Market Review: December 06, 2023

Closing Recap

Wednesday, December 06, 2023





DJ Industrials




S&P 500








Russell 2000













U.S. stocks were higher most of the session, before quietly sliding this afternoon to end near lows and a key support level over the last few weeks. Economic data was positive for the Bulls, with a slightly weaker ADP jobs report, improved productivity and slowing labor costs – all the signs they want to see to give the Fed the go ahead for no more hikes/begin cutting rates in FY24. Treasury yields were lower, with the 10-year hitting lows of 4.11% on the data and Fed rate cut bets, though the dollar edged up. The big story was oil as prices fell to 5-month lows, with WTI settling below $70 per barrel. Fed funds futures traders are pricing in a more than 50% probability that the Fed will begin cutting rates in March and see 125-bps in rate reductions by December 2024. Defensive sectors seeing strength late day including Utilities, Healthcare, and Industrials outperformed while Energy and Technology fell the most in the S&P. Two job-related data points out so far this week, and both were market favorable, with jobless claims tomorrow and the big nonfarm payroll report Friday. Smallcap Russell 2000, which was up over 1.5% earlier in the day, turned negative late in the day.


Economic Data

·     ADP Private sector employment for November at +103K vs. +130K expected and downwardly revised figure of +106K from +113K prior. Recall the government reported on Tuesday that job openings fell to more than a 2-1/2-year low of 8.733M in October.

·     U.S. Q3 non-farm productivity revised to +5.2%, above consensus +4.9% and vs. previous +4.7% while Q3 non-farm unit labor costs revised to (-1.2%) vs. consensus (-0.9%) and prior (-0.8%).

·     October International Trade in Goods and Services deficit at (-$64.3B) vs. (-$64.2B) consensus and (-$61.5B) in September (revised from -$61.2B), which reflected an increase in the goods deficit of $3.5B to $89.8B and an increase in the services surplus of $0.4B to $25.5B.



·     Oil futures fell for a fifth straight session Wednesday, as WTI crude settled below $70 a barrel for the first time in more than five months, down -$2.94, or 4.07% at $69.38 per barrel while Brent Crude futures settle at $74.30/bbl, down -$2.90, 3.76%. Nymex Natural Gas for Jan. delivery lost 14.10 cents per million British thermal units, or 5.20% to $2.5690 (lowest levels since early September) and off 63% from 52-week highs last Sept around $7.00. Prices declined despite a crude draw, and production drop as the EIA showed production fell by -100K barrels per day. Gold prices edge higher, rising $11.60 to settle at $2,047.90 an ounce.

·     Bitcoin’s upside momentum continued, making fresh 20-month highs above $44K as digital assets continued to benefit from a perfect storm of factors that has helped push prices skyward over the past seven weeks. Gains have been sparked by optimism that U.S. regulators will soon approve the first spot Bitcoin exchange-traded fund (ETF), along with an improving macro backdrop and the Fed commentary turning more dovish on interest rates.






WTI Crude















10-Year Note





Sector News Breakdown



·     Electric Vehicles strong: Shares of TSLA, RIVN, LCID, FREY, as well as chargers BLNK, CHPT higher after the European Commission proposed delaying by three years a tightening of local content rules that would have led to import tariffs on many electric vehicles (EVs) traded between the European Union and Britain from the start of 2024. The Commission also said it was setting aside an additional 3 billion euros ($3.24 billion) to boost the EU’s battery manufacturing industry. In Chinese Auto: NIO rises after Reuters said the company is mulling spinning off battery production unit in efforts to turn profitable; says the spin-off could happen as early as end of this year.


Retail, Consumer Staples & Restaurants:

·     In Tobacco: British American Tobacco (BTI) said it will take a hit of around $31.5B as it writes down the value of some U.S. cigarette brands such as Newport, Camel, Pall Mall, and Natural American Spirit. BTI says it was shifting the value of some of its U.S. brands to a finite lifetime of 30 years and would start amortizing the remaining value of its U.S. combustibles brands in 2024. Shares of MO and PM were also volatile in reaction to the BATS news.

·     In Retail: SIG was upgraded to Buy at Citigroup saying Q3 was uneventful on the surface but there were several things that make them more positive on the stock; SFIX shares slumped after Q1 EPS ($0.30) vs est. ($0.23) on revs $364.8Mm vs est. $362.42Mm; sees Q2 revs $325-335Mm vs est. $334.68Mm and adj EBITDA $2-7Mm vs est. $1.11Mm.

·     Discount Stores: OLLI qtrly comparable store sales increased 7.0% from the prior year increase of 1.9% on higher sales of $480.1M, boosted its FY23 comparable sales to rise 5.3%-5.6% above prior view for a rise of 4%-4.5% and guides FY23 adj EPS $2.77-$2.83 vs prior view $2.65-$2.74.

·     In Restaurants: MCD held its Investor Day today and said it plans to open 10,000 new restaurants by 2027 in what the company described as the fastest period of growth in company history and plans to grow its loyalty program to 250 million by 2027 from 150 million now. SHAK upgraded to Strong Buy at Raymond James as believe the company is still in the early innings of driving improved margins and lowering development costs and see idiosyncratic opportunities into 2024 to increase margins/stimulate traffic; PLAY Q3 revenue fell -3% y/y to $466.9M vs. est. $473.1M, but better EPS as efficiencies and lower G&A more than offset slightly softer comps. SBUX shares snapped their 12-day losing streak.

·     In Food & Beverages: CPB Q1 adj EPS $0.91 tops the $0.88 est. on in-line sales of $2.52B as Q1 overall volumes were down -5% as consumers opt for cheaper private-label brands and other alternatives; also reaffirms FY 2024 net sales, adjusted EPS forecast. UNFI mixed Q1 results as revs of $7.55B miss ests $7.62B, but posts smaller-than-expected loss while backed its yearly forecasts; BF FY lowers FY organic net sales to 3%-5%, down from prior 5%-7% view citing elevated input cost pressures and ests organic income growth in the range of 4%-6%, compared with prior range of 6%-8% (follows Q2 sales miss $1,11B vs. est. $1.15B). Food stocks GIS, CAG, SJM, MDLZ were stronger behind the MDLZ results.


Homebuilders, Building Products, Home Furnishing:

·     In Homebuilders: TOL Q4 EPS $4.11 topped the est. $3.72 while Q4 revs fell -19% y/y to $3.02B vs. est. $2.78B; orders were 72% higher YoY at 2.7k homes in FQ423 surpassing Wedbush’s +70% forecast. average closing prices were 13% higher YoY versus its +7% forecast and closings were 27% lower YoY versus its -28% estimate.

·     In Building Products: BLDR upgraded to Neutral from Buy at B Riley and raise tgt to $177 from $128 after Investor Day as believes the “upside” is in the details, while the downside risk is diminishing as the company ages past high (and profitable) lumber prices.

·     The Mortgage Bankers Assoc show: US mortgage applications market index +2.8% in latest week, the purchase index falls -0.3%, the refinance index climbs 13.9% for its largest weekly increase since Feb 2023 as the 30-year mortgage rate falls 20 bps to 7.17% (lowest level since Aug 2023).



·     Energy movers: XOM said it is boosting its share repurchases to $20B per year from the time it closes its PXD acquisition in the first half of next year through 2025, up from $17.5B in 2023; said its oil-equivalent production is expected to increase to 4.2M barrels a day by 2027 from 3.8M oil-equivalent barrels per day in 2024, with growth in the Permian and Guyana. SU forecast higher production for 2024 compared with 2023 and said its 2024 capital expenditure is expected to be between C$6.3B ($4.64B) and C$6.5B, higher than its current-year forecast of C$5.4B-C$5.8B.

·     In Energy Research: JP Morgan upgraded DVN to Overweight noting shares have lagged peers by ~20% YoY, but risk-reward is skewed favorably and upgraded SWN to Neutral as thinks optionality to potential M&A could keep a floor under the shares in the low-to-mid $6 range. Meanwhile, EOG was downgraded from Overweight to Neutral largely on valuation grounds, and RRC downgraded to Underweight in nat gas producers noting shares have risen 28% YTD driven by strong performance in the field, outpacing the gassy peers by 14%.



·     In Banks: Citigroup (C) says will do around $500M of share buybacks in Q4, said largest reorganization in decades will cost about $1 billion for charges related to restructuring and said some of the restructuring charges of about $200 million will probably be booked in Q4.

·     In Consumer Finance/Cards: MA announces $11B share buyback and raises dividend by 16%. COF and DFS were both upgraded to Buy from Neutral at Bank America and raise tgts to $129 and $116 (from $112 and $94) respectively as believes it is in the latter stages of the current credit cycle and expect losses to peak in 2H2024.

·     In FinTech: PYPL downgraded from Buy to Neutral at Bank America and cut tgt to $66 from $77 saying doesn’t think PYPL is broken, but it will take time to fix and see’s 24 as a transition year, as a new CEO/CFO seek to earn Street credibility while driving sustained improvements. JKHY upgraded to Buy from Neutral at Bank America on high-quality business model, solid bookings/pipeline, prospect for improved margins & FCF.

·     In Brokers/Exchanges: HOOD revealed November crypto notional trading volumes 75% above October 2023 levels as users contributed about $1.4B in net deposits in Nov, a 31% jump from 2022 and average revenue per user (ARPA) rose 23% to $77/user.

·     In Insurance: WRB was downgraded from Outperform to Market Perform at KBW but raised price tgt to $80 to reflect the 9.2% upside; it sees more near-term appreciation potential at the reinsurers and personal insurers.



Biotech & Pharma:

·     ARVN was upgraded to Buy at Jefferies after the company released full palbo + ARV-471 data & showed mPFS of 11.1mo in both ESR1 mut & WT pts – in line/slightly better vs Jeff’s expectation (8-10mo) and looks competitive/potential differentiated vs peers.

·     COYA said it has struck a development-and-license deal with RDY for its COYA 302 drug, an investigational therapy for the treatment of Amyotrophic Lateral Sclerosis, or ALS. COYA will be eligible for up to $677.3M in sales-based milestone payments and will get royalties.

·     NBIX received breakthrough therapy designation for its treatment for congenital adrenal hyperplasia from the FDA and said is on track to submit a new drug application for crinecerfont in the treatment of congenital adrenal hyperplasia.

·     NVAX announced that Health Canada has granted expanded authorization for Nuvaxovid XBB.1.5 Vaccine for active immunization to prevent COVID-19 caused by SARS-CoV-2 in individuals aged 12 and older.

·     NVS won U.S. approval for the first oral drug to treat paroxysmal nocturnal hemoglobinuria, a rare immune-related blood disorder and will be sold under the brand name Fabhalta.

·     OPTN shares slip after saying the U.S. FDA delayed a decision on its request for a label expansion of its Xhance drug-device combination by three months.

·     PHVS announces positive top-line phase 2 data from the chapter-1 study of deucrictibant for the prophylactic treatment of HAE attacks as its primary endpoint was met.


Healthcare Services & MedTech

·     In MedTech: INMD cut its full-year EPS view to $2.47-$2.50 from prior $2.53-$2.57 to reflect stronger-than-expected headwinds from the current macro env’t causing a slowdown in platform sales, mainly in North America and sees sales $485M-$495M vs. prior view $500M-$501M.

·     In Health Services/Technology: HQY reported strong results with rev and adj EBITDA comfortably above consensus; company raised F24 and gave us an early look at F25; the initial F25 EBITDA guidance is ~5% above consensus at the mid-point. PHR Q3 results were better than expected with EBITDA upside, driven by strong cost control as the company increases its focus on profitability; mgmt held FY24 revenue guidance flat and raised its EBITDA target.


Industrials & Materials

·     In Transports: CAR announced a special cash dividend of $10 per share of common stock; DAL reaffirmed its profit and revenue forecasts for 2023 at a Wall Street conference today. The Baltic Exchange’s dry index, which factors in rates for Capesize, Panamax and Supramax shipping vessels was down 295 points, or 9.4%, at 2,848 – its lowest since Nov. 29. Truckers/freight names lower (ODFL, SAIA, XPO, ARCB) after the November tonnage #s out yesterday post close were a bit light as (LTL November volume trends softened vs October as tons/day inflected negative YoY and shipments/day growth decelerated).

·     In Aerospace & Defense; AVAV reported 2Q results above consensus and raised FY24 guidance to 28% growth on strong Puma international orders; preliminary guidance for double-digit topline growth in FY25 and expects momentum to continue in FY25 on top of 28% growth in FY24.

·     In Metals & Mining: CLF announced it is increasing current spot market base prices for all carbon hot rolled, cold rolled and coated steel products effective immediately with all new orders, with the minimum base price for its hot rolled steel to $1,100 per net ton.

·     In Materials: lithium stocks rebound after falling in recent days on cautious analyst comments given sharp decline in lithium pricing this year (ALB, LTHM, LAC, SQM).



Semis, Internet, Media & Telecom

·     In Memory: Mizuho said they continue to see positive constructive tailwinds for Memory driving an upcycle into 2024E for both DRAM and NAND as reiterate Buys for MU (PT $86 from $82) and WDC (PT $55 from $52). Mizuho sees stronger Memory industry trends ahead into C24E, a WDC valuation unlock with the Spinoff, MU with HBM3E, potential for CXMT restrictions.

·     In Internet/Online: SHOP downgraded to Neutral from Outperform at Wedbush citing valuation with $68 tgt saying continues to hold a favorable view of Shopify’s overall strategy and competitive positioning within eCommerce, but shares have risen +53% since Q3 results.


Hardware & Software movers:

·     ASAN shares slid as RBC noted revenue upside was subdued, billings significantly missed consensus, and cRPO declined sequentially for the first time. Firm noted operating margin outperformance was impressive again but was overshadowed by soft leading indicators.

·     MDB posted a solid top-line beat, and some unexpected upside to its Enterprise Advanced business; Atlas results, although better than expectations (+36% Y/Y vs. +31% consensus), likely fell short of the buyside’s elevated estimates post SNOW’s and ESTC’s commentary last week.

·     PLTR shares dipped after Japan’s Sompo Holdings sold part of its stake in the data analytics firm as a spokesperson for Japanese insurer says stake sale was for undisclosed amount, but Sompo booked profit of 86B yen ($584.20M).

·     SentinelOne (S) shares rise as delivered strong results and raised its full year guidance for revenue, ARR, pro forma GM, and pro forma OM because of strong demand and execution; raises annual revenue forecast to $616M from prior view of $605M.

·     TOST was downgraded to Neutral from Buy with $16 tgt at Bank America noting shares have lagged significantly since the Q3 print and sees risks which could inhibit n-t re-rating higher.

·     In Storage: BOX shares declined after 3Q results and provided 4Q roughly in line with consensus, ex: Forex and one-time items, but Q3 billings miss and another slight FY24 revenue guide down while FY24 operating margins were lowered by 100 bps and the FY25 margin outlook was ~130 bps below consensus.


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.