Market Review: July 14, 2023

Closing Recap

Friday, July 14, 2023





DJ Industrials




S&P 500








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The S&P 500 hit its highest level in more than a year as a couple large cap banks (JPM, WFC) reported strong quarterly results, while healthcare stocks surged behind better earnings and guidance from UNH, and technology stocks led early, rising 3% for the week. The S&P 500 erased earlier gains, up for 10 of the last 13 days, with momentum in 2023 clearly to the upside, especially for large cap tech. Smallcaps jumped the early part of the week, but stumbled on Friday, falling around 1%. Heading into earnings season, S&P 500 Q2 earnings now seen down (-8.1%) from year ago versus (-6.4%) decline seen week ago according to Refinitiv data and marks 3rd straight quarter of declines. The dollar edged higher, but closed out a dreadful week, falling over 3% after softer CPI and PPI inflation reports mid-week raised expectations the Fed’s last interest rate hike this year will be in July. The Fed is in a quiet period ahead of their July FOMC meeting so the attention firmly on earnings, dominated next week by mega and regional banks, as well as a few big momentum plays (NFLX, TSLA). By end of day, stocks couldn’t hold early gains, ending the day near lows but up nicely on the week. Reminder tonight, the Nasdaq is set to announce how it will reweight the Nasdaq 100 via a "special rebalance" that will take place on July 24. The "Magnificent Seven," Apple, Microsoft, Nvidia, Google stock,, Tesla and Meta Platforms are expected to see lower weights.


Economic Data

·     June import prices fell -0.2% M/m vs. est. (-0.1%) and vs. May (-0.4%), while June export prices fell (-0.9%) vs. est. (-0.2%) and vs. May (-1.9%); U.S. June year-over-year import prices -6.1%, export prices -12.0%.

·     University of Michigan surveys of consumers sentiment prelim July 72.6 tops consensus 65.5 and above final June 64.4; current conditions index prelim July 77.5 vs. final June 69.0 and expectations index prelim July 69.4 vs final June 61.5.

·     University of Michigan surveys of consumers 1-year inflation outlook prelim July 3.4% vs final June 3.3% and University of Michigan surveys of consumers 5-year inflation outlook prelim July 3.1% vs final June 3.0%.


Commodities, Currencies & Treasuries

·     U.S. crude oil futures settle at $75.42 per barrel, down $1.47, 1.91% and Brent Crude futures settled at $79.87 per barrel, down -$1.49, 1.83%. Oil priced dropped on Friday, but still posted its 3rd straight week of gains (up 2%) amid a weaker dollar and as supply disruptions in Africa and a reduction in shipments from Russia tightened the market. Libya’s second-biggest oil field, Sharara, was shutting after protests stopped production at the El Feel field on Thursday Meanwhile, there’s also a halt in Nigeria. An OPEC report, also published on Thursday maintained an upbeat oil demand outlook despite economic weakness.

·     Gold prices ended little changed on Friday, rising +$0.60, or +0.03%, to settle at $1,964.40, but posted its biggest weekly gain since April after signs of cooling inflation this week sparked some hopes of a pause in the U.S. interest rate hikes. Copper ends the week 4.11% higher at $3.9220.

·     Bitcoin pulled back from near 13-month highs around $31,800, jumping this week after a legal victory in the sector which the cryptocurrency XRP was ruled not to be a security. A U.S. judge said that Ripple Labs Inc did not violate securities law by selling its XRP token on public exchanges.

·     Treasury yields rose, moreso on the shorter end of the curve as the 2-yr yield +14 bps to 4.75%, outpacing longer dated maturities; the 3-yr yield +12.5bps to 4.35% and the benchmark 10-year yield rose 6-bps to 3.82%. Overall, a strong week for bonds as yields tumbled on lower rates.

·     The U.S. dollar recovered modestly on Friday after falling sharply the last few days, as investors consolidated losses ahead of the weekend, but its trajectory remained tilted to the downside with the Federal Reserve near the end of its rate hike cycle amid softening inflation. The greenback, however, posted its biggest weekly decline since November, down over 3% as the dollar index hit a 15-month low of 99.574 earlier, the euro touched a fresh 16-month peak of $1.1243 overnight and the Japanese yen rose on day, fell on week.






WTI Crude















10-Year Note





Sector News Breakdown


Retail, Consumer Staples & Restaurants:

·     In Beverages (KO, PEP): Concern about aspartame’s health risks was reawakened after one unit of the World Health Organization (WHO) classified the artificial sweetener as a possible carcinogen and another agency cleared the substance for consumption at common levels. Aspartame was labeled Friday as a possible cause of cancer in a report from the WHO’s International Agency for Research on Cancer, based on limited evidence.

·     In Food: GIS was upgraded to Buy from Hold at Argus with $90 tgt, positive on the company’s efforts to create a differentiated portfolio of brands for health-conscious customers and to generate a higher percentage of revenue from new products.

·     In pool retail: LESL guided Q3 EPS 42% below the Street to $0.39-0.41 vs est. $0.69 and cut 2023 EBITDA guidance by 40% and sees FY net sales $1.43-1.45Mm vs est. $1.6Mm and adj EPS $0.28-0.32 vs est. $0.77 while announced CFO Steve Weddell is stepping down; comps also fell -12%, badly missing the Street at down -1% (shares of POOL declined in sympathy).

Leisure, Gaming & Lodging:

·     In casinos: BYD upgraded from Underweight to Equal Weight at Morgan Stanley on the back of strong Digital performance through its relationship with FanDuel and better brick & mortar results, with a $75 price target (7% upside). The firm also reiterate Overweight on LVS, our new Top Pick in Gaming and stay Overweight on RRR – raise tgts in sector overall.

·     In Boating: Truist tempered CY23, 24 estimates for sector (BC, HZO, PATK) saying despite improved May/June retail patterns, firm sees increased risk to Consensus numbers given elevated inventory levels, the likelihood of sluggish MY24 commitments, and with another round of pricing (MY24) set to test a market already beset by affordability concerns.

·     In Autos: NKLA extends Thursday 61% rally after BayoTech agreed to buy up to 50 of its hydrogen fuel cell EVs over the next five years.


Homebuilders, Building Products, Home Furnishing:

·     Homebuilders were active again, with the group setting new all-time highs several times this month already. Raymond James today upgraded TOL to strong buy saying homebuilders’ resilience to rates poised to continue. Also upgraded LEN, PHM, KBH, and MDC.

·     In Home furnishing: Bank America raised estimates on W, RH and ARHS on improved industry trends in 2Q, strong web traffic data. Total furnishings & bedding trends improved in June. Online furnishings decelerated 3ppts but are still 5ppts above Apr/May.


Energy, Industrials and Materials

·     In Metals: AA was downgraded from Overweight to Neutral at JP Morgan and cut tgt to $36 from $54 driven primarily by its cautious near-term aluminum view; said weak underlying fundamentals combined with still relatively elevated energy costs and lengthy/costly restarts make the economics for ramping additional capacity unattractive anytime soon.

·     Aerospace & Defense: Barron’s noted SpaceX is rocketing up the rankings of aerospace and defense companies. It’s the most valuable aerospace and defense stock in the Western World, topping even the likes of BA and RTX after CNBC reported that SpaceX valuation hit $150 billion, based on a secondary sale of stock at $81 a share (more than $10B from prior valuation).



Banks, Brokers, Asset Managers:

·     Banks rise after JPM, WFC reported strong second quarter results:

·     1) JPM Q2 adj revs rose 34% y/y to $41.3B from $30.7B a year earlier and above ests. $39.34B, while adj EPS was $4.37 vs. est. $3.83 as profit rose 67% after First Republic rescue; Q2 ROE 20%, ROTCE 25%; profit rose to $14.47B, or $4.75 per share, up from $8.65B; Spending on credit cards rose 8% and card loan balances jumped 16%. Auto lending increased, with loan volume up 71%; Trading revenue fell 10%, with fixed-income revenue down 3% and equities down 20%.

·     2) WFC Q2 EPS $1.25 topped estimates $1.16 as revs rose 20.5% y/y to $20.53B vs. est. $20.11B; said Q2 Provision for Credit Losses nearly tripled to $1.71B from $580M and vs. est. $1.55B; net interest income jumped 29.1% to $13.16 billion to beat expectations of $12.82 billion. Average loans increased 2.1% to $945.9 million while average deposits fell 6.8% to $1.35 billion.

·     3) Citigroup’s (C) Q2 profit tumbled 36% hurt by trading business; Net income dropped to $2.92B or $1.33 per share from $4.55B y/y, but EPS beat the $1.31 estimate; Q2 revs fell -1% y/y to $19.44B vs. est. $19.34B; personal banking and wealth management revenue rose 6.1% to $6.40B, institutional clients group revenue declined -8.6% to $10.44B; fixed income revenue was down -13.5% to $3.53 billion and equity revenue fell 10.2% to $1.09B.

·     In Trust banks: STT posted higher Q4 profit as rising interest rates continued to boost net interest income and fee revenue climbed; Q2 EPS $2.17 topped the $2.10 estimate, but revs rose 5% y/y to $3.11B missing est. $3.14B; Q2 fee revenue rose 2% from a year ago to $2.42 billion while net interest income rose 18% to $691 million. Shares tumbled after issuing 4q NII declines of 2% to 6% q/q, which also weighed on comps BK, NTRS.

·     In crypto: Canaccord noted the Ripple decision by federal judge is a huge shot in the arm for the digital assets industry as it likely serves as a multi-faceted positive catalyst for the industry. Canaccord believes the ruling can only help to accelerate crypto legislation currently being drafted in Congress and believes there is a chance that the SEC could take its foot off of the enforcement pedal given the agency’s first court loss and the establishment of today’s legal precedent around the classification of certain digital assets as securities.


Insurance & Services:

·     In Lending: The Biden administration announced it would automatically cancel the education debt for 804,000 borrowers, for a total of $39 billion in relief. The debt cancellation is a result of the administration’s fixes to repayment plans, which included updated counts of borrowers’ payments. – CNBC reported

·     In Insurance: PGR downgraded from Overweight to Equal Weight at Wells Fargo as believes the stock should be range bound until it sees: reserve development dissipate as PGR has added to prior year reserves every month in 2023, and policy growth improve. Into earnings, RBC Capital said AIG, MKL, CB favorite ideas of P&C insurance stocks saying premium growth should remain healthy in Q2 and the next few quarters.



Biotech & Pharma:

·     ACAD announced 2Q preliminary Daybue net sales of $21-23M and 3Q guidance of $45-55M, crushing consensus of $2.3-3.0M. ACAD also acquired ex-US rights for trofinetide from Neuren and global rights in Rett and Fragile X to Neuron’s NNZ-2591.

·     APGE 17.65M share IPO priced at $17.00 (opened at $21.50).

·     GILD said the FDA approved the use of its Veklury, or remdesivir, for patients with severe renal impairment, including those on dialysis.

·     LLY agreed to acquire Versanis, a private clinical-stage biopharmaceutical company focused on the development of new medicines for the treatment of cardiometabolic diseases, as Versanis shareholders could receive up to $1.925 billion in cash.

·     ROIV is close to agreeing on a sale of its experimental drug treating ulcerative colitis and Crohn’s disease to Roche (RHHBY) for over $7B – WSJ

·     THRX shares plunged after discontinuing enrollment in the ongoing phase 1/2 study and terminating development of THE-630 in patients with gastrointestinal stromal tumors, or GIST.


Healthcare Services & MedTech movers:

·     Managed care stocks got a boost after Dow component UNH reported a beat and raise, as Q2 adj EPS $6.14 vs. est. $6.01; Q2 revenue rose 15.6% y/y to $92.9B vs. est. $91B; raised its adjusted EPS guidance range to $24.70 to $25.00 from $24.50 to $25.00. Medical care ratio of 83.2% compared with 81.5% a year ago (shares of CI, CNC, ELV, MOH, HUM all rising in sympathy).

·     In Medical Devices: HOLX upgraded to Buy from Hold at Needham as firm thinks the COVID-related headwind will soon end and that HOLX can grow at least at its 5-7% organic ex-COVID growth target; believes that HOLX can drive ~50+ bps of annual operating margin improvement.

·     In Pet services: ELAN rises as the Environmental Protection Agency (EPA) announced that it had concluded its registration review of Elanco’s Seresto medicated flea and tick collar.

·     Medical Equipment: GKOS shares rose after CMS released their 2024 proposed rule for ASC reimbursement and GKOS saw two large, proposed reimbursement increases for iStent and Infinite. GKOS’ most used code for iStent with combo cataract moved up nearly $500, from a $3,273 ASC fee in 2023 to a proposed $3,761 in 2024 (+15%). In the hospital setting, fee increased from $4,251 to proposed $5,111 in 2024.



Internet, Media & Telecom

·     In telecom: AT downgraded to Neutral from Overweight at JP Morgan and lowering its PT to $17 from $22 saying based on recent commentary from mgmt lowering estimates for wireless (in May and again in June) and broadband (in June), firm believes AT&T is facing marginally more pressure in Mobility (from Verizon, T-Mobile, and cable) and Consumer Wireline.

·     In social media: META’s “Threads” engagement has dropped off since red-hot debut, tracking firms say Facebook’s Twitter-killer, Threads, has seen drops in daily active users and time spent on app since the weekend, according to SensorTower and SimilarWeb.

·     In Media/Music: SPOT tgt rose to $250 from $180 at Wells Fargo saying they dig deeper into the SPOT thesis and emerge even more bullish as MAU growth, market share, cost cuts and margin drivers are starting to fire on all cylinders.


Hardware & Software movers:

·     In Software: MSFT upgraded from Neutral to Buy w/ $400 PT from $345 at UBS citing evidence that Azure/AWS cloud infrastructure spend is beginning to stabilize after a significant deceleration over the past year. UBS believes this, coupled with near-term AI catalysts as well as the material underperformance in the stock since May 1st, make the set up too attractive.

·     Comm Equipment and Parts: GLW downgraded to Neutral from Buy at UBS as it reduces estimates on a slower recovery in customer demand and sees the stock more fairly-valued; the firm said it believes GLW’s largest business, display glass (~45% of income), has troughed. NOK cut its annual outlook saying it now expects sales in the year at 23.2 billion euros ($26.02 billion) against 24.6 billion seen earlier, saying high inflation affects customer’s spending plans; ERIC shares slide after saying it expected Q3 EBITA margin to be in line with or slightly higher than Q2, followed by a seasonally stronger Q4.



·     NVDA another day of record highs, extending YTD gains to +225% and rising for the 25th week in 28 this year so far, helping push the Semi index (SOX) above 3,800 to new 52-week highs.

·     WDC shares jumped midday following report that WDC and Kioxia want merger deal by August, according to an afternoon Bloomberg report (MU shares rose in reaction as well.)


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.