Market Review: May 16, 2022

Closing Recap

Monday, May 16, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     After falling six-straight weeks for the S&P 500 index and Nasdaq Composite, and 7-straight for the Dow, U.S. stocks did not get off to a good start this week either outside of energy and defensive sectors utilities and healthcare. Stocks swung from gains to losses, but less so than in prior weeks, as for just the second time in four weeks the Nasdaq-100 (QQQ) intraday range was less than 2%. A couple of late day comments stopped the midday market rally in its tracks as Michael Burry of ‘The Big Short’ revealed a bet against Apple (AAPL) according to a CNBC report, while Tesla CEO Elon musk said late day the U.S. is probably in a recession for 1 year to 18 months and that it will get worse. Musk also said that inflation has resulted from govt printing money. The comments turned tech lower in a generally quiet day as investors brace for a busy week of top retailer earnings. Economic data was disappointing this morning with Empire Manufacturing miss, ahead of busy day tomorrow: 8:30 AM ET Advance Retail Sales for April (est. +0.9% M/M), Industrial Production at 9:15 AM (Est. +0.5% for April), and Business Inventories and NAHB Housing Index at 10:00, along with Fed speakers Bullard, Harker, Powell, Mester and Evans. Earnings tomorrow in big retail with Wal-Mart (WMT) and Home Depot (HD) both expected, to be followed by Target (TGT) and Lowe’s (LOW) on Wednesday morning.


Economic Data:

·     NY Empire state current business conditions index unexpectedly falls -11.6 in May (below estimate of +17.0) and well below vs April +24.6; new orders index -8.8 in May vs April +25.1, prices paid index +73.7 in May vs April +86.4; employment index at +14.0 in May vs April +7.3 and the six-month business conditions index +18.0 in May vs April +15.2


Commodities, Currencies & Treasuries

·     Oil prices rose throughout the day, with WTI crude up $3.71 or 3.36% to settle at $114.20 per barrel, while Brent crude settle at $114.24/bbl, up $2.69, 2.41%. Natural gas prices rose about 5% to one-week highs above $8.00 mln Btus as higher European prices keep U.S. liquefied natural gas (LNG) exports strong. WTI crude oil prices to a fresh high for the month and U.S. gasoline futures topped $4/gallon for the first time ever.

·     Gold prices edged higher, rising $5.80 or 0.32% to settle at $1,814.00 an ounce, bouncing off its worst levels since February (off earlier lows of $1,785 an ounce) as it looks to snap its 4-week losing streak, getting a boost as the U.S. dollar slipped.

·     Treasury yields slid on Monday after weaker economic data and a further rotation into haven assets with stocks again under pressure. The 10-yr yield fell as much as 7 bps to 2.85% before bouncing slightly, while the 2-yr dropped to 2.56% and the 30-yr only dipped modestly by 2 bps to 3.07%. The Euro continues its slide against the U.S. dollar and is on the verge of trading at parity vs. the buck for the first time in two decades,






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; WEBR shares fall after Q2 EPS loss (-$1.02) vs. est. $0.18, Q2 revs of $607.2M miss ests $659M, and issues weak guidance as sees FY22 revenue $1.65B-$1.8B below consensus $2.09B; big earnings week for retailers with HD and WMT Tuesday morning, LOW, TGT, TJX on Wednesday morning, BJ, KSS Thursday morning and DECK, ROST at night; GME appointed Nir Patel to the role of Chief Operating Officer, effective May 31, 2022 after recently was Chief Executive Officer at Belk, a privately-owned national retailer; WRBY reported an unexpected Q1 loss and revenue that came up shy of expectations, but reiterated its full-year outlook; Wedbush lowered BBY tgt to $80 from $110 and stay cautious into 1Q22 results on Tuesday, May 24 as model 1Q22 comps of -9.8% vs. consensus of -8.4% but see more downside than upside risk; FL was downgraded to mixed from positive by OTR Global

·     Auto sector; CVNA rebounded after forecast significant core earnings for 2023, as the co spelled out plans to rein in spending on advertising, expansion, and other areas to offset waning demand late Friday; Ford (F) sold an additional 7 million shares of electric-car maker RIVN on Friday at $26.99 per share for about $188 million after dumping 8M shares earlier in the week following IPO lockup period expiration according to a regulatory filing (Ford still owns 87 million Rivian shares); NIO upgraded to Buy from neutral at Bank America with $26 tgt saying NIO is trading at 1.7x 1-year forward EV/sales, 1SD below its historical average which seems attractive given the improving outlook

·     Housing & Building Products; According to twitter, in Jan 2021, the 30-yr mortgage rate was 2.65% and average new home price in the US was $401,700. Today the 30-yr mortgage rate is 5.30% and average new home price is $523,900. Assuming a 20% down payment, that’s an 80% increase in the monthly payment (from $1,294 to $2,327); GFF said its Board has initiated a process to review a comprehensive range of strategic alternatives to maximize shareholder value including a sale, merger, divestiture, recapitalization, or other strategic transaction

·     Consumer Staples: IPAR upgraded to Buy at Citigroup after recently reported strong 1Q22 results and offered a robust outlook for the year (11% sales growth and 10% EPS growth) and citing the favorable tailwinds in the fragrance category; SPTN responded to the recent activist pressure it has seen with a new investor presentation highlighting its transformed board and new strategies.

·     Restaurants: MCD announced it will exit the Russian market and has initiated a process to sell its Russian business. This follows McDonald’s announcement on March 8, that it had temporarily closed restaurants in Russia and paused operations in the market. As part of the exit, the company expects to record a non-cash charge of about $1.2 billion to $1.4 billion; SHAK upgrade from Neutral to Buy w/ $70 PT at Northcoast; Goldman Sachs said encourages investors to focus on companies with pricing power (CMG, FWRG, WING) unique reopening dynamics (SHAK, SG) and those that benefit from trade-down trends (MCD) in restaurants



·     Energy stock movers; energy stocks early leaders, with OXY making new 52-week highs along with DVN in refiners: Goldman Sachs upgraded DINO to Buy on improving returns of capital to shareholders, discounted valuation following the acquisition of Puget Sound and Sinclair, widening crude spreads and downgrade MPC to Neutral. overall, recommend investors focus on US refiners with mean reversion potential that have not fully participated in the upside of the recent refining strength

·     Utilities & Solar; SRE said it would sell three million tonnes of liquefied natural gas (LNG) each year to Poland’s PGNiG, in another sign of rising interest in U.S. supply following Russia’s invasion of Ukraine; ARRY files for offer and sell up to 13.9 mln shares of common stock by selling stockholders; FE downgraded to Neutral from Buy at Bank America due to our growing concerns about the negative pension Mark-to-market where we estimate ~$0.20 negative impact on 2023+, prior to mitigation, double management’s guidance



·     Bank, Brokers & Exchanges: CME upgraded to buy from Hold at Argus as expect interest rate contract volume to increase as the Federal Reserve raises rates, and look for steady growth in energy contract volume; CFG two positive with upbeat mention in Barron’s this weekend saying the bank has been growing, and the stock could gain 29%, while was also upgraded to Buy with $54 tgt (from $48) at Bank America

·     Consumer Finance: DFS April net-charge off (NCO) rate of 2.02% increased 27bps m/m, but is still down 53bps y/y while the 30+ day delinquency rate decreased 4bps m/m, slightly ahead of the average 7bps decrease historically seen in April; COF reports April newt-charge-offs 2.19% vs. 2.4% Y/Y, and delinquencies 2.18% vs. 1.92% Y/Y and vs. 2.32% the end of March; SYF delinquency rate of 2.7% in April compared with 2.8% in March and 2.4% in April 2021, and net charge-offs as a percentage of average loan receivables were 2.7% in April vs. 2.9% in March and 3.8% in the year-ago period; BAC credit card delinquency rate was 0.88% at April end vs 0.93% at March end and credit card charge-off rate was 1.45% in April vs 1.37% in March; SOFI was upgraded to Overweight at Piper after shares sold off 70% in the past six months as the combination of an extension of the student loan moratorium, rising interest rates and heavy pressure on fintech stocks have weighed on shares.



·     Pharma movers; LLY rises after the FDA on Friday approved its Mounjaro, a once-weekly injection for adults with type 2 diabetes; SNY said new data from a Phase III late-stage study of its multiple myeloma therapy Sarclisa, in combination with other drugs, showed reducing the risk of disease getting worse by a median of nearly three years; BMY update on checkmate -901 trial evaluating Opdivo (nivolumab) plus Yervoy (ipilimumab) as first-line treatment for patients with unresectable or metastatic urothelial carcinoma as trial did not meet primary endpoint and no new safety signals were observed at time of analysis; ZNTL 10.3M share offering priced at $19.38; MRK 52-week highs; concerns that a shortage of baby formula in the U.S. due to supply-chain issues and a recent product recall may harm the social reputation of producers such as ABT, PRGO and others

·     Biotech movers; ASCO Cancer meeting preview from Cowen, highlighting presentations from MRTX, RHHBY, GILD, IMGN, SWTX, MGNX, PMVP, ELEV, MRUS; EBS entered into a definitive agreement with CMRX to acquire its exclusive worldwide rights to TEMBEXA(R), the first antiviral approved by the U.S. FDA for all age groups for the treatment of smallpox, for up to $337.5 million plus royalties; SGEN announces resignation of president, chairman & CEO clay Siegall

·     Healthcare Services & MedTech Equipment; Agilent (A) Positive Catalyst Watch opened at Citigroup ahead of F2Q22 earnings as constructive on the setup given the resilience exhibited in 1Q by WAT, TMO, DHR & BRKR particularly in Instruments and the Pharma and C&E end markets broadly; CI upgraded to Overweight from Neutral and tgt raised to $304 from $248 at JPMorgan saying near-term, we believe there could be further upside to updated 2022 guidance and we’re encouraged to see Commercial membership growth come in nicely ahead of CI’s initial guidance


Industrials & Materials

·     Transports; in airlines, SAVE shares rallied after reports that JBLU plans to launch a hostile takeover attempt for the discount carrier, according to people with the matter, after Spirit rejected JetBlue’s $3.6 billion offer in favor of an existing deal with Frontier Airlines (ULCC) ; Dow Transports lagged most of the day not turning positive til late in the trading day as broader markets edged higher.


Technology, Media & Telecom

·     Media & Internet; NFLX upgraded to Outperform from Neutral at Wedbush as think that Netflix is positioned to exceed its guidance for Q2, particularly because of the staggered release date for Ozark (maintains $280 tgt); WIX reported a wider-than-expected quarterly loss, but said its businesses were showing steady growth; now sees Q2 revenue of $342M-$346M below est. of around $356M and sees year revs up 10-13% Y/Y or $1.396B-$1.434B below consensus at $1.45B; Chinese Internet names upgraded at JPMorgan (BABA, BIDU, BZUN, BILI ) saying significant uncertainties facing the China’s e-commerce sector should begin to abate on the back of recent regulatory announcements, raising; TTD was upgraded to Buy at Stifel saying recent advertising moves by streaming services have the firm rethinking its stance on connected TV ads; VZ will raise prices for consumers, business customers

·     Software movers; according to NPD Group this weekend, videogame industry sales (EA, TTWO, SONY ) slipped 8% year-over-year in April – the sixth straight month that was worse than the year before; December sales had shown up down 1% from the prior year, while January dipped 2%; February sales slipped 6%; and March fell a full 15%. April overall sales fell 8% from April 2021, to $4.337 billion, according to NPD Group. Hardware sale eked out some rare growth, rising 16% to $343 million as some console supply strains eased; DCOM downgrade to Equal Weight at Stephens following 1Q22 earnings, predicated on the recognition that key aspects to their upgrade a year ago haven’t played out or materialized the way we anticipated

·     Hardware, Components & Services; MANT to be acquired by Carlyle Group in all-cash transaction valued at approximately $4.2B, with ManTech shareholders to receive $96.00 per share in cash ; HEAR rises after reached an agreement with The Donerail Group to refresh its Board of Directors and provides additional detail regarding ongoing, robust alternatives process


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.