Market Review: November 08, 2022

Closing Recap

Tuesday, November 08, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     What looked like a smooth continuation of yesterday’s gains for U.S. stocks, cruising to more than 1% gains earlier in the session, turned into another volatile session with big swings heading into tonight’s mid-term election results and ahead of the CPI inflation data this Thursday. Treasury yields reversed lower, and the dollar sunk, giving a boost to stocks and commodity prices, with precious metals jumping. But an extremely volatile day in crypto assets (Bitcoin hit low of $17,000 and highs $20,600) amid liquidity fears in space on FTX, as well as some slowing demand comments from Fed-Ex (FDX) shook markets midday as S&P futures fell back to overnight lows of 3,800 (off highs 3,867). The move was short lived as stocks rebounded in the final hour of trading to settle higher. Overnight, Asia was mixed as Chinese Covid cases have risen to its highest level since April, throwing some cold water on the reopening narrative the last few days. There were no scheduled Fed speakers today as all the attention turned to the midterm elections. Stock strength was broad based with biggest gains coming in Materials, Technology, REITs, and Industrials though all eleven sectors finished in the green. 

·     Mid-term Election preview: The House of Representatives hangs in the balance on Election Day. The Democrats currently have a 221-212 lead in Congress, with two vacancies, but Republicans appeared poised to take the chamber this year. For today, 34 Senate seats up for grabs, all 435 House seats, and governors in 36 states also on the ballots today in huge implications. Several sectors in focus given possible shift in House power, with solar, cannabis, energy, electric vehicles among some of the sectors to watch. Marijuana Moment reported that Congress will hold a marijuana hearing one week after five states vote on legalization ballot measures (MD, MO, ND, SC, and AR). “In the Senate, results are very likely to be clouded for days thanks to very close races/vote counting in PA, NV, AZ, NH, CO, WI, OH, NC and a likelier-than-not December runoff in Georgia, required if no candidate gets over 50%,” said Terry Haines, founder of Pangaea Policy. More than 44M Americans already have voted in advance either in-person or by mail, according to U.S. Elections Project data. That’s above the 39.1M ballots cast early in the 2018 midterms. Races to watch =

·     Strategy comments by several strategists in recent days making case for near-term market rally: Wells Fargo said today “post-election, we would expect a small lift in the equity market over the next month (+1%) – assuming the CPI print on Thursday is not "hot." Defensive sector outperformance (i.e., Utilities, Staples, Health Care) is expected to last assuming we see an Election Day "red wave." Yesterday, JPM said the peak in bond yields and very downbeat sentiment may support stocks while notable market beat Mike Wilson of Morgan Stanley said that equities should do well after the midterm elections. Expectations are for the White House and Congress to be divided post-election, slowing some of the Biden Administration’s agenda.

·     Wild stats: So far in 2022, the S&P 500 has seen a reversal of at least 1% point from the day’s high or low on 162 trading days (which did not include today), according to Susquehanna, the most daily U-turns since 2008. And it’s already the highest annual total since 2009, with nearly two months still to go. The count represents 76% of all trading days—not far below 2008’s 80%. The S&P 500 has closed below its 200-DMA on 84% of trading days in 2022. It could be worse, like in 2008, 2001, and 1974 when the index closed below its 200-DMA on 100% of trading days.



·     WTI crude oil prices -$2.88 or 3.14% to settle at $88.91 per barrel, picking up steam to the downside late day following a sharp market downturn amid recession concerns and worsening COVID-19 outbreaks in top crude importer China heightened fears of lower fuel demand. Crude output to rise 580,000 bpd to 11.83 million bpd in 2022 (vs rise of 500,000 bpd forecast last month), the EIA reported. U.S. Crude output to rise 480,000 bpd to 12.31 mln bpd in 2023 (vs rise of 610,000 bpd forecast last month). U.S. Petroleum demand to rise 100,000 bpd to 20.48 million bpd in 2023 (vs rise of 190,000 bpd last month). Gold prices jump a third straight session, buoyed by a declining dollar and Treasury yields, rising $35.50 or 2.1% to settle at $1,716 an ounce while silver rises $0.58 or 2.8% to finish at $21.50 an ounce.


Currencies & Treasuries

·     The US dollar declined (giving major US averages a boost early) as traders looked ahead to U.S. midterm elections and hopes of China relaxing coronavirus restrictions faded. The dollar index (DXY) hit lows of 109.36, off overnight highs 110.62 and now more than 500-bps off 52-week (and 20-yr) highs of 114.78 late September. The euro moved back above parity vs. the dollar. Forecasts are for a Republican victory in Congress today, and consequently likely gridlock in Congress seen as a possible positive for bonds and negative for the dollar if it leads to less fiscal stimulus and a partisan impasse around increasing the debt limit.

·     Round trip for volatile move in Bitcoin and other crypto assets amid turmoil and uncertainty in crypto exchange FTX today (lows of $17,000 this afternoon for Bitcoin, after highs above $20,600 midday) on reports FTX saw around $6 billion of withdrawals in the 72 hours before Tuesday morning. FTT (the FTX Token) fell more than 90% midday, lowest since January 2021 after Binance/FTX news.

·     Treasury yields slipped on Tuesday, with the 10-yr down 7 bps to 4.14% and shorter-term 2-yr down 4.5 bps to 4.68% ahead of midterm elections and key CPI inflation data Thursday. The $40B US 3-Year note auction yield at 4.605% vs. 4.617% when issued prior with bid-to-cover at 2.57 as directs accepted 17.0% (vs. prev 19.6%) and indirects accepted 62.2% (prev 53.4%).






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers: GPS will sell its business in China and Taiwan to Chinese e-commerce services provider BZUN for up to $50 million, bringing an end to a bumpy 12-year foray in the region; WSM downgraded to Neutral from OP at Wedbush and slash tgt to $110 from $190 ahead of earnings saying even though they expect a slight beat for 3Q, the darkening macro-outlook and heavily over-inventoried industry leads to sharply reduce forward estimates; KSS shares rise after announces CEO transition process Michelle Gass plans to step down December 2 as Tom Kingsbury to serve as Interim CEO (also released prelim Q3 results); PRTY tumbles after lowering FY 22 guidance

·     Auto sector: in ride hailing, LYFT slides as 3Q results were mixed, with Active Riders ~4% below and revs close to in line, while EBITDA came in ahead after backing out adverse insurance liabilities (GAAP gross margin was otherwise below est’s); NKLA and CHPT partner to accelerate charging infrastructure solutions – collaboration will enable Nikola sales and service dealer network to resell ChargePoint’s charging infrastructure; RIDE reported worse-than-expected 3Q results and provided an operational update as it recently agreed to an expanded equity agreement w/Foxconn; TSLA recalls 40K U.S. Vehicles over potential loss of power steering assist

·     Consumer Staples: SKIN falls after the company lowered its guidance for adjusted Ebitda for the year, citing macro factors; COTY 1Q EPS of $0.11 vs est. $0.12, though EBITDA better at $308M vs $285M and sales also better at $1.39B vs est. $1.37B (organic sales were +9% vs est. +7%); HAIN Q1 EPS 10c vs est. 8c on lighter revs. EBITDA $36mm vs est. $34mm. Reaffirming FY23 Guidance adjusted net sales and adjusted EBITDA; FRPT added back to top pick status and lifting our PT to $80 from $65 at Oppenheimer

·     Restaurants: JACK downgrade from Buy to Hold at Deutsche Bank on what they deem to balance a balanced Risk Reward scenario at present; PLAY upgraded from Hold to Buy at Deutsche Bank saying at current share price levels, have PLAY trading at sub ~6.0x our 2023e adjusted EBITDA estimate of ~$526 million

·     Casinos, Gaming, Lodging & Leisure sector: gym franchise PLNT Q3 adj EPS $0.42/$244.3M tops consensus of $0.38/$234.5M revs and raises FY22 revenue view to up high 50% range from up mid 50% range and adj. EPS view to up mid 90% range from up mid 80% range; in cruise lines, NCLH Q3 revs of $1.6B in-line on slightly smaller than expected loss; SIX was downgraded to Hold from Buy in theme parks at Jefferies as believes a more conservative approach is warranted based on the increasingly negative economic outlook and his expectations for a transition Q3; in online travel, TRIP shares tank following quarterly results as posts slight Q3 beat however Q4 margin guidance came in light of consensus expectations; IGT 3Q EBITDA of $402M vs Consensus $384M, with sales also better at $1.06B vs Consensus $1.01B (beat driven by Gaming, with Lottery in-line) and guide 4Q revenues essentially in-line with consensus



·     E&P and Majors: FANG delivered 3Q22 operational and financial results that were in line with estimates, raised FY22 production and capex guidance to account for the Firebird acquisition, with 4Q22 capex of ~$550mm coming in ~$60mm above consensus estimates; energy names have been the big leaders in the S&P for months, little breather today

·     Utilities & Solar: in solar, SEDG reported a mixed 3Q22 with a beat on revenues, but a large EPS miss primarily due to higher taxes while guidance implies a sequential step-up in GM in 4Q22, but flat operating margins as 3Q22 benefited from an FX impact to OpEx; BLDP downgraded at TD Securities to hold from speculative buy; cuts Target price to $6.5 from $11; ARRY announced a 750MW tracker order for a project in Ohio with deliveries in 2023/2024



·     Bitcoin news: Crypto assets tumbling as Bitcoin (BTC) dropped as low as $17,000, and Ethereum (ETH) over 20% lower on the FTX (Sam Bankman Fried) vs Binance news. Prices rebounded after FTX CEO said in a tweet that the co had come to an agreement on a strategic transaction with Binance for …but bounce short lived as Reuters reported Crypto exchange FTX saw around $6 billion of withdrawals in the 72 hours before Tuesday morning, according to a message to staff sent by its CEO Sam Bankman-Fried; shares of HOOD, MSTR, SI, SBNY, MARA, RIOT, SQ – names that have exposure to Bitcoin/FTX tumbled.

·     Separately, U.S. federal authorities say they seized over $3.36 billion in Bitcoin during an investigation into fraud on the Silk Road dark web marketplace. Germany’s financial regulator ordered the local Coinbase (COIN) branch to comply to risk and capital requirements outlined by national banking legislation; RIOT reported Q3 results last night.

·     Banks, FinTech & Payments: SQ upgrade from Neutral to Outperform at Macquarie and raise tgt to $100 from $90 saying with shares now de-rated and operating leverage flowing through, upgrade on this improved upside/ downside positioning; UPST expected to report earnings tonight; WSJ reported GS expressed interest executives had discussed acquiring Deserve, a fintech credit-card platform that the bank already has close ties to, according to people familiar with the matter. Executives also sounded out another fintech credit-card platform called Cardless and a payments company called CCRD, the people said. – WSJ ; in auto lending, like ALLY, CVNA, etc. TransUnion, which tracks more than 81 million auto loans in the U.S., said Tuesday the percentage of loans that are at least 60 days delinquent hit 1.65% in the third quarter, the highest rate for 60-day delinquencies in more than a decade



·     Pharma movers: PRGO tumbles after company cut its FY profit outlook; In cannabis, CURLF delivered an in-line F3Q22 financial result, meeting consensus view on both revenue and profit; GRWG shares bounce on better Q3 EPS/revs; OMER receives decision from FDA on formal dispute resolution request for narsoplimab – denies Omeros’ appeal requesting immediate labeling discussions; ELAN reported 3Q results, with revenue in-line and beats on EBITDA/EPS while did lower FY guidance, with 4Q EBITDA expected to be $165M to $200M

·     Biotech movers: AMGN shares trade to record highs after hosted an investor event post-AHA and provided updated data from Ph3 FOURIER and OLE Repatha studies and Phase 2 OCEAN(a)-DOSE study of olpasiran; MRNS 10.53M share Spot Secondary priced at $4.75; ROIV 30M share Spot Secondary priced at $5.00

·     MedTech Equipment: MDT slips after saying clinical trial for surgical procedure "renal denervation" (RDN) misses primary efficacy levels; RDN is conducted to lower blood pressure with less medications for hypertensive patients; SWAV company reported a Q3 beat and raised 2022 guidance though implied for Q4 is a modest 6% sequential increase due to macro, fewer selling days as compared to Q3, and greater FX headwinds; MTD upgrade from Sell to Neutral at Goldman Sachs and raise tgt to $1,355 PT from $1,120 as believe the significant multiple compression from peak levels in 4Q21 better reflect the overall macro concerns and potential deceleration in growth for ’23; ESTA reported 3Q revenue that exceeded consensus estimates (operational growth of 38% ) despite facing a significant FX headwind of 600bps in the quarter; PKI 3Q EPS beat, raises midpoint of FY22 EPS guidance, above street; PACB 3Q came in below Street on Instrument weakness ahead of new product cycle; QGEN Q3 beat and raise for year; BVS tumbles after lowering its FY sales forecast and noted higher debt obligations

·     Healthcare Services: ABC 10M share Spot Secondary priced at $155.20; SDC relatively in line 3Q topline, better adj Ebitda loss and upbeat guide; HIMS raised 2022 revenue forecast to range of $519 mln to $522 mln from $470 mln to $485 mln previously; OSH Beat and raise – Lower quality MLR beat driven by PPD; AMWL better than expected earnings report for 3Q22 with total revenues slightly ahead but narrowed adj Ebitda forecast


Industrials & Materials

·     Industrials, Metals & Miners: SCCO upgraded to Overweight at Morgan Stanley as expect to generate more attributable FCF and return more cash to shareholders than FCX, despite being a smaller company and said SCCO is well positioned to outperform FCX amid lower Cu price; GE announces launch of up to $7B debt tender offer; ERII upgraded to Outperform at Raymond James, turning constructive for the first time since July 2021 — following the stock’s 25% drop since the 3Q22 results reported last week; gold miners jumped given the bounce in gold prices (AEM, NEM, GOLD); Dow component BA extended recent gains as industrials surge

·     Chemicals: DD Q3 adj EPS $0.82 vs. est. $0.79 as demand for electronics and other industrial products helped offset cost pressures/announces $5B share buyback; ASH reported F4Q adj. EBITDA of $147mm, directly in-line with consensus of and issued FY23 EBITDA guidance of $600-$650mm; MOS reported 3Q adj. EBITDA of ~$1.7bln, a touch below consensus of $1.87bln while 4Q price guide is better vs. expectations; IFF reported 3Q adj. EPS of $1.36, beating consensus of $1.33 and adj. EBITDA of $612mm was above consensus of $609mm while lowered its FY revenue and EBITDA guidance towards the low; SMG upgraded to OW at Barclay’s with $75 tgt as expect SMG to delever rapidly from here even under a wide range of macro scenarios.


Technology, Media & Telecom

·     Media, Internet: Dow component DIS expected to report earnings tonight; Brendan Carr, a Republican member on the FCC, reiterated his view that TikTok should be banned in the US; Twitter said user growth is at “all-time highs” during the first full week of Musk’s ownership

·     Semiconductors: NVDA said it is offering a new advanced chip in China that meets recent export control rules aimed at keeping cutting-edge technology out of China’s hands, Reuters reported; in earnings, GFS reported quarterly beat and raise helping boost the sector; semi-equipment names AMAT, LRCX, ASML among outperformers

·     Software movers: video game makers in focus as TTWO delivered disappointing F2Q23 results, missing consensus view on both net bookings and profitability and initiated a conservative view on F3Q22 financial growth and reduced FY23 guidance; ATVI delivered F3Q22 bookings and profit that both exceeded consensus view; FIVN slides on lowered 2022E guidance and initial 2023E outlook that fell short of expectations; QTWO missed 3Q expectations and lowered full year targets, as some of its larger financial clients slowed discretionary spend given persistent macro headwinds (at least two analyst downgrades); PWSC reported better 3Q results, with revenue in line and ARR, adjusted GM, and adjusted EBITDA above estimates and raises guidance

·     Hardware, Components & Services: NTDOY raised its profit outlook due to FX (weaker yen), but cut sales forecasts for Switch consoles; TDC reported a good quarter, the highlight being +89% y/y (+99% cc) public cloud ARR growth, the second-highest reported cloud growth rate; SSYS upgraded from Underperform to Market Perform, driven by view of limited further downside; DOCN declines, downgraded at JPMorgan after earnings, which were reported in-line; SANM advanced following earnings and guidance (receives broker upgrade)


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.