Market Review: March 16, 2022

Auto PostDaily Market Report

Closing Recap

Wednesday, March 16, 2022





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Stocks ripped higher for a second consecutive day, but the move was much choppier than yesterday’s massive bounce. Markets soared in the morning and early afternoon before having the wind taken out of its sails by the Fed’s rate hike and outlook that sent stocks tumbling to lows before quickly rallying back to pre-FOMC levels to act like the dip never happened. Today’s 25bps rate hike came as no surprise (the CME FedWatch tool assigned it a 96.3% probability yesterday) but forecasts of 6 more hikes in 2022 with 3-4 more following next year weighed on markets and sent yields rocketing higher. The 10-year yield spiked above 2.24% to its highest level since May 2019 following the FOMC and the 2Yr/10Yr and 5Yr/30Yr spreads drastically flattened in the immediate aftermath. Bank stocks held their gains, seen as a beneficiary of the rate hikes and rising yields, while tech and industrials jump. Overall sentiment was fully behind the risk-on trade as the VIX fell to its lowest levels of March As has been the case in recent weeks, macroeconomic and geopolitical headlines were once again a primary contributing factor to the market’s overall direction as overnight progress in Russia-Ukraine peace talks boosted sentiment overnight while China pledging market-friendly policies to spur economic growth rejuvenated Chinese stocks after several were beaten back to multiple-year lows yesterday.

·     FOMC; The Federal Reserve raised the overnight interest rate by 0.25% to 0.25-0.50% and says ongoing increases in the target range will be appropriate. The vote was 8-1 with St. Louis Fed President Bullard the lone dissenter in favor of a steeper 0.50% hike. The majority of the 16 policymakers also see the Fed funds rate above the 2.4% neutral rate by the end of 2023 and 2024 with the median Fed funds projection at 2.8%. Additionally, seven hikes are now expected in 2022 that implies a hike in each of the subsequent six meetings this calendar year followed by another three-four hikes in 2023. The median projection for interest rates at the end of this year is for rates to be 1.9%, a full 1% above December’s outlook.

·     In his prepared remarks, Fed Chair Jerome Powell reiterated that the economy is very strong, and the central bank remains nimble in the face sustained inflation and supply chain challenges as well as heightened uncertainty from the current Russia-Ukraine conflict. The central bank’s median projection forecasts real GDP growth of 2.8% this year, 2.2% next year, and 2% in 2024. Additionally, they expect the labor market to remain strong with the unemployment hitting 3.5% by year-end and remaining close to that level thereafter. They also see inflation likely taking longer to return to goal than previously expected with prices to rise 4.3% this year, 2.7% next year, and 2.3% in 2024. The Federal Reserve will also announce actions that reduce its balance sheet in coming meetings.

·     Stock/sector news; SBUX bounces after ex-CEO Howard Schultz is stepping in on an interim basis and JPM upgraded the stock to OW on valuation; China stocks (FXI, KWEB, BABA, BIDU, DIDI, etc) skyrocket after the country pledges policies to support financial markets and spur economic growth; BTC Bitcoin, ETH Ethereum, COIN, RIOT Crypto space outperforms, ARKK soars in a rotation into growth names; XLF KRE Banks outperform as TLT bond yields hit their highest levels in multiple years after the Fed raised rates, SIVB, SCHW, MS, FRC, ZION among the S&P leaders; KSS surges on reports activist investor Engine Capital is urging the board to pursue a sale and Hudson’s Bay and Sycamore Partners are prepping bids above $9B for the retailer; JBL jumps on its beat and raise report, S soars on a strong guide after a mixed quarter, and SMAR reverses overnight losses after its quarterly beat and mixed guidance


Economic Data:

·     February Retail Sales rose +0.3% vs. est. +0.4% (Jan revised to 4.9% from 3.8%), while retail sales ex-autos rise +0.2% vs. est. +0.9% (Jan revised to 4.4% from 3.3%); Feb cars/parts sales +0.8%

·     Feb export prices rose +3.0% above est. +1.6% (Jan revised to 2.8% form 2.9%) while Feb import prices rise +1.4% vs. est. +1.5% (Jan revised to +1.9% from 2%); Feb year-over-year import prices +10.9%, export prices +16.6%; Feb petroleum import prices +8.1% vs. 7.9% in Jan

·     Business Inventories for January rose +1.1%, in-line with estimates while Dec revised to 2.4% from 2.1%; Jan inventory/sales ratio 1.25 months’ worth vs dec 1.29 months; Jan business sales +3.7% vs Dec -0.5%; retail inventories ex-autos revised to +1.8%

·     March NAHB Housing market index 79 versus 81 in February; index of current single-family home sales 86 versus 89 in February; index of home sales over next six months 70 versus 80 in February; index of prospective buyers 67 versus 65 in February



·     Oil prices slumped -$1.40 or 1.45% to settle at $95.04 per barrel, falling for a 3rd straight session and touching its lowest levels since late February just one-week after hitting 14-year highs above $130 per barrel. The EIA revealed the first rise in U.S. crude supplies in three weeks, while the International Energy Agency warned that Russia’s invasion of Ukraine and resulting sanctions threaten a supply shock that may push the oil market into a deficit unless major producers increase output. Gold prices slipped -$20.50 or 1.1% to settle at $1,909.20 an ounce, closing ahead of the FOMC rate decision where they boosted rates by 25 bps as expected.


Currencies & Treasuries

·     Treasury yields spiked following the aggressive interest rate outlook from the Fed, as dot plots show between 6-7 rate hikes of 25 bps this year and some next year after hiking today. Bond markets tumbled on the news as Treasury yields all hit multi-year highs with the 10-yr rising as high as 2.24% (up over 8 bps), the 2-yr jumped 12 bps to 1.99%, the 5-yr up 11 bps to 2.228% and the 7-yr up about 10 bps to 2.27% – yields pared gains late day following the initial shock.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; KSS received a letter from Engine Capital regarding its disappointing guidance and urging the company to sale as the stock’s -12% decline at its last analyst day sent a clear message about its plan, and it was later reported PE firm Sycamore Partners and Canadian retailer Hudson’s Bay prepped bids for the company above $9B in value with a share value in the high-$60s; CAL Q4 adj EPS $0.91 vs est. $0.67 on revs $679.3Mm vs est. $677.2Mm, guides FY EPS $3.75-4.00 vs est. $4.03, and added 7Mm shares to repurchase program; SCVL Q4 adj EPS 83c vs est. 44c on revs $313.4M vs est. $280.5M, sees FY22 sales growth 4-7%, adj EPS $3.80-4.10 vs est. $3.85; LE Q4 missed on EPS 21c vs est. 31c and revenue $555.4M vs est. $567.7M with weaker FY guidance of EPS $0.71-1.04 vs est. $1.14 on sales $1.68-1.75B vs est. $1.76B; Credit Suisse and Jefferies both lowered their estimates on NKE ahead of Monday’s earnings report due to macro uncertainty and volatility though both maintain their OP/Buy rating; LE files for shelf of up to 17.1 mln shares of common stock by selling stockholders

·     Auto sector; TSLA is suspending production at its Shanghai factory for two days, according to a notice sent internally and to suppliers; Chinese automaker BYD follows Tesla in hiking car prices due to surging raw material costs; SFT 4Q EBITDA was in line with muted expectations and 2022 outlook and issued medium-term Target for EBITDA breakeven/positive by 2024-25; LOTZ soft 4Q results reflected the ongoing difficult environment for the company’s consignment model while also did not provide guidance due to leadership change; auto stocks a little rebound F, GM, TM as China, Ukraine fears are tamped down

·     Housing & Building Products; FND sees long-term annual targets include total net sales growth of at least 20% as measured over a three-year compounded annual growth period and sees adj operating income about doubling from 2021 to 2024; U.S. mortgage index falls 1.2% in week ended March 11 according to weekly MBA data as purchase index rises 0.7% and refinancing index falls 2.8%; the 30-year mortgage rate rises 18 bps to 4.27% (highest since May 2019)

·     Restaurants & Consumer Staples; USFD is interviewing potential candidates for its board as the food distributor tries to fend off a challenge from activist investor Sachem Head Capital Management, Reuters reported; SBUX said CEO Kevin Johnson is stepping down, handing leadership of the coffee chain back to former longtime CEO Howard Schultz as the company works to move past the COVID-19 pandemic and confronts a unionization push among U.S. baristas; SBUX was also upgraded to overweight at JPMorgan (came before CEO announcement); EL target slashed to $300 from $350 at Oppenheimer as China lockdowns will slow business even as the stock has already been crushed.

·     Casinos, Gaming, Lodging & Leisure sector; U.S.-listed casino operators with exposure to Macau WYNN, LVS, LVS jump as Asian and European stocks rally after a pledge from China to keep capital markets stable; HST upgraded to Outperform at Raymond James saying no lodging REIT has better navigated the transition from the pandemic environment to a post pandemic, cyclical beginning than Hos; travel, leisure, hotel, theme parks, cruise and the like a big rally early as oil slides and investors scoop up beaten names



·     Energy stock movers; Oil fell below $100 a barrel in a volatile session on Wednesday, as it came under pressure from signs of progress in Russia-Ukraine peace talks and a closely-watched report that cut its forecast of world demand. Prices opened to the downside initially, dragging energy stocks (which have been market leaders in 2022) lower including CVX, COP, XOM, OXY. Headlines overnight that Ukraine’s president said the positions of Ukraine and Russia were sounding more realistic, but time was needed eased further war concerns and pressured energy complex; defensive utility names tumbled early with XEL, LNT, D, CMS, AEP pressured; Chinese solar names rally with broader bounce in China stock news of country to offer support for the economy and keep markets stable –DQ, JKS shares rally



·     Bitcoin, FinTech, & Payments; COIN introduced Coinbase Pay to streamline the process for users to fund their Coinbase Wallet from the Chrome browser extension; crypto assets jumped with broader stocks with big gains in Bitcoin and Ethereum; beaten up FinTech/payment stocks SQ, PYPL, AFRM, UPST, GPN saw strong rebounds early

·     Consumer Finance; SOFI was downgraded from Overweight to Equal weight at Morgan Stanley and cut tgt to $10 from $18) as now believe consensus estimates are at risk with another extension of the federal student loan moratorium likely on the way



·     Pharma movers; ACAD upgraded to Buy from Hold at Canaccord and up tgt to $31 ahead of upcoming regulatory saga on Nuplazid for ADP, other catalysts as like the risk-reward heading into an AdCom, 8/4 action date; MRK and ADAG received FDA clearance to proceed with a phase 1b/2 trial of ADG126 in combo with Keytruda (pembrolizumab) in solid tumors; PRTA announced preclinical data for its dual Aβ/tau vaccine targeted at Alzheimer’s disease; APLS reports long-term data from two late-stage studies testing its drug pegcetacoplan as a potential treatment for geographic atrophy (GA)

·     Biotech movers; BIIB announced long-term data from two Phase 3 trials for the Alzheimer’s therapy Aduhelm developed in partnership with the Japanese pharma company, Eisai; RARE was upgraded to Outperform at Credit Suisse as sees a compelling risk/reward profile on the shares ahead of the company’s Angelman syndrome program update; TSVT agreed to sell about 13.9 million common shares to a select group of institutional and accredited investors in a private placement; FOLD announces positive long-term data from phase 1/2 study of AT-GAA

·     Healthcare Services; GOCO 4Q21 results fell in line with the March 1 pre- release reflecting increased shopping behavior among consumers, negative tail revenue from attrition among seasoned cohorts, higher marketing costs, and higher than expected agent attrition


Industrials & Materials

·     Aerospace & Defense; LMT slides after the U.S. Department of Defense will request 61 Lockheed Martin F-35 fighter jets in its next budget, 33 fewer than previously planned. The Pentagon had planned to fund 94 of the planes in FY 2023 that begins October 1, up from the 85 y/y budget (shares of defense stocks broadly declined – LHX, GD, NOC)

·     Transports, Industrial & Machinery; Dow Transports outperform, rising over 800 points, pushing above its 100-day MA resistance of 15,855 (topped 50-day MA yest of 15,400) – broad strength in rails, airlines, truckers (UNP, DAL, JBHT); also broad bounce in industrials with “risk-on” attitude helping equipment and heavy machinery into Fed; CAR board approves $1 billion boost to buyback


Technology, Media & Telecom

·     Internet; Chinese Internet names led the way as China pledged new policies to boost financial markets and spur economic growth. Chinese officials, including President Xi Jinping’s economic czar, Vice Premier Liu He, said they would introduce market-friendly policies and keep the capital market running smoothly, and said any policy that could move markets should be developed in coordination with financial regulators – BABA, BIDU, PDD, TCEHY, NTES surged; They got another pop after the Financial Times reported China plans audit concession in face of US delisting threat; NFLX announced its cracking down on the widespread practice of password sharing between people who don’t live in the same household by prompting them to pay an extra fee

·     Semiconductors; MU was upgraded to Outperform at Bernstein with $94 tgt as sees 28% upside as chip prices will likely rebound later in 2022; also upgraded Samsung, SK Hynix as a correction to the memory market, if any, won’t be prolonged & won’t change the structure; massive gains in beaten up chip stocks, with the Philly semi index (SOX) rising as much as 5%

·     Software movers; NLOK shares fell after UK’s regulator cast doubt on NortonLifeLock Inc’s takeover of London-listed cybersecurity peer Avast after finding the combination could reduce competition; SMAR posted Q4 adj EPS (12c) vs est. (15c) on revenue $157.4M vs est. $151.7M with EPS guidance below consensus but better than expected sales forecasts;     SentinelOne, Inc. (S) reported a mixed Q4 with EPS (27c) wider than est. (18c) on revenue $65.6M vs est. $60.7M and ARR that rose 123% YoY and sees revenue growth of 80% this year at the midpoint of its $366-370M guidance vs est. $346.1M; VMW and GOOGL expand global partnership to help enterprises accelerate app modernization and cloud transformation

·     Hardware, Components & Services; EMS company JBL boosted its financial guidance for fiscal 2022 and set out performance expectations for the fiscal third quarter (now sees FY 22 EPS about $7.25 on revs $32.6B above prior view $6.55 and $31.8B)

·     Media & Telecom movers; VZ said the U.S. Department of Defense has awarded its public-sector unit three task-order awards worth $966.5 million. Verizon will be responsible for providing network-modernization services and technical-support services for the Pentagon


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.

Live Trading

Open an Account

Paper Trading