Market Review: March 13, 2023

Closing Recap

Monday, March 13, 2023





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Stocks closed mixed, rebounding from morning losses as investors await key inflation data on Tuesday (Feb CPI). Bond markets surged (yields tumble), along with U.S. equities as the collapse of two major banks in the last few days raised contagion fears in the rest of the financial sector. After the FDIC closed Silicon Valley Bank (SIVB) on Friday, State authorities closed NY-based Signature Bank (SBNY) on Sunday. After actions by the Fed, SIVB and SBNY has been resolved as uninsured deposits are guaranteed and the Fed to provide loans, but the news pushed banking stocks, both large and mid-cap shares lower. Investors sought safety in defensive sectors as Consumer Staples, Utilities, REITs, and Healthcare sectors outperformed. Technology shares also rallied (large cap AAPL, AMZN, GOOGL MSFT) on hopes the Federal Reserve, at their policy meeting next week, will refrain from raising rates as previously expected given the latest turmoil in the banking system. Fed speakers are currently in their “black-out” period ahead of their meeting next week, so no one was able to weigh in. Last week, there was a 70% chance for a 50-bps rate hike after recent jobs/inflation data, but has now moved (at last look) to a 12% chance of a 25-bps rate hike and 88% chance of no hike. That can change quickly tomorrow when February Consumer prices (CPI) data is revealed at 8:30 AM ET. The situation is going to be incredibly interesting for financial markets in the next few weeks as the Fed is battling inflation and a banking system collapse at the same time. The KBW Bank Index (BKX) dropped to its lowest since Nov 2020 and the KBW Regional Banking Index (KRE) fell to its lowest since January 2021.

·     The Federal Reserve announced a new emergency loan program for banks this weekend after three banks collapsed the last few days (SIVB, SBNY, SI), covering all deposits at Silicon Valley and Signature banks. Plus, it has pledged to address future liquidity problems. The Fed’s new emergency loan program will help assure banks can meet needs of all their depositors. according to a statement. The Cboe Volatility Index (VIX) rose as much as 20% above 30, its highest since October, but pared gains late morning as stocks rose.

·     Next up tomorrow morning, the February Consumer Price Index (CPI) inflation report as expectations call for monthly headline CPI to rise +0.4% m/m (after +0.5% in Jan) and y/y prices to rise +6.0% (vs. last month +6.4%). On a core basis, or excluding food & energy, CPI in expected to rise +0.4% (vs. +0.4% in Jan) and rise +5.5% y/y (vs. +5.6% in Jan).


Commodities, Currencies & Treasuries

·     Bonds rise/yields fall: The attention-grabbing headline in the media was “Treasury yields see biggest three-day skid since wake of Black Monday in 1987.” The 2-year Treasury yield was at 4.101% (down 49-bps) after briefly falling below 4% earlier and headed for its biggest three-day decline since Oct. 22, 1987. The 2-year US Treasury yield is down over 100 bps in the last 3 trading days (5.05% -> 4.04%), while the 10-year fell to 3.5%, down about 20-bps. The dollar weakened against major currencies as the Fed’s move to support the banking system raised questions about the pace of future rate increases – while also boosted chances of the Fed pausing in its rate hikes. Goldman Sachs economists no longer expect the Fed to increase rates at its March meeting. They had previously expected a quarter-point increase.

·     Gold prices surged given the weakness in the dollar and Treasury yields, settling at $1,916.50 an ounce, rising $49.30 on day. Oil prices fell -2.5% lower at $74.80 a barrel (big bounce off lows $72.30), the lowest closing price since Feb. 22, and gasoline and diesel futures also fall as riskier assets fall victim to worries of possible US banking crisis. Brent crude futures settle at $80.77/bbl, down $2.01, 2.43%






WTI Crude















10-Year Note





Sector News Breakdown



·     Reuters reported GM is exploring uses for #ChatGPT as part of its broader collaboration with MSFT, a company executive told Reuters. "ChatGPT is going to be in everything," GM Vice President Scott Miller said in an interview last week.

·     WSJ reported that RIVN and largest shareholder AMZN are in talks to end the exclusivity part of their electric van deal, citing people familiar with the matter.

·     TSLA estimates lowered at Guggenheim for 1Q23 to reflect recent demand trends in all regions and introducing new analysis around backlog, inventory tracking, as well as deep dives for all major operating regions.

·     In auto retail, AAP downgraded to Hold at Argus noting the company has struggled to expand margins amid inflation and currency headwinds. It has also paused stock buybacks, and, in contrast with recent years, has not announced a dividend increase in 2023.


Retail Consumer Staples & Restaurants:

·     Defensive food and beverage stocks CAG, CHD, CLX, CPB, K, KO, MDLZ, PEP outperformed as investors flocked to safety of consumer staples (tobacco, consumer products, etc.)

·     UAA was downgraded to Neutral from Overweight at JPMorgan saying larger picture, mgmt is now citing Summer to Fall ’23 at the earliest for the "inventory overhang" to be worked through, which has created an elevated promo env’t across the sector "longer than expected" for UAA.


Energy, Industrials and Materials

·     Shares of U.S. oil and gas companies followed crude prices lower as the collapse of Silicon Valley Bank (SIVB) raised fears of a fresh financial crisis. Both Brent and WTI crude each fell as much as 5%, sinking majors XOM, CVX as well as E&P and refiners. U.S. approves COP Alaska oil drilling project -interior department’s bureau of land management document.

·     In metals: CLF raised current spot market base prices for all carbon hot rolled, cold rolled and coated steel products by a minimum of $100 per net ton, effective immediately with all new orders. Cliffs’ minimum base price for hot rolled steel is now $1,200 per net ton. In gold miners, shares of AEM, NEM, GOLD, AUY among others rallied behind the surge in gold prices following a further rotation into defensive/haven related assets given bank uncertainty.



Banks, Brokers, Asset Managers:

·     Banks the story again as State authorities closed NY-based Signature Bank (SBNY) on Sunday, after Silicon Valley Bank (SIVB) was shut down by regulators on Friday in the biggest bank failure since the 2008 financial crisis. All depositors of both banks will be made whole, according to a joint statement by the Department of the Treasury, Federal Reserve and FDIC. But that has not eased fears in other regional banks with massive declines early in FRC, CMA, ZION, KEY, FITB, TFC, WAL, BOH, PACW, SCHW and the list goes on.

·     In research: PNC upgraded from Neutral to Buy at Citigroup saying they think it makes sense to add to exposure here, so of their Holds the most attractive name here for US is PNC. JPM was upgraded to Overweight at Wells Fargo saying it should benefit both offense (market share gains) and defense (more diversified) in these less certain times. Citigroup upgrades SCHW to buy from neutral as it sees a compelling risk reward at current levels following the stock’s more than 20% slump over the last two sessions. While client cash sorting is a pressure…. they say they do not see a material risk to deposits leaving SCHW given the composition of its deposit base and customer protections.

·     HSBC will buy the U.K. subsidiary of Silicon Valley Bank (SIVB) for just over $1, after a frantic weekend for regulators who tried to find a way to protect the bank’s depositors after its U.S. parent collapsed – WSJ reported 


Bitcoin, FinTech, Payments:

·     Cryptocurrency prices extended gains as investors assessed the fallout from the collapse of Silicon Valley Bank and crypto-friendly Signature Bank alongside a commitment by federal regulators to backstop depositors at both institutions and across the banking system. Bitcoin jumped around 20% above $24K and Ethereum 16% at $1,650. Cryptocurrency-exposed stocks rose after Bitcoin jumped on US agencies’ pledge to fully protect all Silicon Valley Bank depositors following the lender’s collapse (MARA, COIN, RIOT, MSTR).

·     In auto lending (ALLY, CACC), Bloomberg reported Americans fall behind on car payments at higher rate than in 2009 as automobile repossessions are climbing as inflation forces struggling consumers to make tough choices.

·     The U.S. SEC rejected a proposal to list and trade shares of the VanEck Bitcoin Trust late Friday, marking the third time the regulator has denied VanEck proposals for a spot bitcoin exchange-traded fund (ETF). The SEC has rejected a raft of ETFs that proposed tracking the digital asset.

·     Over the weekend, USDC, a stablecoin that is supposed to trade one-to-one against U.S. dollars, has fallen below $1 on Saturday, after creator Circle said it had over $3.3 billion held at Silicon Valley Bank, which collapsed on Friday. USDC traded at as low as 86 cents on a dollar early Saturday, before it rebounded to around 95 cents, according to CoinDesk data.



Biotech & Pharma:

·     Few M&A headlines: 1) PFE to acquire SGEN for $229 per share in cash in $43B deal; proposed combination enhances Pfizer’s position as a leading company in oncology (SGEN closing price Friday was $172.61) ; 2) SNY to acquire PRVB, adding to portfolio TZIELD, the first disease-modifying treatment for the delay of Stage 3 T1D; holders to receive $25 per share in cash in deal valued at $2.9B, a 273% premium 

·     In other movers: ACAD said the FDA approved Daybue (trofinetide) for the treatment of Rett syndrome in adult and pediatric patients two years of age and older. BIIB’s Samantha Budd Haeberlein, the Biogen senior executive who supervised the development and controversial approval of the Alzheimer’s treatment Aduhelm, has left the company, STAT has learned . CALT announces primary endpoint successfully met in phase 3 Nefigard trial evaluating Nefecon in Iga Nephropathy. ILMN rises on reports activist investor Carl Icahn is gearing up for a proxy fight, planning to nominate three people to Illumina’s board, saying they could help resolve the company’s attempted takeover of Grail

·     In Wall Street research: at Wells Fargo they upgraded AMGN to Overweight as think the pessimism related to co post HZNP deal has caused weakness, & now see the stock trading ~7-8% below the worst case scenario. Firm downgraded MRK to Equal Weight as think with the recent appreciation of stock, MRK seems fairly valued at ~16x 2023 PE. There is also a lack of near-term catalysts and Keytruda LOE issues persist, potentially capping the valuation. Lastly they upgraded LLY to Overweight as recent weakness creates a buying opportunity and think fundamentals of the company remain the same, and at current levels risk / reward into donanemab Alzheimer’s trial may be skewed to the upside.

·     In other research: SAGE upgraded to Outperform from Sector Perform at RBC Capital and raised tgt to $60 from $40 saying their proprietary physician survey shows increased receptivity to lead value driving drug zuranolone vs. our earlier survey, leading US to take up their sales est. MRNA upgraded to Outperform at Cowen and raise tgt to $180 from $150 saying COVID is approaching its tail, as evidenced by expectations for >$5B. MRNA will be a leader in RSV, and they expect flu A VE data by month’s end to be superior.




·     AMAT raised its cash dividend by 23.1% and announces new $10 billion share repurchase.

·     LRCX downgraded to Market-Perform at Bernstein and downgrade Tokyo Electron to MP on valuation, maintain Outperform on AMAT, ASML saying they tweak their CY2023 WFE forecast upward a bit to US$78B (still down 20% YoY), mostly on more R&D from Samsung spends and strong backlog drawdown / ICAPS demand from AMAT. Samsung’s WFE capacity spend will fall ~20% YoY, but R&D will rise to keep the total WFE spend flat.


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.