Market Review: September 20, 2023

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Closing Recap

Wednesday, September 20, 2023





DJ Industrials




S&P 500








Russell 2000













Higher for longer! After holding steady ahead of the FOMC rate meeting, stock prices dropped following the release of results. The Federal Reserve kept interest rates unchanged at 5.25% to 5.5% (as expected), but markets didn’t like that 12 Fed officials see one more hike this year, while 7 see keeping on hold. Fed projections imply one more 25-bps rate hike this year and 50 bps of rate cuts in 2024, versus 100 bps of 2024 cuts in June projections. US two-year Treasury yields rise to 5.15%, the highest since 2006. Bottom line – the Fed signalled borrowing costs will likely stay higher for longer after one more hike this year. Fed Chairman Powell Q&A did little to ease market concerns about future hikes, impact of higher energy prices on inflation, and overall economic outlook as stocks finish on lows!


FOMC Meeting headlines

·     Among headlines from Fed Chairman Powell prepared statement/Q&A: full effects of tightening have yet to be felt; the Fed is in position to proceed carefully on firming rate; US economic activity has been expanding at solid pace; consumer spending readings have been especially robust; nominal wage growth has shown some signs of easing; process of getting inflation to 2% has long way to go; the fact that we decided to keep policy rate where it is doesn’t mean we have decided we have, or have not, reached stance of policy we are seeking; said if energy prices increase and stay high will affect spending, may affect inflation expectations.


Commodities, Currencies & Treasuries

·     WTI crude oil futures settle at $90.28, per barrel, down -$0.92 or 1.01% and falling for a second day after hitting 10-month highs on Tuesday. The price declines come despite bullish weekly inventory data as trade group API that showed a larger-than-forecast 5.3-million-barrel decline last week in US crude-oil inventories. A decision by the Federal Reserve today to keep rates steady was expected, and as such oil prices weren’t affected much. Gold futures settled ahead of the FOMC meeting results, rising +$13.40, or +0.68%, to $1,967.10 an ounce.

·     Treasury yields jumped following the release of the FOMC rate headlines, keeping rates steady at 5.25%-5.5%, as the theme today was rates will be higher for longer, including possibly one more hike this year. The 10-year yield rose to 4.365% and the 2-yr hit 5.16%, the highest since 2006. The dollar pared losses against rival currencies.






WTI Crude















10-Year Note





Sector News Breakdown



·     United Auto Workers (UAW) union strike update: Wedbush says with the UAW strike now well underway it appears UAW President Shawn Fain could significantly expand the factory strike at more plants if no major progress is seen by Friday. This would be a major step-up in this growing battle between the UAW and GM/Ford/Stellantis. Wedbush’s worry is this could be a long and nasty strike which would be an absolute debacle for the Detroit Three. Notes this UAW deal on the table and the business models in Detroit are not sustainable/profitable.

·     Ford (F) reached a last-minute deal to avoid a walkout at its Canadian operations late on Tuesday, as the United Auto Workers union prepared for a potential expansion of its U.S. strikes against the Detroit Three automakers. Unifor, which represents about 5,600 Canadian auto workers, were threatening to go on strike at all three of Ford’s plants if a deal wasn’t reached.


Retail, Consumer Staples & Restaurants:

·     In beauty: COTY guides 2024 adjusted EBITDA $1.08B-$1.09B above prior $1.07B-$1.08B view; now expecting core LFL sales growth in first half FY24 of +10-12%, an increase from its earlier outlook of +8-10%; raised FY24 core LFL sales growth outlook. IFF rises after backs FY23 revenue view $11.3B-$11.6B and FY23 adjusted EBITDA view $1.85B-$2B and said continues to pursue the sale of its Cosmetic Ingredients business.

·     In Food sector: GIS reported slight beat on top and bottom line (EPS $1.09/$4.9B sales vs. est. $1.08/$4.88B) as Q1 gross margin rose 540 basis points to 36.1% and reaffirmed its annual sales and profit forecasts. Food sales continued to decelerate in the four weeks ending Sept. 9, according to Nielsen data, the fourth-straight slowdown in sales growth in Nielsen data and the lowest growth rate since 3Q 2021.

·     In Restaurants: WING was upgraded to Outperform and raised tgt to $200 from $180 at Wedbush saying checks point to Q3 comp store sales growth trending above consensus and says that tough 1H:24 comp sales growth comparison well understood.

·     In Discount stores: DG was downgraded to Underweight in dollar stores at JPMorgan and cut tgt to $116 after CFO recently cited continued uncertainty clouding the FY24 picture today with first half macro headwinds sequentially worsening for DG’s low to middle income consumer.

·     In online retail: CHWY downgraded from Outperform to Perform at Oppenheimer as expects a more challenging backdrop to persist for at least a few more quarters, amid recent signs of weakness in the historically resilient pet food category.

·     In retail research: BBW initiated Buy and $42 tgt at DA Davidson as sees it as an underappreciated small cap growth idea that is a vertically integrated, omnichannel retailer; LULU named a new Buy and $40 tgt at Needham as expects double-digit top line growth as accelerating technical innovation drives demand across both core franchises.


Homebuilders, Building Products, Home Furnishing:

·     Homebuilders will be in focus tonight with KBH earnings expected after the bell. Benchmark said ZG shares have come in meaningfully from the August highs presumably due to ongoing macro fears but says Zillow appears to be speeding up its iterative process, aiming to expand enhanced markets by 50% in October while trying out different rollout strategies.

·     In Furnishing stocks: ETD said it is currently working through insurance to recover a portion of incurred losses from damage at Orleans, Vermont locations; said flooding has resulted in a delay in the production of custom orders, which is expected to reduce net sales by $15M in Q1. SCS reported Q2 revs $854.6Mm vs est. $828.83Mm and adj EPS $0.31 vs est. $0.20; guides Q3 revs $780-805Mm vs est. $820.68Mm and adj EPS $0.23-0.27 vs est. $0.19.

·     Weekly Mortgage Bankers Assoc data showed that mortgage applications rose +5.4% in latest week while the purchase index rises 2.3% and the refinance index rises 13.2%, while the average 30-year mortgage rate rises 4 bps to 7.31% in Sept 15 week.


Energy, Industrials and Materials

·     In Refiners: Raymond James said MPC, VLO, PSX, DK top picks in refiners – raising ests saying the strong 3QTD rally in refining has pushed stocks to a meaningful debate point. With near-term refining fundamentals still supportive of a much higher mid-cycle and robust shareholder returns, they believe the risk/reward for refining still looks solid, but demand needs to remain decent.

·     In Transports: FDX is expected to report earnings after the close tonight. In ride hailing/delivery: UBER’s head of mobility division in Europe has warned that if Brussels’ proposals to designate gig workers as de facto employees was enacted, it would cause the company to shut down in hundreds of cities and raise prices as much as 40%, FT reported.

·     In Aerospace & Defense: TXT shares trade to fresh 52-week highs around $80 after announcing fleet agreement with NetJets for option for NetJets to purchase up to 1,500 additional Cessna Citation business jets over the next 15 years.

·     In Fertilizers: MOS, NTR shares fell late Wednesday as RBC Capital noted the US ITC ordered by court to reconsider phosphate duties. The firm said it views this court ruling as potentially negative for domestic phosphate producers, especially Mosaic, as it brings uncertainty to future US pricing relative to global benchmarks.



Banks, Brokers, Asset Managers:

·     In Banks: BAC said at a conference today that “U.S. consumers remain in good shape, reducing the likelihood of an economic slowdown, and that it is difficult to see a U.S. recession when the consumer is spending 4% more year over year.” CATC announced its sale to EBC for $66.56 per share, a 37% premium, in a transaction that values CATC at 1.15x of stated TBV. In conjunction with the transaction, EBC announced the sale of its insurance business to AJG.

·     In Insurance: GSHD upgraded to Outperform from Market Perform at BMO Capital and raises tgt to $90 based off a 75% probability GSHD can achieve 30% EBITDA margin by 2026-2027 (vs. 22.7% on a TTM basis) for which it applies a 27.0x EBITDA multiple.

·     In REITs: HPP was upgraded to outperform from market perform at BMO Capital Markets; in Retail REITs, Wells Fargo said new net store opening analysis points to strongest potential occupancy gains though 24 for SITC and weakest for KRG, and firm upgraded SITC to overweight, KIM to Equal weight and downgrade ROIC to EW and PECO to Underweight. In Residential REITs, Wells Fargo said preference for SFR within residential given elevated blended lease rate growth operating updates, prefer INVH over AMH on valuation. Shopping REIT REG upgraded to Buy with target of $70 based on valuation at Argus. Raymond James top large cap pick within its healthcare REIT coverage is now Outperform-rated WELL (replacing VTR) due to its operational strength and unparalleled access to and cost of capital, while its top mid/small cap pick is Strong Buy-rated CTRE.



Biotech & Pharma:

·     AHCO terminates employment agreement with prospective CEO; resumes search for new CEO.

·     ALVO said the FDA accepted their resubmitted BLA for AVT02, a high-concentration interchangeable biosimilar candidate to Humira, with a 2/24/24 BsUFA date. No deficiencies in their BLA have been noted by the FDA beyond those associated with their facility.

·     BHC was upgraded to Buy from Hold at Jefferies given positive Xifaxan catalysts slated to include probability of the spin making it appropriate to value shares at $16.

·     BSX held its Analyst Day today: said it sees organic growth 8%-10% in long-range plan.

·     EXAI and Merck KGaA announced a multi-year drug discovery collaboration where EXAI to receive $20M up-front and potential milestone payments of up to $674M and potential royalties.

·     RLMD announced efficacy and safety results from the phase 3 long-term study of rel-1017 in major depressive disorder; said long-term dosing with rel-1017 was well-tolerated.

·     SEEL declined after experimental treatment for suicidal behavior failed in mid-stage study.

·     SPRY tumbled after saying the FDA issued a Complete Response Letter regarding the New Drug Application for its epinephrine nasal spray Neffy. In the CRL, the FDA requested completion of a study assessing repeat doses of Neffy.

·     TSHA said it will discontinue development of its TSHA-120 program to treat giant axonal neuropathy after receiving feedback from the U.S. FDA.



Internet, Media & Telecom

·     In social media: PINS upgraded to Buy from Hold at Citigroup as it emerges from its analyst day incrementally confident that engagement can continue to ramp, that ads innovation and its full-funnel approach to advertising can deliver improving monetization trends, and that adj. EBITDA margins can expand going forward.


Hardware & Software movers:

·     KVYO 19.2M share IPO priced at $30, above its expected range of $27-$29. The first real SMID cap IPO (closest comp BRZE as per Oppenheimer).

·     AAPL shares active on reports unions at the Apple France stores have called for a strike on Friday and Saturday ahead of the iPhone 15 launch, demanding better pay and working conditions.

·     IBM was initiated with an OP rating, and Street high $188 tgt saying they are impressed with the depth of the company’s software platform, particularly its capabilities around enablement.

·     NCNO was downgraded from EW to Underweight at Morgan Stanley saying FY25 estimates look too high when accounting for recent bookings performance and potential revenue headwinds from recent bank closures.

·     ZBRA downgraded to Underweight at Morgan Stanley given view that duration of demand turndown would be longer than expected due to overbuild during COVID and ongoing constraints to consumer spending.



·     WDC shares rose on reports that Kioxia Holdings’ lenders are planning to refinance 2 trillion yen ($13.5 billion) in loans to support its potential merger with Western Digital’s flash memory business, Bloomberg reported.

·     ARM shares extended recent declines post IPO, dropping back near its initial pricing of $51 from last Thursday (traded as high as $69 on Friday 9/14).


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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