Market Review: August 16, 2022

Closing Recap

Tuesday, August 16, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Stocks finish mixed, taking a pause after hitting a key technical level! Stocks were humming along all day, bouncing off morning lows and extending recent gains before the S&P 500 hit and briefly topped its 200-day moving average key technical level around 4,325 (4,327.50 hi). The level brought out sellers quickly, pushing major averages lower, before stocks held and recovered. Prior to the afternoon roll, markets had rebounded, led by some of the most unlikely names, with signs of froth popping up. Outside of a handful of upbeat earnings reports in the retail space (HD and WMT) and few economic data reports, market news was quiet, opening the door for many high short interest related stocks to make ridiculous moves on no specific news outside of mentions on investor forums and stock chasing/short squeezes, lifting names including BBBY (record volume), GME, CVNA, FUBO to name a few (before huge pullbacks late day). Consumer discretionary was the main sector mover after WMT and HD each posted top/bottom line beats on better comps and maintains guidance (recall WMT did recently lower guidance in July), with earnings from LOW and TGT tomorrow morning. Economic data has been less than inspiring of late to say the least, mixed today with better industrial production but another terrible housing report (housing starts fell -9.6% m/m in July). Markets still rising on both negative and positive economic data, with a bit of a goldilocks scenario going on, as good data shows strength in the economy while weaker data or low inflation boosts hopes for an easier rate hike path by the Fed in their effort to fight inflation. Either way, investors continue to chase the stock market rally since July, with lots of money still on the sidelines on concerns the latest leg up is nothing more a “bear market rally” – which remains to be seen at this point – but for now stocks keep churning higher. A drop in energy and oil prices helped fuel the morning rally.


Economic Data:

·     July Housing Starts fell -9.6% M/M to 1.446M vs. 1.540M expected and 1.599M prior (revised from 1.559M). and July Building permits fall -1.3% M/M to 1.674M vs. 1.650M expected and 1.696M prior (revised from 1.685M)

·     U.S. July industrial output rose +0.6%, more than double the +0.3% estimate while June was revised to unchanged (previous -0.2 pct); July mining output +0.7%, utilities output -0.8%; Capacity utilization rises above the 80%-mark aa 4th straight month at 80.3% vs. est. 80.1%


Commodities, Currencies & Treasuries

·     Oil prices tumble, with WTI crude falling -$2.88 or 3.22% to settle at $86.53 per barrel (lowest levels since January and more than $3 off earlier highs), while Natural gas prices surge, up 6.7% to $9.313 mln btus, highest in 9-years (picture in Europe much more dire, hitting highs of $245 euros per MWH, highest since early March, before reversing lower to $222). Oil prices reversed lower following weaker US economic data. Gold prices fall -$8.40 or 0.5% to settle at $1,789.70 an ounce, posting back-to-back losses as investors bail on haven assets for more riskier assets with stocks exploding higher since the beginning of July.

·     Treasury yields open the day lower before jumping post housing starts and industrial production data, as the 10-year yield hits an intraday high of 2.87% before pulling back to end around 2.82%. The US dollar also volatile given the data and investor positioning into the Fed September meeting, with reduced bets of more aggressive rate hikes following the declining inflation data last week in CPI and PPI.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers: WMT reports Q2 results above estimates (a month after lowering guidance by roughly the amount beat) as Q2 EPS $1.77 tops the $1.63 estimate on revs $152.86B vs. est. $151.14B and posts 2Q total us comp sales ex-gas +7%, est. +6.48% – said it is gaining market share in some categories such as grocery, but high inventories; raises FY23 adjusted EPS view to down 9%-11% from down 10%-12%; TDUP posted slight revenue and adj. EBITDA beats against a difficult macro backdrop, but 2H is expected to be softer; for ULTA, UBS said ahead of earnings, they like shares saying while concerns have risen about a moderation in ULTA’s sales growth pace, we think they’re embedded into expectations; Macy’s (M) and JWN tgts cut at Deutsche Bank

·     Housing & Building Products; home improvement retailer and Dow component HD tops market estimates for Q2, buoyed by higher prices and big-ticket purchases, even as customer transactions at its stores fell 3% – HD top and bottom-line results beat expectations and said comp sales rose +5.8% vs analysts’ expectations for +4.9% growth and maintains guidance; note rival LOW to report earnings tomorrow morning

·     Casinos, Gaming, Lodging & Leisure sector; GAN slides after lowering its full-year earnings outlook and posted Q2 results below Wall Street expectations; WWE posts Q2 results ahead of estimates and raises FY22 adjusted OIBDA view to $370M-$385M from $360M-$375M; cruise line CCL said booking activity nearly doubles 2019 comparison after covid protocols simplified



·     FinTech & Payments; PYPL upgraded to Outperform and $116 tgt at Daiwa saying the significant deterioration of the firm’s earnings prospects since last year seems to have played out; Visa (V) and MA were downgraded to Neutral at Daiwa and lower tgt to $225 and $375 respectively saying with border restrictions now almost fully lifted except for some parts of Asia, they see reduced scope for earnings to surpass market expectations going forward

·     Consumer Finance: ALLY shares rise as Berkshire Hathaway raises share stake in Ally Financial (ALLY) to 30 mln shares from 8.97 mln shares; AFRM and BIGC expand partnership to offer Affirm’s adaptive checkout as the preferred pay-over-time solution and BIGC merchants can now offer Affirm’s flexible and transparent bi-weekly and monthly payment options

·     Financial Services: WU announces departure of Chief Financial Officer, Raj Agrawal; RDFN said roughly 63,000 home-purchase agreements fell through in July, equal to 16.1% of homes that went under contract that month, the highest percentage on record with the exception of March and April 2020, and up from a revised rate of 15% one month earlier and 12.5% one year earlier; COMP slides as Q2 EPS loss (-0.24) vs. est. loss (-$0.14); Q2 revs $2.0B vs. est. $2.12B; sees FY22 revenue $6.15B-$6.45B vs. est. $7.59B; sees FY22 Adjusted EBITDA ($225M)-($150M)

·     The U.S. Federal Reserve on Tuesday issued additional guidance for banks considering activities involving cryptocurrencies, emphasizing that firms must notify the Fed beforehand and make sure whatever they do is legally permitted. The Fed said in a statement that while cryptocurrencies can present "potential opportunities" to banks, firms need to make sure they have systems in place beforehand to ensure the volatile assets do not threaten safety and soundness or consumer protections.



·     Pharma movers: MRK commits $3.75 Billion to Circular RNA Vaccines, Drugs as partners with privately held biotech company Orna Therapeutics; FULC pricing of secondary offering of 9.59 mln shares of its common stock at of $7.82 per share; DNA reported a strong Q2 beat and raised its 2022 revenue outlook by $50M to $425-440M, largely baking in the beat, which was driven by strong COVID testing in schools; RPID downgraded at JPMorgan after disappointing 2Q results and FY22 outlook tied to slower ramp expectations for system placements and validations; BMY’s $4.1B of TPTX acquisition gets clearance in US, Germany, set to close

·     Biotech movers: SGEN upgraded to Outperform at RBC capital and raising tgt to $188 saying recent pullback on the arbitration decision is presenting a nearer term opportunity, as SGEN’s CEO search continues and the company’s position as an attractive strategic Target is too intriguing to ignore; FIXX formally announced a reprioritization of its PKU programs, away from its gene therapy program HMI-102 and toward its gene editing program HMI-103. A clinical hold was recently lifted for HMI-102

·     MedTech Equipment; DRIO 2Q revs of 6.2M coming in below consensus est. of $8.2M due to lumpiness in rev recognition for the Sanofi partnership and delays in large national health plan customer rollout to 3Q and mgmt. indicated it’s winding down the B2C business faster; MASI rises early after activist investor Politan Capital Management LP reveals an 8.4% stake worth roughly $750 million in belief that common stock was undervalued


Technology, Media & Telecom

·     Media, Internet; CURI Q2 revenue of $22.3M rises from $15.3M y/y saying it had total paying subscribers in Q2 of about 25 mln, up over 25% from last year and guides Q3 revs $21M-$23M vs. est. $23.7M; NRDY Q2 revenue $42.2M vs. est. $38.47M, exceeding the guidance range of $37-40 million, and up 29% as compared to Q2’21; TME 2Q results are mixed, with revenue and profit beating consensus estimates but operating metrics below expectations; NLSN wins three-year contract from AMZN to measure audience for National Football League’s Thursday Night Football telecasts on Prime Video

·     Software movers; SE reports a wider Q2 operating loss of 150% to $836.7M as net loss increases 115% and suspends 2022 revenue forecast due to macro uncertainties, says it is shifting strategy to focus on long-term efficiency and profitability of the e-commerce business; SNOW downgraded to Neutral at UBS ahead of Q2 results saying its recent round of field checks felt like a tone downtick relative to prior rounds, with more customers flagging efforts to curtail discretionary data analytics spend; ZM downgraded to sell from neutral with $91 tgt at Citigroup saying it sees “new hurdles to sustaining growth,” including growing competition from services like Microsoft Teams and macro-related pressures hitting customers

·     Hardware, Components & Services; RXT downgraded to Underweight at JPMorgan as see limited earnings growth potential over the near term, which could limit the upside in the stock; LITE shares slide after guiding Q1 EPS $1.45-$12.70, below the $1.83 estimate while rev guidance of $490M-$520M topped the $495M estimate saying guidance reflects the impact of share normalization in 3D sensing for smartphones (after Q4 beat); FN posted a strong quarter, offered a strong guide, stated it expects higher GMs and Operating Margins over time than previously guided, and talked about strong on-going demand


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.