Market Review: April 13, 2023

Closing Recap

Thursday, April 13, 2023





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Stocks moved higher off a round of relatively benign economic data pre-open. Core PPI for March came in in-line at +3.4% yr/yr and a bit better mo/mo at -0.1% vs forecast of +0.2%. Initial jobless claims were 239k vs the forecast of 235k, so really nothing to instill angst in the Fed watchers. By midday, US equities were broadly at highs as investors once again look forward to a Fed pause following an expected +25bps rise at the May meeting to about a 5% peak. Current implied rates by year end now incorporate cuts back to below 4.5%. Today seemed to favor Fed implications over recession prospects. Consistent with the risk-on posture today, Communications, Consumer Discretionary and Technology paced the gainers early, while Utilities, Real Estate, Industrials and Consumer Staples were laggards in the red. Into the final hour of trading, stocks continued to push to new intra-day highs.

·     Data-wise, @bespokeinvest highlighted headline PPI has been in-line or weaker than forecast in 8 of the past 12 months, while core PPI has been weaker or in-line 9 of the last 12. Separately, @KobeissiLetter notes a more concerning statistic, pointing out the housing affordability index is below 2008 lows as 25 states have a median monthly a house payment above $2,000/month and 32 states requires at least 30% of median annual income for new home payments. Lastly, @RenMacLLC takes on the market focus on the drop in money supply by highlighting, “The relationship btw YoY changes in M2 and forward $SPY returns is more a function of dual-scaled optical tricks than foundational significance (t-stat -.27?!) Beware monetary dogma and illusions.”

·     From a sector perspective, heading into the final hour, there wasn’t much change versus the midday leaders and laggards. Consumer Discretionary (XLY, +2.15%), Communications (XLC, +2%) and Technology (XLK, +1.9%) remained leaders. Real Estate (XLRE, -0.29%), Utilities (+0.06%) and Industrials (XLI, +0.30%) continued as laggards but only Real Estate remained in the red. As expected on a risk-on day, breadth was notably strong at more than 3:1 in favor of advancers. Both Growth and Value enjoyed nice rallies, with Growth leading on the backs of tech-related gains. The Russell 1000 Growth was +1.7% vs the Russell 1000 Value at +0.88%.


Economic Data:

·     The Producer Price Index (PPI) for March reported at down (-0.5%) vs. est. unchanged (prior -0.1%) and headline Producer Price Index (PPI) Y/Y rose +2.7% vs. est. +3.0% (prior +4.6%). On a core basis, for ex: Food & Energy, PPI M/M fell (-0.1%) vs. est. +0.3% (prior 0%) and on a Y/Y basis rose 3.4%, in-line with expectations (prior +4.4%).

·     Weekly Jobless claims rose to 239K from 22K prior week (above est. 232K); the 4-week moving average rose to 240,000 from 237,750 prior week (previous 237,750); continued claims fell to 1.810M from 1.823M prior and insured unemployment rate fell to 1.2% from 1.3% prior.



·     June gold settled at +$30.40/oz, or +1.50%, to $2,055.30 to mark the second highest active futures settlement. A roll in the US Dollar and renewed hopes/expectations for 2H Fed rate cuts followed neutral PPI and jobless claims data, helping to propel gold higher. Investors broadly ignored 2H recession prospects in favor of focusing on potential Fed pause and future cut scenarios. Currently the market continues to price in a hike at the May meeting followed by a pause and cuts into year-end. Note, these expectations have not been supported by any specific commentary from Fed members.

·     Following a mid-morning rally, May crude futures faded to settle -$1.10, or -1.32%, to $82.16/bbl. Brent also slipped by $1.24, or -1.42%, to $86.09/bbl. The move marks a reversal from yesterday’s nearly five-month highs without any meaningful data driving price. A supply/demand forecast update from OPEC showed little change from the prior forecast and was not a meaningful driver of the weakness. Perhaps today was more of a catch-up day on the proposed OPEC production cut for next month and/or a bit of recession concern, though that was not impactful across other asset classes today.

·     OPEC said world oil demand to rise by 2.32 million bpd in 2023 (unchanged from previous forecast) in its monthly report. OPEC says China’s oil demand to rise by 760,000 bpd in 2023 (up from 710,000 bpd prior). OPEC leaves 2023 world economic growth forecast at 2.6% but says downside risks exist. OPEC says its oil output fell by 86,000 bpd in March to 28.80 million bpd.






WTI Crude















10-Year Note





Sector News Breakdown


Retailers, Consumer Staples & Restaurants:

·     AMZN CEO Andy Jassy’s posted annual shareholder letter, in which the head of the e-commerce giant outlined a wide-ranging vision for Amazon’s future including Web Services, grocery, healthcare, satellite internet, and generative AI.

·     RENT posted solid 4Q top line and adjusted EBITDA results on 40%+ GM; reiterated estimated restructuring plan savings of ~ $25M in FY23.

·     SHOO upgraded to Buy from Neutral at Citigroup with higher tgt of $42 and opening a positive catalyst watch ahead of 1Q23 results as anticipate a modest 1Q beat, but importantly we expect mgmt to talk more optimistically about wholesale trends, suggesting upside in 2Q/F23.

·     SPWH shares fall in sporting goods space after mixed Q4 results and lower guidance as guides 1Q net sales $265-270Mm vs est. $316.7Mm, comps -19%-17%, EPS ($0.40) to ($0.35) vs est. $0.03.

·     TPX, W, ARHS – for mattress and bedding, Bank America said home furnishings and bedding spending trends in March were slightly weaker on average versus February.


Leisure, Gaming & Lodging:

·     In gaming: DKNG upgraded to Neutral from Underperform at Exane BNP Paribas with $17 tgt; PLTK was downgraded to Underperform at Bank America saying renewed buyout speculation drove the stock runup while says current FCF yield unlikely to appeal to investors. Structural challenges persist; investors unlikely to underwrite return to 10%+ LT industry growth model. WYNN named top pick in casinos at Wells Fargo citing a clear path to upward estimate revisions and notes Macau’s recovering.

·     In leisure: WWE upgraded to Overweight at Morgan Stanley and raise tgt to $120 from $105 saying they see TKO, which investors can gain exposure to through WWE shares today, as offering an attractive risk/reward given the secular tailwinds behind sports and entertainment media rights revenues, live content. HOG announced the departure of CFO Gina Goetter at the end of April.



·     Bernstein said following OPEC’s surprise decision to cut production, we have revised our 2023/24/25 Brent oil price to $90 (from $103), $96 (from $88) and $95 (from $85) respectively. LT oil price estimate for equity valuation remains at $75, above futures curve of mid-to high-$60s

·     Prices at pump continue to rise as @GasBuddyGuy notes that Gas Prices are now officially 3c/gal higher than the $3.50-$3.60/gal range the EIA suggested would be the top. Our 2023 GasBuddy prediction from December calls for a national average in April of $3.50, jumping to $3.79 in June.

·     In E&P space: KeyBanc gave another haircut to our natural gas price deck, trimming our 2023 and 2024 decks to $3.00/mcf and $3.80/mcf, respectively (-14% and -11%, respectively), in the face of relentless L48 production growth (lowered ests in group). XOM downgraded to Sector Perform from Outperform and EOG and CVX both upgraded to Outperform at Scotiabank.

·     In solar: FSLR downgraded from Buy to Hold but raise tgt to $230 from $190 as believe that this is an opportune moment for investors to look for better risk/reward elsewhere, after FSLR’s stock rally of 45% since early November (says remain positive on the company). ENPH named catalyst call Buy at Deutsche Bank noting shares has been a material underperformer YTD, while names SPWR a catalyst call Sell idea by the firm. Separately, SPWR was upgraded to Neutral at Bofa based on improved visibility into 2023 profitability.



Banks, Brokers, Asset Managers:

·     Asset Managers out with monthly AUM data: IVZ reported preliminary month-end AUM of $1,483bn, +1.7% MoM driven by primarily by favorable market returns. BEN reported preliminary March AUM of $1,422.1bn, +30bps MoM reflecting positive markets, partially offset by long-term net outflows. For the quarter, BEN reported $3.7bn of long-term net outflows. APAM March AUM of $138.5bn, +2.7% MoM. Artisan Funds and Artisan Global Funds accounted for $67.0 billion of total firm AUM, while separate accounts and other AUM accounted for $71.5 billion. AB reported preliminary month end AUM of $676bn, +1.7% MoM driven by market appreciation, partially offset by firmwide net outflows. Across channels, Private Wealth saw inflows outweighed by net outflows from Institutions and Retail

·     Investment advisors/Alt Managers: Oppenheimer said an uneventful quarter for the "Alts," but they’re bargains; upgrading BX to Outperform; continue to like APO . Notes have long admired Blackstone as a company but have been held back by its high valuation relative to others in the group. The shares are now down 43% from their November 2021 high.

·     In Services & Insurance: PGR reports Q1 results as net premiums earned $13.53B vs. est. $13.58B and net premiums written $16.11B vs. est. $15.95B as per Bloomberg.

·     Commercial Real Estate remains a concern: note $1.5+ trillion in commercial real estate debt will mature by 2025 while interest rates have skyrocketed. Office vacancies just hit a record high. William Blair noted their CRE coverage group is down 32% over the last 12 months; diverse nature of these businesses paired with their ability to monetize change, make these pullbacks attractive entry points; said CIGI best way to play CRE.



Biotech & Pharma:

·     MRK upgraded to Buy at Citigroup driven by materially revised forecasts for MRK’s novel ADC for cancer MK-2870/SKB-264 (TROP2), and cardiology agents sotatercept and MK-0616.

·     NVO raised its yearly sales at constant exchange rates outlook to +24% to +30%, from prior +13% to +19% and sees operating profit at constant FX +28% to +34%, vs. prior +13% to +19%.

·     SRPT shares tumbled after STAT News reported that the FDA staff leaned toward rejecting Sarepta gene therapy before a top official intervened; shares contract manufacturer CTLT with which Sarepta (SRPT) has partnered for SRP-9001, fell in reaction.

·     VRAY shares slid; reported Q1 preliminary revs of $23M, up from $19M a year ago but below ests of $24.7M on a wider loss; lowers year rev growth to 0% to 15%, from 25% to 40%.

·     AGLE downgraded to Equal Weight at Wells Fargo following today’s phase 1/2 HCU study results.

·     In gene editing space: CRSP initiated coverage at Cantor with overweight saying it “stands out to us as an interesting gene editing play for 2023.” NTLA was initiated with Buy and $66 tgt at Canaccord as continues to invest in its CRISPR-Cas9 capabilities, which they think will help the company maintain an edge in the increasingly competitive CRISPR-Cas space. Independent drug pricing review group ICER said in a draft report on Wednesday that CRSP and BLUE’s one-time gene editing therapy for sickle-cell disease would be cost effective if priced at up to $1.9 million.


Transports, Industrials & Materials

·     In airlines: group rebounds after sharp losses yesterday as DAL reiterates 2023 outlook for significant EPS growth to $5 to $6 and free cash flow of more than $2 billion and higher Q2 outlook for PS and revs after Q1 results missed (follows weaker guidance from AAL yesterday that sunk airlines and other travel related names).

·     In Industrials: FAST Quarter in line. March saw a deceleration in both non-resi and manufacturing daily sales; total daily sales were +6.8% in March (vs. +19.1% March last year), vs. +9.6% Feb. Fastener sales were +2.3%, safety sales were +7.4% and other sales were up +9.9%.

·     In Aerospace & Defense: PSN, CACI, and BAH top picks in gov’t and military tech at William Blair and continue to be negative on PLTR Said for PSN, although stock has increased following upgrade, think there is more room to go as see mid $50s over next 12 months; CACI should benefit from two very large contract wins; they are well-known, but still positive; BAH should benefit from 1) wage inflation 2) favorable hiring environment-7.5% y/y increase in headcount.


Materials, Metals & Mining

·     In chemicals: SHW added as a Catalyst Call Buy at Deutsche Bank saying shares have been in the proverbial penalty box since its Q4 release on January 26 when its shares fell 9% following ’23 EPS guidance that was 18% below consensus. IFF also named as Catalyst Call Buy at DBAB. Jefferies downgraded LXU to hold from buy and its tgt halved anticipating challenges facing the chemicals firm will continue for several quarters and cut LYB to Hold citing rising risks over US demand for the chemicals company amid growing pressure on consumers.



Hardware & Software movers:

·     In IT Services: INFY shares slip as reported lower 4Q revs of 374B rupees vs. est. 388B rupees & lower net income of 61B rupees vs. est. 66B rupees, driven by lower financial services & communications revs. Operating margin came in 70bps light at 21% vs. est. 21.7%; sees year rev growth of 4%-7% vs. expectations of growth of 10.73%

·     For AAPL few headlines of note: Nikkei, citing supply chain execs, reports Apple is seeking to make MacBooks in Thailand; note Apple has been mass producing the Apple Watch in Thailand for more than a year. Apple increases iPhone output in India to almost 7% of total production.

·     In 3D: SSYS Board rejected NNDM revised unsolicited proposal of $20.05/share.



·     Bank America provides Q1 EPS preview for AMD (Buy rated)/INTC (Underperform rated) – Lowering INTC estimates on PC inventory, sluggish DC demand, though maintain AMD estimates as headwinds already baked in. New server CPU products 2H-weighted for both, INTC Q1/Q2 at risk on networking inventory builds, AMD already below consensus.

·     For QCOM, MacRumors reported Apple will launch an iPhone SE model in 2025 with a custom modem chip, replacing one from QCOM.


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.