Market Review: August 02, 2022

Closing Recap

Tuesday, August 02, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     It was another choppy trading day for major U.S. averages, with the S&P testing last Friday’s lows before partially rebounding and the SmallCap Russell 2000 outperformed though all 11 S&P sectors were lower. Transports led the declines after disappointing results/guidance from JBLU, EXPD, and MATX. While earnings are more than half-way thru the season, and many sectors continue to move on results, major averages have been chopping around on geopolitical concerns as Nancy Pelosi’s visit to Taiwan weighed on early risk sentiment. Upon landing safely in Taiwan, Pelosi, the first political leader to do so since 1997, markets rallied. The visit defies Chinese territorial integrity and will take necessary measures to defend its sovereignty according to a spokesman. It remains to be seen what language from China will come overnight. There were also several Fed speakers today as Fed President Mary Daly echoed Neel Kashkari comments recently saying it would be premature to say the Fed’s work on inflation is done, while Evans said a 50bps hike in September is reasonable but a 75bp could be ok. Fed’s Mester said getting inflation under control remains the objective. For the time being, markets remain in a trading range after breaking out of a downtrend 2-weeks ago. Another big set of earnings after the bell, highlighted by chip maker AMD, Fintech company PYPL, game maker EA and a handful of energy and insurance names among others.



·     Oil prices rise as WTI crude gained $0.53 or 0.56% to settle at $94.42 per barrel ahead of weekly inventory data tonight (API) and tomorrow (EIA) despite a rebound in the dollar and brent rose $0.51 or 0.5% to settle at $100.54 per barrel. Industry data showed Gas Prices have dropped for 47 days in a row, falling to $4.168/gal. Twenty states have an average of $3.99 or less, the top five most common gasoline prices in the US are all under $4. Diesel prices have fallen for 42 days straight, now with 15 states where diesel prices are at $4.99/gal or less.

·     Gold prices edge higher, up $2.00 to $1,789.70 an ounce, rising a 5th straight day as investors look to haven assets. Prices pulled back off highs above $1,800 an ounce, losing steam as the 10-year yield turned higher after hitting 4-month lows.


Currencies & Treasuries

·     Treasury yields were volatile, with the 10-year hitting 4-month lows of 2.52% overnight before bouncing midday following Fed commentary and more positioning, with the 10-yr rising as high as 2.72% by late day. Still, the curve remains inverted as the 10-yr is more than 30-bps below the 2-yr which was above 3.05%. The U.S. dollar rebounded after a few days of selling pressure, rising back above 106 for the dollar index (DXY), while the buck rebounded against the Japanese yen. Bitcoin prices bounced, reclaiming the $23,000 level as crypto posted a nice rally.






WTI Crude















10-Year Note





Sector News Breakdown


·     Consumer Staples & Restaurants; in beverages, TAP Q2 net sales slip to $2.92B missing the $2.94B estimate while profit falls 88% y/y to $47.9M and EPS was in-line with expectations while reaffirms 2022 guidance for top and bottom-line growth; OTLY lowers its 2022 revenue forecast to between $800M-$830M from a prior range of $880M-$920M citing the impact of the war in Ukraine, COVID-19, and inflationary and supply chain pressures – also slashed its 2022 capex forecast by nearly 50%; CBRL downgraded to hold from Buy at Deutsche Bank

·     Casinos, Gaming, Lodging & Leisure sector; in lodging, MAR profit surges as posts EPS $2.06 above $1.28 y/y and above views while Operating income nearly doubled to $950M and revenue surged 70% to $5.34B while says remains optimistic about our financial outlook and strong cash generation; CHH downgraded to Neutral from Buy at UBS driven by what they see as a difficult environment to grow room rates on top of near double digit % increases compared to 2019; in gaming, IGT 2Q adj EPS $0.57 vs est. $0.30 on revs $1.02B vs est. $1.031B; sees 3Q revs $1.0-1.1B vs est. $1.005B; sees FY revs $4.1-4.2B vs est. $4.133B; in ride hailing, UBER posted mixed Q2 as EPS loss larger than expected but revs of $8.07B beat $7.39B estimate as Gross Bookings grew 33% year-over-year to $29.1B, or 36% on a constant currency basis (LYFT, DASH react); CLAR reported 2Q results that were better than expectations on the top line with EBITDA beat

·     Auto sector: RACE Q2 revenue, shipments and profit were all up more than 20% from the year-ago period and increased its guidance for 2022; auto supplier LEA posts Q2 beat (EPS $1.79/$5.07B revs vs. est. $1.44/$5.02B) while narrowed its year rev outlook



·     E&P and Majors; BP shares rise as announces further $3.5B share buyback; Q2 net income rose to $8.45 billion in April-June from $6.25 billion in the first quarter; RIG Q2 after 2Q Ebitda beat estimates, with other positives including a new contract and a 2-year extension of a revolver; CRK Q2 EPS/EBITDA beat driven by higher realized pricing and production, production was 2% above consensus, FY22 production guide unchanged and capex guidance increased by ~6% midpoint; FANG Q2 EPS/cash flow modest beat driven by pricing and higher nat gas and NGL production and raised capex/production guidance towards the high-end of previous guidance; refiners MPC Q2 EPS $10.61 vs est. $8.90 driven by refining, bought back $4B since the last eps conf call



·     Bank & Investment movers; COWN to be acquired by TD for $39.00 per share in an all-cash deal valued at approximately $1.3B, confirming reports overnight ; KKR says after-tax distributable earnings fell 9% in the second quarter as decline was caused by lower deal fees from KKR’s capital markets business, which charges portfolio companies a fee for helping them arrange initial public offerings and debt funding

·     Insurance: EVER rises as Q2 results were above consensus expectations on the top and bottom line as solid execution helped offset a challenging operating environment but the 3Q guide was mixed; CNO Big beat, .71c vs .48c consensus as unallocated Investment income had a strong beat, spread income was higher, variable investment income was better; AFL Q2 beat $1.46 vs $1.28 consensus on stronger variable investment income, better core NII, higher buybacks and continued favorable claims; GNW posts 10c EPS beat amid strong Enact (ACT) reserve releases, increased Holdco liquidity, and buybacks



·     Pharma & Biotech movers; ELYM tumbles after saying phase 2a clinical trial of ETX-810 in lumbosacral radicular pain (LSRP) did not achieve the primary endpoint; ETX-810 program will be discontinued; NUVB discontinues NUV-422 and prioritizes NUV-868 with P1 trial ongoing for advanced solid tumors, as BTIG downgraded too Neutral

·     MedTech Equipment; in ortho, ZBH Q2 revs $1.78B topped consensus of $1.72B, with most segments ahead of consensus, driven by stronger than anticipated COVID recovery in the quarter (better gross and EBIT margins also helped drive EPS of $1.82 (vs. $1.64 est.) and raised its guidance now expecting $6.70-$6.90 from prior $6.65-$6.85; IDXX Q2 revs of $861M vs. $863M estimate, though better margins offset, with EPS of $1.56 in-line with expectations while cut its organic rev growth guidance to 5.5%-8% from 7.5%-10% and lower EPS view

·     Healthcare Services; HSIC 2Q revs $3.03B light of consensus $3.12B with lighter Dental and Medical business revs. And EPS beat ($1.16 vs. $1.13 est.) – revenue guidance was cut to +3% to +6% (vs. +5% to +8% prior), reflecting FX headwind and lower COVID sales (affirms EPS view); TDOC downgraded at Cowen and cut tgt to $34 as believe ests have not been fully de-risked for macro headwinds to BH and trajectory for Chronic Care; GH receives Medicare coverage for Guardant Reveal™ test; for hospital providers HCA, THC, UHS, CYH, Goldman notes final IPPS (inpatient prospective payment system) rate was released by CMS on Monday with generally favorable updates for hospitals across the board. Base reimbursement rates increased by 4.3%, 110bps better than the proposed 3.2%; SYNH slides as lowered its FY guidance to $4.97-$5.11 from $5.05-$5.25 9est. $5.11) and cuts FY22 revenue view to $5.44B-$5.54B from $5.6B-$5.75B to reflect some of these trends in reimbursable expenses and higher FX fluctuations


Industrials & Materials

·     Aerospace & Defense; WWD downgraded to hold from Buy at Truist and cut tgt to $88 from $121 as results missed expectations and mgmt again lowered its outlook amid ongoing supply chain and elevated costs; BA shares slipped early after headlines the FAA is adopting new airworthiness directive for all Boeing Co model 777 airplanes; LDOS modest operating beat driven by healthcare with full year guide reiterated

·     Industrial & Machinery; CAT a mixed quarter with operating EPS miss, though pricing strong, and book to bill better than expected 1.5x; underlying EBITDA 1% lighter (Q2 adjusted EPS $3.18 vs. est. $3.01; Q2 revs $14.25B vs. est. $14.35B); CMI Q2 EPS $4.94 tops $4.35 estimate and revs $6.59B vs. est. $6.48B while maintains its FY22 forecast, says it expects 8% growth in revenue; ETN posts EPS beat of a nickel with Ebit beat driven by electrical Americas though rest of portfolio light while raises guidance by magnitude of beat; ATKR another mover on earnings; KBR Q2 EPS $0.76 vs cons $0.59, operating profit $174mm vs $165 estimate and no guidance change

·     Transports: CAR posts bigger EPS beat than expected, driven mostly by Fleet costs but shares fell; JBLU reported a larger loss than analysts had been expecting; MATX reported stronger Q2 results but downgraded at Stifel as expect it may be hard for shares to gain value and multiples to expand as numbers are falling; EXPD also weighs on sector, falling after revs miss

·     Metals & Materials; fertilizer names lower on earnings as MOS reported 2Q adj. EBITDA of $2.0bln, below consensus of $2.19bln while saying expects to return 100% of FCF (post-debt commitments) via buybacks; CF also posted mixed Q2 results; in other chemicals, DD reports top and bottom line earnings beat and narrows its year EPS forecast; also in chems, HUN reports Q2 EPS and revenue beat while Q3 rev guide a little light and said remain well ahead or on track to meet the targets that they presented at our Investor Day


Technology, Media & Telecom

·     Media, Internet; PINS Q2 EPS report missed with revs in-line, but was better than feared, and boosted amid a strong activist endorsement (Elliott Management) driving shares higher; U.S. listed China stocks extend recent declines (BABA, BILI, BIDU, JD, NTES) on geopolitical risks and increased tensions between the U.S. and China; FTCH downgraded to Neutral at Cowen as lack of upside to estimates is likely as FTCH works on profitability, customer retention/acquisition, and navigates a promotional environment

·     Semiconductors: MPWR delivered its 9th straight revenue beat in 2Q and once again guided its revenues solidly above estimates; LSCC printed a 2Q beat and provided a 3Q raise as margins rose an impressive +140 bps q/q said Cowen; RMBS delivered a solid beat-and-raise on robust demand across its product portfolio and mgmt mentioned no signs of cancellations/pushouts in orders; IPGP announces new $300M stock buyback program along with earnings results

·     Software movers: ZI rises on strong Q2 beat with revenue growth of 53.5% y/y vs. consensus of 46.0% y/y and operating margin of 40.0% vs. consensus of 39.2% and FY22 guidance revised higher to reflect revenue growth of 44.5-45.9% y/y; SNOW downgraded to Neutral at Cowen citing field checks that show a potential slowdown in product revenue growth in the coming quarters; ATVI earnings largely inline as bookings beat offset by higher expenses as development headcount increased +25% yoy

·     Hardware, Components & Services; ANET Q2 revenue growth of 49% is the best growth in almost five years, topping estimates on better earnings and margins; NTNX announced the appointment of Andrew Brinded as Chief Revenue Officer effective immediately and announced it expects to be at or above the high end of its prior Q4 guidance ranges for all metrics aside from operating expenses; HLIT Q2 revenue/EPS +5%/$0.07 ahead of consensus and total GM beat by +270bp as cable GM recovered


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.