Market Review: October 12, 2022

Auto PostDaily Market Report

Closing Recap

Wednesday, October 12, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Riding a five-day losing streak, US stocks managed to brush aside mixed PPI results and an OPEC cut to oil demand forecasts to stay slightly in the green at midday then stage a brief rally and reversal back to flattish after the release of Fed Minutes was pretty much in-line with market expectations. We still have tomorrow’s CPI report to navigate, but today’s PPI had something for everyone. The headline figures came in a little high, core was generally in-line, and in absolute terms the reading was the lowest in over a year. In the end, the S&P fell a 6th straight day.

·     Data-wise, it is interesting to note (per @bespokeinvest) only 43% of the last 200 trading days have been positive. Only a few other periods have seen such a persistently negative trend. At some point we will have fully discounted Fed rate hikes, a potential recession and weakening earnings, but for now we remain in a negative trend. The S&P 500 has been down 14 of the last 17 trading days. The Nasdaq 100 was up 13 years in a row entering this year, generating an annualized return of over 23% during those years (down -33% YTD). This is the longest S&P 500 correction (peak to trough) since the March 2009 low at 281 days and counting.

·     The sector performance picture was also mixed today. Energy (XLE), Consumer Staples (XLP), Consumer Discretionary (XLY) and Financials (XLF) led as gainers, while Utilities (XLU), Real Estate (XLRE), Materials (XLB) and Industrials (XLI) paced the decliners. Growth outperformed value, but both were muted with the market in absolute terms ahead of tomorrow’s data


Commodities, Currencies & Treasuries

·     Oil prices fell a 3rd day, with WTI crude down -$2.08 or 2.33% to settle at $87.27 per barrel, after rising 16% last week following OPEC+ production cuts (when prices rose 5-straight days). Gold prices fell -$8.50 or 0.5% to settle at $1,677.50 an ounce as a rise in U.S. Treasury yields and strength in the dollar prompted prices to give back most of their gain from a day earlier. The US dollar index (DXY) was little changed at 113.30, but not after the buck hit fresh 24-year highs against the Japanese yen above 146. Treasury yields dipped slightly with the 10-yr down at 3.91%. Investors just awaiting the CPI inflation reading tomorrow.


Economic Data:

·     Sept Producer Price Index (PPI) headline reading rises +0.4% m/m vs. est. +0.2% and rises +8.5% y/y vs. estimate for increase of +8.4% y/y (higher on both counts) and core PPI (ex food & energy) rises +0.3% m/m vs. est. to rise +0.3% and y/y rose +7.2% vs. expected rise +7.3%.


European Markets

·     In a speech in Washington on Tuesday, UK Bank of England Governor Bailey declared that pension funds had three days left before the BoE pulls back on market intervention. Bailey said intervention in the markets will be temporary and they will be out by the end of the week. Hopefully the gov’t is working on a scheme right now. He also added that policy was now operating in opposite directions. The pension fund industry has been calling on the BoE to extend the bond-buying deadline to the end of the month but that seems to be falling on deaf ears. It’s a high stakes gamble being played by the BoE with severe consequences if they get this wrong. Markets still await the outcome in the UK.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers: Piper said their Q3 Farm & Ranch retailer survey shows a Q3 comp of +1%-2%, and retailers forecast a Q4 comp of +5%. For TSCO, this suggests an inline Q3 and healthy upside for Q4. Survey reads for both BOOT and YETI are positive; BSET rejected both proposals by CSC saying it "significantly undervalued the company"

·     Housing & Building Products: mortgage data continues to weaken as weekly MBA data showed US mortgage market index falls 2.0% to 214.3 in latest week as the purchase index falls 2.1%, refinancing index decreases 1.8% (down 86% annually) as 30-year mortgage rate rises 6 bps to 6.81%, highest since 2006; Davidson lowers ests and tgt on building products MLM, VMC to reflect NT volume slowness associated with supply constraints, rail operations and weather

·     Consumer Staples & Restaurants: beverages get a boost early as PEP Q3 core EPS $1.97 vs. est. $1.84; Q3 revs $21.97B vs. est. $20.84B; raises FY22 core EPS view to approx. $6.73 from $6.63 (est. $6.69); raises FY22 core constant currency EPS growth view to 10% from 8%; now expects to deliver 12% organic revenue growth, up from its prior view of 10%; LOCO board of directors declares special dividend of $1.50 per share and approves 20 million share repurchase program; MGPI named as a short call by short sell SprucePoint Capital, saying they see 35%-55% downside; BROS was upgraded to Overweight from Neutral, price target $38 from $48 at JPMorgan; KMB upgraded to Overweight from Neutral, price target $135 at Atlantic Securities

·     Casinos, Gaming, Lodging & Leisure sector: in cruise lines, NCLH upgrade to Buy from Neutral at UBS given the significant improvement in bookings in its Q3 preview, showing it has caught up to the other cruise lines in occupancy while keeping price nicely ahead of 2019 levels; movie theater chain CNK downgraded to underperform from outperform at Credit Suisse



·     Energy stock movers: OPEC cuts full-year 2022 world oil demand growth forecast to 2.64M barrels per day from prior view of 3.1MPD in its monthly report; cuts full-year 2023 world oil demand growth forecast to 2.34 million bpd from prior 2.7 mbpd. OPEC cuts 2022 global economic growth forecast to 2.7% from 3.1% and trims 2023 view to 2.5%

·     E&P and Majors: FANG said it would buy assets of FireBird Energy LLC for $1.6B in cash and stock, adding 68K acres in the Midland basin in Texas; Citigroup downgraded PXD to Neutral and upgraded NOV to Buy (target price to $25) saying NOV’s recovery has been slowed by global exposure and supply chain woes and feel the global recovery should continue even at modestly lower crude prices while supply chain issues likely ease suggesting upside to 2023/24 EBITDA

·     Aerospace & Defense: AIN, HWM, HXL all downgraded to Hold from Buy at Truist in aerospace sector and lower ests across the board in Q3 preview of our cyclically exposed comm’l aero/diversified names amid the deteriorating global macro backdrop and ongoing supply chain challenges; Cowen noted the U.S. Army is very close to selecting either LMT or TXT to build its next-gen medium-lift assault aircraft – says an Army award decision on FLRAA is expected soon, a generational program with major implications for both winner and loser; Airbus (EADSY) CEO says airline traffic recovery unlikely before 2024

·     Industrial & Machinery: GE announced the filing of the Form 10 registration statement with the U.S. SEC for the planned spin-off of its Healthcare division, to be called GE HealthCare; FTV upgrade to OW and SWK downgrade to EW at Morgan Stanley as see thematic beneficiaries with backlog, stimulus, and CAPEX support distancing themselves from cyclical names over the next 6-12 months where waning demand and growing inventory add to price and margin risk; Davidson notes reviewed commercial-van and truck sales and production data for 3Q:22 and the numbers suggest that conditions continued to improve Q/Q, in general – said WNC, SHYF and PLOW are the companies they cover that are most affected by this data

·     Transports: strength back-to-back trading days for transports, outperforming the broader stock market; in car rental, Deutsche Bank cuts forecasts as headwinds on residual values continue to build and lowers tgt to $218 from $229 at CAR and to $29 from $38 on HTZ as think the market is getting incrementally jittery about key model inputs on both the top and bottom lines.

·     Metals & Materials: CCJ and BEP along with institutional partners, are planning to buy Westinghouse Electric Co. The companies said Tuesday that they are forming a strategic partnership to acquire the nuclear services business. The total enterprise value for Westinghouse is roughly $7.88 billion, the companies said.

·     Solar, Utes, Coal: Australian coal miner Coronado Global Resources (CRN) confirmed it was in confidential discussions with BTU regarding a potential "combination transaction". The Australian, citing sources, reported on Tuesday that discussions were happening in New York, but said there was no clarity on the nature of these talks.



·     Banks, Brokers & Exchanges: earnings kick off earnings season – starting this Friday: with JPM, WFC, C, PNC, USB, and MS; then next week on Monday 10/17: BAC, BK, on Tuesday 10/8: GS, STT, TFC, on Wednesday 10/19: ALLY, CFG, CMA, NTRS and Thursday 10/20: FITB, KEY; in research, Deutsche Bank cutting ests and tgt in group to align with market conditions and multiples while upgraded CME to Buy with a reduced PT of $200 as now see the risk/reward very favorable balancing a discounted valuation (vs history). Sees SCHW as having the best setup in to 3Q given higher leverage to rising rates, solid organic growth, and less headwinds from weaker market returns. Firm also broadly positive on the alternative managers

·     Asset Managers: sector out with monthly Assets Under Management (AUM) data: AB prelim assets under management decreased to $613 billion during September 2022 from $667 billion at the end of August; APAM preliminary assets under management as of September 30, 2022, totaled $120.6 billion; IVZ prelim month-end assets under management (AUM) of $1,323.3 billion, a decrease of 6.5% versus previous month-end; LAZ prelim AUM totaled approximately $197.8 billion which included market depreciation of $14.8B; VCTR reported AUM of $147.3 bln as of September 30, 2022, and average assets under management for q3 period of $158.9B; VRTS prelim assets under management of $145.0 billion as of September 30, 2022; TROW prelim AUM $1.23 trillion as of September 30, 2022. Preliminary net outflows for the third quarter of 2022 were $24.6 billion, bringing preliminary year-to-date net outflows to $44.6 billion.

·     Insurance: AIG was upgraded to Hold from Underperform at Jefferies to reflect underappreciated earnings momentum in P&C, where they model 30% earnings CAGR for ’22-’24 vs Street’s 10%; Bank America said they see Hurricane Ian losses to be manageable across AIZ, CINF, SIGI and THG. Said although we expect these names to see hurricane losses, they do not expect their 3Q22 catastrophe loads to materially differ vs long-term expectations.

·     Bitcoin, FinTech & Payments: FIS (tgt to $90 from $125) and FISV (tgt to $105 from $130) both downgraded from Overweight to Neutral at Atlantic Equities, while lowered tgts in most of the space (cut AXP, SQ, GPN, MA, PYPL price tgts); Bitcoin news: Grayscale Investments said in a court filing Tuesday that the U.S. SEC set the bar too high for spot bitcoin exchange-traded funds, which have so far not been approved for listing on U.S. exchanges. Grayscale sued the regulator in June, after the SEC denied its bid to convert its Grayscale Bitcoin Trust (GBTC), the world’s largest bitcoin fund, into an ETF for listing on ICE’s NYSE Arca exchange



·     Pharma movers: MRK and MRNA announce exercise of option by Merck for joint development and commercialization of investigational personalized cancer vaccine – on track to report data from ongoing phase 2 trial of mrna-4157/v940 in combination with Keytruda in 4q 2022; GALT said FDA approves to begin human trial of combination immunotherapy in head and neck cancer; EGRX announces submission of investigational new drug application to U.S. FDA for CAL02

·     Biotech movers: KNTE KIN-2787 Phase 1 monotherapy timeline pushed out to 1H23 – provided some details regarding the ongoing Part A of its KN-8701 study of KIN-2787 in BRAF mutated solid tumors. KIN-2787 achieved dose-proportional exposures at 300 mg BID, a dose predicted to be effective, and importantly, was well-tolerated; RPRX agrees with MRK to co-fund the development of MK-8189, an investigational oral PDE10A inhibitor currently being evaluated in a Phase 2b study for the treatment of schizophrenia; MRNA rises as MRK exercised an option to jointly develop and potentially sell an mRNA-based cancer vaccine (MRK will pay $250M option)

·     MedTech Equipment: PHG shares slide after announced a large write-down stemming from the recall of its sleep apnea devices as expects to record a EU1.3b non-cash charge in Q3 – now expects a mid-single-digit comparable sales decline in Q4; OMI lowered Q3 adj EPS to $0.39-$0.41 below est. $0.53 and for the year sees adj EPS $2.50-$2.60 (vs. est. $2.99) and sees FY adj EBITDA $527M to $537M, vs. prior $570M to $610M saying its Products & HC services segment facing more pressures than previously expected citing unfavorable macro-economic conditions


Technology, Media & Telecom

·     Media, Telecom & Internet: CMCSA promotes Mike Cavanagh to president and will remain CFO; NFLX nears deal to build huge production complex on Jersey shore, the NY Times reported; SKLZ downgraded from Neutral to Sell at BTIG and lower ests, seeing signs of weakness in revenue-related metrics like traffic and downloads that suggest higher risk of negative near-term revisions; ANGI September metrics – Angi total revenue +6% y/y, Service requests (16%) y/y, Monetized transactions (15%) y/y, Transacting Service Professionals (10%) y/y, and Advertising Service Professionals (5%) y/y

·     Semiconductors: after getting crushed yesterday, shares of semi-equipment stocks (AMAT, LRCX, KLAC) get a small piece of good news on reports overnight the U.S. government allowed at least two non-Chinese chipmakers operating in China to receive restricted goods and services without their suppliers’ seeking licenses, easing the burden of a new crackdown Chinese chip sector (didn’t matter as they end lower); INTC is planning a major reduction in headcount, likely numbering in the thousands, in the face of a slowdown in the personal computer market, Bloomberg News reported

·     Hardware & Software movers: KNBE to be acquired by Vista Equity Partners for $24.90 per share, in deal roughly valued at $4.6B, confirming a prior WSJ story ; DOCU upgraded to Neutral at Wedbush reflecting a balanced risk/reward on the stock at current levels; in healthcare technology, DOCS shares fell, pressured as Bank America said following a survey takeaways are generally negative for Doximity and indicate downside risk to next year’s consensus revenue


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.

Live Trading

Open an Account

Paper Trading