Market Review: May 18, 2023

Closing Recap

Thursday, May 18, 2023





DJ Industrials




S&P 500








Russell 2000













U.S. stocks just continue to climb the wall of worry, with the S&P 500 (SPX) again nearing the top end of its 3,800-4,200 range (been stuck for a few months now), with massive outperformance for a second straight day in technology as large cap names keeping major averages higher. The push towards “AI” has been the tailwind for chipmakers AMD, NVDA and those also involved in the sector GOOGL, MSFT. Note performance since the launch of ChatGPT: MSFT +24% and GOOG: +21%. Those names, along with the likes of TSLA, AMZN, AAPL, NFLX have propelled the Nasdaq to 20% gains YTD and the Nasdaq 100 up more at 26% YTD. Technology (XLK) is up 26% YTD and communications (XLC) up 28% YTD, followed up by Consumer Discretionary (XLY) +17.5% YTD. The next best sector is Industrials (XLI) at +1.4% while Energy, Financials, REITs, Utilities, and Healthcare are all down on the year. Even a spike in the U.S. dollar and Treasury yields failed to take some of the shine off big tech with the 10-yr at 3.65% (2-month highs) and the 2-yr above 4.2%. Debt ceiling talks remain an important aspect for stocks, after President Joe Biden and McCarthy reiterated Wednesday their aim to strike a deal soon to raise the $31.4 trillion federal debt ceiling and agreed to talk as soon as Sunday when Biden retuned back from his G7 trip. Economic data was mixed today as weekly jobless claims were lower than expected as the jobs market remains resilient, though the median price of an existing home sold in the US was down 1.7% over the last year, the largest YoY decline since 2012. Leading Indicators fell for the 13th consecutive month, down -0.6% and was in-line with consensus estimates. Overall, absolutely nothing has remotely derailed this tech driven rally to start the year (making up for declines last year), with three of the largest bank failures on record, weak economic data, stubbornly high inflation (though it has decelerated), weaker economic data, and geopolitical concerns with China, Russia, etc. failing to scare investors. Earnings season was better than feared, helping the last few weeks, especially for the large cap giants. Stocks closed around the highs heading into monthly option expiration.


Economic Data

·     Weekly Jobless Claims fell to 242K from 264K the prior week and below consensus of 254K; the 4-week moving average fell to 244,250 from 245,250 the prior week; continued claims fell to 1.799M from 1.807M prior (est. 1.818M) mln).

·     The Philly Fed Business Index actual reading reported at negative -10.4 better than forecast of -20 and prior -31.3.

·     Existing Home Sales for April fell -3.4% M/M to 4.28M-unit rate below consensus 4.30M and down from March at 4.43M; inventory of homes for sale 1.04 mln units, 2.9 months’ worth; the April national median home price for existing homes $388,800, -1.7% from April 2022.

·     The Leading Index for April fell for the 13th consecutive month, down -0.6% and was in-line with consensus estimates – matches longest streak of declines dating back to 2007-2009 where there were 24 consecutive months of declines (as per CNBC). 


Commodities, Currencies & Treasuries

·     Treasury yields pushed to highest levels in over 2-months, as the 10-yr rose 6-bps to 3.64% and the 2-yr yield gained 7.5 bps to 4.23%. The bounce in Treasury yields and the dollar weighed heavily on precious metals prices and commodities in general. After the weekly jobless claims data this morning, Fed futures now show a 40% chance of a 25-bps rate “hike” in June, up from ~5% last week. Futures now see just a 4% chance of rate cuts beginning in July and 26% chance in September (sharply lower from levels seen just 2 weeks ago). Meanwhile not one Fed member has said that they intend to make any rate cuts in 2023 (while futures/markets forecasting at least 2-cuts) – a massive disconnect remains between the Fed and markets! Bitcoin prices failed to rally with markets, down at $27K.

·     Oil prices slumped along with other commodity prices as the recent dollar bounce has weighed on sentiment. NYMEX WTI Crude June futures settle at $71.86 a barrel, down 97 cents, 1.33% while Brent Crude falls -$1.10 or 1.43% to settle at $75.86. Natural gas prices jumped 9.6% to close at $2.592/MMBtu, the highest settlement price since March 13. A weekly report from the EIA on gas inventories came in slightly bullish compared to forecasts.

·     June gold futures slid for a third consecutive session to settle -$25.10, or -1.26%, to $1,959.80/oz. The settlement again marked the lowest level since late March, and left futures on pace for the largest weekly decline since October. The pullback came as traders continued to hope for resolution on the US debt ceiling, yields on US treasuries gained and pressure from a stronger US Dollar resumed. 






WTI Crude















10-Year Note





Sector News Breakdown


Retail, Staples & Restaurants:

·     WMT posts beat with US comps growing 7.3% and a stronger EPS beat on the quarter all generally ahead of expectations; gross margins beat by 18bps and opex beat by 35bps; boosted its adjusted earnings per share forecast for the full year (raises FY24 EPS to $6.10-$6.20, from prior $5.90-$6.05 and vs. est. $6.14) – followed mixed results/guide from TGT Wednesday, as those shares gave back all of yesterday gains.

·     BABA shares fall following mixed Q1 results; 2% rise in revenue from a year earlier, below analysts’ expectations and underscoring China’s weak post-pandemic economic recovery.

·     BBWI posts Q1 beat with sales in-line with the street and guidance (-4%) but gross margins beat by 140bps, which is better than expected.

·     BOOT shares slid after Q4 net sales missed estimates and provided a forecast for the year that failed to match expectations; FY24 EPS guidance had been impacted by investments in new stores and a new distribution center.

·     GOOS shares erase early gains; earnings boosted from China as grew total rev 31.4% with strong growth from Asia Pacific and EMEA2 of 65.4% and 27.3%, respectively.

·     PG downgraded to Hold from Buy at Truist saying the stock’s current valuation now fully reflects its cost-cutting/turnaround efforts.


Leisure, Gaming & Lodging:

·     BOWL shares tumbled as management’s commentary about "softening" trends overshadowed a top and bottom-line beat, with both revenue and profitability coming in ahead of expectations amid ~17% y/y same-store-sales growth.


Energy, Industrials & Materials

·     U.S. natural gas futures jumped to a two-month high on a much smaller than expected U.S. storage build and as wildfires kept gas exports from Canada near a 25-month low The U.S. EIA said utilities added just 99 billion cubic feet (bcf) of gas to storage during the week ended May 12. That, however, was still more than usual for this time of year because mild weather kept demand for the fuel low for both heating and cooling.

·     In solar: CSIQ Q1 EPS $1.19 vs. est. $0.61; Q1 revs $1.7B vs. est. $1.71B; sees Q2 revenue $2.4B-$2.6B, consensus $2.31B and raises FY23 revenue view to $9B-$9.5B from $8.5B-$9.5B (vs. est. $9.22B); Wells Fargo said Treasury released guidelines around domestic content, but the rules fall short on clarity. Based on our assumptions they see this as positive for FSLR , mixed for ENPH , near-term negative for RUN, NOVA and unclear.

·     In utilities: the defensive sector pressured as investors continue to pile into high growth sectors and ditch defensive/haven related sectors (Utes, staples, Healthcare); WEC upgraded from Neutral to Buy at Mizuho noting shares have underperformed the UTY by ~4% over the past two months due to regulatory concerns in WI (50% of asset base exposed) and IL (17% of asset base).

·     In transport: FDX positive mention at Deutsche Bank, placing a near-term Catalyst Buy Rating as firm believes upcoming results next month can be a meaningful positive catalyst for shares.

·     In industrials: WMS shares rise after Q4 beat for EPS and revenues; GE announced new CFO transition; in building products, EXP posted top and bottom-line beat.

·     In lithium sector: ALB upgraded from Neutral to Buy at UBS and raise tgt to $255 from $196 saying a lot of the risks already in the stock as firm estimates ALB is pricing in ~$20/kg lithium prices – sees these assumptions as too bearish. SQM is set to start talks about lithium projects with state miner Codelco in the coming weeks, the firm’s CEO said today.

·     In Metals & Mining: commodity names in general lagged as the dollar bounce, weighing on metals such as gold and silver and dragging down miners (NEM, AEM, GOLD, PAAS).



Banks, Brokers, Asset Managers, FinTech:

·     SCHW said late Wednesday it is planning to sell $2.50 billion in two senior notes offerings; to sell $1.20 billion in fixed-to-floating rate senior notes due 2029 and $1.30 billion in notes due 2034.

·     FUTU downgrade to underweight from equal weight at Morgan Stanley and cut its price target to $34 from $44, citing risks to the trading platform’s assets under management after the company curtailed its offerings in China (also downgraded at JPMorgan).

·     UPST extends rally after earnings pop last week; shares at best levels since early February).


Insurance & Services:

·     ALL said estimated catastrophe losses for month of April of $799 mln or $631 mln, after-tax; during April, Allstate brand implemented auto rate increases of 8.6% across 13 locations, resulting in total brand premium impact of 1.6%.

·     Bank America upgraded CINF to Buy, while downgraded THG to Neutral and SIGI cut to Underperform in regional insurance sector saying key themes from the quarter include elevated catastrophe losses from an early start to spring storm season, reinvigorated property rate increases, and continued margin pressure from inflation.



Biotech & Pharma:

·     CVS, CI and other PBM’s slip after reports the FTC had sought information from two privately held companies (Zinc Health Services and Ascent Health Services) as part of its probe into how pharmacy benefit managers (PBMs) affect pricing of prescription drugs.

·     EYPT announces sale of Yutiq® to Alimera sciences, Inc. for $82.5 million cash plus royalties.

·     NSTG shares tumble after TXG said it won an injunction in its patent litigation against NSTG and NanoString Technologies Germany.

·     PFE continues to underperform large cap Pharma, falling an 8th straight day.

·     TEVA upgraded from In Line to Outperform at Evercore/ISI noting the last few years, net debt has been cut in half, its opioid lawsuits have been settled and its base business has "generally stabilized," saying very interesting setup has emerged.



Internet, Media & Telecom

·     NFLX rises after mgmt presentation; Oppenheimer said company showed: 1) ad tier has ~5M MAUs, significantly more than the 1M reported by third parties; 2) represents 25% of new subscribers in respective geographies; 3) viewed 80% on TV; and 4) average age of 34, all of which helps support the premium ad prices.

·     DIS canceled plans to relocate 2,000 jobs to Florida in part because of "changing business conditions" in the state; said to Shutter Star Wars-Themed Hotel in Florida.

·     META: Bespoke invest notes today marks the 11th anniversary of Facebook’s IPO. During that span, the stock has rallied over 500% or 18% annualized.

·     MSGE shares jumped after reporting pre-mkt EPS and revs Y/Y beats & guidance issue.

·     TikTok is facing its first ban by a US state over national security concerns after Montana’s governor signed a bill prohibiting downloads of the social media app.


Hardware & Software movers:

·     In AI: OpenAI just introduced a ChatGPT app for AAPL IOS and said ChatGPT will be coming to Android (GOOGL) devices soon.

·     In networking/equipment: Dow component CSCO delivered an April quarter beat-and-raise, but orders came in weaker than expected, down -23% and were slightly worse than expectations.

·     In software: NEWR shares rose late Thursday after the WSJ reported Private-equity firms Francisco Partners and TPG are working together on a $5 billion-plus bid to acquire the software company, according to people familiar with the matter. . LSPD shares declined after lower Q1 rev guidance $195M-4200M vs. est. $206M) and FY24 revs disappoints ($875M-$900M vs. est. $897.2M).

·     In the EDA sector: SNPS posted a ~$15M revenue beat on broad-based strength, and modestly raised FY23 guidance by $10M at the midpoint while highlighted an uptick in 2H pipelines for IP.

·     In video games: TTWO reported Q4:F23 results that beat top-line guidance and were in line, provided below consensus guidance for FY:24, but released a FY:25 guide that calls for bookings growth of over roughly $2.5B and signals the long-awaited GTA 6 is coming in FY25.



·     Non-stop strength nearly every day of late for the semi-sector as investors chase chip names on rising AI hope theme; AMD, NVDA continue to lead the pack.

·     MU said it plans to invest up to 500-billion-yen ($3.70 billion) in extreme ultraviolet (EUV) technology over the next few years with support from the Japanese government.

·     The Philly semi-index (SOX) extends gains, trading to best levels since end of March.


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.