Wall Street under bearish pressure 📉 PepsiCo and Coca Cola extend declines

• Wall Street opened lower and after a momentary rebound, indexes are back to declines. US500 loses 1,1%
• A higher-than-expected CPI reading caused investors to price higher the chances of a Fed rate hike in November
• German footwear maker Birkenstock (BIRK.US) loses another 5% after a 12% sell-off on its IPO day 
• Sell-off at Inmode (INMD.US) shares lose 20% - company cuts annual revenue 
• Broadcom (AVGO.US) leads chip companies with 4% rise
• Pepsico (PEP.US) shares lose again - sell-off in 'Beverages' sector continues
• US treasury 10-year yield has increased by 15 basis points today reaching 4,71% which pressured stocks valuations

CPI inflation data slightly surprised the market but that was enough to make investors spooked by the prospect of another Fed rate hike. Core CPI inflation came in at 4.1% - in line with expectations but the headline reading came in 0.1% higher than expected and flat compared to the previous one. Although the data was not strong enough for the suspension of the cycle to be 'taken off the table' investors reassessed the risk of the Fed making another 'hawkish move' in November.

Market echoes of the conflict in Israel have subsided somewhat but investors will be watching the news closely in the coming days - U.S. Secretary of State Blinken will visit Qatar tomorrow to discuss de-escalation and the complicating situation in the Middle East together. As oil came under pressure today, after the EIA report, it is difficult to see it as a factor - a catalyst for today's declines. It seems that a large part of it is played out by psychology and concerns about the overall health of the economy since no information has emerged that could justify the move. US2000 futures are losing more than 2.8% with a 1,1 retreat on the US500 and US30 and a 0.8% decline of the US100 futures.

Chart of US500 contracts, D1 interval. Source: xStation5

Companies recording the highest volatility among the S&P500 - Coca Cola (KO.US) and Pepsico (PEP.US) came under pressure again. Source: xStation5

Current CPI and core inflation in the US. Source: XTB Research

News from companies

• Beyond Meat Inc. (BYND.US) loses more than 8% after a lower recomendation at Mizuho Securities, which lowered its recommendation to negative from the previous neutral, pointing to macroeconomic pressures on consumer behavior and a lack of breakthrough innovations that could boost product demand
• Carvana (CVNA) is losing nearly 10% after long-term supportive BNP Paribas downgraded its 'buy' recommendation on the company, which provides a platform for the online purchase of used cars, to neutral from its previous 'outperform' rating
• First Solar (FSLR.US) shares lose 4% despite pre-open market gains after Barclays raised its rating on the company to outperform from neutral previously.
• Target (TGT.US) is gaining 2% after a 'Buy' recommendation from Bank of America analysts. The bank saw an improved risk profile for the retailer, also supported by a drop in valuation to slightly more attractive levels. BofA had previously maintained a 'neutral' recommendation on Target
• Inmode (INMD.US) shares are trading down more than 20% after the company lowered its annual revenue forecast between to between $500 and $510 million from the $530 and $540 million previously estimated. The company cited greater customer caution and higher interest rates reducing demand for the treatments and equipment it sells for aesthetic medicine. In recent days, the company noted a sell-off dictated by its presence in the Israeli market, but in a broader commentary reported that the war is not disrupting its logistics routes and its exposure to the Israeli market is less than 1%. The company has no debt and had more than $600 million in cash position in Q2 (vs. $1.8 billion capitalization). It maintains a gross margin in the range between 83 and 85% which, given a P/E ratio increasingly closer to single digits, may indicate a potential 'underestimation' of the quality of the company's business by the broad market. On the other hand, however, demand for its services is highly discretionary and could weaken dramatically during a potential recession.

Pepsico (PEP.US) shares are already losing nearly 3% and have failed to stay above the 38.2 Fibonacci retracement of the March 2020 upward wave. The stock is now nearly 12% below the SMA200 moving average. The Source: xStation5