Market Review: October 25, 2023

Closing Recap

Wednesday, October 25, 2023





DJ Industrials




S&P 500








Russell 2000













With October coming to a close, it looks like the Santa Claus rally may be on hold! A day after snapping its 4-day losing streak, the S&P 500 failed to build on the Tuesday rally, tumbling to its lowest level since early June back below the 4,200 level (SPX) and firmly below its 200-day MA of 4,238. Tech was weak as the Nasdaq 100 fell -2.47%, but avoided falling -2.5%, stretching its streak to 215 days with a day down more than that (BTIG noted earlier this month the last calendar year the NDX went without a day down that aggressive was back in 2013). Stock selling accelerated around 1:00 PM ET after a weaker 5-yr bond auction didn’t help the case for a rebound, showing tepid demand for the $52B auction, pushing stocks to lows of the day while Treasury yields extended gains (10-yr at 4.95% and 30-yr around 5.1%). As mentioned above, the tech heavy Nasdaq Composite underperformed, weighed by weakness in cloud software after GOOGL cloud rev growth slowed, and chips (SOX -4% at 5-month lows) after TXN guided Q4 revenue well below consensus views. The Russell 2000 Small Cap also remains a weak spot, down around 7% this month and now down over 4% YTD (vs. S&P +10% YTD and Nasdaq +25% YTD).


Several other sectors saw continued weakness as 1) Dow Transports fall over -300 points with every component in index down on the day (led by drops in ODFL, NSC after earnings); 2) regional gaming sector falls behind weak results comments by BYD; 3) FinTech group extends 2023 losses on another sharp revenue and profit warning from a European competitor, Worldline (echoes comments from Adyen last month that sunk shares of PYPL, SQ – but differs from the better results from Dow component Visa overnight). Defensive sectors such as consumer staples (food specifically – CPB, GIS, UTZ) were one of the few sectors exhibiting strength. Medical equipment was a drag on Healthcare as TMO cut guidance, following recent weakness in rivals PNR, Sartorius.


Economic Data

·     Sept single-family home sales jumped 12.3% to 759K annual rate, above consensus of 680K and vs. Aug 676K; Sept home sales Northeast +22.5%, Midwest +4.7%, South +14.6%, West +7.5%; the Sept new home supply 6.9 months’ worth at current pace vs aug 7.7 months and the Sept median sale price $418,800, -12.3% from Sept 2022 ($477,700).

·     In Washington DC, U.S. House Republican Mike Johnson secures 217 votes needed and was elected as House of Representatives speaker. The vote comes 3 weeks after Kevin McCarthy was voted out of office by his peers.


Commodities, Treasuries and Currencies

·     U.S. crude oil futures rebounded to rise $1.65 or 1.97% and settle at $85.39 per barrel (off earlier lows of $82.08), snapping its 3-day losing streak at 3-days. Inventory data was bearish as U.S. crude oil stockpiles jumped last week as refinery utilization dropped, while gasoline inventories posted a surprise build, the EIA said. Still oil prices managed to bounce to finish higher.

·     The EIA said weekly crude inventories rose by 1.4 million barrels in the more than analysts’ expectations of a 240,000-barrel build. Refinery utilization rates fell by 0.5 percentage point to 85.6% of total capacity. Gasoline stockpiles rose by about 160,000 barrels in the week to 223.5 million barrels vs. est. -900k drop.

·     Gold prices advanced $8.80 to settle at $1,994.90 an ounce, rising despite a big pop in Treasury yields and the dollar as attention remains on the Middle East and a rotation into haven assets as stocks tumbled. The dollar index (DXY) advanced +0.2%.

·     Treasury yields jump across the board – 10yr to highs 4.95% and 30-yr 5.1%. Another weak Treasury auction led to another sell-off in stocks and bonds! The U.S. Treasury sold $52B in 5-year notes at high yield 4.899%, vs. 4.88% when issued (1.9bps tail) prior with a softer bid-to-cover ratio of 2.36 as primary dealers take 19.41% of sale, direct 19.08% and indirect 61.51%.






WTI Crude















10-Year Note





Sector News Breakdown



·     HMC and GM said they are scrapping a plan to jointly develop affordable electric vehicles (EVs), just a year after they agreed to work together in a $5B effort. The decision underscores GM’s strategic shift to slow the launch of several EV models to focus on profitability, as it grapples with the rising cost of United Auto Workers strikes.

·     In EV space: TD Cowen downgraded shares of FREY and EVGO; said for FREY, tgt cut to $7 from $14 as company’s near-term setup "remains murky" with project finance for both Arctic and America yet to crystalize while for EVGO downgrade cited slower than expected DC fast charging installations among other reasons.


Retailers, Consumer Staples & Restaurants:

·     In beer sector, Heineken (HEINY) maintained its full-year outlook, but warned tough economic conditions in some markets could weigh on consumer demand for its beers in 2024; Net revenue before one-offs rose 4.5%, just short of analyst expectations of a 4.8% increase; beer volumes fell 4.2% – slightly less than analyst forecasts (BUD, SAM, STZ among movers.)

·     Few pockets of strength in market today: Food stocks (CPB, GIS, CAG, K) saw a rebound after underperforming in 2023 as investors flocked to defensive sectors such as consumer staples. Also several retailers saw strength AEO, DDS, GPS (was upgraded at Wells Fargo), DG, TGT, URBN were among names seeing upward momentum.


Leisure, Gaming & Lodging:

·     In Casinos & Gaming: BYD shares slumped after Q3 adj EPS $1.36 missed the $1.47 estimate saying results impacted by declines in play from retail customers and ongoing cost pressures; posted a 3% EBITDAR miss, mostly on stepped-up/broad-based cost pressures (regional gaming shares were volatile after print – IGT, PENN, CZR, RRR, LNW).

·     In Cruise lines (CCL, NCLH, RCL): Carnival’s Australian unit has been ordered to pay the medical expenses of a woman who contracted COVID-19, with a judge ruling that the cruise ship operator misled passengers about safety risks. The decision from Australia’s Federal Court is the first-class action win against a cruise ship operator in the world – Reuters reported.

·     In Lodging: hotel operator HLT reported Q3 adj EPS $1.67, in-line with consensus on better revs at $2.67B vs. est. $2.62B; Q3 system-wide comparable RevPAR increased 11.4%, on a currency neutral basis; sees FY23 adjusted EPS $6.04-$6.09, consensus $6.07; sees FY23 system-wide comparable RevPAR, on a currency neutral basis, up 12.0%-12.5% compared to 2022.

·     In Education: LRN shares popped higher after providing an upbeat FY outlook saying sees 2024 revenue in the range of $1.96B-$2.03B above ests. $1.94B and reported Q1 record revenue of $480.2M driven by higher enrollment in general education and career learning.



·     CHX Revenue and adjusted EBITDA missed forecasts mainly due to weaker results in the U.S.-leveraged Production & Automation and Drilling Technologies segments, while Production Chemicals was impacted by $7.2 million of foreign exchange losses.

·     MTDR Q3 Production and capex results, as well as guidance updates, were in-line or better than expected, and 4Q23 guidance of 145 mboe/d (+2%) provides a bullish setup into 2024 and soft 2024 production guidance of "150 mboe/d or more” said Keybanc.

·     RRC Q3 adj EPS $0.46 vs. est. $0.35; Q3 revs $649M vs. est. $603.74M; 2023 all-in capital budget is $570M-$615M and targeting a maintenance program in 2023, resulting in approximately flat production at 2.12 – 2.16 bcfe per day.

·     In Solar: SPWR said its unaudited financial statements for Q1 and Q2 of 2023, as well as its audited annual report for the period ended Jan. 1, 2023, submitted to the SEC should no longer be relied upon. RUN shares also tumbled after short seller Carson Block of Muddy Waters renewed his short call speaking at J.P. Morgan/Robin Hood Investors Conference in NYC. The group has been crushed this year/moreso in last 2-weeks after SEDG tumbled on lower guidance.

·     In Coal: CNX misses Q3 free cash flow (FCF) estimates on higher-than-expected quarterly capital spending at $19M vs. est. $50M; reaffirms year capex and production.



Bitcoin, FinTech, Payments:

·     In Consumer Finance: Visa (V) posted an 11% Q4 revenue rise to $8.61B topping the $8.56B estimate (on better EPS) as payments volume grew 9% in the quarter, unchanged from the prior quarter and processed transactions also remained flat at growth of 10%, but cross-border volumes increased 16% (also announced $25B buyback and raised dividend).

·     Also today, for MA, V, AXP The Federal Reserve is set to propose lowering by about 30% the fees merchants pay to many banks when consumers shop with debit cards, setting off a fight with banks that oppose the changes. At present, merchants pay large card issuers such as JPMorgan Chase and Bank of America 21 cents plus 0.05% of the transaction amount – Wednesday’s plan would reduce the fees to 14.4 cents plus 0.04% of the transaction amount, according to the Fed.

·     FinTech/Payments: European payments company Worldline SA (WRDLY) shares plummeted after cutting its sales outlook; Worldline said it now sees organic sales growth in 2023 of between 6% and 7%, compared with 8% to 10% previously. It also forecasts a 150-basis-point drop in its operating margin. The stock’s plunge mirrored that of peer Adyen NV (ADYEY) in August – shares of US payment companies (PYPL, SQ, GPN, FIS, FI) declined in sympathy.

·     In Payroll: ADP with mixed Q1, beating on bottom line but missing on top saying they saw a 9% increase in revenue from its mainstay employer services business, which provides human resource outsourcing. Interest on funds held for clients also rose 43% to $202 million.

·     In Crypto: after volatility on Tuesday with Bitcoin rising over 10% to $35,000 (highest level in 18-months), reports today indicated that BlackRock bitcoin ETF added to eligibility file, says clearing house DTCC – helping boost sentiment for the space yet again (COIN, MARA, MSTR, RIOT).

·     In Insurance: CB reported operating EPS of $4.95 per share, beating consensus of $4.44 amid higher NII ($1,415 mln vs. $1,280 mln est.; $0.26 beat), stronger favorable prior-period reserve development ($200 mln vs. $84 mln est.; $0.22 beat), and a lower accident year ex-cat combined ratio (84% vs. 85% est.; $0.22 beat), partially offset by higher catastrophe losses said JMP.



·     In online real estate: CSGP bottom line Q3 results missed and guided year revs $2.445-2.450B below est. $2.461B, adj EBITDA $485-490Mm vs est. $517.84Mm noting high interest rates force consumers to rethink property purchases.

·     Earnings in REITs:

·     AAT reported 3Q beat and increased its FY23 FFO guidance 2.6% at the midpoint.

·     BDN reported 3Q23 FFO of $0.29, which was ahead of consensus by $0.01 and narrowed its FY23 FFO guidance, leaving the midpoint unchanged at $1.16; notably, management increased its cash SSNOI growth forecast to 5.0-6.0% (2.5-4.5% prior) and decreased core occupancy guidance.

·     EGP reported a 3Q23 FFO beat that was $0.02 ahead of consensus on a "clean," comparable basis, and management increased FY23 FFO guidance 1.6% at the midpoint to a new range of $7.73-$7.77/share.

·     ROIC reported in-line 3Q23 results, though results included $0.02/share of higher-than-expected other property income; lowered its FY23 FFO guidance by nearly 2% at the midpoint.



Healthcare Services & MedTech movers:

·     In Healthcare Services: TDOC reported a slight top-line miss driven by weaker than expected BetterHelp revenues but reported a ~15% bottom-line beat on lower-than-expected sales and G&A costs; 4Q outlook came in 2.5% below consensus on the top line but 2.8% above on bottom.

·     In Healthcare Technology: VEEV upgraded from Equal Weight to Overweight at Wells Fargo and raised tgt to $229 saying they see a path for Commercial Cloud returning to double-digit growth–and illustrate why IQV is unlikely to stand in the way.

·     In Medical Equipment: TMO Q3 adj EPS $5.69 vs. est. $5.63; Q3 revs $10.57B vs. est. $10.61B.; cuts FY23 adjusted EPS view to $21.50 from $22.28-$22.72 (est. $22.31) and cuts FY23 revenue view to $42.7B from $43.4B-$44B (est. $43.53B) citing the current macroeconomic environment. WAT, DHR, RGEN, AVTR all weak today in rough start to earnings season – follows TMO lowered guidance today, DHR comments yesterday and Sartorius (SOAGY) which pre-released a 3Q23 revenue miss and reduced FY23 guidance earlier this month, citing a variety of macro headwinds.


Industrials & Materials

·     In Transports: NSC Q3 adj EPS $2.65 misses by 4c on better revs of $2.97B, noting earnings were nearly cut in half, dragged by ongoing costs tied to the February train derailment; CNI reported 3Q23 adjusted EPS of C$1.69, slightly below consensus – top line miss driven by yields. Ryder (R) authorizes board authorized 2 new share buyback programs, raised guidance for the year after Q3 results (EPS beat/revs miss); HA reported adjusted 3Q EPS loss of -$1.06, below consensus -$0.94 as weaker performance above and below the line drove the downside. ODFL reported Q3 EPS $3.09 vs. est. $2.92 on in-line revs of $1.52B in freight/logistics.

·     In Industrials: Waste stocks advance after WM Q3 profit topped consensus, helped by lower operating costs; GNRC shares remain weak, lowest levels since April 2020; shares down 8-straight days.

·     In Lithium sector: Piper downgraded LTHM and ALB to Neutral from Overweight and $19 (prior $33) and $155 (prior $255), respectively, based on challenges in EV manufacturing and demand, which may conspire to significantly degrade lithium’s S/D dynamics.


Aerospace & Defense

·     BA reported a wider-than-expected Q3 EPS loss of (-$3.26) vs. est. (-$3.18), but revs grew 13.5% y/y to $18.1B, topping consensus of $18B as commercial airplanes/global services biz revs topped expectations while defense, space and security revenue missed; said Q3 FCF is (-$310M) vs. est. negative (-266.7M); affirmed its 2023 FCF guidance of $3.0B-$5.0B but cut delivery outlook.

·     GD snaps its 7-day losing streak (longest in 4-years) as Q3 profit and revenue topped saying strong demand continued; revs grew 6% to $10.57B vs. est. $10B amid better revs from marine systems, combat systems and technologies businesses which offset a miss by aerospace.



Internet, Media & Telecom

·     In Internet: GOOGL Q3 EPS and revs topped consensus, but shares slid as cloud revs slowed to +22.5% at $8.411B vs est. $8.6B and down from 28% growth last quarter – but positively posted ad revs $59.65B up from $54.48B last year. Reported 3Q with Search and YouTube showing healthy acceleration, reflecting the improving digital ad environment during the quarter.

·     In social media: SNAP shares jumped initially overnight after posting and EPS beat on higher revs and midpoint of Q4 revs topped consensus but did warn expects muted spending from many brand-oriented ad campaigns following the onset of the war in the Middle East. Note META earnings are expected after the close tonight.

·     In Telecom: TMUS followed strong results from VZ and AT recently as EPS $1.82 topped $1.70 est., though revs $19.25B was below the $19.37B est. as now expects to gain between 5.7M-5.9M postpaid net customers for the full year and said FCF is expected of $13.4-13.6B; posted a net gain of 850,000 postpaid phone customers, an increase. VZ was upgraded to Overweight to Equal Weight at Barclays saying improving second derivatives are not reflected in valuation.

·     In Online Retail: ETSY downgraded to Neutral from Buy at Citigroup and cut tgt to $67 from $114 as believes there is limited visibility into the company’s 2024 gross merchandise sales growth and sees some headwinds to Etsy returning to stronger revenue growth, particularly near-term. CHWY was upgraded to Neutral from Sell saying shares largely reflect potential n-t challenges.


Hardware & Software movers:

·     MSFT one of the few bright spots overnight after an EPS/revenue beat as Azure and other cloud services revs +29% above ests of around 26%; intelligent cloud revs +19%. Accelerating Azure growth (+29%/28% Y/Y-CC), besting management’s guidance by 250 basis-points, was driven by better-than-expected AI contribution (3% vs 2%) and healthy new workload activity

·     AAPL is raising the price of its Apple TV+ service to $9.99 per month from $6.99, the company said on its website. It is also raising the price of Arcade to $6.99 from $4.99, and news to $12.99. Price increases for existing users will be effective in 30 days.

·     DDD announces additional restructuring initiative and provides prelim Q3 results as sees Q3 revenue $123M-$124M, below est. $129.97M and withdraws year guide; said restructuring initiative targeted to deliver incremental annualized savings of $45M-$55M by end of 2024.



·     TXN guidance weight on analog semis (ADI) after mixed Q3 results (top line missed/bottom line beat), and guided guides Q4 EPS $1.35-$1.57 and revs $3.93B-$4.27B below consensus $1.75/$4.49B saying demand suffers across its key markets as vendors pull back on orders. Results reflect strong automotive demand trends, which grew 20% y/y; weakening trends in industrials (-15% y/y), and weaker demand trends within Comm, which declined 50% y/y.

·     ASML shares slumped after Bloomberg reported China’s Semiconductor Manufacturing International Corp. used equipment from ASML to manufacture an advanced processor for a Chinese smartphone that alarmed the U.S.


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.