Market Review: August 23, 2023

Closing Recap

Wednesday, August 23, 2023





DJ Industrials




S&P 500








Russell 2000













U.S. stocks gained solidly on Wednesday, with advancers outpacing decliners by more than 3:1 margin, paced by gains in Technology (XLK +1.9%) as semis rise ahead of NVDA earnings tonight and large cap mega tech outperform (NFLX, AAPL, GOOGL, META all up 2% or more). The S&P 500, boosted by technology and real-estate stocks, rose more than 1%, on pace for its best day since June 30th (the last time it posted a closing advance of more than 1%). The Smallcap Russell 2000 also rose around 1% in a broad-based rally (Energy XLE was the lone sector decliner). U.S. business activity rose at a weaker pace in August, boosting Treasuries as the yield on the 10-year note fell from 16-year highs. Interest rate sensitive stocks rebounded as the 10-year yield fell. Retailers Peloton and Foot Locker shares plunged, after their results disappointed investors, following weakness in Dick’s Sporting goods Tuesday, but Abercrombie & Fitch, Williams-Sonoma and Kohl’s shares rose after their own quarterly reports. All eyes on the 2-day Federal Reserve Jackson Hole meeting starting tomorrow.


Economic Data

·     Weaker manufacturing data as S&P Global August flash composite PMI at 50.4 (vs 52.0 in July) and S&P Global August flash services PMI at 51.0 (vs 52.3 in July). S&P Global August flash manufacturing PMI at 47.0 (vs 49.0 in July).

·     July single-family home sales rose 4.4% to 714K unit annual rate vs. est. 705K and June 684K; US July home sales Northeast -2.9%, Midwest +47.4%, South -6.3%, West +21.5% as July new home supply 7.3 months’ worth at current pace vs June 7.5 months. July median sale price $436,700, -8.7% from July 2022 ($478,200).


Commodities, Currencies and Treasuries

·     Oil prices slumped on Thursday, with WTI crude down -$0.75 or 0.94% to settle at $78.89 per barrel, lowest in a month. Prices bounced off session lows as investors noted a much larger-than-expected draw in U.S. crude stocks following weekly inventory data. Markets are also looking for hints on the outlook for interest rates when Federal Reserve officials and policymakers from the ECB, the Bank of England and the Bank of Japan head to Jackson Hole, Wyoming, on Thursday

·     Big reversal in the US dollar index (DXY), falling from highs around 104 to afternoon lows below 103.40 as the buck hits two-week low vs yen, last down 0.8% at 144.73 yen; the euro also edged higher as investors await and “hope” for “dovish” commentary from the Fed tomorrow/Friday.

·     Gold futures ended higher, rising $22.10 or 1.2% to settle at $1,948.10 an ounce, its best one-day gain since the end of July and up a third day as bonds rallied and the dollar slumped. Prices for the metal had been under increased pressure in recent weeks amid surprisingly resilient U.S. economic data and concerns over the Federal Reserve’s likely response.

·     Treasury yields fell, pulling back from the highest levels since the financial crisis in 2008, with the 10-year yield dropping over 12 bps to below 4.2% (off highs above 4.36% yesterday) as markets await the Fed meeting in Jackson Hole tomorrow. The US Treasury sold $16B in a 20-year bond auction at high yield 4.499% and bid-to-cover ratio 2.56, as primary dealers take 11.35% of U.S. 20-year bond sale, direct 20.2% and indirect 68.45%.






WTI Crude















10-Year Note





Sector News Breakdown



·     In Auto retail: AAP announced a new CEO and announces a strategic review after mixed Q2 results and guidance as Q2 EPS $1.44 missed est. $1.69 on better revs $2.69B vs est. $2.66B, while lowers year EPS view to $4.50-5.10 vs prior guidance $6.00-6.50 but better guidance for FY revs comp sales and operating income.

·     In EV sector: TSLA shares slipped early before rebounding: Reuters reported the company lowered the production target of its German plant to 4,350 a week in July and August after hitting 5,000 a week in March and plans to reduce it further; NKLA filed for resale of up to 10.3 mln shares of common stock by the selling stockholders.

·     In Autos: STLA is weighing options for a tie-up with Chinese EV makers such as Leapmotor that could include investment and a business partnership that would help it grow in the country. – Bloomberg reported overnight


Consumer Staples & Restaurants:

·     In Spirits and wine: BFB was double upgraded from Underweight to Overweight at Morgan Stanley and raised tgt to $75 from $66 saying with gross margins now turning from a headwind to a tailwind, and concerns over industry growth likely to dissipate, expects the stock to appreciate as investors refocus on its robust LT +5-7% topline and +HSD OI growth profile.

·     In beverages: (BUD, TAP, SAM) – Bank America said Industry beer volume declined -2.7% in the 4-weeks to August 12th (vs -2.8% in July and June -3.5%). Compared to 2019, volume declined -9.7%. ABI beer volume declined -14.8% YoY in the last 4 weeks, a very slight improvement from recent months with no detectable change in trends for Bud Light (volume -29.7% in the last 4 weeks, same as previous months July/June), Budweiser (-14.1% vs -14.4% in July), Michelob Ultra (-3.6% vs -3.5% a month ago). The biggest beneficiaries of Bud Light losses are Modelo (volume +16%), Coors Light (+16%) and Miller Lite (+13%).

·     In China beer sector, CRBeer (CRHKY) and Tsingtao-H (TSGTF) both upgraded to Outperform at Bernstein as expects China beer demand to outperform other consumer staples categories in the face of macro headwinds.


·     In Apparel retail: ANF shares surge after Q2 results as sales +16% y/y to $935.3M topping the $846M estimate on better gross margins 62.5% and better comp sales growth +4.3%; also raised its FY net sales view to up 10% from prior view up 2%-4%. URBN Q2 EPS $1.10 tops consensus $0.89 on better revs $1.27B as comps +4.9% vs consensus +4.7%, helped by strong comps continuing at Free People Group (growth 27%) and Anthro (+10.6%).

·     In Footwear/sports apparel: another disaster in the space as FL shares tumble after cutting guidance and pausing dividend; Q2 Comparable sales fell (-9.4%) vs. (-10.3%) y/y; Q2 adj EPS $0.04 in-line and sales -9.9% y/y to $1.86B vs. est. $1.88B; said pausing dividend beyond recently approved October payout; lowers year FY sales to down -8%-9% from prior view down -6.5%-8% and cuts FY EPS to $1.30-$1.50 from prior $2.00-$2.25 (follows lower guide from DKS yesterday that weighed on shares of ASO, BGFV in sporting goods – UA, NKE pressured as well). NKE posts 10th straight day of losses and fresh YTD lows after FL and DKS results last two days.

·     In Department stores: KSS follows Macy’s (M) with its Q2 results as adj EPS fell $0.52 tops est. $0.24 as revs declined a 6th straight quarter, sliding (-4.8%) y/y to $3.68B missing the $3.71B estimate; Q2 comp sales fell (-5%) to mark the sixth consecutive period of declines vs. est. (-4.4%) and inventories decreased by about (-14%) to $3.47B; maintains year guidance.

·     In Specialty retail: BBWI better results and mixed guide as Q2 EPS $0.40/$1.56B vs est. $0.33/$1.56B on better GM 39.9% vs consensus 39.2%; guides Q3 EPS mid-point and revs below views but raises year guidance. Bernstein noted Swiss watch exports saw a minor YoY decline of -0.9% after nearly 30 consecutive months of YoY growth, due to challenging comparisons in China.


Leisure, Gaming & Lodging:

·     In leisure: PTON shares tumble on mixed results/lower guide; reported in-line Q4 revs $642M but guided Q1 revs $580M-$600M below est. $647.8M citing seasonal slowdown in hardware sales and guided Q1 adj. EBITDA loss (-$10m-$20m) vs. est. profit $5.68m after larger Q4 Ebitda loss.

·     In Movie theatre: AMC on track to suffer a third day of double-digit losses following a Delaware Supreme Court’s ruling that the company’s stock conversion can proceed.

·     In online dating: Citigroup notes for BMBL, MTCH, July overall downloads stay strong, but MAUs and time spent remain pressured. Said data finds deceleration across most metrics industry wide, including at Tinder, Bumble, and Hinge, as MAUs and time spent remain pressured, but downloads growing MSDs, a potential positive indicator.


Homebuilders, Building Products, Home Furnishing:

·     In Homebuilders: TOL reported F3Q23 EPS of $3.73, well ahead of consensus of $2.87 as better than expected deliveries, higher average selling price (ASP), gross margin and well-controlled SG&A expenses drove upside.

·     Weekly Mortgage Bankers Assoc data shows the mortgage applications index fell -4.2% to 184.8 in week ended aug 18, the lowest since 1995 as the mortgage purchase index falls -5% and the mortgage refinance index falls -2.8% after the 30-year mortgage rate rises 15 bps to 7.31%, the highest since December 2000.

·     In Home Furnishing: LZB Q1 adj EPS $0.62 vs est. $0.55 on sales $482Mm vs est. $474.58Mm, adj op mgn 7%; guides Q2 sales $490-510Mm vs est. $507.08Mm and op mgn 6.5-7.5%; says looking forward, they expect consumer trends to remain soft and sales trends remain challenged against last year, which benefited from an elevated pandemic backlog.


Energy, Industrials and Materials

·     In E&C: DY better Q2 results as EPS $2.03 tops est. $1.66; Q2 adj EBITDA $130.8M vs. est. $119.6M; Q2 revs rose 7.1% y/y to $1.04B vs. est. $1.03B; approves new $150M share repurchase program; sees Q3 revenues in line with Q3 of FY22.

·     In Oil E&P sector: CIVI tgt to $96 from $85 and MUR to $53 from $47 at KeyBanc as they raised commodity prices forecasts and ests; said remains constructive on the outlook for oil and natural gas into 2024, although it believes the easy money for E&Ps has been made in the last 3-months.

·     In Oil research: PBR was upgraded to Buy from neutral at Bank America as sees strong prospects for the LatAm oil and gas sector for the remainder of this year and 2024 with oil prices surging; SU was upgraded to Overweight from Equal Weight at Wells Fargo and raises tgt to C$54 as believes new senior mgmt has the vision and strategy to improve execution, returns, CFFO.



Banks, Brokers, Asset Managers:

·     Generally quiet in financial sector: in crypto, Bitcoin prices rebounded 2% above $26,400 (off overnight lows around $25,750) as Bitcoin related names rebound RIOT, MARA, COIN. In brokerage, SCHW snapped an 11-day losing streak as financials in general getting a bounce today along with rest of mkt (regionals and other banks fell yesterday after S&P downgraded credit rating of a few banks). Regional and large cap banks bounced after weakness Tuesday.



Biotech & Pharma:

·     APLS shares jumped after provided an update on the eye-disease drug Syfovre, which has been hurt by safety concerns in recent weeks; APLS said a causal relationship hasn’t been established between structural variations in a 19-gauge filter needle and events of retinal vasculitis.

·     RHHBY shares rise after the company released interim results from a late-stage clinical trial of a combination of two of its drugs that showed a benefit for overall survival in patients with lung cancer. Shares of other anti-TIGIT drug makers ITOS, RCUS gain as well as other large cap cancer drug makers MRK, GILD which are also evaluating the class of drugs for various oncology and immunology diseases.

·     MNK files for Chapter 11 bankruptcy and cut about $1.9 billion in debt.


Healthcare Services & MedTech movers:

·     In Life Sciences: Reuters reported that NVO has hired TMO as its second contract manufacturer for its hugely popular weight-loss drug Wegovy, a source familiar with the matter told Reuters.

·     Health insurance: PINC was downgraded from Overweight to Neutral at Piper and cut its tgt to $25 from $44 saying its Overweight thesis has not played out. They expected the SCS segment to deliver positive comps starting in 2H23, but it did not.



Internet, Media & Telecom

·     In Streaming/media: NFLX shares jumped after a report that the company has continued to add new users in the US after its crackdown on customers sharing their passwords, according to new research from Antenna, data that suggests the company is on track for another strong quarter of growth at home – Bloomberg.

·     In Online: ANGI tgt cut to $4.50 and IAC tgt cut to $81 at KeyBanc saying sees some signs of progress, some signs of more work to be done (E.G., Angi’s ongoing clean-up for longer-term growth), and an ongoing mixed macro.



·     NVDA expected to report earnings tonight – a barometer for the need/strength in AI space with shares +212% YTD into the print. But semis tumbled ahead of results following disappointing guidance from ADI this morning, a big player in industrial/auto sectors.

·     ADI reported Q3 adj EPS $2.49 below est. $2.52 on revs $3.08B vs. est. $3.1B; but company said the customer inventory adjustments they mentioned last quarter have accelerated as economic conditions deteriorate and our lead times continue to improve; guides Q4 EPS $1.90-$2.10, below est. $2.40 and revs $2.7B plus/minus $100M vs. est. $3.01B. ADI primarily sells chips to the industrial and automotive sectors, which weighed on shares of NXPI, ON, STM.

·     QCOM reportedly faces scrutiny from the FTC over the proposed acquisition of a chip maker that specializes in auto safety products. According to a report late Tuesday from Politico, the FTC plans to open an in-depth probe of Qualcomm’s purchase of Israel-based Autotalks.

·     SMCI was upgraded to Neutral from Underperform at Wedbush as sees limited n-t downside and noted they missed a fundamental shift in FQ4/CQ2, that drove SMCI’s growth over the last few months and created the foundation for the upbeat FY’24 guide.

·     WOLF sold its radio frequency business to MTSI in a deal valued at $125M which includes cash component of $75M and $50M in $MTSI stock with certain restrictions; WOLF guides Q1 sales $185M-$205M vs. $220M-$240M prior and EPS to be unchanged.

·     In the RFID technology sector: AVY was upgraded to Buy from Neutral at UBS this morning as believes the stock can break out of this recent range as earnings inflect meaningfully positive Y/Y in 4Q23/2024, RFID sales get back to >20% growth in 2H23, and Base Labels & Ticket/Tag businesses stabilize. Truist also positive on AVY noting as part of its 2Q23 earnings call yesterday, LOW mentioned that it is embedding RFID technology in power tools to prevent theft, rendering the product inoperable until scanned and purchased (note shares of PI also higher today).


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.