Market Review: October 12, 2023

Closing Recap

Thursday, October 12, 2023





DJ Industrials




S&P 500








Russell 2000













US equity futures gained over night and were testing resistance pivots on both the S&P and NASDAQ into this morning’s economic data. Initial claims and Core CPI mo/mo both came in as expected, but the Core CPI y/y was a touch high so the “hopium” traders took equity futures back to split into the open. S&P went in the red, but NASDAQ remained positive and that continued into midday. Only Technology (XLK) and Energy (XLE) were positive on the sector level, while Utilities (XLU) and Consumer Staples (XLP) were primary laggards. Late morning breadth was a bit over 5:2 favoring decliners as Treasury yields and the Dollar climbed. A further pop in yields following the 30-yr auction created new selling pressure in equities and futures quickly moved to lows into the early afternoon with both the S&P and NASDAQ in losing territory.


On the data side today, @JeremyDSchwartz takes the other side on inflation post-CPI, saying his alt-inflation number using more real-time data for shelter is below 2% for both alt-core and alt-headline, pushing alt-inflation below the Fed target. Though his alt-shelter number is off the lows, it is 2.6% versus the 7%+ official number. Also, in honor of CPI Day, @bespokeinvest reminds us the S&P 500’s average daily move on CPI over the last 12 months has been up or down more than 1% (versus a peak of nearly 2% late last year). As rates back up following CPI and the Treasury auction, @charliebilello notes the 30-year mortgage rate in the US has climbed to 7.57%, the highest since December 2000. Lastly, @DataTrekMB is back about big tech versus the market, noting, “US Big Tech is less attractive (13% upside on average) than the S&P 500 (17% upside) if we use Wall Street analysts’ price targets as a proxy for fair value. Excluding $TSLA, Big Tech’s 12-month upside is 17%, still only in line with the S&P…that said, the Street sees more upside potential for Big Tech (ex-TSLA) than the S&P’s 10 largest non-tech names (+13% upside) from here. The former group’s weighting is +2x the latter in the S&P.”


Heading into the final hour of trading, stocks had rebounded off the lows but were still solidly lower. Breadth expanded to over 4:1 decliners over advancers and Energy (XLE, +0.2%) was the only sector ETF still in the green. Largest decliners included Utilities (XLU, -1.8%), Materials (XLB, -1.5%) and Real Estate (XLRE, -1.25%) as Treasury yields gained and pressured rate-sensitive groups. Growth and value were both losing ground, with value the underperformer. The Russell 1000 Value was -1.15% versus its Growth counterpart -0.65%. Meanwhile, small caps also underperformed with the IWM -2.25% versus the S&P -0.75%.


Economic Data

·     Consumer Price Index (CPI) headline M/M for Sept rose +0.4% vs. est. +0.3% and headline Y/Y for Sept rose +3.7% vs. est. +3.6%. Core CPI Ex: Food & Energy M/M for Sept rose +0.3% vs. est. +0.3% and Y/Y core rose +4.1% vs. est. +4.1% (down from +4.3% prior month reading but hasn’t been below 4% since May 2021).

·     Weekly jobless claims unchanged at 209K from prior week and vs. est. 210K; the 4-week moving average fell to 206,250 from 209,250 prior; continued claims rose to 1.702M from 1.672M prior week and the U.S. insured unemployment rate unchanged at 1.1%.



·     December gold futures slipped $4.30/oz, or -0.23%, settling at $1,883 as investors continue to fear higher for longer rates from the Fed. While today’s CPI came in mostly as expected, it wasn’t enough to make the bond market happy and both Treasury yields, and US Dollar gained in recognition of the fear of rising rates. Probabilities for a December rate hike bounce to about 40% after the data versus just shy of 30% prior. Offsetting some of the pressure from economic data is the safe-haven benefit vs. geopolitical unrest as fighting continues in Israel and Ukraine.

·     WTI November crude settled -$0.58/bbl, or -0.69%, at $82.91. Crude traded similarly to US equities with pre-market gains giving way to afternoon losses before a rally off the lows. Earlier EIA data showed a crude inventory build of 10.176M vs expectations of a draw of 1.4M. Data also showed US crude production climbing to 13.2Mb/d, above the previous high pre-covid. That said, Saudi Arabia and Russia have agreed to extend voluntary supply cuts over the OPEC+ curbs. Brent managed a gain of $0.18/bbl, or +0.21%, to settle at $86.00. With so much economic uncertainty, we are likely to continue to see much of investors’ focus on the supply side until a clearer view of US recession vs. recovery or soft landing gives color to the demand picture.






WTI Crude















10-Year Note





Sector News Breakdown


Consumer Staples & Restaurants:

·     TGT was upgraded to Buy at bank America and raised its price tgt to $135 from $120 noting shares have declined 19-20% since the end of July (vs. the S&P down -5%) and with the stock trading at just 12x 2yr forward earnings, believes the risk/reward outlook has improved.

·     BYND downgraded to Underperform from Neutral at Mizuho while maintain buys on STKL and OTLY (tgt cut to $4 from $7) saying YTD, plant-based stocks have significantly underperformed including BYND (-28%), OTLY (-60%), and STKL (-65%).

·     DPZ misses Q3 revs, falling -3.9% to $1.03B vs. est. $1.05B; said higher menu prices and delivery charges discouraged inflation-weary consumers; also said higher pizza delivery charges have also been a pain point for customers; Q3 comp sales fell -0.6%.

·     VSCO reaffirmed previous guidance for FY23 net sales to decrease in low-single digit range compared to last year; guides Q3 EPS loss (-$0.70-$-0.90) vs. est. loss (-$0.79); now estimates adjusted operating loss for Q3 $45M-$65M.

·     In Consumer Staples: Bernstein upgraded KMB and CLX from Underperform to Market-perform saying they struggle to justify significant incremental downside to either name from here after urging caution to start the year towards the sector despite the benign fundamental outlook.

·     In Housing Retail: LL shares surge as Live Ventures (LIVE) offered to acquire the company for about $180M in cash, or $5.85 per share, . Home builders LEN declined sharply amid a rebound in rates after inflation data.

·     In Food Sector: Deutsche Bank talks about potential impact of GLP-1 on food stocks, saying in base case sees the incremental percentage of the total US population using GLP-1 drugs by the end of the decade at 4.4% (with a low of 2.6% and a high of 7.2%)—placing total penetration of the US population in 2030 between 3.8% and 8.3% (with a conservative base case of 5.6%). DBAB sees risks skewed to heavily processed foods (especially those high in sugar/fat), and sees the portfolios of CAG, CPB, GIS, HSY, KHC, MNST, SAM, STZ, TAP, and TWNK as facing the most risk, with NOMD and arguably SMPL as most insulated/advantaged on a relative basis.


Autos, Leisure, Gaming & Lodging:

·     In Auto news: U.S. auto workers are expected to return to talks with Chrysler maker Stellantis (STLA) on Thursday, a tense day after a surprise walkout at Ford’s (F) biggest and most profitable plant in Kentucky which employs 8,700 workers. Nearly a quarter of the 150,000 UAW workers at the Detroit Three automakers are now on strike.

·     In Casinos: TD Cowen previews the quarter saying they are cautious into quarterly results. The firm noted YTD industry data suggest Nevada gaming revenue will continue to expand in 2023, but the story for regional properties is less clear given the interest rate environment and precarious Consumer Confidence – decreased estimates and tgt for both BALY and CZR.

·     In Powersports: BMO Capital said a dealer survey showed some sequential unit retail sales decline. In terms of companies, DOOO and PII ORV business growth rate was up y/y in the quarter and outperformed the overall ORV category. HOG saw its average growth rate decline y/y in the quarter but was in line with the broader industry.

·     In Theme Parks: Goldman Sachs previews with buys on SEAS, FUN and sell on SIX saying despite strong attendance data in September, we expect choppy 3Q23 earnings for amusement parks amidst ongoing macro uncertainty and the potential for weather to weigh on future attendance. Focus on the outlook for pricing and in-park spending trends over the next few quarters.



·     OPEC stuck to its forecast for relatively strong growth in global oil demand in 2023 in 2024, saying world oil demand will rise by 2.25M barrels per say in 2024 vs. 2.44M in 2023, citing signs of a resilient world economy so far this year and expected further demand gains in China.

·     In Oils: XOM was upgraded to Buy from Hold at Truist and raised tgt to $131 from $110. VTLE said 3Q23 production came in 6% above expectations at 101.3 MBoe/d, amid outperformance in the recently acquired Driftwood and Forge assets and capex also higher at $162M.

·     In Solar & Renewables: FSLR was upgraded to Overweight from Equal weight at Barclay’s with $224 price target saying in an environment where there is uncertainty around the trajectory of utility-scale growth, thinks FSLR’s contracted backlog, and current valuation offers an attractive entry point. Oppenheimer said FSLR, SHLS, and HASI top picks in renewables into Q3 earnings, but said reflecting valuation trends and industry-wide asset timing considerations, is lowering estimates and price targets for AMRC to $55 from $67, CWEN to $34 from $38, and ORA to $84 from $96, while trimming estimates for ENPH and SEDG.

·     In Coal sector: AMR cuts its 2023 metallurgical coal shipment guidance to 14.8m tons-15.2m tons; tightened and adjusted our full-year guidance ranges for shipment volumes; increasing met segment cost of coal sales guidance to a range of $110.00 per ton to $113.00 per ton.



Banks, Brokers, Asset Managers:

·     In Payments: Goldman Sachs previews saying they see a mixed setup for payments stocks into 3Q earnings, with stable consumer spending trends set against headwinds from FX. Buy BILL, PAYO, V, WU, and RELY, while downgrade JKHY to Sell (tgt to $140 from $165) as see downside risks to margins and FCF over the near term from its multi-year public cloud investment strategy.

·     Bank earnings on deck tomorrow morning with JPM, WFC, PNC and Citi (C) are all expected to report quarterly results.



Biotech & Pharma:

·     ANVS announces interim independent analysis for statistical power in its Alzheimer’s study.

·     LLY said a Phase 3 study of its investigational drug mirikizumab met the co-primary and all major secondary endpoints in the treatment of adults with moderately to severely active Crohn’s disease (shares hit another new all-time high today).

·     PEPG said the FDA has lifted a full clinical hold and cleared its application, allowing to initiate an early-stage study of its treatment for patients with myotonic dystrophy, a genetic disorder.

·     PFE said the FDA approved its Braftovi plus Mektovi combination therapy as a treatment for patients with metastatic non-small cell lung cancer (NSCLC) with a BRAF V600E mutation.


Healthcare Services & MedTech movers:

·     In drug retail: Dow component WBA posted mixed Q4 results, with slightly better US revs, offset by worse margins noting higher operating costs in the quarter from certain legal and regulatory accruals and settlements, and costs from its cost restructuring efforts; guided FY24 revs of $141B-$145B (vs. $144B est.) and EPS of $3.20-$3.50 (est. $3.71).

·     Medical Devices: RMD downgraded to Sector Perform from Outperform at RBC Capital and cut tgt to $202 from $273 as expects GLP-1 drugs to have only a modest impact on RMD’s business, and therefore believe the stock offers long-term valuation appeal.

·     In MedTech: INMD shares slumped after lowering its full-year revenue guidance to $500M-$510M from the prior $530M-$540M citing slowing economic conditions and financing constraints; also guided Q3 results below views. DHR and TMO shares slumped late in the day after Sartorius cut its 2024 organic growth forecast to +3% (from +5%).

·     In dialysis sector: DVA said in a statement following its sharp price share decline yesterday that news of NVO’s Ozempic’s potential in treating kidney disease may have only limited impact for patients, says further studies will be needed.

·     In Diagnostics: QDEL reported prelim 3Q revenues $738M-$744M vs. est. $655M citing earlier-than-expected demand for respiratory products noting influenza and new variants of COVID-19 across the Northern Hemisphere (but only maintained year guidance).

·     MedTech impact from GLP-1s: Lakestreet said in a note today that following a sharp sell-off in companies perceived to be negatively impacted by GLP-1s, they reiterate top-ideas unrelated to GLP-1s. We think the risk/reward for IRMD, NPCE, and TELA is compelling after recent broad MedTech weakness. IRMD provides hospital equipment with a robust backlog resulting in strong visibility. NPCE treats severe epilepsy, and we believe estimates are set conservatively. TELA treats hernias and is a top 5 MedTech grower trading at < 2x out-year revenue.


Industrials & Materials


·     Airlines kick off earnings season with DAL as Q3 adj EPS $2.03 tops est. $1.94 while Q3 revs rose 13% y/y to $14.55B (in-line with consensus), while lowered its FY adj EPS $6.00-$6.25, vs. prior $6.00-$7.00 (est. $6.03); said revenue per seat flown a mile fell 4% from a year ago.

·     In Distributors: FAST shares rise behind higher Q3 sales and earnings topping ests and as 3Q daily sales rate for manufacturing customers outpaced that of non-residential construction customers and resellers (shares of GWW, MSM moved in sympathy early).

·     In the E&C Sector: MTZ was upgraded by Craig-Hallum to Buy from Hold with a $98 price target as believes the recent pullback of 45% since MasTec reported its Q3 results has been overdone and is taking the opportunity to upgrade. UBS addressed the selloff in MTZ, PWR, PRIM on the back of investor concerns around renewables development saying the main issues are uncertainty around solar tax incentives related to IRA and rising interest rates – but the firm believes the long-term outlook for renewables is positive.


Materials, Metals & Mining

·     In Lithium: Australia’s Liontown Resources said it has determined to extend the exclusive due diligence period by a week for its proposed A$6.6 billion ($4.23 billion) buyout by U.S. firm Albemarle Corp. (ALB).

·     In Metals: CMC Q4 EPS $1.69 vs. est. $1.82; Q4 sales $1.9B vs. est. $2.12B; Q4 North America segment adjusted EBITDA increased from the prior year period. In gold mining: HL said 2023 production is keeping pace with its guidance, even as it grapples with the fallout from a fire that crippled a key silver mine; for 3Q, silver production fell 8% and gold production rose 11%; GOLD posts Q3 preliminary gold production at 1.04 mln ounces, up 3% sequentially due to higher production from its Cortez mines in Nevada and reports prelim copper production at 112 mln pounds, up 4.7% sequentially helped by its Lumwana mine in Zambia.



·     In Semiconductors: the broader group outperformed, led by biggest gains in equipment stocks (AMAT, KLC, LRCX), but overall helped lead the tech sector outperformance early.

·     In Advertising: PUBGY guided FY organic revenue +5.5% to +6%, vs. prior about +5%, sees operating margin 18% (same as prior view) and free cash flow EU1.7B, above prior at least EU1.6B, and followed better Q3 overall and organic revs (shares of other ad stocks OMC, IPG up initially in sympathy).

·     In eCommerce: Goldman Sachs lowered their 2023 US eCommerce industry growth forecast from +9% to +7% YoY given muted trends in discretionary categories due to ongoing consumer and macro headwinds. Buy AMZN (on CL), CHWY, ETSY, and RENT Sell EBAY. Also, stay Neutral-rated on NFLX and SPOT ahead of 3Q earnings.

·     In Software: TEAM agreed to acquire privately held video messaging platform Loom for about $975 million, beefing up its team collaboration tools to tap into resilient demand fueled by the adoption of hybrid work.

·     In IT Servies & Consulting: Indian IT company INFY cut the top end of its full-year revenue growth to 1%-2.5% on a constant currency basis, compared to its prior view of 1%-3.5% after reporting quarterly profit slightly below estimates, hurt by an uncertain demand environment (cut coms a day after Tata Consultancy warned clients were hesitant to spend on discretionary projects).

·     In Satellite & Telecom: VSAT said it expects to recover less than 10% of the planned throughput from its failed ViaSat-3 F1 satellite and will not replace it but instead finalize a $420M insurance claim by year-end; said it can still meet customers’ current and future needs; also lowered capex.


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.