Market Review: August 30, 2023

Closing Recap

Wednesday, August 30, 2023





DJ Industrials




S&P 500








Russell 2000













U.S. stocks made it a 4th straight day of gains, with the S&P advancing further beyond its 50-day moving average resistance of 4,464 (topped it yesterday) and the Nasdaq made it a 7th day of gains in last eight as investors await another round of inflation data tomorrow and more jobs data Friday. Stocks got a boost on further evidence that inflation is gradually subsiding (PCE data today), and as a report on U.S. private sector employment showed the economy generated fewer jobs than expected in August, marking the latest indication that the labor market is losing steam (taking pressure off the Fed to keep raising rates). GDP for the second quarter was revised lower than a prior estimate. The dollar index (DXY) fell 0.4% following the softer ADP National Employment report, which showed U.S. private payrolls rose by 177K jobs last month vs. est. 195K, a day after the JOLTs jobs report Tuesday dropped to their lowest in nearly 2-1/2 years in July, signaling inflation pressures caused in part by a tight labor market were easing. Next up is the August Nonfarm and Private payroll report on Friday. Bottom line, expectations around a soft landing continue to gain in the wake of today’s US data releases, with risk sentiment seeing another leg higher.


Hurricane Idalia made landfall as a catastrophic Category 3 storm at Keaton Beach on the Big Bend coast, less than 90 miles southeast of the state capital of Tallahassee. The hurricane has since weakened to a Category 1 storm with maximum sustained winds of 90 miles per hour, according to the National Hurricane Center. Idalia is expected to weaken further as it moves inland but will remain a hurricane as the storm moves across southeastern Georgia and southern South Carolina this afternoon or evening. More than 280,000 people in Florida were without power as of early afternoon.


Economic Data

·     U.S. Q2 GDP growth was revised to 2.1%, annualized, from the prior estimate of 2.4% and slower than the +2.4% consensus, the Bureau of Economic Analysis said. The core PCE price index rose +3.7% vs. +3.8% expected and +3.8% prior estimate. Q2 personal income growth of 4.2% (was 4.3%) for total income and 5.9% (was 5.2%) for disposable income.

·     August ADP private payrolls data reported at 177K vs. est. 195K while the prior month was upwardly revised to 371K from 324K.

·     July advance trade deficit of goods widened to $91.2b from $88.8b in prior month, the Commerce Department said vs. median est. $90.0b. Imports rose 1.9% in July to $255.964b from $251.257b in June and exports rose 1.5% in July to $164.789b from $162.428b in June.

·     In mortgage data: The Mortgage Banks Assoc reported that weekly US mortgage market index rose +2.3% in latest week as the purchase index rises 2.0% and the refinance index rises 2.5% as the average 30-year mortgage rate unchanged at 7.31% in Aug 25 week.


Commodities, Currencies and Treasuries

·     Oil prices extended gains on Wednesday with WTI crude rising $0.47 or 0.58% to settle at $81.63 per barrel after industry data showed a large draw in crude inventories in the U.S., the world’s biggest fuel consumer, and as a hurricane in the Gulf of Mexico kept investors on edge.

·     Gold prices rise a third straight session, gaining $7.90 to settle at $1,973 an ounce behind dollar and Treasury yield weakness again after weaker jobs data and better inflation readings.

·     U.S. Treasury yields edged lower on the day, with the benchmark 10-year note holding 4.1%, the back test from late February and early July high’s and off 16-year highs of 4.36% this month.






WTI Crude















10-Year Note





Sector News Breakdown



·     Auto industry remains cautious with UAW negotiations and strike looming. Last week the United Auto Workers (UAW) held a vote and granted its leaders the authorization for strikes if needed due to ongoing contract negotiations with the 3 stalwart OEMs: GM, Ford, and STLAWith a 97% support rate amongst the combined members in the union representing 150k workers, the strike authorization vote is part of the union’s constitution used as a procedural step in negotiations but does not guarantee a strike will occur. However, if an agreement is not reached by September 14th, there is a chance a strike will then occur with the UAW workers walking out.

·     Hyundai Motor Group said that it would acquire a 5% stake in Korea Zinc for $397.74 million.

·     TM has resumed production of Toyota and Lexus vehicles at 12 of its 14 plants in Japan following a system malfunction which prevented the ordering of parts – Nikkei reports.

·     In July, the EU car market continued its growth trajectory, expanding by 15.2%, marking "the twelfth consecutive month of growth; new car registrations reached 851,156 units as the bloc recovers from last year’s component shortages.


Consumer Staples & Restaurants:

·     In beverages: BFB Q1 EPS $0.52 vs. est. $0.53 as sales rose 3.1% to $1.038B vs. est. $1.053B; said Whiskey sales fell 1%, while tequila sales jumped 15% and the ready-to-drink category continued to grow, with New Mix sales surging 52%; Heineken (HEINY) downgraded to underperform from sector perform and lowers PT saying the anticipated cost of revitalizing its portfolio constrains margin expectations so that by 2025 it forecast Heineken’s EBIT margin to be 210bps below 2022. (HEINY was later upgraded – same day – at RBC Capital reversing its views).



·     CONN reported smaller-than-expected Q2 EPS loss while revs overall missed, eCommerce sales increased 41.5% to a second quarter record of $27.2 million; Retail gross margin increased to 36.9% from 34.6% in the prior year.

·     PTON downgraded to Neutral from Outperform at Macquarie and cut its target price 30% to $7, from $10 on near-term pressures on the growth outlook, the seat post recall weighing on subs, and management’s soft guide calling for negative FCF until 2HFY24.

·     PVH reported Q2 revenue growth +4% above guidance of +LSD reported-revenue growth and EPS of $1.98 came in above guidance of $1.70, though it represented a YoY decline of -5% For the FY, reiterated guidance for organic revenue growth to of 2-3%, while raised FY EPS guidance to $10.35 (vs. 10.00 prior), though this is largely a function of a lower tax rate and added buyback.

·     VRA swung back to a profit for Q2, easily topping estimates (EPS $0.33 vs. est. $0.12) though revs fell to $128.2M from $130.4M y/y and consensus $131M; mid-point of year guide below views.


Leisure, Gaming & Lodging:

·     In boating: MCFT reported better Q4 results with EPS $1.37/$166.6M sales topping consensus $1.07/$162.08M, but guided 2024 net sales $390M-$420M, well below estimates $568.8M and said sees 2024 adj. EBITDA $42M-$52M below est. $102.4M; shares of other boating and revs names also pressured early: BC, ONEW, MBUU, HZO.

·     In lodging/gaming: GLPI announced its acquisition of land at the Hard Rock Casino in Rockford, IL for $100M and simultaneously entered a ground lease with the tenant, 815 Entertainment, with an annual rent of $8M. Nevada’s gaming control board releases July data saying Las Vegas Strip July gambling revs rose 7.95% y/y to $834.9m (LVS, EYNN, CZR, BALY).


Energy, Industrials and Materials

·     In Solar: RUN upgraded to Buy/High Risk at Citigroup saying higher rates and NEM impacts appear to be largely priced-in, but RUN is not getting due credit for 1) market share gains from TPO shift, 2) path to FCF generation, 3) no corporate level equity raises, 4) projected component cost deflation, 5) ITC adder benefits, and 6) demonstrated success in selling battery storage (>80% attach rate on new sales in CA and >30% nationally).

·     In airlines: The Transportation Security Administration expects to screen more than 14M passengers during the extended Labor Day holiday weekend from September 1 through September 6. The busiest day is projected to be September 1, when TSA expects to screen over 2.7M travelers passing through security checkpoints.

·     In Homebuilders: Sector higher after HOV boosted its outlook earlier to $21-$24 per share from $17-$20 prior view and better revs; lifting shares DHI , while pullback in yields also helping sector; Wedbush said they think housing stocks continue to benefit from the lack of existing home competition and continue to favor CCS, MTH, CVCO, SKY, LSEA.

·     In Utilities: More than 290,000 customers across Florida and Georgia were without power on Wednesday morning as Hurricane Idalia moved across the region, according to the website Florida Power & Light said it had crews working throughout the night to restore power but warned customers that it was expecting outages throughout its territory.



Banks, Brokers, Asset Managers:

·     In Regional Banks: U.S. regulators on Tuesday unveiled plans to force regional banks to issue debt and bolster their so-called living wills, steps meant to protect the public in the event of more failures. All American banks with at least $100 billion in assets would be subject to the new requirements, which resemble rules that apply to the world’s biggest banks. Impacted lenders will have to maintain long-term debt levels equal to 3.5% of average total assets or 6% of risk-weighted assets, whichever is higher, according to a fact sheet released Tuesday.

·     In payments: the WSJ reported that MA and Visa (V) are planning to increase fees that many merchants pay when they accept customers’ credit cards starting in October and April. The changes could result in merchants paying an additional $502M annually in fees. U.S. merchants paid an estimated $93B in Visa and Mastercard credit-card fees last year, according to the Nilson Report, up from about $33B in 2012.

·     In property & Casualty insurance: Wells Fargo said Hurricane Idalia is the first major storm of 2023 and should result in insured losses of ~$10 billion and shows potential losses by P&C insurer assuming industry loss of $5 billion, $10 billion (base case) and $20 billion. The largest hit to equity will be felt by reinsurers and PGR while top ideas are reinsurers ACGL, EG and RNR.

·     In Business Technology: NCNO posted ~2% upside to Street revenue, driven principally by subscription revenue outperformance and ~175 bps of non-GAAP operating margin upside to the Street; guidance for F3Q and FY24 was raised, though to a lesser extent than F2Q upside.

·     In REITs: HIW downgraded to Equal Weight at Wells Fargo given upcoming moveouts and lower PT to $22 from $27 saying they prefer companies with strong balance sheets, high quality assets, and predictable income streams and prefer BXP .



Biotech & Pharma:

·     EBS said its Narcan nasal spray that’s an antidote for an opioid overdose, will be available without a prescription starting in September; said Narcan will have a suggested retail price of $44.99 a carton, or $22.50 per dose.

·     FGEN shares fell after announcing topline results from LELANTOS-2, a phase 3 clinical study of Pamrevlumab in ambulatory Duchenne Muscular Dystrophy (DMD) saying the study did not meet the primary endpoint — Pamrevlumab was generally safe and well tolerated.

·     JNJ officially updated guidance post KVUE exchange offer, guiding to $10-$10.10 adj reported EPS; maintaining dividend and expects increased 2023 reported sales growth of 7.0% – 8.0%, operational sales growth of 7.5% – 8.5%.

·     OTLK shares tumbled after saying the FDA has issued a Control Response Letter (CRL) for the company’s Biologics License Application for a treatment for wet age-related macular degeneration.

·     PFE and BNTX receive positive CHMP opinion for Omicron xbb.1.5-adapted COVID-19 vaccine in the European Union; vaccine doses will be ready to ship to applicable EU member states immediately upon authorization by the European Commission.

·     Cannabis stocks popped midday after HHS recommends moving marijuana to schedule III designation; to lower-risk US drug category (MSOS, MJ, TLRY, CGC, CRON, CURLF, GTBIF among cannabis related names that all moved higher)


Healthcare Services & MedTech movers:

·     In Dental Supply market: PDCO reported in-line Q1 EPS of $0.40 as revs rose 3.5% y/y to $1.58B vs. est. $1.57B while backed its FY outlook.

·     In diabetes sector: PODD shares surged after filing last night showed CEO insider purchase 5.5K shares valued at $1.006M and amid winning TRO in dispute with EOFlow; note shares of other names in the sector DXCM, TNDM also rallied on CEO buy on hopes sees bottom in industry.

·     In Diagnostic Services: DGX and SRPT expand collaboration to develop AAV companion diagnostics (cdx) for Sarepta’s gene therapies.

·     In Managed Care: CNC downgraded to Equal-weight at Morgan Stanley on lowered confidence in the visibility/stability of their long-term earnings growth profile as it believes the multi-year turnaround in Medicare Advantage Star Ratings and ability to re-procure future Medicaid RFPs are both becoming increasing question marks.



Hardware & Software movers:

·     Apple product event preview: Citigroup said they expect AAPL to hike prices for its iPhone pro models by $100-$200 and expects Apple to unveil the iPhone 15 series and possibly the latest Apple Watch in its September 12 product upgrade event. Said they expect major hardware upgrades to iPhone 15 series include 3 nanometer A17 chips for the Pro models, transition to USB-C port, upgraded camera, and increased memory and storage.

·     In Storage: BOX shares slip as reported a relatively in line F2Q24, but lowered the F2H24 (Jan FYE), which implies a ~4% top-line growth rate (6% cc) in F4Q24, below prior guide of ~10% cc growth for FY24 (new guide 8%) citing ongoing macro negatively impacting seat growth relative to prior expectations pressuring FY24 updated guide.

·     PC Market/Hardware: The road to recovery for personal computers (PCs) has been challenging coming off explosive years in 2020 and 2021, but signs of growth are finally returning. According to the IDC Worldwide Quarterly Personal Computing Device Tracker, PC shipments are forecast to grow 3.7% on year in 2024 reaching 261.4 million units. This shipment volume will be higher than the 259.6 million in 2018, but still below 2019 levels.

·     In Hardware earnings: HPE delivered revenues that slightly beat expectations, as continued demand strength in Intelligent Edge offset weakness in Compute and Storage. Operating profit came in below expectations on higher opex, while EPS benefitted from below the operating line items. For C4Q, the top line guide, at midpoint, is below Street expectations. HPQ delivered mixed results as better-than-expected PC segment revenues were more than offset by weakness in the Print segment, specifically in the consumer print HW segment; lowers FY adj EPS view to $3.23-$3.35 from $3.30-$3.50 prior and FY FCF view to low end of prior $3B-$3.5B guidance.

·     3D stocks (DM, DDD) saw upside volatility after Bloomberg reported AAPL is testing 3D printers to make the steel frames of some of its upcoming smartwatches, citing people with knowledge of the matter. The production technique would render obsolete the need to cut parts of metal into the product’s shape, reducing the time it takes to make the devices.



·     AMBA shares tumble as reports In-line Jul Q revs of $62.1mn, +0.2% vs guidance mid-point but issues materially lower Oct Q revs mid-point of $50.0mn (-19.5% q/q), -23.9% vs $67.4mn est., on sharper-than-expected inventory correction (esp. IoT) + pockets of softening demand.

·     TXN was downgraded from Market Perform to Underperform at Bernstein with $145 tgt saying Street models still do not appear to contemplate the consequences of TXN’s plans, and gross margin expectations appear far too high to U.

·     INTC may overtake Samsung as the world’s 2nd largest contract chipmaker as early as 2024, trailing only TSM according to industry sources – Digitimes reported.


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.