Market Review: March 27, 2023

Closing Recap

Monday, March 27, 2023





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks finish mostly higher, with the tech heavy Nasdaq lagging, but main indexes hold above key levels yet again amid easing financial banking fears as the upside momentum in U.S. stock markets continue. Treasury yields finished near their highs following a rotation out of haven assets (gold also tumbled) and a weaker 2-year auction. No major economic data or Fed speakers to move markets. There was a small reversal of the 2023 trade today as the top S&P sectors year-to-date, Technology (XLK) and Communications (XLC), up +16.3% and +17.3% YTD respectively, were the biggest laggards Monday (MSFT, META, AAPL slip) while all other sectors were firmly positive amid strong market breadth all day, keeping U.S. major averages higher. The S&P saw different sector leaders today with tech lagging, helping hold above its key technical support levels despite several weeks of cautious market headlines including bank failures and liquidity concerns in the financial system, as well as a Fed that remains aggressive in fighting inflation, boosting rates again last week and geopolitical concerns. To no avail, the S&P remains above where it was prior to the SVB bank collapse and stuck in range of 3,800-4,100.

·     Several Fed speakers on deck this week after blackout period ended following another 25-bps rate hike last Wednesday. Fed’s Kashkari said over the weekend that the bank turmoil has increased the risk of recession. Multiple fed officials are scheduled to speak this week (Jefferson tonight, Barr, Barkin, Collins, Williams, Waller this week) and investors will look for commentary on how they plan to balance the war on inflation against rising instability at banks in this higher rate environment. Note the Fed’s preferred measure of inflation (PCE deflator) data is on Friday.

·     Some of Wall Street’s top strategists still cautious: JPMorgan’s Global Head of Macro Quantitative and Derivatives Strategy Marko Kolanovic continues to believe that Q1 will likely mark the high point for equities this year. Meanwhile, Morgan Stanley strategist Mike Wilson reiterated his cautious message that earnings guidance looks too high following the bank turmoil while JPM said this quarter likely marked the high point for stock this year.

·     Geopolitical concerns also remain: over the weekend, President Putin said Russia would station nuclear arms in Belarus. It was only last week, that Putin & XI signed a join China-Russia communique saying, "all nuclear powers must not deploy their nuclear weapons beyond their national territories, and they must withdraw all nuclear weapons deployed abroad.’’


Commodities, Currencies & Treasuries

·     Oil prices jump, extending last week’s advance after weeks of selling pressure (closed last week at $69.26 and versus $66.82 the previous Friday) as banking concerns ease a little, and despite comments from Putin over the weekend raising geopolitical tensions with his plan to station nuclear weapons in Belarus. WTI crude gains $3.55 or 5.13% to settle at $72.81 per barrel, though natural gas futures slide yet again. April natural gas dropped 13 cents, or 5.8%, to settle at $2.088 per million British thermal units (lowest since Feb). Gold prices fall -$30.00 or 1.5% to settle at $1,953.80 an ounce as investors fade haven related assets as banking concerns ease.

·     Treasury prices fall as yields climb as risk appetite and haven demand wane for the time being while markets await this week $120B in coupon auctions. The front end of the yield curve led the selloff in a bear flattener, though most of the curve is still below 4%. Yields extended gains in the afternoon as the U.S. Treasury sold $42B in 2-year notes at a yield of 3.954%, above the 3.927% when issued prior at bid-to-cover ratio 2.44 (vs. 2.61 prior), with primary dealers take 23.03% of U.S. 2-year notes sale, direct 24.17% and indirect 52.8%. The10-yr yield rose about 15-bps to 3.525% while the 2-yr gains over 22-bps to 4%. Bitcoin falls below $27,000, and CFTC charges Binance for violating trading rules.






WTI Crude















10-Year Note





Sector News Breakdown


Autos, Leisure, Casinos:

·     In cruise lines: CCL Q1 revenue beats analysts’ estimates, helped by resilient demand and improving ticket prices as occupancy increased by seven percentage points compared to Q4 2022, driven by higher capacity.

·     For TSLA Barclays said they expect a "modest" delivery beat in Q1, with production modestly outpacing deliveries; expects Q1 deliveries of 425K-units, modestly ahead of the 420K est.

·     FSR added to Citigroup 90-day upside watch list.

·     HTZ said CFO to Leave Company, Alexandra Brooks Named Interim CFO.


Consumer Retail, Staples & Restaurants:

·     BRBR among those hitting 52-week highs in consumer space today.

·     IFF still sees 1q sales about $2.95b to $3B as they reconfirmed 1q guidance.

·     In food: SJM upgrade from Hold to Buy at Argus with $170 tgt saying Smucker is gaining market share as at-home consumption of food and beverages continues to exceed pre-pandemic levels.

·     In restaurants: WING downgraded to underperform from hold at Jefferies on skepticism that the stock offers any further upside/said valuations seem to reflect an overly optimistic view of n-t SSS momentum.

·     In retail: OLLI downgraded to Neutral from Buy at Citigroup noting merchandise margin dollars came in weaker than expected and implied guidance. Convenience store operator ARKO offered to buy truck stop operator TA for $92 per share, it said on Monday.


Homebuilders, Building Products, Home Furnishing:

·     For RH, Wedbush said they lean negative on RH into 4Q22 earnings on Wednesday, March 29 AMC. Says while the company has already indicated it expects 4Q results near the low-end of its guidance range, they expect that the company will point to a weak and uncertain demand environment when it provides its initial outlook for FY23.



·     Energy headlines: Shares of several international oil companies with operations in Iraq are sliding after a landmark court ruling stopped their oil flowing via Turkey to the global market. The ruling relates to a pipeline carrying 400,000 barrels daily from Iraqi Kurdistan, an autonomous region bordering Turkey, and 70,000 barrels more from federal Iraq. – WSJ.

·     In MLPs/Pipelines: 1) BEP said it will acquire Australian integrated electricity generator Origin Energy Ltd. with a consortium of other investors in a deal with an enterprise value of 18.7 billion Australian dollars ($12.43 billion). 2) ET to Acquire Lotus Midstream in a $1.45 Billion Transaction with SUN. Lotus Midstream Owns and Operates Centurion Pipeline, a fully Integrated Crude Pipeline and Terminal System in the Permian Basin.

·     In refiners: price tgt changes at TD Cowen saying they sees 12% upside to 1Q23 consensus EBITDA, with higher risk prints for names with elevated maintenance including PBF and PSX while DK has the most upside vs consensus. Said despite near-term downside risk, continue to expect cracks to maintain a high floor given elevated natural gas and RIN prices. Have 25% downside to 2H23 consensus EBITDA. CLMT $21 (Prior $23) DINO $50 (Prior $52) DK $20 (Prior $24) MPC $147 (Prior $143) PBF $43 (Prior $36) PSX $117 (Prior $118) VLO $146 (Prior $153).

·     In Industrials: Deutsche Bank noted in the wake of the Silicon Valley Bank and Signature Bank failures, many investors are growing worried that tighter credit conditions could impact project CAPEX in the sector. Firm said they find the highest exposures for TEX, VRT, and URI, and essentially zero exposure for AGCO, GE, IR, MMM, and ROK GE shares closed at fresh 5-year highs amid continued outperformances.



Banks, Brokers, Asset Managers:

·     FCNCA shares jump as announced the acquisition of failed SIVB out of FDIC receivership. FCNCA is getting $110 billion in assets (which will roughly double its asset base), $72B in loans and $56B in deposits. FCNCA entered a loss share agreement and equity appreciation rights with the FDIC.

·     Other regional banks moving higher (FRC, CFG, FITB, PACW, ZION, WAL and others) after reports this weekend from Bloomberg that US officials were said to consider more support for banks. Authorities would consider expanding an emergency lending facility that would give the bank more time to prop up its balance sheet.

·     Banking turmoil and recession risks are spelling trouble for the global IPO market, keeping it mired in a slump even after investors started the year thinking that the worst of the stocks rout might be over. Companies have raised just $19.7 billion via initial public offerings in 2023, according to data compiled by Bloomberg. That’s down 70% year-on-year.

·     In research: KEY upgraded from Neutral to Buy at Citigroup with $20 tgt saying while they see some near-term earnings headwinds, particularly on deposit balance outlook, KEY is the biggest beneficiary of fixed asset repricing which will be a nice tailwind in 2024-2025. MTB upgraded to Buy from Neutral at Citigroup with $155 tgt as see it well positioned in the current environment with ~50% of deposits FDIC insured so we see limited risk of deposit flight.

·     In Asset managers, VRTS and VCTR both upgraded to overweight from neutral and underweight, respectively at Piper saying the stocks are undervalued versus peers.


Bitcoin, FinTech, Payments:

·     In payments: MQ upgrade from Peer Perform to Outperform at Wolfe saying at only ~1x FY24 EV/GP, they believe the market is underappreciating MQ’s business.

·     In crypto, Binance and Binance CEO CZ sued by CFTC over regulatory violations; MSTR said during period between February 16, and March 23, Co and units acquired about 6,455 bitcoins for approximately $150.0 mln in cash and now holds aggregate of about 138,955 bitcoins, acquired at aggregate purchase price of about $4.14 bln.



·     In commercial property/REITs: @LizAnnSonders said “U.S. regional banks account for ~70% of all CRE loans; while S&P 500 Real Estate has lagged its parent index by 7% MTD, Markit CMBX BBB S14 Index (synthetic tradable index referencing basket of 25 CMBS), is -12% MT.”

·     In data center REITs: DLR downgraded to Market Perform at BMO Capital and lower tgt to $100 from $121 as believe DLR’s operating fundamentals are improving, demand remains largely healthy, and valuation is reasonable but leverage is too high at 7.1x. Firm upgraded EQIX to Outperform as view data centers as generally well-positioned to weather a challenged macro, and are encouraged by EQIX’s pricing power, the tailwind from strong bookings and lower churn, a $2.3B development pipeline, and services expansion.

·     Raymond James said they are refreshing multifamily estimates (CSR, EQR, ESS), lowering 2024 projections below consensus; reiterate Underweight sector rating relative to other REIT property types. Notably, they are not making any further stock-specific ratings changes at this time, given the group’s 15-20% price correction since early March. That said, we continue to have significant concerns that consensus expectations for 2024 FFO and AFFO remain far too optimistic.



Biotech & Pharma:

·     AZN said its drug Eplontersen showed positive results in a late-stage trial among hereditary transthyretin patients; said Eplontersen drug met its co-primary endpoints through 66 weeks in the NEURO-TTRansform Phase III trial.

·     BCLI rises as the FDA will convene a meeting of independent advisers to review a personalized cell therapy for ALS that the agency has previously refused to consider – STAT News reports

·     BNTX said it expects roughly EU$5B in sales of its Covid vaccine this year, widely missing expectations of 7.45 billion euros and said sales would dive more than 71%; shares of vaccine makers MRNA, PFE, NVAX lower initially.

·     IOVA said it has completed its Biologics License Application submission to the FDA for lifileucel in advanced melanoma.

·     NCNA shares slide as the European Patent Office issued judgment late on Friday declaring drug developer’s ‘190 patent’ as not valid.

·     NVS shares advanced following the announcement of the interim analysis of the NATALEE study of Kisqali in adjuvant HR+/HER2-breast cancer, which was stopped early by the independent data monitoring committee as the primary endpoint of invasive disease-free survival has been met.

·     NXRP said that an independent Data Safety Monitoring Board made a positive recommendation to continue enrollment in its ongoing trial of NRX-101 in patients with suicidal treatment-resistant bipolar depression.

·     RPRX announces $1B shr buyback.

·     UBX shares tumble after announces results from Phase 2 ENVISION Study showed UBX1325 monotherapy did not achieve non-inferiority through 24 weeks due, in part to an unexpected 3.5 letter gain in the anti-VEGF control arm.

·     VRTX and CRSP announce licensing agreement to accelerate development of Vertex’s hypoimmune cell therapies for the treatment of type 1 diabetes; VRTX to get non-exclusive rights to Co’s Crispr/cas9 to accelerate development of potentially curative cell therapies for t1d while CRSP to receive $100M upfront payment plus milestone and royalty payments.



Internet, Media & Telecom

·     Large cap tech lags for a change as AAPL, MSFT, META, AMD, NVDA lag broader mkt rally.

·     In telco, DISH downgraded from Buy to Neutral at UBS and slash tgt to $10 from $27 saying with sub losses continuing (including added pressure from the recent cyber security incident), wireless dilution ramping & wireless M&A less likely NT, they are more cautious on shares. FYBR downgraded to Underweight at Morgan Stanley and lower tgt to $19, given Frontier’s premium to Telco peers, rising risks to Fiber growth targets due to increasing competition, and recent plans for a slower Fiber expansion potentially delaying positive FCF generation.

·     In Internet, PINS upgraded to Buy at Citigroup and increase tgt to $35 from $27 with a risk/reward skew of 2.3 and 66% upside in our Bull case as increase ests for ’24 revs/EBITDA to 3/16% ahead of Street. Elon Musk said Twitter employees will receive stock awards based on a roughly $20 billion valuation, less than half of the $44 billion price he acquired the company for last year – WSJ reported.

·     U.S. listed Chinese companies slipped early (BABA, PDD, JD, NTES), tracking declines in their China-listed counterparts after monthly data showed profits at industrial firms in China declined in first two months of 2023; BIDU dropped its public launch of chatbot “Ernie.”


Hardware & Software movers:

·     In software: BLKB rises after its largest shareholder Clearlake Capital Group L.P. disclosed a bid to buy all the outstanding Blackbaud shares for $71 each, a 22.8% premium to Friday’s closing price of $57.83 in a deal valued at about $3.78 billion. . CRM shares active after Elliott Management Corp. said it no longer plans to nominate directors to the board of Salesforce Inc., avoiding a proxy fight.

·     GLW upgraded to Buy at Deutsche Banks as they believe 1Q23 results are likely to Mark the bottom for both revenues (+ YoY growth) and non-GAAP EPS.

·     RBBN shares fell after announced late Friday that it has priced a private placement financing of Series A preferred stock and warrants to purchase shares of common stock to raise gross proceeds of approximately $53.4 million.

·     ROKU was upgraded from Neutral to Positive w/ $75 PT at Susquehanna saying long-term drivers remain in play, while near-term business fundamentals appear to be bottoming. Despite near-term noise, they believe the long-term CTV opportunity remains intact.


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.