Market Review: March 15, 2023

Closing Recap

Wednesday, March 15, 2023





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Stocks finish mixed in another big “buy the dip” moment for US markets as the tech heavy Nasdaq turned “green” late day in a 200-point bounce off morning lows, finishing at the highs. Stocks were lower most of Wednesday as pressure in the financial sector increased with shares of Swiss Bank Credit Suisse tumbling to record lows after their top shareholder ruled out investing more. In recent days, a crisis in the financial sector has centered around regional banks as Silicon Valley Bank and Signature Bank collapsed, casualties in the face of eight aggressive interest rate hikes by the Federal Reserve in the last 12 months. Attention turned to the big banks on Wednesday as Bloomberg reported midday that the Treasury Department is actively reviewing the U.S. financial sector’s exposure to Credit Suisse, working closely with European regulators. Stocks spiked late day above an intraday 40-point trading range (3,840-3,875) after headlines showed Switzerland held talks to stabilize Credit Suisse indicating options include statement of support, backstop also include Swiss spin-off, UBS tie-up.

·     Amazingly, financials were not the worst sector in the S&P, with that dubious honor going to energy (XLE) falling over 5% as oil prices fell to lowest levels in roughly 15-months below $66 per barrel. Industrials and Materials also fell over 3.5% as commodity prices tumbled on growth fears given bank woes, rate outlook. Goldman Sachs said the U.S. economy is expected to grow 1.2% in 4Q compared with the same quarter y/y, down from a 1.5% expansion previously expected as ongoing pressure could cause smaller banks to become more conservative about lending in order to preserve liquidity. Smallcap Russell 2000 declined over 3% amid the weakness in SMID banks and energy companies.

·     Markets didn’t bounce early despite favorable economic data for the interest rate environment, as both U.S. producer prices and retail sales both declined in February (along with weakness in NY manufacturing), giving Fed officials more room to potentially pause rate hikes next week and going forward. Interesting note that stock buyback blackout period begins tomorrow ahead of earnings next month. Large cap tech held up well in today’s volatility with likes of MSFT, GOOGL, AMZN, NFLX among leaders (QQQ turned positive late day). Defensive utilities (XLU) and Staples (XLP) were also leaders on the day.


Economic Data:

·     PPI inflation lower than ests and prior month. Headline February producer price index (PPI) fell -0.1% vs. expected +0.3% m/m (after +0.7% in Jan) and y/y prices rise +4.6% vs. economist views +5.4% (vs. last month +6.0%). On a core basis, or excluding food & energy, PPI was flat vs. expected rise +0.4% (vs. +0.5% in Jan) and rose +4.4% vs. estimate +5.2% y/y (vs. +5.4% in Jan).

·     Retail Sales for Feb reported at (-0.4%) vs. consensus (-0.3%) and down from January +3.2%; Feb Retail Sales Ex-autos fell (-0.1%) vs. est. (-0.1%) and January +2.4%; Feb Retail Sales Ex-autos/gasoline unchanged vs Jan +2.8% (prev +2.6%).

·     NY Fed’s empire state current business conditions index tumbles -24.6 in March vs -5.8 in February as new orders index -21.7 in March vs -7.8 in February, prices paid index +41.9 in March vs +45.0 in February, employment index at -10.1 in March vs -6.6 in February and six-month business conditions index +2.9 in March vs +14.7 in February.

·     U.S. March NAHB Housing market index 44 versus 42 in February; current single-family home sales 49 versus revised 47 in February (previous 46); index of home sales over next six months 47 versus 48 in February; index of prospective buyers 31 versus revised 28 in February (previous 29).



·     Oil prices drop more than 7%, crossing below the $66 per barrel threshold for first time since December 2021, and hit a new 52-week low of $65.65 as investors shun riskier assets in the wake of the failures of SVB and Signature Bank. Oil prices have declined by over 10% the past three days alone in the wake of the bank failures, along with other factors including: the IEA monthly oil report showed elevated supplies of sanctioned Russian crude reaching the market, and bearish weekly inventory data. WTI crude is now down more than 14% this year and down 47% from last year’s peak of $130/barrel. Gold prices settle at $1,931.30 an ounce, rising $20.40 on the day. A rough day for commodities in general, including industrial metals.


Currencies & Treasuries

·     The dollar bounced, largely behind weakness in the Euro following banking industry concerns, dropping as much as 2% to $1.0516, lowest since early January. The Financial Times reported the EU to speed up work on rules for failing banks in response to U.S. crisis. @charliebilello noted the 2-Year Treasury yield is now under 4%. A week ago, it was above 5%. This is the largest 5-day decline since the October 1987 crash. Market is calling the Fed’s bluff on further tightening after next week’s FOMC meeting next week. Fed Funds Futures: 1 more hike, then rate cuts. The 10-yr yield hits lowest since Feb 3rd (below 3.4%) and the 2-yr lowest since Sept 13th.  






WTI Crude















10-Year Note





Sector News Breakdown


Retail, Consumer Staples & Restaurants:

·     Kellogg (K) unveils names for global snacking and north American cereal businesses following planned separation — Global snacking business to be named Kellanova. N.A. cereal business to be named WK Kellogg Co Kellogg’s brand to remain on product packaging of both companies.

·     OTLY Q4 revenue rises 4.9% to $195.1M, topping ests for $181.5M and forecasts annual revenue growth largely above Wall Street expectations, as sees full-year revenue growth of 23% to 28% compared with analysts’ average estimate of a 25.10%.

·     In beauty, COTY raised its fiscal Q3 core LFL sales growth tracking at +10%, reflecting an acceleration from the +7% core LFL sales growth in Q2. As a result, Coty now expects its FY23 core LFL sales growth to be at the upper end of its prior guidance of 6-8% core LFL sales growth.

·     Retail sector falls with broader market concerns; GES slides after results Q4 top and bottom line beat but sees 1Q revs -7% to -6% vs est. +3.8%, adj EPS ($0.31)-($0.25) vs est. $0.52; guides FY revs +1-3% vs est. +3.9%; LVLU 4Q revenue decreased 6% y/y to $91M, with a 17% increase in active customers to 3.223M, offset by a 2% y/y decline in AOV to $119 (down 11% q/q) while gross margin was pressured; COOK downgraded to Neutral ahead of Q4 earnings on Thursday at Piper as recommend DTC; H reported a 3% sales rise in local currencies in the December to February fiscal quarter, having previously announced December to January sales rose 5%.


Leisure, Gaming & Lodging:

·     In leisure: HOG upgraded to Hold from Underperform at Jefferies with an unchanged price target of $39 saying they see a more balanced risk/reward, but firm remains cautious on Harley-Davidson’s retail demand stabilization amid a shaky macro backdrop.

·     In lodging and rentals: VCSA shares plunge over 30% after the vacation- rental management company’s full-year revenue forecast fell short of expectations.


Homebuilders, Building Products, Home Furnishing:

·     Homebuilders get a bump higher as LEN earnings beat with Q1 adj EPS $2.12 vs. est. $1.55; Q1 revs rose 4.6% y/y to $6.49B vs. est. $5.99B; Net new orders fell -9.9% y/y to 14,194 but above views; qtrly deliveries increased 9% to 13,659 homes (also helping builders a sharp drop in Treasury yields and rate expectations, lowering mortgage rates – as well as sharp decline in commodity costs with steel, copper, aluminum names falling).

·     In Home Improvement retail: Barclay’s said analysis of HD/LOW’s transactions by price point using Barclays card data shows a moderation in big ticket sales through Feb., continuing the trend they cited in Jan., and consistent with Q4 results.

·     In weekly mortgage data: MBA said weekly total application volume rose 6.5% last week compared with the previous week, mortgage applications to purchase a home rose 7% for the week but were still 38% lower than the same week one year ago. Applications to refinance a home loan increased 5% for the week but were 74% lower than the same week one year ago.


Energy, Industrials and Materials

·     Energy stocks were among the biggest decliners in the S&P (HAL, MRO, APA, SLB, DVN) as oil prices drop more than 4%, crossed the $70 per barrel threshold for first time since December 2021, and hit a new 52-week low of $68.58 per barrel as investors shun riskier assets in the wake of the failures of SVB and Signature Bank. WTI crude is now down more than 14% this year and down 47% from last year’s peak of $130/barrel. Broad weakness in solar space as well (NOVA, RUN, ARRY, CSIQ) as well along with energy. XOP tumbles with broader energy weakness, falling for the 7th time in 8-days and oil breaks below $66 per barrel.

·     Inventory data: EIA reported Crude inventories 1.55M build vs. consensus of 417K build. Gasoline inventories 2.06M draw vs. consensus of 1.4M draw. Distillates 2.54M draw vs. consensus of 1.26M draw. Weekly API data shows a build of 1.155 million crude oil inventories; Gasoline inventories fell by 4.587 million barrels; Distillates fell by 2.886 million barrels.

·     Dow Transports underperform for a second day, falling below its 200-day MA support last 2-days of 13,900 amid broad sector weakness; in rails, NSC downgraded from Buy to Hold at Argus noting it has come under the withering eye of regulators and the U.S. Senate in the wake of two of its trains derailing in Ohio in February, along with a fatal collision with a dump truck. The Surface Transportation Board of the U.S. approved CP’s $31 billion acquisition of railroad company Kansas City Southern with a series of environmental and competition conditions.

·     In metals: STLD guides Q1 EPS $3.47-$3.51 vs. est. $3.10 saying sees 1Q profitability from steel and recycling operations meaningfully stronger than 4Q and raised its dividend; prior to the guidance, Citigroup had downgraded STLD to Neutral saying they were structurally bullish on steel but sees short-term headwinds. In aluminum, AA shares fall after co’s Australia unit to cut Portland aluminium smelter output to 75% capacity. Precious metal stocks rise, led by gold miners along with spike in gold on rotation into haven assets (AEM, NEM, GDXU, GOLD).



Banks, Brokers, Asset Managers:

·     Shares of European banks fell sharply overseas after Credit Suisse (CS) shares hit a new record low and 5-yr credit default swaps (CDS) hit record highs after the Swiss bank’s top shareholder Saudi National Bank ruled out investing more. Several European banks were halted after falling sharply this morning on the headlines as weakness carried over to the U.S banks. Soc Gen, BNP, Commerzbank, Deutsche Bank, UBS all pressured early. Regional banks again all over the map today, big swings higher to lower as investors look for possible contagion fears from SIVB, SBNY fallout, while others look for cheap banks to buy (FRC, WAL, PACW, CMA, FHN, ZION, TFC active)

·     BLK CEO Larry Fink warned the U.S. regional banking sector remains at risk and predicted further high inflation and rate increases. Fink described the financial situation as the "price of easy money" and said in an annual letter that he expected more Fed rate hikes. He said that after the regional banking crisis, "liquidity mismatches" could follow because low rates have driven some asset owners to raise their exposure to higher-yielding investments that are not easy to sell.

·     In closed bank news: SIVB confirmed that Silicon Valley Bank sold a portfolio of securities with a book value of $23.97 billion to GS last week before the bank was shut down by the FDIC. The sale of the portfolio to Goldman resulted in a net loss for Silicon Valley Bank of about $1.8 billion, according to an 8-K filing on Tuesday. ; SBNY was being investigated by the U.S. Justice Department for its work with crypto clients before it was seized by regulators over the weekend, according to a new report from Bloomberg overnight.


Consumer Lending:

·     Rising net charge offs (NCOs) and delinquency payments in credit card sector after monthly data, a cautious sign that consumers falling behind on payments:

·     COF reported charge-offs for February of 4.16% vs. 2.19% y/y; February Delinquencies 3.72% vs. 2.51% y/y; a sharp spike from prior month.

·     DFS February net charge-offs (NCOs) 3.4% vs. 2.02% y/y, while delinquencies 2.74% vs. 1.79% y/y; Loans at end-February $89.6b vs $73.1b y/y.

·     JPM credit card charge-off rate 1.33% in Feb vs 1.17% in Jan and credit card delinquency rate 0.88% at Feb end vs 0.83% at Jan end

·     SYF said loan delinquencies was at 3.9% in February, compared with 3.8% in January and 2.9% a year ago. Net charge-offs were 4.7% in February, up from 4.2% in January and from 2.8% y/y; loan receivables were $90.7 billion in February, down 0.9% from $91.5 billion in January.



Internet, Media & Telecom

·     Several large cap tech names stay strong on day, helping major averages pare losses as AMZN, GOOGL, META, NFLX, MSFT among leaders’ midday.

·     TikTok leadership is discussing the possibility of separating from ByteDance Ltd., its Chinese parent company, to help address concerns about national security risks – Bloomberg.

·     META is winding down plans to push non-fungible tokens, or NFTs, to users from content creators — a symptom of both the limits of growth at the beaten-down tech company and waning interest in digital assets more broadly – Barron’s reported.

·     TMUS is buying Mint Mobile, the budget wireless provider part owned by actor Ryan Reynolds, for as much as $1.35 billion.

·     Diamond Sport Group, an unconsolidated and independently run subsidiary of Sinclair Broadcast Group, filed for bankruptcy protection on Tuesday – CNBC reported


Hardware & Software movers:

·     In security software: SentinelOne (S) reported 4Q results with non-GAAP EPS of ($0.13) (consensus ($0.16)) on revenue of $126.1M (consensus $124.7.0M), up 92% y/y, marking the sixth consecutive quarter of over 25% y/ y operating margin expansion.

·     Software: SMAR January quarter results beat consensus estimates across the board despite a macro that continues to weaken for the company while FY24 billings and revenue guides came in moderately below expectations. QTWO downgraded t Hold at Canaccord and slash tgt to $25 from $60 saying with Silicon Valley and Signature Banks gone in a flash, the regional banking sector could come under more pressure over the coming months. ADBE reports tonight.

·     Samsung Electronics expects to invest $230 billion over the next 20 years to develop what the country’s government called the world’s largest chip-making base, in line with efforts to boost the national chip industry. Samsung’s around 300 trillion won project is part of a 550 trillion won private-sector investment plan unveiled by the government on Wednesday.


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.