Market Review: August 18, 2023

Closing Recap

Friday, August 18, 2023





DJ Industrials




S&P 500








Russell 2000













U.S. stocks opened to the downside but pushed higher throughout this option expiration “triple witching” Friday to finish mixed but capping another losing week this month (and 4th straight day of losses for the S&P). The S&P 500 posted its first 3-week losing streak since February and remains on track to snap its 5-month win streak along with the Nasdaq (down -4.8% MTD and -7.4% MTD respectively). The CBOE Volatility index (VIX) traded as high as 18.88, its highest level since May 31st before pulling back to close lower on the day. Government bonds rallied as the 10-year U.S. Treasury yield fell back under 4.3%, after settling at the highest since November 2007 Thursday. Gold snapped a 9-day losing streak but was down for week while oil rose on Friday but snapped a streak of 7 straight weekly gains. Earnings movers this week included WMT, CSCO, AMAT higher on results and WOLF, ADYEY, EL lower this week with several notable tech names expected next week. China stocks gave back gains the day prior after Evergrande filed for bankruptcy protection in the U.S. nearly two years after its descent into distress triggered a crisis across China’s property sector. Attention turns to Fed Chair Powell’s speech at Jackson Hole Symposium next week and his policy signal.



·     Oil prices snapped its streak of 7 straight weekly gains, with WTI crude rising $0.86 or 1.07% to settle at $81.25 per barrel but finished with a 2.3% weekly decline. Brent Crude futures settled at $84.80 per barrel, up 68 cents, 0.81%. Weak economic data for China and Fed minutes suggesting another rate hike is still on the table was among reasons for the weekly losses. Brent and RBOB Gasoline futures finished lower for the week as well. WTI crude oil prices climbed by 20%, or $14, over the past seven weeks as WTI notched its longest streak of weekly gains since June 2022 on the back of Saudi and Russian production cuts designed to offset weak demand.

·     Natural gas prices fall -2.7% on the day and -7.9% for the week to end at $2.551/MMBtu, marking the third weekly decline in four weeks.

·     Gold futures finished higher on Friday, snapping a 9-day losing streak (longest since March 2017) as prices edged higher $1.30 to settle at $1,916.50 an ounce, but prices ended the week lower sparked by a sharp rise in global bond yields and a stronger U.S. dollar. U.S. economic data this week reinforced expectations the Federal Reserve will keep rates “higher for longer.”


Currencies & Treasuries

·     Bitcoin prices dropped below $26K, falling to two-month lows in a 6% decline while Ethereum dropped over 3% to around $1,650. The sharp pullback started overnight after the WSJ reported late yesterday that SpaceX sold its bitcoin holdings after writing down the value by $373 million in 2021 and 2022. Tesla sold 75% of its bitcoin holdings last year. SpaceX posted a Q1 2023 profit of $55M on $1.5B in revenue after two years of major but narrowing losses.

·     Treasury yields pulled back after the 10-year hit 4.33% on Thursday, the highest level since the financial crisis of 2009 as strong data points raise expectations the Fed will continue to raise. Treasuries rallied partially this morning with no economic data released as the 10-yr eased back to 4.23%. All eyes on the Jackson Hole Fed meeting late next week.

·     The U.S. dollar hit a fresh two-month high of 103.68 early Friday before pulling back but posted a fifth consecutive week of gains in its longest winning streak for 15 months. The greenback was buoyed by demand for safer assets on China economy worries and bets U.S. interest rates will stay high. Minutes from the Federal Reserve’s last meeting showed this week that most members of the rate-setting committee continued to see "significant upside risks to inflation".






WTI Crude















10-Year Note





Sector News Breakdown


Staples & Restaurants:

·     In Beauty: EL shares hit fresh 52-week lows after swung to a Q4 loss and guided for lower-than-expected sales growth in FY24; guided for another loss in Q1 amid a 10%-12% drop in sales and guides year sales to $17.02B vs. est. $17.21B amid sluggish U.S. demand.

·     In Restaurants: BLMN shares rose after the Wall Street Journal reported that activist investor Starboard Value has built a more than 5% stake in the owner of Outback Steakhouse. ; RRGB mixed results and guidance sends shares lower.

·     In Beverages: TLRY bought the remaining 57.5% equity stake in Truss from partner Molson Coors Canada to position itself as a leader in cannabis-infused drinks in Canada (terms not disclosed).



·     FTCH shares tumbled after posting softer 2Q results and lowered guidance; cuts FY23 group GMV view to roughly $4.4B from $4.9B and lowers FY23 adjusted EBITDA margin growth; downgraded at Keybanc and JPM based on decreased confidence in execution and the timeline to profitability.

·     FL was upgraded from Sell to Hold at Williams Trading but lower tgt from $25 to $23, reducing estimates saying checks indicate that FL’s business in the U.S. has worsened, but its internal rules do not permit them to maintain its Sell rating.

·     GPS positive mention at Citigroup ahead of earnings next week as expects 2Q EPS beat vs cons (AMC 8/24) driven by stronger GM (+290bps vs cons +180bps), though it expects sales below cons (-8% vs cons -7%) – said opens positive catalyst watch given negative sentiment.

·     ROST shares rally early after reporting a top- and bottom-line beat, with significantly better gross margins benefiting from freight while provided an above-Street guide as raises FY23 EPS view to $5.15-$5.26 from $4.77-$4.99 prior (est. $4.97).

·     Canaccord said ahead of the Back-to-School (BTS)/Back-to-College (BTC) season, highlights areas within its coverage that could benefit from another normalizing season where students return to in-person learning. The NRF’s annual survey indicates another record BTS/BTC season with spending expected to increase +12.5% to $41.5B for BTS and +27.2% to $94.0B for BTC spending.


Leisure, Gaming & Lodging:

·     In autos XPEV reported a wider-than-expected Q2 loss as revs decreased -32% to 5.06B yuan, in line with estimates while Gross margins were -3.9%, compared with 10.9% y/y due to inventory write-downs; guides Q3 revs 8.5B-9B yuan below estimates of 9.77B yuan. TSLA falls a 6th straight day and down 10 of last 11 to lowest levels since early June.


Energy, Industrials and Materials

·     In Utilities: HE shares rebound after a dreadful week saw shares fall more than -68% at one point; rebounds today after saying it is seeking advice from various experts as part of prudent scenario planning; said goal is not to restructure company but to endure as financially strong utility. Headlines come after ratings cuts from S&P and Moody’s and class action lawsuits alleging Hawaiian Electric was responsible for the deadly Maui fires. POR upgraded from Neutral to Buy at Guggenheim saying yesterday’s 230bps underperformance (vs. UTY) providing a trigger point.

·     In Solar: Bloomberg reported US probe finds Asian solar makers evading tariffs on China; shares of CSIQ, JKS were active after headlines. A US government probe concluded some manufacturers in Asia are illegally bypassing tariffs on Chinese solar equipment, exposing them to duties that threaten to hike the cost of renewable power and slow the development of clean energy. 

·     In Industrials: DE beat and raise as Q3 EPS $10.20 beats consensus $8.20; Q3 revenue $14.28B vs. est. $14.25B; raises FY23 net income view to $9.75B-$10B from $9.25B-$9.5B and raised operating margins for several segment sectors, but shares under pressure, falling a 4th straight as fears grow of rising inventory as the co boosted output capacity to reduce its production backlog. ITRI upgraded to Buy from Hold at Argus noting the company has been shifting its focus from standalone, ‘noncommunicating’ devices toward smart networks and customized solutions.

·     In Homebuilders: BZH downgraded to Neutral from Outperform at Wedbush as does not see an emerging catalyst to increase its target, and it is stepping aside as a result.



·     Cryptocurrency-exposed stocks COIN, MARA, RIOT, HUT, CLSK, MSTR declined after the Wall Street Journal reported that SpaceX has sold off its Bitcoin holdings. The price of Bitcoin fell around 8% in just 10 minutes overnight down to levels not seen since late June on reports that SpaceX wrote down the value of BTC it previously acquired by $373M and sold it.

·     In Payments: SQ mentioned cautiously as Wedbush said they believe BILL’s results, metrics, FY24’s guidance and cautious commentary bodes negatively for Neutral rated SQ’s merchant-facing platform’s near-term growth prospects. Said BILL’s below-consensus FY24 guidance and management’s commentary suggesting spending moderation by SMBs given macro headwinds.

·     In Insurance: In research, Morgan Stanley upgraded GL to Equal Weight and downgraded AFL to EW from OW with several price tgt changes in insurance sector. Said the life insurers second quarter results were generally encouraging, leading US on average to increase forward estimates. Said while valuations have moved well off their lows from earlier in the year, stills see solid upside potential in several stocks, with MET and EQH being among its best ideas for the sector.



Biotech & Pharma:

·     Vaccine names PFE, MRNA, BNTX, NVAX shares weaker after outperformance on Thursday – CNBC reported new Covid vaccines from Pfizer, Moderna and Novavax will likely provide protection against the new “Eris” variant, now the dominant strain of the virus in the U.S. The drugmakers designed their updated coronavirus shots to target the omicron subvariant XBB.1.5, which is slowly declining nationwide.

·     REGN shares popped late afternoon after receiving FDA approval as the first treatment for children and adults with CHAPLE disease.



Hardware & Software movers:

·     In SaaS/Cloud/payments: BILL posted ~5% revenue upside, ~9% gross profit upside, and ~450 bps of operating margin upside vs. the Street as revenue upside was driven by core transaction revenue growth (TPV upside) and higher float revenue but FY24 growth outlook of 22-23% came in below est. of 25%. SNOW slides after cuts tgt to $190 from $203 as sees challenges to Q2 revs ahead of earnings next week; says Co is overvalued; APPF announced a ~9% workforce reduction.

·     In security software: PANW earnings and 2-hour c/c after the close tonight – a summer Friday – shares down roughly 18% since announcing its earnings date (fears of lower guide following recent FTNT comments in sector).

·     In Optical Equipment: LITE upgraded from Neutral to Buy at Rosenblat for similar reasons to its COHR yesterday noting LITE is the leading laser chipmaker for Datacom transceivers with more share than previously thought.

·     Electrical Equipment sector: KEYS fresh 52-week lows after forecast Q4 EPS $1.83-$1.89 below consensus $1.99 and guides Q4 revenue $1.29B-$1.31B, below consensus $1.39B.

·     In IT Services: GLOB shares advance after modestly better Q2 adj EPS $1.36 and revs +15.9% y/y to $497.5M and guidance just above consensus estimates.

·     Hardware: DLB to replace STAA in S&P MidCap 400 at open on 8/22.



·     AMAT reported EPS of $1.90, 9% above consensus on $6.4B in revenue, 4% above consensus and guided Q4 to $2.00 EPS, 24% above consensus on revenue of $6.5B, 11% above consensus, the last of the major semi-equipment names to report.

·     IPGP downgraded to Neutral from Buy at Citigroup mainly due to challenging global macroeconomic conditions, which is likely to offset the demand growth from emerging applications; cut its 2023/24E earnings forecasts by 11.5%/12.8%.

·     MRVL upgraded from Neutral to Buy at B Riley and raise tgt to $75 from $60 ahead of earnings next week saying its recent tally of super-seven hyper-scale CAPEX shows a first in three-quarter CY24E spending rise and believes enterprise-related inventory headwinds are moderating.


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.