Mid-Morning Look: May 26, 2023

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Mid-Morning Look

Friday, May 26, 2023






DJ Industrials




S&P 500








Russell 2000






There has been no slowing down U.S. stock markets in 2023 so far, with large cap tech and communications leading the Nasdaq and S&P 500 index while the momentum into the long-day 3-day Memorial Day holiday weekend remains strong. U.S. stocks moving straight up for the first hour on Friday, extending yesterday’s spike as debt ceiling talk hopes offset a round of “hotter” and strong economic data. The “AI” theme has given a new boost to tech with better results from MRVL last night, following the NVDA surge the day prior on its big beat and sharp guidance hike, lifting the entire tech landscape related to “AI” (SOX index +7.5% WTD and 15% MTD). After several rounds of negotiations, President Joe Biden and top congressional Republican Kevin McCarthy are closing in on a deal to raise the government’s $31.4 trillion debt limit for two years according to several media outlets, while capping spending on most items. The Dow Jones Industrial Average is on track to snap its five-day losing streak. Nasdaq leading again, on track for its 5th straight weekly advance and 3rd straight month as surging Treasury yields not impacting “high growth” sectors such as tech, with focus solely on “AI” growth (XLK +30% YTD). Nasdaq with no let-up since Wednesday lows of 12,415.85 (440-point bounce off those lows).


Hotter PCE inflation data for April failing to dent market enthusiasm, coming in slightly above last month’s readings and consensus on a Y/Y basis, Durable Goods data topped estimates, while Personal Income was +0.4% (in-line) and consumer spending made a big jump, rising +0.8% topping +0.5%. The data shows the Fed’s rising rate hike cycle from last year has done little to slow overall sentiment, with consumers still strong and inflation not falling at the rate the Fed would like – puts chances of another rate hike in June or July in play (and no rate cuts forecasted after 3 were expected for 2023 just 3-weeks ago). The 2-year Treasury yield reverses higher up about 9-bps to 4.6% and 10-yr yield +2.4 bps to 3.84% following the early economic data, but pared gains after UoM inflation expectations data at 10:00.


Economic Data

·     Hotter inflation data as PCE price index for April M/M roses +0.4% vs. est. +0.3% and Y/Y PCE price index +4.4% vs March +4.2% (and prior +4.2%); the Core PCE Y/Y rises +4.7% above consensus/prior +4.6%).

·     Personal income for April rises +0.4% vs. consensus +0.4% and vs March +0.3%; Personal Spending rises +0.8% vs. est. +0.5% and personal saving rate +4.1% vs March +4.1%.

·     Durable Goods Orders for April reported +1.1%, better than the (-1.1%) estimate and vs. previous month of +3.2%; April Durables shipments -0.7% vs March +0.7%; April Durables ex-transportation orders -0.2% vs. est. (-0.1%).

·     University of Michigan surveys of consumers sentiment final May 59.2 above consensus 57.7 and vs. preliminary May 57.7 and final April 63.5; current conditions index final May 64.9 vs prelim May 64.5 and final April 68.2 and expectations index final May 55.4 vs prelim May 53.4.

·     University of Michigan surveys of consumers 1-year inflation outlook final May 4.2% vs prelim 4.5% and final April 4.6% and University of Michigan surveys of consumers 5-year inflation outlook final May 3.1% vs prelim 3.2% and final April 3.0%.







WTI Crude















10-Year Note





Sector Movers Today

·     Semis: What a week for semiconductors as the SOX rises about 7% the last 5-days, buoyed by the surge in NVDA shares after the “AI” theme takes hold following massive beat and rev guidance higher. MRVL kept “AI” party going last night after its results. SOX is up 14% MTD and over 31% YTD just five months in, erasing most of the 2022 losses. MRVL delivered upside results as Q1 sales/EPS $1.32B/$0.31 just above Street and Q2 guided up 2%/5%; sequential growth expected through the year led by 5G and rebounding cloud and storage; said AI contribution of $200M ‘22, expected to surpass $400M ’23 and $800M next.



·     AI +7%; momentum rally given the upbeat “AI” prospects from NVDA, MRVL this week.

·     GPS +10%; as posted a narrower Q1 loss and said it is making progress in expanding its Q2 and FY gross margins as it reduces its capital projects investments.

·     MRVL +25%; delivered upside results as Q1 sales/EPS $1.32B/$0.31 just above Street and Q2 guided up 2%/5%; sequential growth expected through the year led by 5G and rebounding cloud and storage; said AI contribution of $200M ‘22, expected to surpass $400M ’23 and $800M next.

·     PARA +6%; controlling shareholder Shari Redstone’s National Amusements secured a $125M investment from BDT & MSD Partners – WSJ https://tinyurl.com/4ukpcdk7

·     PDD +14%; as reported big first-quarter profit and revenue beats, boosted by strength in online marketing and transaction services.

·     RNG +3%; Needham upgrades to Buy after nearly a year on the sidelines in response to surgical cost cuts and stabilized growth and now sees the company demonstrating its capacity to achieve 20%+ Operating Margin.

·     WDAY +8%; 1Q adj EPS beat $1.31 vs est. $1.12 on revs $1.68B vs est. $1.667B; sees 2Q subscription revs $1.611-1.613B; raises low end of subscription revs FY guide to $6.55-6.575B.



·     BIG -12%; as suspended dividend, posts wider Q1 EPS loss (-$3.40) and said expects sales to fall again in Q2 while failed to give quarterly earnings and full-year outlook; only said sees FY23 sales, gross margin momentum in back half of year.

·     DOMO -15%; Reported non-GAAP EPS of $0.17 in line with the consensus on revenue of $80M (consensus $79M), up 7% y/y, down from 14% last quarter; subscription revenue of $71M (consensus $70M) up 10% y/y, down from 18% last quarter.

·     MDB -2%; downgraded to Sell at Guggenheim while raising its tgt to $210 from $205 based on modestly raised forecasts.

·     RH -4%; reported 1Q above consensus, but guided 2Q below and implied a lower FY EPS outlook on lower margins; cut their operating margin guidance as they are now forecasting increased markdowns to clear through discontinued inventory.

·     TGT 2%; falling for the 7th consecutive trading day.

·     TLRY -22%; priced an offering of $150 million of unsecured convertible senior notes.

·     ULTA -11%; Q1 sales up +12.3% vs Street estimate of +11.7%; store comps were up +9.3% vs the Street at +9.4%; EBIT margins came in a bit below at 16.8% vs the Street at 17.4%; only reiterated EPS year view and cut its annual operating margin forecast to 14.5%-14.8% from 14.7%-15%.


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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