Market Review: June 22, 2022

Closing Recap

Wednesday, June 22, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks end lower, boosted by defensive sectors Healthcare, Utilities and Real Estate, while Energy was the clear loser following a sharp drop in oil prices to 6-week lows along with weakness in Materials and Industrials as well (commodity names). After opening lower, major U.S. indexes erased losses following Fed Chairman Powell’s testimony before a Senate committee, saying the Fed is strongly committed to bringing down inflation that is running at a 40-year high while policymakers are not trying to cause a recession in the process. The comments were in-line with last week’s FOMC policy meeting and raised no surprises.

·     Recession fears grow for markets: In a Bloomberg opinion piece, Former New York Fed President Bill Dudley writes “If you’re still holding out hope that the Federal Reserve will be able to engineer a soft landing in the US economy, abandon it. A recession is inevitable within the next 12 to 18 months.” Citigroup economists see the chance of global recession nearing 50% as central banks tighten monetary policy and demand for goods weakens. The prediction follows Goldman Sachs view yesterday for a 30% chance of the U.S. economy tipping into recession over the next year, up from its previous forecast of 15%.

·     Overseas, UK inflation hit new 40-year highs as soaring food prices pushed British consumer price inflation (CPI) to 9.1% last month, up from 9.0% in April and matched economist consensus. Czech central bank’s board raised its main interest rate by 125 basis points to 7.00% on Wednesday, extending a year-long policy tightening drive to battle inflation that has surged to nearly a 30-year high (has now risen key rate 675 bps since last June)


Commodities, Currencies & Treasuries

·     Oil prices fall, but finish off their worst levels, as WTI crude drops -$3.33 or 3.04% to settle at $106.19 per barrel (off lows $101.53), ending at 6-week lows. After six-straight winning months, WTI is down about 9% for June, while Brent is down nearly 11% with one week to go. Demand concerns, the prospect of a U.S. gasoline tax holiday, and renewed fears of a recession were enough to pressure energy prices across the board.

·     Gold slipped in quiet trading -$0.40 to $1,838.40 an ounce, its third straight decline (albeit small), while industrial metal prices were broadly lower with copper hitting 16-month lows and aluminum prices falling to 1-year lows on rising recession fears and slowing demand.

·     The dollar index (DXY) ended lower as the buck was generally mixed on a day of light economic data and stocks pushing slowly higher from the onset as investors digest testimony from Fed Chairman Powell to Congress today on monetary policy, and rates.

·     Treasury yields fell to almost two-week lows as commodity prices softened and as fears that the Federal Reserve will cause a recession by tightening monetary policy boosted demand for the U.S. bonds. The yield on the 10-year has fallen 35 bps (from 3.5% to 3.15%) since last Tuesday.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers: NKE downgraded to Neutral from Buy at Seaport Global not on the quarter or guidance but reflects their broader view that there’s a disconnect between sentiment and reality. Sentiment isn’t exactly great, seeing how NKE’s shares are down 39% from their 52-week high, but that’s better than the company’s average peer, which is down 46% on average; LZB posted a top and bottom line beat for Q1 on better guidance – 4Q adj EPS $1.07 vs est. $0.92 on sales $685Mm; guides 1Q sales +7-10% vs est. +5.6% and adj op margin 6.5-7.5%; BURL downgraded to MP from OP at Cowen and cut tgt to $175 noting shares are down over 50% from its peak and don’t think it’s cheap enough to defend here; BBBY slides after several analysts cut their price tgt ahead of earnings next week as sees downside risk to the home goods chain’s sales (Telsey cuts tgt to $6 from $15, Wedbush to $7 from $14, UBS to $5 from $12 and Bofa to $3

·     Auto sector; TM lowered its global production plan for July by about 50,000 units, citing its decision to extend the suspension of operations at some plants and production lines; production volume for July is expected to be roughly 800,000 units; CHPT remains fav name in EV at Stifel and adjusting TPs on BLNK ($19 from $30); CHPT ($26 from $32); WBX ($24 from $29); Wells Fargo said GM remain underweight, but bullish on OW-rated e-powertrain suppliers like BWA, MGA & recently upgraded LEA in autos; LOTZ closes 50% of its stores to strategically focus on path to profitability; closures will result in an estimated workforce reduction of 25% to 30%; estimates an additional savings of $7.5M-$8.5M

·     Housing & Building Products; Weekly U.S. mortgage market index rises 4.2%, purchase index rises 7.9% and refinancing index falls 3.1% according to MBA as the average 30-year fixed rate jumped 33 bps to 5.98%, highest since Nov 2008; tgt changes at Gordon Haskett in home improvement retail as FND PT cut from $90 to $75, LOW PT cut from $225 to $190, and HD PT trim from $330 to $315, maintains Accumulate on all; RBC Capital with several changes in homebuilders and building products, downgrading JELD (tgt to $12 from $20), BECN (tgt to $58 from $70) to Sector Perform and GMS (tgt to $46 from $73), IBP (tgt to $71 from $91) to Underperform in products as still see NT risks on downward earnings revisions and deteriorating data. For homebuilders, TMHC upgrade from Sector Perform to Outperform and downgraded PHM; CENT says 2022 GAAP EPS now expected to be at or above prior year of $2.75 (estimate $3.11) saying lower outlook driven primarily by poor garden season

·     Consumer Staples: KHC upgraded to Outperform at BMO Capital with a $46 Target as KHC’s strategic evolution, which continues to be overlooked by the market, creates a compelling investment opportunity; SAM downgraded to Market Perform at Bernstein and slash tgt to $340 from $565 saying Twisted Tea continues to go from strength to strength and has become the real growth driver but Truly just hasn’t performed as anticipated; CHEF raised its year sales view to $2.325b-$2.425B from prior view $2.13B-$2.23B (est. $2.243B) and upped its year Ebitda outlook; in tobacco, the WSJ reported the FDA is preparing to order Juul Labs Inc. to take its e-cigarettes off the U.S. market, saying the FDA could announce its decision as early as Wednesday

·     Restaurants: JACK downgraded at Cowen to market perform from outperform and slash tgt to $68 from $115 saying the challenging QSR industry sales backdrop, Jack’s above-industry levels of pricing & inflation, and (potential distraction from) the TACO integration present limited visibility in 2022-23E & a headwind to the long-term Target of 4% net restaurant growth beginning in 2025; LOCO COO Lozano said to step down by Nov. 22

·     Casinos, Gaming, Lodging & Leisure sector; in towables/RV space, WGO reported a Q3 EPS and rev beat but said it expects supply-chain challenges and inflationary pressures to persist through the company’s current quarter and into its fiscal 2023, which is expected to begin around the end of August; in online gaming (DKNG, MGM, CZR), BTIG notes U.S. operations trending ahead of 2q consensus expectations; seeing some signs of rationalization and operating improvement



·     Energy stock movers: President Biden calls for gas tax holiday which would suspend federal gas and diesel taxes for three months, requests similar states to suspend gas taxes, or find similar relief, ask industry to put record profits to work and calling on retailers to promptly lower prices. Biden will ask that both the 18c-per-gallon federal tax on gasoline and the 24c-per-gallon tax on diesel be suspended.

·     E&P and Majors; CHK doubles its authorization for common stock and warrant repurchase from $1 billion to $2 billion saying repurchase authorization permits Chesapeake to make repurchases on a discretionary basis as determined by management; PFHC agreed to acquire U.S. Well Services (USWS) in a stock-for-stock deal with an exchange ratio of 0.0561 ProFrac common shares for each U.S. Well common share.



·     Bank movers: JPM said it is laying off hundreds of home-lending employees and reassigning hundreds more this week as rapidly rising mortgage rates drive down demand; for exchanges, ICE tgt cut by $16 to $126 at Raymond James to reflect lower market multiples, softer energy trading volumes, and dilutive bond issuances, but continue to view the risk/reward attractive as ICE enjoys an all-weather franchise; banks weak in general as treasury yields fall

·     Bitcoin, FinTech & Payments; shares of COIN and HOOD slide early after Binance.US starts zero-fee trading for bitcoins in pricing war with plans to eliminate the charges for more tokens in the future; overall crypto space pulls back after modest bounce yesterday, with bitcoin down around $20,500, but off the Saturday lows of $17,787.

·     REITs; JPMorgan upgraded BRX from Neutral to Overweight reflective of both their more positive view of the strip center group as a whole and how they view Brixmor’s positioning within the group; WELL to Overweight as like the senior housing (SHO) revenue momentum that the company is driving and EXR from Neutral to Overweight reflective of both more positive view of the self-storage sector and how they view EXR’s positioning within it – the firm downgraded MPW from Overweight to Neutral.



·     Biotech & Pharma movers; ATHA shares plunge as topline results from its exploratory Phase II study of fosgonimeton in patients with mild-to-moderate Alzheimer’s disease didn’t meet the primary endpoint, though was generally well-tolerated, with a favorable safety profile; MBIO said the FDA has granted Orphan Drug Designation to MB-106; ANIP receives FDA approval for abbreviated new drug application for clorazepate dipotassium tablets

·     MedTech Equipment; EXAS and Ultima Genomics (a privately held company developing a high-throughput sequencer that may compete with ILMNs NovaSeq platform) announced a long-term supply agreement yesterday – Canaccord said remain confident that Illumina will continue to lead the NGS market, recognizing that the comparable options in the field are certainly increasing

·     Healthcare Services: CI was upgraded to Overweight at Morgan Stanley saying Cigna stands to be the largest beneficiary from Humira biosimilars in their Healthcare Services coverage as sentiment should turn more favorable in 2023, while firm downgraded ANTM to Equal weight noting Anthem’s multiple has expanded >5x turns since 1Q20 and at 15.2x is trading at the highest multiple since 3Q18 (16.4x), +2.4x turns higher than its 5- year average


Industrials & Materials

·     Aerospace & Defense; BA cautioned that supply chain disruptions will likely continue until at least the end of next year. Speaking at Bloomberg’s Qatar Economic Forum in Doha, CEO Dave Calhoun said aircraft demand is surging, thanks in part to firm rebound in post-pandemic travel, but labor and part shortages will make it difficult for suppliers to meet customer needs; OSIS announced that its Security division was awarded an order for approximately $29 million

·     Industrial & Machinery; GNRC shares pressured after known short-seller SprucePoint Capital issued a "Strong Sell" report on the company and sees 40%-50% downside, touting it as “a struggling+highly promoted generator Co trying to transition into an #ESG solar energy play to compete with TSLA”; RBC Capital upgraded SUM to Outperform from Sector Perform and SITE to Sector Perform from Underperform.

·     Metals & Materials; MT downgraded to Neutral from Overweight at JPMorgan; SON raises Q2 EPS view to $1.60-$1.70 from $1.20-$1.30 (est. $1.27) citing strong April and May results combined with its current June forecast; expects operating results to be significantly better than previously projected; Copper prices slumped to their lowest level in over a year on rising recession concerns while other industrial metals also slid (aluminum to 1-year lows)

·     Chemicals: DOW downgraded to Underperform at Credit Suisse and cut tgt to $49 from $67 as remain concerned that US basic chemical producers are overearning, just as there appears to be a consumer shift away from goods to services; SMG downgraded to Equal Weight from overweight at Wells Fargo with target to $85 (from $115) and are lowering price targets on HYFM (to $4 from $7) and GRWG (to $3.50 from $4.00), more cautious on the recovery of the hydroponic sector into 2H CY22.

Technology, Media & Telecom

·     Media & Internet: META shares fell 4% yesterday as Bank America highlighted the company’s decision to delay commissions to Creators on Facebook and Instagram, which could impact the company’s 2023 revenues. On 6/21, Meta announced several new monetization features and extended the company’s prior pledge (by another year) to not charge commission from Creators on Facebook and Instagram platform until 2024 (firm says est. delay is less than 1% 2023 revs) – note Mark Zuckerberg slated to appear on Jim Cramer “Mad Money” tonight; SNAP tgt cut to $18 from $35 at Guggenheim citing concerns about slower growth at the social media company

·     Semiconductors were a soft spot for markets today, with most of the money rotating into tech went into software and Internet movers; ZM rises a 3rd straight day and 5 of last 6-days as tops its 100-day MA resistance this week of $113.50


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.