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Price crash and bear market


The S&P 500 (SP500) is now firmly in bearish territory, with the index slumping to a new 2022 low this week amid growing concerns over the Federal Reserve’s increased hawkishness as well as global macroeconomic factors. The benchmark index fell 5.3% in the three months ended Sept. 30.

Investors remain concerned that the Fed’s stepped-up rate-hiking (five this year) campaign will lead to a recession. Bearish sentiment is also supported by the global energy crisis, a strong dollar, the prolonged Ukraine war, and global supply chain woes.

Analysts expect the S&P 500 (SP500) to continue spiraling, with Goldman Sachs cutting its forecast for the index by ~16% and RBC Capital projecting another ~4% drop to reach 3,500.

Take a look at the biggest losers and gainers on the S&P 500 index (SP500) during the three months ended September 30:

Top losers:

1. Charter Communications (CHTR): -35.3%.

The telecommunication firm’s Q2 earnings topped estimates, but its internet subscribers declined. Analysts raised concerns over its broadband business amid growing competition and the threat of existing subscribers switching to fiber. Additionally, CHTR was reportedly directed to pay $1.15B to the family of a customer murdered by a Spectrum field technician.

2. Fedex (FDX): -34.5%.

The package-delivery giant reported preliminary Q1 results well below expectations and withdrew its FY23 forecast, dragging down markets. In its earnings report, FDX highlighted cost cuts and pricing actions. But Deutsche Bank cautioned clients that these may not be enough to provide an inflection point for FDX.

3. Lumen Technologies (LUMN): -33.3%.

The telecommunications firm’s recent sell-off may be a result of growing competition, massive debt, divestiture of businesses for over $10B (sale of its U.S. telecom assets, European fiber network, among others) and reaction to retirement of CEO Jeff Storey. Former Microsoft executive Kate Johnson was named the new chief. LUMN’s latest quarterly profit fell short of estimates.

4. Catalent (CTLT): -32.6%.

The pharmaceutical contract manufacturer’s shares dropped after it reported mixed Q4 results as its outlook fell short of estaimtes. CTLT recently rejigged its operating structure, reducing its reporting segments to two. SA contributor Mayank Sharma said a key risk factor for CTLT’s profit margins is its high debt levels – at $4.2B as of June 30 – owing to recent rate hikes.

5. Match Group (MTCH): -31.5%.

The online dating firm’s stock tumbled after it reported weaker-than-expected earnings and its guidance widely missed estimates. MTCH also unexpectedly announced changes at Tinder, which analysts viewed cautiously. J.P Morgan raised concerns over Tinder execution challenges, slowing new user addition, and the app’s CEO Renate Nyborg quitting.

Top gainers:

1. Constellation Energy (CEG): +45.3%.

The energy firm’s recent rally was in part driven by President Joe Biden’s Inflation Reduction Act, which includes clean energy tax credits that are expected to benefit CEG. Also, CEG shares hit a record high after the firm said its nuclear plants ran at near 100% capacity this summer. SA contributor Gary Gambino said the market likely values CEG higher than peers due to its carbon-free nuclear plants and strong balance sheet.

2. Enphase Energy (ENPH): +42.1%.

The clean energy firm’s recent gains were also a result of the Inflation Reduction Act. Needham said ENPH should benefit from higher govt. spending and more solar adoption. Also, ENPH soared after its strong Q2 earnings and Q3 sales guidance above expectations. Guggenheim believes ENPH appears fairly valued.

3. Etsy (ETSY): +36.8%.

The e-commerce firm’s latest earnings handily beat estimates, which led to a whopping ~42% monthly gain for ETSY in July. Analysts remain cautious over ETSY due to high macro risks that could dampen demand and concerns over total addressable market.

4. Netflix (NFLX): +34.6%.

The streaming giant is pressing ahead with its plans to launch its advertising-supported service, reportedly pushing for a Nov. 1 start date. Most analysts are bullish regarding NFLX’s plans, with the ad-supported tier expected to boost subscriber growth and ARPU. In its Q2 earnings report, NFLX posted a smaller-than-expected loss in subscribers, which sent its shares higher.

5. Tesla (TSLA): +28.2%.

The EV giant recently effected a three-for-one split. TSLA is expected to post record Q3 deliveries as high as 370K units. Its Q2 profit topped estimates, but concerns remained over its margins. Additionally, it paused plans to expand its Germany factory to push for domestic production to qualify for tax credits. SA contributor Livy Investment said TSLA’s lofty valuation could likely decline to adjust for rising capital costs and decreasing ROI in the current macro climate.

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