Market Review: October 06, 2023

Closing Recap

Friday, October 06, 2023





DJ Industrials




S&P 500








Russell 2000













U.S. stock markets enjoyed a much-needed bounce to close out the week, with the S&P posting a 100-point reversal off the lows, snapping its 4-week losing streak in the process while the Nasdaq made it 2 up weeks in a row despite a strong jobs report figure earlier this morning. It looked bleak initially as futures fell following a Sept jobs report that was almost double the economist’ expectation, ramping up fears of an additional rate hike in November from the Fed while the 10-year yield spiked back near 4.9% its highest in 16-years. However, S&P futures only traded as low as 4,242.25 this morning, still above its 200-day MA support around 4,230 and was still above Wednesday’s low of 4,235.50. That gave Bulls hope posting a bounce pre-mkt that continued into the afternoon as shorts covered. A few underlying bullish data points with the jobs data helped markets including: 1) average hourly earnings in Sept posted its mildest monthly increase since Feb 2022 and its smallest year-over-year gain since June 2021 and 2) total jobs in the US increased 2.1% over the last year, the lowest y/y rate since March 2021.


Markets have endured a rough stretch, falling sharply in August and September so the fact key technical levels held, and beaten-up sectors got bought, helped the market rally. NYSE breadth a nice reversal from this morning, with advancers leading decliners by more than 2:1 margin as all S&P sectors were “green" except for Consumer Staples which remain weak (SJM, K, MDLZ, CHD, KHC). The energy sector got a boost behind a WSJ report that XOM was looking to acquire PXD for nearly $60B deal (more below). Another big week coming up with Producer Price Index (PPI) on Wednesday and the Consumer Price Index (CPI) inflation data on Thursday as well as the start of earnings next week with PEP, DPZ, UNH, DAL early in the week and big banks JPM, Citi and WFC on Friday.


Economic Data

·     September Nonfarm Payrolls increased 336,000, well above the est. 170,000 and Private Payrolls added 263,000 vs. est. 160,000. Manufacturing Payrolls 17K vs. est. 5K. The unemployment rate steady at 3.8% vs. est. to fall to 3.7%. September average hourly earnings for all private workers +0.2% from the prior month (below consensus +0.3%) and on a Y/Y basis rose 4.2% vs. est. 4.3%.



·     Oil prices finished higher on Friday, with WTI crude rising $0.48 or 0.58% to settle at $82.79 per barrel, but still posted its steepest losses in a week since March, falling nearly -9% this week after another partial lifting of Russia’s fuel export ban compounded demand fears due to macro headwinds. Brent crude rose $0.51 to $84.58 per barrel but was down around -11% on the week. U.S. energy firms this week cut the number of oil and natural gas rigs operating for a third week in a row for the first time since early September, Baker Hughes said. U.S. oil rigs fell five to 497 this week, their lowest since February 2022, while gas rigs rose two to 118.

·     Diesel prices rise as Russia’s government said on Friday it had lifted a ban on pipeline diesel exports via ports, removing the bulk of restrictions installed on Sept. 21. The restrictions for gasoline exports are still in place. Nymex Natural Gas for Nov. delivery gained 40.90cs per million British thermal units, or 13.96% to $3.3380 per million British thermal units this week.

·     Gold prices edged higher on Friday, rising $13.40 to settle at $1,845.20 an ounce, but still down on the week, bouncing after a nine-day losing streak, although robust U.S. jobs data raised worries over another U.S. rate hike.

·     The U.S. dollar gained initially after a stronger job report before pulling back late morning/early afternoon as stocks rallied. The pullback put it below last week’s close and snapped the 11-week winning streak (had risen about 8% during that stretch). Against the yen, the dollar has advanced in four of the last five weeks. The dollar index (DXY) hit highs of 106.98 this morning but traded around 106 this afternoon.






WTI Crude















10-Year Note





Sector News Breakdown


Retail, Consumer Staples & Restaurants:

·     In beauty: ELF was upgraded to buy from Hold at Jefferies saying it sees a buying opportunity following the recent valuation pullback in the cosmetics company.

·     In retail: LEVI posted mixed Q3 as EPS beat by a penny but revs $1.51B miss est. $1.54B and said expects FY adj EPS at low end of its range and lowered its FY23 revenue view to "flat to up 1%" vs. prior forecast of up 1.5%-2.5%. OSTK rises on insider buy (Director Marcus Lemonis makes another insider buy – late y’day Lemonis Marcus (DIR) Bought (B) 31.8k shares @ $15.67).

·     In gun sector: (SWBI, VSTO, RGR): U.S. unadjusted criminal background checks fell 1.8% to 2.1 million in September, citing NICS data; compared to a year earlier, background checks decreased 15% from 2.47 million.

·     In Food & Beverage: PEP to kick off earnings next week, while overall sector has been weak given the impact of weight loss drugs Ozempic and Wegovy. The food sector has been crushed in recent days/weeks, CAG, CPB, MDLZ, KHC as well as beverage names KO, PEP, TAP and others. Rising rates impacting spending for consumers is a big theme for retail, food, restaurants. Big box retailers with exposure to food also hammered with WMT, TGT, COST all weak as well early as well as discount retailers such as DLTR, DG.


Autos, Leisure, Gaming & Lodging:

·     In RV sector: LCII downgraded to Underperform from Neutral at Raymond James following up with dealers to discuss Open House and the 2024 RV Industry outlook. The firm views LCII’s consensus 4Q23 & FY24 earnings estimate as too high, which could create a negative catalyst.

·     In autos: TSLA cut prices of its Model 3 compact sedan and Model Y SUV in the U.S. by about 2.7% to 4.2% to boost demand; Model 3 sedan down by $1,250 to $38,990, while prices of the Model Y long-range variant were cut by $2,000 to $48,490. The UAW said this afternoon that Detroit’s automakers (GM, F, STLA) would be spared additional walkouts Friday, citing progress made in negotiations with all three companies.

·     In used cares (CVNA, KMX, AN): the Manheim Wholesale used-vehicle prices increased 1.0% in September from August. The Manheim Used Vehicle Value Index rose to 214.3, down 3.9% from a year ago.


Energy, Industrials and Materials

·     In E&P/Major news: PXD shares jumped after the WSJ reported overnight XOM is closing in on a deal to buy the E&P company in a takeover that could be worth roughly $60 billion; CVX workers at two of their LNG facilities in Western Australia voted to restart strikes, endorsing a similar move by colleagues. APA guides Q3 adjusted production and adjusted oil production to be in upper end of prior guidance range. Natural gas E&P names outperform again in energy complex with gas prices rising (AR, CHK, EQT, RRC).

·     In utilities: DTE shares defended by several analysts after tumbling yesterday after the ALJ in DTE’s electric GRC released the PFD, which came below Staff recommendations. The PD called for the same level of ROE at 9.8% as the Staff proposal; however, the absolute revenue deficiency came in at $290M, below Staff’s $379M and the Company’s $580M request. Mizuho, KeyBanc and BMO Capital noted shares of CMS a peer MI utility, declined in sympathy. 1) Keybanc said they view the PFD as a neutral development, not out of step with precedents, while Mizuho said they believe the sell-off is overdone and the PFD is not as concerning as may appear.

·     In other Utility news: the spike in Treasury yields again weighed heavily on interest rate sensitive sectors and dividend paying sectors (same theme over the last 2-weeks); AES was downgraded to neutral from Buy at UBS due to rising interest rates and earnings deceleration at the infrastructure segment driven by coal shutdowns.

·     In Refiners: few Wall Street firms get more cautious as Mizuho lowered prices targets on VLO, PSX, PBF, DINO, DK, and MPC as sees an increase in earnings QoQ, driven primarily by sequentially higher crack spreads and utilization, though partially offset by capture headwinds and models EBITDA ~3% below consensus with notable ‘misses’ from VLO, PSX and MPC, and ‘beat’ from PBF. Raymond James said they are nudging down 3Q23 estimates — though by a narrow enough margin to call its prior views ‘close enough.’ Said headwinds to capture rates are widespread: (1) narrowing light-heavy diffs (a tailwind in 2Q to a headwind in 3Q), (2) lower secondary products margins, (3) regional dislocations and (4) rising backwardation/timing issues.



Banks, Brokers, Insurance:

·     In Banks & Brokers: another volatile sector given the spike in Treasury yields and rising rate expectations; earnings season upon us with next Friday kick off for JPM, Citi, PNC, WFC earnings results; COLB was upgraded to Neutral at UBS saying the primary reason is a shift in how it is viewing "core" earnings. FRHC shares fell after CNBC reported the Kazakh financial firm that’s been targeted by short sellers, is now under scrutiny by the Justice Department and federal regulators,

·     Into Insurance earnings, JPMorgan said valuations are compelling as well, but prefers companies with healthy balance sheets and lower risk profiles (GL, MET) over those at the lowest multiples (BHF, LNC). The firm said its best long for investors with a cautious macro bias was GL, top long if rates remain high but the equity market declines MET, its best short for investors cautious on the equity market PFG and offers a pair trade – Long VOYA (Overweight), Short PFG (Underweight).


Bitcoin, FinTech, Payments:

·     In FinTech: TD Cowen initiates coverage with a focus on major merchant acquirers/payfacs, launching Outperform on GPN, FI , and Market Perform on PYPL, ADYEN saying they think too much pessimism is reflected in shares and see secular demand via ongoing global disruption & digital payment adoption driving sustainable growth & FCF opportunity.

·     In Consumer Finance: Citigroup opened positive catalyst watches on DFS and NAVI as expects consumer finance companies to see additional NIM compression near-term as it expects one more hike and a higher for longer interest rate environment. Reserve builds should reflect loan growth, while economic trends appear stable enough to limit significant additional economy-related builds.



Biotech, Pharma, and Medical Equipment:

·     APLS was upgraded to Overweight from Neutral at JPMorgan and raised tgt to $81 from $60 saying the 3Q Syfovre beat underscores a return to growth for the product, even in the face of retinal vasculitis (RV) headwinds from the summer.

·     ARQT said it won FDA expanded approval of its Zoryve cream for the topical treatment of plaque psoriasis in children ages 6 to 11.

·     CYTK shares rose after saying it expected topline results from its aficamten heart drug trial by the end of the year.

·     PHG shares fell after the FDA said it is unsatisfied with the status of the company’s recall of devices to treat sleep apnea and asked for additional testing. The FDA doesn’t believe the testing and analysis that Philips has shared to date are adequate to fully evaluate the risks posed to users from the recalled device. 



Hardware & Software movers:

·     In Internet: AMZN launched the first of its satellites 311 miles above the Earth for its space Wi-Fi business, Project Kuiper this afternoon.

·     In PC’s: HPQ slides after Warren Buffet’s Berkshire Hathaway sold another 3.1M share @ $26.20 on 10/3 according to a filing and now holds 97.9M shares, or a 9.9% stake valued at $2.6B.

·     In Components & Equipment: TEL upgraded from Market Perform to Outperform at TD Cowen and raised tgt to $140 from $115 saying the number of known unknowns is shrinking, the auto strike already in effect and TEL less US exposed, and the secular electrification story remains in place and shares trading at just off 5-year relative valuation lows vs key comp APH

·     In Networking: JNPR discloses restructuring plan, including ~440 employee workforce reduction; note mgmt. discussed this plan back in July on the co’s Q2 earnings call.



·     TSM said its 9-month revenue fell 6.2% y/y to NT$1.536T; saw revenue of NT$1.638T for January through September 2022; Sept revs fell -13.4% y/y to about NT$180.43B; said revs dipped -4.4% m/m and generated NT$188.69B in revenue in August 2023.

·     AEHR shares tumbled after the company kept its full-year guidance unchanged as it posted higher profit in the fiscal first quarter.

·     IMOS said its Q3 revenue increased 6.2% y/y to $173.1M, and 2.5% q/q; revenue for September was $59.3M, up 4.3% m/m and 20.2% y/y.

·     SIMO said Q3 sequential revenue growth is expected to be slightly above the high-end of its original guidance range of 15% to 20%.


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.