Mid-Morning Look: August 19, 2022

Mid-Morning Look

Friday, August 19, 2022

Index

Up/Down

%

Last

 

DJ Industrials

-229.88

0.67%

33,769

S&P 500

-45.04

1.05%

4,238

Nasdaq

-225.10

1.75%

12,740

Russell 2000

-37.52

1.87%

1,963

 

 

U.S. stocks open weaker, putting the 4-week win streaks in jeopardy for the S&P 500 and Nasdaq (which are the longest week-over-week winning streaks since October-November), as stocks fail on rising rate fears. There are small pockets of strength early in defensive sectors such as utilities, consumer staples and healthcare, but market breadth remains decisively lower on Fed rate fears. Note Fed speakers late next week at the Jackson Hole event. Crypto slammed Friday morning, with bitcoin down more than 8% and ether down more than 9% along with more “froth” coming out of the market as speculative and so called “meme” related stock movers pressured (BBBY, GME, AMC) to the downside. Several U.S. Federal Reserve officials said this week the central bank needs to keep raising interest rates to rein in inflation, which added to market concerns. Industrials fall on weaker DE earnings and outlook, high-growth, and technology stocks (AMZN, GOOGL and the likes) slip as yields push higher; banks also fell and were on track to end the week lower, potentially snapping their six-week winning streak. Gold prices slipped for a fifth consecutive session, its longest losing run since November last year (down 3% over that stretch) amid a strong dollar and rising yields. Several factors in Europe not helping sentiment including: 1) UK consumer sentiment hits record low as inflation soars as the GfK consumer sentiment index sank to a record-low -44 in August from July’s reading of -41; 2) German producer prices jumped at the fastest pace on record in July, surging 37.2% on the year, the biggest rise since records began in 1949, while the m/m rise of 5.3% was also the highest on record.

 

 

Macro

Up/Down

Last

 

WTI Crude

0.54

91.03

Brent

0.18

96.77

Gold

-7.40

1,763.90

EUR/USD

-0.0045

1.0043

JPY/USD

1.19

137.07

10-Year Note

0.103

2.983%

 

 

Sector Movers Today

·     Media, Internet; RBLX has poached a META executive, Steve Park, for the newly created role of Asia-Pacific head of public policy, as the videogame company chases growth in the region – WSJ reports; Morgan Stanley lowered its 2023 revenue and EBITDA estimates for META citing falling total engagement and the continued rise of Reels, both of which are believed to be negatively impacting revenue and cut tgt to $225 from $280; PARA renewed its U.S. media rights to the Champions League in a deal valued at more than $1.5 billion over six years, in a deal is more than double the size of its previous contract, Bloomberg reported

·     Semiconductors; AMAT reported JulQ Rev/EPS of $6.52B/$1.94, slightly better than consensus $6.28B/$1.79, and guided OctQ to $6.65B/$2.00 (consensus $6.55B/$1.94) despite continued supply chain challenges impacting its ability to meet demand while GM contracted 180 bps due to higher costs and unfavorable mix; Samsung Electronics said it broke ground at a new semiconductor research and development complex in South Korea, where it plans to invest about 20 trillion won ($15 billion) by 2028 to drive leadership in chip technology

·     Casinos, Gaming, Lodging & Leisure sector; MSGE board of directors has authorized the exploration of a potential spin-off that would focus on its traditional live entertainment and the MSG Networks businesses/ company would create a separately traded public company; movie theatre chains pressured after the WSJ reported Cineworld Group Plc (CNWGY), the owner of Regal Cinemas, is preparing to file for bankruptcy within weeks after struggling to rebuild attendance from pandemic lows https://on.wsj.com/3K84ksx ; DASH said it is ending its partnership with WMT next month after more than 4 years of delivering products to customers

·     Retailers; BBBY shares tumble a 2nd straight day after top investor Ryan Cohen exited his stake, as his RC Ventures sold millions of shares on Tuesday and Wednesday at a range of prices from $18.68 to $29.21, according to a filing with the SEC; FL a bright spot in retail after Q2 adj EPS $1.10 vs. est. $0.80, Q2 sales fell -9.2% y/y to $2.07B vs. est. $2.08B on a smaller comp loss (-10.3%) vs. est. (-13.7%) and names former ULTA CEO Mary Dillon as new CEOP effective Sept 1; ROST missed 2Q sales and GM expectations, but better SG&A led to a bottom-line beat; lowered 2H guidance (F22 EPS lower by 11%) as 2022 EPS guidance lowered to $3.84-4.12 from $4.34-4.58); BKE reports Q2 profit of $1.01 topping the $0.90 estimate but Q2 sales rise 2.3% to $302M, missing estimates of $304.3M

 

Stock GAINERS

·     AXSM +33%; after saying the FDA has approved its oral drug Auvelity as a treatment for major depressive disorder; expects drug to be commercially available in the U.S. in Q4, 2022

·     BILL +16%; delivered an outsized beat, reporting revenue growth of +156% Y/Y, handily beating core and upside forecasts alongside announcing stronger than expected FY23 guidance while organic core Y/Y growth remained strong at ~71%;

·     DVA +3%; assume coverage with a Buy rating and $117 price target at UBS supported by a favorable risk-reward, which skews 2-to-1 to the upside

·     FL +21%; after Q2 adj EPS $1.10 vs. est. $0.80, Q2 sales fell -9.2% y/y to $2.07B vs. est. $2.08B on a smaller comp loss (-10.3%) vs. est. (-13.7%) and names former ULTA CEO Mary Dillon as new CEOP effective Sept 1

·     GM +2%; to resume buybacks; expands program to $5B shares and to reinstate quarterly dividend at $0.09

·     MSGE +3%; Board of directors has authorized the exploration of a potential spin-off that would focus on its traditional live entertainment and the MSG Networks businesses

 

Stock LAGGARDS

·     AXDX -29%; as 17.5M share Secondary priced at $2.00

·     BBBY -42%; shares tumble a 2nd straight day after top investor Ryan Cohen exited his stake, as his RC Ventures sold millions of shares on Tuesday and Wednesday at a range of prices from $18.68 to $29.21, according to a filing with the SEC

·     COIN -8%; with Bitcoin falling around 9% at worst to $21,250 and Ethereum falling over -10% below $1,700, weighing on shares of other related Bitcoin miners, investors, banks

·     DE -2%; posts Q3 EPS miss and lower views as Q3 EPS $6.16 vs. est. $6.69, narrows FY22 net income view to $7B-$7.2B from $7B-$7.4B and lowers FY22 operating cash flow view

·     HOOD -6%; after saying equities trading volumes fell 33% in July vs last year, while options contracts declined 29% and cryptocurrencies plunged 59% while Monthly active users on co’s trading platform were down 33% y/y

·     HPQ -4%; cut to Underweight and tgt to $30 at Wells Fargo as think there is increasing scenario in which shares could see relative underperformance through the remainder of 2022 and into 2023

·     STNE -24%; after posted a Q2 loss of 489.3 million reais ($94.7M), compared with a profit of BRL526.0 million a year earlier

·     W -15%; after announcing a workforce reduction involving approximately 870 employees, or about 5% of global workforce

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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.