Market Review: May 02, 2022

Closing Recap

Monday, May 02, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     In another volatile trading session on Wall Street, U.S. stocks finish the day at highs following a significant rebound in the final 90-minutes of trading (300-point bounce for the Nasdaq) as investors buy last week’s dip (and weakness this morning), ahead of the key FOMC meeting on Wednesday. The weakness in U.S. stock markets for April carried into May to start the day ahead of another busy week of earnings (another roughly 160 S&P companies reporting) and an FOMC meeting. The S&P 500 Index broke below its 2/24/22 intraday lows (4,114.65), trading at lowest levels since May 2021 (today lows 4,060) ahead of anticipated interest rate hikes (50 or 75 bps remains the question). Volatility continues to pick-up steam amid massive market swings as investors cope with inflation, earnings, rising interest rates, soaring commodity prices, a surging dollar, and yields, as well as several macro/geopolitical events (Ukraine/Russia, China, Covid). For 82 days, the Nasdaq has traded with an intraday range greater than one percentage point– longest streak since the 127 trading days between Dec. ’08 and June ’09-Dow Jones Market Data. U.S. stocks a decent rebound late day, pushing the Nasdaq into positive territory. Note the last time the market saw a fed funds target rate of 3.00% was March 2008. Right now, the market is pricing a target range at 2.50%-2.75% by year-end. The market expects fed funds to peak in August 2023 at 3.31%.


Economic Data:

·     S&P Global April final manufacturing PMI at 59.2 (vs flash 59.7) and vs final March 58.8; sector final output index for April at 57.6 vs flash reading 57.4 and final March 56.1; sector final output prices index for April at 76.3 vs flash reading 78.4 and final March 69.7

·     ISM Manufacturing PMI actual fell to a 2-year low of 55.4, below forecast 57.6 and prior 57.1; new orders Index Actual 53.5 vs. previous 53.8; prices paid actual 84.6 vs. previous 87.1; employment Index actual 50.9 below previous 56.3

·     Construction Spending for March MoM Actual 0.1% below forecast 0.8% and previous 0.5%


Commodities, Currencies & Treasuries

·     Gold prices tumbled as the U.S. 10-year Treasury yield moved back near 3.00% this afternoon, its highest yield since Dec 2018, the time right before Fed Chairman Powell flip-flopped away from his hawkish stance to dovish. Meanwhile, 10Y real yields have surged back into positive territory for the first time since the onset of the pandemic in March 2020. Between the U.S. dollar hitting 20-year highs recently, Treasury yields jumping, inflation fears rising and slowing demand for commodities in China given the Covid lockdowns, precious metal prices have slipped.

·     Oil prices rebounded off earlier weakness, with WTI crude rising $0.48 or 0.46% to settle at $105.17 per barrel, well off earlier lows $100.28 per barrel. European Union officials are working on a proposal to sanction Russian energy. Some are skeptical it will pass since it requires unanimous support from EU members, many of whom rely on Russian energy. Markets are also monitoring lockdowns in China and looking ahead to a meeting of the OPEC+ alliance later this week, where members are set to discuss its supply agreement.

·     The yield on the benchmark 10-year Treasury topped 3% for the first time in over 3-years from 2.885% on Friday, rising for a fourth consecutive trading session. The U.S. dollar held on to its recent gains, with the WSJ Dollar Index (DXY) rising another 0.1% after its biggest monthly jump in a decade (over 4%) ahead of rising interest rate expectations from the Fed this week.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; AMZN hits near 2-year lows early, extending last week earnings related losses; BBWI upgraded to Outperform at Cowen as they like BBWI’s solid brand positioning coupled with a robust product innovation pipeline and see upside to Street’s FY22 and FY23 estimates; GIII to acquire remaining 81% stake in Karl Lagerfeld for $210 mln in cash, becoming sole owner of Parisian fashion brand; bullish comments by Wells Fargo on UAA into the NTM, as the brand makes headway on its turnaround into FY23; for RGR, SWBI, U.S. unadjusted criminal background checks fell 15% to 2.607 million in April, according to data from the FBI’s National Instant Criminal Background Check System (NICS), vs. 3.081 M/M and compared to a Y/Y, background checks decreased 26% from 3.51 million

·     Auto sector; monthly China EV delivery data out: LI delivers 4,167 Li ONEs, down 62% M/M; reported 5,539 deliveries in April 2021; overall deliveries of Li ONE have reached 159,971 since the vehicle’s market debut in 2019; NIO delivers 5,074 vehicles in April down from 9,985 in March, however YTD deliveries of 30,842 vehicles is up 13.5% Y/Y; overall deliveries reached 197,912 vehicles; XPEV delivers 9,002 Smart EVs in April 2022, representing a +75% Y/Y and down- 41.6% M/M; YTD total deliveries reached 43,563, up 136% Y/Y; LAD shares could rise 65%, good reason to buy, according to Barron’s saying Lithia is growing fast, while margins, which shot higher because of shortages, might be more resilient than the market is giving it credit for; INVZ said it has been selected to become the direct lidar supplier to "one of the largest vehicle manufacturers in the world” without specifying; NKLA announces $200 million convertible senior notes investment

·     Housing & Building Products; JELD falls after Q1 EPS miss $0.16 vs. est. $0.33 saying earnings impacted by surging material, freight, and labor costs; AFI tumbles after the company warned it has yet to reach a deal to sell itself and the company will likely seek bankruptcy protection – said it has amended some of its credit agreements while engaging with interested third parties to potentially sell itself.

·     Consumer Staples; APRN surges as co’s top holder RJB Partners invests $20M through a private placement at $12/share and has committed to invest another $20M, expected to close on May 30 and CEO Linda Findley also invests $500,000 through private placement; SPTN said today in press release that since engaging with Macellum, has not received offers to buy co, nor has it been approached by strategic/financial buyer to acquire co

·     Casinos, Gaming, Lodging & Leisure sector; cruise lines mentioned positively in Barron’s saying although the cruise ship industry continues to struggle in the face of surging inflation and rising fuel costs, summer bookings have picked up, and names like Carnival (CCL) trades roughly 55% below where it was at in late January 2020; food delivery names UBER, DASH were notable lower as RBC maintain a preference for LYFT vs. UBER given delivery exposure where maintain doubts around Q2/Q3 demand holding up posing near-term risk for both UBER & DASH



·     Energy stock movers: energy stocks lagged, tracking oil prices lower as investors looked to beaten up tech stocks on the day; OPEC April oil output rises 40,000 bpd month on month to 28.58 mln bpd citing a Reuters survey. OPEC states’ compliance with OPEC+ output cut pledges rises to 164% in April from 151% in March. Oil prices pulling back after Crude oil rose a fifth consecutive month in April, up 2.6% for the week and 4.4% for the month to $104.69/bbl, while June natural gas soared 28.4% in April to $7.244/MMBtu for its best monthly gain since 2009.

·     E&P and Majors; Warren Buffett said this weekend he spent $40B on energy equities last quarter, beginning share purchases in earnest just as the war in Ukraine broke out as purchased $7B worth of OXY and value in CVX went from $4.5B to $25.9B during the quarter; BP said it expects oil production of 200,000 bpd at gulf of Mexico’s thunder horse project by end of 2022; WTI announced the signing of a Memorandum of Understanding with Korea National Oil Corporation to jointly consider and pursue various opportunities in upstream oil and gas as well as other potential joint venture opportunities; GPRE posts EPS miss with revs of $781M beating



·     Bank movers; banks/financials fail to rally despite another spike in Treasury yields; BRK Q1 operating earnings rose slightly from a year ago, but insurance underwriting earnings declined; had cash and short-term securities holdings of ~$106.3B at March 31, 2021, down 28% from ~$146.7B at Dec. 31, 2021; used about $3.2B of its cash to buy back its common stock in Q1, less than the $6.9B of stock it repurchased in Q4 2021; CMA upgraded to OW while KEY downgraded to Underweight at Piper post earnings thinking; IBKR said daily average revenue trades (DARTs) of 2.2M in April fell 10% over March but remained 1% above the year-ago period, while client equity of $324.5B dipped 9% M/M in April and -6% over April 2021.

·     Bitcoin, FinTech & Payments; GPN reports slightly better Q1 EPS and in-line revs of $1.95B and raises FY22 operating margin expectations, while maintained rev outlook; WU was downgraded to Sell at Citigroup citing several factors that impact their decision; Mizuho Updating models & PTs following the first week of 1Q Payment’s earnings, which were broadly marked by top-line beats and mostly positive stock reactions. Increasing PT for ADP from $235 to $250. WEX from $220 to $235. Lowering PT for PYPL from $175 to $120 and lowering PT for HOOD from $19 to $14; BKKT and GPN announced a strategic alliance

·     Financial Services & Lending: MCO shares slide after EPS, revs miss and lower guide as sees adjusted EPS $10.75 to $11.25, down from prior $12.40 to $12.90 (ahead of comp SPGI to report tomorrow); in mortgages, Wedbush lowers ests and tgt on ZG, RDFN, OPEN but keep Buy ratings as lower outlook on our residential real estate technology coverage noting investor sentiment is materially bearish, and we are likely going to see downward estimate revisions at least this quarter and possibly in the coming quarters; crypto assets active after Warren Buffett and Charlie Munger talked negatively (again) on Bitcoin (BTC) and crypto in general



·     Pharma movers; VRTX announced the VX-880 Phase 1/2 study has been placed on clinical hold in the U.S. by the FDA due to a determination that there is insufficient information to support dose escalation with the product; HZNP’s Uplizna was approved by the European Commission as a standalone therapy for adult patients with neuromyelitis Optica spectrum disorder; PFE slips after its oral antiviral pill Paxlovid was not effective at preventing coronavirus infection in people living with someone infected with the virus (vaccine makers MRNA, BNTX, NVAX rise after PFE’s COVID-19 pill fails as preventative therapy – also note NVAX moved closer to US approval for its long-delayed COVID-19 vaccine as the FDA schedules a public advisory committee hearing for June 7 to consider the shot)

·     Biotech movers; AXSM failed to receive FDA approval for AXS-07 for the acute treatment of migraine, receiving a Complete Response Letter (CRL) which identified the need for additional CMC data pertaining to the drug product and manufacturing process – but said no clinical efficacy or safety issues raised; biotech has been bludgeoned for over a year and the XBI plunged 18% in April 2022, its 2nd worst month ever (January 2016 the XBI fell 28%, was worse); SAGE and BIIB initiate rolling submission of NDA to FDA for zuranolone for the potential treatment of MDD; SUPN said the FDA approved expanded use of its attention deficit hyperactivity disorder treatment, Qelbree, in adult patients aged 18 and older


Industrials & Materials

·     Transports; SAVE shares fall as rejected a $3.6 billion cash takeover bid from JBLU saying a deal likely can’t be completed, and that Spirit is sticking with plans to merge with rival budget carrier ULCC. Spirit’s board said it believed there was too much risk that regulators would bar a merger with JetBlue, however, even after JetBlue pledged to shed assets to win regulatory approval and to pay a $200 million breakup fee if it was unable to complete the proposed acquisition for antitrust reasons; broader transports were mixed on day

·     Metals & Materials; gold miners were pressured following a sharp 2% decline in gold prices, with NEM all falling; in forest and paper, WY downgrade from Outperform to Market Perform w/ $42 PT at BMO Capital saying with shares trading at a ~15% premium to our NAV, they are stepping to the sidelines; Deutsche bank noted they view boxboard data, which was released after market close on Friday, April 29 as a slight positive given favorable demand (IP )


Technology, Media & Telecom

·     Semiconductors; ON posts Q1 beat on EPS and revenue and better guidance as sees EPS $1.20-$1.32 vs. est. $1.05 on revs $1.97B-$2.07B vs. est. $1.92B; global semiconductor sales rose 1.1% M/M in March to $50.6B, according to the Semiconductor Industry Association. Q1 sales totaled $151.7B, an increase of 23.0% over the first quarter of 2021, but 0.5% less than the fourth quarter of 2021; QCOM rises after German daily Handelsblatt reports car maker Volkswagen has set up a years-long partnership with company; Volkswagen will use QCOM’s SoC, developed specifically for automated driving starting in 2026 – Handelsblatt

·     Hardware & Software movers; ATVI rises early as Berkshire Hathaway Inc. revealed it started buying more shares of since MSFT announced its plan to acquire the videogame maker in January and now has a 9.5% stake, Warren Buffett said Saturday at Berkshire’s annual meeting; ROKU said that the Apple Music app, a premium music subscription service developed by Apple Inc, is now available globally on the Roku® platform; EPAM upgraded to Overweight at Piper as recent checks indicate that the demand environment remains healthy for Digital IT Services and EPAM’s operational impact appear to be manageable


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.