"You can't be fat and fast, too; so lift, run, diet and work." -- Hank Stram

Surprise!!

The spate of intense hurricanes that have hit parts of the U.S. population had put the American population down close to a million vehicles. We already knew that. Parts of Texas and Louisiana were seen as ready to replace lost vehicles. However, the thought was that demand might have been suppressed elsewhere due to storms that merely kept people from shopping or thinking about such things. Nobody saw an annualized print of 18.6 million vehicles at the headline for total September vehicle sales across this space coming. Consensus had been for 16.6 million, and the very highest estimate that I even saw was all alone "up" at 17.5 million. Now, just think of the positive impact that this data will have on September retail sales when the Census Bureau releases those numbers on Friday Oct. 13. The rate hike talk will likely intensify at that time, as long as headline CPI, also released that morning, sings along to a mild degree.

So it was that General Motors (GM) , Toyota (TM) , Nissan, Honda (HMC) , Volkswagen (VLKAY) , and Ford Motor (F) all posted significantly improved sales that in aggregate showed a 6.1% year-over-year gain from last September. Curiously, this just happened to be the third September in a row that sales decisively beat expectations. Won't know if that is something to build into future pricing models, unless we see it for another year or two. Oh, and by the way, Ford Motor wasn't quite done with the news cycle.

See this new $100,000 Ford truck? Sick. 

Operational Fitness

Going to the gym today? Probably, or hopefully, I find the time to get there today myself. Ford Motor Company is headed to the gym. It is going to get lean and mean, or at least Ford is going to get a makeover. News broke late on Tuesday that Ford will target $10 billion in incremental material cost reductions, while reducing engineering costs by an additional $4 billion over the next five years. Got your attention? I think it should. We better dig in.

On top of these planned giant-sized savings on the expense side, the firm also plans to re-allocate $7 billion worth of capital from currently existing passenger cars to SUVs and trucks. The focus there will be on the Ranger and the new version of the Bronco. No word yet on which sedans will be cut back or phased out. Think we're done? Think again, slick. Ford will also reduce internal combustion engine capital expenditures by one third, and shift that expense into the firm's developing electric car segment. This will be in addition to the already announced $4.5 billion investment being made by the firm in that space.

Still with me? Good. The firm also plans to reduce or streamline the number of orderable combinations across its various nameplates. This means less choice at the dealership, which will likely go unnoticed for most consumers, but a far smoother process at the plant.

Hmmm. Hot mess, you say? Moving away from what has worked for a century? Moving into gas guzzlers, and electric cars at the same time? Safe to say that One Plan, One Team, One Goal is out. Targeting profitability is in. Improving the firm's "operational fitness" is what CEO Jim Hackett has stated as the corporate goal.

Favorite CEOs

When asked about my favorite CEOs, I usually come up with the same answers as everyone else who is nerdy enough to pay attention here. We all love Jensen Huang of Nvidia (NVDA) , and his ability to recognize what will be pertinent to tech before it is. We all love the cool confidence of Martin Anstice (Lam Research: (LRCX) ), who "very quietly" clobbers you at earnings time. We all love the cool factor that T-Mobile (TMUS) CEO John Legere brings to any televised interview. We are all even starting to like (GE) 's John Flannery, simply because he is not Jeffrey Immelt.

How about the guts and aggression of this guy, though? I don't know if having guts is enough. Sometimes it is, but I know enough to respect aggression when I see it. Ford CEO Jim Hackett is ready to get after it. The stock is up almost 20% since mid-August, and immediately after announcing those robust September sales that ramped up 9% over last September, this guy attacks. Wednesday morning, the stock sits in a severely overbought state, technically. I do not like to chase, and so I will not. There will be a technically inspired profit taking at some point, probably soon. This is where the cogent investor can take advantage of the algorithm. This is where man can beat machine, and both sides walk away happy. A leader this aggressive is a leader, period.

New Ford CEO Jim Hackett.
New Ford CEO Jim Hackett.

Ford's Supply Chain

This strategic shift by the manufacturer will surely impact its supply chain, but how? This is a developing story, and the expected pullback from internal combustion is one that many of these suppliers have been bearish on, pointing toward a lack of consumer demand. There are many such suppliers. Let's take a quick look at two.

What happens to a firm like BorgWarner (BWA) ? While BWA has spread its wings into developing solutions for combustion, hybrid and electric vehicles, the firm has an entire segment devoted to manufacturing products for gasoline and diesel engines. BWA makes and sells things like turbochargers, timing devices, chains, and emissions systems. I would think that this might not be especially good news for a firm like this. BWA has run about 16% over that last month, closing at $51.81 last night. The stock has obviously benefited from the surge in storm-related demand placed upon the industry. That said, the stock looks expensive to me based on fundamentals, pays less than an attractive dividend, and looks extended technically.

Not that BorgWarner could not evolve with the industry -- in fact, it already has to some degree, and has been public about it. I would look at prices in the low-to-mid $50s as a possible short opportunity. Just remember, if you do that, to get yourself long an equal amount of out-of-the money, long-dated calls so if we're wrong, you don't get your face ripped off. January $55s went out last night at $1.45, meaning that you would have to cover your short below $50.25 by the third week in January to break even.

A supplier in a different situation that I will be keeping my eye on is Delphi (DLPH) . I find it interesting to note that Delphi has come off its late summer highs, even though this parts supplier is considered to be a leading system integrator in the industry-wide trend toward vehicle electrification, as well as the move toward autonomous vehicles. This firm's anticipated spin-off of the power-train business, sometime in the first half of next year, is seen as a key to unlocking unrealized value. It would be tough for me to bet my own capital against this one. The stock trades at a realistic valuation as well, making it borderline cheap below the last sale of $99.62.

Love the new Ford GT.

Macro

08:15 - ADP Employment Report (September): Expecting 134,000, August 237,000. The expectation for today's ADP print, if realized, would represent the weakest job creation as per this series since October of last year. Of course, this month may not truly be comparable to months in the recent past, due to the extreme weather conditions experienced in several parts of the country.

09:45 - Markit Services PMI (September-rev): Flashed 55.1. Like its manufacturing counterpart, this series takes a backseat to its ISM cousin. Traders will take a pass on reacting to this item at the time of its release, and keep their powder dry for at least fifteen minutes.

10:00 - ISM Non-Manufacturing Index (September): Expecting 55.5, August 55.3. The expansion of the service sector rebounded in August after showing signs of slowing in July. Overall, the series has stayed on trend and has remained strong, though not showing the rate of headline expansion seen across the manufacturing space. Then again, manufacturing is coming off a much lower base.

10:30 - Oil Inventories (Weekly): API -4.079 million, Last Week -1.8 million barrels.

10:30 - Gasoline Stocks (Weekly): API +4.19 million, Last Week +1.1 million barrels. Though the Tuesday afternoon release of the weekly API data showed a large draw for the headline commodity, WTI crude, it was the much larger than expected build for gasoline stocks that overnight markets took their cue from, as prices for WTI were pushed below $50 a barrel just after the news hit the tape. A confirmation of this data in Wednesday's EIA release could be problematic for the energy sector in equity market trading.

15:00 - Fed Speaker: St. Louis Fed Pres. James Bullard is set to speak at a banking conference from St. Louis. Bullard has been openly dovish of late. That said, St. Louis does not vote on policy until 2019. In terms of potential for market impact, this speech will be overshadowed by Janet Yellen who will immediately follow Bullard at the same conference.

15:15 - Fed Speaker: Federal Reserve Chair Janet Yellen will speak on community banking from St. Louis. Yellen has been hawkish most recently, but has openly admitted to being confused by the forces impacting consumer level inflation and labor markets. For that reason, this speech will be closely watched, as are all of Yellen's appearances. This could possibly be the economic event of the day.

Sarge's Trading Levels

These are my levels to watch today for where I think that the S&P 500, and the Russell 2000 might either pause or turn.

SPX: 2561, 2554, 2441, 2529, 2519, 2512
RUT: 1527, 1520, 1512, 1506, 1499, 1491

Today's Earnings Highlights (Consensus EPS Expectations)

Before the Open: AYI ($2.43), LW ($0.49), MON (-$0.39), PEP ($1.43), RPM ($0.84)

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At the time of publication, Stephen Guilfoyle was long GE, LRCX, although positions may change at any time.