC) shares tumble after voluntarily filing for chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of Texas as it plans to implement a “comprehensive recapitalization transaction.”

·     Syndax (SNDX) shares rose after the company said it would announce results from its clinical trial Oct. 2 for Revumenib.

Technology, Media & Telecom

·     Apple Inc. (AAPL) said it will fix app software problems blamed for making iPhone 15 models too hot to handle after blaming a software bug and other issues tied to popular apps such as Instagram and Uber for causing its recently released iPhone 15 models to heat up.

·     Microsoft (MSFT) was added to Q4 2023 Tactical Ideas List at Wells Fargo with a $400 price target noting shares are down -10% since the Q4 report, as early enthusiasm around AI and Azure reacceleration settles a bit and the firm now sees a favorable path forming ahead of an improving ROY model trajectory.

·     Toast (TOST) downgraded to Neutral from Buy at Mizuho and cut tgt to $16 from $30.