Market Review: November 01, 2022

Closing Recap

Tuesday, November 01, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Rough day on Wall Street as major averages were unable to hold overnight gains, sinking and ending near session lows as US Treasury yields rebounded along with the dollar after mixed economic data – but all eyes fixed on the FOMC meeting tomorrow. The Fed began its two-day meeting today with their decision and commentary expected tomorrow afternoon. Fed Fund Futures are pricing in a 75bps rate hike, and a peak of nearly 5% in rates by the March ’23 or May ’23 meeting. So far this year, the Fed rose by 25-bps in March, 50-bps in May, 75-bps in June, 75-bps in July and 75-bps in Sept. Mixed bag of economic data today as JOLTs data strong (2nd month in a row it has moved markets) which weighed on sentiment (as investors looking for weak data for Fed to ease rate hike cycle), ISM services in-line, just above expansion levels as orders contracted for the fourth time in five months, while an index of prices paid fell to a more than two-year low and construction spending above views for Sept. Energy the best sector on the day, while tech and discretionary the biggest losers (AMZN, AAPL, GOOGL tumble). Unconfirmed reports overnight about how China is formulating a plan to exit its zero covid policy helped boost Asian markets and lifted China stocks as well as commodity linked stocks but failed to carry over into the US session meaningfully.


Economic Data:

·     JOLTs Job Openings for Sept reported at 10.717M vs. est. 9.75M and prior 10.28M

·     S&P Global October final manufacturing PMI at 50.4 (vs flash 49.9)

·     ISM U.S. Manufacturing activity index 50.2 in October vs. 50.9 in Sept (est. 50.0); prices paid index 46.6 in October down from 51.7 in September; new orders index 49.2 in October vs 47.1 prior; employment index 50.0 in October vs 48.7 prior

·     Construction spending for Sept +0.2% vs. est. (-0.5%) to $1.811 trln, vs. Aug (-0.6%) and private construction spending +0.4%, public spending (-0.4%)

·     The average price paid for a new vehicle hit a record of $46,173 in July and has been trending downward in recent months. In October, consumers paid an average of about $45,600 for a new car or truck, several hundred dollars off the summer peak but still 33% higher than before the pandemic. The average interest rate on a new-car loan was 5.7% in Q3, up from 4.3% y/y.



·     Oil prices end higher, with WTI crude rising $1.84 or 2.13% to settle at $88.37 per barrel and Brent crude rises $1.84 or 1.98% to settle at $94.65 per barrel. Prices got a late day boost after a WSJ report saying Saudis on high alert for potential Iranian attack, which raised the prospect of disruptions to the oil market in the oil-rich Middle East. Traders also continued to weigh prospects for energy demand from China on the heels of unconfirmed rumors overnight that the country may ease COVID curbs. Volatile natural gas prices drop 10% to a session-low $5.780/MMBtu, reversing much of yesterday’s 12% increase. Gold prices rise $9.00 or about +0.6% to settle at $1,649.70 an ounce as the dollar was flat and yields edge higher, with investors awaiting the Fed tomorrow.


Currencies & Treasuries

·     Treasury yields bounced back, as the 10-year rose to 4.08% after hitting lows of 3.92% after the monthly JOLTs data showed labor markets improving (ahead of ADP Private payrolls tomorrow and Nonfarm payrolls Friday), but still tight and posing a big challenge to the Fed. The 2-yr yield bounced to highs above 4.54%, off lows of 4.4% after the data. Meanwhile 3-Month Treasury Bill Yield hit 4.16% above longer term 30-Year Treasury Bond Yield 4.12%. Series I savings bonds issued over the next six months will pay a yield of 6.89%, vs. record high of 9.62%.

·     The US dollar ends little changed (DXY at 111.60), but finishing off earlier lows of 110.70, getting a boost ahead of tomorrow’s FOMC policy meeting and after economic data showed signs of an improving jobs market. The euro holding below parity vs. the dollar after topping it briefly last week, while the yen fell further against the greenback.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers: SHOO downgraded to Neutral from Outperform at Wedbush and cut tgt to $29 from $43 as see near-term risk into tomorrow’s EPS print due to the deteriorating macro environment, difficult compares, high exposure to the challenging U.S. wholesale channel; VSCO is paying $400 million to buy Adore Me, an online lingerie brand known for inclusive sizing and marketing; SKX downgraded to Hold from Buy at Argus saying the company is expected to face continued supply-chain disruptions and pressure related to COVID lockdowns in China and cuts ests.

·     Auto sector: GT reported soft 3Q22 results with revenue/SOI both missing consensus expectations, largely driven by weaker than anticipated volumes, particularly out of Europe (Q3 adj EPS $0.40/$5.3B vs. est. $0.54/$5.3B); TM profit plunges 25% on chip shortages and surging costs; CVNA rises after JPMorgan upgraded from Underweight to Neutral as believe Carvana’s approach to retailing used vehicles has given it a multi-year head start in the online-only space of a fragmented used vehicle industry, allowing it to expand at a rapid pace; Chinese EV stocks rise after deliveries data/China macro headlines: 1) NIO reported deliveries for October of 10,059 vs. 10,878 m/m, down -7.5% m/m; 2) XPEV reported vehicle deliveries for October of 5,101 units and YTD deliveries 103,654 units, a 56% increase y/y; 3) LI reported vehicle deliveries for October of 10,052 units up 31% y/y from 7,649 – to start delivery of Li L8 this month;

·     Housing & Building Products: TREX 3Q results were essentially in-line with expectations and 2022 guidance was largely reiterated but Stifel noted 2023 commentary regarding gross margins (building up from 4Q22 levels of ~33%) and SG&A (~$150-160M) suggest some downside to 2023 margins; homebuilders mixed amid further signs of slowing housing, rising rates

·     Consumer Staples & Restaurants: food distributor SYY mixed Q1 results as small EPS miss and sales beat as reaffirms FY23 guidance; TAP EPS missed and now expect to be at the low-end of the +HSD% range on cc underlying income/revenues beat on the quarter; MNST upgrade from Neutral to Overweight at JPMorgan and raise tgt to $106 from $96 saying Monster remains one of the best growth stories in coverage universe, with a strong track record of delivering an above-average earnings CAGR

·     Casinos, Gaming, Lodging & Leisure sector: in ride hailing, UBER shares rally after mixed results/better guidance as forecast Q4 adjusted EBITDA between $600M-$630M vs. est. $569.4M after better Q3 Ebitda and revs (EPS and bookings missed); Macau casino stocks higher amid reopening headlines/loosening zero-covid comments in China, helping lift LVS, MGM, MLCO, WYNN among names; IMAX hit revenue expectations, but missed on earnings; we expect consistent and expanding profitability beginning in Q4; lodging names slip



·     The WSJ reported midday that Saudi Arabia has shared intelligence with the U.S. warning of an imminent attack from Iran on targets in the kingdom, putting the American military and others in the Middle East on an elevated alert level, Saudi and U.S. officials said. In response to the warning, Saudi Arabia, the U.S. and several other neighboring states have raised the level of alert for their military forces, the officials said

·     Energy stock movers: sector remains one of the few market bright spots for the year amid rising oil prices help big oil post record profits this quarter for likes of XOM, CVX, others; refiners outperform today with PSX reporting jump in Q3 profit, benefiting from surging fuel demand and tight energy supplies (Q3 EPS $6.46 vs. est. $5.04); MPC Q3 EPS $7.81 tops estimate of $7.07 and increases dividend by 30% to 75 cents and said demand for products remains strong

·     Utilities & Solar: FSLR upgraded to EW from UW at Barclays and raise tgt to $162 from $89 saying demand for domestically manufactured products support First Solar’s pricing power while its almost sold-out status through 2026 kicks the concern about potential ASP deterioration



·     Banks & Asset Managers: Asset manager ATCO to be acquired by Poseidon Acquisition Corp in a deal valued at $10.9 billion, the companies said, with holders to receive $15.50 per share; Truist said favorite ideas now in banks buy rated HWC, PB, SBCF, and FNB in earnings recap; IBKR oct ending client equity of $296.7 bln, 22% lower than prior year and had 2.04 mln client accounts, 29% higher than prior year in Oct; in insurance, AFL reported an EPS miss and variable investment income was also -$0.11 below plan; CINF slips as EPS beats on lower taxes, higher cat reserve releases +.10, and lower expense ratio +.05

·     FinTech, Consumer Finance: SOFI rises as Q3 EPS loss (-$0.09) vs. (-$0.10) and revs $419.3M vs $391 est. and Q3 adj Ebitda rises to $44.3M; raises FY22 revs to $1.517-1.522B above est. $1.50B, and adj EBITDA $115-120M; said total members over 4.7M, +61% y/y; UPST announced notified about 140 hourly employees who help process loan applications the positions were eliminated

·     REITs: in research, Raymond James downgraded both WELL and VTR to Outperform from Strong Buy ahead of 3Q22 earnings releases and expected 4Q22 outlooks as believe results will come with little surprises, but believe expectations for 4Q22 and 2023 are too high; SPG raised quarterly dividend to $1.80 per share and reported Q3 FFO beat



·     Pharma movers: big morning of earnings as Dow component PFE Q3 adj EPS $1.78 tops est. $1.40 and revs $22.6B vs. est. $21.12B; raises FY adj EPS to $6.40-$6.50 from prior $6.30-$6.45 and sees FY revs $99.5B-$102.0B vs. prior view $98.0B-$102.0B; LLY falls on guidance – Q3 EPS $1.98 vs. est. $1.96; Q3 revenue $6.94B vs. est. $6.89B; sees FY Adj EPS $7.70-$7.85, vs. prior $7.90-$8.05; sees FY revs $28.5B-$29.0B, vs. prior $28.8B-$29.3B; CTLT tumbles as Q1 EPS $0.34 misses the $0.56 estimate and revs slip -0.3% y/y to $1.02B below ests $1.09B

·     Biotech movers: INCY Q3 EPS $0.60 misses $0.74 est. and sales $823.3M miss $848.2M est.; ANAB upgraded from Neutral to Buy at Guggenheim based o positive view on the applicability of checkpoint receptor agonists across several immune-inflammatory diseases; UBX announces positive 24-week data from phase 2 BEHOLD study of UBX1325 in patients with diabetic macular edema; NBIX raised 2022 guidance for Ingrezza from $1,350-1,400M ($1,375 at the midpoint) to $1,400-1,425M ($1,413M at the midpoint), up (+37.5M at midpoint) by more than beat

·     MedTech Equipment: ABMD to be acquired by JNJ for an upfront payment of $380.00 per share in cash, with an enterprise value of approximately $16.6B which includes cash acquired and ABMD holders will also receive a non-tradeable contingent value right (CVR) entitling the holder to receive up to $35.00 per share in cash if certain commercial/milestones are achieved; SYK shares slide as top line strong with 10% organic growth, but margin headwinds worse than expected and guides FY adj EPS $9.15-9.25 below prior $9.30-$9.50 and est. $9.36; HOLX F4Q sales +10%, EPS 19c ahead of Street on Covid-19 testing; WAT with Q3 top and bottom line beat but guides Q4 EPS $3.66-$3.76 vs. est. $3.84; AXNX reported Q3 sales of $70MM up 50% y/y, delivering an 11% upside surprise and raising its 2022 sales outlook by $9MM more than beat; EW announces $750 million accelerated share repurchase; TFX Iso-Gard filter S, a medical device to protect patients from potential airborne contaminants, was classified as most serious recall from regulators, saying its use could lead to injuries or death.

·     Healthcare Services: Truist noted CMS released the final 2023 home health reimbursement rule that was better than our expectations and the proposed rule, including a +0.7% rate increase vs. the proposed net (4.2%) decrease and their expectation of roughly flat – firm said AMED most directly impacted (AMED, AVAH, HUM, LHCG); CTLT Q1 EPS $0.34 misses the $0.56 estimate and revs slip -0.3% y/y to $1.02B below ests $1.09B; XRAY announces restatements of 3q 2021 and full year 2021 financials; ACHC Q3 adj EPS $0.86 vs. est. $0.79; Q3 revs rose 13.5% y/y to $666.7M vs. est. $657.5M; sees FY22 adjusted EPS $3.00-$3.10 (est. $3.08)


Industrials & Materials

·     Aerospace & Defense: SpaceX is set to launch its powerful Falcon Heavy rocket on a classified mission for the US Space Force after a more than 3-year hiatus, Bloomberg; AL announces lease placement of three new Boeing 737-8s with Aero Italia; LDOS Q3 beat, narrows year profit outlook, and raises year rev outlook; ARNC cut its revenue forecast for the full year and free cash flow outlook

·     Industrial & Machinery: strong earnings results across the industrials space in shares of AME, ETN, RRX, XYL; XYL 3Q adj EPS $0.79 vs est. $0.66 on revs $1.38B vs est. $1.34B; sees FY organic revs +9-10% vs prior +8-10%, sees adj EPS $2.65-2.75 vs prior $2.50-2.70 and est. $2.60; AME 3Q adj EPS $1.45 vs est. $1.37 on revs $1.55B vs est. $1.51B; guides 4Q adj EPS $1.45-1.47 vs est. $1.43; sees FY sales approx +10% vs est. +9%, sees FY adj EPS $5.61-5.63 vs est. $5.51; KMT roughly in line qtr with FY guide marginally below consensus; WAB slight beat vs consensus driven by higher freight margins with guide narrowed but ahead of est.; FLS report Q3 miss driven by weakness in both segments with outlook also below consensus but mgmt. notes some of issues impacting 3Q not likely to persist into 4Q; ETN modest beat with guide that largely brackets consensus

·     Transports: CAR Q3 EPS $21.70 vs est. $14.46 and revenue $3.55B mostly in-line and better EBITDA $1.46B vs consensus $1.11B, driven by increased demand in both the commercial and leisure segments, carried through to September; in rails, RBC Capital upgraded NSC to Sector Perform from Underperform on positive operating momentum versus expectations and raise tgt to $237 from $221, while the firm downgraded UNP to underperform on weak operating performance relative to expectations and cut tgt to $187 from $200


Technology, Media & Telecom

·     Media, Internet: SONY said quarterly profit through September rose 24% on healthy demand for its music and movies and boosted its full-year operating profit forecast on Tuesday by 4.5% to 1.16 trillion yen; SIRI posted a drop in profit for Q3 after booking higher costs, but growth in the number of self-pay subscribers increased revenues – raised dividend; FOXA Q3 top and bottom line above ests ($1.21/$3.19B vs. est. $1.14/$3.17B) as top line growth was driven by an 8% jump in advertising revenue thanks to higher political advertising sales; shares in Chinese companies were rallying (BABA, BIDU, NTES, JD, PDD) amid renewed optimism that the country would loosen its strict Covid-19 measures which have dampened growth

·     Semiconductors: Deutsche Bank noted NXPI delivered its traditional beat, but for the first time this cycle guided cautiously (4Q revs guided ~4% below Street ests) as macro headwinds are beginning to impact a greater portion of the co’s overall business; RMBS delivered a solid beat-and-raise on strong Product sales and better supply chain execution but did suggest cautiousness among customers in taking on higher levels of inventory into 1H CY23; LSCC printed a clean 3Q beat and raise with GMs +40 bps Q/Q and guides 4Q revs $170-180Mm vs est. $169.5Mm

·     Hardware & Software movers: VRNS tumbles after results, as Wedbush downgraded to Neutral saying delivered a disaster quarter and guidance along with a confusing conference call – also reported ARR of $447.8M, equating to 26% growth Y/Y and falling short of JMP estimate for $450M; ANET delivered and guided for revenue upside, which drove significant reported and implied EPS upside – Revenues of $1.18B, up 57% y/y and 12% q/q, came in $126mn or 12% above; LUMN wins $1.5 billion defense information systems network contract

·     Telecom movers: GOGO upgrade from Underweight to Equal Weight w/ $15 PT at Morgan Stanley as valuation looks more reasonable and solid trends are likely to continue for the near/medium-term


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.