Market Review: December 13, 2022

Closing Recap

Tuesday, December 13, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Below-consensus CPI gave the markets a big pre-open boost, but investors did a favor for Chairman Powell and sold into midday. An afternoon rally lifted indices back toward about +1-1.5% but remained well off the early-pop highs before easing again. Tomorrow we will hear from the Fed and investors will learn whether we get hawkish Powell or dovish Powell but, as mentioned above, a more muted move in equities does indicate some balance in investor expectations and gives Powell a little freedom from having to manage runaway markets, whether that is part of his mandate or not. S&P closed below its 200-day MA into Fed.

·     Data items of note today: from @MBjogovic, interesting to note today’s CPI was the second consecutive below-expectations result … something we haven’t seen since October 2018. Per @bespokeinvest, SPY has only gapped up 2%+ but closed lower on the day 6 times in its history. At midday, it certainly felt we were heading that way. @Charliebilello reminds us the average price of a used Tesla is now over $12k lower than the peak in July. Good for used car inflation, now so much for Tesla. Finally, @GasBuddyGuy gives us more reason to expect consumers to feel modestly better into the holidays; New Mexico is the 16th state with average gas prices falling to $2.99/gallon or less. North Carolina, Nebraska, Wyoming, North Dakota, and Ohio are hovering in the $3.00-3.04 range.

·     From a sector perspective, Utilities (XLU), Consumer Discretionary (XLY) and Consumer Staples (XLP) were the biggest laggards and only groups in the red into the last hour of trading. Energy, (XLE), Real Estate (XLRE) and Communications (XLC) were sector leaders, each gaining more than 1.2% into the final hour. Both Value and Growth gained on the day, with the Russell 1000 Growth slightly outpacing its Value counterpart. Breadth was about 2:1 in favor of gainers into the final hour.

·     The other big story was in the crypto currency space as the SEC charged Samuel Bankman-Fried with orchestrating a scheme to defraud equity investors in FTX Trading Ltd, the crypto trading platform he co-founded and headed until it collapsed spectacularly in recent weeks. The SEC said Bahamas-based FTX raised more than $1.8 billion from investors, including about $1.1 billion from about 90 U.S.-based investors. The news comes just hours after Bankman-Fried’s arrest in the Bahamas. The arrest came ahead of the House Financial Services Committee hearing today.


Economic Data:

·     Softer inflation reading as Consumer Price Index (CPI) for November rose +0.1% M/M vs. est. +0.3% (prior month +0.4%) and headline y/y rises a smaller +7.1% vs. est. +7.3% and down from prior month +7.7%. On a core basis, CPI m/m rises +0.2% vs. est. +0.3% and y/y rises +6.0% vs. est. +6.1% (down from prior month +6.3%).

·     Inflation data: as per Charlie Bilello, price changes over last year (CPI report) show: Fuel Oil: +65.7%, Gas Utilities: +15.5%, Transportation: +14.2%, Electricity: +13.7%, Food at home: +12.0%, Gasoline: +10.1%, Food away from home: 8.5%, New Cars: +7.2%, Shelter: +7.1%, Overall CPI: +7.1%, Medical Care: +4.4%, and Used Cars: -3.3%


Commodities, Currencies & Treasuries

·     WTI crude rises $2.22 or 3.03% to settle at $75.39 per barrel following a dip in the dollar and hopes for bullish weekly inventory data. U.S. commercial crude-oil stockpiles are expected to have decreased from the previous week, projected to have fallen by 3.1 million barrels for the week ended Dec. 9. Gold prices rise $33.20 or 1.9% to settle at $1,825.50 an ounce following dollar decline and Treasury yield slide post CPI data and ahead of FOMC meeting tomorrow afternoon. The US dollar sunk on the CPI report, dollar index (DXY) hitting 104 level, down -1%.

·     Ten-year Treasury yields sunk to lows around 3.42% from 3.611% yesterday following a consumer-inflation reading showing prices rose last month at the slowest 12-month pace since December 2021 and below economists estimate. Yields pared losses to 3.50%. The data comes after consumer inflation hit a four-decade high in June. Markets are still pricing a 50-bps hike by the Fed tomorrow. Weak bond auction as the US Treasury sold $18B in 30-year notes at a yield of 3.513% vs. 3.482% when issued prior as bid to cover 2.25 down from 2.42 prior auction, indirect bidders awarded 61.6% vs. 69.9% prior and directs awarded 23.1% vs. 20.4% prior.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers: JOAN suspended its dividend to preserve capital and reported Q3 results which missed on EBITDA margin; CONN To be replaced in the S&P SmallCap 600 by MBC, effective prior to the opening of trading 12/19; overall discretionary stocks saw early gains, but faded along with the broader stock market pullback

·     Auto sector: the selling pressure in TSLA continues since Elon Musk bought Twitter last month, falling to fresh 52-week lows and down over -50% YTD; LEV 19.69M share Spot Secondary priced at $2.54; EVGO and LYFT launch partnership under which drivers on Lyft platform can get discounted charging on EVgo’s fast-charging network

·     Consumer Staples & Restaurants: PM resumed coverage at Citigroup with Neutral, down from prior view of Buy; COTY enters into hedging agreements related to planned share buyback program of $200M in CY25; HNST announced new CEO, formerly AMZN executive

·     Casinos, Gaming, Lodging & Leisure sector: NCLH downgraded to Neutral from Buy, price target $19 from $24 at UBS, dragging down other cruise lines as broker sees uncertainty in the outlook for NCLH’s cost performance despite improving demand and said NCLH is experiencing impact of inflation more than industry peers due to wage pressures



·     Energy stock movers: OPEC stuck to its forecasts for global oil demand growth in 2022 and 2023 after several downgrades, saying that while economic slowdown was "quite evident" there was potential upside such as from a relaxation of China’s zero-COVID policy. Oil demand in 2023 will rise by 2.25 million barrels per day (bpd), or about 2.3%, the Organization of the Petroleum Exporting Countries (OPEC) said in a monthly report, after growth of 2.55 million bpd in 2022. Both forecasts were unchanged from last month.



·     Bank movers: weakness in online brokers with SCHW and IBKR lower; lower interest rate hikes generally negative for financials, but big banks (XLF) outperform; group saw weakness after E*TRADE announced it will eliminate all trade commissions and early redemption fees for mutual fund online trades on its platform. Also, the Financial Times reported banks, trading firms and brokers are bracing for the biggest overhaul of US stock trading in almost two decades with the release on Wednesday of plans designed primarily to lower costs for small investors; in research, analysts cautious as JPMorgan said they remain bearish for SMID banks given earnings vulnerability as they downgraded KEY, HBAN, LOB to Underweight while upgraded FHB assumed coverage with Neutral at Citi and $10 tgt as see a mixed outlook from here given potential headline risk from upcoming SEC market structure proposals, a cautious equity market outlook, and potential fallout from FTX impacting crypto trading.

·     Asset managers: AB preliminary assets under management increased to $658 billion during November 2022 from $627 billion at the end of October. The 5% AUM increase was driven by market appreciation, partially offset by firm-wide net outflows; IVZ reported preliminary month-end assets under management (AUM) of $1,437.9 billion, an increase of 5.7% versus previous month-end. The firm experienced net long-term inflows of $1.3 billion in the month

·     FinTech & Payments: AFRM and SYF downgraded to Neutral at Bank America and DFS downgraded to Underperform on risks around lower-income consumer and credit. Firm noted COF’s mid-quarter update on 11/15/22 suggested weakening credit conditions among U.S. consumers. With unemployment likely to rise, and interest rates still increasing, we believe these general pressures will intensify over the next few quarters; Piper assumed SQ w/ Overweight Rating and $93 Price Target as sees tremendous room for revenue and income growth; assumes PYPL Neutral and $85 tgt saying is in transitional period and AXP assumed Neutral



·     Pharma movers: MRTX won FDA accelerated approval for Krazati in certain patients with non-small cell lung cancer; said the accelerated FDA green light is based on objective response rate and duration of response; MGTA released a positive update on clinical trial data for a drug called MGTA-117 treating acute myeloid leukemia patients, sending shares higher; LLY said it expects adjusted profit in the range of $8.10 to $8.30 per share in 2023 (est. $9.15); in research, PFE, HUM and INSP all upgraded to Buy from Neutral at Goldman Sachs while firm downgraded BHG; VNDA shares plunge after loss in Hetlioz patent case

·     Biotech movers: MRNA rises after saying the combination of its personalized cancer vaccine and MRK’s Keytruda cancer immunotherapy reduced patients’ risk of relapse or death by about 44%, versus Keytruda alone, in the 150-volunteer study; WVE and GSK enter strategic collaboration to advance oligonucleotide therapeutics, including Wave’s preclinical RNA editing program targeting alpha-1 antitrypsin deficiency


Industrials & Materials

·     Aerospace, Industrials and Machinery: BA rises as UAL announced an order for 100 Boeing (BA) 787 widebody, twin-aisle jets with an option to purchase 100 more. It’s the largest widebody jet order from a U.S. air carrier in history; shares of SPR which makes equipment parts for BA planes rose too; CARR and NVT downgraded to Sector Weight at KeyBanc saying in part a reflection of concern around peaking sentiment in Late-Cycle, they now view the risk/reward for CARR and NVT shares as balanced; TEX reiterates 2022 guidance and unveils long-term targets

·     Airlines: UAL said it would buy 100 wide-body jets from Boeing; sees 2024 adj CAPEX about $11B and sees 2023 adj CAPEX about $9B; ALK sees 4Q capacity down 7%-9% vs 2019, load factor 84% to 86%, saw 83% to 86% prior, and Q4 total revs up 13%-14% vs 2019, vs. prior up 12%-15%; SAVE said due to effects of hurricane Nicole, company has reduced its Q4 capacity guide from up 24.5% to up 24.1% compared to q4 2019; JBLU said its Q4 revenue will take a hit from December travel demand levels that have paced below expectations – now expects revenue per available seat mile for the current quarter to be at the low-end of its prior guidance range

·     Metals & Materials: gold miners (NEM, AEM, GOLD) get a boost on spike in the precious metal as the dollar tumbles on softer inflation reading; BHP is facing a 5 billion pound-plus ($6 billion-plus) lawsuit brought by 200,000 Brazilians at London’s High Court over the collapse of the Fundao dam; in research, RIO and BHP both downgraded to Sell at UBS saying the stock has moved too far, too fast and the macro backdrop is still fragile with global growth slowing & China’s reopening challenging; in steel sector (NUE, X, STLD), U.S. spot HRC prices increased over the past two weeks as mills pushed through an attempted $60/st price increase, with prices up 8.1% or $50/st to $670/st (-55.3% since April), marking the first increase in spot prices since mid-September; CCK enters into cooperation agreement with Icahn Enterprises; Icahn to support all crown nominees for election at 2023 annual meeting


Technology, Media & Telecom

·     Media, Internet: PINS upgraded to overweight from neutral at Piper and raise tgt to $30, noting multiple tailwinds heading into 2023 that are separate from the health of the ad market; WPP loses $1B L’Oreal US media account to OMC; early strength in tech, especially high growth names in software and Internet, but faded as profit taking ensued following the big gap higher; BMBL, MTCH higher on the day after reports AAPL is getting ready to allow alternative app stores on its iPhones and iPads as part of an overhaul to comply with strict European Union requirements that are coming in 2024

·     Semiconductors: QRVO trades to 200-day moving average around $102, first time at 200-day since Sept 2021 as outperforms in semis; equipment stocks strong early LRCX, KLAC, AMAT; China is working on a more than 1-trillion-yuan ($143 billion) support package for its semiconductor industry, three sources said, in a major step towards self-sufficiency in chips and to counter U.S. moves aimed at slowing its technological advances.

·     Hardware & Software movers: ORCL better results as 2Q adj EPS $1.21 vs est. $1.18 on revs $12.3B vs est. $12.1B, adj op mgn 41%; Q2 total cloud revenue $3.8B, up 18% in USD, up 25% in constant currency; PLAB Q4 EPS $0.60 vs. est. $0.48; Q1 revs in-line at $210.3M; sees Q1 revenue $203M-$213M vs. est. $209M; NTAP downgraded to Underweight from Equal Weight at Morgan Stanley saying multiple has room for downside in the current period of cloud business digestion; TRMB downgraded to Market Perform at Raymond James following its announced acquisition of Transporeon for €1.88B ($1.97Billion) on view that it is inopportune timing to consummate a deal, pay full freight and significant premium to peers


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.