Market Review: August 28, 2023

Closing Recap

Monday, August 28, 2023





DJ Industrials




S&P 500








Russell 2000













U.S. stocks enjoyed a strong open to continue the upside momentum initiated last week. A mostly-as-expected commentary from Fed Chair Powell on Friday and new capital markets supports from China helped maintain positive sentiment. Despite some fade in the indices, late-morning breadth remained strong at 3:1 in favor of advancers. All S&P industry groups continued to show gains, with Materials and Consumer Discretionary leading, each up about 1%. Utilities and Health Care were laggards, each up less than +0.1%. Stocks resumed their upward momentum after a bit of a lunch break, with both S&P and NASDAQ futures testing resistance pivots.


In data-of-interest, @DataTrekMB notes Q3 has started strong as the AtlantaFed GDPNow model currently predicts 5.9% real economic growth. The expectation is for the estimate to come in a bit as the quarter progresses, but still a strong start. @CharlieBilello notes the 3-month T-Bill yield has moved up to it highest level since January 2001, at 5.61%, while the market is now projecting a 60% probability of another Fed hike in November. He also highlights the loss of housing purchasing power over the last couple years, noting a 2.65% mortgage in January 2021 could have bought you a home worth $641k versus today’s 7.23% mortgage rate buying just $434k given the same monthly budget (32% purchasing power decline).


Heading toward the close, US equities rallied back near highs in an otherwise sideways-feeling session. Breadth eased a little, but still held at about 5:2 favoring advancers into the last half hour of trading. Similarly, all but one of the S&P sector groups held gains. Utilities (XLU, -0.05%) was the lone sector decliner, while Communications (XLC, +1.03%) and Real Estate (XLRE, +0.82%) were leaders. Both Growth and Value styles were enjoying modest gains. The Russell 1000 Value was slightly outperforming its Growth counterpart +0.46% to +0.41%, respectively.






·     December gold futures gained $6.90/oz, or +0.35%, to settle at $1,946.80. The gain marked the first up day in the last three sessions as US Treasury yields eased a bit and the US Dollar was flattish on the day. All eyes now are on whether the Fed really is in a prolonged pause period, so economic data later this week will be particularly impactful.

·     WTI October crude futures gained $0.27/bbl, or +0.34%, to settle at $80.10 as investors watched Tropical Storm Idalia. Idalia is forecast to gain strength after it passes over the western edge of Cuba and become a hurricane as it works its way toward the Florida gulf coast. Energy infrastructure impacts are still uncertain, but the storm could become a category 2 or category 3 hurricane before landfall, so definitely worth tracking. Separately, Brent crude slipped a bit, settling -$0.06/bbl, or -0.07%, to $84.42.








WTI Crude















10-Year Note





Sector News Breakdown



·     In autos: Unifor autoworkers overwhelmingly vote to authorize strikes at GM, F, and STLA

·     In EV sector: XPEV acquired Didi’s smart auto development business for $744 million, and Xpeng will issue consideration shares to DIDI at HK$64.03 each share. China’s BYD Co Ltd said first-half profit jumped 204.7% as net earnings for the six-months ending June 30 reached 10.95 billion yuan ($1.50 billion), up 204.7% from 3.6 billion yuan a year earlier.


Consumer Staples & Restaurants:

·     In Consumer products: CHD upgraded from Hold to Buy at Truist and raise tgt to $105 PT noting its vitamin business has struggled over the past year with a shrinking category and lost market share, but its cat litter business has remained strong. ENR was downgraded from Buy to Hold at Truist and cut tgt to $35.



·     In Footwear: Stifel said its Back-to-School 2023 athletic footwear survey highlights brand and style popularity shifts in key U.S. wholesale channels. A NKE style was cited as the most popular in 88% of back-to-school 2023 checks but burgeoning lifestyle silhouette popularity from New Balance (+8ppts y/y) and to a lesser extent, lifestyle silhouette popularity from HOKA brand (DECK), and ONON are responsible for the difference.



·     In Utilities: HE shares surge after the utility said Maui county’s lawsuit is "factually and legally irresponsible", pointing to the county’s responsibility; said the fire caused by downed power lines was later reported "100% contained" and declared "extinguished" by County Fire Department. In research, Wells Fargo upgraded UGI to Overweight saying the risk/reward favors investors following underperformance, noting shares have lagged peers by 18% last year and ~30% YTD. Wells downgraded ATO to equal weight on valuation and continue to like the story and more constructive on relative pullbacks.

·     In Alt Energy/Solar: FCEL shares rose after announced an agreement with XOM to extend their ongoing joint development agreement through March 31, 2024.



·     In REITs: Two M&A deals in REIT sector today: 1) HT announced an agreement to be acquired by private equity firm KSL Capital Partners LLC in a cash deal valued at $1.4 billion where KSL will pay $10 in cash for each share, which represents a 59.2% premium. ; 2) RPT to be acquired by KIM in an all-stock transaction valued at about $2 billion. RPT Realty shareholders will receive 0.6049 of a newly issued Kimco stock for each share held, or $11.34, a 19% premium to RPT’s closing price on Aug. 25.


Insurance & Services:

·     In Insurance: the WSJ reported that homeowners are increasingly forgoing home insurance (ALL, TRV), gambling that the likelihood of a disaster isn’t high enough to justify the cost of a policy; Barron’s reported this weekend ALL, ACGL, RYAN, GWRE are among companies’ that could capitalize on strong demand for insurance according to Barron’s. Notes backed by nearly $1T in capital and rising premiums, insurers might profit from the coming wave of catastrophic weather.



Biotech & Pharma:

·     ANIP said it received FDA approval for an abbreviated new drug application for estradiol gel, 0.1%; ANI’s estradiol gel, 0.1%, is the generic version of the reference-listed drug Divigel, used for the treatment of symptoms caused by menopause or removal of the ovaries.

·     BBIO announced detailed results from its Phase 3 ATTRibute-CM study of acoramidis for patients with ATTR-CM. A highly statistically significant result, demonstrated by a Win Ratio of 1.8, was observed on the primary endpoint. This result was consistent across both variant and wild-type ATTR-CM patients, as well as across NYHA Class I, II and III patients.

·     HZNP shares rally as the Federal Trade Commission suspended its challenge of AMGN’s $27.8B acquisition of HZNP, giving the agency time to weigh a settlement that would allow the deal to close with conditions – WSJ

·     NVCR said a phase 3 study of its Tumor Treating Fields therapy in combination with paclitaxel missed its primary endpoint of overall survival in patients with platinum-resistant ovarian cancer; said therapy was well-tolerated in the study, with no added systemic toxicities.

·     NVS presents new long-term Leqvio® (inclisiran) data demonstrating consistent efficacy and safety beyond six years; announced new long-term data from orion-8, a phase iii open-label extension of orion-9, orion-10, orion-11 and orion-3 trials.


Healthcare Services & MedTech movers:

·     In Life Sciences: ABCM to be acquired by DHR for $24.00 per share in cash, or a total enterprise value of approximately $5.7 billion including assumed indebtedness and net of acquired cash.

·     In Managed Care/Health Services: CNC said it has signed a definitive agreement to divest Circle Health group to Pure Health at an enterprise value of approximately $1.2B. THRN agreed to be taken private in a $680 million deal by private-equity firm L Catterton for $10.20 a share in cash, a nearly 31% premium to Friday’s closing price

·     In MedTech: BSX presented 12-month data from its ADVENT pivotal trial for its FARAPULSE Pulsed Field Ablation (PFA) system at the European Society of Cardiology meeting yesterday (8/27). The randomized, non-inferiority trial showed 73.3% treatment success in PFA versus 71.3% in the thermal arm (current standard of care), meeting the 65% efficacy threshold.

·     In Ortho: ZBH upgraded from Neutral to Buy at BTIG with $139 tgt noting shares have pulled back ~13% since their 2Q23 earnings call and now sit at the lowest level relative to SYK over the last 20+ years on a P/E basis. While BTIG’s upgrade is partly rooted in valuation, it thinks the sell-off following the CEO transition was a little overdone.


Industrials & Materials

·     In Industrials: ETN said invests more than $500 million in North American manufacturing to support electrification, energy transition and digitalization across industries; EMR reinstated EW and $105 tgt at Barclay’s and upgraded to buy from Hold at Argus with $110 price target; MMM shares rise on reports that have tentatively agreed to pay more than $5.5 billion to resolve over 300,000 lawsuits claiming it sold the US military defective combat earplugs, people familiar with the deal said; GNRC shares higher ahead of Tropical storm landfall in Florida expected tomorrow.

·     In Transports: JBLU upgraded to In Line from Underperform at Evercore ISI with a $4.50 price target following the 35% decline in shares since Evercore’s July downgrade; FWRD upgraded from Underperform to Peer Perform at Wolfe noting the stock is down 32% YTD, materially underperforming the S&P 500 (+15%) and Wolfe’s WR Transport Index (+20%) and FWRD shares are down 35% since announcing the acquisition of Omni Logistics on August 10th.


Aerospace & Defense

·     In Aerospace & Defense: SPCE announces flight window for third commercial spaceflight; said flight window opens Sept 8th; LHX downgraded from Outperform to Market Perform at Bernstein and cut tgt to $210 from $239 noting the co remains a "show me" story as the problem remains on margins with supply chain issues, inflation on fixed-price contracts, and execution; BA tgt raised to $260 at TD Cowen saying it is likely China delivery restart & upcoming expected favorable update on the 737-bulkhead issue offer upside given the stock’s 7% recent dip.



Hardware & Software movers:

·     APPF upgraded from Market Perform to Outperform at William Blair noting there have been several developments at AppFolio in recent months and has grown increasingly supportive of the strategic and financial direction of the company.

·     CRWD downgraded to Equal Weight from Overweight at Morgan Stanley and cut tgt to $167 from $178, cautious into the fiscal Q2 earnings report this week.

·     MDB positive mention at Stifel ahead of earnings this week noting after SNOW results, they believe Atlas is well positioned to beat sell-side’s 33% Y/Y growth expectations, by ~4% points.

·     UPWK downgraded to Neutral from Buy at BTIG citing valuation after 41% YTD gain.

·     In EMS Sector: JBL to sell its mobility business to BYD Electronic Int’l in a deal valued at ~$2.2B.

·     In Optical: FN CEO Grady discloses sales of 27K shares at $159.92 on 8/24 valued at $4.3M; and CFO Sverha discloses sale of 20K shares at $160.90 on 8/24 valued at $3.2M as per filings late Friday.



·     MTSI was upgraded to Buy from Hold at Benchmark with $92 tgt after recent RF GaN on SiC asset acquisition from WOLF; firm estimates MTSI will generate about $0.58 in annualized EPS accretion when fully integrated, excluding the benefits from the fab facility.


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.