Market Review: August 23, 2022

Closing Recap

Tuesday, August 23, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Wall Street finish slightly lower on Tuesday as the Dow and S&P slipped despite strength in energy, metals, and industrials as data showed weakness in housing and manufacturing ahead of a U.S. Federal Reserve gathering later this week in Jackson Hole, Wyoming, where markets are hoping for more dovish commentary. Defensive sectors underperformed today led by weakness in Healthcare and Utilities. Markets are split between expecting a 50-bps hike and a 75-bps hike by the Fed when they meet next month. The benchmark 10-year yield rose to its highest level since late July, the dollar hit 20-year highs before paring gains, natural gas prices hit 14-year highs before slipping and oil prices have steadily climbed over the last week renewing inflation fears. Considering 95% of large cap stocks declined yesterday, the first 90+% day since June and the S&P 500 came into the day down 3 of last 4 days and Nasdaq down 4 of last 5-trading days, today was more sideways than anything with no big gyrations.


Economic Data:

·     New Home Sales for July decreased -12.6% to 511K from 585K units in June, missing the estimate of 575K (the revised June rate of 585K is 29.6% below the July 2021 estimate of 726K); new home supply 10.9 months’ worth at current pace vs June 9.2 months and vs. 8.4 months in May; July median sale price $439,400, +8.2 pct from July 2021 ($406,000)

·     S&P Global August flash composite PMI at 45.0, the lowest since May 2020 and vs 47.7 in July; S&P Global August flash services PMI at 44.1 (vs 47.3 in July) and S&P Global August flash manufacturing PMI at 51.3 vs 52.2 in July

·     Richmond Federal Reserve Manufacturing Survey for August -8 vs. -6 consensus and 0 prior as Shipments -8 vs. -7 prior, capacity utilization -5 vs. -7 prior and new orders -20 from -10 prior.

·     Euro data weaker: Eurozone composite PMI declined to 49.2 in August from 49.9 in July, with the headlines for the manufacturing and services sectors down to 49.7 and 50.2, respectively. UK manufacturing purchasing managers’ index fell to 46.0 in August from 52.1 in July, below the 51.0 reading expected in a WSJ survey of analysts. The services PMI fell to 52.5 in August from 52.6 in July, beating an expected 52.0.


Commodities, Currencies & Treasuries

·     Oil prices rise and U.S. natural gas jumps to 14-year intraday highs above $10.00 per mln Btus before reversing and ending the day lower on news of a further delay in the resumption of initial operations at the Freeport LNG export plant in Texas. Freeport LNG said it expects partial recovery to begin in early to mid-November, not October as originally estimated. WTI crude rises $3.38 or 3.74% to settle at $93.74 per barrel helped by news Saudi Arabia floated the idea of OPEC+ output cuts to support prices in the case of returning Iranian crude and with the prospect of a drop in U.S. inventories.

·     Gold prices rose $12.80, or 0.7%, to settle at $1,761.20, snapping its 6-day losing streak after closing at its lowest since late July. Treasury yields jumped initially with the 10-year hitting highs around 3.08% before slipping. The U.S. Treasury sold $44B in 2-year notes at a yield of 3.307% vs. 3.293% when issued prior (1.4bps tail), with bid-to-cover at 2.49 vs. prior auction 2.58 and primary dealers take 22.95% of U.S. 2-year notes sale, direct 17.31% and indirect 59.73%. The auction was the first of $126B in supplies this week (2s 5s and 7s). The U.S. dollar was volatile, falling from 20-year highs initially as the euro moved back and forth above parity following weaker economic data and positioning ahead of Fed comments later this week.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; Macy’s (M) Q2 EPS and sales top consensus ($1.00/$5.6B vs. est. $0.85/$5.49B) on weaker margins 38.9% vs. 40.6% y/y but inventory $4.61B, +7.3% y/y vs. est. $4.72B (Hedgeye notes inventories ended the quarter up only 7.3% — tight relative to what they’ve seeing out of the rest of apparel retail) lowers year outlook to $4.00-$4.20 vs prior $4.53-$4.95 and lower sales; DKS said Q2 comp sales fell (-5.1%) vs. est. drop (-6.46%) while Q2 profit and sales top views and raises 2022 adj EPS view to $10-$12 per share, from previous $9.15-$11.70

·     Auto sector: XPEV Q2 net loss of 2.70 bln yuan ($394.28 million) vs. 1.19 bln yuan a year earlier, delivered 34,422 vehicles in Q2 vs. 34,561 in Q1 and sees Q3 deliveries 29K-31K (below Q2 deliveries) – shares of LI, NIO move in sympathy

·     Consumer Staples; DOLE Q4 PES $0.44 tops the $0.36 estimate while revs of $2.36B misses the $2.49B est. and lowers year sales view to $9.1B-$9.4B from $9.4B-$9.7B view and est. $9.49B and also lowers year adj Ebitda view; GO downgraded to Underweight from Equal Weight at Morgan Stanley saying the stock has gotten ahead of its fundamentals and seems priced for perfection, which drives a negative risk/reward skew and ~20% downside to our $33 PT; SJM reported an EPS beat on in-line sales of $1.87B for Q1 while raised its year profit forecast

·     Restaurants; DENN upgraded to Outperform from neutral at Wedbush as believe upside to current 2H:22 and 2023 expectations exists and that DENN’s LT 10%+ annual EPS and FCF/share growth algorithm is intact under new CEO; PZZA, WING, and MCD remain BMO Capital favorite ideas in restaurants to capitalize on potential trade down. PLAY, BLMN, and EAT are their preferred names on the other end of the barbell as a recession is largely priced in

·     Casinos, Gaming, Lodging & Leisure sector; SCPL was reinstated Underperform at Bank America saying downside risk to consensus greater than other coverage because mobile lacks hard core customers and potential UA disruption underappreciated; for online betting (DKNG, CZR, PENN) Bank America notes July represented the 2nd weakest month of the year for OSB handle & GGR Y/Y growth and the weakest Y/Y growth for iGaming

·     Travel: Morgan Stanley with price tgt changes in online travel names: BKNG ($2300 from $2100), EXPE ($128 from $140), ABNB ($125 from $100), TRVG ($2.10 from $2.20), DESP ($10.50 from $10) as remain EW the group but most constructive BKNG given scale and share gain advantages – the firm reduces ’23 bookings estimates for BKNG to fall by 3%/4%/3% following a steeper than expected slowing of demand and forecast ’23total bookings growth for BKNG/EXPE/ABNB of 10%/16%/14%.


Energy, Industrials & Materials

·     Energy stock movers: For the first time since 1982, the Atlantic has had no named storms (e.g., >=39 mph tropical cyclones) between July 3 – August 22; APA announced it has discovered oil offshore Suriname at Baja-1 in Block 53, as Baja marks sixth oil discovery in offshore Suriname, and the first on Block 53; natural gas companies outperformed broader strong energy complex as natural gas prices topped $10, highest in 14-year (EQT, TELL, SWN, RRC) – Demand for U.S. gas remains high as it is relatively cheaper than European and Asian gas, whose prices have soared to new records recently; CEIX, DEN, EQT, OXY, VET among energy related names w/52-week highs

·     Materials and Miners; aluminum stocks AA, CENX, KALU rally following a strike at its Alcoa’s Mosjøen smelter in Norway began yesterday, August 22, 2022, after a collective agreement between Industri Energi and Norsk Industri was not reached by the agreed-upon deadline; fertilizer stocks MOS, CF, IPI, NTR rise early as Polish chemicals firm Grupa Azoty said it was temporarily halting production at its plants making nitrogen fertilizers, caprolactams and nylon 6 due to an unprecedented rise in natural gas prices; gold miners NEM, GOLD, etc. rebound as gold looks to snap 6-day losing streak, getting a boost on US dollar/Treasury yield sell-off



·     Biotech & Pharma movers; ALC to acquire AERI for $770M at $15.25 per share; deal is a premium of 37% to Aerie’s last closing price of $11.15 a share on Monday ; FHTX shares fall after the FDA places full clinical hold on Phase 1 study of FHD-286, months after trial was put on a partial hold due to one death; AMGN announces positive top-line results from phase 3 study of ABP 959, biosimilar candidate to Soliris® (eculizumab)

·     MedTech Equipment; MDT reported Q1 EPS $1.13 vs. est. $1.12; Q1 revs -8% y/y to $7.4B vs. est. $7.22B; reiterate guidance for FY23 for profit and organic revs; have several near-term pipeline catalysts approaching – warned gross margin impacted by strong dollar and inflation; expect continued impact in quarters ahead

·     Healthcare Services: CANO rises after investor Own Creek Asset Management, which owns 8.69 million shares, or a 3.75% stake, urged the company to pursue strategic alternatives, including a possible sale


Technology, Media & Telecom

·     Media, Internet; TWTR has major security problems that pose a threat to its own users’ personal information, to company shareholders, to national security, and to democracy, according to an explosive whistleblower disclosure obtained exclusively by CNN and The Washington Post. ; separately, Elon Musk’s lawyers sent a subpoena to Twitter co-founder Jack Dorsey ahead of the trial surrounding the stalled $44 billion takeover of the social media platform, seeking evidence from Dorsey about fake accounts on the site; WBD’s HBO’s "House of the Dragon" drew nearly 10 million viewers in the U.S. during its Sunday night debut; The audience was the largest in HBO’s history for the debut of a new series, the network said; JD beat top and bottom line expectations in Q2 as revenue rose 5.4% in the April to June quarter, marking the Chinese e-commerce giant’s slowest year-on-year growth on record.

·     Software movers; Internet security stocks gained after PANW posted a Q4 adj EPS and rev beat, announced a 3-for-1 stock split and guided Q1 profit/sales above consensus; ZM shares slide after cutting its FY23 revenue guidance to $4.39B-$4.4B from prior $4.53B-$4.55B (est. $4.54B) and guides year EPS $3.66-$3.69 from $3.70-$3.77 and guided Q3 EPS and revs below views; MRIN rises after the company said its flagship platform can now optimize SNAP’s social media’s advertisement campaigns

·     Semiconductors: Semiconductor sales outlook is cut by World Semiconductor Trade Statistics w/ growth this year now seen at +13.9% (down from +16.3% previously) while the 2023 increase is forecast at just 4.6%; INTC signed a definitive agreement with Brookfield Infrastructure Partners L.P. to jointly fund Intel’s under-construction semiconductor fabrication facility located in Chandler, Arizona; TSM will soon move 3nm process technology to volume production, but the process is unlikely to generate revenue substantially until at least first-quarter 2023, according to industry sources, Digitimes reported

·     Hardware, Components & Services; AAPL will begin manufacturing the iPhone 14 in India about two months after the product comes off the assembly lines in China; Bank America cut DELL F2Q/F23 estimates for PC slowdown, weaker storage, incremental FX ahead of earnings this week; firm also lowers estimates on PC units for HPQ as see a weaker 2H22 and see risk to management’s expected F4Q bounce; DOCN to acquire Cloudways for $350M in cash


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.