Market Review: August 19, 2022

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Closing Recap

Friday, August 19, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks slide, with the S&P and Nasdaq snapping their respective 4-week winning streaks as a jump in the US dollar, Treasury yields and bets for a more aggressive 75-bps rate hike in the September FOMC meeting weighed on investors sentiment heading into the weekend. Growth stocks were among the biggest drags in the S&P (Tech, Comm Services, Discretionary) as Fed speakers ramped up the aggressive rate hike talks this week. Just yesterday, St. Louis Fed President James Bullard said he was leaning toward supporting a third straight 75-bps hike in September, while S.F. colleague Mary Daly said hiking rates by 50 or 75 basis points next month would be "reasonable". After extending a rally that started in July, the S&P touched and failed at its 200-day moving average resistance earlier this week (roughly 4,325), and has since pulled back about 100-points – will momentum continue next week? Or will Bulls jump back in?

·     Several factors in Europe not helping sentiment today including UK consumer sentiment hits record low as inflation soars as the GfK consumer sentiment index sank to a record-low -44 in August from July’s reading of -41. Also, German producer prices jumped at the fastest pace on record in July, surging 37.2% on the year, the biggest rise since records began in 1949, while the m/m rise of 5.3% was also the highest on record.

·     In the week ahead, a few items to watch include: the Federal Reserve is holding its annual economic policy symposium in Jackson Hole, Wyo., and Chair Jerome Powell is slated to speak Friday morning; several tech and retail earnings (NVDA, Macy’s, CRM, ULTA, SNOW, dollar stores and several software names) and more inflation data late week as the personal-consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge, is due Friday morning. Data this week was mixed with several softening views on Housing, while manufacturing showed good (Philly Fed) and bad (Empire) along with improving jobs data.



·     Oil prices reversed higher with WTI crude climbing $0.27 or 0.3% to settle at $90.77 per barrel, advancing for a 3rd straight day, but still posting a decline on the week (down -1.4%) as a strong dollar and concerns about a global economic slowdown weigh amid soaring inflation rates. Baker Hughes reports that the U.S. rig count is down 1 from last week to 762 with oil rigs unchanged at 601, gas rigs down 1 to 159 and miscellaneous rigs unchanged at 2. Russian state-owned energy exporter Gazprom PJSC said it would shut down the Nord Stream natural-gas pipeline to Germany for three days of maintenance later this month. Natural gas prices rise 1.6% to $9.336 mln btus, ending at its highest level since Aug ’08, and finished the week +6.5% having risen six of the past seven weeks.

·     Gold prices slip for a fifth consecutive session, its longest losing run since November last year, sliding -$8.30 or 0.5% to settle at $1,762.90 an ounce amid a strong dollar and rising yields. Gold prices finished lower by around 3% this week. The yield on the 10-year Treasury note was up 10 basis points at 2.98% in early afternoon trading Friday, while the 2-year Treasury yields were also rising amid expectations for further rate hikes.

·     The U.S. dollar index (DXY) hit a five-week high back above the 108 level, posting its biggest weekly gain since April 2020 on market positioning as markets prep for the likelihood that the Federal Reserve will keep hiking rates to battle inflation. No policy meeting until mid-September but concerns remain ahead of the Jackson Hole meeting next week where Fed Chair Powell is expected to speak – and they have been more hawkish over the last few weeks. The euro dropped 0.32% to $1.0055, its lowest since the same date as it nears parity again. In cryptocurrencies, bitcoin fell over 8% below $21,500.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; BBBY shares tumble a 2nd straight day after top investor Ryan Cohen exited his stake, as his RC Ventures sold millions of shares on Tuesday and Wednesday at a range of prices from $18.68 to $29.21, according to a filing with the SEC; FL a bright spot in retail after Q2 adj EPS $1.10 vs. est. $0.80, Q2 sales fell -9.2% y/y to $2.07B vs. est. $2.08B on a smaller comp loss (-10.3%) vs. est. (-13.7%) and names former ULTA CEO Mary Dillon as new CEOP effective Sept 1; ROST missed 2Q sales and GM expectations, but better SG&A led to a bottom-line beat; lowered 2H guidance (F22 EPS lower by 11%) as 2022 EPS guidance lowered to $3.84-4.12 from $4.34-4.58); BKE reports Q2 profit of $1.01 topping the $0.90 estimate but Q2 sales rise 2.3% to $302M, missing estimates of $304.3M

·     Auto sector: GM to resume buybacks; expands program to $5B shares and to reinstate quarterly dividend at $0.09; RIVN says it has made the decision to discontinue the entry-level "Explore" package for its cars, according to a mail sent to customers; BLNK said to deploy EV charges across Chula Vista under five-year deal

·     Housing & Building Products; HD announces new $15B share repurchase program; Wayfair (W) announced a workforce reduction involving approximately 870 employees, or about 5% of global workforce; homebuilders KBH, DHI, BZH, TOL slide, pressured amid another spike in yields (10-yr up around 3%) – also rough week of data with Existing Home Sales, and housing starts for data missing estimates this week – the median existing home sold for $388.1K in July, down at a 25% annualized pace from June

·     Casinos, Gaming, Lodging & Leisure sector; MSGE board of directors has authorized the exploration of a potential spin-off that would focus on its traditional live entertainment and the MSG Networks businesses/ company would create a separately traded public company; movie theatre chains pressured after the WSJ reported Cineworld Group Plc (CNWGY), the owner of Regal Cinemas, is preparing to file for bankruptcy within weeks after struggling to rebuild attendance from pandemic lows ; DASH said it is ending its partnership with WMT next month after more than 4 years of delivering products to customers


Energy, Industrials and Materials

·     Energy, Utilities & Solar; OXY shares outperform as U.S. Regulator FERC authorizes Berkshire Hathaway to buy up to 50% of Occidental Petroleum common stock; MAXN shares slide after posting wider-than-expected Q2 EPS loss ($2.15) vs. est. loss ($1.60) while Q2 revs beat but sees Q3 revs $270M-$290M below est. $305.3M; CGRN shares tumble after the company announced 2.9M share spot secondary priced at $2.75; defensive utilities (XLU) held up better than most sectors with rotation into defensive assets

·     Transports, Industrial & Machinery; DE slipped initially on Q3 EPS miss (before reversing higher) and lower views as Q3 EPS $6.16 vs. est. $6.69, narrows FY22 net income view to $7B-$7.2B from $7B-$7.4B and lowers FY22 operating cash flow view to $5.3B-$5.5B from $5.6B-$6B; OSIS Q4 EPS $1.96 vs. est. $1.95; Q4 revs $332.2M vs. est. $336.4M; sees FY23 EPS $6.02-$6.25 below consensus $6.30; sees FY23 revenue $1.24B-$1.275B vs. est. $1.26B



·     Brokers, Bank, and Exchanges: NDAQ downgrade from Overweight to Neutral at Atlantic Equities on valuation and adjust ests – though continue to have a very positive view of Nasdaq longer-term, based on management quality, consistency of growth in recurring revenues, and its low penetration of addressable market opportunities.

·     FinTech & Payments; HOOD shares slip after saying equities trading volumes fell 33% in July vs last year, while options contracts declined 29% and cryptocurrencies plunged 59% while Monthly active users on co’s trading platform were down 33% compared with last year and more than 6% lower than June (the “meme” stock blow up last 2-days BBBY, GME also not helping); STNE slides after posted a Q2 loss of 489.3 million reais ($94.7M), compared with a profit of BRL526.0 million a year earlier mostly due to Mark-to-market losses from its investment in Banco Inter SA

·     Consumer Finance: AFRM falls after Mizuho said data for July shows further rise in 30+ day delinquencies for two major non-0% APR trusts: 2021- B A 30+ DQ rose to 3.51%, up from 3.03% in June. 2021-A A 30+ DQ rose to 3.37%, up from 3.01% in June (notes earnings are next week 8/25); group was generally lower with broader market; QFIN slips after the company posted lower profits in its second quarter and announced a cut to its dividend.

·     Bitcoin news; rough morning for crypto space with Bitcoin falling around 9% at worst to $21,250 and Ethereum falling over -10% below $1,700, weighing on shares of other related Bitcoin miners, investors, banks including MARA, COIN, MSTR, RIOT, SI, BTBT, BITF, HUT; Stablecoin Tether’s reserves were worth $66 billion at the end of June 2022, down from $82.4 billion at the end of March, the company said. Tether’s holdings of U.S. Treasury bills fell to $28.9 billion in the second quarter, the statement by accountant BDO Italia said, compared to $39.2 billion in the first quarter.



·     Biotech, Pharma & Healthcare Services: CNC, JNJ, LLY, ELV among top gainers in the S&P as healthcare provided some support; AXSM rises after saying the FDA has approved its oral drug Auvelity as a treatment for major depressive disorder; expects drug to be commercially available in the U.S. in Q4, 2022; AXDX 17.5M share Secondary priced at $2.00; ICPT entered into agreements to repurchase $327.9M of its secured convertible debt using cash and equity, which will decrease ICPT’s outstanding debt by 45%; ME announced departure of CFO effective Sept 1st

·     MedTech Equipment; DVA assume coverage with a Buy rating and $117 price target at UBS supported by a favorable risk-reward, which skews 2-to-1 to the upside as have high conviction in DVA’s ability to deliver $200-300M of OI growth next year; TNDM hits 52-week lows


Technology, Media & Telecom

·     Media, Internet; RBLX has poached a META executive, Steve Park, for the newly created role of Asia-Pacific head of public policy, as the videogame company chases growth in the region – WSJ reports; Morgan Stanley lowered its 2023 revenue and EBITDA estimates for META citing falling total engagement and the continued rise of Reels, both of which are believed to be negatively impacting revenue and cut tgt to $225 from $280; PARA renewed its U.S. media rights to the Champions League in a deal valued at more than $1.5 billion over six years, in a deal is more than double the size of its previous contract, Bloomberg reported

·     Semiconductors; AMAT reported JulQ Rev/EPS of $6.52B/$1.94, slightly better than consensus $6.28B/$1.79, and guided OctQ to $6.65B/$2.00 (consensus $6.55B/$1.94) despite continued supply chain challenges impacting its ability to meet demand while GM contracted 180 bps due to higher costs and unfavorable mix; Samsung Electronics said it broke ground at a new semiconductor research and development complex in South Korea, where it plans to invest about 20 trillion won ($15 billion) by 2028 to drive leadership in chip technology

·     Software movers: BILL delivered an outsized beat, reporting revenue growth of +156% Y/Y, handily beating core and upside forecasts alongside announcing stronger than expected FY23 guidance while organic core Y/Y growth remained strong at ~71%; in video games (ATVI, EA, TTWO) Cowen lowering expectations for total industry console video game software & services dollar spending for 2022 from -1% y/y to -7% y/y; TWLO, RNG hit 52-week lows

·     Hardware, Components & Services; GLOB reported better than expected Q2 results, while providing better than expected CY22 guidance (excluding F/X headwinds), as demand for digital/ SMAC based services remains strong; HPQ downgraded to Underweight and tgt to $30 at Wells Fargo as think there is increasing scenario in which shares could see relative underperformance through the remainder of 2022 and into 2023; for PCs (DELL, HPQ), UBS said notebook pricing data indicates ‘Windows’ notebook net pricing in the US was up about 70 bps q/q and +2-3% y/y


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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