Analysis: MKC F COST CBOE VZ

Equity futures are in the red here on Thursday and we have a noticeable dearth of economic data and only a few earnings reports at hand this morning, including one from our own McCormick & Co. (MKC) . That report is just hitting the tape and at first blush the company served up a mixed quarter in terms of consensus expectations but reaffirmed its guidance for the year. As we digest that report and the earnings conference call, we'll have more in-depth comments out later this morning.

Weighing on equity futures this morning is the renewed climb in Treasury yields, no surprise given the parade of Fed heads over the last few days who reiterated the Fed's stated playbook to return inflation to its long-term target. At the same time, the bigger-than-expected cut to oil production by OPEC+ is reviving inflation concerns just as September PMI data point to continued price pressures. Those pressures are leading some companies to announce another round of price increases, as Ford Motor (F) did Wednesday night for its F-150 Lightning Pro electric truck (see below). Such actions more than likely will keep the Fed on its stated course, translating into even higher borrowing costs that are intended to reduce overall borrowing and tamp down the economy.

And like that, the question over whether the Fed will overreach with its efforts is back in the spotlight while the list of companies offering downside guidance relative to expectations grows. The growing conclusion is the market rally we saw early this week was yet another bear market rally ahead of the September quarter earnings season.

AAP Portfolio Quick Hits 

Costco Wholesale (COST) reported total comparable sales for September that beat consensus expectations as reported net sales rose 10.1% year over year to $21.46 billion. Total comparable sales for September climbed 8.5% year over year, beating the 6.3% consensus estimate; stripping out fuel and currencies, Costco's US comp sales rose 8.6% year over year, also beating the consensus forecast of a 7.3% increase. What makes Costco's September figures even more impressive is that these gains in the US follow the 10% comp sales ex-gas, ex-fuel reported for September 2021. As we move through the coming days, COST is one stock where were open to adding more shares.

Reuters reports Ford will raise the price of its F-150 Lightning Pro electric truck by about 11%, putting the 2023 model near $52,000. Reasons for the second price increase since August include production constraints, persistent inflationary impacts and surging material costs as well as "other market factors," as cited by the company. Ford clearly is focused on delivering profits, and while higher auto loan costs run the risk of tempering adoption, we must factor in the extended $7,500 tax credit for electric vehicle purchases into our thinking as it offsets those higher costs. There is also chatter the US Environmental Protection Agency will propose EVs be eligible for renewable fuel credits, another potential offset for those costs.

Cboe Global Markets (CBOE) reported total US options volume reached an all-time high, with volume across all four Cboe options exchanges of 309.3 million contracts in September, up 2% from the previous record in August. Trading in S&P 500 Index (SPX) options reached an all-time high, setting multiple records.

And while most tend to focus on Verizon's (VZ) consumer businesses, the company won a new Enterprise Infrastructure Solutions (EIS) contract to modernize the global communications infrastructure and provide IT services for each of the Department of State's U.S. embassies, consulates and other key locations around the globe. Over the next 10 years that contract is valued at an estimated $1.58 billion. While relatively small compared to Verizon's annual revenue, the win is a reminder the company has opportunities to expand its Business segment, which accounts for about 22% of its revenue and is far stickier than the Consumer business.

October Members-Only Call Today 

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At the time of publication, Action Alerts PLUS was long CBOE, COST, F, MKC and VZ.