Mid-Morning Look: May 23, 2022

Mid-Morning Look

Monday, May 23, 2022






DJ Industrials




S&P 500








Russell 2000






U.S. stocks looking strong initially (though volatile moves the first 30-minutes) as investors look to put money to work with the S&P 500 and Nasdaq coming into the week with 7-week losing streaks and as the Dow looks to snap its 8-week losing streak. Gold resumes upward momentum as the dollar falls to 1-month lows; treasury yields inch up 4 bps at 2.83%. No major economic data on the calendar today and no Fed speakers until later in the day. Early leaders are financials, led by a 5% jump in JPM as they hold investor day today (positive outlook for NII), as well as gains in industrials, materials, energy, and defensive utilities. Weakness again in consumer discretionary and retail on follow through from last week earnings in space and analyst downgrades, along with leisure and travel names on rising recession fears. Technology mixed ahead of a busy week in earnings software results (SNOW SPLK WDAY ZM). In M&A news, VMW shares jump on media reports this weekend AVGO is in talks to buy the company. In macro stories over the weekend, President Biden said he’ll review China tariffs imposed by the Trump administration and ECB President Christine Lagarde outlined a plan to start rate hikes in July and exit sub-zero territory by the end of September (which is lifting the euro vs. greenback today).







WTI Crude















10-Year Note





Sector Movers Today

·     Retailers; AAP – handful of retail earnings this week; BIRD a positive mention in Barron’s saying shares may have bottomed given that the company, with a current market capitalization of about $700Mm, has net cash of $240Mm; GME announced it has launched its digital asset wallet to allow gamers and others to store, send, receive and use cryptocurrencies and non-fungible tokens (“NFTs”) across decentralized apps without having to leave their web browsers; retail changes at Citigroup, downgraded GPS to Neutral and cut tgt to $8, KSS downgraded to Neutral and cut tgt to $39 from $55; RL downgraded to neutral with lower $98 tgt, UAA cut to Neutral with lower $10 tgt; PLCE downgraded to Sell with lower $36 tgt, AEO cut to Neutral with lower $14 tgt, CRI downgraded to Sell from Buy with lower $68 tgt (from $110), ANF cut to Neutral; for KSS, minority shareholder Macellum Advisors GP LLC, with a 5% stake, is considering legal action against the board for waiting until just after the company’s annual shareholder meeting to disclose a hefty first-quarter earnings miss, reduced full-year guidance and the departure of two executives

·     Hardware, Components & Services; HPQ downgrade from Buy to Neutral at Citigroup noting shares have outperformed their peers (-10% YTD vs Nasdaq at -30% YTD) but says challenging PC shipment growth and higher freight costs are likely to limit operating income growth and EPS upside here in FY22; GLW downgraded to Neutral from Buy and tgt to $36 from $47 at Citi on lower PC and tablet demand, lower visibility in demand recovery for premium and large size TVs; MSI upgraded to OW from EW at Morgan Stanley saying analysis shows the $300 Bull case valuation on MSI on a 2-year view is achievable

·     Utilities & Solar; strength across the board in defensive utilities to start the week – ED, SRE, NI, AWK, AES, EXCOn Friday, Staff and intervenor testimony was filed for the CECONY 2022 electric and gas rate cases. And as we expected, Staff’s recommendation was significantly lower than ED’s request. Specifically, Staff proposed increases of $299.5M for electric and $165.4M for gas, compared to ED’s request of $1.037B and $402.2M, respectively. ED was upgraded to Neutral at Guggenheim as believe the removal of the valuation discount no longer justifies a Sell rating, and the stance is now in line with their broader outlook for the sectors on potential earnings re-rating, near-term catalysts, and alignment with energy transition policy in NY state; DTE upgrade from Neutral to Outperform at Credit Suisse following a positive update from management at this year’s AGA conference and see the opportunity for portfolio rotation to fund upside CAPEX.



·     AES +2%; strength across the board in defensive utilities to start the week – ED, SRE, NI, AWK, EXC all up 1.5% or more to start

·     AXL +5%; is exploring a potential sale, Bloomberg reports late Friday citing people from the process. https://bloom.bg/3lAQyn6 (note AXL this weekend said “we feel it is important to clarify that we are not engaged in a process to sell company”)

·     CNCE +6%; said its oral investigational medicine CTP-543 in adult patients with moderate to severe alopecia areata met main and secondary goals in a late-stage trial

·     JPM +5%; center stage today holding its investor day, after raising its outlook for net interest income (NII) growth to $56B in 2022 (from view of couple billion more than $53B prior) and reaffirming return on tangible equity target of 17%.

·     VMW +19%; AVGO is in talks to acquire cloud service provider VMW Reuters reported this weekend, citing people familiar with the matter. Negotiations between Broadcom and VMware are ongoing, and a deal is not imminent, the sources said https://bit.ly/3wLcPU7



·     ADSK -8%; downgraded to Hold at Deutsche Bank and lowering tgt based on conversations with platinum partners which indicate mixed 1Q results and downside to FY23 estimates

·     CDNA -10%; after CFO, Ankur Dhingra resigned effective May 25th to pursue another career opportunity

·     LYB -1%; DOW and LYB both downgraded to Neutral from Overweight at Piper saying checks in the chemical supply and product chains indicate that parts of the industry, especially olefins and polyolefins, may have entered a period of price and volume weakness

·     NOTV -13%; after disclosed late Friday that the DOJ, together with federal and state law enforcement agents, executed a search and seizure warrant at Inotiv’s Cumberland, Virginia facility on May 18th

·     RL -4%; adding to last week losses in retail, as Citigroup downgrades a handful of stocks in the sector saying last week’s earnings reports represented a wake-up call for retail that showed the stars are now misaligned” for fiscal 2022 – cut rating on CRI

·     SIGA -7%; after big wins last week for antiviral and vaccine names on fears of monkeypox break-out, shares of several of last week winners seeing profit taking


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.