Market Review: February 15, 2023

Closing Recap

Wednesday, February 15, 2023





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Stocks finish at the highs in another “buy the dip” moment, as the market debate continues whether the recent string of positive economic data and inflation readings will change anything regarding the Fed’s intentions. To start the year, calls were for a 25-bps hike in March, a pause after and potentially 50-bps worth of cuts by end of year. Following recent data of a strong jobs market, rising retail sales, improving housing, manufacturing and services, the outlook on rate cuts is gone and now calls are for another 25-bps hike in May and maybe in June. Of course, the Fed has been telling markets for weeks that cuts were unlikely after a few more potential hikes and then a pause – but stocks kept pushing higher. Meanwhile, Treasury and currency markets are telling a different story. For the time being, stock markets appear to have “blinders” on, with investors chasing price action with the biggest losers of 2022 remaining the biggest winners in 2023 so far (Discretionary +18.5% YTD, Communications +16.5% YTD and Technology +15% YTD).

·     Overall, markets remain complacent despite growing calls on Wall Street for meaningful downside. Early results from a survey of JPMorgan’s clients this week showed that 68% were more likely to decrease their exposure to stocks in the coming days and weeks, while 32% were likely to increase it. Meanwhile Morgan Stanley strategist, who has been a “bear” for some time now, said just last week that “Forward EPS growth has just gone negative. This has only previously happened 4 times over the past 23years. In each prior instance (2001, 2008, 2015, 2020), equities have faced significant price downside associated with the shift from positive to negative earnings growth. What makes this analysis more powerful is that, historically, most of the price downside in equities comes after forward EPS growth goes negative.

·     Investors continue to “buy the dip” as every pullback is met with immediate buying pressure, keeping the S&P 500 above the 4,100 level. As @knowledge_vital noted: Bulls & bears are both stuck. Bulls like the medium-term, but don’t want to chase.  Bears meanwhile are apoplectically negative but also tired of banging their head against the wall and watching the SPX shrug off a slew of (ostensibly) powerful blows. So, the standoff continues.

·     Market factors the remainder of the week (outside of busy earnings tonight/tomorrow), includes producer price index (PPI) for Jan tomorrow morning along with weekly jobless claims, Philly Fed Survey and Housing Starts data as well as commentary from St Louis Fed President Bullard and then option expiration on Friday.


Stats of the day – first three from @Charliebilello:

·     1) Apple has bought back $566 billion in stock over the past 10 years, which is greater than the market cap of 494 companies in the S&P 500 @Charliebilello

·     2) Latest Gallup poll: 50% of Americans said they were worse off than a year ago. Since 1976, the only other times w/ 50% or more saying "worse off": 2008/2009 (financial crisis/recession).

·     3) How Times Have Changed: Auto Sales, 10 Years Ago: GM: $152 billion, Ford: $134 billion and Tesla: $0.4 billion. Sales Today: GM: $157 billion, Ford: $158 billion, Tesla: $81 billion.

·     4) @biancoresearch notes: Since February 7, six trading days ago, during the NYSE-only session, the S&P 500 has reversed at least 1% TEN times (four were 2%).

·     5) Nomura’s McElligott on the "beast": "…over the past month, nearly 1 out of every 2 Options traded on SPX, SPY and QQQ are 0 days til expiration." For now, things are behaving rather OK, but the increase of these options will become a problem for markets, as hedging the underlying will cause major issues for the market micro structure.


Economic Data strong:

·     Retail Sales data for January stronger at +3.0% vs. est. +2.0% (prior (-1.1%) while retail sales ex-autos, gas rise +2.6% m/m vs. est. +0.9% and retail sales ex-autos rise +2.3% vs prior month.

·     NY Fed’s Empire State stronger as current business conditions index -5.8 in February vs -32.9 in January and better than expected -18.0; new orders improve at -7.8 in February vs -31.1 in January, prices paid index jumped to +45.0 in February vs +33.0 prior and employment index at -6.6 in February vs +2.8 in January.

·     Industrial output for January unchanged vs. consensus +0.5% (Dec -1.0%); Capacity use rate 78.3% vs. consensus 79.0% and vs. Dec 78.4%; Jan manufacturing output +1.0% (vs. est. +0.8%) and vs Dec (-1.8%).

·     Business Inventories for December rose +0.3%, in-line with consensus and prior month; U.S. Dec inventory/sales ratio 1.37 months’ worth vs Nov 1.35 months; Dec business sales -0.6% vs Nov -1.2% (prev -0.8%).

·     NAHB Housing Market Index for Feb showed confidence among U.S. single-family homebuilders improved for a second straight month, rising seven points to 42 this month, notching the largest monthly gain in nearly a decade (ex-covid Spring) above the est. of 37.

·     The UK’s inflation rate slowed for a third month but remained stubbornly in double digits five times above the Bank of England’s targeted level. The Consumer Prices Index rose 10.1% from a year ago in January, the lowest since September, and down from 10.5% the month before.

·     The U.S. could become unable to pay all its bills on time sometime between July and September, the nonpartisan Congressional Budget Office estimated, giving lawmakers several months to reach an agreement on lifting the debt limit and avoiding a default. The Treasury Department ran up against the roughly $31.4 trillion debt limit in January.



·     Oil prices fall as WTI crude slips -$0.47 or 0.59% to settle at $78.59 per barrel, following a weekly inventory report that showed larger builds in inventories and on expectations of further interest rate hikes. The International Energy Agency boosted forecasts for global oil demand as China’s economy reopens following years of Covid lockdowns. Natural gas prices fell 9.6 cents, or 3.7%, to settle at $2.471 per MMBtu. Gold prices slide -$20.10 or 1.1% to settle at $1,845.30 an ounce to its lowest settlement in roughly 5-weeks as the dollar and Treasury yields firm up.


Currencies & Treasuries

·     The yield on the 10-year U.S. Treasury note climbed above 3.81% Wednesday, the first time above that level this year after a report showed U.S. retail sales jumped 3% in January, providing further evidence that economic activity is holding up better than many investors anticipated – and keeps higher rates in play for longer by the Fed. Yields have climbed steadily since the jobs report over a week ago, and better data points since. Bespoke Invest noted the 6-month Treasury bill was yielding 5% this morning after closing with a yield of 4.995% yesterday. The last time the 6-month T-Bill closed with a yield above 5% was July 25th, 2007.

·     The US dollar rises following retail sales data showing a January rebound, as the sales upside surprise supports the idea that the Fed can remain very aggressive with fighting inflation. Hawkish Fed action over the last year has supported the dollar, but over the last few months has come under pressure on expectations the Fed would begin to pause soon. The WSJ Dollar Index gains 0.8% (back above 50-day MA 103.40) and strengthens against the euro and the yen. Bitcoin surges for a second day, up 8% late topping the $24K level after lows around $22K this morning.






WTI Crude















10-Year Note





Sector News Breakdown



·     In autos: TSLA will halt some production at its Shanghai factory until the end of February, as it upgrades the facility to start rolling out a revamped version of its Model 3 sedan in the competitive Chinese market, Bloomberg reported.

·     In electric vehicle charging (BLNK, CHPT), the WSJ reported that TSLA will open part of its proprietary Supercharger network (at least 3,500 new and existing chargers) to other kinds of vehicles for the first time, the White House said Wednesday. The move qualifies the company for a share of billions of federal dollars on offer to build a national network of EV chargers.

·     In auto dealers: LAD tumbles early after Q4 results miss with EPS $9.05 missing the $10.10 estimate and revs $6.99B missing $7.07B estimate as said Q4 total vehicle gross profit per unit falls 17.3% to $5,691; SAH reported a top and bottom line Q4 beat.



·     In research: AEO downgrade from Buy to Hold at Jefferies with $16 tgt and lowering CY’23 sales growth estimate to 0% vs. consensus 3% while firm also downgraded AKA, CURV, LVLU and cut ests across the board; BBWI downgrade from Buy to Neutral at Citigroup saying while they anticipate a modest 4Q beat driven by slightly better comps/GM, they believe investor focus will be on where new CEO Gina Boswell sets the bar for F23. CAL rises in footwear after raising year adj EPS view to $4.50-$4.52 from $4.30-$4.40 est. $4.35).


Leisure, Gaming & Lodging:

·     In lodging and travel: ABNB shares rise after Q4 Nights & Experiences booked slightly missed ests. but revenue and adj. EBITDA came in noticeably better as demand remains strong in all regions, aided by increased cross-border travel and Q1 rev guide 16%-21% better; SABR shares slip after Q4 revs $631M miss ests. $667M on larger EPS loss; TRIP rises on Q4 beat as adj EPS $0.16 vs. est. $0.04; Q4 revs $354M vs. est. $343.9M. MAR downgrade from Outperform to In Line wat Evercore/ISI on valuation after run up in shares.

·     In leisure/RV sector: LCII downgraded to Neutral from Buy at Roth MKM with a lower price target of $114 (down from $137), driven by reduced confidence that the aftermarket business will be able to provide enough of a cushion against expected tough sledding for the RV OEM biz.

·     Cruise lines extend 2023 gains after a poor 2022, with CCL, NCLH and RCL all up over 50% YTD.


Homebuilders, Building Products, Home Furnishing:

·     According to weekly MBA mortgage data: US mortgage market index falls 7.7% to 230.4 in latest week, purchase index falls 5.5% to 179.6, refinancing index decreases -12.5% to 480.5 as the average 30-year mortgage rate rises 21 bps to 6.39% in latest week. Several earnings in the housing and building product space today with MLM, OC, TMHC all movers.



·     Earnings in Oil, E&P space: DVN shares fell after the oil producer reported Q4 core EPS that fell short of the average analyst estimates (EPS of $1.66 missed the $1.75 estimate; had said in January that it estimated its Q4 production to be 2% lower). After pre-announcing 4Q production and capex two weeks ago, CRK delivered 4Q22 earnings that fell in line with expectations.

·     In macro news: the International Energy Agency (IEA) boosted forecasts for global oil demand as China’s economy reopens following years of Covid lockdowns. The agency raised global demand estimates by a hefty 500,000 barrels a day for the first quarter. As a result, world consumption will climb by 2 million barrels a day this year to average 101.9 million a day, it said

·     Inventory data bearish for oil: API Oil inventories showed Crude with +10.5m barrel build vs +1.1m expected; Gasoline +846k: Distillates +1.73m: Cushing +1.95m. The weekly EIA inventory data even bigger build as crude stocks up 16.3M barrels vs. est. build 1.2M barrels, with gasoline stocks up 2.3M barrels, and distillate stocks off -1.3M barrels.



Banks, Brokers, Asset Managers:

·     In euro banks: BCS slides after posting a surprise drop in Q4 profit and as revenue missed estimates across every major business line; results were further marred by 1.2 billion pounds in credit impairment charges and a 26% leap in costs to 8.9B pounds.

·     In research: Piper made a couple of rating changes to reflect better views on certain large regional banks and our perception of relative value within the group as they upgraded USB to overweight from Neutral and downgraded CMA from OW to Neutral after earnings recovery.


Bitcoin, FinTech, Payments:

·     GS has dropped plans to develop a branded credit card for retail customers, CNBC reported on Wednesday, citing people with knowledge of the matter.

·     In monthly charge off data: COF reported charge-offs for January of 3.81% vs. 2.03% y/y and reported a jump in delinquencies at 3.65% vs. 2.4% y/y. AXP card member loans 30 days past due loans as a % of total 1.0% vs 1.0% at dec 2022 end and loans net write-off rate-principal only 1.5% at Jan 2023 end vs 1.2% at Dec 2022. BAC January credit card delinquency rate was 1.09%% vs 1.03% at Dec 2022 end and net charge-off rate was 1.48% vs 1.44% in Dec 2022. Citi (C) credit card charge-offs 1.50 % in Jan 2023 vs 1.34% in Dec and delinquency rate 1.04% vs. 1.01%.

·     UPST reported 4Q22 results that topped consensus as total revenue being slightly above the high-end of the target while posts adjusted EBITDA losses of ($17M) but 34K Q/Q decline in loans was significantly less bad than prior but Q1 rev guide but miss (about $100M vs. est. $157.99M).

·     China FinTech: TIGR, FUTU shares rise early as China regulator clarifies regulatory requirements. China Securities Regulatory Commission reiterated it will tighten the supervision of illegal cross-border brokerage services but stressed it won’t restrict their existing customers transactions for no valid reason, according to a statement from the regulator.



Biotech & Pharma:

·     BIIB CEO Christopher Viehbacher said he’ll expand the company’s research beyond its core expertise of neuroscience and into new areas including immune-conditions and rare diseases; Q4 EPS beat on slightly better revs and lower R&D; FY guidance range light vs consensus.

·     EBS said it sealed a deal to sell a portfolio of travel vaccines to Danish vaccines-maker Bavarian Nordic for up to $380M.

·     TTOO said offering of 11.1 mln shares, warrants to purchase up to 22.2 mln shares at a combined price of $1.08/share and accompanying warrants.


Healthcare Services & MedTech movers:

·     GH initiates new study to examine the impact of shield™ blood test to increase screening compliance for colorectal cancer.

·     OSUR posts Q4 rev beat and better Q1 guide; said it is anticipating higher revenue in H1 of the year followed by lower sales in H2 as the company works down its COVID-19 gov’t contracts.

·     WAT agreed to acquire privately owned Wyatt Technology Corp. for $1.36 billion in cash, looking to tap into the market of bioanalytical characterization for new modalities; Q4 beat despite 8% EPS headwind due to unfavorable FX; guides Q1 and FY23 light of consensus.


Industrials, Aerospace & Defense

·     GNRC among top gainers in the S&P after mixed Q4 results (EPS $1.78/$1.05B revs vs. est. $1.76 and $1.07B); said expects sales to be weak in the first half of the year and rebound in the second half; pared gains after conference call.

·     POWW tumbled after slashing its revenue outlook for the current year, citing inflationary pressures weighing on consumers.

·     HWM downgrade to Neutral at Benchmark noting the aerospace supplier took a conservative approach to FY23 guidance given a lack of confidence in aerospace OEM’s build rate visibility.

·     DY downgraded to Equal Weight (from Overweight) and lowering our PT to $88 ($120 prior) @ WELLS – We expect revenue growth to slow materially in FY’24 based on a more muted forecast for fiber builds, particularly at AT&T and LUMN


Materials, Metals & Mining

·     In chemicals: ECL was upgraded to Outperform at RBC noting fixed currency operating income (OI) accelerated to 14% in 4Q22, and they expect further improvement going forward driven by significant expansion in incremental gross margin. In lithium, LTHM reported results largely in line with expectations and initial 2023 guidance seems roughly in line and said that Li expansions in Argentina are largely on track, albeit with a minor delay (2-3 months). ALB reports tonight.



Internet, Media & Telecom

·     Ad Tech/Internet: TTD beats on both top and bottom line for Q4 and guides Q1 revs $363M vs. est. $360.9M saying they outpaced nearly all areas of digital advertising in 2022, with 32% revenue growth y/y, and a record $491M of revenue in Q4 alone. AKAM downgraded from Outperform to Sector Perform at RBC Capital and cut tgt to $85 from $135 after in-line Q4 results but noted the clear change in strategy to going all-in on Linode/Compute backed by significant Compute OpEx (headcount) and CAPEX plans in CY23. GDDY posts rev forecast miss; guides revenue growth light of the street and printed a deceleration in customer adds.

·     Media: IQ announced a framework agreement with BIDU, connecting iQIYI to Baidu’s generative dialogue product ERNIE Bot. UBS upgraded IAC to Neutral from Sell saying they are incrementally more positive on ANGI which represents 22% of the IAC shares and higher valuation for DDM given multiples for digital ad names have expanded YTD. SNAP investor day tomorrow.

·     In online services: UDMY shares fall on top/bottom line miss – EPS loss (-$0.36) vs. est. loss (-$0.23); Q4 revs rose 22% y/y to $165.33M vs. est. $166.04M and guides Q1 revs $168M-$172M below consensus est. $186.7M.


Hardware & Software movers:

·     In Hardware & software: RBLX shares rally after smaller EPS loss of (-$0.48) vs. est. (-$0.52) and net bookings rose 17% y/y to $899.4M above ests $888.1M; said January average DAUs 65M; average daily active users (DAUs) were 58.8M, up 19% y/y. AAPL shares little roll off highs after WSJ reported U.S. escalates Apple probe, looks to involve Antitrust Chief. Earnings tonight for ROKU, CSCO, TWLO, SNPS, RNG among them.

·     Connectors: UBS said for APH, TEL that Connector price trends have maintained an upward trajectory through January w/ distributor pricing up another 130-bps m/m – January price gains build on the re-acceleration observed during Q4 where pricing came in +390 bps Q/Q. Stifel downgraded TEL to Hold from Buy at Stifel and ST to Hold from Buy as well, after shares rose 15.6% YTD and 29.7% YTD respectively.



·     ADI reported better-than-expected Q1 results and guidance – Q1 EPS $2.75 on revs $3.25B topping $2.60/$3.15B estimates and guides Q2 EPS $2.75 plus/minus 10c vs. est. $2.42 on revs $3.1B-$3.3B vs. est. $3.03B saying demand remains resilient in Industrial& Automotive markets.

·     ASML said a former employee in China stole data about its technology, risking inflaming political tensions amid heightened concerns about espionage.

·     CRDO forecast 4Q revenue $30M-$32M, missing the average analyst estimate of $58.3M saying its largest customer has reduced its demand forecast for certain Credo products.

·     TSM shares slip after Warren Buffet’s Berkshire reduced its stake by 87%, to 8.3M shares down from prior 60.1M shares prior according to qtrly filing.


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.