Market Review: November 21, 2022

Closing Recap

Monday, November 21, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Stocks fell on Thursday amid concern that China may tighten Covid curbs after a string of reported deaths, and increasing cases, while investors rotated money back into the dollar. Investors flocked to more defensive sectors (Utilities, Staples, REITs) and out of tech, energy and discretionary in a generally quiet day. Walt Disney Co. (DIS) outperformed in the Dow after bringing back former leader Bob Iger as chief executive officer in a surprise move. Volumes were light, news, data, and research quiet ahead of the holiday week (markets closed Thursday and early close Friday), as well as the start of the FIFA World Cup today. Bitcoin prices hit fresh 2-year lows, oil prices tumbled and recovered on OPEC headlines and Treasury yields rose.



·     Oil prices fell but pared losses after the Saudi energy minister categorically denied reports that Saudi Arabia is discussing with other OPEC producers an output increase of 500,000 bpd – State News Agency. WTI crude fell -$0.45 or 35c on the day to $79.37 per barrel, well off earlier lows of $75.08 after the initial Journal report. The rebuttal came after an earlier WSJ report that Saudi Arabia and other OPEC oil producers are discussing an output increase, the group’s delegates said. Oil prices rebounded after hitting lows of $75.08 earlier after the article. Separately, Goldman Sachs cut its oil prices forecasts on China concerns. Cut Brent’s oil forecast for the fourth quarter to $100/bbl from the prior projection of $110/bbl. Bespoke investment noted the AAA national average price of a gallon of gas took out its September low yesterday (before today’s big drop in oil prices). Should help November CPI. Down 10 cents/gallon MTD. Gold prices fell -$14.80 to settle at $1,739.60 an ounce as a bounce in the US dollar weighed on prices early and carried over into the afternoon while silver slides about -0.6% to $20.85.


Currencies & Treasuries

·     Treasury yields edge higher/yield curve inverts further; In the US, $120B new issuance started today as the US Treasury sold $42B in 2-Year note sale at high yield rate 4.505% vs. 4.515% when issued, bid-cover ratio at 2.64 (vs. previous 2.59), directs accepted 22.4% (vs. 25.3% prior) and indirect accepted 57.0% (vs. 50.5% prior). In another auction, the U.S. Treasury sold $43B 5-year notes at high yield 3.974% (vs. when issued 3.967%) as bid-to-cover ratio 2.39, directs receive 18.71% and indirects awarded 66.22%.

·     Bitcoin sunk to fresh 2-year lows, down over 5% to $15,750 and Ethereum down over 9% to under $1,100 as the crypto meltdown continues after the FTX bankruptcy fallout. The US dollar saw solid gains despite mixed Fed speaker commentary today/weekend from Bostic, Daly and Mester. The Euro loses 1.0300+ status as Buck bounces and overshadows hawkish-leaning ECB commentary and firm rebound in EGB yields.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers: big week of earnings coming up: today URBN and tomorrow ANF, BBY, CAL, CHS, DKS, DLTR, AEO, GES and JWN; WSM downgraded to EW from OW and tgt to $114 from $192 and RH cut to EW from OW w tgt to $243 from $328 citing a weakening housing cycle saying believes will have a trickle-down impact on home furnishing spending over the next 12 to 24 months and high-end wallet pressure; says rising inventory positions will worsen over the next several quarters along with a deceleration in demand

·     Auto sector: CVNA was downgraded to Sell at Argus, even after shares are down sharply from their 52-week highs, reflecting both the company’s recent results and weak industry trends. As used car prices fall, they believe that Carvana will struggle to make a profit on vehicles previously purchased at high prices; TSLA trades new 2-year lows, down over -3% to around the $170 level (took out the 11/18 low of 176.55)

·     Consumer Staples & Restaurants: in food, SJM Q2 adj EPS $2.40 vs. est. $2.19; Q2 sales $2.21B vs. est. $2.17B; boosted FY23 adjusted EPS view to $8.35-$8.75 from $8.20-$8.60 (est. $8.49) and raises FY23 revenue growth view to 5.5%-6.5% from 4%-5%; QSR upgraded to Equal weight at Morgan Stanley saying the appointment of Patrick Doyle, former CEO of DPZ, as executive Chairman is the catalyst; DPZ said it will roll out 800 General Motors Co. Chevy Bolt electric vehicles (EVs) as part of its pizza delivery fleet; YipitData suggests that DASH is already well ahead of UBER in terms of its grocery and convenience businesses in aggregate, as per tweet

·     Casinos, Gaming, Lodging & Leisure sector: Macau related casino stocks WYNN, LVS, MGM, MLCO slide as hard-hit Beijing tightens entry rules amid rise in COVID infections in the city and nationally; in research, Morgan Stanley initiated US Gaming with an In-Line view as depressed valuation has started to reflect earnings risk from an eroding macro and are bullish sports betting with DKNG a top Pick and OW rating, and overweight on LVS ($49 tgt) and RRR ($52 tgt) while Underweight rated on BYD


Energy, Industrials & Materials

·     Energy stock movers: sector the worst performer in the S&P after media reports that Saudi Arabia and other OPEC oil producers are discussing an output increase; shares of HAL, APA, DVN, HES and others saw sharp declines as WTI oil tumbles to lowest since January; S&P 500 energy sector index hits over three-week low, last down 3.5% – oil prices pared losses after Bloomberg reported the Saudi’s denied any talks of production cuts as reported in the WSJ.

·     Chemicals: OLN downgraded to Sector Weight at Keybanc as see signs that caustic soda price momentum is stalling in most regions. With U.S. caustic soda prices ~80-90% above the prior cycle peak, they see the commodity’s price outlook as skewed flat-to-down

·     Industrials and Machinery: KeyBanc downgraded FSS to SW from OW as tgt is reached but raises tgts on AME and TKR as think those names have more reasonable valuation and more favorable risk/reward skews. Finally, Balance Sheets generally remain healthy although KAMN and MKSI slipped in the rankings given recent deal activity; Jacob’s (J) a mover on earnings; industrials again outperform broader sector averages; in metals, steel names outperformed with STLD at fresh 52-week highs amid strength in steel names; X around its 200-day MA $24.75; NUE rises to best levels since May

·     Paper & Containerboard: for IP, PKG, WRK, Jefferies noted, citing containerboard prices fell $20-40 / ton in Nov with the industry working through a glut of inventory & weak demand. The magnitude of the first price cut is in-line with buy side expectations, but with the 5% capacity still to come online in Feb/Mar & softening macro backdrop, we wouldn’t be surprised if prices cumulatively fall by $50-100 / ton in 2023.

·     Transports: Two of the country’s largest railroad unions (CSX, UNP) will reveal Monday whether their members voted to accept a new wage deal brokered by the White House or reject it and move closer to a strike that could disrupt the flow of goods around the country. Union Pacific Corp., CSX Corp. and other freight railroads move about 40% of U.S. long-distance cargo and serve the agricultural, energy and manufacturing sectors

·     Pipelines: at JPMorgan, said factoring in the lower NGL EBITDA expectations and various other modeling adjustments, they lower PAA YE23 PTs to $14/unit and said factoring in the potential for 2023 Permian growth to fall short of more bullish expectations, they see a more balanced risk/reward profile and downgrade PAA and PAGP to a Neutral rating from Overweight

·     Utilities: the defensive sector outperformed with rotation out of growth names; XEL downgrade from Outperform to Neutral wat Credit Suisse saying valuation is fairer at a 14% premium; PNW upgraded from Underperform to Neutral at Credit Suisse following positive EEI meetings and the Arizona Corporate Commission (ACC) election



·     Bank movers: crypto bank SI tgt raised to $30 from $25 at Wells Fargo and upgrade shares to Equal Weight saying the downside scenario played out faster than expected, and crypto winter has morphed into an existential question of survival. This is difficult for SI, as all current and future growth engines are essentially on hold; in regional banks, RF downgraded to Market Perform as we now see risk-reward as balanced given recent outperformance and widening valuation Gap vs. peers and CMA upgraded to Outperform following the recent selloff juxtaposed with its relatively solid fundamental positioning heading into a potential recession

·     Consumer Finance: UBS initiated shares of AXP, COF, DFS and SYF all at Neutral in cards saying as these stocks are very sensitive to shifting views on consumer spending and, eventually, consumer credit deterioration, they think the macro-outlook will keep stocks within a (volatile) range for now. In Fintech, GPN shares slipped as Susquehanna noted DKNG shares fell after reports of customers that were victims of an alleged phishing hack – the firm noted the alleged phishing incidents are said to be from one of its Fintech suppliers, Global Payments (GPN)



·     Biotech & Pharma movers: MRK agreed to acquire IMGO for $36 per share in deal valued at $1.35B; TEVA says CEO Kare Schultz will retire, names Richard Francis as new chief executive; in MedTech, BDX shares outperformed after Evercore ISI with comments after call with mgmt noting Sterigenics was awarded a $363 M verdict awarded against it in IL related to ETO (ethylene oxide). BDX had ~210 cases outstanding as of FY3Q’22 related to ETO, and this has been topical for investors.

·     Healthcare Services: SHC shares jumped after late Friday, a jury ruled in favor of SHC in its second trial (Fornek vs. Sterigenics) as part of a broader Master Complaint in Cook County. IL. This is a major win for SHC according to KeyBanc and investors now have a second data point that presents a more balanced picture of the various potential outcomes of this litigation; in managed care, Raymond James downgraded UNH, and CI to Outperform from Strong Buy and downgrades shares of ALHC, and OSH down to Market Perform; SGRY sells ~23.5 mln at $24.50 – Offering size more than double the $275 mln targeted upon launch early Monday


Technology, Media & Telecom

·     Media, Internet: Dow component DIS shares rebound after it brought back former leader Bob Iger to replace his successor Bob Chapek as CEO, a surprise capitulation by the board after a string of disappointing results. Iger, 71, who spent more than four decades at Disney, including 15 years as its CEO, has agreed to serve for two years; PARA has decided not to support an appeal of a recent ruling that blocked the planned $2.18 billion sale of its Simon & Schuster book-publishing unit to rival Penguin Random House, WSJ reported; MTCH positive mention in Barron’s saying product fixes could help restore its former high growth rate, particularly if new features can entice users to buy higher-priced sub plans and make a la carte purchases; EVCM downgrade to Neutral, SQSP upgrade to Overweight at Piper saying if sequential $ growth remains flat for the next five quarters, LSPD as the most risk & GDDY, SQSP lowest risk

·     Semiconductors: TSM is planning to produce chips with advanced 3-nanometre technology at its new factory in the U.S. state of Arizona, but the plans are not completely finalized yet, the company’s founder Morris Chang said, Reuters reported; POWI downgrade from Outperform to Market Perform at Northland saying it has high exposure to the consumer market which is unlikely to be strong in CY23 and believe that cellphone fast charger revenue likely peaked; NVDA set to launch lower-spec AI GPU for sales to China; INTC reinstated Market Perform at Cowen saying a difficult 2023/24 lies ahead with further share loss in Datacenter and a declining PC market pressuring cash generation in a historic CAPEX cycle; AVGO outperformed

·     Software movers: handful of earnings results this week expected including ZM tonight, ADSK, VMW tomorrow night; in research, MDB was downgraded to EW from OW at Morgan Stanley saying a challenging spend environment will likely weigh on growth for the next few quarters resulting in FY24 cons expectations that may be too high; KeyBanc initiated MDB with an Overweight and $215 tgt as sees durable long-term growth for the NoSQL vendor

·     Telecom movers: in cable, UBS said 3Q provided further evidence of fixed wireless taking share from cable while telco DSL declines worsened – they estimate the industry added 860K broadband subscribers, up from last year’s 835K and well above 610K in 3Q19. Cable adds slowed but were slightly better than expected (+63K vs. +585K last year) while fixed wireless net adds reached 930K+, up from 825K in 2Q and 220K in 3Q21 (CHTR, CMCSA, CABO)


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.