Market Review: September 28, 2022

Closing Recap

Wednesday, September 28, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks finally held a rally, as the S&P 500 and Dow Jones Industrial Average each snapped their respective 6-day losing streaks amid a sharp decline in Treasury yields and U.S. dollar (after having risen to 15-year and 20-year highs respectively) after the Bank of England said it would begin buying U.K. government bonds in a bid to stabilize markets. The yield on the benchmark 10-year Treasury notes briefly climbed above 4% for the first time in more than a decade before tumbling over 25 bps to 3.7% and 2-yr to 4.1% down 20-bps. Biggest stories of the day included:

·     1) The Bank of England stepped in to stabilize UK markets after routs in bonds and the pound. It will carry out temporary purchases of long-dated gilts today and delay planned sales of debt, citing "a material risk" to financial stability that would lead to "an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy." The yield on 30-year gilts plummeted. Commentary eased global Treasury yields.

·     2) Apple (AAPL) a drag on technology following reports it is dropping plans to increase production of its new iPhones this year after an anticipated surge in demand failed to materialize, Bloomberg News report said. Shares of semiconductors underperformed the broader bounce in the Nasdaq on fears of slowing iPhone production (AAPL finished well off morning lows).

·     3) Hurricane Ian rapidly intensified as it neared landfall along Florida’s southwest coast Wednesday morning, gaining top winds of 155 mph (250 kph), just shy of the most dangerous Category 5 status. Airlines canceled over 2,000 U.S. flights on Tuesday and Wednesday and some Florida airports halted operations; Disney and Universal closed parks today and tomorrow; GNRC, PWR, HD, LOW shares active on rebuild concerns; all eyes on Property & Casualty sector as Hurricane Ian is expected to make landfall in Florida late Wednesday evening (ACGL, ALL, CB, TRV, WRB, RE, RNR); BMO Capital notes INVH, SUI, MAA, UDR, ELS among REITs with highest exposure to impacted areas in Tampa, central Florida from Hurricane Ian.


Economic Data:

·     Wholesale Inventories M/M for Aug P +1.3% vs. est. +0.4% and previous +0.6%; Retail Inventories M/M for Aug +1.4% vs. est. +1.0% and previous +1.1%; Advanced Goods Trade Balance for August (-$87.3B) vs. est. (-$89.0B) and previous (-$90.2B)

·     Pending Home sales index -2.0% vs. est. -1.4% while Aug Pending Home sales -24.2% Y/Y



·     Gold prices jump, rising $33.80 or 2.1% to settle at $1,670 an ounce back to its highest levels in a week amid as UK policy intervention sent the Pound higher (dollar lower) and yields tumbling, providing a temporary easing in commodity selling pressure. Oil prices jump as WTI crude rises $3.65 or 4.65% to settle at $82.15 per barrel, getting a boost from a falling dollar (off 20-year highs) as well as U.S. production cuts caused by Hurricane Ian. German security agencies fear that Nord Stream 1 will become unusable forever after major leaks from both Nord Stream 1 and Nord Stream 2 into the Baltic Sea, German daily Tages Spiegel reported.


Currencies & Treasuries

·     The U.S. dollar index (DXY) with a sharp move lower, falling more than 1% below 113 after hitting fresh 20-year highs of 114.78, amid policy actions in the UK. Also helping, reduced FOMC probabilities showed a big change from yesterday with 50bps hike 53.6%, 75bp hike 46.4% compared to 37.5% and 62.5% respectively yesterday, on the back of the BOE news. Euro extends gains vs U.S. Dollar, hits session high of $0.9727, up 1.4% late afternoon, while the British Pound jumps around 1.5% around 1.09 (well off historic lows of 1.0327 earlier this week).

·     Treasury yield tumble for the first time in 2-weeks, kicked off after the Bank of England said it would start a temporary program of long-dated UK gov’t bond purchases to try and stabilize the market. Bespoke noted the streak of days without a back-to-back 2y yield declines (which we had today) was snapped at 42 days, the longest since 2y notes were introduced. Also helping bonds, unlike last 2-days, today’s 7-yr Treasury auction was well received (sending yields lower again) – strong bid to cover with yield below when issued and solid indirect participation. U.S. sold $36B in 7-year notes at high yield 3.898%. Treasury 10-year yields climbed to the highest level since October 2008 this week, as investors were rattled by Federal Reserve hawkishness and concern over potential Japanese sales of US government debt. Also note a bill was introduced in the U.S. Senate to increase the annual maximum purchase on I bonds to $30,000, WSJ reported.






WTI Crude















10-Year Note





Sector News Breakdown


·     Auto sector; TSLA underperformed broader auto market; ENVX initiated Outperform and $25 tgt at Cantor; RBC Capital previews RIVN 3Q22 deliveries, tweaking production forecast to 8.5k from 8.65k and for deliveries, now forecast 7.2k from 7.8k prior and more in line with consensus of 7.1k; LYFT said it is freezing hiring in the United States through the end of the year, as part of an effort to prune costs amid decades-high inflation

·     Housing & Building Products: Mortgage applications decreased another 3.7% from a week earlier and are now down 84% from same week a year ago. The national average for a 30-year fixed rate mortgage is 6.52% (some say 7% but that may be next week with long-end bond yields finally budging) That’s the highest since mid-2008

·     Consumer Staples & Restaurants: CALM reported 1Q EPS $2.57 vs est. $2.56 on sales $658.3Mm vs est. $617.4Mm and said expects continued corn and soybean upward pricing pressures and further market volatility to affect feed costs; TSN named John Tyson CFO (aged 31) after Glendinning stepped down to transition to president of prepared foods; PM CEO told Reuters the co is not considering withdrawing its offer for Swedish Match despite deteriorating global economic conditions and has "options on the table" including holding a majority stake

·     Casinos, Gaming, Lodging & Leisure sector: in towables/RVs, THO quarterly results easily topped consensus views and said it plans to begin providing annual guidance and will give FY23 following the conclusion of the Dealer Open House; cruise lines on watch ahead of hurricane Ian impact in Florida (CCL, RCL, NCLH)

·     Retailers: VFC introduces the fiscal year 2027 long-term strategic growth plan, while sees FY adj. Operating margin about 12%, saw about 13.2% and cuts FY23 adjusted EPS view to $2.60-$2.70 from $3.05-$3.15; NKE expected to report quarterly results tomorrow night


Energy, Industrials and Materials

·     Energy stock movers; Among the stronger S&P sectors today as oil rebounds with the dollar easing more than 1% on the day (after jumping to 20-year highs this week); natural gas prices in Europe rose after Russia warned that flows via Ukraine are at risk. European governments raced to safeguard their energy infrastructure after detecting leaks on two major Russian natural gas pipelines that officials said were the result of sabotage. The European Union threatened retaliation for any further attack on Europe’s energy facilities following the incidents on the Nord Stream and Nord Stream 2 pipelines.

·     Aerospace & Defense: LMT downgraded to Underweight from Equal Weight at Wells Fargo and LHX downgraded to Equal Weight from Overweight in defense sector saying the bull case for defense seems clear — geopolitical tensions are high, and politicians have discussed higher defense spending. But think 2023 sets up as a difficult U.S. budget environment, with significant downside potential if tensions ease; Cowen said BAH, LDOS, KBR favorites into print in Defense IT Preview saying solid demand, abating award delays & improving labor availability suggest 2-7% defense IT organic growth in 2023 with below-avg. risk and lower valuations; BA rises midday after headlines China Airlines finalizes landmark order for up to 24 Boeing 787 Dreamliners

·     Transports, Industrial & Machinery: Deutsche bank said on the back of a refreshed HVAC market deep-dive, they are turning modestly more bullish, especially on the light commercial HVAC market, reiterate buys on JCI and are warming up to CARR given its overall market positioning; overall transports outperform a second day outside of rails; same group seeing weakness early as CSX and NSC both downgraded to Neutral from Positive at Susquehanna (follows downgrade by UBS of both names yesterday)

·     Metals & Materials: ASTL provided FY2Q’23 guidance, indicating expected EBITDA of ~C $75m-80m, well-below Consensus of C$187m citing operational issues resulting in production shortfalls and falling prices for the weak results; NUE approved the construction of a galvanizing line at Nucor Steel Berkeley in South Carolina; gold miners catch a bid behind strength in gold prices as dollar eases and treasury yields fall (NEM, AEM, GOLD)



·     Bank movers: The SEC announced charges against 15 broker-dealers and one affiliated investment adviser for widespread and longstanding failures by the firms and their employees to maintain and preserve electronic communications. The firms agreed to pay combined penalties of more than $1.1B; in regional banks, Wedbush assumed coverage of 16 names, with outperform ratings on CFG, CMA, CUBI, FITB, RF, but maintaining cautious outlook on concerns relating to the 12-month outlook rather than near-term trends, as we expect challenges to arise over the next several months related to weakening loan demand

·     Insurance: all eyes on Property & Casualty sector as Hurricane Ian is expected to make landfall in Florida late Wednesday evening, most likely south of Tampa as a Category 3 storm. While insured loss estimates are far ranging ($10-30 billion), Wells Fargo said they do think the industry can absorb the loss. They said those best positioned to benefit from the upturn include RNR and ACGL (as well as RE and even WRB who has pointed to potentially increasing their cat reinsurance exposure even before Hurricane Ian). Bank America said it is not unreasonable to expect reinsurers like RE or RNR to have 2-3% market share of a major event, while ACGL and AXIS market shares are likely closer to 1%.

·     Financial Services: BR was mentioned as a short call by Spruce Point Capital, saying they see 65% to 75% downside risk as believes that Broadridge’s claims of being a fintech leader with SaaS qualities and a $60 billion TAM are exaggerated ; PAYX reported Q1 profit that beat expectations and raised the full-year outlook, citing notable strength in mid-market, retirement and HR solutions businesses (raised 2023 EPS growth guidance range to 11% to 12% from 9% to 10% and affirmed its revenue growth outlook of 7% to 8%)

·     REITs: BMO Capital notes INVH, SUI, MAA, UDR, ELS among REITs with highest exposure to impacted areas in Tampa, central Florida from Hurricane Ian. Believe REITs with the highest exposure to impacted areas include ELS (25.6% of assets), INVH (20.8%), SUI (19.6%), MAA (14.5%) & UDR (13.4%). Conversely, storage may be a beneficiary if people are displaced from their homes. Irma, a Category 4 Hurricane when it hit SE Florida in 2017, caused $77B in estimated damages, and we believe had the largest financial impact for SUI, ELS and INVH.



·     Pharma movers: ALT announces first dosing of all subjects in phase 2 momentum trial of pemvidutide in subjects with obesity or overweight; GMDA 12.9M share Spot Secondary priced at $1.55; MNMD 7.06M share Spot Secondary priced at $4.25; TBPH said it will buy as much as $95m of its shares in a tender offer at $9.75 to $10.50 per share; CARA said its partner Maruishi Pharmaceutical submits marketing application in Japan for drug to treat pruritus; PEPG rises after positive data from early stage trial of Co’s muscular weakness condition drug

·     Biotech movers: BIIB and partner ESALY shares surge after saying their experimental Alzheimer’s disease drug significantly slowed progression in a large study, bolstering the drug’s prospects for approval. Lecanemab reduced cognitive and functional decline by 27%, compared with a placebo, over 18 months in a Phase 3 study of 1,800 patients with early-stage Alzheimer’s. All key secondary endpoints were also met with highly statistically significant results compared with placebo (shares of other Alzheimer drug makers LLY, PRTA, RPRX moved on headlines).

·     MedTech Equipment: ILMN upgraded from In Line to Outperform at Evercore/ISI and raised tgt to $250 from $170 noting ILMN is coming out of a multi-year underperformance vs. secular peers (EW, ISRG) and is about to enter a new product cycle. While new product cycles have historically been a catalyst, the current situation has been complicated by Grail situation


Technology, Media & Telecom

·     Hardware, Components & Services: AAPL shares a drag on technology following reports it is dropping plans to increase production of its new iPhones this year after an anticipated surge in demand failed to materialize, Bloomberg News report said. AAPL told suppliers to curtail efforts to increase assembly of its flagship iPhone 14 product family by as many as 6 mln units in the second half of this year, report says; BB reported Q2/F23 results in-line with estimates

·     Media, Internet: NFLX upgraded from Neutral to Overweight at Atlantic Equities and up tgt to $283 from $211 noting Netflix will launch its advertising supported initiatives in early November; rest of Internet space seeing modest buying strength as Treasury yields show relief pullback for first time in 2-weeks – lifting GOOGL, AMZN, META, others; LGF is now considering a spinoff of its studio business rather than its Starz premium-cable channel, according to a securities filing

·     Semiconductors: sector pressured early, especially names that supply to Apple after Bloomberg News reported the iPhone maker is dropping plans to increase production of its new iPhones this year as demand falters (TSM, QCOM, AVGO, SWKS among movers); INTC signaled yesterday the company would re-enter the graphics business, releasing a graphics card for gamers that is slated to be available on Oct. 12, competing in a market that has been dominated by AMD and NVDA (said cards will start at $329 – NVDA last week unveiled a new generation of graphics processors priced at up to $1,599); Barclay’s lowers ’23 ests given the sharper reset we have already seen in areas such as PC, Gaming, Consumer, and Handsets and anticipation that the rest of the Semi universe will follow as supply continues to free up

·     Software movers: PATH falls as co analyst day provided outlook for FY24 ARR growth of +20% y/y CC represents a meaningful deceleration from the guided +36% y/y CC for Q3 FY23 said bank America; PRGS Q3 EPS $1.00 vs. est. $0.97; Q3 revs $153.1M vs. est. $148.2M; guides Q4 EPS $1.06-$1.10 vs. est. $1.10; raises FY22 EPS view to $4.08-$4.12 from $4.05-$4.11 (est. $4.08), backs FY22 revenue view $609M-$617M, consensus $612.44M; DOCU announces restructuring plan, will cut current workforce by about 9% and sees charges of about $30M to $40M

·     Telecom movers: Cowen said ANET, CALX, CIEN and MSI are least exposed and among their favorite stocks, while ADTN and EXTR are most exposed to Europe in Telecom and Equipment noting given heightened macro-related risk posed by Russia’s plan to terminate gas shipments to Europe, they look at revenue exposure to Europe in and across the sector; VZ said it is preparing to launch a pay-as-you-go home wireless internet service next month aimed at bargain hunters, doubling efforts to find growth in the prepaid market


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.