Market Review: September 18, 2023

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Closing Recap

Monday, September 18, 2023





DJ Industrials




S&P 500








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U.S. stocks failed to move meaningfully as markets await the blitz of central bank meetings this week. Top stock stories today were sparse Monday but included: 1) day four of the Big three auto UAW union strike (GM, Ford, STLA), 2) markets prepare for two big IPOs in the next two days (Instacart pricing tonight “CART” and trading tomorrow and “KVYO” pricing Tuesday night and trading Wednesday – more below on both) 3) and AAPL strength helping keep the Nasdaq afloat. Attention also firmly on the upcoming macro events this week that include the FOMC interest rate policy meeting on Wednesday 9/20 and Fed Chairman Powell press conference, the Bank of England (BoE) and Swiss National Bank (SNB) rate meetings Thursday 9/21 and the Bank of Japan (BoJ) Central bank rate decision on Friday (though there are roughly 7 other central bank meetings this week). Meanwhile the Republican-controlled House of Representatives and the Democratic-led Senate have until Sept. 30 to avoid the U.S.’ fourth partial government shutdown in a decade. TD Cowen said if no movement from the House on legislation comes by end of week a shutdown seems inevitable. September NAHB Housing market index 45 (lowest since March) below consensus 50 and vs. 50 in August as index of current single-family home sales 51 versus 57 in August (previous 57). NYS breadth was flat as Energy, Financials, Industrials lead higher while Discretionary, REITs, and Materials fell the most.


Commodities, Currencies & Treasuries

·     U.S. crude oil futures settle at $91.48 per barrel, up $0.71 or 0.78% and Brent crude futures settle at $94.43/bbl, up 50 cents, 0.53%. Oil prices climbed for a third consecutive session to mark a fresh high for the year on continued bets for tighter global crude supplies. Natural gas prices rose for the third time in the past four sessions, climbing 3.2% to $2.728/MMBtu.

·     Gold prices for December delivery rose $7.20 or 0.4% an ounce to settle at $1,953.40 per ounce, giving up some early declines to settle at their highest in more than two weeks. Precious metals waiting to hear from Federal Reserve Chairman Jerome Powell.

·     Treasury yields were little changed with the benchmark 10-year yield at 4.325% heading into the Fed meeting later this week and the dollar index (DXY) edging down slightly.






WTI Crude















10-Year Note





Sector News Breakdown



·     UAW update: The United Auto Workers (UAW) and Chrysler-parent STLA resumed bargaining talks today as a strike against the Detroit Three automakers enters its fourth day. Union negotiators and representatives of GM, F and STLA held talks over the weekend. About 12,700 UAW workers are on strike as part of a labor action targeting three U.S. assembly plants – one at each of the Detroit Three. The strikes have halted production at plants in Michigan, Ohio and Missouri that produce the Ford Bronco, Jeep Wrangler, and Chevrolet Colorado.

·     In used car market: CVNA was upgraded to Neutral from Underperform at Wedbush and raised price tgt to $48 from $40 as the recently completed debt exchange and improving profitability could drive upside in 3Q/4Q and give at least two years of breathing room to execute. In the near term, CVNA shares could trade higher on profit and cash flow upside.


Consumer Staples & Restaurants:

·     DG, DLTR, Macy’s (M), PTON, TGT, SJM among names hitting 52-week lows.

·     CLX said a cyberattack that was disclosed last month is disrupting operations and hurting the availability of the bleach and cleaning wipe maker’s products.

·     NKE estimates lower at Wells Fargo into earnings and cut tgt to $120 saying sentiment continues to drift lower, where it expects to hear worse than good news.

·     RL was upgraded to Buy from Neutral at Guggenheim with $166 tgt citing four factors: includes its belief that there are opportunities to deliver better than it previously expected gross margins into 2024 and 2025, Cotton has fallen by 27% over the last 18 months and represents about 80% of RL’s materials, valuation, and recent underperformance.

·     SKX upgraded to Overweight from Neutral at Piper Sandler and raised tgt to $59 from $54 as believes SKX can drive +mid-teens earnings growth in the medium term driven by product innovation, international, and gross margin expansion.

·     SMPL was upgraded to Overweight at Morgan Stanley as it sees an attractive buying opportunity following the stock’s -11% pullback YTD (vs. S&P 500 +16%).

·     VFC was downgraded to Neutral from Overweight at Piper Sandler and cut tgt to $20 from $28 as now believes the Vans turnaround will take longer than originally anticipated, which also impacts VFC’s timeline on decreasing leverage.


Leisure, Gaming & Lodging:

·     In Food Delivery: DASH was upgraded to Buy from Neutral at Mizuho and raise tgt to $105 from $90 after running deep dive across all key metrics and said it feels confident that Gross-Order-Value (GOV) growth rate should outperform guidance and Street expectations in 2H23.

·     In casinos and gaming: Las Vegas’ newest resort, the $3.7 billion Fontainebleau, is opening Dec. 13 after decades of planning.

·     Instacart, Incorporated as Maplebear, is set to start trading as (CART) tomorrow morning 9/19. Instacart, in a filing Friday, implied a valuation of $9.6B at midpoint by pricing its units between $28-$30 reflecting the shift in the market dynamics since it assessed itself at $24B in March of last year, following a $39B valuation set in a late-stage venture capital round a year before.



·     In Energy: VLO was a top gainer in the S&P early after authorized share repurchase of up to $2.5 bln late Friday and in general refiner strength (MPC also higher).

·     Oil prices have pushed above USD 91 per barrel and are currently hovering at the highest level in over ten months, as markets prepare for a widening of the deficit in physical markets through the fourth quarter of the year. Demand is expected to pick up and supply restrictions by Saudi Arabia and Russia will keep prices underpinned, with speculation that OPEC+ is eager to push prices towards USD 100 per barrel making the rounds.



·     In FinTech: PYPL was downgraded from Outperform to Market Perform at Moffett and cut tgt to $75 from $85; GPN was downgraded from Neutral to Sell at Redburn with $105 tgt noting it is particularly exposed to payment processing competition, with limited product differentiation yet currently commanding top decile margins in the S&P 500.



·     Shopping center REITs: Mizuho said they continue to see BRX as an attractive GARP story, upgrade KIM to Buy and as it sees more relative growth via the recently acquired RPT portfolio and opportunistic Albertsons capital and downgraded FRT to Neutral given what it sees as a less attractive GARP profile into FY24 with more debt refinancing and office lease-up headwinds. Overall, Mizuho said it is increasingly constructive on the Shopping Center REITs on what it sees as an incrementally more favorable risk adjusted GARP for the subsector into FY24.

·     In Mortgage REITs: AGNC upgraded from Neutral to Buy at UBS and raised tgt to $11.50 saying as a pure-play Agency MBS REIT, AGNC should benefit from favorable market dynamics for the asset class over the medium to long term. NLY was also upgraded from Neutral to Buy at UBS with $24 tgt up from $21 saying as the largest Agency MBS focused mREIT, it should benefit as market dynamics for the asset class improve over the coming quarters.



Biotech & Pharma:

·     BCRX was upgraded to Outperform from Sector Perform at RBC Capital saying its physician surveys reflects additional room for growth in the overall HAE market, continued near-term appetite for starting pts on Orladeyo, and improving reimbursement/retention metrics.

·     BNTX and Coalition for Epidemic Preparedness Innovations, or CEPI, said they are partnering to advance an mRNA based Mpox vaccine. BioNTech will start a Phase 1/2 clinical trial of the vaccine called BNT166, while CEPI will commit funding if up to $90 million for the program.

·     DCGO named COO Lee Bienstock as CEO on Friday after Anthony Capone resigned.

·     INCY shares fell after the FDA (late Friday) approved a GSK blood-cancer treatment, Ojjaara, that will compete with Incyte’s Jakafi. The FDA approved Ojjaara for use in patients with myelofibrosis.

·     NVO shares slip after reports that U.S. drug regulators had recently issued a report detailing quality control lapses at the group’s Clayton, North Carolina plant

·     PTCT extended last week declines, downgraded to Neutral from Buy at Citigroup following the CHMP’s negative opinion on Translarna, as sees limited opportunities to drive upside near-term.

·     TCON announces ENVASARC phase 2 pivotal trial exceeded futility threshold at final interim analysis and will continue as planned.


Industrials & Materials


·     Deutsche bank provides Q3 earnings preview for transport sector saying they expect this to be an ugly quarter on a headline basis as estimates 80% of the companies it previews to miss 3Q consensus expectations. DBAB projects a median miss of about 8% (CSX, NSC, UNP), with Rails and UPS missing by the most relative to prior expectations. The firm said the only two companies they project to beat are SAIA (+6% vs consensus) and ODFL (+2% vs consensus), which reflects the volume surge following Yellow’s bankruptcy. Airlines stocks tumbled to end near lows for DAL, JBLU and others (follows 4 lower outlooks last week in airline space as oil prices rise).


Aerospace & Defense

·     JOBY said it plans to locate the co’s first scaled aircraft production facility in Dayton, Ohio as plans to invest up to $500 mln into development of facility, creating up to 2,000 jobs with plans to start hiring in coming months.

·     LHX was upgraded to Overweight from Equal Weight at Wells Fargo and the firm upgraded LMT to Equal Weight saying thinks LHX numbers can start to move higher on AJRD accretion, with upside to its estimates if EACs recover. Also says government shutdown fears could provide an attractive entry point near-term for defense stocks.

·     MRCY mentioned positively in Barron’s saying the defense contractor is suffering through growing pains, but new mgmt. has the chance to help the electronics maker mature.


Materials, Metals & Mining

·     In Steel sector: STLD guides Q3 EPS $3.46-$3.50 vs. est. $3.61 (follows lower guide last week from NUE in steel space); said Q3 profitability from the company’s steel operations is expected to be significantly lower than sequential second quarter results, based on metal spread contraction as lower realized flat rolled steel pricing more than offset lower scrap costs. U.S. Steel (X) said on Monday it plans to temporarily idle blast furnace ‘B’ at its Granite City Works near St. Louis.

·     In Forest & Paper sector: Bank America noted Fastmarkets RISI’s Pulp & Paper Week published its September pricing review for paperboard and pulp on Friday. Overall, domestic containerboard prices were flat this month, while export prices were flat-to-down (by $8-9/MT). Boxboard prices were also flat across each grade, although demand was generally described as soft. Firm maintains Buy ratings on WRK, SON neutral on GPK, PKG, GEF and Underperform on IP.



Internet, Media & Telecom

·     In Media sector: NXST and DIRECTV officially reached a comprehensive new multi-year distribution agreement covering 176 Nexstar-owned local television stations and the company’s national cable news network, NewsNation.

·     In social media: PINS investor day preview at KeyBanc noting believes Pinterest’s Investor Day (9/19) will reinforce that the pace of execution has changed, and that Pinterest can sustainably grow in mid-to-high teens and achieve 30%+ EBITDA margin.

·     In Satellite & Telco: IRDM upgraded to Buy at Deutsche Bank with $57 tgt after having pulled back meaningfully since reporting 2Q earnings (-21% vs Nasdaq -1%). In the firm’s view, believes the main cause of the weakness is concern around the direct-to-device opportunity.


Hardware & Software movers:

·     In Computers/Hardware/Services; AAPL received positive analyst commentary as Wedbush noted iPhone 15 Pro/Pro Max checks tracking strong out of the gates.

·     In Storage: NTAP downgraded to Market Perform from Outperform at William Blair citing doubts over NTAP’s ability to achieve sustained high-single-digit revenue growth and are increasingly questioning the company’s ability to execute in the (cloud) space.

·     In Software: AYX was upgraded to overweight from equal weight at Morgan Stanley saying the current valuation undervalues its growth and profit potential. Unity (U) shares pared losses after saying it would be making changes to controversial fees announced last week that caused an online uproar and led to open rebellion from some game developers. KVYO recently raised its IPO price range to between $27-$29 per share (up from prior $25-$27), aiming for $9 billion valuation – deal is expected to price tomorrow night (Tuesday 9/19) and trade Wednesday.

·     In Networking & Comms: CSCO will lay off 350 employees in Silicon Valley next month, in the tech giant’s latest round of job cuts.



·     ARM initiated at Underperform and $48 tgt at Bernstein saying its carrying a premium on hopes that it will be a beneficiary of rising artificial intelligence adoption, but it is too soon to declare the company an AI winner.

·     MU was upgraded to Buy at Deutsche Bank with $85 tgt saying DRAM prices started to improve at least one quarter ahead of their expectation on the recent demand strength for AI servers, fueling the growth of HBM and DDR5.

·     CAMT, together with FORM said they have entered into an agreement for the acquisition by Camtek of FormFactor’s FRT Metrology business for $100M in cash, subject to customary purchase price adjustments.


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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