Market Review: October 13, 2022

Closing Recap

Thursday, October 13, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     WOW is probably the best word to describe today’s trading action (or maybe just another average day for stocks in 2022!). In the span of three hours this morning, S&P 500 futures had a -3.9% decline and a 3.9% rally! U.S. equity futures completely reversed an early gain (up 1% pre-economic data on UK PM news) after CPI data came in hotter than expected (core CPI hit record 40-yr high). S&P and Nasdaq futures tumbled, falling between 2-3% on the open as Treasuries gapped down with the 10-year yield rising above 4% and the dollar surged. The only weird move this morning was the VIX which declined slightly (was maybe the tell of things to come). However, after the open, markets based and then fireworks as stocks “squeezed” higher, holding the 3,500 level for the S&P and Nasdaq above 10K. The Dow Jones Industrial Average posted a more than 1,500 swing from low to highs (was down -550 points at the lows) while the S&P posted a 200-point reversal from lows to highs. The headline CPI data was bad, no doubt, but like the PPI report yesterday, showed a few points that could be seen as slowing inflation. Meanwhile reports that UK Prime Minister Liz Truss is considering raising Corporation Tax next year in a spectacular mini-Budget U-turn, boosted the British Pound. Financials outpaced gains in the market ahead of big bank earnings tomorrow from JPM, Citi, WFC, MS and others, while Energy was the biggest winner on the day on oil price spike. In the end, the S&P and Nasdaq snapped their 6-day losing streaks heading into the final trading day of the week.

·     The Labor Department’s consumer prices index (CPI) report showed headline CPI gained at an annual pace of 8.2% in September, compared to an estimated 8.1%, while the core reading (ex food & energy) rose 6.6% y/y, above ests of 6.5% and a new all-time high dating back to 1982. The data reinforced the case for another big rate hike by the Federal Reserve as fed-funds futures traders priced in a 100% probability the Federal Reserve will lift its key interest rate by 75 bps to a range of 3.75%-4% in its early November meeting.


Some interesting stats/headlines/comments:

·     The S&P 500 opened lower by more than 1%, following 6 consecutive losses and trading at a 52-week low – since the inception of the futures market in 1982, only one other day matches this level of carnage: October 10, 2008, according to market data.

·     Bespoke noted today was the fourth time (6/10, 7/13, 9/13, and today) of the last five CPI days that the S&P 500 gapped down at least 1.5%

·     U.S. Social Security recipients will get the biggest boost to their monthly benefits in more than four decades, officials said following the release of key inflation data that showed U.S. prices rising more than expected. Retirees and other beneficiaries will get an 8.7% cost-of-living adjustment starting in January, the U.S. Social Security Administration said. That is the biggest hike since 1981, when benefits rose 11.2%, according to the agency’s website.

·     Hiking rates to bring down inflation is not a "policy mistake," it’s the Fed’s mandate as per @Chaliebilello. The Fed policy mistake was believing that 0% rates, buying billions of mortgage bonds in a housing bubble, & increasing the money supply by 40% in 2 years would have no negative consequences (well said).


Economic Data:

·     Inflation reading “hot” – Consumer price index (CPI) for Sept on a headline basis reported at +0.4% m/m vs. est. +0.2% (and vs. +0.1% prior) and rose +8.2% y/y vs. est. +8.1% y/y (vs. prior +8.3%). CPI on a core basis (ex food & energy) rose ++0.6% vs. est. +0.5% m/m (vs. prior +0.6%) and rose +6.6% vs. +6.5% y/y (vs. prior +6.3%) – core reading the hottest since 1982. Lower YoY % increase: Fuel Oil, Gasoline, Electricity, Food at Home, New Cars, Used Cars while higher YoY % increase: Gas Utilities, Transportation, Food away from Home, Shelter, Medical Care, Apparel. Real wages under Biden have declined for a record 18 months. This means that US incomes have been below inflation since the start of 2021.

·     Weekly Jobless Claims rose to 228K in latest week vs. est. 225K and 219K prior week; the 4-week moving average rose to 211,500 from 206,500 prior week; continued claims rose to 1.368M from 1.365M prior week and US insured unemployment rate unchanged at 1.0%



·     Oil futures rebound alongside stocks and other risk assets, as WTI crude gains $1.84 or 2.11% to settle at $89.11 per barrel (snaps 3-day losing streak), off the morning lows of $85.56. Earlier today, the IEA warned that the OPEC+ plan to cut oil output threatens a price spike which will lead to a global recession. Crude futures initially lost ground after CPI data showed the annualized increase in core CPI, which strips out volatile food and energy prices, rose to 6.6% from 6.3%. Gold prices end lower by 50c at $1,677 an ounce, bouncing off lows around $1,650 as the dollar and Treasury yield gains were erased with the mid-morning market rebound.


Currencies & Treasuries

·     Volatility in markets off the charts today, with Treasury market and currencies no exception.

·     Treasury yields extended gains as 10-yr hits highs of 4.08%, up 18-bps (end 3.94%); the 2-yr surges 23-bps to 4.52% (new 15-yr high) shortly after the release of the “hotter”-than-expected CPI report this morning. The data suggested the Fed will need to keep interest rates higher for longer to tame sticky inflation. Core CPI jumped 6.6% on an annual basis, faster than the 6.3% registered in the 12 months through August. Economist had expected a 6.5% gain in Sept. The Fed’s terminal rate will now likely peak next year at 4.90%, up from previous forecasts of 4.65%.

·     The US dollar was all over the place, as the dollar index (DXY) hit highs just shy of 114 after the higher CPI data, hitting fresh 27-yr high against the Japanese yen (147.67) and euro hitting 2-week lows (0.9632) before reversing. The dollar index by midday traded as low as 112.20, down about 1% in a staggering reversal, which helped boost US stocks. Sterling hits one-week high vs dollar, up 2% at $1.133 (follows the UK news mentioned above – and ahead of expected news tomorrow). Canadian dollar weakens to lowest in more than 2 years at 1.3977 to the U.S. Dollar. Bitcoin hits lowest in a month below $18,500 before rebounding back above $19,000.






WTI Crude















10-Year Note




Sector News Breakdown


·     Retailers: activist Investor Macellum urges KSS to replace board members, targets chairman, other long-serving directors at department-store chain or face another proxy fight – WSJ reported ; VSCO guides Q3 EPS a high-end of $0.00-$0.25 range vs consensus $0.14 and OI to high-end of $10M-$40M range vs consensus $28.6M; still sees Q3 revenue to decline HSD; Bloomberg reported AMZN saw softer sales during the most recent Prime Day vs. the one in July as consumers purchase household goods instead of big-ticket items

·     Housing & Building Products: rising mortgage rates continue to weigh on housing related sentiment- note average 30-Year Mortgage Rate in the US: 1970s: 8.9%, 1980s: 12.7%, 1990s: 8.1%, 2000s: 6.3%, 2010s: 4.1%, 2020s: 3.6% – and today’s Rate: 6.9%; ZG August newly Pending Home sales decreased by 29%

·     Consumer Staples & Restaurants: ACI shares popped after Bloomberg reported Kroger (KR) in discussions to combine with Albertsons ; DPZ beat quarterly same-store sales estimates as U.S. comp-store sales rose +2% vs. 1% estimate as revs rise to $1.07B vs. est. $1.06B, though EPS of $2.79 misses the $2.96 estimate – Domestic franchise comp sales growth +2.2% vs. estimate +1.3%; in staples, CL upgraded to Overweight at JPMorgan with $79 tgt saying it is one of the few companies that will likely be able to keep pricing power while cost pressures alleviate due to good brand equity; MO announced price increase (15-20c per pack).

·     Casinos & Leisure; LVS upgraded to Neutral from Underperform at Bank America and maintain $37 PO saying while uncertainty in Macau is still high, LVS is a low beta & low leverage stock that is less correlated with US macro/rates; in cruise lines (CCL, RCL, NCLH), Bofa also said overall industry pricing in 2023/2024 modestly increased +0.3%/+0.3% sequentially.



·     Energy movers: was the best performing S&P sector today, helped by improving oil prices and heading into earnings which are expected to be positive for industry given the spike in commodity prices in recent months; The US Strategic Petroleum Reserve moved down for the 57th consecutive week, now at its lowest level since 1984. The 31% decline in reserves this year is the largest on record by a wide margin. TS was upgraded to Buy from Hold at Stifel and raised tgt to $38 from $30 citing its excellent position in the global OCTG market, expectations for rising demand in the Eastern Hemisphere and continued growth in North and South America

·     Utilities & Solar: Utility pain continued early, amid spiking Treasury yields/interest rates (hitting defensive, high dividend paying sectors such as utilities and telecom) as XLU down 22% over last 23 trading days. Bespoke Investment noted last night the Utilities sector (XLU) is now down 20.5% over the last month. March 2020, October 2008, late 2002, and the 1930s are the only other periods that saw one-month crashes of 20%+ (group rebounded with broader market).



·     Bank movers: earnings barrage begins tomorrow in banks, with JPM, WFC, C, PNC, USB, and MS; then next week on Monday 10/17: BAC, BK, on Tuesday 10/8: GS, STT, TFC, on Wednesday 10/19: ALLY, CFG, CMA, NTRS and Thursday 10/20: FITB, KEYBLK Q3 adj EPS $9.55 vs. est. $7.07; Q3 revs fell -15% y/y to $4.3B vs. est. $4.23B; posted a 16% drop in Q3 profit; AUM at qtr-end $7.96 trillion vs $9.46 trillion reported at q3 2021 end; Q3 adj operating margin 35.4%; regional banks were among the biggest upside movers in the S&P today – KEY, FITB, HBAN, USB, RF, CFG, etc. into big 2-weeks of earnings

·     Consumer Finance: AAPL partners with Goldman Sachs, $GS, to introduce high-yield savings accounts for Apple Card holders; Citigroup downgraded AXP to Sell and SLM and VEL to Neutral as Citi’s economics team has forecast a modest US recession as a base case in 2H23, they felt it was prudent to assume a mild recession in our consumer finance stocks. While the recession is projected to be mild, the impact to our EPS can be rather large as we are coming off record low credit losses and are now forecasting slightly higher than normal credit losses in 2024.

·     Bitcoin news: after weeks holding around the $19,000-$20,000 level, prices hit lows just above $18,000 as risk assets tumble following the “hawkish” CPI print this morning, with rising expectations for higher interest rates surging. Shares of Bitcoin leveraged stocks such as COIN pared losses as Bitcoin back to flat at $19,100 – $800 bounce off lows as risk assets rebound.



·     Pharma movers: RLMD shares tumble after saying its therapy to treat major depressive disorder, REL-1017, did not show statistically significant improvement in symptoms of depression when compared to a placebo; AXSM advanced on the RLMD depression drug fails; PFE and BNTX announce positive early data from clinical trial of omicron BA.4/BA.5-adapted bivalent booster in individuals 18 years and older; VECT priced its 16.7M share offering at $7.50 per share; DICE 8.22M share Secondary priced at $36.50; XNCR upgrade from Outperform to Strong Buy at Raymond James; GSK said its experimental vaccine against respiratory syncytial virus (RSV) sharply reduced the risk of disease in a key trial, paving the way for a contest with PFE

·     Biotech movers: BMRN said U.S. health regulator accepted its marketing application for Valoctocogene Roxaparvovec AAV gene therapy; adds agency has set target action date as March 31, 2023; few notable research calls as BIIB upgraded from Hold to Buy at Stifel and raise price tgt to $299 as think upcoming Roche gantenerumab data is unlikely to live up to the high bar lecanemab recently set, and we think there’s a meaningful commercial role for lecanemab even if LLY’s donanemab succeeds; BGNE upgraded to Buy from Neutral at Guggenheim based on their higher conviction in the global Brukinsa opportunity in hematology; RARE upgraded to Buy from Neutral at Guggenheim as well saying the near-term pipeline risk appears adequately discounted

·     MedTech Equipment: QDEL rises early as guides prelim Q3 revs $782M-$785M vs. est. $651.8M; COVID-19 product revenue is expected to be approximately $171M and non-COVID-19 product revenue is expected to be in the range of $611M-$614M; Truist said Q3 Hospital Survey Suggests Minimal MedTech 3Q vol. pick-up, improving 4Q/NTM Growth; OMI downgraded to Neutral at Citigroup following lower guidance yesterday

·     Healthcare Services: WBA posted a loss for the fourth quarter, partly due to higher operational costs and an impairment charge related to its Boots UK business, but adj EPS of $0.80 topped ests on in-line revs while guides FY EPS $4.45-$4.65 vs. est. $5.01; PDCO announces leadership transition as Don Zurbay appointed president and CEO and company reaffirms fiscal 2023 earnings guidance


Industrials & Materials

·     Transports, Industrial & Machinery: AOS lowers FY adj EPS $3.05 to $3.15, down from prior $3.35 to $3.55 and guides prelim Q3 EPS to $0.71, below the $0.88 estimate; in airlines, DAL Q3 adj EPS $1.51 vs. est. $1.54 and revs $12.84B vs. est. $12.83B while guides Q4 adj EPS $1.00-$1.25 vs. est. $0.80 and sees Q4 revs to be up 5% to 9% from 2019 levels, with operating margins of 9% to 11%; RYAAY bookings for the autumn mid-term and Christmas holidays are ahead of pre-COVID levels and it sees average fares rising by more than expected for the financial year to end-March, Chief Executive Michael O’Leary said

·     Metals & Mining: CRS guided Q1 EPS loss larger-than-expected to (-$0.16-$0.14) vs. est. loss (-$0.01); aluminium prices rose strongly for a second straight day, after news reports suggested that the United States could ban imports from Russia, a major producer. The U.S. threat comes as the London Metal Exchange considers blocking Russian metal from its trading system. Russia produces around 6% of the world’s aluminium – Reuters (AA, CENX producers)

·     Materials, Paper, and Packaging: AMCR, SON, SLVM upgrade to Buy and downgrade AVY, BCC, GEF at Bank America saying increased recession risks bring additional earnings risks and adjust ratings. Still see SLGN and GPK as Buy-rated stocks with the best value/catalyst combination, though we recently moved GPK off the US1 list. Said packaging has already incorporated much bad Europe, energy, and foreign exchange (FX) news. Paper/Forest Products (PFP) is also inexpensive but we’re cautious ahead of looming price declines


Technology, Media & Telecom

·     Media, Internet: DWAC shares rose after saying the Truth Social Android App is available for users to download on Alphabet Inc’s (GOOGL) Google Play Store; NFLX undercuts Disney+ with launch of its $7/month ad-supported plan starting Nov. 3 – Commercials will be 15 or 30 seconds in length & will play before & during Netflix content. Tier will include avg of 4-5 mins of commercials & have 720p; Cowen cuts ’22-’27 ad ests for META given 1) various macro + FX headwinds; 2) transition to short-form video monetization; and 3) weaker than expected 3Q22 Digital ad expert check call

·     Semiconductors: AMAT lowered its F4Q revenue guidance mid-point from $6.65B to $6.40B, which includes an impact of $400M driven by new export regulations for U.S. semiconductor technology sold in China – cuts Q4 adj EPS view to $1.54-$1.78 from $1.82-$2.18 (est. $2.01); TSM cut its cap-ex spending to around $36B for 2022, down from prior view of $40B-$44B; Revenue for the quarter climbed 36% to $20.23B, versus TSMC’s prior estimated range of $19.8B-$20.6B; forecast a 29% rise in Q4 revenue to between $19.9B-$20.7B, compared with $15.74B a year earlier; equipment stocks (AMAT, LRCX, KLAC, ASML) been hardest hit of late on reduced cap-ex spending fears from semis (TSM overnight, MU last week)

·     Hardware & Software movers: DCT 4Q FY22 came in above Street estimates on the top and bottom line as ARR grew a healthy 25% Y/Y (21% organically) and SaaS net dollar retention came in at 108%; RBLX tgt cut to $51 from $58 at BTIG, refreshing estimates ahead of Sept. metrics, revisiting gift cards and ad contributions – said Roblox’s est. 15% m/m downtick into Sept. would suggest Sept./3Q Bookings of $200M/$680M

·     Telecom movers: Citigroup upgraded ATUS to Buy (revised tgt of $8) and CMCSA to Buy (revised tgt of $36) and stay Neutral CHTR (revised tgt of $350) saying cable revenue is going ex-growth, and average EBITDA-based valuations have approached Telco levels for the first time since the period surrounding the financial crisis. They believe recent cable share price underperformance is likely getting ahead of 3Q results that are likely to reinforce this new reality. Morgan Stanley lowers estimates and PTs across cable again (ATUS, CHTR, CMCSA), seeing (effectively) no growth through 2025 saying "there is likely rising risk that the prospect of customer loss leads to discounting and an erosion of pricing power.’


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.