Market Review: January 14, 2022

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Closing Recap

Friday, January 14, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     New year, same Friday afternoon ramp. Major indices each hit their lowest levels of the day around 1:30 as it looked like it was a broad rout to dampen sentiment ahead of the 3-day weekend and earnings season. However, the S&P then shed all its losses while the Nasdaq staged its own rally to end strongly in the green. Despite today’s late push, 2022 has not been kind to the stock market with all major indices slipping for the second straight week to start the year on the wrong foot. Tech stocks have been especially pressured by rising yields, and this was the first week where the 10-year yield held above 1.7% for the entire week since January 2020 before the pandemic. Additionally, the small-cap Russell 2000 remains in correction territory more than 12% off its November highs. Today, the retail sector underperformed after December retail sales fell -1.9%, much worse than the expected 0.1% decline, while banks were mixed despite rising yields after a handful reported earnings. Wells Fargo rose to new 52-week highs after its report, though investors were apparently less enthused about the quarters from Citi, JPMorgan, and BlackRock as these stocks were weak all day. Other banks GS, BK, PNC, TFC, SI, and SBNY will report Tuesday morning to start the shortened week as earnings season ramps up.

·     Stock/sector news; JPM, C, BLK stumble despite EPS beat, while WFC hits 52-week highs after its report and guide; LVS, WYNN, MLCO surge on Macau’s new gaming legislation that paves the way for current operators to retain their licenses and does not include any new taxes; PTON fades after being removed from the Nasdaq-100 after just 13 months and SAM plunges after slashing its EPS guidance with a potential quarterly loss as both hit their lowest levels since April 2020; XRT Retail ETF hits 10-month lows on December’s soft retail sales print with shopping REITs SPG, KIM, MAC, department stores M, KSS, JWN, UAA, BBWI, DLTR, TPR among underperformers; MRNA sinks after its CEP said the pandemic could start moving into an endemic phase in 2022 amidst broad weakness in vaccine names BNTX, NVAX, PFE, JNJ; SHW rolls on its prelim Q4 EPS miss, SAP higher after its beat and strong outlook with a new 1B euro buyback program; XLE Energy ETF 2.5-year highs; FANG, MRO, CVX, XOM among 52-week highs as oil prices rise again


Economic Data:

·     Retail Sales for December fell -1.9% MoM vs +0.0% consensus and +0.2% prior (and revised from +0.3%), while core Retail Sales fell -2.3% MoM vs. +0.3% consensus and +0.1% prior; as rising inflation appears to have taken a toll on sales; Ex-Auto & Gas, retail sales fell -2.5% M/M vs. +0.2% consensus and -0.1% prior

·     Import prices fell -0.2% MoM vs. +0.3% consensus and +0.7% prior as lower fuel prices more than offset prices for nonfuel imports; on a YoY basis, U.S. import prices rose 10.4%, the largest calendar-year increase since 10.6% in 2007. Export prices fell -1.8% MoM vs. +0.4% estimate, with the price drop the largest since the index fell 3.5% in April 2020.

·     Industrial Output for December fell -0.1% vs. est. +0.3% and down from upwardly revised Nov reading of +0.7% (from +0.5%); capacity utilization rate 76.5% vs. est. 77%; Dec manufacturing output -0.3% vs. Nov +0.6%

·     University of Michigan surveys of consumers sentiment prelim for Jan 68.8, below consensus 70.0 and Dec-F 70.6; current conditions index prelim Jan 73.2 vs final Dec 74.2 and surveys of consumers expectations index prelim Jan 65.9 vs Dec-F 68.3

·     Business Inventories for Nov rises +1.3%, in-line with estimates and October reading; Nov business sales +0.7% vs Oct +2.2%


Commodities, Currencies & Treasuries

·     Gold prices fell slightly by -$4.90, or 0.3%, to settle at $1,816.50/oz., though posted a weekly gain for the fifth time in the past six weeks.

·     Baker Hughes rig count for gas increased 2 to 109 and the oil rig count rose 11 to 492, the highest since April 2020.

·     Oil prices rose $1.70, or 2.07%, to settle at $83.82 per barrel despite China’s plan to release reserves during its Lunar New Year holidays (Jan. 13 – Feb. 6) as part of a global plan to reduce prices. This marks the fourth consecutive weekly increase in oil prices.




WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; KSS, M, WMT, TGT, URBN among retailers impacted by a weak December retail sales figure showing a negative reading compared to an expected rise by economists as a spike in inflationary prices appears to have impacted consumer buying in the key holiday shopping period – Retail Sales for December fell -1.9% MoM vs +0.0% consensus; KeyBanc upgraded FIVE to OW despite facing difficult comps early this year as they believe these are priced in and store expansion, higher prices including a new high $25 price point, and its position in a niche market will support long-term growth; PTON shares slid after it was announced it will be replaced in the Nasdaq-100 on January 24; Wedbush remains bullish on POSH, REAL, TDUP and said the fundamental outlook is positive with favorable risk/reward once the broader tech sell-off subsides given their long-term structural tailwinds and external factors such as inflation and supply chain disruptions possibly driving consumers towards resale channels this year; Bank of America reiterated LEVI at Buy with a trimmed $30 PT from $34

·     Broadline/Hardline Retail: JPMorgan upgraded ORLY to OW and added ULTA to its Focus List as a growth idea after its pullback as it favors names with high visibility to positive comps in Q1 (such as these two and DRVN, GPC) or where sentiment has washed out against upside and valuation (such as ASO), remove TGT from its Focus List given near-term concerns on SSS forecasts, remain UW on Wayfair (W), WSM, TCS despite steep pullbacks as key risks are still in the earlier stages of playing out, and in staples, they downgraded BJ to UW given mounting headwinds and their balanced ratings distribution while maintaining WMT at Neutral and COST at OW; ODP received a proposal from a second party to acquire its consumer business and it will now delay its public company separation to evaluate the potential sale

·     Auto sector; Ford (F) downgraded to Sector Perform at RBC Capital while up tgt to $26 from $21 and CRNC also downgraded and cut tgt to $77 from $95 saying positioning will matter as we get closer, but broadly, lower guidance could be a clearing event for the path to play autos for volume recovery. They see current consensus as being most aggressive on MTOR, ADNT and a beat at APTV

·     Consumer Staples; SAM cuts FY21 EPS view to ($1.00)-$1.00 from $2.00-$6.00, now ests shipment growth for products and gross margins will be below guidance primarily a result of more aggressive wholesaler inventory reduction than expected, primarily affecting Truly; GRWG downgrade from Buy to Hold with $12.50 PT at Craig Hallum after lower guidance

·     Restaurants; DPZ downgraded to equal-weight from overweight at Morgan Stanley and firm upgraded CMG to overweight from equal-weight amid a mixed view on restaurant stocks into 2022; TXRH was upgraded from In Line to Outperform w/ $110 PT at Evercore/ISI as believe there is still significant upside potential to traffic as COVID hopefully dissipates this spring; MCD tgt raised from $275 to $300 at Evercore largely as a result of accelerating sales in international markets and the resulting benefits to FCF growth; Loop Capital said latest DPZ U.S. franchisee checks indicate same-store sales growth came in above expectation in fiscal 4Q; PLAY upgrade from Hold to Buy at Gordon Haskett and downgraded EAT to Hold; Cowen said similar to 3Q our checks suggest a choppy earnings season ahead given COGS & labor pressures remain elevated while sales trends are broadly robust but decelerating from 3Q to 4Q

·     Casinos, Gaming, Lodging & Leisure sector; casinos a bright spot in a weak market overall early, with shares of LVS, MLCO, WYNN, MGM rising overnight after Macau’s government announced that the number of new casino operators allowed to function in the gambling hub would be limited to six with an operating period of up to 10 years. Current licenses of Wynn Macau, MGM China, Melco, and others are all due to expire this year. The announcement puts an end to concerns that the government would change the current status quo for the number of operators in Macau; in leisure, MTN said season-to-date total skier visits were down -1.7% compared to prior year season-to-date period and relative to 2019/2020 north American ski season, 2021/2022 north American ski season got off to a slow start


Energy, Industrials and Materials

·     Energy stock movers; energy complex remains top leaders in 2022 thus far, with more gains today (FANG, MRO, APA, OXY, COP, CVX), many names trading 52-week highs as oil prices move back near 2-month highs and about $3 bucks from 7-year highs. Oil prices on course for a fourth weekly gain boosted by supply constraints and a weaker dollar

·      Transports; ODFL to replace PTON in the Nasdaq 100 index; in rails, CNI upgrade from Hold to Buy with $137 tgt at Deutsche bank as believe market participants are underappreciating the potential for positive, operational-led management change at CNI after many years of underperformance; airlines big winners the day prior following DAL earnings and general upbeat sentiment around the Omicron virus (note MRNA CEO saying overnight he believes pandemic could start moving into an endemic phase in 2022)

·     Metals & Materials; SHW prelim Q4 adj EPS $1.35 missed est. $1.69, lowering its FY adj EPS view to $8.15 from $8.35-8.55, with Q4 sales in-line $4.76B and they expect raw material availability and labor constraints to continue through 1Q22; BMO upgraded MOS and KPLUY to Outperform on concerns Belarusian potash is about to become stressed that would lead to investors bidding up the share prices of potash producers; JPMorgan raised their MOS PT to $50 from $43 as the best positioned fertilizer company for capital appreciation in 2022 and prefer it to CF, NTR given their share value is largely correlated with nat gas prices



·     Bank movers; JPM Q4 EPS $3.33 vs est. $3.01 on adj rev $30.35B vs est. $30B, recovery of credit losses $1.29B vs est. provision $172.8M, sees FY22 net interest income ~$50B v est. $55.7B; WFC Q4 EPS $1.38 vs est. $1.11 on revenue $20.86B vs est. $18.85B, ROE 12.8% from 6.6% YoY, net interest income -1% YoY but noninterest income +27% due to strong PE and VC business and the sales of its corporate trust and asset management units ; Citi (C) Q4 adj EPS $1.99 vs est. $1.37 on revs $17B vs est. $16.77B; BLK Q4 adj EPS $10.42 above est. $10.15 on revenue $5.11B vs est. $5.16B, net inflow $211.7B, ended the quarter with over $10T AUM; FRC Q4 EPS $2.02 vs est. $1.94 on revs $1.4B vs est. $1.35B; Wells downgraded JPM with lower estimates as its cost and time frame for winning is greater and longer than expected with no assurance the bank’s historic increase in expenses will level off after this year

·     Insurance; ACGL tgt raised to $50 (from $48), CB PT raised to $225 (from $210), GSHD PT lowered to $160 (from $170), TIG PT lowered to $14 (from $18) at JMP Securities saying 4Q21 results will likely paint a mixed picture as geographically-isolated weather/catastrophe losses and a low level of Mark-to-market gains on the back of strong equity markets will likely have an uneven impact on reported EPS and book value growth

·     FinTech & Payments; a sector that remains under immense pressure, with more than 40% haircuts off highs for several names on high growth tech pullback last few months; KeyBanc downgraded shares of PAGS, FISV and IIIV to Sector Weight from Overweight in FinTech as continue to tilt toward a more selective sector approach and lower tgts for PYPL, SQ, MQ, HOOD, RSKD, FIS, GPN, RELY to primarily reflect the negative impact of higher rates

·     Financial services: MCO target price raised to $430 at BMO Capital and SPGI to $511 assuming some slight multiple expansion when applying the stock’s 2022 multiples to our 2023 estimates. Said, while the "comps" were still tough, they believe 4Q21 debt issuance trends were a bit stronger than expected, mainly driven by increases in structured products and leveraged loans.



·     Biotech movers; another rough day for vaccine makers, led by early declines in MRNA, PFE, BNTX, JNJ, NVAX after MRNA CEO said the pandemic could start moving into an endemic phase in 2022, but it depends on decisions made across the world, and countries will need to stay vigilant as Omicron spreads

·     MedTech Equipment & Healthcare Services: SWAV shares slipped overnight after CSI issued a press release stating that the company is developing an intravascular lithotripsy (IVL) device for coronary and peripheral artery disease. Given that CSI has been trying to invalidate SWAV’s IVL patents, Wells Fargo said this news does not come as a complete surprise to them


Technology, Media & Telecom

·     Software movers; SAP announces EUR 1B share repurchase program; said targets FY22 non-IFRS cloud revenue at constant currencies between EUR11.55B and EUR11.85B, 5% ahead of consensus; posted 4Q operating profit of EUR2.47B, around 2% ahead of consensus and revs of EUR7.98B above consensus EUR7.75B; MTTR, SAIL removed from Best ideas list at Wedbush; CHKP upgrade from Market Perform to Outperform at Raymond James as recent channel checks suggest strong near-term demand in both emerging subscription-based technology and net new customer growth (i.e. not just renewals); TEAM bounced off its lows in the afternoon after Mizuho learned of additional price increases

·     Hardware, Components & Services; GLW downgraded to Hold from Buy at Deutsche Bank as think street estimates for Corning are too high and are likely to move lower following 4Q21 result; NTAP upgrade from Market Perform to Outperform at Cowen and up tgt to $116 saying they are increasingly convinced NTAP is transitioning from a period of secular headwinds toward a multi-year period of structurally higher margins and secular growth

·     Media & Telecom movers; DIS downgraded from Buy to Neutral at Guggenheim and cut tgt to $165 from $205 reflecting updated view of the pace of profit growth at the company’s direct-to-consumer and parks businesses, which is now below consensus through fiscal 2024; SIRI downgraded to Underweight at JPMorgan and lower estimates to reflect continued weakness in US auto sales and higher opex/capex spend; NFLX raised its monthly subscription prices for its standard plan to $15.49 from $13.99 in the U.S. and C$16.49 from C$14.99 in Canada, the first increases for those regions since October 2020


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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