Market Review: August 21, 2023

Closing Recap

Monday, August 21, 2023





DJ Industrials




S&P 500








Russell 2000













U.S. stocks rebound after the August pullback continued last week, as the S&P 500 and Nasdaq snapped their 4-day losing streak with 2023 winners Technology and Consumer Discretionary leading the charge. Small Caps and interest rate sensitive sectors such as Utilities and REITs declined the most as Treasury yields hit fresh 16-year highs ahead of the Fed’s annual Jackson Hole meeting later this week to discuss rates, the economy and other topics (ECB’s Lagarde also set to speak). Semis outperformed with the SOX up around 3% to 3,565, led by shares of NVDA ahead of earnings later this week (glimpse into AI for chips), while software names jumped behind earnings results from PANW. Large cap leaders such as MSFT, AMZN, META and TSLA also helped the Nasdaq outperform. Breadth on the day still favored decliners over advancers by 1.5:1 margin, as many sectors fell (large cap tech again doing heavy lifting – much like 2023). No economic data today in the US but a busy week ahead!


Interesting stats: Financial Times reported the surge in zero-day options sparks volatility fears; very short-dated options account for 43% of volume in S&P 500 options. . Also, markets remain in “sell the rips” vs. “buy the dips” mode as debt levels continue to climb: Household Debt: $17.1 trillion, Mortgage Debt: $12.0 trillion, Auto Loans: $1.6 trillion, Credit Card Debt: $1.0 trillion – all these balances are at a record high while current interest rates: Credit Card Debt: 25%, New Car Loans: 14%, Used Car Loans: 9% and 30-yr Mortgage: 7.5%. Meanwhile Student loan payments are set to resume in one month. Total student loan debt just hit $1.6 trillion, @Kobessei tweeted.


Commodities, Currencies and Treasuries

·     Oil prices reversed initial gains, with WTI crude down -$0.53 or 0.65% to settle at $80.72 per barrel, adding to last week losses after snapping streak of 7 straight weekly wins Friday. Prices jumped overnight as hurricane season in both the Pacific and Atlantic oceans became more active, raising the possibility of offshore oil production facility closures and/or refinery shutdowns. Investors were specifically watching to see what impacts Tropical Storm Hilary was having on refineries in and around Southern California. Natural gas prices rose 3.3% higher at $2.632/MMBtu following a -7.9% decline last week. December gold futures rise $6.50 or 0.3% to settle at $1,923.00 an ounce, posting back-to-back gains following a four-week losing streak.

·     U.S. 10-year Treasury yield hits highest levels since 2007, rising above 4.35% at one point as investors yield caution ahead of the Fed Jackson Hole Annual meeting later this week. The spread remains -64bps between 2-yr and 10-yr as yield curve steepens from roughly -90bps end of July to about -65 bps today (as 2-yr yield back around 5% today). Meanwhile, the 30-year Treasury yield traded at 4.455% and was on track to surpass the closing high it reached on April 28, 2011. Bitcoin prices hovered around the $26,000 level most of the day.






WTI Crude















10-Year Note





Sector News Breakdown



·     XPEV upgraded to Buy from Neutral at Bank America on expectation that stronger cost controls and a pact with Volkswagen can enable the company to turn a profit in 2025.

·     TSLA shares rose to start the week: note shares were down almost 30% from 2 months ago, comes into today with 6-day losing streak and down 10 of the last 11.

·     NKLA recent recall of most of its electric trucks could weigh on the electric-vehicle startup’s ability to meet its deliveries guidance for the year, the company said in a securities filing.

·     U.S. auto safety regulators said they are investigating whether Ford Motor’s (F) 2022 recall of nearly 49,000 Ford Mustang Mach-E electric vehicles adequately addressed concerns – Reuters.


Retail, Consumer Staples & Restaurants:

·     CAG hits fresh 3-yr lows, CPB nearly 18-month lows and GIS hits more than 1-year lows as food stocks tumble across the board.

·     EL adds to Friday earnings related losses; down a 7th straight day and down 15 of last 16 trading days to new 52-week lows. Other beauty names in focus this week with ULTA, COTY, ELF expected to report earnings this week.

·     FRPT announces deal with shareholder Jana Partners, will add two directors to its board.

·     MCD shares dropped below its 200-day MA support of $279.80, down a 5th straight day.

·     UA shares underperform in retail, falling over 5% late in the day.

·     Roark Capital is nearing a deal to buy the Subway sandwich-shop chain for about $9.6B, the WSJ reported, noting the deal could be finalized this week.


Leisure, Gaming & Lodging:

·     In timeshare stocks (HGV ), Bank America said while July trends for timeshare were steady and in-line with Q2 levels, they remain concerned on the impact of the Hawaiian wildfires. According to Placer data, visitations to Hawaii timeshare properties are down ~40% in the week following the wildfires, and Hawaii inbound air traffic is down -6% Y/Y since the start of the fire s vs +4% Y/Y for the month of July.

·     In Leisure: GOLF upgraded from Hold to Buy and raised the tgt to $84 from $61 at Jefferies saying they have underappreciated the value of GOLF’s best-in-class portfolio in a healthy golf industry. WWE said that WrestleMania 40 broke the company’s all-time gate record in one day. WrestleMania 40, which takes place at Lincoln Financial Field in Philadelphia on Saturday, April 6 and Sunday, April 7, sold more than 90,000 tickets when it went on sale last Friday.


Energy, Industrials and Materials

·     In E&P sector: one M&A deal as Permian Resources (PR) agreed to acquire ESTE in an all-stock transaction valued at approximately $4.5 billion, inclusive of debt with holders to receive a fixed ratio of 1.446 shares of Permian Resources common stock.

·     In Industrials: GNRC, PWR shares edged higher early as about 15Mm California customers were without power as of last night amid Tropical Storm Hilary impact. OTIS falls a 10th straight day, trading down to its 200-day MA support of around $83 (hasn’t been below 200-day since November 2022).

·     In Coal: AMR was downgraded to Market Perform at TD Cowen and trim tgt to $194 from $200 noting shares have rallied considerably since last summer.

·     In Housing: BZH, TOL, PHM, KBH were down over 1% in homebuilder space, extending the recent pullback as mortgage rates continue to rise as Treasury yields hit 15-year highs. The average rate on a 30-year fixed rate rises to 7.28% as per CNBC this morning.

·     In Paper Sector: shares of IP, PKG, WRK lower after Bank America noted containerboard prices were flat domestically according to industry data late Friday, while prices continued to decline in the export markets by about -$10-35/ton(ne). As for boxboard, prices were largely flat across the grades (with weakening undercurrents), and solid bleached sulfate (SBS) folding carton prices declined for a second month in a row, down a sharp $60/ton.

·     In E&C sector: KBR says acquiring Jacobs (J) CMS business does not align with strategy and thus is not being pursued – Reuters. The comments follow an article out of the Sunday Times this weekend suggesting KBR’s potential interest in acquiring Jacobs’ (J) Critical Mission Solutions.

·     In Materials: DD announced a definitive agreement to sell an 80.1% ownership interest in the Delrin® acetal homopolymer (H-POM) business1 to TJC LP (TJC) in a transaction valuing the business at $1.8 billion. Gold Miner HL shares fell after reports damage due to fire at its Lucky Friday mine; said fire has been contained and efforts are ongoing to extinguish it.



Banks, Brokers, Asset Managers:

·     GS said to be exploring a sale of the investment advisory business it acquired four years ago; Currently evaluating alternatives – FT reported.

·     In Consumer Finance: The percentage of credit card debt flowing into serious delinquency rose from 3.35% in the second quarter of 2022 to 5.08% in the second quarter of 2023."

·     In Insurance: ALL, TRV, RNR weaker as insurers pressured by damage from Tropical Storm Hilary. Hilary was downgraded to a post-tropical cyclone from a tropical storm early Monday but was still expected to lash parts of the Southwest with potentially catastrophic flash floods and landslides, according to the National Hurricane Center.



Biotech & Pharma:

·     EXEL and Ipsen announce positive results from phase 3 CONTACT-02 pivotal trial evaluating Cabozantinib in combo with Atezolizumab in Metastatic Castration-Resistant Prostate Cancer.

·     GERN said the FDA accepts Geron’s marketing application for its drug to treat certain patients with transfusion-dependent anemia.

·     GILD said the FDA the has placed a partial clinical hold on the initiation of new patients in U.S. studies evaluating magrolimab to treat acute myeloid leukemia (AML).

·     KRYS announced that it has completed the sale of its Rare Pediatric Disease Priority Review Voucher (PRV) for $100 million.

·     REGN said the FDA approved Eylea HD (aflibercept 8mg) in wet age-related macular degeneration (wAMD), diabetic macular edema (DME) and diabetic retinopathy (DR), following the unexpected CRL in late June.


Healthcare Services & MedTech movers:

·     In MedTech sector: PODD upgraded at Citigroup while reiterating positive catalyst watch on BSX and opening a positive catalyst watch on ESTA. The firm said while the bar for companies in 1Q23 was to meet expectations and maintain guidance, the “hurdle rate” this quarter was for a beat-and-raise. Citi is upgraded PODD, reiterating its Positive Catalyst Watch on BSX, and opening a Positive Catalyst Watch on ESTA, and adjusting TPs for BAX, BDX, NVRO, SGHT, and TNDM.



Internet, Media & Telecom

·     In social media: META plans to launch a web version of microblogging app Threads early this week, the biggest new feature to be introduced on its competitor to Elon Musk’s X; Separately, the WSJ reported Daily active users on Meta’s Threads drops to under 10 million.

·     In media: LSXMK and LSXMA both upgraded from Neutral to Buy at Seaport Global and placing a $32 PT on each of the share classes as thinks the story is cleaner now, post-reclassification, which separated out the 30% ownership of LYV into its own tracking stock.

·     In telecom: CCOI upgraded to Neutral from Sell driven by several key factors, including: 1) Accelerating revenue growth, driven by new services and 2) Adjusted EBITDA margin expansion and improving FCF growth.


Hardware & Software movers:

·     PANW shares jumped following upside results late Friday, helping boost the Internet security sector. The company reported mostly better Q4 results as ARR, operating income, EPS and adj FCF were all well ahead of expectations, while revs were in-line. The results come after a drama-filled two-plus weeks with investors, and analysts, speculating a multitude of plausible and not-so-plausible scenarios to why they would report on a late summer Friday afternoon.

·     SentinelOne (S) shares spiked after Reuters reported the company has been exploring options that could include a sale and has hired investment bank Qatalyst Partners to advise on talks with potential acquirers.

·     VMW rises after UK’s competition regulator CMA clears AVGO’s $61B deal to acquire VMW (excluding debt) as Broadcom says it expects deal to close on October 30 as scheduled.

·     NSSC shares tumbled after the company preannounced on Friday weaker FQ4 revenues and said it would restate the prior 3 quarters of F23 due to cost-accounting errors that are expected to have impacted nine-month EPS by ~$0.26.



·     The Philly semi-index (SOX) was down 4% last week, again underperforming SPX down 3%, though SOX YTD performance remains up 36% vs SPX up 14% YTD. There have been more downward than upward revisions thus far following earnings results from most semis. Key earnings this week in the space are: NVDA, MRVL and ADI

·     TSM denied a media report from the China Times that it would cut 2023 financial forecast for third time. TSM later maintains guidance provided at the company’s July 20 conference.


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.