Mid-Morning Look: May 15, 2023

Mid-Morning Look

Monday, May 15, 2023






DJ Industrials




S&P 500








Russell 2000






U.S. stocks are pulling back off overnight highs as the focus this week is: retail earnings (HD, WMT), debt ceiling talks between the GOP and White House, and a bevy of Fed speakers all discussing the U.S. outlook, inflation, and interest rates. The impasse in Washington over raising the roughly $31.4 trillion borrowing limit is looming where markets fear the U.S. will default on its debts, creating market uncertainty. President Joe Biden is expected to meet House Speaker Kevin McCarthy and other congressional leaders on Tuesday for budget negotiations after staff-level talks continued throughout the weekend. Dow components HD is expected to report tomorrow and WMT on Thursday leading a handful of retailer earnings this week. Fed speakers this morning leaning more to the “hawkish” side on rates, as Atlanta Fed President Bostic said in CNBC interview that cutting rates this year not his baseline case and doesn’t expect to cut rates well into 2024; he noted the Fed may have to go up on rates. Chicago Fed President Austan Goolsbee says much of the impact from the Fed’s rapid rate-hiking campaign is still working its way through the economy. Meanwhile, billionaire hedge fund manager Paul Tudor Jones says the Fed is done raising rates and he believes that stocks will finish the year higher from here. The Dow Jones Industrial Average is trying to snap its 5-day losing streak (and down 10 of last 11) while the tech heavy Nasdaq comes into Monday riding a 3-week winning streak after rising +0.4% last week. Lone piece of U.S. economic data indicated slowing growth as the NY Fed Manufacturing posted a sharp drop from the prior month and well below consensus views.


Economic Data

·     NY Fed’s empire state current business conditions index tumbles to -31.8 in May vs +10.8 in April and the new orders index sharply lower at -28.0 in May vs +25.1 in April. The prices paid index rose +34.9 in May above +33.0 in April. Employment index at -3.3 in May vs -8.0 in April and empire state six-month business conditions index +9.8 in May vs +6.6 in April.







WTI Crude















10-Year Note





Sector Movers Today

·     Monthly credit cards data slightly improved: BAC credit card charge-off rate was 1.89% in April vs 1.90% in March and net charge off rate was 1.17% vs. 1.9% in March. COF April domestic credit card net charge-offs rate 4.26% vs 4.16% in March; 30+ day performing delinquencies rate for domestic credit card 3.57% at April end vs 3.66% at March end; April auto net charge-offs rate 1.16% vs 1.30% in March. DFS credit card delinquency rate 1.38% at April end vs 1.40% at March end; card charge-off rate 1.78% at April end vs 1.61% at March end. JPM credit card charge-off rate 1.58% in April vs 1.62% in March; credit card delinquency rate 0.87% at April end vs 0.88% at March end. SYF April adjusted net charge-offs 4.7% of average loan receivables; and April 30 days+ past due 3.7% of average loan receivables.

·     In materials, chemicals: DD was upgraded to Buy at Deutsche Bank with $80 tgt saying shares are down 15% versus a 3% gain for the S&P since mid-January and DuPont’s shares now trade at a 50% discount to its peers. We think this marks a good entry point for shares. VNTR reaches agreement to enter prepackaged Chapter 11 to significantly reduce debt. CX downgrades to Neutral from Buy at Bank America citing 64% YTD share price appreciation that makes CX’ valuation less attractive.

·     In semiconductors: WDC rises as Reuters reported that Kioxia and Western Digital are speeding up merger talks and nailing down a deal structure, as a slumping flash memory market puts fresh consolidation pressure on the world’s No. 2 and No. 4 players. https://reut.rs/450kWww . According to TrendForce, DRAM and NAND Flash prices are expected to fall further in the second quarter of 2023 due to weak server shipments and high inventory levels – Digitimes reports. https://bit.ly/42CakCy



·     AI +5%; prelim earnings Q4 total revenue seen $72.1M-$72.4M vs. est. $71.1M; posts prelim estimates for adj. loss from operations of $23.7M-$23.9M vs. prior forecast of $24M-$28M loss.

·     MMP +14%; OKE agreed to acquire Magellan in a cash and stock deal valued at ~$18.8B including assumed debt, for $67.50 per share https://bit.ly/3puysYX

·     MNDY +10%; beat and raise; Q1 revs rise 50% y/y to $162.3M vs. est. $155.3M and sees year adj op profit $8M-$12M vs. prior view loss of (-$36M-$32M) and raises year revs to $702M-$706M from prior $688M-$693M view.

·     NGMS +119%; Aristocrat Leisure Limited agreed to acquire NGMS for $29.50 a share in all-cash deal for the lottery game technology company in a deal valued at $1.2B https://bit.ly/3W278gO 

·     SHAK +5%; Activist investor Engaged Capital has built a 6.6% stake in SHAK, including swaps, and is planning to run a proxy fight for three board seats, WSJ reported https://on.wsj.com/3pE9WVv

·     SRPT +25%; after an FDA advisory panel narrowly recommended approval for its gene therapy for Duchenne Muscular Dystrophy (DMD) by a vote of 8-6, ruling that the potential benefit to patients outweighs a long list of concerns from agency reviewers.

·     WDC +7%; as Reuters reports that Kioxia and Western Digital are speeding up merger talks and nailing down a deal structure, as a slumping flash memory market puts fresh consolidation pressure on the world’s No. 2 and No. 4 players. https://reut.rs/450kWww



·     ATNX -60%; after files for Chapter 11 proceedings; reaches agreement to pursue expedited sales process of certain assets.

·     FSLR 2%; downgraded from Outperform to Peer Perform, removed from Alpha List at Wolfe Research citing valuation after spike in shares last week on constructive Treasury guidance.

·     HRB -5% and INTU shares fall -5%; the WSJ reported the Biden administration is considering creating a government-run alternative to TurboTax (INTU) and HRB, drawing resistance from Republicans and companies fearing a loss of business. https://on.wsj.com/3pDYzwS

·     OKE -6%; following M&A purchase of MMP over the weekend (see above).

·     SOFI -10%; downgraded to underperform from Neutral at Wedbush as believes the company may be nearing a tipping point on the fee income it recognizes related to loan origination and sales.


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.