Market Review: March 28, 2022

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Closing Recap

Monday, March 28, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. equity markets pushed higher late day, jumping above key technical levels, helped higher after the Financial Times reported Russia is no longer requesting Ukraine be “denazified” and is prepared to let Kyiv join the European Union if it remains military non-aligned as part of ongoing ceasefire negotiations. The headlines came at a time the S&P 500 was testing its 100-day moving average resistance level of 4,545 -and as headlines hit, markets pushed above and held. It marked the 3rd key technical level topped over the last 2-weeks with the 50-day and 200-day recently topped. Momentum clearly to the upside with “fear” all but gone as the CBOE Volatility index (VIX) tumbles yet again (down 9 of last 10 days), as stocks erase all the losses since the start of the Ukraine/Russia conflict and surging in the face of rising interest rates from the Fed.

·     Stocks still finished mixed as the S&P 500, Dow, and Nasdaq look to rally for a 3rd straight week, outperforming on the day but the SmallCap Russell 2000 was little changed behind weakness in energy and financials. Large gains in Tesla (TSLA) up 7% helped boost the S&P and Nasdaq, with shares now up over 40% over the last 2-weeks as large cap tech movers overshadow weaker market breadth ahead of the first face-to-face peace talks between Ukraine and Russia in more than two weeks. Defensive Healthcare, Utilities, REITs, and Consumer Staples outperform, while tech was mixed led by Internet movers. Strong economic data and gains in beaten-down growth stocks have powered stocks higher in recent days, despite the Russia-Ukraine conflict and hawkish comments from Federal Reserve policymakers where rising rates are coming, including a high likelihood of a 50-bps hike in May to fight inflation. Is the latest leg of the incredible stock market rally partially a function as well of end of quarter “window dressing” with PMs positioning into it? Or does the latest rally still have legs?   

·     Stock & Sector movers: TSLA soars to lead the S&P and Nasdaq after its SEC filing says it will ask shareholders to approve another stock split so it can pay a dividend; energy another wild swing as WTI crude prices slide to negate last week’s rise; HAL APA DVN OXY among the worst S&P decliners along with metals FCX NUE, fertilizers MOS CF reversing recent outperformance; financials another weak area after Morgan Stanley downgraded their sector view along with SYF ADS C FITB MTB while BAC BK were down less than peers on Morgan Stanley’s upgrade; Bitcoin, Ethereum jump to lead crypto-leveraged names COIN MSTR RIOT MARA; semis lower after Goldman removed AMD from its Conviction Buy list and downgraded QRVO TER MCHP.

·     U.S. President Biden proposed $5.79 trillion budget for fiscal 2023, estimates $1.15 trillion deficit as budget maintains promise that no one earning less than $400,000 per year will pay higher taxes. White House says federal government will spend about $1 trillion less on pandemic and economic support in 2022 than 2021. Says stronger economy and higher business, individual incomes will boost tax revenues by $300 billion or more than 10% in 2022 from 2021. White House budget calls for those with assets of over $100 mln to pay at least 20% of their income in federal income taxes and says deficits under budget would fall to 4.5 of GDP in FY 2023 and stay below 5% over next decade, vs 12.4% in FY 2021. Budget revives Biden’s proposed increase in U.S. Corporate tax rate to 28% from 21% currently.


Economic Data:

·     February International Trade in Goods: -$106.6B vs. -$107.6B prior, as imports were $263.7B, up from $262.5B in January and exports were $157.2B, up from $154.8B in the previous month. Advance wholesale inventories were estimated to be $814.8B at the end of February, up 2.1% from the prior month and +19.4% from Feb. 2021



·     Oil prices were pressured throughout the day, with WTI crude falling -$7.94 or 6.97% to settle at $105.96 amid bearish demand headlines this weekend: Shanghai entered a two-stage lockdown to control Covid infections, as the Kremlin said peace talks could get under way Tuesday, and OPEC is set to meet Thursday to discuss lifting production targets for May. U.S. Secretary of State Blinking opened the door to removing the terrorist designation for Iran’s Revolutionary Guard Corps as part of an Iran deal. Gold prices finish lower, as April gold slides -$14.40 or 0.7% to settle at $1,939.80 an ounce as the dollar rebounds (DXY back above 99 level), with gold slipping a second straight day.


Currencies & Treasuries

·     The U.S. dollar was broadly higher, as the Japanese yen tumbles to seven-year low as the Bank of Japan continued to ease monetary policy aggressively, widening the policy divergence with the Federal Reserve. The yen fell as much as 2.4% to 125.09 against the greenback, the weakest since August 2015 before paring losses, after the BOJ offered for the first time ever to buy an unlimited number of 10-year notes over the next three days. At the same time, the Fed recently raised interest rates and has said more tightening would follow to curb soaring inflation.

·     Long-term Treasury yields edge lower while shorter maturities rise, further flattening the yield curve as recession fears mount. The 10-year falls to 2.457% from 2.491% Friday, while the two-year rises to 2.315% from 2.299%. In auction news, the U.S. Treasury sold $50B in 2-year notes at a yield of 2.365% vs. 2.355% when issued prior, as the bid-to-cover was at 2.46 and indirect bidders awarded 55.03% of the auction and directs 25.55%. The U.S. Treasury sold $51B in 5-year notes at a yield of 2.543% vs. 2.553% when issued prior with the bid-to-cover at 2.65 vs. 2.60 prior and indirect bidders awarded 60.2% and directs 19.74%.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; FL downgraded from Outperform to Market Perform and tgt cut to $34 from $42 at Cowen as are more cautious on the model following inbound data into March regarding digital traffic and search trends; SNBR downgraded to Neutral from Outperform at Wedbush and cut tgt to $54 from $80 on less favorable recent channel checks, negative demand signals from more aggressive promotions and the deteriorating macro environment; HAS rejects settlement offer from Alta Fox regarding potential proxy contest – Reuters reported; WMT Removing cigarettes in various markets, including some stores in California, Florida, Arkansas and New Mexico – WSJ

·     Auto sector; TSLA shares jumps after company asks shareholders to vote on authorizing additional shares; stock buyback; RBC Capital raised TSLA 1Q22 delivery forecast to 325.5k, +3% vs. prior and ~6% above consensus (expect to be announced on April 2); XPEV Posts Q4 revenue of 8.56 billion yuan ($1.34 billion), up 200% y/y and says delivered 41,751 cars in Q4, up 222%; GM and F tgts cut at Citigroup (to $95 from $100 and to $18 from $23 respectively) after latest data points; NIO announced the start of deliveries of its ET7 sedan; MULN announces today that it expects to report in excess of $65 million in cash and cash equivalents when it files Form 10Q for the Company’s second quarter ending March 31, 2022

·     Consumer Staples; tobacco stocks weak (BTI, PM) after RBC Capital downgraded MO to neutral, while WSJ reported WMT is ending sales of cigarettes in some stores, prompting concern other retailers may do the same; RBC Capital overall with several changes in Staples sector as updated focus list, with top picks in order being STZ, NAPA, KO, EPC, COTY, KDP after adding NAPA and upgrading while removing EL from focus list, due to near-term risks in China, but reiterating our Outperform rating and downgrade MO and CPB to Sector Perform; Piper downgraded BYND to Underweight and cut tgt to $29 from $50 as remain bearish on key fundamentals, as competitive intensity is growing have lower U.S. MCD expectations, and continues to burn cash, with no clear path to positive EBITDA.

·     Casinos, Gaming, Lodging & Leisure sector; cruise lines among early leaders, benefitting from the sharp decline in oil prices, helping discretionary spending related sectors; BJ announced a partnership with DASH, the local commerce platform, to offer on-demand grocery delivery from 226 BJ’s locations across 17 states.



·     Energy stock movers; were among the top decliners in the S&P amid another wild swing for oil prices, this time to the downside as WTI crude prices slide to negate last week’s rise; shares of E&P, services, and majors tumbled with HAL among the worst S&P decliners; MUR shares fell as Keybanc noted Offshore Energy is reporting that the Cutthroat Well in Brazil operated by ExxonMobil (XOM) was a dry hole (notes MUR had a 20% WI in this well); Utilities were generally higher amid a shift to defensive sectors; SWX said its board strongly recommends that stockholders vote for all its director nominees on white proxy card promptly upon receipt; AEE, D, DUK, ED, EIX, ETR, FE, NI, PEG, SO all hitting 52-week highs in utility sector today; solar stocks FSLR, SPWR rose as U.S. Commerce department says will probe whether solar imports from Malaysia, Cambodia, Thailand, Vietnam are circumventing tariffs on products from China



·     Bank movers; AIG announces strategic partnerships with BLK to manage certain AIG and Life & Retirement Assets; BlackRock will manage certain liquid fixed income and private placement assets representing up to $60B of assets on behalf of AIG and up to $90B of assets on behalf of AIG’s Life & Retirement business; in research, banks FITB downgraded at Morgan Stanley to Equal weight while downgraded MTB and Citi (C) to underweight saying war changes everything as fatter tail risks require more capital and liquidity. Higher for longer inflation increases credit risk. An inverted curve could slow growth. ’23 EPS down 3% on higher provisions, less buybacks. Shift bear case to recession. Downgrading industry view to In-Line (upgraded BK and BAC to EW); BCS tumbles after terms show shareholder to sell about 575m shares

·     Bitcoin, FinTech & Payments; Bitcoin leveraged stocks MARA, COIN, RIOT, MSTR, advance as Bitcoin prices top highest levels since late January above $47,500 as crypto rebounds; Ethereum up 7.5% above $3,300; CME launched options on Micro Bitcoin and Micro Ether futures, further expanding its suite of cryptocurrency derivatives offerings.

·     Consumer Finance; ADS and SYF downgraded at Morgan Stanley on rising risks to the subprime consumer and consumer discretionary spend… both are the most exposed names we cover to 1) subprime credit card, at 38% and 22% of loans, and 2) discretionary retail spend. Like other peers, credit card losses at both ADS & SYF have outperformed historical averages over the past 2years, benefitting from unprecedented support from the US government as well as a robust jobs market. However, we are firmly entering a period of normalizing credit costs

·     REITs; UBS said they think the decline in REIT shares of -8.5% to start 2022 has created opportunity. Fundamentals remain strong. Future growth is healthy as the consensus models 2022 FFO growth of 8.7%, 2023 of 5.6%, & 2024 of 7.6%. YTD, 2023 FFO forecasts have increased by 1.3%. But, NTM FFO multiples have contracted by -8.4% due to higher interest rates & macro uncertainty. Our work suggests the market is using forward FFO growth to guide valuation; SLG upgraded to Buy at Truist on fair valuation as believe “return to office” is reflected at current levels and view fundamentals as challenged, highest financial leverage in our office REIT coverage



·     Pharma movers; AMLX tumbles after results from a single clinical trial of an experimental drug for ALS "may not be sufficiently persuasive" to support approval, according to a review of the drug posted Monday by officials with the FDA; CAPR slides after saying that while a Phase 2 study of its lead asset, CAP-1002, as a potential treatment option for hospitalized patients with advanced symptoms of Covid-19 met its primary objective of safety, it is evaluating its next steps for the program

·     Biotech movers; IONS and BIIB said topline results from their phase 1 ALS study of BIIB078 did not meet any secondary efficacy endpoints and did not demonstrate clinical benefit and to be discontinued; VIR and GSK announced that FDA has revised the Emergency Use Authorization (EUA) for Sotrovimab based on FDA’s determination that the currently authorized 500 mg dose is "unlikely to be effective" against the Omicron BA.2 variant

·     MedTech Equipment; STAA rises initially after the FDA approved the company’s EVO/EVO+ Visian Implantable Collamer Lens for the correction of myopia and myopia with astigmatism; rebound early today for MedTech names such as ISRG, DXCM, while services were mixed


Industrials & Materials

·     Aerospace & Defense; Saudi airline Flynas is in negotiations with BA and Airbus (EADSY) to buy aircraft worth $13-$15 billion, the carrier’s CEO told Al Arabiya in an interview on Monday. The carrier has increased the number of its new orders to 250 aircraft, and it is also planning to increase the number of the company’s destinations – Reuters

·     Industrial & Machinery; DE upgraded to Neutral from Underweight, ITW upgraded to Overweight from Neutral and KMT downgraded to Underweight at JPMorgan – add ITW to the Analyst Focus List, along with OW-rated AGCO and removing CAT from the AFL following the recent rally. DE upgraded on belief that the Ag upcycle will be extended through 2023 driven by current geopolitical events and high grain prices; Oppenheimer updates most Industrial Machinery & Flow Control models to better capture an increasingly complex macro backdrop (Russia/Ukraine/China) as favor Americas-weighed revenue, capital deployment optionality, and reasonable valuations with top-pick CSL firmly meets each of these criteria while downgrade ITT on potential 2022 earnings downside

·     Chemicals & Materials; SWM and NP agreed to combine in an all-stock merger valued at about $3B where Neenah shareholders will receive 1.358 shares of Schweitzer-Mauduit for each share held as SWM holders will own about 58% of the combined company, and Neenah 42%; HUN doubles size of share repurchase authorization to $2 billion; MOS, NTR, CF shares pullback after surging this month as fertilizer prices have more than doubled since last year due to a limited supply of the relevant minerals and high energy costs, high global demand and agricultural commodity prices, reliance on fertilizer imports, and lack of competition

·     Metals and mining; gold miners slump tracking prices of the safe-haven metal, which is down more than 1% on a spike in U.S. Treasury yields, a stronger dollar and hopes of progress in Russia-Ukraine peace talks (weakness in AUY, NEM, GOLD, AEM); industrial metals AA, FCX, CENX, STLD, CLF giving back some of last week strong gains


Technology, Media & Telecom

·     Semiconductors; Goldman Sachs with several changes as they upgraded KLAC to Buy with a $430 tgt in the equipment space, while removed AMD from its conviction buy list and downgraded MCHP, QRVO and TER to Neutral from Buy as expects macro headwinds to pressure smartphone sell-through; also not helping semi’s was a report out of the Nikkei this weekend saying AAPL plans to cut production of the iPhone SE model next quarter amid lower demand for consumer electronics

·     Software movers; SE shares fell initially as Shopee, the e-commerce platform of Sea Ltd. is closing its India operations less than a year after expanding into the populous South Asian nation saying it will exit India "in view of global market uncertainties." TUYA narrows Q1 total revenue to range between $54M-$55M from prior $50M-$57M

·     Hardware, Components & Services; AAPL shares slipped initially following a Nikkei report this weekend that the tech giant plans to cut production of the iPhone SE model next quarter amid lower demand for consumer electronics; HPQ agreed to acquire POLY, the conferencing hardware and headset company, for $40 a share, or $3.3 billion including debt, a 53% premium to Poly’s Friday close of $26.20; SONO will replace GTLS in the S&P SmallCap 600 effective prior to the opening of trading on Wednesday

·     Internet, Media & Telecom movers; AAPL’s best Picture Oscar win for “CODA,” the first time a streaming service has won Hollywood’s top award, should lead to a significant boost in the service’s user base, according to Wedbush; media names PARA, DISCA, and advertising stocks IPG, OMC among top decliners in the S&P 500 early


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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