Market Review: September 25, 2023

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Closing Recap

Monday, September 25, 2023





DJ Industrials




S&P 500








Russell 2000













U.S. stocks finished near the highs in a sleepy session, with light volume amid the Yom Kippur holiday as markets await key inflation data the tail end of the week (core PCE on Friday and GDP inflation data points Thursday). Stock prices opened lower and held that way before bouncing late morning following S&P’s improved growth outlook for the US next year (boosting the "soft landing" case). Stocks and bonds have been selling off together in September as the 10-year yield topped 4.54% today while the S&P 500 and Nasdaq came into Monday riding 3-week losing streaks. We are also six days away until the potential government shutdown begins as Congress currently has no plan on the table right now. If the house fails to pass a bill this week, a partial shutdown of the U.S. government will come by next Sunday where federal workers will be furloughed, and a wide range of services will be suspended. Rising interest rate fears have pushed stocks lower this month as various senior Fed officials have emphasized since the FOMC meeting last week that interest rates will remain high “well into next year,” in the words of one of them today, Chicago Federal Reserve President Austan Goolsbee. The euro falls again Monday, coming into the week riding a 10-week losing streak. If the house fails to pass a bill this week, a partial shutdown of the U.S. government will come by next Sunday where federal workers will be furloughed, and a wide range of services will be suspended.



·     Oil prices dip as WTI crude falls -$0.35 or 0.39% to settle at $89.68 per barrel while Brent Crude futures settle at $93.29 per barrel, up 2 cents, 0.02%. Note WTI crude prices have surged by 9% to 10-month-highs during the first half of this month due to Saudi and Russia production cuts, but prices have stalled out since. Gold prices fell -$9.00 to settle at $1,936.60 an ounce, pulling back as the US dollar extended its gains, rising to its highest levels since last November. The euro down again today after falling for a 10th straight week and is down 5% from its July highs.


Currencies & Treasuries

·     U.S. Treasury yields were higher, with the benchmark 10-year Treasury rising as much as 10-bps to highs of 4.54% (16-yr high), building on three straight weeks of gains on expectations the U.S. Federal Reserve will keep interest rates at higher levels for longer than initially anticipated. Chicago Fed President Austan Goolsbee said that inflation remaining entrenched above the central bank’s 2% target remains a bigger risk than tight Fed policy slowing the economy more than needed. The yield on the 30-year Treasury bond was up 12-basis points to 4.642%. More supply will come to the market this week when the Treasury auctions off $48B in two-year notes on Tuesday, $49B in five-year notes on Wednesday and $37B in seven-year notes on Thursday.






WTI Crude















10-Year Note





Sector News Breakdown



·     The UAW strike has reached week one, and the UAW and Detroit Three automakers are still far apart. On Friday 9/22, the UAW announced that it is broadening the strike to 38 parts distribution facilities at GM and Stellantis. The facilities distribute OE replacement parts to auto dealers so in relatively short order parts shortages will halt certain repairs at GM and STLA, leaving some customers stranded. Notably, the UAW negotiations with Ford appear to have progressed so no additional facilities have been struck.

·     TSLA Q3 delivery outlook at Barclays: The firm: 1) Expect 3Q deliveries miss, 455k unit’s vs cons. 463k; 2) 3Q production at 435k units, down considerably q/q; 3) Inventory likely reduced amid continued discounting, slowed production; 4) Margins will again be a key focus, questions on whether 2Q was trough; 5) 4Q may see some catch-up from 3Q weakness.

·     NIO denied overnight reports that it is considering raising around $3 bln from investors, initially reported by Bloomberg News. Report had said NIO had approached investors from the Middle East and the fundraising may happen as soon as next year.

·     The Canadian autoworkers ratified a new labor agreement with Ford Motor Co. (F) on Sunday, averting a threatened strike; the new agreement raises base hourly pay for production workers by almost 20% over three years, and by more than 25% for trade workers, and gives permanent workers a $10,000 bonus and adds a cost-of-living adjustment.

·     In Auto Retail: KMX was upgraded to Outperform from Neutral at Wedbush and raised tgt to $90 from $85 saying after underperforming the retail used car industry’s unit growth by as much as 15% points in Q3 as the company faced tough comps and focused on profit over unit sales in an industry downturn, underperformance has narrowed to an estimated 9% into earnings.


Consumer Staples & Restaurants:

·     In Food & Restaurants: CPB, MDLZ, CAG, KDP shares were down -1.5% or more and likes of GIS, HSY hit fresh 52-week lows as food/staples remain weak (XLP -0.6% on day and -6.5% YTD); DNUT said CEO Tattersfield will step down from the role at the end of the year, after about 7 years in the role and be succeeded, effective Jan. 1, by current COO Charlesworth.

·     In Grocery: Morgan Stanley provides grocery deep dive saying expectations for the industry include: 1) moderating growth trends ahead (as inflation slows); 2) continued share gains by private label; 3) increased promotional activity by national brands; 4) continued market share gains for WMT and 4) continued adjustments at AMZN, which may improve its competitiveness.

·     Discount retail pricing: Bank America Charlotte NC pricing study showed: WMT had lower prices vs conventional, mass & specialty peers. TGT was runner up at a premium of +8% to WMT, while SFM had the highest overall prices at +30%. Found WMT prices also beat b (+9% vs WMT) & FDO (+18%). Found both Aldi and Lidl had lower prices vs WMT, with Aldi -11% vs WMT and Lidl -1%.

·     In furniture/retail/housing: WSM shares outperformed, rising over 12% late day after two funds managed by private equity company Leonard Green & Partners disclosed stock purchases, in a filing late Friday afternoon. Leonard Green & Partners has a 5% stake in the home goods retailer.

·     Apparel retailers URBN, NKE, FL all downgraded to Hold from Buy at Jefferies warns of a “significant risk to consumer spending ahead,” from the looming resumption of student loan payments, which restart on Oct. 1. They surveyed U.S. consumers with outstanding student loan debt and found that 90% are “at least somewhat concerned about being able to meet all of their monthly expenses, while apparel, footwear, accessories, restaurants, and big-ticket items are likely to see the biggest pullbacks in spending.”


Leisure, Gaming & Lodging:

·     In Cruise Industry: Bank America said based on prices pulled in early September, average sequential pricing decelerated for CCL (-1.4%) and NCLH (-7.8%), while accelerating for RCL (+2.2%) when compared to August. In addition, we have seen strength in Europe pricing with Caribbean coming off strong levels.



·     In MLPs & Pipelines: PAA and PAGP both downgraded to Underweight from EW at Barclays saying PAA owns critical infrastructure assets and has a clear, unitholder-friendly capital allocation framework that demonstrates judicious capital stewardship. However, the firm is cautious on PAA’s recontracting outlook and its medium to long-term asset utilization.

·     In Oil News: CVX plans to add 65,000 barrels per day of Venezuelan oil output by the end of 2024 through its first major drilling campaign in the nation since Washington allowed it to restore production clipped by U.S. sanctions – Reuters reported.

·     In Refiners: TDCowen raised price targets on DINO $51 (Prior $48) DK $25 (Prior $21) MPC $159 (Prior $142) PARR $41 (Prior $39) PBF $48 (Prior $36) PSX $134 (Prior $123) VLO $151 (Prior $137) as models 9% upside to 3Q23 EBITDA and 15% 4Q23 as cracks should remain supported into 2024 given low diesel inventories into peak demand season. See PBF most upside for 3Q and PSX most of large caps with MPC least. Combining 3Q and 4Q23, PBF and PARR have most upside vs least for large caps MPC, PSX and VLO.



Biotech & Pharma:

·     ABBV late Friday said it discontinues CD47 collaboration IMAB, which will regain full development and commercial rights to its CD47 programs including lemzoparlimab. Upfront/milestone payments that I-Mab had already received (~$200M) will not be affected.

·     ALEC was initiated at Sell and $4 tgt at Goldman Sachs as sees significant risk to the company’s lead clinical stage programs, latozinemab AL002 (Alzheimer’s disease).

·     APLS said effective 10/1/23, it has been assigned the permanent and product-specific J-code for Syfovre, simplifying the billing and reimbursement process for healthcare professionals.

·     ARDX said Japan Partner receives approval: Upon the Japan approval, the company received a $30M milestone payment from tis Japanese partner Kyowa Kirin and a $5M payment via its financing agreement with HealthCare Royalty Partners.

·     BBIO raised $250 million in a private placement led by the Qatar Investment Authority.

·     BCLI submitted "grossly deficient" manufacturing information to the FDA, according to agency documents disclosed ahead of a panel discussion scheduled for Wednesday.

·     HRMY was downgraded from Neutral to Sell at Goldman Sachs and tgt to $31 from $40 as sees multiple emerging risks to the durability of HRMY revenue, as derived exclusively via Wakix sales.

·     MORF downgraded to neutral from buy at BMO, saying additional upside for the company’s lead product candidate for inflammatory bowel diseases “is becoming difficult to defend.”

·     NVS upgraded to EW from UW at Morgan Stanley as remains bullish on the company’s near-term earnings momentum and anticipates EU biopharma to offer a "safe heaven" from weakening growth or higher real yields as it provides relatively high returns.

·     NVO and LLY are expected to make tens of billions of dollars a year on their new obesity drugs, Barron’s reported, which could be bad news for the companies and government agencies expected to pick up the tab. The financial strain of paying for these drugs on a widespread scale could mean reduced benefits for Medicare prescription drug plans.


Healthcare Services & MedTech movers:

·     In MedTech: ENOV said it has reached an agreement to acquire LimaCorporate S.p.A., a privately held orthopedic company, for 700 million euros ($745 million) in cash at closing and another EUR100 million in Enovis stock.

·     In Healthcare Services: RAD is negotiating with creditors over the terms of a bankruptcy plan that would include liquidating a substantial portion of its more than 2,100 drugstores, the WSJ reported this weekend citing people familiar with the talks. Rite Aid has proposed to close roughly 400 to 500 stores in bankruptcy, and either sell or let creditors take over remaining ops.


Industrials & Materials


·     MTZ extends month-to-date losses to over -25%, falling for a 7th straight day and up only one trading this day this month so far (9/14).

·     ENVX announced its standard IoT and Wearable-sized batteries have been chosen by Accurate Meditech for their Class II FDA-Approved "Mini" multi-vital sign monitor. MMM

·     MMM said it was evaluating whether there are options to restart its idled PFAS manufacturing processes at its Zwijndrecht, Belgium facility.


Materials, Metals & Mining

·     In Metals: AA shares down over -6% to lowest levels since March 2021 and FCX snaps its 6-day losing streak though industrial metals remain pressured; AA names William Oplinger as CEO, Roy Harvey becomes strategic advisor to CEO; CLF was upgraded to Buy at Citigroup with $22 tgt and STLD also upgraded to Buy with $130 tgt as believes U.S. flat rolled prices will rebound into year-end and steel company valuations are relatively attractive. Gold miners pressured as gold prices slide with rise in the dollar.

·     In Packaging: SEE was upgraded to Buy at Citigroup with $41 PT citing line-of-sight to +MSD% EBITDA growth Y/Y in ’24 on easier-to-achieve cost saves and vol inflection, supportive valuation, and potential for portfolio actions to move the needle.

·     In Chemicals: FMC downgraded from Buy to Neutral w/ $98 PT at Redburn saying considering recent developments in industry-wide sales volumes of crop chemicals and the apparent confidence by investors in the strength of FMC’s IP protection, believes more earnings downgrades are likely and there is too much uncertainty. DOW was upgraded from Neutral to Overweight at JP Morgan as think the recent downward movement in equity values has given investors an opportunity to purchase Dow shares at a reasonable valuation.



Internet, Media & Telecom

·     Media stocks WBD, PARA, CMCSA, DIS, NFLX shares active after Hollywood writers reached a preliminary agreement to end one of the two strikes on Sunday. While the strikes will pause, the agreement needs to be ratified by the WGA members to end the strike. James Dolan, the chairman of MSGS said he has no plans to sell the New York Knicks and Rangers. There is no thought of a full sale of the teams, Dolan told Barron’s 


Hardware & Software movers:

·     CWAN was upgraded from Hold to Buy at Loop Capital and raise tgt to $25 from $20, incrementally more positive about the company’s near-term and long-term growth prospects following its most recent industry checks, positive feedback from last week’s user conference.

·     MSFT was upgraded to Neutral from Sell at Guggenheim saying the Generative AI narrative is too positive a force to contend with.

·     Global PC monitor market sees -17.1% decline in Q2 2023 amidst inventory corrections with prospects of a holiday quarter rebound, reports IDC. Although the market slightly exceeded expectations by reaching just over 29.9 million units, it still fell short of pre-COVID levels observed in the second quarter of 2019.


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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