Market Review: August 30, 2022

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Closing Recap

Tuesday, August 30, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. markets fell to 5-week lows and remain on track for monthly losses after today’s reversal to the downside following a strong open. Volatility continues despite light volumes heading into the Labor Day holiday weekend, with major averages now giving back roughly half of its summer rally (which began in July) on tough talk from the Fed on interest rates the last 2-weeks. With this morning’s declines, the Nasdaq 100 has fallen 10% since its 8/15 high, giving up just over 50% of the gain it saw from 6/16 to 8/15. The Dow (32,100), S&P 500 (4,010) and Nasdaq (11,990) all closed below their respective 50-day moving average (MA) levels today, with just the Russell 2000 barely holding above its (1,841). Stocks extend to a 3-day losing streak, reeling since Friday when Fed Chair Jerome Powell made clear he and fellow monetary policymakers are prepared to raise borrowing costs as high as needed to restrict growth and push down inflation that’s currently running at more than three times the Fed’s 2% target, even though doing so will likely mean lost jobs and pain for households and businesses. Minneapolis Fed President Neel Kashkari said yesterday he was "happy" to see the stock market’s reaction to Jackson Hole comments, a sign that they are concerned about the high-flying stock market over the last two months despite their warnings of higher rates going forward after boosting 200-bps this year already.

·     Note the Federal Reserve’s balance-sheet unwind is set to ramp up this week, which means the central bank will finally begin unloading the Treasury bills it started amassing almost three years ago, Bloomberg noted. As part of its broader plan to reduce its $9 trillion portfolio, the Fed will boost its monthly caps for the number of Treasuries and holdings of mortgage-backed securities that it will let mature to $60 billion and $35 billion, respectively, while using its $326 billion stash of T-bills as filler when coupons run below the monthly level.

·     After outperforming on Monday, energy stocks were the biggest drag in the S&P 500 index, falling over 3% with oil prices tumbling over $5 a barrel, but all 11-S&P sectors finished lower, with no place to hide today with stocks, bonds, oil, gold, and precious metals all lower. Economic data mixed bag today with confidence rising, home price gains slowing and a further improving job picture. US listed China stocks tumble on US headlines with Taiwan and audit inspection headlines. All 11-S&P sectors currently lower on the day

·     Federal Reserve speakers continue their “hawkish” outlook on rates and goal to slow inflation after NY Fed Bank President John Williams said the U.S. central bank will likely need to get its policy rate above 3.5% and is unlikely to cut interest rates at all next year as it wages a battle against far too high inflation. "From my perspective right now, I see us needing to kind of hold a policy stance – pushing inflation down, bringing demand and supply into alignment – it’s going to take longer, will continue through next year." "Based on what I’m seeing in the inflation data, and what I’m seeing in the economy, it’s going to take some time before I would expect to see adjustments of rates downward."


Economic Data:

·     US home price growth slowed in June (the latest data released from S&P Core Logic Case-Shiller). The headline national average saw home prices rise 17.96% YoY (well below the +19.90% YoY seen in May) and the 20-City Composite home price index rose 18.65% YoY, well below the 19.20% YoY expected and May’s +20.51% surge

·     Consumer Confidence for August reported at 103.2 vs. est. 98.0 and estimate 97.7; consumer present situation index 145.4 in August vs July revised 139.7, expectations index 75.1 in August vs July revised 65.6 (previous 65.3) and 1-year consumer inflation rate expectations 7.0% in August vs July revised 7.4% (previous 7.6%)

·     JOLTs job openings for July rose to 11.24M from 11.04M and above ests. 10.45M


Commodities, Currencies & Treasuries

·     After posting its biggest gain in 6-weeks Monday, oil prices declined sharply today, with WTI crude down -$5.37 or 5.54% to settle at $91.64 per barrel while Brent fell -$5.78 or 5.5% to $99.31 per barrel. U.S. gasoline futures settle at $2.6944 per gallon, lowest since Feb 18, before Russia invaded Ukraine. Gold prices finish lower, falling -$13.40 or 0.8% to settle at $1,736.30 an ounce, hurt by rising interest rate hike expectations and upward trajectory for yields.

·     Treasury yields jumped, especially on the short end as the yield curve keeps pointing toward a recession, with the 2-year yield hitting 3.5%, its highest levels since Nov 2007 and well above the 0.20% on this day a year ago! Expectations for more sharp monetary tightening by the Federal Reserve recently helped propel yields, with the 10-yr hitting highs above 3.15% before paring gains. Investors generally view an inverted yield curve, in which long-term yields are lower than shorter-term ones, as an indicator of expected economic contraction.

·     The U.S. dollar opened lower, rallied following mixed economic data, only to level off and finish little changed overall, as the euro recovered back above the parity level vs. the dollar (barely). A key survey showed U.S. consumer confidence improved by more than expected in August as the Conference Board said its consumer confidence index rose to 103.2 in August from 95.3 in July following three consecutive months of declines. That lifted the dollar initially. Several ECB policymakers called for decisive and swift rate hikes to combat soaring inflation, as German inflation rose to its highest level in almost 50 years in August.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers: electronics and appliance retailer BBY reported a smaller-than-expected drop in quarterly comparable sales, helped by steep discounts and said sees Q3 sales to decline slightly more than 12.1% in Q3; KIRK shares slump after posts Q2 net loss of $25.7M vs. net income of $0.6M a year ago period and Q2 net sales fell to $102.1M from $114.8M on comp sales loss -8.6%; CONN shares slide as Q2 adj EPS of $0.04 misses the $0.09 estimate and Q2 revs fell -17.1% y/y to $346.6M, below consensus $370.23M while Q2 comp store sales decreased (-22.0%); discount retailer BIG reported a smaller-than-expected Q2 loss on slightly better sales of $1.35B vs. est. $1.34B as sales decline to last year was driven by a comparable sales decrease of (-9.2%); Citi said they are cautious on OLLI going into 2Q EPS this week and are issuing a negative catalyst watch for several reasons; PTON discloses delay in filing of its FY22 10-K; in research, GCO downgraded to Neutral from Buy at Seaport Global and GPS upgraded at Barclay’s

·     Auto sector; LCID filed for a new mixed shelf offering of up to $8 billion as the luxury electric-vehicle maker looks to bolster working capital; NKLA files prospectus supplement relate to issuance, sale from time to time of shares of common stock of up to $400M as per SEC filing; FREY finalized a deal with Nidec where it will supply 38GWh of lithium-ion (Li-ion) battery cells from 2025-2030, with an option to upsize the volume to 50GWh over the period; TRUE said August sales data suggests the auto industry "may be turning the corner." Total new vehicle industry sales in August were expected to be up slightly from July and up 9% from a year ago, while used vehicle sales are expected to be up 4% from July but down 17% from last year

·     Casinos, Gaming, Lodging & Leisure sector; in leisure, KeyBanc said THO July trends vs. 2019 came in above our expectations, while HOG July trends vs. 2019 remain well below 2019 levels, against tight channel inventories and the volatile macro backdrop (inflation, Ukraine, etc.); leisure names including cruise lines (CCL, RCL, NCLH), travel (BKNG, EXPE), casinos (WYNN, MGM) and theme parks (SIX, SEAS) giving back some early summer gains on fears the Fed aggressive actions on rates could subdue consumer discretionary spending.


Energy, Industrials and Materials

·     Energy stock movers; brutal day for energy stocks with oil prices tumbling, as shares of MRO, HAL, OXY, SLB, APA all lower; Gas prices keep inching down with the national average now $3.82 per gallon, oil and wholesale gasoline prices down this morning, pointing to a continued decline for now according to industry data; Gazprom PJSC told French utility Engie SA it will reduce gas deliveries starting Tuesday because of disagreements over some contracts; the WSJ reported XOM has notified Russian officials it will sue the federal government unless Moscow allows the company to exit a major oil and gas project

·     Aerospace & Defense; The Biden administration is preparing to sell $1.1 billion in missiles and radar support to Taiwan, according to an official familiar with the matter, in what would be the largest such transfer in almost two years, Bloomberg reported; RBC Capital initiates coverage of the defense primes, with an OP rating on LHX (top pick), GD and Sector Perform rating on LMT as model top-line U.S. defense budget growth of ~3% through 2027, with a ~5% increase in investment accounts, and after lowering full-year 2022 expectations, believe 3Q22 results could be a positive catalyst and expect funding for nuclear weapons to remain supported

·     Transports, Industrial & Machinery; ROP said it would buy Frontline Education from private equity firm Thoma Bravo in a deal that valued the education software maker at about $3.7 billion, bolstering its software business; the Baltic Dry Index fell for a fourth straight session, down 65 points, or about 6%, to 1,017 points to a more than two-year low with the panamax segment falling by the most in over eight months/Capesize index a fourth consecutive session

·     Metals & Materials; SEE upgraded to Neutral from underweight at JPMorgan saying restructuring efforts are helping offset cost inflation, and the annualized effects of cost savings benefits are likely to mean that its operating cost structure for 2022 is pointed in the right direction; aluminum producer AA said it will curtail one potline or one-third of production capacity at Lista smelter in Norway to mitigate high energy costs for the site

·     Utilities & Solar; FSLR will spend $1.2 billion to expand its solar panel manufacturing operations in the U.S., creating hundreds of jobs including with a new factory in the Southeast; SEDG solar power optimizers and inverters could face an import ban, as the U.S. ITC said Monday it would investigate a few products after a smaller rival alleged patent infringement; the WSJ reported a federal appeals court resuscitated a $200 million bankruptcy claim against PCG, ruling in favor of investment firms that argued the California utility underpaid them



·     Bank movers; rising interest rate expectations as well as higher Treasury yields, which tend to help bank lending margins, continue to fail to lift financials; weaker investment banking revs and slowing trading volumes taking its toll on banks and brokerage; Canadian bank BMO said a slump in equity and debt issuances reduced investment-banking fees as capital-markets revenue fell 20% to C$1.26 billion ($974 million) in Q3 and overall profit missed analysts’ estimates; GS is weighing pivot for its consumer banking arm said Reuters



·     Biotech & Pharma movers: SGMO announced updated preliminary results from the Phase 1/2 STAAR clinical study; JNCE said that a Phase 2 trial evaluating its non-small cell lung cancer treatment vopratelimab did not meet its primary endpoint; LQDA slides after an order in the U.S. District Court for the District of Delaware suit between the co and UTHR issued by the judge in the case – as request to stay decision on ‘793 patent refused


Technology, Media & Telecom

·     Media, Internet; TWTR shares slipped after Tesla CEO Elon Musk filed a second notice to terminate the Twitter deal as he cites comments from whistleblower Mudge Zatko as evidence that Twitter under reported the number of bots; BIDU Q2 EPS $2.36 vs. est. $2.28; Q2 revs fell -5% y/y to $4.43B vs. est. $4.45B; Baidu AI Cloud revenues maintained rapid growth momentum of 31% year over year and 10% quarter over quarter; said its autonomous ride-hailing service Apollo Go had 287,000 rides in Q2 (boosts other US listed China stocks); BABA among a number of U.S.-listed Chinese companies selected by U.S. Regulators for audit inspection

·     Semiconductors: AMD launched its next generation of Ryzen desktop CPUs on Monday, marking its first desktop CPU launch since the Ryzen 5000 family in 2020. The Ryzen 7000 family of processors is based on AMD’s Zen 4 core architecture, which offers a +13% boost in IPC over Zen 3, PCIe 5.0 and DDR5, and is built on TSMC 5nm; AMBA earnings expected tonight; PLAB slides on lower outlook as sees Q4 EPS $0.44-$0.52 on sales $205M-$215M below est. $0.54/$214.3M

·     Software & Hardware movers: VMW extends collaboration with MSFT to make it easier for customers to run enterprise workloads in Microsoft azure; earnings results tonight from CRWD in Internet Security; HPQ and HPE earnings on deck after the close: ZEN 2% shareholder Light Street Capital Mgmt said it would vote against the software company’s $10.2 billion deal to go private and instead proposed that it remain a standalone public company and find a new top boss.


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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