Market Review: May 10, 2023

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Closing Recap

Wednesday, May 10, 2023





DJ Industrials




S&P 500








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U.S. equities enjoyed a nice early pop after April CPI came in in-line. The +4.9% overall y/y reading was the 10th consecutive decline in the inflation rate and the lowest since April 2021. The core rate moved down to +5.5% y/y, also in line with expectations. By midday, after a bit of morning volatility, the S&P 500 was holding around flat. Traders had taken advantage of the early gains to sell the news, trade the range or just realize some profits, then left stocks to settle back to a narrower range through the morning. However, into the final hour, stocks were rallying off early afternoon lows testing early highs in yet another “buy the dip” moment. Also moving post-CPI were implied probabilities on future Fed moves. The probability the Fed pauses in June rose to almost 99% by midday versus 79% prior to the data and the implied December rate slipped to 4.328% from 4.437% pre-CPI. Technology, Real Estate and Utilities were the morning sector leaders, while Energy and Financials were primary laggards. 


From a data perspective, the folks at Zerohedge note that while consumer price inflation has slowed, it still outpaced wages for the 25th straight month. Also on CPI, @charliebilello highlights the category disparity over the last year, with transportation +11%, food away from home +8.6% and shelter +8.1%, while fuel oil was -20.2%, gasoline -12.2% and used cars -6.6%. @GuyDealership notes new car deals are improving as well, with auto incentives hitting the highest point in over a year. The average incentive/vehicle is $1,714. For the Fed pause/cut crowd, @SG_PorterandCo (Scott Garliss) points out the real fed funds rate (implied fed funds minus CPI) is now positive and has been a condition for ending past rate hike cycles. And to keep the Fed cut watchers honest, @KobeissiLetter reminds that the Fed is set on their 2% inflation target and has specifically said they will not raise it, so perhaps we could see a pause but not likely a pivot.


Sector-wise, leadership was similar to the morning movers. Communications (XLC, +1.04%), Technology (XLK, +1.02%) and Real Estate (XLRE, +0.89%) were leaders. Energy (XLE, -1.05%) and Financials (XLF, -0.93%) remained the laggards. Growth and Value were split consistent with sector performance, as Russell 1000 Growth gained +0.72% while Russell 1000 Value slipped -0.30%. Breadth remained fairly balanced with advancers leading marginally; 1.15:1.


Economic Data

·     The Consumer Price Index (CPI) data mostly in-line across the board for the month: Headline M/M for April reported in-line up +0.4% vs. est. +0.4% (prior +0.1%); Consumer Price Index (CPI) Headline Y/Y for April rose +4.9% vs. est. +5.0% (prior +5.0%). On CPI Core, Ex; Food & Energy M/M for April rose in-line +0.4% vs. est. +0.4% (prior +0.4%) and CPI Core, Ex: Food & Energy Y/Y for April also in-line at +5.5% vs. est. +5.5% (prior +5.6%)



·     June gold futures slipped modestly after April CPI data was generally in-line. The contract settled -$5.80/oz, or -0.28%, to $2037.10. Some traders saw the economic data as mixed, with no clear confirmation of the Fed’s next likely move. As a result, after an initial burst higher, gold sold off before rallying to a more flattish finish.

·     June WTI crude oil futures were soft throughout the day, settling -$1.15, or -1.56%, to $72.56/bbl. Brent also slipped to settle at $76.41/bbl, -$1.03 or -1.33%. A build in inventories versus an expected draw prompted the weakness. It was the first weekly gain for crude in the last four weeks. Traders generally seem to have overlooked the above-expected draws in both gasoline and distillate inventories on the week. Separately, crude stocks in the SPR declined again to the lowest since October 1983.







WTI Crude















10-Year Note





Sector News Breakdown



·     Used car prices (KMX, CVNA) were showing meaningful progress in coming down from pandemic highs. That changed in April. The index for used cars and trucks rose 4.4% from March, the first monthly increase in nearly a year and the largest jump since mid-2021.

·     BLNK reiterated ’23 revenue guidance and 30% gross margins for the year, despite lower 1Q gross margins on weaker industry seasonality and overstock issues with contract manufacturers.

·     CARG posted better than expected 1Q results and 2Q guidance. CARG’s foundational Marketplace Subscription business drove higher revenue per dealer.

·     LI Q2 revs topped consensus and guided tear revs and deliveries above consensus.

·     RIVN reported a smaller-than-expected Q1 loss and reaffirmed its annual production plans; MarQ top line at $661M, having delivered ~7.9k vehicles versus 10.4k produced.

·     TM said it would invest an additional Yen1 trillion, equivalent to $7.4 billion, in EVs through 2030, bringing Toyota’s total planned outlays for the period to around $37 billion.


Retailers, Consumer Staples & Restaurants:

·     BUD nationwide retail sales of Bud Light were down 23.4% y/y in latest week, worse than the 21.4% decline it suffered a week earlier, according NielsenIQ data.

·     CELH posts revenue and EBITDA beat in 1Q23; revs of $260.0M, well above consensus of $219.6M and adjusted EBITDA of $48.7M, well above consensus of $29.4M as retail scanner data (per SPINS/IRI) indicate a strong start to 2Q23, with Celsius sales up ~123% for the 4 weeks.

·     BROS was downgraded at JPMorgan and TDCowen after results as thinks revenues are likely to miss reiterated guidance that it expects to ultimately be lowered.

·     FRG to be acquired by a Consortium Led by Management Group with stockholders to receive $30.00 per share in cash, in a deal valued at $2.6B.

·     WWW Q1 EPS and revenues top consensus and reaffirms forecasts for year while posts gross margin of 39.4% compared to 42.5% in the prior year.


Leisure, Gaming & Lodging:

·     In online travel: ABNB shares slide as the company posted record nights booked of 121.1M but still just missed ests 121.6M while revs of $1.82B beat the $1.79B estimate but guided adjusted Ebitda margin to be lower because of the timing of marketing spending.

·     In leisure: MODG shares slid as topped expectations for Q1 as revs rose 12% to $1.17B above the $1.14B estimate but guided year EPS $0.63-$0.69 from prior $0.70-$0.78 range.

·     In casino: WYNN LV/EBH beat, and Macau was in line w/ WELLS’s above-Street est.; commentary was encouraging re: Macau (2QTD/Golden Week trends strong, EBITDA fully recovering to ’19 levels) and LV (record April).



·     OXY reported a 48% decline in Q1 earnings as EPS of $1.09 missed the $1.24 consensus expectations as realized prices for oil fell to $74.22/barrel vs $91.91/barrel a year earlier.

·     BE reported 1Q23 revenue of $275M (+37% y-o-y) which was slightly better than consensus $262M. 1Q23 revenue came in at 18% of FY 2023 revenue target of $1.4-1.5bn (+17-25% y-o-y). 1Q23 acceptances grew by 35% y-o-y to 51MW.

·     ARRY Q1 results beat consensus driven primarily by very strong gross margins but mgmt noted slower order activity (and backlog declined from Q4), given customers waiting on IRA clarity.



Banks, Services, Bitcoin, FinTech, Payments:

·     FCNCA shares rise after Q1 results, helped by $9.82 billion preliminary gain, net of tax, from the acquisition of SVB.

·     MQ forecast Q2 rev growth that disappointed after stronger Q1 results.

·     UPST shares jump after earnings better but also said secured long-term funding agreements that could deliver $2 billion to the Upstart platform over the next 12 months.

·     LZ 1Q revenue and adj EBITDA were well ahead of expects, 7% and 29% respectively and raised 2023 revenue and adj EBITDA guidance.



Biotech & Pharma:

·     SRPT shares were volatile after FDA officials expressed doubts about its new Duchenne muscular dystrophy (DMD) drug in briefing documents to its outside advisers, who are scheduled to meet Friday to discuss the evidence for the treatment. Officials listed concerns about the indicator Sarepta relied on to show the drug works, as well as overall effectiveness and safety.

·     NERV rises early after FDA accepted marketing application for its experimental drug, roluperidone, to treat negative symptoms of schizophrenia.

·     TEVA posted a drop in Q1 profit that fell way short of estimates as EPS of $0.40 missed the $0.56 estimate and down from $0.55 y/y and revs of $3.7B compared to est. $3.63B saying sales were hurt to rising costs due to inflationary and other macro pressures; backed year guidance; said to introduce new strategic framework at May 18 Investor Day event.


Healthcare Services & MedTech movers:

·     CUTR shares declined after CFO resigns, Q1 revs fell -5.2% y/y to $55.0M vs. est. $60.6M and reports Q1 adj EBITDA -$14.5M.

·     EXAS easily exceeded expectations in 1Q and raised guidance by more than the beat.

·     HALO Q1 total revs of $162M and EPS of $0.4 slightly below Streets’ top-line revs of $177M and EPS of $0.55 but maintained top-line, bottom-line and royalty guidance for FY23.

·     MASI 1Q23 revenue and EPS beat consensus and management reiterated their 2023 revenue and EPS guidance.

·     SYNH to be acquired by a private investment consortium for approximately $7.1B as holders to receive $43 per share (follows a Bloomberg report last night)


Industrials, Aerospace & Defense

·     AXON topped quarterly expectations handily for revenue / EPS and raised guidance reflecting strength in business.

·     RKLB reported 1Q23 revenue and EPS ahead of consensus boosted by recovering launch revenue in the quarter.

·     ROK slips after the WSJ reported the co is being probed by the U.S. over whether the company is exposing critical U.S. infrastructure, military, and other government assets to a potentially serious cyberattack through one of its China-based facilities,

·     SPCE reported Q1 2023 earnings after the close yesterday, confirmed plans for a crewed test flight (Unity 25) in late May, followed by the first commercial flight (Galactic 01, carrying Italian Astronauts), which is planned for late June.

·     In lithium, Australian lithium miner Allkem Ltd signs a deal to buy LTHM in a deal that will create a $10.6B entity; Allkem will own 56% of the new firm, as LTHM holders to get 2.406 shares of the new company for each existing Livent share.



Internet, Media & Telecom

·     GOOGL shares jumped after unveiled steps toward improving Search through Generative AI; unveils Pixel 7a phone, available today starting at $499; says Pixel Fold available next month starting at $1,799.

·     AKAM Q1 results topped expectations and gave a full-year forecast that is ahead of consensus views; CDN beat, Compute was inline, & Security missed.

·     DUOL delivered a beat and raise across all key metrics as Needham notes the co accelerates in three key areas: efficacy, engagement, & monetization.

·     NYT digital advertising revenue decreased nearly 9% to $61.3 million; revs of $561.7M missed $571M estimate; added 190,000 digital-only subscribers in the first quarter, compared with 240,000 in the prior quarter.


Hardware & Software movers:

·     TWLO tumbles as beat consensus 1Q23 revenue/EPS estimates by +.3%/$.26, but guided 2Q23 revenue growth to slow to 4% y/y.

·     RNG 1Q23 results beat lowered revenue expectations but delivered impressive OM expansion (+680bp y/y) and FCF.

·     EA reported a top- and bottom-line beat vs. guidance consensus but the company left FY24 expectations unchanged.

·     AMPL downgraded by two analysts (Piper, William Blair) as see a challenging year ahead for renewals, down sell, and churn with no meaningful catalysts to offset these headwinds.

·     RPD delivered solid quarter, beating on revenue / pro forma EPS, with ARR growth in line, while modestly raising guidance; provided no comment on strategic alternatives.

·     QTWO reported upbeat 1Q23 results, with both revenue and EBITDA coming in above expectations.

·     TOST reported strong 1Q results, beating expectations on the top and bottom line as the demand for modern restaurant software and payments solutions continues to grow and raised guidance.

·     Optical, Laser, Communications: COHR the 2nd name in space in two days to lower guidance; COHR Q3 adj EPS $0.58 well below the $0.82 estimate and revs $1.24B misses consensus $1.34B; guides Q4 EPS $0.33-$0.43 vs. est. $0.87 and revs $1.125B-$1.175B vs. est. $1.34B and guides year revs $5.08B-$5.15B, consensus $5.4B (followed weak guide from LITE Tuesday).



·     AMD and NVDA again outpacing strength in semis given AI ship growth hopes.

·     IDCC double upgraded from Underperform to Buy at Bank America and raised tgt to $105 from $55 saying they are bullish on medium-term outlook and strong mgmt.

·     ENTG said it will sell its electronic chemicals business to Japan’s Fujifilm for $700 million and use the proceeds to accelerate debt payments.

·     ICHR falls after 1Q23 results met the mid-point of its guidance ranges but guides 2Q down 20% Q/Q due to incremental memory and leading-edge logic weakness.

·     TSM April sales fell for a 2nd consecutive month, w/ revs dropping 14% YoY as electronics demand slowed.


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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