Market Review: August 22, 2022

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Closing Recap

Monday, August 22, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     US equities slid as investors returned to a focus on yields and the Fed. The US 10-year yield pushed back above 3% and the Dollar Index hit $109 intraday as investors shifted to a more risk-averse stance. By early afternoon, the implied probabilities on the Fed’s next move in September stood at 43.5% for a+50bps hike and 56.5% for +75bps. As a reminder, we will hear from Chairman Powell at Jackson Hole later this week.

·     The emerging energy crisis in Europe also weighed as investors fear recession and recession contagion. A Bundesbank statement indicating a view that recession is much more likely than previously seen, along with expectations inflation could peak above 10%, helped to feed the Euro-zone concerns.

·     As we have seen in recent risk-off days, value modestly outperformed growth in Russell 1000 indices but both were solidly in the red. Similarly, Energy, Consumer Staples, Utilities and Healthcare led as S&P sector performers.  More economically sensitive and valuation-sensitive groups Technology, Communications and Consumer Discretionary lagged.



·     Oil futures finish lower but bounces more than $3 off its worst levels on renewed worries about tight supplies and production capacity, while natural-gas prices rallied to fresh 14-year highs. WTI crude declined by -$0.54, or 0.6%, to settle at $90.23 on expiration day after dropping to an intraday low of $86.60. September natural gas rose $0.34 or 3.7%, to end at $9.68 per million British thermal units as speculation regarding Europe’s gas-driven energy crisis more than outweighs plenty of bearish fundamentals. Gold futures fell -$14.50 or 0.8% to settle at $1,748.40 an ounce, its lowest settlement in nearly four weeks, and down a sixth straight session (longest losing streak since early July).


Currencies & Treasuries

·     The 10-year note yield rises above 3%, highest since July 21 while the dollar index (DXY) hit above 108 and the euro dropped back below parity against the US dollar (euro fell more than -0.9% to 0.995) and the dollar/yen to 137.50. U.S. Treasury yields were higher in generally thin trading, as investors awaited a Federal Reserve gathering later this week in Jackson Hole, Wyoming that is expected to reinforce the central bank’s commitment to stamping out inflation. The auction this week of $126 billion in shorter-dated coupons (two-year, five-year, and seven-year notes) has also added to the mild sell-off in Treasuries.






WTI Crude















10-Year Note





Sector News Breakdown


·     Staples & Retailers; ADDYY announces CEO transition; VFC downgraded Outperform to Market Perform at Cowen lowering PT to $50 from $52 as see uncertainty related to management’s guidance and Vans re-acceleration that is implied by consensus estimates into FY24 as digital trends that we track for Vans remain tepid; WEN after the fast-food chain’s restaurants were linked to an outbreak of dangerous E. coli bacteria in an investigation of dozens of cases

·     Auto sector: TSLA after CEO Elon Musk Tweeted Sunday that that price of full-self driving software for its clean-energy cars is about to rise by around 25%. Musk said the cost of FSD will rise by $3,000, to $15,000 per user, when the new version of the software is rolled out; Ford (F) weaker after a jury in Georgia on Friday awarded $1.7 billion to the family of Voncile and Melvin Hill who were killed in a 2014 accident

·     Housing & Building Products; RDFN said home sales dropped 19.3% y/y in July to their lowest level since the beginning of the pandemic, the biggest annual decline in U.S. home sales in more than a year and home sales dipped 4.1% from the previous month, the sixth-straight monthly decline.

·     Casinos, Gaming, Lodging & Leisure sector; AMC tumbled on its first day of trading for its AMC Preferred Equity Units (APE), or Apes, which were declared by the company as a special dividend to class A common shareholders earlier in August; Cineworld (CNWGY) confirms it is considering bankruptcy (last week reports)



·     Energy stock movers; natural gas prices jump early (big surge in Europe with more than 20% pop on more supply concerns. Russia will halt natural gas supplies to Europe for three days at the end of the month via the Nord Stream 1 pipeline, piling pressure on the region as it seeks to refuel ahead of winter. British gas for immediate delivery was up 85 Pence to 450 Pence per therm and the Dutch September contract rose 22 euros to 278 euros per megawatt hour (MWh) as per Reuters early. Utilities outperform other sectors as investors remain involved in defensive assets; in solar; JKS said its manufacturing facilities in Sichuan, China, have been halted temporarily due to province-wide power rationing



·     Bank movers; generally weaker on the day on no specific news other than rising economy fears; banks, insurance names pared losses as Treasury yields rebounded to best levels in about a month; in mortgage banking, Credit Suisse lowered estimates to reflect continued challenging revenue environment as origination revenue continues to decline. This is unlikely to improve in the intermediate term, shifting the focus to cost reductions to improve profitability – said RITM, COOP, PFSI, and RWT are their favorite; crypto related stocks saw weakness along with Bitcoin and Ether pullbacks – COIN, MARA, MSTR slide; FinTech names also with weakness seeing PYPL, SQ, AFRM among pullbacks; credit cards names also slide.



·     Pharma movers; BHC has transferred common shares in an amount equal to approximately 38.6% of the issued and outstanding shares of Bausch + Lomb Corporation to an existing wholly-owned unrestricted subsidiary of the company in continuing process toward separating Bausch + Lomb; TNXP initiates enrollment in Phase 2 PREVAIL study of TNX-102 SL for the treatment of long COVID; TVTX and CSL Vifor announce EMA has accepted for review the Conditional Marketing Authorization application for Sparsentan for the treatment of IgA Nephropathy; GRTS downgraded to Sell at Goldman Sachs as believes will not be financially capable to support its solid tumor cancer vaccine candidate trials long enough to generate clinically meaningful results

·     Biotech movers; ITCI downgrade from Buy to Neutral at Goldman Sachs and cut tgt to $49 from $64 as see early indicators that Caplyta prescription volume growth is slowing and note that ITCI has already exercised primary levers to accelerate volume growth; NVAX received expanded emergency use authorization from the FDA, for people ages 12 through 17; GILD announces first global regulatory approval of Sunlenca, the only twice-yearly HIV treatment option; MRNA to supply 12M doses of Omicron-containing bivalent COVID-19 booster vaccines to Canada

·     MedTech Equipment; TFX will acquire Standard Bariatrics for an upfront cash payment of $170M at closing, with additional consideration of up to $130M payable upon the achievement of certain commercial milestones; PODD has received clearance from the FDA for its Omnipod 5 Automated Insulin Delivery System (Omnipod 5) for individuals aged two years and older with type 1 diabetes (T1D); Citigroup upgraded BRKR to buy and added ILMN to Positive Catalyst Watch ahead of the company’s investor day.

·     Healthcare Services; AMZN is among the bidders for healthcare company SGFY, joining other heavy hitters vying in an auction for the home-health-services provider, according to people familiar with the matter – WSJ


Industrials & Materials

·     Aerospace, Industrial, Transports & Machinery; several changes at Evercore/ISI as UPS downgraded to In Line from Outperform, SNDR upgraded to Outperform from In Line, CNI downgraded to In Line from Outperform and SAIA downgraded to In Line from Outperform all at Evercore ISI while FDX, CHRW added to Tactical Outperform List; VSAT awarded $99M order from U.S. NAVWAR

·     Metals & Materials; AA said a strike at company’s Mosjøen smelter in Norway began on Monday after a collective agreement between Industri Energi and Norsk Industri was not reached by the agreed-upon deadline; Europe’s energy crisis has claimed another victim in the power-hungry metals industry, after Norsk Hydro said it planned to shutter an aluminum smelter in Slovakia at the end of next month, Bloomberg reports; gold miners NEM slide with lower gold prices; lithium producers rebound after recent weakness ALB, LTHM, SQM


Technology, Media & Telecom

·     Hardware & Software movers; PANW and ZM are expected to report earnings after the close ahead of a busy week of results in the software sector; COUP downgraded to Underperform from SP at RBC Capital and trim tgt to $55 from $65 as view Coupa as disproportionately recession-prone, have concerns on the roll-up nature and financial profile looks unattractive; DOCU downgraded to SP from OP at RBC and cut tgt to $65 from $80 as see a long path to turnaround, which is effectively on hold without a CEO and said execution issues and high employee turnover reduce their confidence in numbers; CSVI rises as Private investment firms Centerbridge Partners and Bridgeport Partners to acquire CSI for ~$1.6 bln, or $58 per share; in storage sector this week, earnings results expected form PSTG and NTAP


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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