Market Review: June 20, 2023

Closing Recap

Tuesday, June 20, 2023





DJ Industrials




S&P 500








Russell 2000













U.S. stocks finish down for a second day, but well-off morning lows as investors again look to “buy the dip” on any pullback as stocks start the week on a down note. Both the S&P and Nasdaq extended their weekly winning streaks last Friday (5-weeks and 8 respectively), but edge lower ahead of a busy week of Fed speakers, including Fed Chairman Powell testimony to Congress this week. Stocks pared losses following strong housing data showing the consumer remains very strong and as mega cap tech (AAPL, AMZN, TSLA, NFLX, NVDA) extend gains. US Housing Starts jumped 21% in May, the biggest MoM increase since 2016 and on a y/y basis, starts grew 6%, the first positive YoY reading since April 2022. Commodities were today’s laggards, with energy, precious and industrial metals falling after Chinese banks trimmed benchmark interest rates on loans to households and businesses, but by a smaller-than-expected margin (US listed China stocks also down sharply on day). Investors now await testimony from Federal Reserve chair Jerome Powell to Congress this week (Wednesday and Thursday at 10:00 AM) as data suggests the economy remains healthy. Transportation stocks will be in focus tonight with package delivery giant Fed-Ex (FDX) reporting earnings, giving a glimpse into retail and consumer buying power. Yields on government bonds slumped on the long and short end of the curve, the dollar edged higher along with Bitcoin while gold and oil fell.


Morgan Stanley strategist Mike Wilson reiterated caution in stocks (has done so throughout the 2023 rally) noting sentiment and positioning has turned outright bullish as both retail and institutional investor sentiment has reached its highest levels in over 2 years and registered readings in the top quintile of the past several decades. However, given his fundamental view on growth, says finds it hard to get on board with the current excitement and narrative supporting it. While breadth has stabilized, it remains far from supportive of higher prices.


Economic Data

·     May housing starts surge +21.7% to 1.631M unit rate, far surpassing the expected decline of -1.4% to 1.42M and compared to April (-2.9%); May single-family starts +18.5% to 997,000-unit rate; multifamily +27.1% to 634,000-unit rate. Building Permits rose +5.2% to 1.491M rate vs April -1.4% (ests were for permits to rise 2.2% to 1.4M).


Commodities, Currencies & Treasuries

·     WTI Crude Oil July futures settle at $70.50 a barrel, down -$1.28, or 1.78%, under pressure through the course of the day after China lowered key lending rates today, not as deep as markets were hoping) and there was no confirmation of a wider stimulus package. A pick-up in the dollar following today’s U.S. data round also added to pressure on oil. Gold prices slid -$23.50 or a little over 1% to settle at $1,947.70, while silver was down 89c, or 3.7%, to end at $23.23 an ounce with broader commodity weakness. Natural gas prices fell 14c, or 5.3%, to settle at $2.492 per million British thermal units on forecasts for less hot weather and demand.

·     U.S. Treasury yields fell but ends off the lows ahead of Fed Chair’s Jerome Powell’s congressional testimony this week. After a blackout period leading up to the Fed’s policy announcement last Wednesday, central bank officials are back in full force and are the big focus this week. U.S. Treasury yields briefly trimmed its dip after data showed housing starts surged last month to their highest in more than a year. But yields have retreated after that brief respite. After holding modest gains earlier, Bitcoin prices jumped over 4% this afternoon to highs around $28,000 while other crypto prices also rebounded.






WTI Crude















10-Year Note





Sector News Breakdown

Retailers, Consumer Staples & Restaurants:

·     NKE mixed comments at Morgan Stanley as remains overweight saying 4Q EPS likely comes in in-line with the Street, if not ahead but warns that near-term inventory challenges mean initial ’24e guide potentially below Street (shares were also downgraded to mixed by OTR Global).

·     In tobacco: PM upgraded to Buy and open a Positive Catalyst Watch at Citigroup saying with NGPs contributing meaningfully to industry and PM’s performance in particular, firm believes investors are at risk of structurally under-valuing this evolving segment.

·     In Food: in food distribution, Morgan Stanley upgraded USFD to Overweight with perhaps more optionality today while they downgraded PFGC to EW, but still solid fundamentals. Firm also introduces an indicator that tracks job postings as a directional top line indicator.


Autos, Leisure, Gaming & Lodging:

·     In Electric vehicles (EVs): RIVN said it has agreed to adopt TSLA’s charging standard, giving customers access to the biggest U.S. charging network. LILM announced an agreement with Heli-Eastern for the purchase of Lilium Jets. EV charger maker BTC Power to add Tesla’s charging standard to its products next year – CEO – Reuters reported.


Homebuilders, Building Products, Home Furnishing:

·     Housing Starts and Building Permits data for May crush economist expectations, surging well above prior month as continued upward momentum in housing space continues; shares of BZH, CCS, DHI, LEN, FOR, TOL, PHM, KBH, MTH and other homebuilders remain strong.



·     In Oil E&P: Broad weakness in energy stocks today as OXY posts its 8th straight daily loss; CIVI has agreed to purchase a portion of Tap Rock’s Delaware Basin assets for $2.45B, which includes $1.5B in cash and approximately 13.5M shares of Civitas common stock valued at approximately $950M, subject to customary anti-dilution and purchase price adjustments.

·     In Utilities: NI said that asset manager Blackstone’s (BX) infrastructure unit has agreed to acquire a 19.9% equity interest in its unit NIPSCO for $2.15 billion. PNM and Avangrid have mutually agreed to an amendment and extension of their merger agreement through December 31, 2023. POR downgraded to Neutral from Buy at Guggenheim on a lighter catalyst pathway in 2H23; SRE files for two-part, notes offering.

·     In Solar: TD Cowen said they came away incrementally cautious on residential solar demand in Europe and have lowered estimates (lower volume and ASP assumptions) and price targets for ENPH $317 (Prior $341) S92.GY €91 (Prior €98) and SEDG $330 (Prior $360).



Banks, Brokers, Asset Managers:

·     In Fintech: PYPL announced that KKR will purchase up to €40 billion of eligible current and future PayPal Pay Later loans originated in Europe. The company is pointing to an incremental $1B in repurchases for the year ($5B total vs. $4B prior).

·     In Insurance: LMND shares stumble as Morgan Stanley initiates at Underweight rating and $14 tgt noting shares have rose ~47% YTD on the back of strong 1Q23 results, but the company’s path to profitability remains long.



Biotech & Pharma:

·     ACLX shares fell after the FDA placed a clinical hold on mid-stage study of its experimental therapy to treat patients with type of a blood cancer.

·     AZN has drafted a plan to spin out its sizable Chinese business in the event geopolitical tensions become untenable, the Financial Times reported yesterday.

·     BBIO said its investigational treatment for children with achondroplasia, a bone growth disorder that causes disproportionate short stature, resulted in significant growth in a clinical trial.

·     DICE to be acquired by LLY for about $2.4B, or $48 per share

·     ENTA issued results from an early-phase clinical trial of a treatment for respiratory syncytial virus, or RSV. EDP-323, an oral antiviral that received FDA fast-tracked in April, demonstrated safety and tolerability, and will be advanced to a human challenge study by early in Q4.

·     MRK provides update on phase 3 KEYNOTE-585 Trial in locally advanced resectable gastric and gastroesophageal junction adenocarcinoma; said the primary endpoint of event-free survival (EFS) did not meet statistical significance, while one endpoint met study goal.

·     PDSB to be Added to Russell 2000® and Russell 3000® Indexes Effective June 26, 2023.

·     QURE announces achievement of $100 million milestone related to hemophilia B gene therapy.


Healthcare Services & MedTech movers:

·     ABC said to repurchase 275,984 of its shares back from WBA with aggregate price for repurchase is approximately $50M; WBA now owns about 16% of co’s outstanding shares.

·     BDX agreed to sell its surgical instrumentation platform to STE for $540 million, or about 3.2x the annual revenue of $170 million for the units included in the deal.

·     CANO announces leadership change as Mark Kent appointed Interim Chief Executive Officer after Dr. Marlow Hernandez has agreed to step down immediately.


Industrials & Transports

·     Dow Transports hit highest levels since March, topping 14,800 earlier ahead of FDX earnings, which are expected to report earnings after the close (watch UPS).

·     CAR upgraded from Equal Weight to Overweight at Morgan Stanley and raised tgt to $230 from $182 saying with the backdrop of normalization in the rental industry, the firm looks for operational execution to preserve what could now be a higher floor for the industry.

·     GNRC shares clear its 200-day MA of $122.60 (first time above its 200-day MA since December 2021) amid upside momentum with heat waves and storms boosting interest.


Aerospace & Defense

·     The Paris Air Show took place this weekend throughout week: EADSY said India’s IndiGo airline is buying 500 passenger jets from the European plane maker at the Paris Air show in a record-setting order; Goldman Sachs noted Day 1 saw a large order by IndiGo for 500 Airbus A320s, in addition to 30 A320nes (Flynas), and 3 A350-900s ordered by Air Mauritius. There were no orders announced for Boeing at this time.

·     AL announced long-term lease placements for two new Airbus (EADSY) A220-300 aircraft with Cyprus Airways.

·     BALL upgraded to EW from UW at Wells Fargo citing Reuters report Friday that Ball could monetize its Aerospace business for ~$5.0 billion.

·     LMT raised concerns with the U.S. Defense Department and FTC about LHX purchase of AJRD, Lockheed’s COO told Reuters.

·     RTX hosted an investor day where it reiterated 2023 and 2025 guidance.


Materials, Metals & Mining

·     In Metals: 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 $50 per net ton, effective immediately with all new orders. Cliffs’ minimum base price for hot rolled steel is now $950 per net ton.

·     In Chemicals: OLN lowered its Q2 adj. EBITDA forecast to $350M-$360M range from prior expectation of slightly lower than Q1 levels of $710.9M citing impact from extended vinyl chloride monomer plant turnaround at Texas facility and market conditions.



Internet, Media & Telecom

·     In Telco: AT CFO said this morning sees about 300k new phone customers in 2Q (which is below Street consensus est. of 476k). Separately, Axios reported AT&T has begun deploying an OpenAI-based tool that assists its technology workers in tasks ranging from coding to customer support to language translation. TMUS Q2 phone subscriber gains about 700k says CFO (est. 664k).

·     In Internet: BIDU upgraded from Equal Weight to Overweight and raise tgt to $190 from $160 as believes China’s AI evolution is at an inflection point. BABA said its CEO and Chairman Daniel Zhang will step down from the roles to focus on its cloud division as the company moves ahead with a plan to split into six business units.

·     In Media: WBD’s Superhero action movie "The Flash" performed very poorly over the weekend, taking in only $55M in ticket sales and DIS’ Pixar’s "Elemental" brought in second-lowest box office haul in the animation studio’s history taking in $30M US and $45M globally (both movies cost their respective studios over $200M to make). In advertising: OMC to roll out AI tool to assist ad agency employees, the WSJ reported.

·     CSCO launched networking chips for AI supercomputers that would compete with offerings from AVGO and MRVL


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.