Market Review: November 10, 2022

Closing Recap

Thursday, November 10, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     What a day on Wall Street as stocks surged after U.S. inflation rate cools in October, raising bets the Fed could pare back aggressive rate hikes in the future and prompting a broad-based stock market rally. The biggest gains came from growth stocks (technology, discretionary) and interest rate sensitive sectors (REITs, utilities). The S&P 500 topped its 100-day moving average resistance of 3,907 (200-day MA higher at 4,083) and posted its first 5.5% plus move since March 2020 (pandemic), while the Nasdaq surged over 7% on lower rate hike expectations. The Dow Jones Industrial Average climbed over 1,000 points and Smallcaps jumped approaching their 200-day MA. The U.S. Bureau of Labor Statistics said that inflation measured by the consumer price index rose 0.4% in October (vs. est. +0.6%) for an annual rate of 7.7%, down from 8.2% last month and below the 8% economist estimate. Core inflation, which excludes energy and food prices, increased 0.3% in October for a rate of 6.3% in the past year (vs. est. +0.5% and +6.5% respectively). Treasury yields sank amid signs of inflation cooling, with the yield on the 10-year Treasury note down 26 basis points at 3.89% and two-year yields dropping 30 basis points to around 4.34% and the dollar index (DXY) falling 2% for its worst day in about 10-years. Euro Stoxx 50 index rises 3.2%, closes at highest since April.

·     Fed’s Harker said: expects Fed can slow rate hike pace in coming months; at some point next year, Fed to hold at restrictive stance; Fed will need to assess how rate hikes are impacting economy; rate hikes smaller than 75 basis points are still significant; Fed needs sustained decline in inflation to moderate rate hike campaign; future Fed hikes will be driven by the data

·     San Francisco Fed President Mary Daly comments were a bit of a mixed message saying: CPI report was good news. not hanging our hats on inflation expectations; going to continue to adjust policy until that job is fully don; labor market report showed easing, but not at all close to what we need; job growth stronger than we need it to be; own outlook was for the Fed Funds Rate to peak at 4.9%. “Pausing is not the discussion. The discussion is about stepping down… there’s likely some more rate hikes in our future.”

·     Federal Reserve Bank of Cleveland President Loretta Mester said Thursday that while there are some new hopeful signs of moderating inflation, the main risk still facing the U.S. central bank is that it doesn’t act aggressively enough to tame very high price pressures. “Given the current level of inflation, its broad-based nature, and its persistence, I believe monetary policy will need to become more restrictive and remain restrictive for a while in order to put inflation on a sustainable downward path to 2%,” Mester said in a speech text.

·     Interesting stat of the day: Market has been very sensitive to CPI data. If you only had invested on last 10 CPI days (b4 today), would be down 7% YTD. $SPY was down 21% on year (b4 today). So, CPI days accounted for 1/3 of year’s drawdown.


Economic Data:

·     Consumer Price index (CPI) for October rose +0.4% m/m below the est. +0.6% (from +0.4% prior prior) and y/y headline CPI rises +7.7% vs. +8.0% expected (from 8.2% prior). Core CPI (ex food & energy) rose +0.3% vs. expected rise +0.5% m/m (vs. prior +0.6%) and rises +6.3% y/y vs. +6.5% estimate and (vs. 6.6% prior) – both lower readings for headline and core lifts stocks.

·     Weekly jobless claims rose to 225,000 in latest week vs. est. 220K and prior week revised up to 218K; the 4-week moving average fell to 218,750 from 219,000 prior week; continued claims rose to 1.493 mln oct 29 week (con. 1.475 mln) from 1.487 mln prior week and the US insured unemployment rate unchanged at 1%.

·     Regarding inflation – day data shows improvement, but still a long way to go: Price increases over last year: Fuel oil: +68.5%, Gas utilities: +20%, Gasoline: +17.5%, Transportation: +15.2%, Electricity: +14.1%, Food at home: +12.4%, Food away from home: 8.6%, New cars: +8.4%, Overall CPI: +7.7%, Shelter: +6.9%, Used cars: +2.0%.

·     Home-sale prices rose 3.2% year over year during the four-week period ending November 6, the smallest increase since July 2020, according to Redfin. The median home sale price has fallen 8.4% from its all-time high in June, when the average 30-year fixed mortgage rate was over a point lower than it is now. The 15-year mortgage rate in the US has moved up to 6.38%, its highest level since 2007. This is more than triple last year’s all-time low rate of 2.10%.


Commodities, Currencies, Bitcoin & Treasuries

·     Oil prices follow rest of commodity space higher, with WTI crude +$0.64 or 0.75% to settle at $86.47 per barrel following the tumble in the dollar. Brent crude futures settle at $93.67/bbl, up $1.02, or 1.1%. Gold prices rise $40.00 or 2.3% to settle at $1,753.70 an ounce, rising the 4th time in last 5-days, getting a big boost from the drop in the dollar, yields and reduced rate hike expectations.

·     Treasury yields tumble in one of the sharpest single day drops in a decade after October’s cooler-than-expected consumer-price index (CPI) report triggered a rally into bonds on hopes of slowing interest rate hikes. The rally left 2- and 10-year Treasury yields poised for their largest one-day declines in at least 13 years. U.S. Treasury 10-year yield extends fall, hits five-week low down over 30-bps to 3.84%, while the 2-yr fell 30-bps to 4.322%. A strong bond auction (unlike yesterday’s dismal 10-yr) helped ease yields further as the US Treasury sold $21B in 30-year notes at a yield of 4.08% vs. 4.113% when issued prior in a strong auction, as the bid-to-cover was 2.42 and primary dealers take 9.69% (said smallest takedown in at least 20-years) of U.S. 30-year bond sale, directs 20.39% and indirect 69.93%.

·     The U.S. dollar slumped over 2% on the day, with the dollar index down at 108.15 as softer-than-expected U.S. consumer price data raises hopes that the Federal Reserve may need to tighten monetary policy less than expected in its fight against inflation. Note the last 5 sessions have seen the fourth-largest drop in the USD (Bloomberg USD Index) since at least 2005; only larger declines were in December 2008, April 2009, and April 2020 (citing Bespoke). The greenback was down as much as 3% against Japanese yen, its sharpest one-day slide since July 2016. Against the euro, it was off by 1.4%, its biggest drop since Nov. 4.

·     After an absolute dreadful week for crypto currency following the FTX debacle, prices of Bitcoin, Ethereum, and others rebounded today with the broader market rally. Bitcoin back above $17K after dropping to more than 2-year lows around $16K. Irony, today was the one-year anniversary of the Bitcoin all-time high: $69,355. The FTX saga gets weirder and weirder as the WSJ reported this morning that FTX, the world’s third largest crypto exchange, tapped into customer accounts to fund risky bets, setting up its downfall. FTX Chief Executive Sam Bankman-Fried told an investor this week that its affiliated trading firm Alameda owes FTX about $10 billion .






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers: AMZN outperformed with broad market bounce and report the company is reviewing unprofitable business units, including the devices unit, to cut costs, the Wall Street Journal reported; RL topped market estimates for quarterly revenue, as wealthier shoppers unaffected by inflation splurged on the company’s high-end clothing and footwear; CPNG reported EBITDA well above consensus while total expenses grew only 1% YoY with revenues growing at 10% YoY; DDSQ3 EPS and sales easily top consensus; TPR beat Q1 profit estimates as wealthier consumers in Europe and rest of Asia splurge, but cuts its annual sales and profit forecasts; PRPL reported 3Q22 revenue that came in slightly above expectations and EBITDA that far surpassed consensus, but forward-looking guidance was slightly underwhelming following a strong 3Q; HBI downgrade from Outperform to Neutral at Credit Suisse as see other names within coverage that have done more work to stabilize the near-term outlook; YETI rises early on earnings

·     Auto sector: RIVN Q3 adj EPS ($1.57) vs. est. loss ($1.82); Q3 revs $536M vs. est. $551.57M but still sees FY production 25k vehicles, reaffirmed EBITDA; GM downgrade from Outperform to Peer Perform at Wolfe; TSLA removed from the Wedbush Best Ideas list as our near-term view of this name is increasingly becoming more challenged

·     Consumer Staples: CELH reported a record quarter driven by expansion across all channels and PEP orders; BYND weak demand and elevated competition in the plant-based meat category continue to weigh on shares, driving soft Q3 results overnight; plenty of earnings in food space as BGS in-line Q3 EPS and slight miss revs as volume declines and cuts annual dividend, UTZ posts top and bottom line Q3 beat and raises FY22 revenue growth view to 17%-19% from 13%-15%, and USFD with mixed Q3 (EPS miss, sales beat), announces $500M buyback and narrows year EPS outlook; MO downgraded to Sell from Neutral at UBS saying the market appears to be pricing in too favorable an outlook for the company as consumers go for cheaper products

·     Casinos, Gaming, Lodging & Leisure sector: massive move in travel, lodging, theme parks, casinos across the board on better inflation data; in theme parks, SIX Q3 EPS $1.39 misses the $1.60 estimate on revs $505M vs. est. $549.9M as attendance sank 33% to 8.0M missing ests of 8.7M, hurt by an increase in ticket prices, but shares bounce after amending corporation agreement w/ H Partners (follows weaker SEAS results the day prior); in casinos, WYNN posts Q3 EPS loss (-$1.20) vs est. loss (-$1.00); Q3 revs $889.7M vs. est. $871.21M with revs in Vegas rising y/y but falling in Macau due to China restrictions; in leisure, VCSA shares tumble, downgraded at JPMorgan coming out of 3Q as the print raised a few concerns heading into 2023


Energy, Industrials and Materials

·     Utilities & Solar: solar sector soars (TAN up over 9% midday) as California issues revised proposal on rooftop solar subsidies; California regulators soften blow of solar subsidy rollback; shares of FSLR, SPWR, SEDG, ENPH surged – shares of grid infrastructure names PWR, WCC, HUBB, MTZ also rallied on the solar headlines; SPWR was upgraded to Neutral from Underperform at Credit Suisse based on EBITDA growth ramp not reflected in current price

·     Aerospace & Defense: LHX downgraded to Hold from Buy at Argus noting shares have outperformed the broad market over the past quarter, gaining 3% while the S&P 500 has fallen 9% and think the relative strength may falter as the company’s earnings outlook is weakening; AVAV upgraded to an Outperform at Raymond James with $100 price Target as see an acceleration of orders since August that de-risks the consensus forecast, enables record backlog to persistently hover above $300 million



·     Asset managers: monthly AUM data released: AB preliminary assets under management increased to $627 billion during October 2022 from $613 billion at the end of September; BEN reported preliminary month-end assets under management (AUM) of $1,318.4 billion at October 31, 2022, compared to $1,297.4 billion at September 30, 2022; TROW preliminary month-end assets under management of $1.28 trillion as of October 31, 2022; VRTS preliminary assets under management of $149.5 billion as of October 31, 2022; APAM preliminary AUM as of October 31, 2022, totaled $125.3 billion; IVZ reports preliminary AUM $1.36T as of October 31, +2.8% MoM; net long-term outflows of $1.1B in the month; LAZ preliminary assets under management ("AUM") as of October 31, 2022 totaled approximately $204.6 billion

·     Banks & Financial Services: Economy-sensitive big bank stocks advance, tracking gains on Wall Street after October’s inflation data – JPM, BAC, C, WFC, SIVB; ZIP reported upside to both revenue and EBITDA with modestly higher paid employers and revenue/employer than expected and 4Q guidance is largely in line with Street estimates; in lending, Auto loan delinquencies have risen to the highest level in over 10 years, according to TransUnion saying 1.65% of auto loans were at least 60 days delinquent in the third quarter

·     FinTech & Payments: after weak results and guidance sent shares lower the day prior, Bank America downgraded UPST to Underperform from Neutral and lower tgt to $15, from $34 (notes co guided to 4Q revs of $125mn-$145mn, below Street at $184mn, on continued negative net interest income and decl. volume); PAY 3Q results featured upside to both net revenue and contribution profit growth (+26% vs Street +21% y/y) and adj EBITDA ($8.0M vs Street $7.3M); MQ 3Q was very strong – and upped the FY guidance

·     REITs: among the top performing sectors in the S&P, as interest rate sensitive names move higher the most; WE said it will exit about 40 locations across the U.S. and forecast current-quarter revenue below estimates as the flexible workspace provider faces high expenses and a strong U.S. dollar; reported Q3 revs $817M vs. est. $865M and sees Q4 revs $870M-$890M vs. est. $923M; AVB downgraded to Neutral from Buy and cut tgt to $170 from $220 at Mizuho, while firm also lowers tgt prices on AIRC, CPT, UDR, MAA, EQR and ESS.



·     Pharma movers: VERU tumbles after saying the FDA advisory committee voted 8-5 against its COVID-19 treatment sabizabulin saying that benefits do not outweigh the risks; APLS and ISEE both downgraded to Hold from Buy at Jefferies saying the Street is over-modeling both individual potentials, missing the competitive dynamic between the two and leaving estimates too high in the out years; JAZZ reported a bottom-line beat. It raised the midpoint of 2022 revenue guidance, driven by increases in the guidance midpoint for both Neuroscience and Oncology therapeutic areas; BCLI tumbles after receives refusal to file letter from FDA for its New Biologics License Application for NurOwn for the treatment of ALS; INAB files $200M mixed-securities shelf

·     MedTech Equipment: BDX Q4 adj EPS $2.75 vs. est. $2.74 and revs $4.76B vs. est. $4.72B; sees FY23 adjusted EPS $11.85-$12.10 vs. est. $12.19 and sees FY23 revenue $18.6B-$18.8B vs. est. $19.37 while raises qtrly dividend by 4.6% to $0.91; shares down -1.3%

·     Healthcare Services: CANO Q3 missed across the board on EPS, revs, and Ebitda and cuts FY guidance as revenue guidance decrease primarily driven by lower-than-expected revenue per member per month (downgraded at Raymond James); in general, names like distributors CAH, ABC, MCK lagged as investors bailed on defensive sectors


Technology, Media & Telecom

·     Media, Internet: just wow as high growth names saw some of the biggest moves on easing fears of interest rates; big moves in names like META, SHOP, SNAP, SPOT, ETSY, NET, and the list goes on and on; BMBL tumbles on disappointing quarterly results and guidance as Q3 revs fall short of views and guides Q4 revs $232-$237M vs. est. $254.5M while Q3 total paying users increased to 3.3M from 2.9M

·     Semiconductors: just a massive rally in chip stocks, with the Philly semi-index (SOX) rising as much as 9.8% to 2,640, just topping its 100-day MA resistance of 2,617 with huge moves in likes of AMD, NVDA, LRCX, KLAC (just fill in name here and was up over 5%); TSM posted Oct revs of $6.6B, up 56% YoY and up 1% MoM; Foxconn reported earnings and said 2023 revs would probably be “flat” given ongoing COVID headwinds and a global slowdown in growth

·     Software movers: RNG better Q3 results, approves a 10% reduction in its full-time employee workforce and raises its FY adj EPS forecast to midpoint $1.97 from $1.93, though lowered sales guidance; ATVI upgrade to Outperform at Raymond James; APPS posted 2Q profit and adjusted Ebitda that beat estimates while Unity (U) Operating income was guided breakeven by 4Q, now they guide $5-$15M, which translates to adj. EBITDA of $15-$25M; JAMF delivered another solid quarter, beating on both top and bottom line for its 9th consecutive quarter as a public company, continued >25% ARR growth across all geos/verticals/cohorts, and momentum in Security; PANW upgraded to Buy at Loop Capital; in 3D sector SSYS and DM active on earnings


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.