Market Review: March 17, 2023

Closing Recap

Friday, March 17, 2023





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Fear and uncertainty guided trading again today, as US equities failed to extend yesterday’s strength. There was little on the economic calendar to push sentiment meaningfully in either direction, as industrial production came in slightly below expectations and University of Michigan preliminary sentiment for March also came in a little light, but inflation expectations came down. Investors continued focus on regional banking fears and to discount the Fed’s higher for longer commentary, with the December implied rate dipping below 4% today vs 5.5% December implied just over a week ago. Equities started the day a bit weak, slid into mid-day and never were able to generate much of a rally.

·     Data-wise, there wasn’t much optimism out there today. @Bespokeinvest highlights an 11-month slide in leading indicators, crude oil at a 52-week low, the largest single-week decline in the 2-year yield since 1987, deeply inverted yield curves and the 20+% decline in bank stocks over the last couple weeks. Similarly, @LizAnnSonders points out the Leading Economic Index dipped in February by 0.3% month/month, bringing year/year change down to -6.5%, a rate historically consistent with recessions. Lastly, @KobeissiLetter points out what many investors already seem to be thinking: the $30B deposit program for First Republic Bank may really just have spread the risk from small banks to large banks, not offering a real solution.

·     Heading into the final hour of trading, Financials (XLF, -2.95%) were leading the way lower again, with Industrials (XLI, -1.7%), Real Estate (XLRE, -1.6%) and Energy (XLE, -1.5%) tightly clustered behind. Only Information Technology (XLK, -0.04%) had seen green, but couldn’t hold gains. Both Growth and Value slipped, with Value -1.9% and Growth -0.80%, again showing the relative strength in large-cap technology names. Breadth was solidly negative much of the day, holding at about 3.5:1 in favor of decliners into the last hour.

·     Liquidity driven gains: @GordonJohnson19 tweeted: “Liquidity exploded higher this week. That is, while everyone is focused on the +$297.017bn in "not QE" the @federalreserve did this week, what they are failing to also acknowledge is the +$100.484bn @SecYellen infused into mkts this week, as well as +$37.494bn in RRP that flooded the mkt. So, Fed + Yellen + RRP = $434.995bn that has flooded the US mkts JUST THIS PAST WEEK (this is GREAT for all risk assets – the S&P 500 is HIGHLY correlated to net liquidity from the Fed + Treasury + RRP). But, that’s not it; that is, when looking at the balance sheets of all the world’s key central banks (Fed + ECB + BoJ + BoE + PBoC + BoK + BoC + BCB + SNB + CBC), the ECB’s/BoJ’s bal. sheets expanded +$32.9bn/+$86.5bn this week, in addition to the Fed’s +$297bn, or a net weekly gain of +$416.4bn. Translation? Liquidity is SURGING, again, meaning risk assets have a friend in the world’s central banks. Call it QE, call it "not QE"; call it what you want. But, in general, when liquidity goes higher, SO DO RISK ASSETS (money losing meme stocks + worthless NFTs/crypto + bad companies).


Economic Data:

·     Industrial Production for February was unchanged vs. consensus +0.2% and below Jan +0.3%; Capacity utilization rate 78.0% vs. est. 78.4% and in-line with January; U.S. Feb manufacturing output +0.1% vs. est. (-0.2%) and Jan +1.3%

·     University of Michigan Consumer Sentiment reported at 63.4 vs. est. 66.9; the 1-Year Inflation Expectations: 3.8% vs. prior 4.1% and the 5-Year Inflation Expectations rose 2.8%, vs. est.2.9%.

·     U.S. leading index fell another -0.3% to 110.0 in February after slipping -0.3% to 110.6 (was 110.3) in January. This is an 11th consecutive monthly drop, the longest since the 24-month slide in 2008-09. It is the lowest since February 2021.



·     After looking stronger into the open, WTI April crude futures slipped $1.61, or -2.36% to settle at $66.74/bbl, while Brent fell $1.73, or 2.32% to finish at $72.97/bbl. The WTI settlement marked the lowest level since December 2021, despite a mid-day bounce that kept futures off their lows of the day. The move completed the largest weekly drop since June for WTI and August for Brent, with both WTI and Brent also marking fifteen-month lows.

·     April gold settled +$50.50/oz, or +2.62%, at $1,973.50. Gold has returned to safe-haven status thanks to the recent bank-related turmoil, finishing at the highest level in eleven months and posting the best weekly gain in almost three years. Next week’s Fed activity will propel the next move, with many investors expecting a raise and pause stance.







WTI Crude















10-Year Note





Sector News Breakdown

Consumer sector

·     In autos: XPEV reported Q4 losses that were wider than expected (RMB2.74 a share, from RMB1.51 a share, y/y), revenue dropped 39.9% to RMB5.14B vs. est. RMB5.61B, while deliveries fell 46.8% to 22,204 EVs and gross margin contracted to 8.7% from 12.0%.

·     In retail: BBWI downgrading to Hold from Buy at Argus given the increasing pressure from online retailers and economic uncertainty, they downgrade; discount retailer DG downgraded to Hold from accumulate at Gordon Haskett after earnings.


Energy, Industrials and Materials

·     In energy: US oil rig count down 1 to 589 US total rig count 754 – US gas rig count up 9 to 162 – Baker Hughes reported in its weekly update

·     In transports: FDX rises as Q3 EPS $3.41 vs. est. $2.73; Q3 revs $22.2B vs. est. $22.74B; raises FY23 EPS view before-MTM ex-costs to $14.60-$15.20 from $13-$14 (est. $13.56), while backs FY23 capex view of $5.9B

·     In steel sector: U.S. Steel (X) guides Q1 adj EPS $0.58-$0.63 vs. est. $0.41; guides Q1 adj EBITDA $375M vs. est. $304.8M; Mini Mill segment is expected to return to positive EBITDA in Q1. Gold miners saw early strength (NEM, AEM, GOLD) as gold spiked amid another rotation into haven assets given stock market volatility and bank uncertainty into weekend.

·     In solar: shares of ENPH, RUN, SEDG, NOVA extend recent pullback amid increased perception of risk for the broader solar industry particularly for rooftop solar due to uncertainty in the financial sector (Silicon Valley Bank, Credit Suisse, etc.). BMO noted while the sector is dependent on well-functioning credit markets, they see the average -13% decline in our solar coverage since 3/9/2023 (TAN -6% and SPX +1%) as having overshot to the downside.



Banks, Brokers, Asset Managers:

·     U.S. banks borrowed almost $165 billion from the Federal Reserve in the past week after the failure of Silicon Valley Bank, according to data released Thursday. Financial institutions borrowed $153 billion through the Fed’s existing emergency loan program and $11.9 billion was borrowed through a new Bank Term Funding Program established by the central bank.

·     FRC shares continue volatile week, falling -30% after its board suspended its dividend last night, sending shares lower a day after 11 major lenders deposited $30 billion in the bank in an effort to stop a spreading financial panic following two bank failures (stock downgraded to Neutral and tgt slashed to $5 from $140 at Wedbush) – regional banks fall again: USB, CMA, ZION, TFC, KEY

·     In Bitcoin/crypto: what a week it has been, with Bitcoin rising over 30% on signs the Fed will soon stop hiking rates after tamer PPI inflation data and the recent turmoil in the banking sector; shares of cryptocurrency-exposed stocks have been moving higher (MARA, RIOT, COIN, MSTR, HUT) as Bitcoin extended its gains, rising back above the $26,500 threshold.

·     In insurance: CB upgrade to Overweight at JPMorgan saying the long-term fundamental outlook for CB has been positive but have been reluctant to recommend the stock due to concerns about slowing price hikes in the commercial lines market and the stock’s valuation.



Biotech, Pharma, MedTech:

·     ACER said its experimental drug, ACER-801, did not achieve statistical significance in decreasing the frequency or severity of hot flashes in post-menopausal women in a mid-stage study.

·     CUTR filed an NT 10-K on 2/28, stating it would miss its March 1 10-K deadline and disclosed material weakness in internal control over financial reporting and cited a 15-day grace period.

·     GOCO print was overshadowed to a large degree by a lookback adjustment to revenue, which like 4Q21, drove a significant headline miss, said RBC Capital.

·     SRPT shares tumble as the company’s proposed gene therapy for Duchenne muscular dystrophy will now face an FDA advisory committee before its application deadline in late May, two weeks after Sarepta indicated regulators weren’t planning such a panel.



Internet, Media & Telecom

·     BIDU said it had won a permit to provide a fully driverless ride-hailing service in the Chinese capital of Beijing.

·     GRPN posted Q4 adj EPS loss of (-$0.38) vs. profit last year and revs fell -34% y/y to $148.2B mln vs $217M year prior and withdraws previously issued full-year free cash flow and adj. EBITDA margin forecast citing turnaround strategy.

·     WBD was upgraded at both Wolfe Research and Wells Fargo

·     In software, RNG downgraded to Perform from Outperform at Oppenheimer saying its next leg of growth will stem from the convergence with digital AI assistants, which will require investment.

·     In semis: NVDA was upgraded to Overweight at Morgan Stanley saying they still see indications that LLM enthusiasm is turning into stronger spending both near term and long term; AMD tgt raised to $120 from $110 at Cowen after mgmt meetings; the group has had an incredible run all week with the Philly semi-index (SOX) rising above 3,100 this morning before fading.


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.