Market Review: October 21, 2022

Closing Recap

Friday, October 21, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     US equities markets rallied and finished near highs after the Fed’s Daly kicked off another round of Fed speakers with less hawkish comments this morning. The market gave particular attention to comments on avoiding overtightening (“want to make sure we don’t overtighten just as much as not to undertighten”), with additional emphasis on giving consideration to slowing the pace of rate hikes (“think hard about step down but we’re not there yet”).

·     The stock market bounce started early after the WSJ reported that some Fed officials are signaling greater unease with big rate rises to fight inflation . Article noted Federal Reserve officials are barreling toward another interest-rate rise of 75-bps at their meeting Nov. 1-2, but some officials have begun signaling their desire both to slow down the pace of increases soon and to stop raising rates early next year to see how their moves this year are slowing the economy.

·     In sector news, social media names tumble behind cautious and disappointing revenue growth outlook (hitting GOOGL, META, PINS ahead of their earnings next week), while hospital providers and healthcare facilities tumble on earnings misses from THC and HCA (also hitting MedTech names on slowing procedure fears), Transports rebound behind better results from CSX in railroads. TWTR shares also tumbled on reports the US is said to weigh security reviews for Musk deals, including Twitter purchase as US officials have reportedly become uncomfortable over Musk’s recent comments on the funding of Starlink in Ukraine.

·     This week was a big week for corporate earnings…but next week another ballgame as we hear from over 33% of the S&P 500, with nearly every sector well represented. Some highlight names include: AAPL, AMZN, GOOGL, META, MSFT, INTC, TXN, CMCS, STX in the TMT sector as well as AMT, BA, BSX, CAT, CMG, COF, CVX, F, GM, HAL, HLT, KHC, KO, LUV, MA, MCD, MO, NOC, RCL, RTX, UPS, V, & XOM.



·     Oil prices settled with a gain of $0.54, or +0.64%, to $85.05/bbl. The moved pushed oil to a weekly gain of 0.5%.

·     December gold settled at $1,656.30/oz, +1.3% (+$19.50/oz), pushing the active contract to a weekly gain of almost 0.5%. While the close was nicely positive, price action early in the session hit the lowest intraday level for the active contract since April 2020 before bouncing on speculation about future Fed moves. 

·     U.S. Natural gas futures slid early hitting seven-month lows before settling at $4.9590/MMBtu, -$0.399 or -7.4% (lowest close since March 2022). The weekly slide hit -23% as concerns swirled around more mild winter whether expectations and a more balanced supply/demand position.



Currencies & Treasuries

·     An absolute wild day (week, month…heck year for that matter) for currency and Treasury yields, with prices whipping around like “meme” stocks these days; volatile amid rising interest rates in the US, UK bond market concerns, BoJ letting yen weaken and inflation. The US Treasury 5-year yield tops 4.5% for first time since 2007, the 10-year yield hits new 14-yr highs of 4.34% and the 2-yr 15-yr highs at 4.64% at highest of day before paring gains on WSJ article about Fed (see above) and Fed Daly comments. Policy makers continue to signal their determination to keep raising rates until they are sure inflation is under control. Just yesterday Federal Reserve Bank of Philadelphia President Patrick Harker said officials are likely to raise interest rates to “well above” 4% this year and hold them at restrictive levels to combat inflation. The pound extended drop, fell to lows $1.1061 before rebounding back above $1.12 – wild moves in Japanese yen as dollar hits fresh 32-yr highs 151.49 before massive reversal, down -2.5% to 146.20 (dollar up 28% YTD still) – the yen snapped its 12-session decline vs. the dollar following the notable reversal.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers: more continued weakness in footwear/sports and athletic apparel early, a day after Adidas (ADDY)) released weaker Q3 numbers and a meaningful FY guide-down, the second pre-release and guide down in two months; UAA downgraded to Market Perform from Outperform at Telsey and lower tgt to $8 from $12 noting both adidas and NIKE have called out high inventory across the marketplace and the need to increase promotions to clear goods, leading to downward revisions to their financial outlooks; WHR reported 3Q total sales of $4.8bn which missed consensus of $5.2bn as all regions missed on EBIT, EPS wide miss for Q3 and cuts FY ongoing EPS to $19 from prior $22-$24, vs. est. $21.85

·     Auto sector: Toyota (TM output in October and November is expected to be around 750,000 and 800,000 units respectively, below the average 900,000 monthly production plan for September through November it projected late last month – more weakness in auto space; ALV rises early on results as Q3 adj EPS $1.23 vs. est. $1.27; Q3 net sales $2.3B vs. est. $2.36B; sees 2022 organic sales growth of around 15% (vs. prior 13%-16%); sees 2022 adj. operating margin of upper end of around 6.0%-7.0% (vs. prior 6.0%-7.0%); Chinese battery giant CATL has slowed its planning for investment in battery plants in North America on concern that new U.S. rules on sourcing battery materials will drive costs higher, the WSJ reported overnight. The world’s largest battery maker, which supplies one of every three electric vehicles, has been considering opening new plants in the United States and Mexico since earlier this year, Reuters reported previously.

·     Housing & Building Products: Raymond James downgraded a handful of homebuilders, cutting KBH, LEN, MDC, PHM and TOL to market perform and cut DHI to Outperform from strong buy and lower price tgts saying the outlook for the U.S. housing market is becoming more onerous as mortgage rates have driven affordability to unprecedented levels

·     Consumer Staples: in food delivery, NYTimes reported Instacart will no longer pursue an IPO this year because of turbulent market conditions; in beverages, SAM rises after mixed results as Q3 EPS $2.21 below est. $3.28 as Q3 revs rose 6.2% y/y to $596.5M vs. est. $567.1M; depletions decreased 6% and shipments increased 1.4% compared to Q3’21; reduces FY gross margin view to 42%-43.5%, from 43%-45%; in grocers, WSJ reports the antitrust authorities who review the proposed KR supermarket merger may be focused on local store overlap in specific regions; SMPL Q4 earnings beat as sales rise on price increases and raises FY sales outlook but warns of gross margin hit; HAIN downgraded to Neutral at Piper as believe pressure on UK/EU consumers (UK is ~20% of HAIN, EU: 7-8%) is likely to grow and add pressure on HAIN’s sales and earnings


Energy, Industrials and Materials

·     E&P and Majors: SLB Q3 adj EPS $0.63 vs. est. $0.56; Q3 revs $7.5B vs. est. $7.21B; qtrly North America revenue of $1.5 bln was flat sequentially and increased 37% year on year; Q3 revenue was driven by international, which posted 13% growth sequentially and 26% year on year; capital investment for full-year 2022 is expected to be approximately $2.2 bln; OVV downgraded at RBC Capital given higher expected relative returns elsewhere; XOM shares set intraday record high, hit $106.16 – topping the previous record of $105.57 from June 8 (earnings next Friday with CVX)

·     Transports: after tumbling yesterday on cautious comments, mixed cargo results from UNP, the rail space gets good earnings from CSX overnight, reported Q3 adj EPS (cleaned up for labor accruals, land, and a lower tax rate) of $0.51 per share, modestly ahead of consensus as revs grew 18% YoY, driven 10% by fuel surcharge and1.5% by volume, with the remaining price/mix heavily influenced by strength in export coal rates



·     Bank movers: SIVB shares fall as posted beat for the qtr of $7.21 for EPS but lowered its 2022 outlook for deposits, net interest income and net income margin, but said the outlook for net charge-off for the year was improving; BANR downgraded from Strong Buy to Outperform at Raymond James but raise target to $72 as the bank has been a material outperformer YTD; HBAN top gainer early in the S&P after earnings, helping lift banks; RF posted an operating miss of $0.56 to consensus of $0.59 but core PPNR beat of $0.03 was driven by higher NII of $0.01 and higher fee income; OZK Operating $1.08 vs Street $1.17 as miss was from higher provision and higher expenses; WAL Fees (-$0.15) and NII (-$0.01) partially offset by lower expenses (+$0.05) and provision (+$0.01); also results for ASB, HTH, FFBC

·     Consumer Finance: AXP shares fall despite Q3 EPS and revs beat (revenue $13.56B vs. est. $13.50B and EPS $2.47 vs. est. $2.40 while guides year EPS above $9.25-$9.65 (vs. est. $9.90) and backed year revs up 23%-25% – shares slip as consolidated provisions for credit losses came in at $778M in the quarter vs a benefit of $191M, a year earlier

·     Financial Services: EFX was downgraded at RBC Capital and lowers target price to $158 from $195 given market multiple re-rating and TRU trading at a significant discount; staffing company RHI declines after Q3 EPS of $1.53 missed estimates of $1.63 and revs rose to $1.83B y/y but missed ests of $1.92B citing neg for-ex impact (and guided Q4 EPS below views)



·     Pharma movers: TEVA assumed Buy and $10 tgt at Jefferies saying after several years of declining revs, limitations from a heavy debt load and significant legal overhangs, the recent opioid settlement better enables the company to get back to business; PFE plans on roughly quadrupling the price of its Covid vaccine to as much as $130 per dose when its current program with the U.S. government runs out. The U.S. now pays about $30 a dose to Pfizer and its German partner BNTX

·     Biotech movers: IMUX plunged after saying that pre-planned interim analysis in a recent trial of its IMU-935 for patients with moderate-to-severe psoriasis found that reductions in the psoriasis area and severity index in the two active arms didn’t separate from placebo at four weeks; BHVN 25M share Secondary priced at $10.50

·     Healthcare Services: Hospital providers/healthcare facility names tumble today after disappointing results from THC and HCA: 1) THC mixed Q3 results but shares tumble as guides FY operating revs $19B-$19.2B vs. est. $19.34B and EPS cont ops $5.88-$6.42 vs. est. $6.11; narrows FY adj EBITDA $3.38B-$3.48B from prior $3.38B-$3.58B; 2) HCA reported lower-than-expected Q3 revenue as hospital admissions related to COVID-19 dropped, as total revs -2% to $14.97B vs. est. $15B – decline in COVID-related admissions led to a -1.5% drop in overall same facility admissions, and a -3.5% fall in same facility rev per admission (the weakness in providers raised fears of slowing procedures as well – hitting MedTech stocks early – DXCM, ABMD, EW, etc.)


Technology, Media & Telecom

·     Media, Internet: social media names get hammered after SNAP Q3 results top views for EPS, revs and DAU’s but September revenue growth decelerating to +2% Y/Y compared to July and August +8% Y/Y, said was not providing formal guidance for next quarter after saying advertising partners are decreasing their marketing budgets (comments weigh on GOOGL, META, PINS); TWTR shares fall after the U.S. government is discussing whether the U.S. should subject some of Elon Musk’s ventures to national review including the deal for Twitter Inc (TWTR) and SpaceX’s Starlink satellite network, Bloomberg News reported ; Note the deal is still expected to close next week according to CNBC’s David faber today;

·     Hardware & Software movers: CTSH downgraded to Neutral from Buy at Bank America due to a combination of company-specific risks and a worsening macro backdrop (CTSH will report 3Q earnings on 11/2, and read-throughs from comps suggest elevated attrition and pockets of demand softness); ORCL receives second analyst upgrade this week, with KeyBanc raising to Overweight with $80 tgt (Piper upgraded this week); RPD downgraded to Hold from Buy at Needham and removed the firm’s previous $90 price target, citing field contacts suggesting Rapid is being increasingly pressured by customers shifting to platforms such as CRWD and PANW; in video games (ATVI, TTWO, ATVI), NPD said that U.S. video game content spending fell 7% in the month of September year-over-year, to $3.4B; JNPR upgraded to Strong Buy from Outperform and raises its PT to $37 from $36 at Raymond James (2nd analyst upgrade this week of shares)

·     Telecom movers: a day after an upside surprise from AT earnings and raised guidance helped the Telco space, Dow component VZ today posted a Q3 EPS beat of $0.04 (though profit did slide y/y) and revs $34.2B vs. est. $33.8B while Verizon FIOS video subs down nearly 9% y/y and Verizon lost 189,000 monthly bill-paying phone subscribers in its consumer business – still sees adjusted EPS $5.10 to $5.25, vs. estimate $5.18; AT upgraded to Buy from Hold at Truist after earnings results yesterday


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.