Market Review: November 22, 2022

Closing Recap

Tuesday, November 22, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Stocks “melted” higher on light volumes alongside light macro news and slowing earnings into the Thanksgiving Day holiday as major averages finished at their best levels of the day with the S&P at 4,000. Volumes also lagged with world watching the World Cup. All eleven S&P sectors finished higher but was again paced by energy rising over 3%, a 2% advance for materials and over 1% for technology and financials. Retailers got a strong bounce, reacting well to earnings results from BBY, BURL, AEO, ANF, DKS, and URBN all with big moves. Oil prices jumped after Saudi Arabia confirmed OPEC+ was sticking with outputs cuts, shooting down a report Monday that said the alliance was considering increasing output which sent crude prices sharply lower. It was a slow steady climb all afternoon, heading into the holiday shortened part of the week.

·     Goldman Sachs strategy call today: Goldman’s 3-month price target for the S&P 500 is 3600, the 6-month target is 3900 while the U.S. benchmark index should close the year at 4000. This projection is based on a belief the Fed will be able to deliver a soft landing for the U.S. economy with the 2023 S&P 500 EPS flat at $224. A hard landing scenario is described as a “distinct risk.” We expect in a recession the S&P 500 would trough at 3150.

·     Bank America strategy call today: S&P 500 2023 year-end Target 4000, 2023 EPS $200. But there is a lot of variability here. Our bull case, 4600, is based on our Sell Side Indicator being as close to a "Buy" signal as it was in prior market bottoms – Wall Street is bearish, which is bullish. Our bear case from stressing our signals yields 3000. In 2023, don’t index, “outdex”. If we kicked out the 50 largest companies, valuations are in line with history for the remaining S&P 450. But still crowded mega caps de-rating could dwarf these gains. Changes in leadership last longer than expected.

·     Amazing stats: according to Bespoke Invest, in the Russell 1,000 there are now 35 stocks trading below $10/share vs. just 11 a year ago. There were 49 stocks trading above $500 a year ago vs. 26 now. Median share price in the Russell 1,000 has fallen from $88.50 to $73.40 over the last year. Also, the last time crude oil was down 25% from a 52-week high and the Energy sector was within 3% of a 52-week high was way back in 2006, as per Bespoke. As per Charlie Bilello, the US Money Supply decreased 1.5% over the last 7 months, the largest decline over a 7-month period on record (note: M2 data goes back to 1959).


Economic Data:

·     Busy day of economic data coming up on Wednesday ahead of the off-day Thursday, with weekly jobless claims moved up a day early (est. 225K), Durable Goods orders for Oct (est. +0.4%), S& Global PMI, Nov-F New Home Sales for Oct (est. 570K) and University of Michigan Sentiment (est. 55.0) along with both 1 and 5-yr inflation expectations.



·     Oil prices rose with WTI crude +$0.91 or 1.14% to settle at $80.95 per barrel, now more than $5 per barrel off yesterday lows after top exporter Saudi Arabia confirmed OPEC+ was sticking with output cuts and could take further steps to balance the market, outweighing global recession worries and concern about China’s rising COVID-19 case numbers. The WSJ reported Russian natural-gas giant Gazprom threatened to throttle exports to Europe via Ukraine from next week, putting in question one of the last remaining routes for Russian gas to reach Europe. The pipeline via Ukraine is one of two functioning gas-pipeline links between Russia and Europe, along with a route via Turkey. Moscow this year has cut off most of its once-plentiful gas exports to Europe in what Western governments say is retaliation for their support for Ukraine in the war.

·     Gold prices snap their 4-day losing streak (barely), rising $0.30 to settle at $1,739.90 an ounce, helped by a retreat in the dollar and benchmark U.S. Treasury yields in holiday thinned-trading, while investors awaited cues on the U.S. Federal Reserve’s monetary policy path with the Fed Minutes from the November meeting tomorrow.


Currencies & Treasuries

·     U.S. Treasury yields eased amid thin trading and lingering concerns over more COVID infections in China, with investors waiting for clues on the outlook for inflation and monetary policy from the Federal Reserve’s minutes due on Wednesday. Benchmark 10-year Treasury yields were down nearly 7 basis points to 3.75% while the two-year eased by a smaller amount at 4.51% (the inversion remains over 70-bps). You must go back to the early 1980s to find a wider spread for this closely watched indicator of future recession risk. Traders widely expect the Fed to raise rates by 50 bps in December, with some betting on a 28.9% chance of a 75-bps hike according to fed fund futures. The US dollar also slipped over -0.5% on the day.






WTI Crude















10-Year Note





Sector News Breakdown


·     Hardline and Broadline Retailers: BBY Q3 EPS $1.38 vs. et $1.03; Q3 revs fell -11% y/y to $10.59B vs. est. $10.31B; Enterprise comp sales -10.4% vs. +1.6% y/y and estimate -13.1%; International comp sales -9.3% vs. -3% y/y, and US comp sales -10.5% vs. +2% y/y; resumes share repurchases; MOV lowers FY23 revenue view to $740M-$750M from $780M-$790M; DLTR Q3 EPS $1.20 on revs $6.94B vs. est. $1.18/$6.84B and Q3 enterprise comps +6.5%, Q3 Dollar Tree comps +8.6% and Q3 Family Dollar comps +4.1% – issues lower EPS view/better sales; DKS raises FY comp sales view to down -1.5% to -3%, from prior -2% to -6% after posts Q3 adj EPS $2.60 above est. $2.21 and revs $3B vs. est. $2.69B; said Q3 comp store sales rose 6.5% and raises full year 2022 EPS guidance to $10.50 to 11.10, up from $8.85 to 10.55 previously and raises 2023 guidance (watch SPWH, VSTO, BGFV); COST added to Bank America US 1 list as expect high food inflation to drive continued share gains for the warehouse club channel

·     Apparel & Footwear Retail: AEO a sound Q3 beat as EPS $0.42 top ests $0.22 on better revs $1.24B vs. est. $1.21B and said total ending inventory at cost increased 8% to $798M compared to $740M last year, with units up 7% while guides Q4 brand revenue down mid-single digits; ANF posted Q3 EPS and sales beat, guides Q4 revs $1.2B vs. est. $1.09B and sees FY22 net sales down 2%-3% from $3.7B in 2021 vs. prior view of down mid-single-digits, helping boost shares; BURL Q3 adj EPS $0.43 vs. est. $0.52 and revs $2.04B misses the $2.07B est. as comp sales fell (-17%) and narrows FY22 adjusted EPS view to $3.77-$4.07 from $3.70-$4.30 (est. $4.00) and expects FY22 comp sales down (15%-14%); CAL Q3 EPS $1.15 vs. est. $1.12 and revs $798.3M vs. est. $784M – Famous Footwear (0.8%) and Brand Portfolio +26.0%; GM 42.6% vs consensus 42.4% and guides FY EPS $4.30-$4.40 vs consensus $4.20-$4.40; CHS Q3 EPS $0.20/$518.3M vs est. $0.13/$508M; comps +16.5% vs consensus +13.1% and GM 40.0% vs year-ago 40.7% (mixed Q4 and FY guidance); URBN Q3 EPS $0.40 vs est. $0.41 and revenue $1.18B vs est. $1.16B; comps +4% vs consensus +2.2% – Urban (9%) vs consensus (8.5%), Anthropologie +13% vs consensus +10.0%, and Free People +8% vs consensus +5.8%

·     Auto sector: Benchmark noted sales of used vehicles in the US were down 11.0% in October, the 12th consecutive YoY decline and the lowest comparable total since 2012. Year-to-date sales totaled 30.7 million units, down 12.9%, below all available totals on record; after falling 97% from highs, two more analysts this morning downgraded shares of CVNA to reflect a higher likelihood of insolvency by 2024 without a faster reduction in operating costs; LYFT was downgraded to Market Perform at Cowen and tgt to $14 from $36 on near-term challenges including higher insurance costs, potential for revenue per rider to be affected by weaker consumer; and regulatory overhang; LEV enters into multi-year cell supply agreement for EV battery manufacturing with a top-tier supplier

·     Housing & Building Products: in homebuilders, TOL upgraded to Overweight at JPMorgan to join Overweight-rated DHI and PHM, while among the smaller caps, we reiterate our Overweight ratings on KBH and TMHC, upgrade GRBK to Neutral and downgrade MDC and CCS to Underweight saying approaching 2023, we are moving to a positive sector stance on the homebuilders (versus previously being less constructive for most of 2022), as we believe the stocks, already pricing in a mild recession; Investor home purchases fell 30.2% y/y nationwide in the third quarter, according to a new report from RDFN. That is the largest decline since the Great Recession aside from the second quarter of 2020, when investor activity plummeted due to the onset of the pandemic. It outpaced a 27.4% drop in overall home purchases nationwide.

·     Restaurants & Consumer Staples: BRBR 4.6M share Spot Secondary priced at $22.30; IPAR said it expects 2023 net sales of $1.11B, resulting in earnings per diluted share of $3.70 and excluding one-time items, we are targeting 12% earnings per diluted share growth in coming year; QSR tgt raised to $80 at RBC Capital and remains top pick among the global franchised fast food group following last week’s news of Patrick Doyle joining the company as Executive Chairman; JACK slides after guides FY23 adj EPS of $5.25-$5.65 below ests $6.59 after Q3 EPS miss of $1.33 saying decline in margins reflects rise in food and packaging costs and wage inflation



·     E&P and Majors: sector leader again, same story for much of 2022 with investors staying in energy stocks; PBR downgraded to Sell from Buy at UBS and cut tgt to R$22 from R$47 as expect an upcoming switch in the company’s direction; Repsol (REPYY) upgraded to Outperform at RBC Capital and raises PT to €19 calling it the most geared to refining, most geared to a tight distillate market and think market is underestimating near term and 2023 earnings potential; VAL announces contract award for drillship Valaris DS-12; FANG filed mixed shelf; SWN rise as energy names leveraged to natural gas outperform given colder temps.

·     Utilities & Solar: in solar, CSIQ Q3 EPS $1.12 vs. est. $0.49; Q3 revs rose 57% y/y to $1.93B vs. est. $2.07B; sees Q4 revs $1.8B-$1/9B vs. est. $2.07B; sees solar module shipments 6.0 to 6.3 GW; sees 2023 Total Module Shipments 30 GW to 35 GW



·     Asset Managers & Bank movers: BX downgraded to underperform from neutral at Credit Suisse saying that it is awaiting a better entry point for US alternative asset manager stocks; BK offices in Frankfurt have been raided by Cologne prosecutors as part of their probe into the Cum-Ex scandal, Bloomberg reported ; PACW announced an acceleration of its planned CEO transition to YE22 (from YE23) and that it has hired a new CFO.



·     Pharma movers: MRK said a Phase 3 study of its blockbuster cancer drug Keytruda met its key endpoint in certain patients with stomach cancer; FENC upgraded to Overweight from Neutral, and increasing our price Target to $12 from $9 at Cantor; GMDA shares fall after saying the FDA extended the review period for its experimental therapy omidubicel by 3 months as they will now decide on the use of omidubicel by May 1, 2023, vs previous target action date of Jan. 30, 2023; NVAX tumbled after Global vaccine alliance Gavi rejected Novavax’s claim that the group had breached an advance purchase agreement to procure 350M doses of the company’s vaccine.

·     MedTech Equipment: MDT Q2 adj EPS $1.30 vs. est. $1.28; Q2 revs fell -3.3% y/y to $7.59B vs. est. $7.70B; lowers FY EPS $5.25-$5.30 down from prior $5.53-$5.65 an est. $5.53 and expects FY23 2H revenue growth of 3.5% to 4.0% on an organic basis, an acceleration over the first half; Agilent (A) Q4 EPS/revs beat driven by strong Life Sciences and Applied Markets Group performance; FY23 guidance mixed w/ EPS above and revs below consensus; QGEN launches monkeypox test for NeuMoDx platform to fight global outbreak by boosting R&S

·     Healthcare Services: WBA upgraded to Outperform from Market Perform at Cowen and raise tgt to $54 from $43 as WBA’s transformation into a health care services business accelerates and op Inc mix shifts away from US retail; CVS board approves 2022 Repurchase Program for $10B


Industrials & Materials

·     Aerospace & Defense: the WSJ reported a bipartisan group of senators is urging the Biden administration to reconsider its decision to not give Ukraine advanced drones, saying that technology could help Kyiv to hold its territory

·     Metals, Industrial & Machinery: DE expected to reports earnings tomorrow morning in the machinery sector; in E&C space, DY Q3 EPS $1.80 vs. est. $1.32; Q3 sales rose 22% y/y to $1.04B vs. est. $975.6M; GTLS downgraded to a Neutral at Goldman Sachs saying while they do not reflect the proposed Howden transaction in view, are increasing assumed cost of capital for GTLS, driven largely by our view that the company’s willingness to raise longer term financial leverage targets, delay simplification of the capital structure; ZTO increased and extended its share repurchase program; industrial metals outperform STLD, FCX, CENX as well as gold miners in further rotation into industrials and materials

·     Transports: in the railroad sector (CSX, UNP, NSC), members of the union representing conductors and other workers voted to reject a proposed contract adding to concerns of a potential freight rail strike that could begin as soon as Dec 5; The on-time delivery rates of parcel carriers UPS and FDX are above 96% so far in November. UPS has consistently reached 96% to 97% on-time rates, while FedEx has improved its on-time rate from 95.6% in October to close to 96.8% in the first three weeks of November, according to parcel analytics firm ShipMatrix. Trucking stocks JBHT, CHRW, ODFL declined as EVRISI Trucking Survey ticked down for a fourth straight week, moving down from 48.9 to 46.0, its lowest reading since July 2020, as contacts see few signs of a peak season. Volumes have weakened further in November, as per Evercore/ISI.


Technology, Media & Telecom

·     Media, Internet: for LYV, three Democratic Senators called on the DOJ to hold Live Nation accountable and break apart the company if needed; PARA officially terminated the agreement to sell Simon & Schuster business to Penguin Random House; Paramount says Simon & Schuster remains a “non-core asset”; WMG adj OIBDA of $265M (adj EBITDA $276M) was ahead of cons at ~$220M, while headline revs of $1.5B were ahead of Street at $1.4B – Recorded Music streaming revs decreased by -40bps or +4.7% ex-FX as a result of the continued growth in subs revenue

·     Software movers: ZM reported disappointing overall results, with F3Q above consensus but another (slight) guide down on FY23 revenue (raise on margins) – Piper noted lead metrics (particularly RPO, cRPO, and new business) continue to decelerate and miss, total customers are declining, and Q4 guide came in beneath; Private equity firm Clayton Dubilier & Rice is in talks to invest about $1 billion in enterprise software provider PEGA, sources said, Bloomberg reported ; SE downgraded at Cowen citing the lack of visibility in both commerce and gaming for the downgrade

·     Hardware, Components & Services: DELL F3Q revenue and earnings beat expectations, the company’s F4Q guide and prelim FY24 framework provide an important window into the negative impact that higher interest rates, inflation, and a complex macro backdrop will likely have on Enterprise IT spending over the next 9-12 months said UBS; CGNX downgraded Outperform to Market Perform at Cowen and cut tgt to $50 from $55 as think the Street is too aggressive and makes results a risky event as estimates have not reset to the extent, we had anticipated post supplier fire; CSGS initiated at Outperform at Oppenheimer with $75 target


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.