Mid-Morning Look: June 16, 2022

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Mid-Morning Look

Thursday, June 16, 2022






DJ Industrials




S&P 500








Russell 2000






Nowhere to run, nowhere to hide the recurring theme over the last few weeks, with global stock markets at their lowest levels since December 2020 as stock markets, bond markets (yields multi-year highs), commodity markets and even crypto currencies all tumble with global recession fears rising by the day. The Dow Jones Industrial Average drops below 30,000 for the first time since January 2021, while the S&P 500 falls for the 6th time in the last 7-sessions with stagflation fears also rising (prices rising and growth slowing). Even defensive sectors such as healthcare, consumer staples, utilities and REITs have seen massive selling along with higher growth sectors such as tech and discretionary. Economic data has been abysmal of late with sliding manufacturing data, tumbling housing data, jobless claims rising, etc. Sentiment weak as gas prices in the U.S. hit another record high, rising to an average of $5.11 per gallon, while mortgage rates rose by 55bps in just one week as per Freddie Mac, for its biggest jump since 1987 and consumer prices at 40-year highs (nat gas, oil, used cars, food). Just today alone, data showed weekly Jobless Claims above ests, housing starts plunge -14% and Philly Fed reading first negative post since July 2020 and missing ests. Global central bank “hawkishness” taking its toll on investor sentiment and stock markets in general with several central banks raising interest rates to fight off inflation issues, with the Bank of England, Swiss National Bank (a surprise 50 bps move) and Hungary Bank following the FOMC rate hike yesterday, which boosted rates by 75 bps (and expectations for another 75-bs hike in July). Several high-profile companies announcing job cuts/freezes over the last few weeks, stock markets tumble and sentiment in media (CNBC) has been getting notably overly Bearish – rough times now with every stock market bounce met with more selling pressure.


Economic Data

·     Weekly jobless claims fell to 229K in latest week from 232K but above ests for 215K reading; the 4-week moving average rose to 218,500 from 215,750 prior week; continued claims rose to 1.312M from 1.309M prior week and U.S. insured unemployment rate unchanged at 0.9%

·     Housing starts for May tumble -14.4% to 1.549M (lowest rate since April 2021), below estimate of 1.701M units and down vs April +5.5%; May single-family starts -9.2% to 1.051M unit rate and multifamily -23.7% to 498,000-unit rate; Building permits 1.695M below est. 1.785M

·     Philly Fed Business Index June actual -3.3, its first negative reading since July 2020 and below forecast of +5 and down from previous month reading of +2.6; prices paid index declined for the second consecutive month, down 14 points to 64.5; new orders index fell 35 points to -12.4, and the shipments index fell 25 points; employment index moved up from 25.5 to 28.1







WTI Crude















10-Year Note





Sector Movers Today

·     Metals & Materials; STLD guides Q2 adj EPS $6.61-$6.65, above the $5.68 estimate saying profitability from the company’s steel operations is expected to be historically strong, but lower than Q1 results, due to lower earnings from the company’s flat roll steel operations; shares of industrial metals/miners slipped on global worries over easing demand and broader market weakness amid recession fears (RIO, VALE, AA, FCX, CLF among movers); TROX increased the bottom-end of the range for its full-year 2022 financial outlook in TiO2 sector; CMC reported Q3 net sales of $2.52B topping ests of $2.32B on better adj Ebitda

·     Retailers; down with broader market on recession fears and slowing consumer spending concerns; in research, AZO upgraded to Overweight with a $2,420 PT at Morgan Stanley saying the stock offers ~20% upside with an attractive ~3:1 bull/bear skew and raised DG to OW as well saying it fits their theme of favoring quality, defensive retailers with offensive characteristics. The firm downgraded AIRS to equal weight and cut tgt to $8.50 from $17 as misjudged the market’s appetite for a high growth services retailer at IPO and updating our valuation framework and cut SBH to Underweight (tgt to $12 from $19) noting it has struggled to hold market share as the category favors omni-channel offerings

·     Auto sector; TSLA increased its Model Y long-range price to $65,990 from $62,990 after delaying the deliveries of some long-range models in the United States by up to a month; RACE held its capital markets day and unveiled its long-term electrification plans and expected BEV penetration for BEV/ PHEV/ICE of 5%/55%/40% by 2026 and 40%/40%/20% by 2030; in EV space (TSLA, RIVN, NIO, XPEV) Jefferies lowered their global EV sales estimates for 2022 and 2023 as expect EV sales in 2022 of 8.7M, down from a prior forecast of 9M, and 2023 sales of 11.5M, lower than prior view 11.8M; LEV files $350M mixed securities shelf

·     Semiconductors; KLAC said its board raised the quarterly dividend by 24%, to $1.30 from $1.05, and authorized the repurchase of up to an additional $6 billion in stock; AMAT has acquired Picosun Oy, a privately held semiconductor equipment company based in Espoo, Finland; Samsung temporarily reduces procurement amid inventory pressure – asks component makers and others to delay shipments https://s.nikkei.com/3b3MtG2 ; NVDA Director Stephens sells 227,650 shares @ $158.06 for proceeds of $35.9M as per For 4 filing



·     ACIU -23% after it and partner Roche said its investigational Alzheimer’s treatment fails to meet main goals in a mid-stage study as crenezumab did not “statistically significantly” slow or prevent cognitive decline in people with a specific genetic mutation that causes early-onset of Alzheimer’s

·     CCL -9%; discretionary spending fears ramp up hitting leisure related sectors such as cruise, restaurants, travel, hotels, and theme parks

·     EBIX -37%; after short seller Hindenburg Research takes a short position calling the company’s plans for the public listing of its Indian unit EBixCash a ‘race against the solvency clock’

·     KPTI -9%; said it received notice from BIIB that they elected to terminate asset purchase agreement dated January 24, 2018

·     KR -3%; after lower gross margin, forecasts FY same-store sales growth below estimates overshadow top and bottom line beat and raised rev view for year

·     U -10%; initiated a new Sell and $27 tgt at Benchmark as suspect sustained economic malaise, post-pandemic normalization on player engagement and user acquisition, and rationalized spend scenarios could be a challenging environment

·     UBER and LYFT -5%; as the top court in Massachusetts blocked a ballot measure Tuesday that would have asked voters to classify gig workers as independent contractors rather than employees, saying the measure overreached by limiting gig companies’ liability in some situations. The decision is a setback for the companies that rely on such workers


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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