Market Review: October 28, 2022

Closing Recap

Friday, October 28, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     US equities enjoyed a nice bounce with both S&P and NASDAQ up more than 2%. AAPL earnings stood out last night for not hugely disappointing investors as other tech names have recently, and the stock pulled the market higher with a nice rally today. In-line core PCE data also failed to spook investors and supported the move higher in equities with breadth a bit better than 2:1 in favor of gainers. October has thus far outperformed to the upside and investors seem once again to be looking for reasons to believe in a Fed pivot, or at least an easing of rate increases, on the not-too-distant horizon (perhaps a bit optimistic at this point). From a data perspective, though, there is reason to be more bullish than bearish, at least in the near term. Over the last six instances, the S&P 500 has averaged a gain of 7.3% with a median gain of 5.8% in the period between a 2s/10s yield curve inversion and the start of recession. Just something to consider.

·     On a sector ETF basis, only Consumer Discretionary (XLY) was lower and that really was just a function of AMZN’s decline and weighting in the ETF. Equally weighted, Consumer Discretionary performance was more than +1.5%. Sector leaders on the day were Technology (XLK) +4.3% thanks to AAPL’s big day, Communications (XLC) better than +2% on TMUS, GOOGL and VZ strength and Utilities (XLU). Both value and growth gained better than 2% with growth modestly outperforming The Dow remains on track for a 14% advance in October – would be the biggest monthly gain since January 1987.


Economic Data:

·     U.S. Q3 employment cost index (ECI) rose +1.2%, in-line with estimates and down from +1.3% in Q2; Q3 wages/salaries +1.3% vs Q2 +1.4% and Q3 benefit costs +1.0% vs Q2 +1.2%

·     Personal Income rose +0.4% m/m vs. +0.3% expected and +0.4% prior while Personal spending rose +0.6% m/m vs. +0.4% expected and +0.6% prior; Sept personal saving rate 3.1% vs Aug 3.4%

·     PCE Price Index for Sept rises +0.3% m/m, in-line with consensus and +0.3% prior while rises +6.2% y/y vs. +6.3% expected and +6.2% prior

·     Core PCE Price Index for Sept rises +0.5% m/m vs. +0.5% expected and +0.5% prior and rises +5.1% y/y vs. +5.2% expected and +4.9% prior.

·     University of Michigan surveys of consumers sentiment final Oct 59.9 mostly in-line with consensus 59.8; University of Michigan surveys of consumers 1-year inflation outlook final oct 5.0% vs prelim 5.1% and final sept 4.7%; current conditions index final oct 65.6 vs prelim oct 65.3 and expectations index final oct 56.2 vs prelim oct 56.2 and final sept 58.0

·     Sept Pending Home sales index -10.2% vs. est. (-5.0%) to 79.5; Sept Pending Home sales -31.0% from Sept 2021



·     Oil prices fell with WTI crude -$1.18 or 1.32% to settle at $87.90 per barrel while Brent dropped -$1.19 or 1.23% to settle at $95.77 per barrel as a bounce in the U.S. dollar weighed on commodity prices, while COVID-19 restrictions in China renewed concerns about energy demand. Still, prices still ended the week higher with WTI crude rising 3.4%, its first gain in 3-weeks. Gold prices slide -$20.80 or 1.25% at $1,644.80 an ounce. Natural gas for December delivery fell 19.1c, or 3.3%, to settle at $5.684 per million British thermal units (MMBtu). For the week, the contract was on track to gain about 15% after plunging about 23% last week. That would be its first weekly gain in 10 weeks


Currencies & Treasuries

·     Treasury yields advanced across the curve on Friday as data showed that a key gauge of U.S. inflation favored by policy makers rose sharply in September. The 2-year yield rose 10-bps today, but overall declined 6.7 bps this week to 4.422%, down now 2-straight weeks; The 10-year yield rose 7 bps today, but declined 20.3 bps this week to 4.009%, snapping a 12-week winning streak (largest 1-week decline since July 1, 2022). All about the Fed next week for bonds and currencies, with 75-bps expected – what comes after remains to be seen.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers: another big online tech giant bites the dust as AMZN said that it could just break even in Q4 while analysts were expecting more than $5 billion in operating profit and holiday sales of $140B-$148B vs. ests on revenue of $155.09B; AWS misses expectations with sales of $20.54B growing 27.5% y/y but was the lowest growth rate dating back to 2014 and below est. $21.2B; DECK Q3 revenue growth of +25% constant-FX (vs. consensus up mid-to-high teens), and EPS of $3.80 (vs. consensus $3.68) and reiterated FY as-reported revenue and EPS guidance; COLM Q3 EPS $1.80 vs. est. $1.67; Q3 revs $955.0M vs. est. $962.7M; backs FY22 EPS view of $5.00-$5.40 (est. $5.16) and backs FY22 revenue view, but qtrly inventories increased 47% to $1,056.9B; BBBY said to sell up to additional $150 mln of shares in "at-the-market" (ATM) program

·     Consumer Staples: CL Q3 adj EPS $0.74 vs. est. $0.73 and revs $4.46B vs. est. $4.47B; Q3 gross profit margin 57.2%, down 220 bps, raises FY22 organic sales growth view to 6%-7% from 5%-7%; sees FY22 company net sales growth to be in middle of 1% to 4% range; CHD Q3 EPS and sales top consensus but guides Q4 EPS $0.58-$0.62 below est. $0.72 and narrows year sales view; CVGW announced the divestiture of its Limoneira position for gross proceeds of $18.5M; NWL lowers full-year 2022 net sales and profit forecasts as inflation-hit consumers rein in spending

·     Restaurants: BLMN Q3 adj EPS $0.35 vs. est. $0.34 and revs $1.06B vs. est. $1.05B and comp sales rose 1.4%, just below the 1.8%, but expects EPS to range from $1.05 to $1.15, down from prior guidance of $1.11 to $1.22, as higher revenue is offset by higher inflation; TXRH Q3 EPS of $0.93 was higher than $0.89 consensus on co-owned SSS growth of 8.2% (vs. 6.1% cons.) and domestic franchised SSS growth of 6.7% (vs. 4.8% cons). Average check growth was 7.7%, including 0.5% of mix shift and 7.2% menu pricing, and traffic was 0.5%


Energy. Industrials and Materials

·     E&P and Majors: top majors report earnings today as XOM Q3 adj EPS $4.45 vs. est. $3.79; Q3 revs $112.07B vs. est. $115.6B; raises quarterly dividend to 91c per share; company spent $5.73 billion on new oil and gas projects last quarter, up 24% from a year ago, and remains on track to hit an investment Target of $21B-$24B; CVX Q3 adj EPS $5.56 vs. est. $4.81; Q3 revs $66.64B vs. est. $58.22B; reports Q3 U.S. upstream earnings $3.4B and reports Q3 U.S. downstream earnings $1.29B; worldwide net oil-equivalent production was 3.03 mln barrels per day in q3 2022; PXD delivered a modest earnings beat with no major surprises after the close, and left major guidance components unchanged

·     Aerospace & Defense: BAH posts Q2 results that top estimate and raises FY23 revenue and non-GAAP EPS forecasts citing momentum in its VoLT (velocity, leadership, technology) strategy; LHX downgraded to Market Perform from Outperform at Raymond James citing the stock’s recent outperformance, lack of identifiable catalysts, and several factors negatively impacting sales

·     Industrial & Machinery: in waste, CWST reported 3Q adj EBITDA of $75.0M, which comfortably beat our estimate consensus of $68.6M, driven primarily by revenue, with margins coming in line; RSG reported 3Q22 adj. EBITDA of $1.05B, which beat consensus of $977M driven by both revenue and margins. The strength on the top line was broad-based as average yield of 5.6% ticked up 60 bps sequentially and volume of 2.2% came in well above our estimate; in machinery, TEX increased its 2022 guidance to $4.00-$4.20 from prior $3.80-$4.00 after Q3 EPS/rev beat

·     Metals & Materials: in steel sector, US Steel (X) achieved 3Q adj EBITDA of $848M compared to mid-September guidance of $825M, but lowered guidance for Q4 Ebitda; in chemicals, EMN slashes FY22 EPS view to $8.05-$8.35 from $9.50-$10.00 (est. $8.75) after beating for Q3; LYB posted Q3 Ebitda and revs that missed consensus ests; Shares of copper miners fall (FCX) as copper slides after touching its highest in nearly three weeks on Wednesday as a strengthening dollar and new COVID-19 flare ups in China, weigh on industrial metals

·     Utilities & Solar: FSLR missed both revenue and profitability expectations by a wide margin and lowered 2022 guidance; JKS Q3 EPS $0.90 tops estimates of $0.41 while total revenue of 19.52 bln yuan ($2.74 bln), up 127.8% on-year due to an increase in solar module shipment; PCG 35M share Block Trade priced at $14.90



·     Pharma movers: ABBV mixed Q3 as EPS of $3.66 beats $3.57 est. but revs of $14.81B misses the $14.9B estimate, raises quarterly dividend to $1.48 from $1.41 and narrows year EPS view to $13.84-$13.88 from $13.76-$13.96 (est. $13.86) – Q3 U.S. Humira net revenues $4.956B, up 7.4%; VRTX reported $2.33B (+6% q/q; +18% y/y) in 3Q22 WW Cystic Fibrosis (CF) sales, above Street $2.23B estimates, driven by Trikafta/Kaftrio demand, uptake, and label expansion into younger CF patients while raised 2022 sales guidance to $8.8-$8.9B

·     Biotech movers: GILD Q3 sales above expectations, 2022 guidance raised prompts upgrade to Overweight from Neutral at Piper and raise tgt to $96 from $79, as multiple roadblocks have cleared for Gilead’s HIV and oncology franchises, providing greater visibility on future revenue growth; SGEN revenue was 11% higher than cons. while EPS was a miss (-$1.03 vs cons. of -$0.96) largely driven by higher R&D costs; BIIB slips after a report by STAT News said death of patient in closely watched Alzheimer’s trial for lecanemab raises concern about risk for some groups; PTCT shares fall following negative initial feedback from FDA on Translarna, coming on the heels of a partial clinical hold for their Huntington’s splice modulator, along with earnings

·     MedTech Equipment: EW slides as reported Q3 revs miss ($1.319B vs. est. $1.333B), near the bottom of the $1.30-$1.37B guidance range driven by lower TAVR results, as U.S. hospital staffing challenges persisted; RMD Q3 revenue beat consensus while EPS missed in F1Q23 as supply chain constraints improved sequentially; DXCM reported $769.6M in Q3 revenue (+18.5% y/y rep., +20% y/y org.), ~$19M above consensus and EPS a $0.04 beat driven by strength in U.S. sales as domestic revenue growth of 17% y/y

·     Healthcare Services: DVA slides as reports Q3 profit that missed ests (EPS $1.45 vs. est. $1.77) citing labor pressure and as it closed centers due to a decline in patient visits due to COVID-19 and lowers its FY22 adjusted profit outlook to $6.20-$6.70 from $7.50-$8.50


Technology, Media & Telecom

·     Hardware & Services: AAPL topped expectations on revenue and earnings with the help of Macs selling at a record pace during the back-to-school season, which outweighed a slight miss on iPhone sales – Q4 revs rose 8.1% y/y to $90.10B vs. est. $88.90B; Q4 products revs rose 9% y/y to $70.96B, Mac revs rose 25% y/y to $11.51B (better), iPad revs fell -13% y/y to $7.17B; SSNC results missed expectations as economic uncertainty resulted in weaker trends and reduced the full-year outlook on the top and bottom line

·     Media, Internet: Elon Musk completed his Twitter purchase, fires CEO and other top execs – new regime began today; PINS MAU accelerated Q/Q returning to 3Q21 levels growing 12M Q/Q to at 445M with UCAN users up for the first time since 1Q21 to 95M – Q3 adj EPS $0.11 vs. est. 0.06; Q3 revs rose 8% y/y to $685M vs. est. $666.71M

·     Semiconductors: INTC posted strong 3Q results, benefiting from customer pull-ins ahead of 4Q price increases, while 4Q guidance was below expectations as PC demand deteriorates, enterprise weakens, and China remains weak – stepped up cost cutting plans (INTC was upgraded at Barclay’s); Apple supply chain active (AVGO, CRUS ) after Apple reported iPhone revenues slightly below expectations, due to FX headwinds and supply constraints related to stronger than expected demand for the iPhone 14 Pro series; MPWR reported 3Q22 results that slightly beat revenue and NG EPS consensus estimates, while GM was in-line but guides revenue below consensus for the first time in 14 Qs

·     Telecom movers: TMUS posted impressive results and raise its guidance in the face of a relatively strong competitive environment and weakening macro – said expects to add between 6.2M-6.4M net monthly-bill paying subscribers in 2022, up from a prior forecast of 6M-6.3M; EGHT cut its revenue guidance for the full year; the guidance missed the average analyst estimate; CHTR Q3 residential internet customers increased by 61,000, vs an increase of 243,000 customers y/y


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.