Market Review: December 17, 2021

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Closing Recap

Friday, December 17, 2021





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Markets were choppy into quadruple witching options expiration, finishing with weekly declines, weighed down by cyclical stocks linked closely to the economy as investors digested the Fed’s midweek decision to end its pandemic-era stimulus faster and upped its timeline on interest rate hikes to curb soaring inflation. The Nasdaq managed to stay in positive territory along with outperformance in Smallcaps Friday, with the Russell 2000 rising over 1%, but cyclical stocks lagged, dragging down the S&P and Dow. All three main U.S. stock indexes finished with a decline for the week after the Fed on Wednesday signaled three quarter-percentage-point interest rate hikes by the end of 2022. Markets are heading into a shortened holiday week with several uncertainties, none bigger than the spike in Omicron cases around the globe.

·     Interest rates: the Fed’s Waller said today that the March FOMC meeting is “live” and its very likely a rate hike could happen at that meeting, though says could be pushed off until May. The 10-year yield finished around 1.4%, more than 30 bps off December highs, but also off morning lows following Waller comments on hikes. Recall earlier this week, the FOMC left rates unchanged as expected, will reduce bond purchases by $30 bln a month, and projects three interest rate rises in 2022 and median forecasts show, 3 in 2023, and 2 more in 2024.

·     Omicron variant remains a real concern for markets, with booming cases counts in Europe and now the U.S. The UK reports 111 COVID-19 deaths on Friday (Thursday: 146), reports record number of new COVID-19 cases on Friday of 93,045 new COVID-19 cases on Friday (Thursday: 88,376); in Ireland, says 35% of COVID-19 cases are of Omicron variant, up from 27% on Thursday and country to set new COVID-19 curfew for bars of 8 P.M., rejecting advice of 5p.M. Closure. In the U.S., sports industry feeling impact of rising cases as CNBC reported the NFL is set to postpone several games this weekend due to a surge in COVID-19 infections.

·     Stock and Sector movers: FDX soared after its beating quarterly expectations with raised guidance and a new $5B buyback; RIVN stumbled to record intraday lows after reporting it lost over $1B and said it will miss its production target in its first public quarterly earnings report; GM sinks after its Cruise CEO unexpectedly stepped down; CERN leads the S&P, ORCL index’s worst daily mover after the WSJ reported a potential merger worth around $30B; DRI rolls on weak EPS guidance despite its quarterly beat; banks GS, WFC, SIVB, MS, ZION underperform with falling yields – 10-year back below 1.4%; stay-home beneficiaries TDOC, W, ZM, outperform amidst surging Covid cases, though no clear rotation as reopen names also rise.


Commodities, Currencies

·     Oil prices slip, with WTI crude down -$1.52 or 2.1% to settle at $70.86 per barrel (posting a weekly slide of about -1.1%), while Brent declined -$1.50 or 2% to settle at $73.52 as surging cases of the Omicron coronavirus variant raised fears new curbs may hit fuel demand. Baker Hughes (BKR) reported that the number of active U.S. rigs drilling for oil rose by four to 475 this week. The rig count was also up by four in the previous week. The total active U.S. rig count, which includes those drilling for natural gas, climbed by three to 579

·     Gold prices settled above the $1,800 an ounce level for the first time since November 22nd, rising $6.70 or 0.4% to settle at $1,804.90 an ounce, registering a 1.1% gain on the week. Investors rotated into defensive and safe-haven assets this week as omicron concerns remain a big risk to the global economy, while precious metals also seen as a potential hedge against inflation.

·     The U.S. dollar jumped +0.5% against the euro and weakens a bit against the yen as investors look for safety amid rate-increase concerns. The Dollar Index (DXY) rises 0.5% above 96.50 as the Fed’s latest hawkish pivot points to a materially faster pace of policy tightening than previously anticipated. Though Treasury yields have remained depressed.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers & Staples; PG , KO and EL all pulling back after hitting ATH’s yesterday as consumer staples leading S&P sector gains this month; FRPT tumbles after cutting FY21 guidance on supply chain issues as now sees FY21 sales of $425M to $430M vs. $445M prior view and $442M consensus; also sees adjusted EBITDA of about $42M for FY21 vs. $50M prior view and $49M consensus; NKE earnings expected Monday after the close; DKS authorized the repurchase of an additional $2 billion of the Company’s common stock in connection with its ongoing share repurchase program; Kellogg (K) said its union will vote by Monday on the tentative 5-year contract agreement to end the ongoing strike that started October 5 at four plants

·     Auto sector; RIVN shares slide as reported non-GAAP adjusted EBITDA loss of ($-727Mm), below consensus of (-$690Mm), while generated roughly $1mm in revenue in 3Q with operating expenses amounted to $694mm – says expect to start production in Georgia facility in 2024; GM slips after saying Dan Ammann, the CEO of its majority-owned Cruise self-driving car subsidiary, is leaving co, effective immediately; GM did not give a reason for the departure; said Kyle Vogt, Cruise president and chief technical officer, will serve as interim CEO; NKLA rises midday after delivers first Nikola tre battery-electric trucks to Total Transportation Services Inc

·     Restaurants; DRI EPS/sales beat ($1.48/$2.27B vs. est. $1.43/$2.23B) as reports same-restaurant sales were up 29.3% for the Olive Garden chain in FQ2 and were 31.2% higher for the LongHorn Steakhouse chain against the soft pandemic comparable, but shares slipped after issuing mixed FY22 guide as revs better $9.55B-$9.70B vs. $9.54B est. but EPS miss $7.35-$7.60 vs. $7.61 est.; SBUX downgraded to Neutral from Outperform at Baird and cut tgt to $116 from $126 saying while still optimistic about the company’s long-term fundamental outlook, is less constructive near-term due to an increasingly uncertain backdrop in China

·     Casinos, Gaming, Lodging & Leisure sector; SIX was upgraded to Outperform from Neutral at Credit Suisse and up tgt to $53 saying the risk-reward sets up well given stock’s recent sell-off following co’s earnings report in October; in gaming, Wells Fargo said they believe the recent pullback in USSB/iGaming-exposed stocks has created some interesting opportunities, and highlight CZR and PDYPY as top ideas for investors looking to gain exposure to digital gaming; seeing travel and lodging names under pressure early before paring losses



·     Energy stock movers; energy stocks among top decliners in the S&P 500 as oil prices fell as surging cases of the Omicron coronavirus variant raised fears that new curbs may hit fuel demand; shares of COP, CVX, XOM and other E&P and equipment names dropped; IMO provides 2022 corporate guidance outlook saying 2022 capital spending is forecast at $1.4B while final investment decision for Strathcona renewable diesel project is expected in 2022; NOG upgraded to Buy at bank America saying a dividend plan may provide more support for shares, noting management has laid out its cash return strategy announcing a long-term base dividend plan; BOOM to buy a 60% controlling interest in Arcadia Inc. for $282.5 million in cash and DMC stock.

·     Pipelines: WMB downgraded to Neutral from Buy with a $27 tgt at Citigroup which is the Street low saying while call isn’t an inherent negative view on WMB’s assets base, it is a reflection of what they view to be limited upside (total return of ~10%) versus peers (says prefers owning TRGP); DCP was upgraded to Buy from Neutral at both Citigroup and Mizuho saying with shares down ~20% over the past two weeks, believe we are getting good entry after pullback

·     Utilities, Industrials & Solar; CMS downgraded from Buy to Neutral, raise tgt from $65 to $67 but overall seeing shares as fairly valued given the broader sector re rating of late; KeyBank lowered their PT on GNRC to $500 from $540 but said they would be buyers after the recent pullback as overarching momentum remains intact; solar names still breaking down after earlier this week California proposal to reduce the rate at which homeowners can sell excess electricity from their rooftop solar panels into the grid (RUN, ENPH, NOVA, FSLR have fallen)



·     Bank movers; large cap banks, regionals and insurance names saw a pullback amid another tumble in Treasury yields, which could compress lending margins; FUTU and TIGR shares initially tumbled on Reuters report that Chinese regulators are planning to ban online brokerages from offering offshore trading services to mainland clients due to concern about data security and capital outflows (shares reversed higher); HOOD snaps losing streak after hitting all-time lows

·     Asset managers; BMO Capital with a few changes as IVZ upgraded Invesco to Outperform from Market Perform with a $33 price target saying that sustained improvement in net flows and consequent benefit to organic revenue growth are not yet fully reflected; TROW upgraded to Outperform with a price target of $246, down from $253 as now sees high single-digit % upside to consensus EPS expectations following the announced takeover of Oak Hill Advisors; and BEN downgraded to Market Perform from Outperform with a $38 price target saying that benefits from the LM transaction have been slower to materialize than previously expected

·     Bitcoin news; crypto assets end the day and week lower, but finish off the worst levels of the morning (Bitcoin fell as low as $45,400 and Ethereum around $3,700); FTFT signs agreement to build cryptocurrency mining farm in U.S.; MOGO amends its existing senior credit facility with funds managed by affiliates of Fortress Investment Group.



·     Pharma movers; huge weak thus far for likes of PFE trading to new all-time highs as Omicron variant picks up steam; South Africa hospitalization rate plunges in Omicron Wave according to Bloomberg saying "only 1.7% of identified COVID-19 cases were admitted to hospital in the second week of infections in the fourth wave, compared with 19% in the same week of the third delta-driven wave”; late yesterday, a CDC advisory panel unanimously advised yesterday that people take an mRNA-based vaccine as opposed to the one developed by JNJ

·     Biotech movers; the European Medicines Agency recommends refusal of marketing authorization for BIIBs Alzheimer’s drug, Aduhelm saying results from main studies were conflicting and did not show that Aduhelm was effective at treating adults with early-stage Alzheimer’s; shares of vaccine makers NVAX, PFE, MRNA were mostly higher on variant concerns; NVAX outperformed, as the WHO issued and emergency use listing for nvx-cov2373, expanding basket of who-validated vaccines against the SARS-CoV-2 virus

·     MedTech Equipment; JPMorgan upgraded EW to Overweight with a $140 PT (from $114) as they view the company’s guidance as conservative and say it offers best-in-class growth with several positive data points, upgraded IART to Neutral as they are hopeful the new CEO can make more tangible strides toward its 5-7% revenue growth target, upgraded IRTC to OW with a $116 PT (from $100) on favorable risk-reward, a solid setup for 2022+, and meaningful growth opportunities, downgraded MDT to Neutral, removed it from its Focus List, and lowered its PT to $105 from $130 after setbacks to their most significant pipeline products, and resumed BAX at OW with a $95 PT as they see shares materially undervalued after closing the Hill-Rom deal; GH rises Most after co’s cancer diagnostic study reaches enrollment target


Industrials & Materials

·     Transports; FDX shares rose after announces new $5 bln share repurchase program along with a 2Q adj EPS beat of $4.83 vs est. $4.27 on revs $23.5B vs est. $22.47B, as continue to forecast improved earnings and margins for FY; sees FY 2022 EPS of $20.50-$21.50 vs. est. $19.64; overall transports declined despite a bounce in airline stocks across the board (AAL, DAL, JBLU)

·     Metals & Materials; United States Steel Corp. (X) issues Q4 2021 adjusted EBITDA is expected to be approximately $1.65B vs est. $2.13B; said are bullish for next year; Q4 guidance indicates another quarter of strong performance yet reflects a temporary slowdown in order entry activity; gold miners (NEM, GOLD, AEM) getting another good bounce this week as gold prices topped the $1,800 an ounce level on safe-haven buying by investors amid market uncertainty.


Technology, Media & Telecom

·     Software & Hardware movers; ORCL is in discussions to acquire CERN in a deal that could be worth around $30B, the Wall Street Journal reported saying a deal could be finalized soon, assuming talks don’t fall apart ; internet security stocks saw strength on stay at home fears as virus cases grow again, while high growth software names that have fallen from elevated levels in the summer saw a bounce (MDB, SNOW); ADBE extends losses from yesterday after plunging n weaker FY22 guidance; ANET upgraded to Buy at Cleveland Research on encouraging hyperscale visibility through 2022 and into 2023, incremental enterprise share gains, and increasing emphasis from strategic partners

·     Media & Telecom movers; AMC and CNK shares rise on volatility; AMC said "Spider-Man: No Way Home," which opened last night across the U.S., was the highest-grossing film on its opening night for a December opening with about 1.1 million people seeing it at AMC cinemas


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.

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