Hump Day Pause | The Daily Peel | 10/6/22

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Market Snapshot

After a sharp rally to start the week, stocks took a breath Wednesday.

It’s a confusing landscape where bad news is good news and vice versa.

Anything that convinces JPow to slow rate increases will be cheered by the market, while good economic numbers could convince him to keep tightening the screws.

At this point, he’s getting a bit of both. The USD rallied, and bond yields went higher to close out hump day.

At the close, the Dow ticked down 0.14%, the Nasdaq lost 0.25%, and the S&P fell 0.2%.

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Let’s get into it.

Monkey Meme of the day

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Macro Monkey Says

Bankers are old school. Deal-making shouldn’t be.

What's Ripe

Chewy ($CHWY) — Market research data is hinting at a big Q3 earnings beat for the pet product retailer.

Despite what you might think, pet supplies tend to be pretty recession proof. If you’ve ever had to deal with a dog adjusting to a new type of food, you’d understand why.

A strong subscription service that’s led to consistent profitability is part of the reason why investors are snapping it up.

$CHWY was up 10.62% by the end of the day.

Wingstop ($WING) — It seems like every fast-food ad these days is for chicken sandwiches. Burgers just don’t hit the same for Americans anymore.

That’s good news for Wingstop, which recently announced a broader lineup of chicken sandwiches to complement its signature wings.

The stock has made an epic comeback since YTD lows in May, climbing nearly 100% since that point.

$WING gained a nice 6.9% on the day.

What's Rotten

Carvana ($CVNA) — There’s having a bad year, and there’s losing over 90% of your market value in less than 10 months.

The pain continued for the car vending machine company Wednesday after a high-profile price target cut.

After a jump to start the week, $CVNA is again dangerously close to a post-IPO low.

$CVNA ended the day down 7.35%.

Squarespace ($SQSP) — Squarespace hasn’t been hit as hard as competitor Wix.com this year, but investors were dumping it hand over fist on Wednesday.

The rise of the gig economy and sole proprietorships has been a tailwind for $SQSP, but a looming recession has many fearing slowing growth.

If those that struck out on their own post-C-19 go back to a 9-to-5 during a recession, earnings will suffer.

By the end of the day, $SQSP was down 5.46%.

Thought Banana

RTO in a Recession — Bosses frustrated by employees’ refusal to return to offices have been smug in their assumption that once the economy turns sour, underlings will bow at their knees and sprint back to their cubes.

But if Meta is any indication, pressure to cut costs could shrink office space and offset labor market pressures that, in theory, would push workers back.

• To be fair, tech companies have an easier time dealing with remote work than other industries
• But the fact remains that office space isn’t cheap, and execs will have to weigh the softer costs of remote work versus very real lease bills
• Productivity in the office versus at home is still up for debate, but some studies are giving the upper hand to WFH

At a high level, remote workers will only grudgingly RTO if they aren’t confident in their prospects elsewhere.

• But industries that tend to be most affected by recessions, like retail, tourism, and construction, don’t have very high WFH rates anyway
• To be sure, many money-losing tech companies would struggle in a recession too, but the extent of that damage is unclear

With the Fed on a warpath to slow the economy, it’s possible that in-office opportunities could be all that remains.

But execs banking on employees trudging back to the office for fear of losing their job seem a bit too smug right now.

Wise Investor Says