Mid-Morning Look: October 05, 2021

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Mid-Morning Look

Tuesday, October 05, 2021






DJ Industrials




S&P 500








Russell 2000






Is it just a reflex bounce for major averages, or is this the “buy the dip” that markets have been yearning for the last few weeks, as FAANG tries to recover after yesterday’s drubbing, as the NY FANG+ index closed below its 200-DMA today for the first time in 378 trading days and is now down more than 9% from its Sept. 7th record close. Tech weakness Monday was paced by sharp declines in FB (down 15% off record highs) and AMZN (comes into the day with 6-day losing streak) as well as general selling pressure in semis and software too. Energy and Financials are up 14% and flat vs Tech down 7% for the past month. Energy again posting the biggest rise among major S&P 500 sectors on rising oil (WTI crude tops $79 per barrel). In D.C., reports overnight that President Biden is open to help lower price of reconciliation bill, reiterates expectations topline figure will come down to $1.9T-$2.2T from initial $3.5T. Also, Senate Majority Leader Chuck Schumer plans to set up a vote by Wednesday to increase the federal debt limit and avoid defaulting on U.S. debt, which Treasury Secretary Janet Yellen said could cause a recession. Schumer said in a Monday letter that Democrats needed to send a bill dealing with the debt limit to President Joe Biden by the end of the week, ahead of Oct. 18. A strong start to the day for major averages that have now slipped more than 5% off record highs recently.


Economic Data

·     The Institute for Supply Management (ISM) non-manufacturing activity index (services) edged up to a reading of 61.9 last month from 61.7 in August and above ests of 60.0. New orders received by services businesses inched up to 63.5 last month from a reading of 63.2 in August. Supplier deliveries dipped to a reading of 68.8 last month from 69.6 in August., while a measure of prices paid by services industries rose to 77.5 from a reading of 75.4 in August.

·     August International Trade in Goods and Services widens to (-$73.3B) vs. -$70.7B consensus and (-$70.3B) prior month, revised from (-$70.1B) as August exports were $213.7B, $1.0B more than July exports and August imports were $287.0B, $4.0B more than July imports.

·     IHS Markit September final composite PMI at 55.0 (vs flash 54.5) and September final services PMI at 54.9 (vs flash 54.4); final input prices index for september at 74.1 vs flash 74.2 and final august 72.5; input prices index for september at 76.2 vs flash reading 76.3 and final august 74.9







WTI Crude















10-Year Note





Sector Movers Today

·     Consumer Staples; PEP Q3 core EPS $1.79 vs est. $1.73 on revs $20.19B vs est. $19.39M, sees FY core EPS at least $6.20 vs est. $6.24, raised its FY organic rev growth to +8% from +6%; BMO downgraded ACI to Underperform given the risk to their margin outlook based on significantly greater margin expansion relative to key grocery peers and SFM to Underperform as well on risks to outsized gross margin gains and efforts to cut costs despite weak comps; NAPA beat on sales and EBITDA driven by both vols and price mix and guided FY22 sales above consensus while EBITDA was in line with street; AGFY agreed to buy two companies that provide equipment for processing marijuana plants in a deal that could be worth as much as $65 million; Bank of America reinstated coverage with a Buy ratings on EL ($345 target) due to strong innovations, customer loyalty, leverage to reopening, skincare, and China growth, as well as the entry point with shares -10% MoM and PG ($160) given best in-class innovation with global share gains and easier 2H comps, and Neutral on CL ($80)

·     Retailers; COLM downgraded to Neutral from Buy at Bank America and lowering tgt to $108 from $137 as believe supply chain constraints could pressure outlook and believe factory closures are likely to impact F1H22 shipments and lower our F22 EPS; LULU approved $500M boost in buyback program; Cowen lowered its tgt on FL to $61 from $82 and lowered ests on higher costs, lack of visibility and weakness in units sold – which they say will likely be down well into the double-digits into Q3, Q4 and Q1 due to supply chain issues; VFC tgt cut to $83 from $94 as expect management to lower full year sales and gross margin guidance, and are adjusting lower estimates given a lack of visibility and confidence in the name; BBBY reinstated Underperform and $14 tgt at Bank America saying results continue to materially underperform the industry.

·     Semiconductors; Infineon said it expects revenue to grow in the mid-teens in the current fiscal year, and is guiding for a segment result margin of around 20%; the company met its targets for fiscal 2021 of approximately EUR11 billion ($12.78 billion) in revenue, and a margin above 18%, according to preliminary figures released; KeyBanc said recent findings are positive for SYNA (increasing estimates and price target to $230), NVDA (increasing estimates and price target to $260), and TXN (increasing estimates and price target to $250); while negative for QCOM (increasing estimates and lowering price target to $175); and positive for Apple suppliers (AVGO, CRUS, QRVO, and SWKS); MRVL extends data infrastructure leadership with TSMC 3nm platform – enabling unique cloud-optimized silicon solutions with advanced IP and packaging technologies

·     Vaccine news: JNJ submits data to the U.S. FDA for emergency use authorization of a booster shot of its COVID-19 vaccine in people aged 18 years and older as data from late-stage study that found a booster given 56 days after the primary dose provided 94% protection against symptomatic COVID-19 in the U.S. and 100% protection against severe disease, at least 14 days after the booster shot; PFE Covid shot protects people from hospitalization even as effectiveness against infection drops, Lancet study says. Said effectiveness in preventing infection by the coronavirus dropped to 47% from 88% six months after the second dose, while analysis showed that the vaccine’s effectiveness in preventing hospitalization and death remained high at 90% for at least 6-months; MRNA announces European medicines agency authorizes third dose of covid-19 vaccine for immunocompromised individuals aged 12 years and older



·     ABMD +4%; among top gainers in S&P 500 as Jefferies raises numbers after bullish survey

·     BHVN +3%; said it expects Q3 revenue from its Nurtec ODT migraine drug at $136M, up 46% from $93M in Q2 and above ests of $114M – said it has now tallied $336Mn in net product revenue for Nurtec ODT since the initial product launch in March 2020

·     JNJ +0.5%; submits data to the U.S. FDA for emergency use authorization of a booster shot of its COVID-19 vaccine in people aged 18 years and older

·     PSX +3%; energy complex again the leader in the S&P early, with refiners (PSX, MPC) among top gainers as oil prices extend gains, but whole energy complex jumping (MRO, APA, OXY)

·     UAA +4%; initiated Outperform at Wedbush (overall initiated 18 names – outperform ratings on NKE, ADDYY, UAA, POSH, TDUP, RVLV, PVH, SHOO and RL and says the most compelling long-term risk/reward comes from UAA



·     CMTL -12%; with Q4 miss and lower guide as 4Q adj EPS $0.23 vs est. $0.24 on net sales $145.8Mm vs est. $149.7Mm; guides FY22 adj EBITDA $70-76Mm vs est. $80.5Mm

·     EQIX -2%; and DLR downgraded to Neutral at Credit Suisse and make slight model adjustments, coming in slightly below consensus for 2021E/2022E to account for industry headwinds

·     NEM -2%; gold miners fall (AEM, GOLD) in conjunction with sliding gold prices

·     RIDE -7%; downgraded at Morgan Stanley and cut tgt to $2 from $8 saying its agreement to sell its plant to Foxconn for $230M is less than 20% of the firms plant value estimate

·     SYY -0.5%; general weakness in defensive sectors early such as food, utilities, staples, REITs

·     VFC -1%; tgt cut to $83 at Cowen as expect management to lower full year sales and gross margin guidance, and are adjusting lower estimates given a lack of visibility and confidence in the name


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.

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