Mid-Morning Look: October 06, 2021

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Mid-Morning Look

Wednesday, October 06, 2021






DJ Industrials




S&P 500








Russell 2000






U.S. stock markets very choppy and volatile to start the day, as the S&P 500 comes into the day with 4-straight daily of 1% moves in either direction, as stocks resumed the downward trend (but bounce off morning lows). Some selling in recent winners such as energy and financials pressure the main indexes initially, while technology tries to bounce after underperformance this week. The slump for stocks came even as a report from ADP showed that 568K private-sector jobs were created in September, outpacing estimates for 425K (ahead of nonfarm payroll data Friday). While the jobs report is good for the economy it also raises chances the Fed continues plan to taper bond buying assets in November. Surging energy prices (oil prices 7-year highs and natural gas 13-year highs into profit taking today) have stoked inflationary pressures. Bitcoin prices surge (along with rest of crypto sector), topping $54,000 as investors look to “safe-haven” plays with stocks under pressure. Traditional haven plays such as gold and silver failed to bounce. Treasury yields slipped off overnight highs (10-yr above 1.57%) to fall below 1.51%. All eleven S&P sectors start the day in the “red” as a stalemate over Republicans and Democrats about the debt limit showed no sign of abating, with President Joe Biden saying that his Democrats might make an exception to a U.S. Senate rule to allow them to extend the government’s borrowing authority without Republican help. Oct. 18th is the date by which Treasury Secretary Janet Yellen said she expects the country to reach its limit on sovereign debt.


Economic Data

·     The ADP Private Payrolls report was strong, as added +568K jobs vs. +428K consensus and +340K prior (revised), while goods producing sector added 102K jobs, while service producing sector added 466K jobs.







WTI Crude















10-Year Note





Sector Movers Today

·     Transports; airlines under fire this morning as Goldman Sachs downgraded AAL to Sell from Neutral and cut tgt to $18 from $19 and downgraded JBLU to Neutral from Buy and lower tgt to $17 from $20; Wolfe also lowering ratings on ALGT, DAL, HA to Peer Perform from Outperform while the recent rise in oil prices also a headwind for airlines; in rails, Susquehanna remain Positive on larger U.S. rails NSC, CSX, and UNP and willing to capitalize historically high valuations to gain exposure against an inflationary backdrop; FDX pressured after Cowen trims tgt to $283 from $297 citing higher labor and fuel costs (noted In September, FDX posted a 7% drop in quarterly profit and cut its FY forecast as labor shortages crimped earnings, slowed package)

·     Metals & Materials; Goldman Sachs upgraded shares of CLF, CMC while downgrades X, NUE saying they see opportunities for investors to get tactical. They express a more cautious view on the sheet steel space, with a downgrade of X to Sell on higher capital intensity driving negative free cash flow momentum, and NUE to Neutral from Buy following outperformance, and an upgrade of CMC to Neutral following relative underperformance and the lack of HRC exposure and highlight underappreciated idiosyncratic opportunities in the space with upgrade of CLF to Buy from Neutral (remains Buy rated on STLD, SCHN); gold miners fail to rally as defensive play despite the stock market pullback; AEM was upgraded to Outperform at RBC Capital saying it is now also benefiting from lower costs, and improved balance sheet

·     Semiconductors; NVDA has offered concessions in a bid to secure EU antitrust approval for its $54 billion acquisition of British chip designer Arm Holdings (deadline is 10/27), though the EU competition enforcer did not provide details of the concessions in line with its policy; STX was downgraded to Equal-weight at Morgan Stanley saying they are bullish on the long term outlook for STX and the HDD industry, but notes it isn’t immune to cyclical demand weakness, and see early signals pointing to moderating cyclical demand into year end and 2022; Cowen noted yesterday’s Infineon message was positive for the group that includes STM, NXPI, and CREE as they raise FY’22 estimates in line with Street on strong; MCHP collaborated with Acacia, now part of CSCO, to enable market transition to 400G pluggable coherent optics for data center routing

·     Restaurants: RBC lowered estimates on EAT, TXRH to reflect a more cautious stance on margins, and sees potential for further choppiness in casual dining as they expect cost pressures to come into greater focus as the sector’s top-line trend improves from August’s deceleration; Loop initiated Buy ratings on CBRL, PLAY, DPZ, PZZA, WEN, MCD, TXRH and Hold ratings on CMG, QSR, SHAK, YUM, WINGStephens started NDLS at OW with an $18 PT as it is positioned to accelerate its unit growth, advance its average unit volumes, and expand its restaurant margins now and over the coming years; TACO signed its first deal to expand to North Carolina

·     REITs; RBC Capital boosted estimates and price targets for Residential REITS given final September rent figures, which continued to advance at a rapid pace across most of the U.S. Firm said they continue to see the most upside for the single-family rental names (AMH/INVH), while think ESS is the most attractive apartment company and SUI is the most attractive MH/RV name; NLY and AGNC downgraded to Neutral from Overweight at Piper given they see increasing rate volatility over the next several months, especially as we approach a potential tripping of the debt ceiling in late October/early November



·     ACER +9%; after it and its Swiss partner Relief Therapeutics said the FDA has allowed it to file a new drug application for its experimental drug, ACER-001, to treat urea cycle disorders

·     AYI +13%; Q4 adj EPS $3.27 vs. est. $2.85; Q4 revs $992.7M vs. est. $963.96M; says they improved our operations and delivered solid performance in a challenging environment and are entering FY22 from a position of strength

·     AZO +1%; strength in auto space, while company also to buy back up to additional $1.5B of stock

·     PLTR +4%; announced it will be progressing to the next phase of the Distributed Common Ground System-Army Capability Drop – 2 contract worth $823M

·     VMC +2%; Loop Capital upgraded construction aggregates companies MLM and VMC to Buy from Hold – ahead of potential infrastructure bill in D.C.

·     VYGR +55%; announces license option agreement with PFE for next-generation tracer AAV capsids to enable neurologic/cardio gene therapy programs



·     AAL 5%; Goldman Sachs downgraded to Sell, expecting shares to underperform as its relatively higher operating leverage weighs on its profitability recovery

·     CDW -5%; downgraded at Morgan Stanley due to near-record valuation and ~45% revenue exposure to PCs

·     DNA -19%; falls on negative “short” report by Scorpion Capital

·     GOGO -10%; downgraded to underweight at Morgan Stanley with competitive landscape expected to pressure valuation and free cash flow over coming year

·     HYZN -4%; pressured after being named as new “short” call by Iceberg Research citing trouble at its parent company, Singapore-based Horizon

·     MANU -14%; as 9.5M share Spot Secondary priced at $17.50

·     MRNA -4%; Sweden’s Public Health Agency announced on Monday its decision to use the PFE COVID-19 vaccine for children aged 12-15, opting against the MRNA vaccine

·     STX -4%; downgraded to Equal weight at Morgan Stanley saying they are bullish on the long-term outlook for STX and the HDD industry, but notes it isn’t immune to cyclical demand weakness

·     TAK -6%; after announcing that a safety signal has emerged in its Phase 2 studies of TAK-994, and as a precautionary measure, the company has suspended dosing of patients and has decided to stop both Phase 2 studies early


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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