Market Review: April 19, 2023

Closing Recap

Wednesday, April 19, 2023





DJ Industrials




S&P 500








Russell 2000





US equities faced a softer open with no significant domestic economic news pre-market and higher inflation readings in Europe. Markets continue to expect a +25bps rate hike from the Fed in May with an implied peak in June at 5.12% and a December low back to 4.64%. By midday, though US equity indices were back to flattish on breadth of about 1.7:1 in favor of decliners as Utilities, Real Estate and Financial offset weakness in Energy and Communications. Earnings will continue to be a dominant focus this week, but thus far have given investors little reason to panic.


Data-wise today, some focus on VIX and earnings. @DiMartinoBooth shares an Art Cashin comment, “The $VIX is astonishingly trading <17 & that’s reminiscent of several short-term market tops in stocks w/VIX this low. Complacency w/an extra push.” Similarly, but with a Fed focus, @DataTrekMB highlights the VIX made a new 52-week low, and history shows Fed rate cuts tend to occur only with the VIX above its long run average 20. Investors hoping for 2H rate cuts may need some VIX help. In terms of earnings, @bespokeinvest shares the EPS beat rate on earnings since yesterday’s close is 65%, but 100% if you back out the financials. Lastly, a thought from @KobeissiLetter with much recent focus on price cuts and $TSLA earnings tonight, “Most car companies spend money on advertising to get you to spend more on their cars. Tesla, $TSLA, doesn’t spend money on advertising but is lowering prices to what consumers are willing to pay. Why spend on advertising when you can just match what people can afford to pay?” Not too many retailers have successfully "made it up in volume," but we’ll see.


From a sector perspective, heading into the final hour of trading, Real Estate (XLRE, +0.71%), Utilities (XLU, +0.67%) and Financials (XLF, +0.43%) paced the gainers with Consumer Discretionary and Healthcare also up on the day. Laggards included Energy (XLE, -0.66%), Communications (XLC, -0.59%) and Technology (XLK, -0.29%). Interestingly, despite Technology and Communications slipping, Growth outpaced Value with the Russell 1000 Growth +0.11% versus the Russell 1000 Value -0.02%. Breadth improved from midday levels to about 5:4, still favoring decliners over advancers with equity indices roughly flat.



·     June gold settled -$12.40/oz, or -0.61%, to $2,007.30 with pressure from a strong US Dollar and continued expectations for a May rate hike by the Fed. Recent Fed speaker commentary has once again been a bit more hawkish, also playing a role in gold fade, but investor expectations for a pause and potential 2H rate cut has helped create support around the $2,000 level.

·     May crude futures were softer all day, settling -$1.70, or -2.10%, to $79.16/bbl. Brent also slipped by $1.65, or -1.95%, to $83.12/bbl. The move pushed crude to the lowest level since March 31 despite a larger-than-expected draw in today’s EIA inventory report. Crude stocks in the US SPR also declined and hit the lowest level since October 1983.  As questions and uncertainty linger around recession prospects, crude price action generally has been a good reflection of related energy demand concerns.






WTI Crude















10-Year Note





Sector News Breakdown



·     In Electric Vehicle: TSLA cut prices for the 6th time this year, cutting on the Model 3 and Model Y once more ahead of the company’s first-quarter results; has cut U.S. prices of its base Model 3 by 11% so far this year and that of its base Model Y by 20% (comes ahead of earnings this week). RIVN was downgraded at RBC Capital.

·     In auto dealers: LAD reported Q1 EPS $8.30/$6.97B in revs, below ests $8.85/$7.31B; said new and used unit growth was 4% and 6%, respectively and total vehicle gross profit per unit of $5,585, down $1,240; shares of auto dealers AN, PAG, SAH, GPI, ABG active on results.

·     In auto suppliers: MGA downgraded to Sector Perform from Outperform at RBC Capital and lower price target to $52 from $58 as believe more meaningful margin and FCF improvements may not occur until 2025+ as the company accelerates investment in its core growth initiatives. Deutsche Bank said with overall LVP better in Q1, they expect most suppliers to meet or beat Street estimates, with the notable exceptions AXL and perhaps DAN and see APTV, ADNT, ALV, BWA, and VC as best positioned to outperform.


Retailers, Consumer Staples & Restaurants:

·     In retail: WMT upgraded to Buy at Gordon Haskett; Outdoor retail: CENT guides Q2 EPS to be approximately $0.90, below estimates $1.18 and sees FY23 EPS to be $2.35 or better, driven largely by late start of garden season (est. $2.65); said company advances cost and simplicity program – top customers: WMT, HD, LOW, COST, WOOF.

Homebuilders, Building Products, Home Furnishing:

·     In building products: Bank America upgraded composite decking companies AZEK to Buy (from Neutral) and TREX to Neutral (from Underperform) following a challenging 2022 for decking and underperformance in Trex (-61% since beginning of 2022) and Azek (-49%) share prices (vs. XHB -19%), they believe the composite decking industry is poised to recover in 2H23

·     Weekly U.S. mortgage market index fell -8.8% in the latest week according to the Mortgage Bankers Assoc (MBA) as the purchase index falls 10% and refinance index falls 5.8% after the 30-year mortgage rate rises 13 bps to 6.43 pct in April 14. Note homebuilders PHM, TPH, MTH were among names hitting 52-week highs yesterday.


Energy, Industrials & Materials

·     In oil services: BKR Q1 adj EPS $0.28 tops est. $0.26 on better revs $5.72B vs. est. $5.53B; Orders rose 11.6% to $7.63 billion, as oilfield services and equipment orders jumped 25.4% to $4.10 billion and industrial and energy technology orders fell 1% to $3.53 billion.

·     In Majors & E&P: XOM assumed, upgraded from Neutral to Buy at UBS with $144 tgt (from $125) saying they see the Integrated Oils as best positioned to outperform this upcycle, driven by improved balance sheets and significantly more capital efficient asset bases that generate higher FCF with greater visibility to support consistent shareholder returns.

·     In airlines, UAL reported a narrower-than-expected Q1 EPS loss (-$0.63), which came in better than consensus mean loss per share of (-$0.73) while reiterated its full year EPS outlook of $10 – $12 with June Q EPS guide of $3.50 – $4.00 (midpoint ahead of consensus of $3.59).

·     In truckers: MRTN reported 1Q23 EPS of $0.28, which beat consensus by a penny driven by continued strong performance in Dedicated, partially offset by softer results in Trucking, while revs of $298.02M missed the est. $309.89M (followed mixed JBHT results day prior).

·     In aerospace & defense: SPR upgraded to Buy from Neutral at Benchmark calling the recent share price move lower on fitting issue an overreaction and provides attractive entry point for ramping aerospace long-cycle. LUNR shares jumped after saying the National Aeronautics and Space Administration awarded a contract for work on the Joint Polar Satellite System to a joint venture led by Intuitive with KBR.

·     In Materials and metals: gold and silver miners slide as the price of gold dips below $2,000 an ounce with investors weighing what the Fed’s next move could be; a rebounding dollar also adds pressure to names (AEM, AUY, GOLD, NEM.

·     In Industrials: The American Institute of Architects’ Architecture Billings Index (ABI) has returned above the growth threshold of 50 upon increasing to 50.4 in March from 48.0 in February. Recently, from October to February, the ABI had been below 50 for five consecutive months. This followed 20 consecutive months of the index being above 50 previously.



Banks, Brokers, Asset Managers:

·     Regional banks big move higher (KRE up over 4%) as earnings coming in “less bad” than markets fear so far:

·     CFG shares slip; reports Q1 deposits fell about 5% q/q as ended with $172.19B in deposits, down from $180.72B in 4Q but up about 9% y/y; net charge-offs rose to $133M in 1Q, up 125% from a year ago and up 51% from the prior quarter.

·     FULT Q1 EPS $0.39 vs. est. $0.48; Q1 revs $267.3M vs. est. $228.0M; Q1 provision for losses $24.5M vs. ($7.0M) y/y and net interest margin of 3.53% vs. 2.78% y/y.

·     HWC 1Q EPS $1.45 vs est. $1.43 on NII $287.6Mm vs est. $283.25Mm, total deposits +2% sequentially.

·     MCB shares rise 1Q EPS $2.25 vs est. $1.79 on NII $58.5Mm vs est. $60.6Mm; ROAE 17.2%.

·     MS Q1 adj EPS $1.70 vs. est. $1.67 and revs $14.50B vs. est. $14.07B; said Q1 total deposits $347.52B vs. est. $352.17B; better FICC Sales & Trading Revs $2.58B vs. est. $2.42B); Q1 net interest income $2.35B vs. est. $2.46B.

·     UCBI 1Q operating EPS $0.58 vs est. $0.69 on NII $211.47Mm vs est. $217.63Mm; operating ROA 1.71%, ROCE 7.3%, operating ROTCE 11.6%.

·     USB Q1 EPS $1.16/$7.2B revs vs. est. $1.12/$7.12B; Q1 net interest margin 3.10% vs. 2.44% y/y; total avg deposits $510.32B (est. $521.54B) and total avg loans $386.75B (est. $390.01B).

·     WAL shares jump; Q1 adj EPS $2.30 vs. est. $2.09; qtrly net rev $551.9M, down 0.7%; total deposits of $47.6 billion at end of March; said immediately available liquidity exceeds uninsured deposits, with coverage ratio of 158% of April 14; Q1 NII $609.9M and NIM 3.79% vs. est. 3.7%.

·     In research: Wedbush upgraded WAL to Outperform and adds to the Wedbush Best Ideas List as deposit outflows in March have partially reversed and WAL’s higher level of insured deposits at 73% should help support deposit levels going forward – also adding NYCB, MTB, and RF to the Wedbush Best Ideas List.


Bitcoin, FinTech, Payments:

·     Consumer services/auto lending: ALLY profit fell more than analysts expected as it made fewer auto loans and put aside additional provisions to cover mounting consumer defaults; Q1 EPS $0.82 missed the $0.87 estimate and revs of $2.05B below est. $2.07B; SYF Q1 EPS $1.35 vs. est. $1.46; total deposits $74.4 billion, +3.7% q/q; deposit growth +17.1% vs. +15.2% q/q; net interest income $4.05 billion, -1.3% q/q; qtrly net interest margin decreased 58 basis points to 15.22%. SYF said in 1Q, loans that were at least 30 days past due rose to $3.47B, or 3.81% of total loan receivables at the end of the quarter, up from $2.19B, or 2.78% of loan receivables y/y.

·     In FinTech/Payments: SQ launches new hardware-free tap-to-pay service; payment companies are unveiling options to turn smartphones into tap-and-go payment devices. PYPL previews by two analysts as Wells Fargo said Based on the data they’re seeing, expect PYPL’s 1Q revs and EPS will be solid, and could potentially surprise to the upside. Mizuho trims tgt to $92 saying proprietary web traffic analysis points to incremental softness in branded checkout in March. FOUR shares weaker after “short” report from Blue Orca saying they think its gross profit, EBITDA, and cash flow are inflated by hyper-aggressive maneuvers


Insurance & Services:

·     In P&C insurance, TRV authorizes an additional $5.0B of share repurchases and raises dividend after results that topped views with core EPS $4.11 vs. est. $3.58. BMO Capital lowered estimates for ALL, HIG, and CINF saying for ALL change is driven by a higher catastrophe loss ratio as now estimate an 8.5% ratio for 1Q23, compared to prior 6.5% estimate and Visible Alpha consensus of 6.9%. Our higher CAT loss estimate follows recent preannouncements and results reported by HIG, CINF, and PGR, which all included CAT losses above consensus.



Biotech & Pharma:

·     GMDA shares slipped after raising nearly $23 million in a dilutive public offering, selling 17.5 million shares, and accompanying warrants at a price of $1.30 per share and warrant.

·     IMRX upgraded at Mizuho to Buy ($20 tgt) and Morgan Stanley to EW ($14 tgt) as the company accelerated timelines for its Phase 1 study with a recommended Phase 2 dose expected by early 2024.

·     LEGN shares jumped as STAT news noted leaked study results show a CAR-T from JNJ providing big benefit for patients with multiple myeloma. TDCowen noted CARTITUDE-4 hit with an incredible 0.26 HR at interim analysis, which they estimate could equate to almost 40 months mPFS at final analysis – game changing efficacy is highly encouraging.

·     PCVX 11.2M share Secondary priced at $41.00.


Healthcare Services & MedTech movers:

·     In MedTech: ISRG posts Q1 procedure growth beat (+26% vs 14% street) supported by a sharp reversal in OUS back to +28% Y/Y growth (+25% last year); raised procedure guide by more than Q1 street/internal beat; also put up a $100mn/$0.02 headline beat.

·     In managed care: ELV Q1 adj EPS $9.46 vs. est. $9.26; Q1 revs $41.9B vs. est. $40.83B; Medical membership totaled approximately 48.1M as of March 31, an increase of 1.3M, or 2.9% y/y; raises FY23 adjusted EPS view to greater than $32.70 per share.



Internet, Media & Telecom

·     In Streaming: NFLX added fewer subscribers than had been anticipated in Q1 (streaming paid net change: +1.75m (exp +2.41m)) and lower Q2 guidance (Q2 revs $8.24B vs. est. $8.47B) but shares pare overnight losses as the company raised its full-year free cash flow forecast (now expect at least $3.5B of FCF for the full year 2023) – UBS upgraded to buy from neutral.

·     In Media: FOXA and Dominion reportedly reach agreement to settle litigation over 2020 election claims; Fox to pay $787.5M to settle; note the co. still faces a $2.7B defamation lawsuit from Smartmatic; in advertising OMC Q1 EPS $1.56 vs. est. $1.39; Q1 revs $3.44B vs. est. $3.38B; for DIS, Bloomberg reports Disney will kick off previously announced layoffs next week as it begins to cut its headcount by thousands.


Hardware & Software movers:

·     In IT Services: CDW shares slip as sees prelim Q1 revenue roughly $5.1B below consensus $5.56B citing intensifying economic uncertainty that led customers to spend more cautiously and sees 2023 non-GAAP EPS on diluted basis to be modestly below FY22. Stifel said based on CDW’s commentary as well as recent survey, they see risks to n-t estimates on NSIT and see potential risks to estimates on PLUS and ARW’s IT distribution segment.



·     In semi equipment: ASML Q1 results beat but bookings disappointed at E3.5B vs consensus E5.5B with book-to-bill at 0.6x — management said Memory customers are limiting capex and they see some of that behavior in Logic as well.


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.