Market Review: October 26, 2023

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Closing Recap

Thursday, October 26, 2023





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S&P 500








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Stocks tumbled amid another day of consistent selling pressure, pushing the S&P 500 index (SPX) down more than 100-points from its 200-day moving average resistance around 4,240 just a day ago and falling for the 6th time in the last 7-days. Earnings season is revealing the difficulties companies are having in a high interest rate environment, with many noting cutbacks on consumer spending, push out of orders, and cautious outlooks as stocks continue to get punished on misses/lower guide. Market breadth actually favored advancers/decliners despite the drop, but markets were hit hard by heavy selling in large cap tech with GOOGL, META falling on recent earnings results, AAPL settled below its 200-day moving average ($170.35) for the first time in 165 trading days dating back to March 2nd, and AMZN dropped ahead of earnings (retail spending a fear after UPS lowered its forecast this morning citing weaker macro environment). While stocks sank, the CBOE Volatility index (VIX) didn’t rise above Monday’s high of 23.08 which was interesting. The U.S. dollar touched its highest level against the Japanese yen in a year to 150.32, while Treasury yields slipped on a round of mixed data (see below). Note the Nasdaq 100 dropped more than 10% from its 7/14 high, its first 10%+ correction since its 2022 closing low. The Russell 2000 index (RTY) is nearly in “bear market” territory, defined as 20% from peak. Not many positive to gather from the recent trading action heading into the heart of earnings season.


Economic Data

·     Q3 Gross domestic product (GDP), a measure of all goods and services produced in the U.S., rose at a 4.9% annualized pace, up from the 2.1% pace in Q2 and above the economists’ expectations for a 4.7% acceleration. U.S. advance Q3 PCE price index ex-food/energy/housing rose +1.8% vs Q2 +3.1% and advance Q3 PCE services price index ex-energy/housing +3.6% vs Q2 +3.5%.

·     Weekly Jobless Claims rose to 210K in the latest week vs. est. 208K and prior week 200K; the 4-week moving average rose to 207,500 from 206,250 prior; continued claims rose to 1.790M from 1.727M prior week and Us insured unemployment rate unchanged at 1.2%.

·     Durable goods orders advanced 4.7% in September to $297.2B, compared with the 1.7% increase expected and the 0.1% decline (revised from +0.2%) in August. September Retail Inventories (Advance) +0.9% to $800.7B vs. +0.5% prior. On a Y/Y basis, retail inventories grew 5.6% in Sept.

·     Wholesale Inventories 0.0% M/M to $900.6B vs. 0.1% consensus, compares with -0.1% in August.

·     September Advance International Trade in Goods posts a deficit of (-$85.78B) vs. (-$86.20B) consensus and (-$84.27B in August).

·     Sept Pending Home sales index rose +1.1% vs. consensus -1.8%; Sept Pending Home sales -11.0% from Sept 2022.

·     The average interest rate on a 30-year mortgage rises to 8.09%, its highest since July 2000. Mortgage rates are now up for 7 straight weeks in their historic run higher.


Commodities, Currencies & Treasuries

·     Oil prices slide, as WTI crude dips -$2.18 or 2.55% to settle at $83.21 per barrel (lowest in 2-weeks), Brent Crude futures settle at $87.93/bbl, down $2.20, 2.44% adding to recent weakness. Bearish inventory data yesterday, a strong dollar amid reasons for pullback. The primary risk associated with the ongoing conflict in the Middle East is the potential for stricter sanctions against Iranian oil exports due to Iran’s support of Hamas.

·     Gold prices held up well, rising $2.50 to settle at $1,997.40 an ounce d as investors looked to haven assets as stock markets hit 5-month lows. Gold ticked higher as steady safe-haven demand fueled by the Middle East conflict helped bullion weather pressure from strong U.S. data that quelled recession fears.

·     The U.S. dollar index (DXY) was 0.2% higher at 106.75, its highest in nearly three weeks as the euro falls -0.25% around $1.0538 as economic data in the US remains strong, positing a 4.9% advance in Q3 GDP this morning. The Japanese yen weakened to hit a fresh one-year low of 150.78 per dollar and was not far off the 32-year low of 151.94 it touched in October last year, which led to Japanese authorities intervening in the currency market.

·     Treasury yields slipped following a softer PCE inflation data point in the GDP reading, coupled with the first decent bond auction this week from the Treasury. There was $38B in 7-year notes sold at a yield of 4.908% vs. 4.91% when issued prior; bid-to-cover ratio 2.70, non-comp bids $253.18 mln; Primary dealers take 10.98% of U.S. 7-year notes sale, direct 18.4% and indirect 70.62%. The auction was better than, helping push yields to lows of day initially.






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10-Year Note





Sector News Breakdown



·     Ford (F) and United Auto Workers (UAW) union negotiators reached a tentative labor deal after a six-week strike, UAW President Shawn Fain said, agreeing on a 4-1/2-year contract that would provide a record pay boost. The union is still in striking GM and Stellantis.

·     In Auto suppliers: VC mixed results as EPS beat while top line tops consensus and narrows its year profit/sales view; LEA posted top and bottom line Q3 beat while boosted its year outlook for revenue to $23.1B-$23.3B from $22.35B-$23.05B but narrows EPS outlook.

·     In auto parts retail: ORLY reported 3Q results ahead of consensus expectations on the top and bottom lines, Q3 comps of +8.7% were ahead of consensus’ +5.6%, operating margins of 21.3% (+20 bps y/y) were slightly ahead of consensus’ 21.1% and EPS of $10.72 beat.

·     In Car Rental: HTZ shares tumble as Q3 adj EPS $0.70 misses the $0.77 estimate while revs rose 8.3% y/y to $2.7B, in-line with consensus and net income margin of 23% was the same y/y.

·     In Motorcycles: HOG reported a 24% fall in Q3 profit as customers cut back on discretionary spending due to higher borrowing costs and inflationary pressures; said sales from motorcycles and related products fell about 9% to $1.30B and global motorcycle shipments decreased 20%; said some customers are struggling to keep up with bills.


Consumer Staples & Restaurants:

·     In Food: HSY beat Wall Street expectations for quarterly sales and profit, benefiting from higher prices of its chocolates and candies and reaffirms its annual profit forecast of $9.46-$9.54.

·     In beverages: KDP Q3 results topped consensus as higher prices and resilient demand for its sodas and beverages helped limit hit from slowing coffee business; said coffee segment remains under pressure, with net sales falling 3.2% to $1.01B

·     Other movers included MO in tobacco, falling after EPS and revs missed expectations and expects 2023 adj EPS of $4.91 a share to $4.98 a share, compared to the analyst view of $4.98 a share.



·     In Toy retailers: MAT shares declined despite a top and bottom-line quarterly beat thanks to success of its “Barbie” movie as sales rose 9% y/y to $1.92B (est. $1.84B) and raised its year EPS view – did note sales of its American Girl segment, however, dropped 13%. HAS tumbles on guidance as expects 2023 revenue to tumble 13% to 15% compared to a prior forecast of a 3% to 6% decline after Q3 revenue declined 10% y/y to $1.50B 9vs. est. $1.64b)

·     In Appliance retail: WHR lowers FY23 adjusted EPS view to about $16.00 from $16.00-$18.00 prior and cuts FY23 cash provided by operating activities view to approximately $1.1B from $1.4B and cut its fs free cash flow estimate.

·     Other retailers: OSTK reported smaller-than-expected loss but revs below consensus while said it is planning to launch a branded Overstock website that will operate as a clearance and liquidation retailer now that its main site has taken on the Bed Bath & Beyond banner; in research, BBWI downgraded from Buy to Hold at Jefferies as sees limited growth oppty as data across social, foot traffic, & share suggest a slowing of trends for BBWI.


Leisure, Gaming & Lodging:

·     In Cruise lines: RCL raises FY adj EPS view to $6.58-$6.63 from prior $6.00-$6.20 (above est. $6.08) citing higher ticket prices along with steady demand for leisure travel which followed a Q3 sales beat but warned of cancellations tied to the war will reduce 4Q earnings.

·     Boating sector: BC Q3 adj EPS $2.42 vs. est. $2.36; Q3 revs $1.59B vs. est. $1.66B; cuts FY23 EPS view to $9.00 from $9.50 (est. $9.30) and lowers FY23 revenue view to $6.45B-$6.5B from $6.7B-$6.8B; HZO Q4 revs $594.6M beats $531.6M est. but EPS missed.

·     Lodging sector: WH Q3 EPS $1.31 vs. est. $1.26; Q3 revs $402M vs. est. $395.47M; Q3 global RevPAR grew 3% y/y constant currency and system-wide rooms grew 3% y/y; boosts FY23 adjusted EPS view to $3.94-$4.08 from $3.92-$4.06 (est. $3.99). CHH said it had asked the board of Wyndham to engage in merger talks after they rejected Choice’s $7.8B offer last week.

·     Entertainment: LYV upgraded from In Line to Outperform at Evercore/ISI with $100 tgt saying the regulatory overhang, uncertainty about ’24 growth, and upside to near-term estimates creates an attractive entry point for Live Nation’s equity. EDR rises as the talent agency and sports company run by Ari Emanuel, said it would start exploring strategic alternatives for the company, which could mean a potential sale.


Homebuilders, Building Products, Home Furnishing:

·     In Home Improvement retail: TSCO lowers FY 2023 sales forecast to $14.5B-$14.6B vs. prior $14.8B-$14.9B and profit view to $10-$10.10 per share, from prior expectations of $10.20-$10.40; posted Q3 sales $3.41B miss and said comp store sales fall on weak demand for seasonal goods and big-ticket items.

·     Homebuilders: TPH posted Q3 EPS of $0.76 topping $0.57 est. on better revs as new orders of 1,513 was ahead of consensus estimate of 1,469 homes; CCS posted Q3 EPS of $2.58 versus consensus estimate of $1.64 as total revenues declined 20% to $889M with average closing price of $382k versus Wedbush $375k estimate.



·     In Oil Services: BKR delivered solid 3Q23 results with revenue and adjusted EBITDA outpacing Stifel estimates by 2.9% and 1.9%, (+1.8% and 2.1% versus the consensus), respectively, and landing near the high end of guidance.

·     In Refiners: VLO renewable diesel segment sales volumes averaged 3 million gallons per day, 761,000 gallons per day higher than a year earlier; Q3 EPS $7.49 vs. est. $7.47 and in-line revs $38.4B as operating income came in at $3.50B vs. est. $3.53B.

·     In Solar: NOVA posted a top and bottom line miss for Q3 (larger EPS loss), but shares rebounded as company backs FY23 adj Ebitda outlook.



Banks, Brokers, Payments:

·     In Banks: MS announced Ted Pick will become its new CEO as James Gorman stays on as executive chair. LAZ revenue missed in both Financial Advisory and Asset Management, Assets under management $228.26B, +15% y/y, EST $230.6B and adj EPS $0.10 misses by 6c.

·     In Consumer Finance: MA Q3 adj profit of $3.39 tops ests $3.21, Gross dollar volumes rose 11% to $2.3 trillion on a local currency basis, sees Q4 net revenue growth in low double digits vs consensus ests for more than 16% increase.

·     In Insurance: WTW among top gainers in the S&P better-than-expected organic revenue growth and margins topped expectations; EG posted Q3 EPS beat mostly reflecting higher-than-expected investment income and lower-than-expected core and catastrophe loss ratios.

·     Payment sector was crushed on Wednesday, Mizuho said Europe’s Worldline’s warning of a "macroeconomic deterioration" in core geographies like Germany hurt the entire FinTech sector pre-market. Mizuho views the worries as overblown for the following reasons: Visa specifically did not call out a recession in its initial FY24 guide, which it provided yesterday. Firm also said stocks like AFRM and SQ have little to no exposure to Germany & Europe. Goldman Sachs weighed in as well saying underperformance in US payments stocks Wednesday reflects flight to quality away from acquirers amidst concerns around slowing trends in Europe. Goldman highlights GLBE, RSKD, NVEI and FIS as most directly exposed to weaker European trends.



·     AVB reported another quarterly beat (+1.6% vs. cons.) and management increased 2023 SSNOI and core FFO guidance (+0.7%).

·     EPR reported a sizable 3Q23 beat (+$0.10/sh vs. consensus) that included a total of ~$19.3M of deferred rent and ~$5.2M of interest collections from cash basis customers; Despite the big quarterly beat, FY23 guidance was increased 0.8% at the midpoint.

·     EQIX adjusted EBITDA beat ($935.9mn vs $922.7mn cons) and they raised FY23 guidance modestly see $8.16B-$8.20B of revs, Adj EBITDA of $3.680-$3.710 and AFFO of $31.87-$32.19.

·     GTY reported a 3Q23 AFFO beat of $0.02, and management increased its FY23 AFFO guidance higher by 0.4% at the midpoint by lifting the low and high end of the range $0.01/sh to a new range of $2.24-$2.25/sh.

·     INVH 3Q23 core FFO missed consensus and management decreased 2023 core FFO guidance by $0.01 or 0.6% at the midpoint; higher-than-expected operating expense growth guidance, which increased 150 bps to 10.5% due to higher property tax bills in FL and GA.

·     KIM FFO beat and raises low end of the ’23 guide to $1.56-1.57 from $1.55-1.57 prior. NOI beat in the qtr and they are taking up NOI growth to 2% at the midpoint vs prior 1.5%.

·     KRC reported 3Q23 FFO of $1.12, which beat both consensus by $0.05 and raised its FY23 FFO/sh guidance by ~$0.10/sh to a range of $4.55-$4.60 ($4.43-$4.53 prior), primarily driven by management increasing its cash SSNOI growth forecast to a range of 2.75-3.25% (1.5-2.5% prior).

·     MAA 3Q23 core FFO beat consensus and management’s quarterly guidance, yet the Company reiterated the midpoint of its 2023 core FFO guidance.

·     SUI FFO beat ($2.57 vs $2.48 cons) and though the company lowered their FY23 guidance in line with consensus at $7.09 at the midpoint (down from $7.16 at the midpoint previously.

·     VICI reported a 3Q23 beat and management raised its FY23 AFFO guidance by ~0.9% at the midpoint to a new range of $2.14-$2.15/sh (from $2.11-$2.14/sh).


Insurance & Services:

·     In business Services: URI posted adjusted 3Q23 results that included a ~2% beat on EBITDA while revenues of $3,765M were above consensus of $3,695M. WU exceeded expectations and the company achieved positive digital revenue growth one quarter early; however, their 4Q23 EPS guidance was ~12% below the street and revs 3% below.

·     In Real Estate services: RDFN reports buyers get some relief as new listings finally increase, more sellers drop prices. Said new listings have posted their first annual increase since July 2022 as some seller’s tire of waiting for mortgage rates to come down and others worry that prices will decline. New listings of homes for sale rose 0.3% from a year earlier.



Biotech & Pharma:

·     BMY Q3 revenue $10.97B vs $10.94B est. as Opdivo inline and Sotyktu beat though Eliquis and majority of new product launches softer; now expected >$10B revs from new product portfolio in 2026 (vs. $10B-$13B in 2025) and lower non-GAAP op margin to be >37% (vs. 40%+ prior).

·     MRK beat consensus on top and bottom line, with sales beats in Keytruda and Vax portfolio (ex-Gardasil), though the largest delta beat vs consensus was in its COVID-19 antiviral while raised its topline guidance and lowered EPS guidance after recent ADC deal.

·     ALT said the FDA has granted fast track designation to its clinical program investigating pemvidutide for the treatment of NASH.


Healthcare Services & MedTech movers:

·     In Dental services: ALGN shares tumbled after Q3 EPS and revs fell short of consensus saying people are cutting back on dental and orthodontic visits, prompting them to guide Q4 revs $920-940Mm below consensus est. $1.02B (other dental stocks include HSIC, PDCO, XRAY).

·     In MedTech: BSX 3Q beat with rev, Organic Growth and EPS ahead, with all segments ahead (ex neuromod). Organic growth pointed to upper end of range and EPS was raised to $1.99 to $2.02 (vs. $1.96 – $2.00 prior), with 4Q EPS guide catching street at high end.

·     In Medical Equipment: EW delivered in-line results for Q3 sales/EPS, but its TAVR business missed despite posting double-digit ex-FX sales growth in US/Int’l and Q4 guide now implies FY23 guide to be at the low-end of the range for both sales (up 10-13% y/y underlying) and EPS ($2.50-$2.60)

·     In Hospitals: UHS 3Q results were positive with both segments beating revenue, margin and EBITDA estimates and an overall EBITDA beat of $6M or 1.4%. Acute care volumes were strong at 6.8% (same facility) driving revenue upside, and acute margins were 30bps better than expected. Behavioral volumes remain weak for the second sequential quarter at just 1.1%.

·     In Managed care: MOH Q3 adj. EPS of $5.05 tops ests $4.88 and reaffirmed 2023 EPS guidance of >$20.75, as beat was driven by higher premium revenue and higher NII, which was offset by a higher MCR and higher G&A. Medicaid membership slightly missed Street and overall MCR of 88.7% came in higher than Street 88.3%.

·     Health Services: KVUE reported results that were largely in-line with consensus estimates at the top and bottom line while trimming the top end of its full-year organic sales and EPS guidance range due to a soft start to the cold and flu season and FX.


Industrials & Materials


·     In Transports: sector slammed for the 6th time in 7-days early after UPS Q3 adj EPS $1.57 vs. est. $1.52; Q3 revs $21.06B vs. est. $21.45B; maintains CAPEX spending at about $5.3B; but cuts FY23 revenue view to $91.3B-$92.3B from about $93B and below consensus $92.76B; shares of FDX and other transports slumped in reaction. Other sector, CP reduced its 2023 EPS growth guidance from +MSD to "flat to slightly positive” in rails and LSTR in truckers with results.

·     In Airlines: SAVE reports Q3 -$1.37 vs -$1.47 on revs $1.26B vs. $1.25B est. saying seeing discounted fares for travel booked through the pre-Thanksgiving period, no return to a normal demand and pricing for the peak holiday periods; LUV EPS beats but revs miss noting so far in Q4, overall demand for travel stable with strong bookings for holiday travel periods; ULCC shares jumped early following its quarterly results.


Industrials, Aerospace & Defense

·     In Industrials: CARR Q3 EPS topped consensus by $0.10 and raised FY23 adj eps forecast from $2.55-$2.65 to about $2.70 and reported 5% yoy increase in Q3 sales and 3% yoy increase organic sales; LII raises FY23 adjusted EPS view to $17.25-$17.75 from $15.50-$16.00 and upped its FY23 revenue view to up 5% from up 2%-4%, consensus $4.81B; FTV downgraded from Buy to Neutral at Bank America after weaker Q3 core revenue growth of 2.5% y/y and organic volumes declined (1.7)% y/y with a 4.2% benefit from pricing. HON 3Q EPS $2.27 beat est. but sales missed at $9.21B vs. est. $9.24B, missed segment EBIT by 1% in qtr and narrowed year outlook.

·     In Ag Equipment: OTR Global downgraded its view on farm equipment manufacturers AGCO, CNHI, DE to Negative from Mixed, saying global new farm equipment orders declined further year-over-year between August and October.

·     In Defense: RKLB said the Federal Aviation Administration (FAA) authorizes resuming Electron launches; NOC Q3 EPS topped estimates and raised its year revenue outlook.



Internet, Media & Telecom

·     In social media: META easily topped earnings expectations on strong revs rising 23% y/y, daily active users rose 5.6% y/y to 2.09N and Q4 rev guidance bracketed consensus but like SNAP did the day prior, warned of ‘softer ad spend’ following outbreak of Israel-Hamas conflict.

·     In Media: EDR shares jumped as the talent agency and sports company run by Ari Emanuel said Wednesday it would start exploring strategic alternatives for the company, which could mean a potential sale.

·     In Content Delivery: AKAM upgraded to Neutral from Sell at Guggenheim as it sees potential upside to current 2024 Street estimates which creates a more balanced risk/reward scenario.

·     In Cable & Telecom: CMCSA mixed Q3 results as loses 18K broadband customers vs. est. +3.6K; said overall revs $30.12B beat est. $29.6B but ad revs fell -8.4% y/y.

·     In Towers: AMT names new CEO, Q3 revs $2.8B top est. $2.76B and better adj EBITDA, helping boost shares of comp towers CCI, SBAC early.


Hardware & Software movers:

·     IBM posted net income of $1.7B vs. $3.2B loss the year prior on better revs and noted clients are increasingly adopting their WatsonX AI and data platform along with our hybrid cloud solutions; saw an 8% increase in software revs, 6% growth in consulting and a 2% drop in infrastructure.

·     NOW reported a quarterly bounce in revenue on strong subscription sales up 27% to $2.2B and an aggressive push into AI and overall revs rose 25% to $2.2B y/y and noted 83 new transactions worth more than $1 million in net new annual contract value.

·     PI soars as Q3 adj EPS $0.00 vs est. ($0.10) on revs $65.005Mm vs est. $64.75Mm, adj gr mgn 50.5%, adj EBITDA $300k vs est. ($2.665Mm); guides Q4 revs $65.5-68.5Mm vs est. $65.97Mm, adj EBITDA ($0.9Mm) – $0.7Mm vs est. ($1.733Mm).

·     ANET, NVDA and others saw weakness initially after META lowered its capex spending outlooks to $30B-$35B next year (est. $33.8B) and lowers the top end of capex view for 2023 by $1B.

·     ADBE upgraded from Perform to Outperform at Oppenheimer with $660 tgt as it sees a strengthening business momentum, a favorable outlook for FY2024, and durable growth based on positive fundamental trends and a top position in software for the generative AI opportunity gleaned from its customer and industry surveys.

·     In the EMS sector: FLEX said it is spinning out its remaining 51% stake in NXT in an exchange worth roughly $6 a share; and following generally strong Q2 results, Flex guided Q3 revs $6.7B at midpoint, or down ~10% q/q and $1.3B below Street, on incremental weakness. BHE posts top and bottom line beat for Q3 but guidance for Q4 below views.

·     In IT Services & Consulting: FFIV downgraded from Neutral to Underperform at Bank America and lower tgt from $165 to $160 as believes challenges to software and systems pose risks to revenue guidance and model -2% and +4% rev. growth for FY24/FY25.



·     KLAC reported F1Q24 EPS that was 6% above consensus on revenue that was 1% above, and it guided F2Q EPS 6% above consensus on revenue that is 2% above.

·     MXL tumbles as missed 3Q ests and guided 4Q23 well below expectations as heavy channel inventory digestion in the Broadband and Connectivity segments clouds near-term visibility.

·     STM Q3 sales and gross margin beat expectations and its CEO gave upbeat comments on automotive demand next year; did warn Q4 revs would fall -3% y/y due to weaker demand from some industrial clients, particularly in China.

·     TER Revenue and non-GAAP EPS came in at the upper end of the guidance range, modestly above ours/cons. estimates on sequential growth in semi test and robotics; Q4 guidance is below consensus, with revenue expected to decline 5% QQ at the mid-point of the range.

·     WDC shares tumbled after Nikkei reports Western Digital and Kioxia scrap memory merger talks.


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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