Bottoms Up | The Daily Peel | 9/28/22

Market Snapshot

After a morning bounce, major indices were mostly flat at the close. They’re down about 20-30% YTD.

So…is this the bottom? Most traders aren’t making that call since a hell of a lot could still go wrong from here.

Home price data came in and showed decelerating growth, marking the first MoM decline since the start of 2019. We could be looking at 7% mortgages here soon.

At the close, the Dow lost 0.43%, the Nasdaq ticked up 0.25%, and the S&P dropped 0.21%.

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Let’s get into it.

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What's Ripe

DICK’s Sporting Goods ($DKS) — While tech companies are sending employees to the curb, DICK’s and other retailers are ramping up hiring for the holidays.

Since beating Q2 estimates a month ago, $DKS has been mostly flat, and investors piled in Tuesday in hopes that the huge seasonal hiring means the company has big plans for the holiday season.

$DKS shot up 8.15% on the day.

WTI Crude — Crude kicked off 2022 at $76/bbl.

On Tuesday, it closed at about $76/bbl. In between, it reached a high of $123/bbl.

To the delight of American drivers, the price has been steadily sinking since the middle of summer. A mix of tepid growth, a brawny dollar, and global interest rate hikes have put pressure on it since then.

Some traders think oil prices could spike again if Russian production grinds to a halt, but for now, it’s back where it started the year.

Crude gained 2.33% by the end of the day.

What's Rotten

Lumber (LBS) — Tech stocks haven’t been alone in their C-19 run-up and collapse. Lumber has followed a similar pattern.

When everyone looked at their four walls all day during Peak Pandemic, they started remodeling like crazy, sending wood prices soaring.

Lumberyard owners are feeling the pinch, but the rest of us will enjoy deflationary tailwinds that hopefully result in more and cheaper homes being built.

Lumber is down 15% in the last month and 63% YTD.

Bitcoin (BTC) — Since plummeting to the $20k level in June, BTC has mostly held steady.

It hasn’t been the inflation protection that its evangelists had hoped for. Instead, it’s mirrored the movement of stocks, more or less.

Maximalists will tell you it’s going to $1 million, and the likes of Charlie Munger will say it’s going to zero.

For now, it’s struggling to hold onto $20k.

BTC is down 60% YTD.

Thought Banana

Amazon Gets the W — It’s no secret that sports are king of live TV, and it’s even less of a secret that most of TV is moving to streaming.

So, Amazon’s recent debut of the NFL’s Thursday Night Football on Prime shouldn’t have been much of a surprise. But the ratings blew expectations out of the water, registering 15 million viewers.

It’s even better than it seems. The audience skewed younger than the average audience for NFL games so far this season, which has advertisers drooling for several reasons:

1. Amazon can target ads in a way that TV broadcasters can’t, and buying something based on a commercial is just a click away, unlike with TV
2. Advertisers prefer a younger audience since they buy more discretionary items and can be loyal to a brand for decades
3. The NFL has been trying to reach younger people for decades, as most of its audience skews older

The game we’re talking about was Chargers vs. Chiefs, which is about as marquee of a matchup as you’ll get. Herbie and Mahomes lit it up in a close game that had all the ingredients of a great TV product.

As we come out of that game, there are several key questions:

1. Can Prime continue to draw these kinds of audiences when the matchups aren’t as good?
2. Will advertisers pay a premium to target specific audiences and have their products available just a few clicks away on Amazon?
3. Could this success propel Amazon or a different behemoth like Apple to go after the NBA once its TV deal expires in 2025?

It was only Week 1, but still a big W for Bezos & Co.

Wise Investor Says