Market Review: September 19, 2022

Closing Recap

Monday, September 19, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Major U.S. stock averages were choppy with major averages bouncing between gains and losses several times today before rallying in the final hour closing just off the highs ahead of the 2-day FOMC meeting this week. The U.S. central bank is expected to raise its policy rate by 75 basis points on Wednesday for the third time since June. Since March, the Fed has lifted that rate from near zero to its current range of 2.25% to 2.50%. Treasury yields pushed higher; the dollar was steady ahead of the commentary mid-week. Sectors were mostly higher in a generally quiet trading session though notable weakness in vaccine names today (MRNA, PFE, BNTX, NVAX) after President Biden said last night in 60-minutes interview said that “the pandemic is over” – commentary also helped boost travel and leisure related names. No major earnings today or tomorrow with the Fed the big factor for markets. A massive week ahead for central banks and stocks markets overall, with at least six monetary policy meetings taking this place alone, with most expected to boost interest rates. The FOMC is expected to raise rates by at least 75-bps this Wednesday at the conclusion of its meeting (following unprecedented back-to-back 75 bps hikes the prior two meetings), while the Swiss (SNB), Norway (Norges Bank), and Sweden (Riksbank) are also expected to hike rates along with the Bank of England (BoE) later in the week. On Thursday the BOJ meet and markets strongly expect that policy settings will be left unchanged, despite downward pressure on the yen.



·     WTI crude oil futures settle at $85.73/bbl, up 62 cents, 0.73%, a nice rebound off earlier lows $82.10, NYMEX Natural Gas October futures settle at $7.7520/MMBtus. Gold prices slip -$5.30 or 0.3% to settle at $1,678.20 an ounce, staying near more than 2 ½ year lows as the dollar and Treasury yields rose on expectations the U.S. Federal Reserve will deliver a steep rate hike when it meets this week. The Fed, at the conclusion of its two-day policy meeting on Wednesday, is expected to raise interest rates by 75 basis points.


Currencies & Treasuries

·     Treasury yields finish higher, but off their highest levels as we move closer to the FOMC policy meeting results Wednesday. The US 10y yield neared 3.52% after closing 3.451% Friday, its highest level in 11-years (April 2011). Fed fund futures are pricing in around an 80% chance of a 75 basis-point move, and a 20% chance of a larger, 100 bps rate hike. The 12-month Treasury yield hit 4% this morning, more than 107 bps higher than the 2.93% level it closed at the last time the Fed met on July 27th. The 2-yr yield hit a fresh almost 15-year high of 3.970%.

·     The US dollar index (DXY) little changed around 109.75 after making its big upward move to 20-year highs in recent weeks amid rising inflation concerns and steps taken by the Fed (raising rates) The euro was slightly lower against the dollar, back below parity while the British pound bounces back above the 37-year lows reached last week sub $1.14, while the New Zealand and Australian dollars fell as well. The Canadian dollar fell to its lowest level in almost two years. The buck was firmer against the Japanese yen ahead of FOMC and BoJ policy meetings this week. The Bank of Japan is widely expected to stick with massive stimulus at its meeting. Bitcoin prices hit 2-year lows around the $18K level before paring losses while Ethereum fell -7% to $1,330.

·     Yields surged last week: the 2-year yield rose 29-bps to 3.859% and the 7th straight week of gains and up over 300-bps from 2022 closing low 0.764% in January. The 10-yr yield rose 12.6-bps to 3.447%, also up for seven consecutive weeks and up 182-bps from 2022 closing low 1.628% In January. The 30-year yield rose 6-bps to 3.518%, up 3-straight weeks.


Economic Data:

·     U.S. September NAHB Housing market index 46 versus 49 in August, the lowest since May 2020; index of current single-family home sales 54 versus 57 in August; index of home sales over next six months 46 versus 47 in August; index of prospective buyers 31 versus 32 in August






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers: RL said its 3-yr financial outlook accelerates to a mid- to high-single digit revenue compounded annual growth rate and operating profit growth exceeding top-line growth by fiscal 2025 in constant currency and plans to continue returning approximately $2B in excess FCF to holders through FY25 through dividends and share repurchases; MAT said it has entered into agreement of $1.4b in aggregate principal amount of senior secured revolving credit facilities; PRPL rises after holder Coliseum Capital offers to buy for $4.35 per share

·     Auto sector: AZO reported Q4 profit and sales that rose above expectations, helped by continued strength in its commercial business as sales grew 8.9% to $5.35B (est. $5.16B), with the commercial business growing sales 22% and comp-store sales rose 6.2%, topping est. +3.4%; VWAPY said it would seek a $75 billion valuation for its planned IPO of luxury division Porsche

·     Housing & Building Products: ahead of earnings this week in homebuilders, KeyBanc changes its underweight Builder outlook to overweight, based on our view "Early Pain = Early Gain," with most builders’ underperformance relative to the S&P by the 3rd quartile in previous cycles. They see fundamental and rate pressures persisting, but positive relative performance, supporting upgrades (DHI, LEN, MTH, PHM, and BLD to Overweight, and KBH and TOL to Sector weight)



·     Energy stock movers: US shale drillers are struggling to meet strong demand for gas from domestic generators as well as customers in Europe and Asia scrambling for replacement supplies following Russia’s invasion of Ukraine, per Reuters. Oil dipped initially as the dollar strengthened ahead of central-bank meetings this week that are expected to lead to further monetary tightening, heightening concern among traders that economies could weaken – but rebounded throughout the day,

·     E&P and Majors; EQT upgraded to Outperform at BMO Capital and increasing target price to $65 saying should benefit from a significant step-up in FCF next year as hedges roll; expect gas prices to remain strong and are raising our 2023 and long-term price forecasts; OBE upgraded to MP at BMO Capital as no longer see the balance sheet as an area of concern for the company

·     Utilities & Solar; ARRY upgraded to Overweight from Neutral at Piper saying the company’s strong order book creates the potential for an attractive 2023 revenue and EBITDA outlook; FSLR entered into an agreement to supply 600 megawatts (MW)DC of its high-performance, advanced thin film photovoltaic (PV) solar modules to Azure Power Global Limited



·     Bank movers: a group of President Biden-appointed bank regulators are considering new rules to require large regional banks to add to financial cushions that could be called on in times of crisis. a group that includes firms such as USB, TFC and PNC has introduced new risks to the financial system – WSJ reported

·     Bitcoin news: Bitcoin sinks toward lowest since 2020 on nerves over Fed hike while also adding to nervousness around cryptos was the white house’s unveiling last week of plans to regulate the industry; shares of MARA, COIN, MSTR, SI, RIOT slipped initially on crypto pullback

·     REITs; CSGP priced its offering of ~10.66M shares at a price of $70.38 per share; in research, Mizuho downgraded ESS to Neutral in large cap Apartment coverage universe, saying for ESS, downgrade is more fundamentally driven, reflecting the implications of its more rapid sequential blended rent deceleration in 3Q22 thus far, while UDR is valuation driven; at Citi, several changes in REITs as upgraded AKR, ESS, HR while downgraded HPP, KRC, KRG, ROIC



·     Biotech movers: vaccine names PFE, MRNA, NVAX all underperformed broader markets/biotech; BLUE said its gene therapy for a brain-wasting disease received accelerated approval from US regulators, making it the first treatment of its kind for children living with cerebral adrenoleukodystrophy; VIRI said top-line results from phase 2b study of IMC-1 in Fibromyalgia did not achieve statistical significance on the prespecified primary efficacy endpoint; ALLK says offering of 29.88 mln common shares priced at $5.02/share; VERU slides after FDA reschedules Covid drug meeting date

·     MedTech Equipment; BSX presented data from its PROTECTED TAVR trial which missed statistical significance for its primary endpoint (all stroke at 72 hours or discharge) but showed that use of cerebral embolic protection (BSX’s Sentinel device) for reduction of disabling stroke, a secondary endpoint, was statistically significant, with a 60% relative risk reduction; EW presented interim results from CLASP-IID, a head-to-head study of PASCAL vs. ABT’s MitraClip in DMR were presented over the weekend at TCT BTIC said hits primary endpoint with non-inferiority to MitraClip; some sign of greater and sustained reduction in MR severity at six months

·     Healthcare Services: MCK said it has reached an agreement to acquire Rx Savings Solutions for up to $875M, a Co that serves about 17 million patients; LH was downgraded to Hold from Buy at Argus and removing it from our Focus List, reflecting the pending spinoff of the company’s Clinical Development business


Industrials & Materials

·     Aerospace, Industrial & Machinery; BA selects SPR to replace KC-135 horizontal stabilizers – new horizontal stabilizers will be produced at spirit facility in Tulsa, Oklahoma; OSIS increased the number of shares available under its current stock buyback plan to 2 million shares

·     Transports: Senator Elizabeth Warren (D-MA) is requesting that the U.S. Department of Justice heavily scrutinize JBLU planned purchase of SAVE and ultimately block the combination. Warren wrote a letter to Transportation Dept. Secretary Pete Buttigieg asking that the agency to consider blocking the $3.8 billion purchase; Parcel shippers such as FDX, UPS, USPS and AMZN could face excess capacity in the coming peak delivery season, as consumers revert to spending more in stores or on travel and entertainment, said ShipMatrix

·     Metals & Mining: EAF said late Friday that inspectors issued a suspension notice for its Monterrey facility, which accounts for about 25% of its total production; in gold mining, NEM mentioned positively in Barron’s saying it may be time to buy the gold producer whose shares have dropped more than 50% from an April high alongside the decline in gold prices; KGC announces enhanced share buyback program as commits to $300M over remainder of 2022 and 75% of excess cash in 2023 and 2024 and maintains quarterly dividend; AngloGold Ashanti has agreed to pay $150 million in cash to acquire a subsidiary of CDE with mining concessions in Nevada adjacent to its own, the companies said.

·     Chemicals: in the TiO2 sector, VNTR downgraded to Underperform from Market Perform at BMO Capital and TROX downgraded to Market Perform noting their exposure to Europe/APAC and believe faces a challenging outlook with TiO2 prices which are expected to come down on reduced demand and improved supply chains; HUN downgraded to Sector Perform at RBC Capital and lowering ests and tgt following the company’s updated 3Q guidance and belief that pressure will persist into 2023.


Technology, Media & Telecom

·     Media, Internet: NFLX upgraded to Outperform at Oppenheimer with a $325 tgt saying its ad-tier launch should accelerate subscriber growth, drive ARPU, and slow churn and in 2025E; forecast global advertising revenue of $4.6B, driving total revenue to $42.4B, with 282M total subscribers, both 3% and 6% above Street estimates; WIX rises after reports that activist investor Starboard Value has established a roughly 9% interest and spoke to the company about how it can better its operations; GOOGL has been asked by the Indian government and the central bank to introduce more stringent checks to help curb the use of illegal digital lending applications in India, Reuters reports; Rumble Inc to start trading with ticker "RUM" today after SPAC merger as closed business combination with special-purpose acquisition company CFVI

·     Semiconductors: BMO cut its tgt on MU to $80 from $85 saying given memory fundamentals, thesis will be given a severe test over the next two quarters or so as they are lowering numbers considerably for FY23 and introducing FY24 estimates, both well below consensus.

·     Hardware & Software movers: CRM added to Raymond James’ current favorites list and HUBS removed from the list; Bloomberg reported a hacker released gameplay from TTWO’s Grand Theft Auto VI in one of the biggest leaks in gaming history; KNBE shares jumps after confirms it received a non-binding proposal from Vista Equity Partners to acquire remaining outstanding shares not already owned for a price of $24.00 per share, payable in cash; NTAP downgraded from Positive to Neutral w/$75 tgt from $100 at Susquehanna; SE is preparing to lay off 3% of employees at its e-commerce arm Shopee in Indonesia, as per a Bloomberg report


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.