Market Review: October 10, 2023

Closing Recap

Tuesday, October 10, 2023





DJ Industrials




S&P 500








Russell 2000













U.S. stocks built on yesterday’s upward momentum, with the Nasdaq 100 rising to its best levels in over 3-weeks behind sliding Treasury yields, falling back as low as 4.62% as investors rotate into haven assets as well as equities given the escalation of tensions in the Middle East. The S&P 500 also touched 3-week highs as dovish comments from U.S. Federal Reserve officials eased concerns ahead of key inflation data points in coming days. The Producer Price Index (PPI) is tomorrow 10/11 and the Consumer Price Index (CPI) on Thursday 10/12. For the Sept PPI, headline estimates are for a rise of +0.3% M/M (vs. prior month +0.7%) and to rise +1.6% Y/Y (prior also 1.6%). On a core basis, or ex: food & energy, PPI expected to rise +0.2% (same as prior) and +2.3% Y/Y (prior +2.2%). Meanwhile, Atlanta Fed President Raphael Bostic said the U.S. central bank doesn’t need to raise interest rates any further and sees no recession ahead. All 11 major S&P 500 sectors finished higher, with NYSE breadth over 4:1 advancers leading, as consumer discretionary leading gains, while energy and healthcare lagged. The Small Cap Russell 2000 jumped over 1% after turning negative YTD last week.


Some wild stats: U.S. Mortgage Rates are at their highest level since December 2000 (7.49%) while Mortgage Purchase Applications have plummeted to their lowest level since 1995; the average interest rate on 48-month new car loans in the US has moved up to 8.30%. That’s the highest we’ve seen since 2001. The US has already issued $1.76 trillion in net Treasury securities through September. Will be well over $2 trillion by year-end, trailing only 2020 for the largest net debt issuance of any year in history.


Economic Data

·     The NFIB Small Business Optimism Index fell to 90.8 vs. 91 est. & 91.3 in prior month; outlook down sharply to -43; index in September also remained below its 49-year average of 98 points for the 21st-straight month.

·     August wholesale sales were quite strong at +1.8% m/m vs. +0.4% est. & +1.2% in prior month. Wholesale Inventories for August fell (-0.1%) M/M to $900.2B vs. (-0.1%) consensus, -0.1% prior August estimate, and -0.2% in July.


Commodities, Currencies and Treasuries

·     U.S. crude oil futures settle at $85.97 per barre, down 41 cents, 0.47%, easing after rallying more than 4% in the previous session, with traders cautious as they watched for potential supply disruptions amid military clashes between Israel and the Palestinian Islamist group Hamas. Gold prices rose $11.00 to settle at $1,875.30 an ounce. Natural gas futures inch higher in their now six-day long rise; gains nearly 0.2% to $3.382/MMBtu.

·     Treasury yields were lower all morning with the 10-year hitting lows below 4.62% but edged higher this afternoon. U.S. sells $46 bln 3-year notes at high yield 4.740%, vs. 4.723% when issued prior. awards 94.40% of bids at high; the U.S. 3-year notes bid-to-cover ratio 2.56, and primary dealers take 22.09% of U.S. 3-year notes sale, direct 21.94% and indirect 55.97%.

·     The 10-year Treasury yield slid to 4.637% on Tuesday after closing at 4.783% on Friday as investors sought the safety of bonds following Saturday’s attack on Israel by Hamas. Still, yields are up from 4.346% on Sept. 20, the day of the Fed’s last meeting, and 3.850% on July 26, the day of the last Fed rate increase.






WTI Crude















10-Year Note





Sector News Breakdown



·     RIVN was upgraded to Buy from Neutral at UBS but trim tgt to $24 from $26 as see an improved set-up with the stock down ~20% since 10/4 (vs. S&P500 ~+1.4%) as the company issued a $1.5bn green convertible note and higher rates for longer weighed on the market.

·     CPRT announced a new strategic investment and partnership with Purple Wave, Inc., an online offsite heavy equipment auction company.

·     The Canadian auto workers union launched a strike against General Motors early Tuesday, worsening the labor strife for GM, which is already dealing with a historic UAW strike in the U.S.


Retail, Consumer Staples & Restaurants:

·     In Beverages: PEP reported Q3 core EPS $2.25, topping consensus $2.15 as revs rose 6.7% y/y to $23.45B vs. est. $23.4B; raises FY23 core EPS view to $7.54 from $7.47 (est. $7.49) and said continues to expect 10% organic revenue growth; sees FY24 towards upper end of l-t ranges; shares of other beverages like KO, MNST moved in reaction.

·     In retail: BIRK 32.3M share IPO is expected to price tonight (10/10) and trade Wednesday (10/11), with current price range $44-$49. LVMVY Q3 revenue EUR 19.96 bln, up 9% organically (vs. consensus +11.5%) and said fashion and leather goods q3 revenue up 9% organically at EUR 9.75 bln (vs. consensus +10%) – luxury retailers edged lower on results (RL, TPR).

·     In Restaurants: Bernstein notes for MCD, trading at 21.1x NTM PE, MCD is as cheap as it was 5 years ago, but arguably with improved fundamentals. Notes the stock dropped by nearly 15% in the past 3 months, as believe that the relative weakness was driven by mounting concerns on fundamentals (sustained traffic declines while lapping pricing actions and GLP-1 exposure). and macro/positioning (higher bond yields and softer consumer environment).


Leisure, Gaming & Lodging:

·     In Leisure: HOG tgt lowered to $33 from $35 at Citigroup saying the long-awaited retail recovery continues to get pushed out, and inventory risk only adds to the demographic bear case. In theme parks, Keybanc said emerges from 3Q23 operations and look ahead to earnings season, it sees a messy setup for amusement park stocks. KEYB sees a mixed attendance picture (see misses for FUN, think SIX can meet expectations).

·     In Hotels: Hyatt (H) was named by S&P Dow Jones Indices to replace NATI in the S&P MidCap 400 Index, effective Thursday. MAR estimates raised at Argus as believes that Marriott’s profitable fee-based business, strong liquidity, and emphasis on corporate travel position it well for an earnings recovery in 2023.

·     In RV sector (CWH, THO, WGO): BMO Capital noted According to preliminary data from Statistical Surveys (SSI), August North American RV retail registrations declined -16% y/y (U.S. -17%, Canada -12%) to 35,275 units. Registrations declined -27% vs 2019 (towables -28%, motorized -22%), but was above the firm’s estimate of down -29% at 30K.



·     In Solar: MAXN guides Q3 revenue to $224M-$229M range, below consensus $316.2M and shipments to be in the range of 622 to 632 megawatts and said the adj EBITDA guidance they provided for Q3 is expected to shift downward by approximately $30 million. However, the overall space saw a nice rebound after weeks of pressure (SEDG, ENPH, FSLR). Also headlines helping as California considering cutting solar incentives for renters as the CA PUC posts notice of delay until November.



Banks, Brokers, Asset Managers:

·     Several analysts preview the brokers, alt managers, cards and banks heading into earnings season: BMO Capital said they lower 3Q23 estimates by -6% on average among banks, -4% among asset managers, and -1% among payment stocks. For Alt Managers (BX, ARES), Jefferies is reducing estimates on average by 2.1% to reflect lower activity. TFC is in talks to sell the rest of its insurance brokerage to private equity firm Stone Point Capital for roughly $10 billion, Semafor reported.

·     In Exchanges: Oppenheimer earnings preview saying NDAQ is their top pick and is a contrarian call with thesis that organic growth will re-accelerate driven by the Solutions segment and support earnings growth and multiple expansion. Highlight CBOE and CME as high-quality defensive names as CBOE benefits from the rise of 0DTE.

·     In Insurance (ALL, CB, PGR, TRV): Bloomberg noted the US has already faced a record number of disasters costing $1 billion or more in 2023, with 24 such events. In the first nine months of the year, storms, drought, and a wildfire killed 373 people and caused $67.1 billion in damage, according to a report issued by the National Centers for Environmental Information.



·     China’s Country Garden warned about its inability to meet offshore debt obligations, setting the stage for one of the country’s biggest debt restructurings.

·     Healthcare REITs OHI and SBRA upgraded to Buy at Bank America citing their portfolios are in better shape today than pre-COVID given lease restructurings done over the last 3 years, they invest in SNFs which trade at high cap rates, see improving investment volumes as a key source of upside relative and CMS minimum staffing requirements were better than expected.

·     In Net lease REITs: O downgraded to Neutral from Buy at Bank America and downgrades NTST & SRC to Underperform from Neutral and lowers price objectives on the NL REITs as see more value in SNF focused REITs than in traditional net lease REITs.

·     In Commercial Real Estate: KBW said they remain cautious on the commercial mortgage REITs (CMREITs) in the face of higher rates, which they expect to weigh on credit, originations, and valuation. Into 3Q23 earnings, they lower estimates by 11% in 2H23 and 8% in 2024 on higher CECL reserves and lower originations. We lower price targets by 4%. They downgrade STWD to Market Perform from Outperform as relative valuation is unattractive (0.88x P/B, 10.1% dividend yield) and CECL reserve of 1.5% is below peer’s 2.5%. Also view BXMT’s valuation as full considering high office exposure. Remain Underperform on CMTG and GPMT and Market Perform on most others. Believe OP-rated LADR should outperform on excess dividend coverage and sector-high liquidity while NREF’s total return, including special dividends, remains attractive.



Biotech & Pharma:

·     AKRO shares tumbled after saying an experimental medicine failed to show a significant benefit for patients with cirrhosis caused by NASH. While the study’s primary goal of improving liver fibrosis was not achieved, efruxifermin outperformed placebo by 10 percentage points. MDGL shares rise after rival Akero’s lead drug to treat severe fatty liver disease fails in mid-stage study. Shares of ETNB fell in sympathy with AKRO which is also developing its lead drug, pegozafermin, in NASH patients and was granted U.S. FDA’s "breakthrough therapy" status last month.

·     IMUX shares fell after saying it received positive interim data from a Phase 2 trial for a treatment for progressive multiple sclerosis.

·     LXRX said its Inpefa heart failure drug received preferred formulary status with Express Scripts for Medicare patients starting Nov. 1.

·     VTYX reports VTX002, its treatment for ulcerative colitis, with a placebo-adjusted clinical remission rate of 17%, compared to its guidance for a "best-in-class" rate for clinical remission of 15% to 25%.


Healthcare Services & MedTech movers:

·     EXAS was upgraded from Neutral to Overweight at Piper and raise tgt to $90 saying with strong Cologuard growth (Piper estimate 29% YoY in 2023) and a clear path to five+ years growth rates of above 10%, thinks the 36% pullback since highs in July represent a pretty compelling entry.

·     NSTG guides prelim Q3 revenue above $48M vs. est. $46.3M and said to eliminate about 110 positions; commenced implementing a reorganization of the Company’s R&D and manufacturing departments and activities.


Industrials & Materials

Aerospace & Defense

·     Defense contractors LMT, LHX, & CACI look best positioned for impact in defense sector said TD Cowen, noting the Israel-Hamas conflict outcome will depend on whether other Arab nations join the fray. But yesterday’s 3-11% defense stocks’ relative gain was close to their 5-13% relative lift in the first five days of the Ukraine conflict; and there’s less likely fundamental follow through from Israel-Hamas.

·     BA said 737 MAX jet deliveries to customers fell in September to the lowest level in more than two years and production is running at about half the company’s target. Boeing executives have said that deliveries would slow but that they still expected to meet their targets for the full year. Boeing said it delivered 15 new 737 jets to the world’s airlines in September, the smallest number since shipping out 11 in May of 2021

·     JOBY mentioned cautiously after Kerrisdale Capital said they are short shares of $4.8 billion development stage aircraft manufacturer that they believe is years away from generating operating revenue and which we don’t expect will ever earn an economic profit

·     PLTR won a new Army contract involving artificial intelligence, the company said which supports the Combatant Commands, Armed Services, Intelligence Community and Special Forces as those groups "continue to test" AI capabilities, worth up to $250 million through 2026.


Materials, Metals & Mining

·     Steel sector (X, NUE, STLD): Bloomberg reported the European Union is working on an interim deal with the US that would introduce new tariffs aimed at excess steel production from China and other countries in order to end a Trump-era trade conflict

·     In Potash/Fertilizer space: Wells Fargo said it estimate Israel accounts for ~4-5% of global potash supply and ~5-6% of global potash exports, which could be at risk if the conflict intensifies or drags on for an extended period. Sees potential upside risk for Potash/Nitrogen Prices and said that NTR, MOS and CF most levered.

·     Packaging companies: BERY, CCK, GPK, OI, SEE, SLGN had estimates and price targets cut by Citigroup today for NA Packagers with heavy Food & Beverages exposure on potential impact from Ozempic and other GLP-1 drugs. The firm identified the drugs as posing a risk to CPG vols; last Wednesday WMT’s CEO indicated “it definitely sees a slight change compared to the total population… just less units, slightly less calories”.

·     In Industrials: HON said it has realigned its business segments around what it calls the three "compelling megatrends" of automation, the future of aviation and energy transition, which is set to take effect in the first quarter of 2024. PGTI shares jumped after Reuters reported that the company rebuffed a $1.9 billion acquisition offer from Miter Brands



Hardware & Software movers:

·     In Media: NFLX shares slumped midday after a report in The Information said as of about June, Netflix’s ad sales and ad-supported subscriber numbers were roughly half what staffers had initially projected internally for 2023, one of the people said.

·     In PCs: Global personal computer shipments (HPQ, DELL, LNVGY) declined for the eighth consecutive quarter, falling -9% to 64.3M y/y for the three-month period ending in September according to research firm Gartner said. Lenovo maintained its top spot in the industry in terms of market share with 25.1%, followed by Hewlett Packard and Dell.

·     In Comm Equipment and Networking: GLW was downgraded to Neutral from OW at JPMorgan and cut its price tgt to $36 from $43 led by its expectation that the magnitude of earnings upside in the near- to medium-term is likely more muted than previously anticipated. JNPR was downgraded to Neutral from Overweight at JPMorgan.

·     In Software: Unity (U) announced CEO John Riccitiello stepping down to retire, while remaining in advisory capacity to ensure smooth transition. Jim Whitehurst has been named Interim CEO. PD announced proposed private placement of $350 million of convertible senior notes.

·     In Video Game Software: EA upgraded from Neutral to Buy at Bank America noting several weak FY24 guides, a tough comp for SPORTS FC post World Cup, and a sparse launch pipeline have kept EA rangebound since January.



·     Citigroup downgraded QRVO to Sell from Neutral at Citigroup on China smartphone substitution risk post Huawei Mate 60 phone launch and maintain NVDA as #1 as investor focus moves to AI demand signals through the end of the year before B100 GPU launch in 1H24 as likely the next major stock catalyst.

·     COHR shares rallied as narrows Q1 revenue view to $1.05B-$1.055B from $1.0B-$1.1B (est. $1.07B) and said it has concluded a review of its silicon carbide business and will receive $1 billion in investments from Denso Corp. and Mitsubishi Electric Corp.


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.