Mid-Morning Look: July 18, 2022

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Mid-Morning Look

Monday, July 18, 2022






DJ Industrials




S&P 500








Russell 2000






U.S. stocks rise, adding to last Friday’s strength as investors jump back into riskier stocks, while defensive sectors (utilities, staples, healthcare) lag ahead of a huge week of earnings. Several factors helping lift markets early including the US dollar easing from the two-decade high hit last week, as traders pare bets on how aggressive the Fed will be in raising rates at its meeting later this month (now bets for 75-bps hike vs. 100-bps). Inflation data has been mixed in recent days with the CPI and PPI for June showing bigger spikes, but the expectations index from the UoM on Friday showed improvement. Financials extend gains as earnings results still overall disappoint, but with sliding recession fears, group getting a much-needed rebound. Energy another leader today as oil prices climb Comments out of China that the government will lend support to struggling regional banking and property sectors also helped sentiment. The Euro back above parity vs. the dollar after dropping below last week. Yield curve remains inverted between the 2s-and 10’s). Stifel also a bullish strategy call today saying they see an S&P 500 relief rally to 4,200 and prefer Cyclical Growth (Software, Semiconductors, Media & Entertainment, Technology Hardware and Retail) as see a decline for oil, inflation, and rate futures as well as avoidance of significant 2H22 S&P 500 EPS concerns supporting a P/E ratio-led rally in advance of our view that the Federal Reserve slows rate hikes and pauses rates by late-2022.







WTI Crude















10-Year Note





Economic Data

·     U.S. July NAHB Housing market index 55 versus 67 in June; July index of current single-family home sales 64 versus revised 76 in June; July index of home sales over next six months 50 versus 61 in June; July index of prospective buyers 37 versus 48 in June


Sector Movers Today

·     Bank movers; BAC reported a 34% drop in profit to $5.93B or 73c per share, missing estimates and compared with $8.96 billion, or $1.03 per share a year ago; BAC also said net interest income (NII) jumped 22% to $12.5BN driven by higher interest rates, lower premium amortization and strong loan growth, while Noninterest income slumped 9% driven by lower investment banking fees, mark-to-market losses related to leveraged finance positions and lower service charges due to non-sufficient funds and overdraft policy changes; GS Q2 profit fell 47%, earning $2.93B, down from $5.49B, but EPS of $7.73 exceeded the $6.56 a share expected, while revs were down 23% to $11.86B, but beat the $10.78 billion expected – said investment banking revs fell 41% y/y to $2.14B in fees, and trading revenue was $6.47 billion in the quarter, up 32%; SCHW posts higher quarterly profit and revenues in online brokers

·     Restaurants; few previews in restaurant sector today as Goldman Sachs downgraded EAT to Neutral from Buy as see greater risk for SSS trends at both Chili’s and Maggiano’s to decelerate and believe that incremental gains from EAT’s digital brands may be harder to achieve, while double upgraded YUM to Buy from Sell as the company’s highly-franchised model provides relative insulation from macro-volatility and removed CMG from conviction Buy list and lower tgt to $1,720 from $1,995 as see risk that continued cost inflation may make it more challenging for the company to drive incrementally higher earnings; Morgan Stanley said data points to increasing risk to sales while inflation persists; here we Mark down 2H/23 numbers for much of our universe, though deceleration is likely gradual over several quarters. We see long term value in beaten down names but biased defensive near term (MCD, YUM)

·     Casinos, Gaming, Lodging & Leisure sector; in casinos (MLCO, WYNN, MGM, LVS), Macau to extend lockdown until July 22 as Bernstein estimates Jul’22 GGR -98% vs. ’19 noting Macau casinos have been shut down since July 11 with current plans to remain shut until July 22 (i.e. a total 12-day period, extended from initial plan of 7-day shutdown until July 17, the same period as the city-wide lockdown); in food delivery (DASH, UBER), British food delivery company Deliveroo slashed its FY revenue forecast, as expects FY 2022 gross transaction value (GTV) growth of 4% to 12% in constant currency versus previous outlook of 15% to 25% rise

·     Metals & Materials; ASH guides Q3 EPS $1.89 an on sales $644M, above ests $1.39 and $598.7M as expect underlying near-term demand to remain strong but expects that free cash flow generation will be below prior year; in paper, packaging, and forest products, RBC Capital upgraded shares of CFX and RYAM to Outperform (from Sector Perform previously) and downgraded CAS, CFF, DBM, and GFP into earnings for the group saying the Timber REITs should also have a strong quarter. Containerboard names should deliver solid results with an improvement in production and transportation



·     ASH +3%; guides Q3 EPS $1.89 an on sales $644M, above ests $1.39 and $598.7M as expect underlying near-term demand to remain strong but expects that free cash flow generation will be below prior year

·     BA +3%; DAL will buy 100 Boeing (BA) MAX 10 jets worth about $13.5 billion at list prices and has options to buy another 30, it said on Monday

·     COIN +11%; big day for crypto related stock amid a resurgence in the sector with Bitcoin at 1-month highs above $22,000 and Ethereum jumping over 17% around $1,500

·     ETON +13%; receives marketing approval from U.S. Food and Drug Administration for the oral form of its seizure drug, Zonisade

·     FDP +2%; after Bloomberg reported late Friday Infrastructure Investor I Squared Capital is exploring an expanded partnership that could include a takeover of the bananas distributor, according to people https://bloom.bg/3aMEoWo

·     GS +3%; Q2 profit fell 47%, earning $2.93B, down from $5.49B, but EPS of $7.73 exceeded the $6.56 a share expected, while revs were down 23% to $11.86B, but beat the $10.78B expected – said investment banking revs fell 41% y/y to $2.14B in fees, and trading revenue was $6.47B

·     ODP +11%; sees FY22 adjusted EPS $4.10-$4.50, sees FY22 revenue $8.45B-$8.6B (est. $8.41B), sees FY22 adjusted EBITDA $430M-$460M and announces $600M share repurchase program

·     SU +4%; after added three new independent directors and would review a possible sale of its downstream retail business as part of an agreement with activist investor Elliott Management



·     AWK -2%; broad weakness in defensive utility stocks (CMS, XEL, AEP)

·     HOLX -2%; downgraded to Neutral and removing $79 tgt at BTIG noting its supply challenges within the Breast Health business are likely to get worse (3Q and 4Q) before they get better (2023) coupled with growing CAPEX concerns into a recessionary environment

·     PARA %; downgrade from Equal Weight to Underweight at Morgan Stanley and cut tgt to $22 from $32 saying shares trade at a premium to its peers despite a more uncertain path towards long-term EBITDA and FCF growth

·     RGLS -5%; after late Friday, its partner SNY terminated a mid-stage study testing Co’s drug lademirsen to treat rare genetic disorder Alport syndrome/Sanofi also notified RGLS it is currently evaluating different opportunities for the drug


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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