Market Review: October 11, 2023

Closing Recap

Wednesday, October 11, 2023





DJ Industrials




S&P 500








Russell 2000













U.S. stocks advanced in a choppy session, trading below yesterday’s highs but also above yesterday’s lows as markets digested a further drop in yields, more developments in the Middle East, a hotter PPI reading (ahead of tomorrow’s more important CPI reading), another new IPO hitting the market (BIRK), and a nomination of a new House speaker in Washington (Scalise). Uncertainty around the path of the U.S. economy, including difficulties estimating the state of financial markets, potential oil price shocks, and the impact of labor strikes, pushed the Fed into a cautious stance at their policy meeting last month, today’s Fed minutes showed. Also today, September producer prices rose above economist estimates, raising the short end of the curve yields, while long yields slipped on haven flows. Earnings seasons finally kicking into gear with DAL, DPZ, WBA reporting earnings tomorrow morning, then the banks on Friday before the flood gates open over the next 4-5 weeks. There was a big deal in the energy space as XOM agreed to acquire PXD in a near $60B deal in the Permian.


Obviously, the macro situation (rates, oil, inflation, jobs, the Fed, Middle East, etc.) all remain key drivers of broader markets, but among the biggest stories the last few months has been the surge in demand for weight loss drugs (Wegovy, Ozempic, Mounjaro) following positive data points from NVO/LLY. GLP-1 agonists are a class of type 2 diabetes drugs that improve blood sugar control and may also lead to weight loss. They are taken by a shot or pill and mimic the action of a hormone called glucagon-like peptide. Several sectors have been decimated in recent months amid the rise of GLP-1 including food (CPB, K, KO, HSY), insulin (DXCM, PODD, TNDM), sleep apnea (RMD), and now dialysis sector (BAX, FMS, DVA). Overnight, NVO hinted its weight-loss drug, semaglutide the active ingredient in weight loss drugs), showed early promise in kidney disease treatment. Note WMT recently said the Ozempic craze slims demand in grocery aisles – raising fears about slowing spending on food/drinks. The other factors are secondary impacts such as slowing shipping (truckers) and packaging stocks. LLY making new highs today and NVO close to its all-time best.


Economic Data

·     The Producer Price index (PPI) for September rises +2.2% y/y above est. +1.6% (and previous 1.6%) and on a month/month basis, rises +0.5% vs. est. +0.3% (and vs. prior reading +0.7%). On a core basis, PPI y/y rises +2.7% vs. est. +2.3% and above last month 2.2% and m/m rises +0.3% vs. est. and prior reading +0.2%.



·     WTI crude oil dropped -$2.48 or 2.88% to settle at $83.49 pr barrel, only slightly higher than where it was trading since the Hamas attack on Israel this weekend while Brent crude futures settle at $85.82 per barrel, down $1.83, 2.09% as supply fears ease. Prices settled slightly lower on Tuesday after Saudi Arabia said it was working with regional and international partners to prevent an escalation and reaffirmed its efforts to stabilize oil markets. Natural gas prices rebound off morning lows to settle -0.1% at $3.377 mln Btus but was enough to snap its 6-day win streak. Gold prices rose $12.00 or 0.64% to settle at $1,887.30 an ounce as Treasury yields slip with investors buying haven assets.


Currencies & Treasuries

·     U.S. Treasury yields were mixed, with those on benchmark 10-year notes falling over 5-bps to 4.6% (touched lows of 4.54%) to a roughly two-week low, as prices rose on safe-haven flows due to fighting in the Middle East that has persisted for a fifth straight day. Meanwhile, shorter term 2-year yields, which reflect interest rate expectations, rose modestly following slightly hotter-than expected producer prices (PPI) data amid higher costs for energy products. Investors will next set their sights on Thursday’s U.S. consumer price index next for direction on yields.

·     The US Treasury sold $35 bln in 10-year notes at high yield 4.610% vs. 4.592% when issued prior (1.8bps tail, biggest since April) as the bid-to-cover ratio 2.50, and primary dealers take 18.75% of U.S. 9-year 10-month notes sale, direct 20.91% and indirect 60.34%. Crypto prices came under pressure as Bitcoin dropped over 2% to $26,750 and weighed on crypto related stocks (COIN, MARA, RIOT). The US dollar index (DXY) was flat, and the buck was flat vs. the euro as well.






WTI Crude















10-Year Note





Sector News Breakdown



·     CHPT shares tumbled after announcing “at-the-market” offering facility; said raises $232M to support path to profitability in 2024.

·     A joint venture of STLA and Samsung SDI plans to invest more than $3.2 billion in a second electric-vehicle battery manufacturing facility in Kokomo, Indiana, in what will become Jeep maker’s sixth battery Facility Globally.

·     Citigroup previews auto earnings as maintains a cautious stance on U.S. supplier stocks outside of specific verticals (SW/ADAS) and said tactically prefers pair trade positioning into the quarter and are opening an Overweight LEA and Underweight MGA position.


Retailers, Consumer Staples & Restaurants:

·     In Consumer Staples: ahead of earnings, RBC said top ideas into the print are CHD (positive volume growth), MDLZ (positive volume growth), EL (no further reductions to estimates), CL (global business performing much better than US scanner data), KVUE (expecting company to clear a low hurdle), and COTY (already pre-announced positive results). Names RBC is most cautious on: CLX (further cuts to 2H), KDP (coffee volumes). Meanwhile Citigroup also previewed the sector saying names they are positive on into the print include CL, TAP, and CHD, while names it is cautious on into the print include NWL, KDP, and MNST.

·     In earnings preview at TD Cowen: BIRD tgt cut to $1 from $1.5 and VFC to $17 from $19 in retail – track decelerating digital trends at NKE, SKX, and ASO. Within Market Perform rated COLM, VFC, PUMSY, MODG, BIRD, TDCowen said sees risk to Q4 guidance and consensus estimates as data weakens. Trends deteriorated across most Softlines, Dept store and large e-com platforms and said ONON, DECK and RL are +standouts.

·     BIRK 32.3M share IPO priced at $46, the middle of its $44-$49 range, raising about $1.48B based on 32.3M shares sold and values the company at about $9.3B on a fully diluted basis – shares opened this afternoon below deal price at $41.

·     CAVA was upgraded to Overweight at Morgan Stanley shifting its relative preference to CAVA where it has somewhat more confidence in the catalyst path and near-term estimates, as well as the long-term fundamental growth story.

·     CMG will raise menu prices again, citing inflation, CNBC reported. The burrito chain had paused price hikes for more than a year after three rounds of raising menu prices in 13 months.

·     LW increases its buyback authorization to an aggregate amount of $500 million and said it aims to hit a dividend payout ratio of 25% to 35% of net income and set long-term targets that include adjusted diluted earnings per-share growth in the high single-digits.



·     In Oil stocks: XOM agreed to acquire PXD for $253 per share in a deal valued at $59.5B; Pioneer shareholders will receive 2.3234 shares of ExxonMobil for each Pioneer share at closing (the news confirms recent media reports). ; NOG announced 6.5M shares offering priced $38.88, for ~$252.7M raise for general Corp. purposes. Wells Fargo said they views the merger between XOM as a positive for Midstream as XOM intends to accelerate Permian production growth; said TRGP & PAA are the main winners while EPD and ET benefit on the margin.



Banks, Brokers, Asset Managers:

·     In Asset managers: Monthly assets under management (AUM) data released: 1) AB prelim AUM decreased (-4%) to $669 billion during September 2023 from $694 billion at the end of August; 2) APAM prelim AUM as of September 30, 2023, totaling $136.5 billion; 3) BEN prelim AUM of $1.37 trillion at September 30, 2023, compared to $1.42 trillion at August 31, 2023; 4) IVZ prelim AUM of $1,487.3 billion, a decrease of 2.6% versus the previous month-end; 5) VCTR prelim AUM of $153.5B as of September 30, 2023; 6) LAZ prelim AUM as of September 30, 2023 totaled approximately $228.3 billion.

·     In Banks, Brokers & Exchanges: Deutsche Bank downgraded CBOE to Hold from Buy citing several downside risks including significant slowdown in recurring revenue fee growth, and a slowdown in usage of proprietary index products among others while says continue to favor SCHW and CME in brokers, asset managers and exchanges as sees shares of SCHW as particularly oversold. MS downgraded from Buy to Neutral at UBS and cut tgt to $84 from $110 as they see headwinds that make it harder to exceed consensus estimates (lowers ests by 11% in ’24E and ’25E).

·     In Financial Services: Reuters reported late morning that NCR is in advanced discussions to merge its automatic teller (ATM) business with cash management firm BCO, creating a combined company worth close to $12 billion, including debt . Note that BCO later responded to the Reuters report, saying it was not in talks with NCR.



Biotech & Pharma:

·     NVO shares jumped after saying it will halt a trial studying Ozempic as a treatment for kidney failure in diabetes patients ahead of schedule as it was clear from an interim analysis that the treatment would succeed; shares of rival weight loss drug maker LLY rises as well.

·     AMGN was upgraded to Outperform w/$318.00 pt from $267.00 at Leerink Partners.


Healthcare Services & MedTech movers:

·     Dialysis/Renal care stocks tumble on NVO news overnight: shares of DVA, FMS, BAX all pressured after NVO’s Ozempic Kidney trial was stopped early at the interim having met pre-specified criteria on efficacy. NVO announced that the outcomes-based FLOW trial testing once weekly 1mg semaglutide (lower dose than in weight loss trials) in reduction in progression of renal impairment in people with T2D and CKD will stop at the interim at the request of the IDMC having met pre-specified criteria on efficacy.

·     In Medical Equipment: SILK shares crushed after CEO said to step down as will continue as President and CEO until a successor is found, while provided preliminary 3Q23E revenue of $44.4M (up 19% y/y) versus consensus’s $46.3M, and lowered 2023 revenue guidance to $170-$174M (up 23-26% y/y) from $180-$184M, versus the Street’s $181.7M. MedTech in general slammed on the GLP weight loss drug craze as SYK which makes hospital beds drop sharply, as did hospitals such as HCA, CYH, THC. Nowhere to hide as ISRG, ABT, ZBH all tumbled.

·     In Healthcare IT Sector: Keybanc downgraded OMCL in the HCIT sector saying they favor shares of PGNY, ALIT and RCM noting the sector is down ~9% from last quarter and is headed for another volatile setup over the next several weeks into year-end based on a several factors. The firm said believes there will continue to be a mixed impact from GLP-1 drugs with positive high-margin revenue streams in the form of pharma digital advertising campaigns (benefiting DOCS, GDRX, and PHR), but potential disruption, longer term, to certain elective surgeries.

·     In Managed Care: HUM said longtime CEO Bruce Broussard will step down in H2 of 2024 and named healthcare veteran Jim Rechtin as his successor. CVSAetna said “At this time, CMS has not disclosed the final 2024 Star ratings, CVS said. “Accordingly, CVS Health and Aetna do not have knowledge of the final 2024 Star ratings and cannot confirm the ratings at this time.” WBA shares rose after the appointment of Tim Wentworth as the company’s new Chief Executive Officer, effective on October 23. Wentworth most recently was founding CEO of Evernorth, Cigna’s health services organization.


Industrials & Materials


·     In transports: Goldman Sachs lowers 3Q EPS across coverage (ex- LTL space) on tepid peak season trends, still elevated inventories, and concerns over goods demand. JPMorgan downgraded RXO to Underweight and upgraded CSX to Overweight saying downside concerns have played out and is positive on JBHT into the print and add it as a Positive Catalyst Watch on domestic market share gains. The firm remains OW on CP but removes it from the AFL as a Growth idea given its new estimates are now well below consensus.


Aerospace & Defense

·     Deutsche Bank said the most important takeaways from Army trade show were: 1) Comments from LMT that it was planning to dual source solid rocket motors on PAC-3 (negative for LHX); 2) a sense of confidence from LMT that it would be successful in leveraging PAC-3 to take share from RTX’s Standard Missile family of missiles; and 3) commentary from GD that the gov’t would fund 100% of the CAPEX needed to increase production on 155mm artillery rounds.



Internet, Media & Telecom

·     In Media: DIS announces another round of price hikes in time for the holiday season; The daily ticket for days when demand is highest, which was $179, has increased to $194, an 8.4% increase. They increased single-day admission prices on its most popular days by nearly 9%, while parking fees have risen nearly 17% and the cost of using the Anaheim parks’ ride-jumping Genie+ service has gone up 20%.


Hardware & Software movers:

·     In software: ETWO shares slid after cutting its FY24 revenue view to $625M-$635M from $655M-$670M (below consensus $658.74M); backed FY24 adjusted gross profit margin view 68%-70%. HUBS was downgraded from Strong Buy to Outperform at Raymond James as believes the outperformance YTD sets up a more balanced risk/reward scenario relative to historical levels. ADBE shares rose after analysts’ positive post Adobe MAX user conference and Analyst event.

·     In Hardware: HPQ guided FY24 adjusted EPS $3.25-$3.65 vs. est. $3.47, said anticipates generating free cash flow of $3.1B-$3.6B for FY24 and indicated that it expects to return approximately 100% of free cash flow through dividends and share repurchases. SNX 6.75M share Spot Secondary priced at $96.00. ANET was downgraded to Neutral from Overweight at Piper citing concerns around ’24 networking spend and valuation.



·     Samsung (SSNLF) said it sees Q3 operating profit to fall 78% y/y at 2.4 trillion won ($1.79 billion), compared with the profit of KRW10.85 trillion for the same period in 2022; said its revenue likely fell 13% from the same period a year earlier to 67 trillion won.

·     TXN was downgraded to Perform from Outperform at Oppenheimer and removing $195 target ahead of earnings 10/24 saying sees 3Q print/4Q guide in line, following four Qs of correction-led cuts. OPCO said NVDA, AVGO, MRVL and MPWR top names in semis into earnings.


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.