Market Review: March 31, 2023

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Closing Recap

Friday, March 31, 2023





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     The end of month/quarter markup continued for major averages Friday as U.S. stocks opened higher and kept on rallying, boosted by another round of “not as bad as feared” inflation data as the core PCE for March ticked slightly lower from prior month and below ests, but remains stubbornly high. Stocks held steady with headlines surrounding banks dialing back emergency lending from funds and White House calling on US regulators to toughen rules for large regional banks. The benchmark S&P 500 gained nearly 6% in the first quarter, with the technology sector up about 20% while the financials index is set for its worst quarter since June. Markets continue to benefit from stabilization in banking sector and notion Fed of pivot due to tightening in financial conditions (and upward momentum). Note five S&P 500 stocks are set to close Q1 with 50%+ YTD gains. The top three are $500+ billion companies: NVDA +87%, META +73%, TSLA +59%, WBD +57% AMD +51%. Major averages close the week higher after what looked ominous Monday and Tuesday but rallied into the weekend. Stress in the banking sector has reminded us of the consequences of monetary tightening, but zero fear as the CBOE Volatility index (VIX falls a 6th straight day to around 18.50 after highs around 31 mid-month). The S&P 500 (SPX) after weeks of being stuck between 200-day MA and 50-day, broke out this week, rising above 4,100.

·     Wall Street is getting bullish on U.S. stocks as Citigroup raised its view to overweight from underweight, while downgrading European shares saying the rising risk of recession will prompt investors to move into quality growth stocks. Goldman expects the S&P 500 to post more gains, at least in April. According to Lipper: For the week ended 3/29/2023: Equity Fund Outflows were $20.5B vs Inflows last week were $11.9B while ex-ETFs Equity Fund Outflows were $7.9B vs Outflows last week were $2.8B (showing more cash on sidelines). @RyanDetrick tweeted: April is the second-best month on average for stocks since 1950 (November is better). Up 17 of the past 18 times in a pre-election year. And the best month the past 20 years. Of course, it was down 8.8% last year, so no, this isn’t perfect. Still, worth knowing. @charliebilello tweeted recently: The "Fed Put" Is Back. The Fed’s balance sheet has grown $392 billion over the last 2 weeks, the largest 2-week spike higher since April 2020. Thus over 60% of the Quantitative Tightening since last April has been undone … in just two weeks. Overall lots of optimism for a stock market that saw gains in Q1, led by nearly 20% in the technology sector alone.


Economic Data:

·     Personal Income M/M for March rises +0.3% vs. est. +0.2% (prior +2%); Personal Spending M/M for March rises +0.2% vs. est. +0.3% (prior +1.8%). Feb personal saving rate +4.6% vs Jan +4.4%.

·     PCE Price Index M/M for Feb rises +0.3% vs. Jan +0.6% and PCE Price Index Y/Y for Feb rose +5.0% vs. +5.3% prior in January.

·     U.S. Feb. Core PCE Price Index (MoM) rose +0.3% vs. est. +0.4% (prior +0.5%) and on a Y/Y basis, Core PCE Price Index rose +4.6% vs. est. +4.7% (prior +4.7%).

·     Chicago PMI for March reported at 43.8 vs. 43.4 consensus and 43.6 in February; marked the seventh straight month of contraction in Chicago’s manufacturing sector.

·     University of Michigan Sentiment final March 62.0 vs. consensus 63.2 (prelim March 63.4); current conditions index final March 66.3 vs prelim March 66.4 and expectations index final March 59.2 vs prelim March 61.5.

·     The UoM 1-yr inflation expectations reported at 3.6% vs. est. 3.8% and previous 3.8%; while the 5-10 Year Inflation seen at 2.9% vs. est. 2.8%.


Commodities, Currencies & Treasuries

·     Gold prices slide -$11.50 or 0.6% to settle at $1,986.20 an ounce but managed to post gains for the month and quarter amid weakness in the U.S. dollar as rate hike expectations dwindle and rate cut opportunities arise given the fragile banking system situation.

·     Treasury yields edge lower Friday, with 2-year on pace for biggest monthly drop in 15 years. The benchmark 10-year Treasury yield fell to 3.50%, its largest monthly drop in three years (down 42-bps); the 2-yr down 4 basis points at 4.08% (down 72-bps for March marking its biggest monthly drop since January 2008).

·     Oil prices rise, with WTI crude +$1.30 or 1.75% to settle at $75.67 per barrel; for the quarter crude oil lost about -5.7% and down -1.38% for the month (a 5th straight down month, longest streak since 2015 when it fell 7-straight months). Natural Gas for May delivery lost $2.26 per million British thermal units, or 50.48% to $2.2160 per million British thermal units this quarter and down -$4.55 or 67.25% over the last two quarters (today it is up 11.20 cents or 5.32%).






WTI Crude















10-Year Note





Sector News Breakdown

Consumer Retail, Staples & Restaurants:

·     In restaurants: QSR upgraded to Outperform at TD Cowen and up tgt to $75 from $72 saying improvement in BK U.S. SSS will allow the stock to get more credit for stronger performing segments including Tim’s Canada (~45% of adj. EBITDA) and BK Int’l (~23% of adj. EBITDA).

·     In auto retail: AAP upgraded to Equal weight from Underweight at Barclay’s following the stock’s significant pullback year-to-date; reward now skews more balanced.

·     In beauty: ULTA tgt raised to $600 from $530 at Argus saying they have a favorable view of Ulta’s business partnerships, loyalty programs, strong customer engagement, and new focus on wellness. NUS announces CFO Mark Lawrence is resigning after 6 years to pursue another opportunity; company is reiterating Q1 and FY23 guidance given in Feb.

·     In autos: reminder TSLA expected to announce delivery forecasts this weekend: TBC said based on checks, regionally reported data, and app download they forecast total 1Q23 deliveries of 445k units, which would be +44% y/y and +10% q/q. Deutsche Banks trimmed their 1Q deliveries estimate lower to 416k units (+34% YoY, +3% QoQ) reflecting still the uncertain macro environment after the price cuts, as well as competitive pricing responses in China. We estimate Tesla delivered about 135k units of Model 3+Y in China, with the rest to come from N. America (168k), Europe (73k), and RoW (25k).


Banks, Brokers, Asset Managers:

·     Stat of day: The top 10 banks in the U.S. hold more assets than the other 2124 banks combined.

·     The most recent Fed H.4.1 report showed a $22 billion decrease in discount window borrowing offset partially by an $11 billion increase in the BTFP facility, since the end of last week. The Federal Reserve Banks with the largest decreases in securities, unamortized premiums & discounts, repurchase agreements, & loans were S.F. ($19 billion), and NY ($8 billion). Overall, this report indicates that the liquidity pressures in the banking system have eased.

·     Banks mixed; MCB late yesterday in filed 8-K said: the Company and Bank remain well capitalized across all measures of regulatory capital, with a total risk-based capital of 13.4% and 13.1%, respectively, at December 31, 2022, well above regulatory minimums; shares of CFG, ZION, CMA, SCHW, MTB among top S&P decliners today.



Biotech & Pharma:

·     CYTK said it had stopped a late-study stage of its treatment for amyotrophic lateral sclerosis (ALS), as the drug was found to be ineffective.

·     PACB was upgraded to Outperform at TD Cowen and raised tgt to $15 from $13 calling it a growth transformation story under CEO Henry where investor bias has shifted positive, though the high multiple and expectations keeps many investors away.


Energy, Industrials, Transports & Materials

·     In aerospace & defense: HWM upgraded to Buy from Neutral and establishing a $49 PT at Benchmark saying along with several recent large aircraft orders support ramping production rates, they are also more comfortable with Street expectations, and robust industry lead times suggest long-cycle ordering continues for the jet engine supply chain. ASTS falls after posting a 4Q loss that’s wider than the year-ago period.

·     In industrials, GNRC was downgraded from Neutral to Underperform at Bank America and cut tgt to $91 from $141 saying after GNRC’s precipitous fall from grace as the second worst performing stock in 5&P in 2022 now moves into a deteriorating macro environment with a strained resi consumer and highlight risk to further HSB underperformance on volumes and pricing.

·     Gasoline prices at the pump jump toward their highest since late November and may see further increases as crude-oil prices rebound from short-lived banking scare and as gas stations switch over to pricier, summer-blended fuels. AAA says the national average for a gallon of regular stands at $3.50, up 6 cents from a week ago and up 14c from a month.



Internet, Media & Telecom

·     For Internet: Bloomberg reported that NFLX will reduce film output & consolidate film units to increase quality. For META, Benchmark said they expect ‘23/’24 revenue will fall -7%/-14% short of consensus and the same shortfall on operating income despite our conservative cost assumptions. GRPN announces CEO transition as Kedar Deshpande, CEO and director has stepped down; Appoints Dusan Senkypl as interim CEO, effective immediately.

·     In software/hardware: just another mass melt up in tech with more than 4% gains or more for MDB, NOW, SNOW, U, CRWD, etc. BB reported weak Q4/F23 (Feb) results consistent with the recent preannouncement, with total revenue of $151M below estimates, driven by weak Cybersecurity revenue of $88M versus Canaccord prior $111M estimate. Management indicated large government perpetual license-type deals did not close in the quarter and slipped to F2024. PGTI shares jumped after the co approved a shareholder rights plan in response to their view of the likely accumulation of PGTI shares by a strategic investor.

·     In semis: Japan said it will expand restrictions on exports of 23 types of leading-edge chipmaking technology, as the US ratchets up efforts to limit China’s access to key semiconductor knowhow. MU shares slipped after China Cyberspace regulator (CAC) said to implement cybersecurity review on micron’s products in China.


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.

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