Market Review: February 21, 2023

Closing Recap

Tuesday, February 21, 2023





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks extended last week’s declines as both equities and bond prices fell (yields jumped) amid a weaker forecast from Dow component Home Depot (weighing on retail/discretionary names) and growing concerns that the Fed will keep interest rates moving higher for “longer and deeper. Energy was one of the few bright spots today with stocks generally “for sale” but fell midday as all eleven S&P sectors finished “in the red”. Markets have endured huge swings to start the New Year as Bespoke investment noted the S&P has already seen 10 one-day gains of 1%+ this year and today marked the 7th 1%+ drop of the year. The tide has turned from overly “bullish”, with investors buy every dip in January, to more “cautious” in that latter part of February as rising Treasury yields and the US dollar have jumped on increasing interest rate hike expectations by the Fed following a pattern or strong economic data and signs inflation deceleration may have peaked, after both the CPI and PPI coming in “hotter” last week. The market-implied terminal rate is up some 40 bps this month, with some calls for the fed funds rate somewhere around 6% by the end of 2023. Earnings has also slowed, Goldman Sachs noted with more than 80% of the S&P 500 having reported (big remaining chunk the next 3-days), quarterly EPS fell by 1% y/y and by 5% ex: energy this earnings season with slightly better than expected sales growth offset margins that fell by 97 bp, or 15 bp more than consensus expected. The S&P 500 bottomed around the 4,000-level mid-afternoon, its lowest levels since late January. Next up a slew of earnings results, Fed Minutes tomorrow, then a heavy dose of data and Fed speakers later in the week. Geopolitical tensions also run hot between the US and China/Russia.


Economic Data:

·     S&P Global Feb manufacturing PMI at 47.8 vs 46.9 prior; the composite PMI at 50.2 vs 46.8 prior and flash services PMI at 50.5 vs 46.8 in January.

·     Existing Home Sales for January fall for a 12th straight month, down -0.7% at 4.00 mln unit rate vs. est. 4.10M and down from Dec at 4.03M; inventory of homes for sale 980,000 units, 2.9 months’ worth; national median home price for existing homes $359,000, +1.3% y/y.



·     Gold futures declined, falling -$7.70, or 0.4%, to settle at $1,842.50 an ounce on Comex, the lowest most-active contract finish since Dec. 30 as a sharp rise in U.S. Treasury yields and the strength of the US dollar pressured commodity prices.

·     Oil prices dip as WTI crude futures settle at $76.16 a barrel, down 18 cents, 0.24%, extending its loss from last week with U.S. prices marking the expiration of the March futures contracts. The April WTI contract , which is now the front-month futures contract, settled at $76.36, down 19 cents, or nearly 0.3%. Brent crude futures settle at $83.05/bbl, down $1.02, 1.21%. U.S. natural gas futures dropped almost 9% to a near 29-month low, fell 20.2 cents, or 8.9%, to settle at $2.073 per million British thermal units, their lowest close since September 2020.


Currencies & Treasuries

·     Treasury yields climb all day, extending last week and this year’s rally, with the 10-year yield topping 3.96% (up from a four-month low of 3.321% on Jan. 19) and the 2-yr 4.72% (3-month highs). Note last week the yield on the 6-month T-Bill closed above 5% for the first time since 2007, today it’s the 12-month T-Bill topping the 5% level. The Treasury sold $42 billion in two-year notes on Tuesday to slightly soft demand, the first sale of $140 billion in new coupon-bearing debt this week.

·     The U.S. dollar was mixed, falling against the British pound after data showed an unexpected bounce in British business activity, but the buck was strong vs. the euro as business activity in the U.S. unexpectedly rebounded in February, hitting its highest level in eight months. The data follows a strong of solid economic reports in recent weeks on retail sales, the labor market and manufacturing production, raising prospects of longer and deeper interest rates hikes from the Fed than the market was forecasting just 3-weeks ago.






WTI Crude















10-Year Note





Sector News Breakdown



·     Europe Jan. Car sales rose 11% for sixth monthly gain in a row.

·     TSLA battled at the $200 price level all afternoon.

·     In auto suppliers, DAN Q4 adj net loss of $0.10/share, worse than ests of a profit of $0.26 and guides FY 2023 adj earnings between $0.25-$0.75, well below analysts’ ests of $1.74 saying they experienced unexpected headwinds in the fourth quarter.

·     In auto dealers: at JPMorgan downgraded AN to Underweight and SAH to neutral from overweight, while remain OW on GPI and LAD, and Neutral on ABG and PAG.


Consumer Staples & Restaurants:

·     In food: GIS raised its organic sales guidance by 1.5% at the midpoint and EPS by 2% ahead of its CAGNY presentation this morning. In beverages: TAP Q4 EPS $1.30 tops consensus $1.07 and revenue $2.63B above est. $2.62B while guides FY23 net sales low single-digit increase vs. 2022 on a constant currency basis, Capital expenditures $700M +/-5% vs consensus $629.2M. Defensive Consumer Staples were among the better performing sectors today.



·     Large cap retailers in focus as WMT posts better Q4 results, but lower Q1 guide: Q4 revs $164B tops est. $159.75B on better earnings $1.71 vs. est. $1.51 and on higher comps ex-gas +8.8% vs. est. +5.24% and Walmart-only US stores comparable sales ex-gas +8.3%, vs. estimate +4.82% – but guides Q1 EPS guide $1.25-$1.30 vs. est. $1.36 and op margins +3.5%-4%.

·     Other retail: DDS mixed Q4 results as EPS beats, but sales slip and inventory rise 4% on unchanged comps. CAL upgraded from Neutral to Overweight at Piper and raise tgt to $35 from $26 following the 2/15 pre-announcement underpinned by a 2023 earnings reset coupled with further confidence in EPS gains being structural in nature.


Homebuilders, Building Products, Home Furnishing:

·     Home improvement retailers slip after HD posts mixed Q4 results (EPS beat, sales miss), Q4 comp sales decreased 0.3% below est. +0.55%; expects 2023 EPS to decline in the mid-single-digit percentage range, compared with estimates of a 0.4% increase to $16.72 and sees 2023 sales growth and comparable sales growth to be about flat compared with fiscal 2022 levels. LOW to report earnings later this week; also watch TSCO. In building products, AWI modest operating miss driven by weaker margins with FY guide also marginally below consensus. JELD shares outperform in construction materials after guiding year EBITDA $360M-$400M (vs. est. $355M) after Q4 top and bottom-line results easily top consensus.



·     Oil prices on track for its 8th down month in last 9, but overall energy related stock prices outperformed better than other sectors. Energy names saw strength early buy reversed lower with broader markets. WSJ reported late day that CHK is expected to announce the sale of oil assets to a division of U.K. chemical maker Ineos Group AG for $1.4 billion.

·      In Utilities, PEG affirms outlook for 5%-7% long-term earnings growth through 2027 after Q4 results; FELE announced increase to share buyback; LNT was upgraded to Neutral from Sell at September following recent constructive conversations with Wisconsin PSC Chairperson Valcq and Commissioner Huebner. In solar, VVNT shares fell after a federal jury in North Carolina ruled that Vivint had to pay a total of $189.7 million in damages to CPI Security Systems Inc. for a 2020 lawsuit.

·     In MLP/Pipelines: WMB reported 4Q Adj. EBITDA of $1,774B, beating consensus at $1,681B (+6%)/$1,730mm (+3%) and implied guidance range of $1,456-1,756mm entirely due to Sequent. Bank America notes despite the 6% consolidated EBITDA beat, Transmission/GOM (-2%), Northeast G&P (-1%), and the West (-3%) all missed consensus.



Banks, Brokers, Asset Managers:

·     Financials were lower with broader averages, failing to benefit from the recent rise in interest rate expectations, which tend to helping banks and brokers with lending margins; in research, AX all downgraded to OP from Strong Buy at Raymond James, FCF cut to MP and they upgraded GBCI, PB in banking sector saying post-4Q22 earnings last month and now midway through 1Q23, they are selectively adjusting several ratings now that they have fully reflected on last quarter’s results, digested incremental economic/industry data, and gleaned insights from several recent investor conferences.

·     In lending, the WSJ reported the Biden administration is expected to trim costs under a mortgage program for first-time and lower-income buyers, a bid to boost affordability while median home prices remain near record highs, according to people familiar with the move. The Federal Housing Administration will reduce the fee borrowers pay to have their mortgages insured by the agency by about $800 a year on a typical loan, or 0.3 percentage point, the people said.



Biotech & Pharma:

·     AKBA received interim response from the FDA to appeal for Vadadustat for the treatment of anemia due to CKD.

·     ALRN announces termination of phase 1b breast cancer chemoprotection trial and exploration of strategic alternatives; to reduce workforce from nine to three full-time employees.

·     ANK shares rise early after Caligan Partners earlier this morning urged Co to consider strategic alternatives including a full sale.

·     APLS shares rise after saying late Friday the FDA approved syfovre to treat geographic atrophy secondary to age-related macular degeneration.

·     ATNM shares rise after upbeat trial results for its Iomab-B therapy, as the company shared the full dataset on the blood cancer treatment that had met the primary endpoint of durable Complete Remission (dCR) of six months in its Phase 3 Sierra Trial.

·     BCRX shares slide after posting wider than expected Q4 EPS loss of (-$0.38) and expects sales of its oral treatment Orladeyo in Q1 2023 to be similar to or slightly less than Q4 sales of $70.7M.

·     BHVN announced that it received Fast Track designation from the FDA for taldefgrobep alfa, a novel anti-myostatin adnectin, for the treatment of spinal muscular atrophy (SMA).

·     CMMB said it received FDA clearance of its investigational new drug application to evaluate CM-101 in a Phase 2 trial of adults with systemic sclerosis.

·     ELAN Q4 adj EBITDA below expectations ($174M vs GSCO $187M est.) on inline revenue and slightly higher expenses; sees FY adj EBITDA $920M-$1B vs $1.04B est. Q4 pet health revenue came in well below expectations while farm animal revenue was better than expected.

·     VIR upgraded to Buy from Neutral and tgt raised to $53 from $41 at Goldman Sachs saying underappreciated by many investors and will report data from its Phase 2 PENINSULA study of VIR-2482, its intramuscular injected mono-antibody for prophylaxis/prevention of influenza A

·     VRCA prices $32.5M offering of common stock/warrants at $6.75.


Healthcare Services & MedTech movers:

·     MDT Q3 EPS slightly ahead of expectations ($1.30 vs $1.27 est.), tweaks low end of FY23 (Apr 23) guide up slightly ($5.28-$5.30 vs $5.25-$5.30 prior) and Q3 revenue $7.73B vs $7.54B est. Expects Q4 organic revenue growth of 4.5-5.0%.

·     CVRX shares tumble after a trial of its BeAT-HF therapy for heart failure did not reach statistical significance on the primary endpoint.


Industrials & Materials


·     Barclays initiates coverage on European Airlines, with OW ratings on Air France-KLM, Lufthansa and Ryanair, EW on easyJet and IAG and downgrade Wizz OW to UW.

·     EXPD posts Q4 EPS of $1.38, missing consensus $1.96 on light revs falling -36.2% y/y to $3.44B vs. est. $4.01B, citing a drop in buy and sell rates and a softening in demand (shares of CHRW, JBHT, XPO, HUBG, WERN were active).

·     In trucking: The DAT Truckload Volume Index hit new highs for January, indicating solid seasonal demand for truckload services, said DAT Freight & Analytics, operators of the industry’s largest online freight marketplace and DAT iQ data analytics service. At 223, the DAT Truckload Volume Index (TVI) for van freight was 2.8% higher than in December and up 2.8% year over year. The refrigerated ("reefer") TVI was 174, 3.0% higher than in December and up 3.6% year over year. The flatbed TVI was 218, up 10.7% compared to December and 12.4% higher year over year.


Industrials, Aerospace & Defense

·     GNRC downgraded from Buy to Hold at Truist (tgt to $145 from $160) saying they see high interest rates coupled with higher product prices prolonging a recovery and posing a meaningful risk to the company’s 2023 financials.

·     IR Q4 beat as EPS $0.72 tops est. $0.62 and Q4 revs $1.2B vs. est. $1.54B; said it expects revenue to grow this year, boosted by strength in the first half of 2023 that is expected to fade as the year goes on; sees 2023 revs to grow 7%-9% or $6.33B-$6.45B vs. est. $6.24B.

·     MTW shares rise after big Q4 beat as EPS $0.74 vs. est. $0.26; Q4 revs rose 24.9% y/y to $621.6M vs. est. $565.8M; sees FY23 $2B-$2.1B vs. est. $1.94B, FY23 adj EPS 35c-$1.15 vs. rest. $0.52.


Materials, Metals & Mining

·     In metals: TECK said it will spin off its steelmaking coal business to shareholders, creating two independent, publicly listed companies (Teck Metals Corp. and Elk Valley Resources Ltd.), which will focus on base-metals production and steelmaking coal production, respectively. Teck also reached an agreement with its steelmaking coal joint-venture partners Nippon Steel Corp. and POSCO to exchange their minority interests in two of their operations. ARNC operating beat (miss adj for Russia) with FY outlook that’s also bracketed by consensus. CLF said it is increasing current spot market base prices for all carbon hot rolled cold rolled and coated steel products by a minimum of $100 per net ton.

·     In chemicals: HUN posts Q4 loss of (-$91M) vs year-ago profit of $597M, as EPS missed estimates hurt by lower sales though said sees some green shoots in areas like China, automotive, and aerospace, but construction demand globally is still under pressure. WLK notable EPS miss ($1.79 vs. $2.28 est.) miss driven by performance and essential mats (74c), housing and infra (33c), while revs also below views at $3.33B vs. $3.39B est. VNTR Q4 revs fall -32% y/y to $366M but tops consensus of $357M as TiO2 revs down -41% y/y to $240M; NDSN falls on earnings.



Internet, Media & Telecom

·     Internet: JD shares slip after the company said it is launching a 10 bln yuan ($1.5 bln) subsidy campaign next month to compete against rival PDD Holdings Inc’s (PDD) budget shopping app Pinduoduo, South China Morning Post reports.

·     In social media: META said it was testing a subscription service, called Meta Verified, which will let users verify their Facebook and Instagram accounts using a government ID and secure a blue badge. The service, to be offered at $11.99/month if signed up through a web browser and $14.99/month for subscription through Apple’s iOS or Google’s Android.

·     In Telco/Cable: CABO downgraded to Underweight from EW at Wells Fargo as see slowing broadband sub growth—likely from competition—and a dilutive ’25 put to consolidate MBI as key negative catalysts that will derate CABO. Reuters reported late day that AT&T (T) is exploring a sale of its cybersecurity division, potentially undoing an acquisition it completed five years ago.


Hardware & Software movers:

·     TCEHY is in talks to sell Meta’s Quest 2 virtual reality headsets in China, days after Reuters exclusively reported that it was abandoning plans to create its own VR offerings, the WSJ reported this weekend

·     Sentinel (S) downgraded to Equal Weight at Wells Fargo on concerns of declining demand trends and recent executive departures, which they believe will make it more difficult to reach material profitability, maintaining an $18 PT tgt.

·     DOCU downgraded to Sell from neutral at UBS with free cash flow considered not as compelling compared to that of Zoom and other low-growth software peers.



·     NVDA says it has 10-year license deal with MSFT to integrate Xbox games into GeForce now service.

·     QCOM said it is launching a paid cloud software service to help companies that use its chips keep tabs on goods as they move through the supply chain.


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.