Market Review: September 12, 2023

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Closing Recap

Tuesday, September 12, 2023





DJ Industrials




S&P 500








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U.S. stocks finish lower ahead of key inflation data tomorrow (CPI) and Thursday, an ECB interest rate decision Thursday, and a potential auto industry union strike (also Thursday) as energy prices/stocks jumped while technology stocks lagged. The top stories today had Oracle (ORCL) slowing revenue growth sending shares down over 10% and Apple’s (AAPL) new product launch announcements (details below). There was also a slew of Wall Street conferences moving several sectors which continues into tomorrow. Stocks ended near lows late day, taking out yesterday lows in the process, though NYSE breadth was about flat despite major averages weakening as small cap gains in energy and financials help offset the weakness in technology. Bank of America’s monthly global fund manager survey shows a "dramatic shift in relative exposure," with a record jump in allocations to U.S. equities and a slide out of emerging-market equities as China growth expectations take a tumble. September’s survey showed 0% expected a stronger Chinese economy, a steep drop from 78% expecting a stronger economy in Feb.


Consumer Price Index (CPI) August data expected tomorrow at 8:30 AM: Based on consensus forecasts, headline CPI is expected to accelerate to 0.6% M/M (vs. 0.2% in July) on higher gasoline prices, with the y/y change edging up to 3.6% (vs. 3.2%). Core inflation will likely remain at 0.2% M/M with the y/y pace falling to 4.3% (vs. 4.7% prior). In an interesting stat today: U.S. incomes fell for a third straight year as Americans’ inflation-adjusted median household income fell to $74,580 in 2022, declining 2.3% from the 2021 estimate of $76,330, The amount has dropped 4.7% since its peak in 2019, per WSJ.


Commodities, Currencies and Treasuries

·     U.S. crude oil futures settle at $88.84 per barrel, up $1.55, or 1.78%, up over $20 from their 2023 lows while Brent Crude futures settle at $92.06/bbl, up $1.42, or 1.57%. The U.S. EIA raised its 2023 world oil demand growth forecast by 50,000 barrels per day to 1.81 million bpd. In its monthly forecast, the agency cut its oil demand growth estimate for 2024 by 250,000 bpd to 1.36 million bpd. U.S. crude output is due to rise by 870,000 bpd in 2023 versus the previous year. In 2024 oil output is expected to rise by 380,000 barrels per day to 13.16 million bpd.

·     Natural gas prices climbed for a fourth consecutive session, rising 13.5 cents, or 5.2%, to settle at $2.743 per million British thermal units, their highest close since Sept. 1, after falling for four straight sessions before that. The market has been lacking any serious direction in recent weeks as prices stay in a rather tight range roughly between $2.500 and $2.700.

·     Gold prices settled down -$12.10, or -0.62%, to $1,935.10 an ounce, the dollar index bounced from yesterday’s losses and Treasury yields stayed steady ahead of tomorrow’s CPI report. Not much fluctuation in Treasury yields with the 10-yr dipping 2 bps to 4.26% and the 2-yr at 5%. The US Treasury sold $35B in 10-year notes at a yield of 4.289%, in-line with when issued prior as the bid-to-cover (demand) was 2.52 vs. prior auction of 2.56 as primary dealers take 13.77% of U.S. 9-year 11-month notes sale, direct 19.92% and indirect 66.31%.






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10-Year Note





Sector News Breakdown


Retail, Consumer Staples & Restaurants:

·     WMT CEO provided an upbeat outlook at the Goldman Sachs conference today saying that US consumers have held up better than expected, says expects prices to decrease in general merchandise in the short term but not all the way back to where they were 2 years ago.

·     CASY rises after Q1 EPS beat ($4.52 vs est. $3.36) while revenue of $3.87B just below consensus $3.90B with better EBITDA $315.5M vs consensus $266.1M; reaffirms FY inside same store sales +3-5%; Q1 fuel segment posted slightly lower revenue with much higher fuel margins than expected at $0.41 cents per gallon compared to its $0.36 assumption.


Leisure, Gaming & Lodging:

·     In Autos: AAP shares fell after ratings agency S&P Global downgraded the company’s credit and debt ratings from investment grade (BBB-) to junk (BB+). Shares of Detroit three automakers (GM, F, STLA) and auto suppliers (BWA, APTV) rally after the UAW said Monday there was some progress in labor talks, but wide divide remains (ahead of the strike deadline this Thursday 9/14).

·     In Casino/Gaming: MGM said its dining, entertainment and gaming offerings are now operational after a cyberattack prompted the casino operator to shut down certain systems on Monday.

·     In Leisure products: DOOO was upgraded to Buy from Neutral and tgt raised to $128 from $111 saying coming out of most recent round of ORV channel checks, 2Q earnings, and its deep dive on powersports inventories, it is upgrading shares.



Banks, Brokers, Asset Managers:

·     In Banks: Barclays held a financial services conference today. Among headlines: 1) WFC said was comfortable’ with existing NII guidance and says overall real estate portfolio is doing well with no systematic stress seen apart from stress in the office space; 2) ZION says net interest income increased in August vs July at conference; 3) CMA CEO said bank expects average loan balances in Q3 below prior forecast, average deposit balance through 8/31/23 are tracking above; 4) NTRS shares tumble after saying sees Q3 NII ‘closer to down 10%’ vs. prior guidance of down 5% and that August was ‘soft as we anticipated it to be.’ 5) PNC said that net interest income is expected to decline slightly and be toward the low end of the 3% to 4% range previously stated while also mentioned a “structural” program on expenses to be announced on earnings day.

·     In business Services: in Unfirms, CTAS upgraded to Buy from Neutral at Bank America on higher confidence in a potential US economic soft landing and increased estimates.

·     In monthly AUM data: CNS preliminary assets under management of $80.0 billion as of August 31, 2023, a decrease of $2.3 billion from assets under management at July 31, 2023.

·     In Consumer Services: DFS reported credit card delinquency rate 1.51% at Aug end vs 1.46% at July end and the credit card charge-off rate 1.98% at Aug end vs 1.79% at July end.

·     In Mortgage/Lending: RDFN noted the median US asking rent in August was $2,052, just $2 below the record high set a year earlier, up slightly–0.7%–from a month earlier. However, with vacancies on the rise, some landlords are doling out one-time discounts to attract renters while maintaining high asking rents on paper they said.



Biotech & Pharma:

·     GERN was upgraded to Buy at Goldman Sachs and maintained $4 tgt saying the correction represents a buying opportunity ahead of 2024 launch for imetelstat for the treatment of lower-risk MDS which was recently accepted, with an assigned PDUFA date of June 16, 2024.

·     EXEL is licensing the global rights to develop and commercialize an investigational cancer treatment that was derived from Insilico Medicine’s generative AI drug-discovery platform.

·     HUMA announced top-line data from a trial that evaluates its Human Acellular Vessel (HAV), used to treat traumatic vascular injuries.

·     LYRA reported a successful Phase 2 study of its LYR-220 drug candidate in the inflammatory sinus disease chronic rhinosinusitis; said primary endpoint met with no serious adverse events.

·     MLTX shares rally after competitor SLRN announced top-line data for Izokibep (IL-17 drug) from the Phase 2/3 trial in HS (Hidradenitis Suppurativa). Cantor said they believe this is a big positive for MLTX as it mitigates the risk from a competitor in HS, putting SLK significantly ahead in HS.

·     NBIX announces positive top-line data from phase 3 study of crinecerfont in adults for the treatment of congenital adrenal hyperplasia.

·     SLRN shares tumble after saying its lead product, izokibep, did not meet the primary endpoint of a clinical trial of patients with hidradenitis suppurativa, a chronic inflammatory skin condition.

·     TSVT said CEO Nick Leschly is stepping down, is cutting 176 jobs, representing about 40% of the company’s workforce, as it seeks annualized cost savings of at least $65M, or about $130M in the 2024-2025 period; said it no longer expects to generate $470M-$570M in 2023 revenue, as sales of its Abecma gene therapy medicine declined.


Healthcare Services & MedTech movers:

·     Insulin companies DXCM extend YTD losses (down -7% YTD, -41% YTD and -51% YTD respectively) given upbeat weight loss drug industry results this year (LLY ) in GLP -1 drug sector. LLY shares top $600, rising an 8th straight day on weight loss drug momentum.

·     OFIX falls after fires CEO, CFO, and Chief legal officer following probe saying the investigation found that each of those three executives "engaged in repeated inappropriate and offensive conduct that violated multiple code of conduct requirements.”

·     SGHT shares tumbled after lowered Q3 rev guidance to $19M-$20M vs. est. 423.7M and cut its FY sales view to $80M-$82M from prior $89M-$94M view (est. $92M) citing reductions in new account additions and a decrease in year-over-year utilization.

·     SYK announced that its Pangea Systems including Femur, Fibula, Tibia, Humerus and Utility have received 510k clearance from the U.S. FDA.


Industrials & Materials

·     UPS shares slip after saying its new five-year deal with Teamsters-represented workers will cost less than $30 bln that was outlined by the union. The contract would increase wages and benefit costs at a 3.3% compound annual growth rate over the life of the agreement. Contract-related costs in H2 2023 are expected to be about $500 mln more than UPS expected.

·     Ag space/chemicals (DE, AGCO, MOS) shares active after the USDA boosted its production outlook for corn, compared to analyst projections of a cut – USDA cites production outlook to greater harvested area which offset a cut to avg yield.

·     In Aerospace: AER 40.68M share Spot Secondary priced at $59.00; GE unit to sell about 40.7 mln AER at $59 each for about $2.44 bln in all. RTX was downgraded at both Barclays and RBC Capital Markets after the aerospace and defense company cut its full-year sales forecast.

·     In Paper sector: WRK and Smurfit Kappa to merge to create the world’s largest listed paper and packaging company worth nearly $20B. WestRock stockholders will get one share in the new company, called Smurfit WestRock, and $5 in cash for each share they hold, or $43.51 per share.



Internet, Media & Telecom

·     In Media: the WSJ reported that National Amusements, the parent company of PARA, said that the majority holder in Paramount has paid down part of its loan, and creditors will get increased interest and collateral.

·     In social media: TikTok is rolling out its TikTok Shop product for all users in the US this week, as the firm makes a big push into eComm.

·     In Internet: GDDY shares rise after activist Starboard said the co was "deeply" undervalued and that the web services firm should consider a potential sale if it cannot improve its financial performance.


Hardware & Software movers:

·     Apple (AAPL) product launch headlines:

·     1) Apple announces iPhone 15 has super retina XDR display, which uses OLED technology coming in two sizes, 6.1 inches for iphone 15 and 6.7 inches for iphone 15 plus. bringing 48-megapixel main camera to iphone 15. Apple says iphone 15 has new 2x telephoto option for capturing photos and 4k video. iphone 15 USBC cable can charge mac, iPad, iPhone, and Air Pods Pro second generation. Price points: $799 for iPhone 15 and $899 for iPhone Plus. For iPhone Pro models: Apple says iphone 15 pro comes in 6.1 inches for iphone 15 pro and 6.7 inches for iphone 15 pro max. Apple raises price of iphone 15 pro max by $100 to $1199.

·     2) Apple announces Apple watch series 9 with all-day 18hr battery life that as a new second generation ultra-wideband chip that enables precision finding for iphone. Apple watch Ultra 2 has battery life up to 36 hours of typical use on a single charge and up to 72 hours in low power mode. new apple watch series 9 starts at $399 and Ultra 2 watch starts at $799.

·     ORCL shares stumbled after reported Q1 cloud sales growth that slowed in the quarter to +30% from +54% of the prior quarter, dimming enthusiasm; sales growth driven by strength in OCI Gen 2 (66% Y/Y growth) and back-office apps (17% Y/Y growth).

·     CRM and GOOGL expand their partnership to deliver a new era of business productivity powered by generative AI.

·     PERI was downgraded to Market Perform from Outperform at Raymond James on valuation noting the stock has outpaced many of its AdTech peers (in some cases considerably) since the pandemic recovery started in late 2020.

·     LAW shares tumbled after the abrupt announcement that the CEO and Co-founder resigned from the company and board yesterday.

·     SKIL Reported 2Q24 inline on revs and a slight EBITDA beat, Reit. FY24E guide; expecting continued demand and engagement from employee re-skilling.



·     ARM IPO expected later this week; 95.5M share ADS expected to price between $47-$51.


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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