Market Review: December 01, 2023

Closing Recap

Friday, December 01, 2023





DJ Industrials




S&P 500








Russell 2000













After a modest gain yesterday, US equity futures bounced between gains and losses overnight before settling slightly negative into the open. There were no meaningful pre-market economic reports today so perhaps just a bit of profit taking after a nice November run. Recent Fed speakers have only muddied the waters with no consistent message, but investor expectations continue to trend toward rate cuts in the first half of 2024, with close to an 80% implied probability of a cut at the May meeting. Better reports on US Construction Spending, ISM Manufacturing New Orders and ISM Manufacturing Prices Paid after the open helped push the S&P 500 briefly back green, keeping alive investor hopes for a soft landing in the economy, while the Nasdaq remained softer on weakness in Technology and Communications. Early market breadth was just shy of 2:1, favoring advancers with gains in Energy, Industrials, Real Estate and Materials more than enough to offset the declines in Tech.


In data of interest today, @TimmerFidelity notes we have seen economic soft landings following peak Fed rates several times previously, but not necessarily accompanied by a broadening of any market rally. Conversely, recessions can produce a broadening tape if they follow periods of narrow leadership as has been the case recently. Separately, @bespokeinvest notes while much has been made of recent mega-cap outperformance, over the past two years just five basis points separates the Nasdaq 100 (QQQ) and the S&P 500 Equal weight (RSP) and both are flat. Lastly, @KobeissiLetter mentions the S&P 500 has traded with a daily RSI of 70+ since November 20th. The ten consecutive days of 70+ RSI is the longest streak since 2019.


Heading into the final hour, US equities enjoyed modest gains after Powell’s comments failed to spook the markets. All S&P sector ETF’s were in the green, with Real Estate (XLRE, +1.80%), Industrials (XLI, +1.5%) and Materials (XLB, +1.1%) leading the way. Laggards included Communication Services (XLC, +0.11%), Consumer Staples (XLP, +0.35%) and Health Care (XLV, +0.32%). Small caps were outperformers, as IWM gained +2.45% (highest since Sept) vs. SPY at +0.50% and QQQ +0.25%. Both growth and value were up for the day, with value the outperformer. Russell 1000 Value gained +0.94% versus its Growth counterpart +0.34%. Breadth expanded to better than 4:1 advancers over decliners.


Economic Data

·     ISM U.S. manufacturing activity index for Nov at 46.7 vs. consensus 47.6 and compared to 46.7 in October; prices paid index 49.9 in November vs 45.1 in October; new orders index 48.3 in November vs 45.5 in October; employment index 45.8 in November vs 46.8 in October.

·     Construction Spending for October rose +0.6% above consensus +0.4% and compared to Sept +0.2% (vs. previous +0.4%); Oct private construction spending +0.7%, public spending +0.2%.

·     S&P Global Nov. Manufacturing PMI at 49.4 vs 50 prior.



·     February gold futures jumped $32.50/oz, or +1.58% to settle at $2,089.70. The settlement marked a record high close and neared a golden cross. Re-escalating conflict around Gaza supported the move in what has been about a two-month trend higher. Also, in play have been rising expectations for the end of the rate-hike cycle this year and rate cuts from the Fed in the first half of 2024.

·     WTI January crude futures slipped $1.89/bbl, or -2.49%, to settle at $74.07, while Brent crude similarly slid $1.98/bbl, or 2.45%, to $78.88. The move lower marks the second consecutive session of losses despite a decision by OPEC+ to cut production rates. Trader sentiment appears to be either a view the cuts will not be sufficient to impact prices or ongoing questions about how compliant members will be with the new plan.






WTI Crude















10-Year Note





Sector News Breakdown



·     In Electric Vehicles: TSLA slipped after the Cybertruck Delivery Event, which included estimated Cybertruck sticker prices and the fact that the lowest priced model won’t be available until some point in 2025. FSR said it has made a strategic decision to reduce December production to prioritize liquidity to unlock over $300M of working capital, which creates additional business flexibility; Fisker is adjusting production guidance to just over 10,000 units for 2023.

·     In Chinese EV, monthly delivery figures out: NIO November delivery growth came in below that of its rivals, delivering 15,959 vehicles, up 12.6% y/y as its November deliveries included 10,545 SUVs and 5,414 sedans. XPEV said it delivered 20,041 EVs in November, up 245% y/y while LI said its November deliveries increased 172.9% y/y to 41,030 EVs.


Retail, Consumer Staples & Restaurants:

·     In Beauty: ULTA Q3 beat was driven by a slight sales beat (comp +4.5%, Transactions +5.9%, Average Ticket 1.4%) and slightly better-than-expected Gross Margin according to BMO; narrowed year EPS, sales, and comp sales views.

·     In Retail: GCO cuts FY23 adj EPS view to $1.50-$2.00 from $2.00-$2.50 while sees sales view to be down 1% to 2%, compared to prior view of down 2% to 4%. The WSJ reported Saks Fifth Avenue wants to buy rival Neiman Marcus. Neiman is open to a deal. But the two luxury retailers can’t agree on the terms of a marriage. This week, Neiman rejected Saks’s most recent takeover offer, which valued the upscale chain at close to $3B, according to people familiar with the situation. TLYS Q3 sales/EBITDA/EPS of $166.5M/$574k/($0.03) vs consensus of $168.2M/($1.1M)/($0.07) and comps -9%, store sales declined 6.4% to $132.4M, 79.6% of sales, e-comm down 6.2%.

·     In Beverages: STZ upgraded from Buy to Conviction Buy w/ $290 PT at Goldman Sachs as thinks the co is poised to continue to gain share in the US Beer market as it expands distribution into the middle of the country from its coastal strongholds. PEP mentioned positively in Barron’s saying shares have fallen 7% this year, a result that reflects sentiment vs. fundamentals, but thinks as 2023 comes to an end, sentiment might be about to turn.

·     In Restaurants: TXRH downgraded to Neutral from Overweight at Piper saying it is a valuation call pure and simple as TXRH has simply achieved and moved through Piper’s $110 price target. Piper also said for restaurants overall, they are incrementally more cautious into 2024.


Energy, Industrials and Materials

·     In Railroads: NSC was upgraded from Neutral to Buy at Bank America and raised tgt to $248 from $204 saying NSC appears set to post better-than-expected Q4 volumes, has easier comps into 1H24, can generate solid operating leverage on sequential fluidity improvement.

·     In Chemicals: CC was upgraded to Outperform at RBC Capital and raised tgt to $40 from $28, saying they are now more optimistic on: 1) slow TiO2 margin recovery, 2) solid TSS performance/growth outlook, and 3) settlement of PFAS liabilities.

·     In Metals: WOR shares rose 5% after the company completed the separation of its steel-processing business, Worthington Steel (WS) into a standalone, publicly traded company, while those shares were down. The spinoff distribution was completed at 12:01 a.m. ET on Friday to shareholders of record as of the close of business on Nov. 21



Banks, Brokers, Asset Managers:

·     In Banks: Citigroup initiated coverage of 19 regional banks that have garnered significant investor interest following the banking turmoil in March 2023. The firm remains constructive on the sector given the juxtaposition of discounted valuations coupled with its view that the best time to buy bank stocks is the transition from late-cycle to early-cycle when it believes credit will fare better than market concerns. Top picks include WAL, EWBC, FHN and WTFC and announces pair trades: WAL over CFR, OZK over BKU.

·     In Insurance: LMND was downgraded to Perform from Outperform at Oppenheimer citing its 67% rise since late Oct, which they believe has been driven by a short squeeze (34% of float) following better Q3 results/Q4 outlook. CBRG 35M share Spot Secondary priced at $20.50.

·     In Crypto: big gains for names in the crypto space, with shares of COIN, MARA, MSTR, RIOT (miners and investors) seeing early strength at Bitcoin prices jumped early.



Biotech & Pharma:

·     ALT said 391 people enrolled in a trial of its obesity drug pemvidutide lost weight taking the pill in conjunction with diet and exercise; more than 50% of enrollees achieved at least 15% weight loss and more than 30% of people achieved at least 20% weight loss on certain doses of the drug. B Riley said Pemvi 2.4mg delivers on weight-loss, beating expectations w/15.6% reduction at week 48 vs 24-wk WL of 10.7%, and no plateau suggesting deeper benefit with longer dosing.

·     BNTX downgraded to Underweight from Neutral at JP Morgan as believes downward revisions to long-term estimates and protracted timelines to meaningful pipeline readouts could hinder the stock’s ability to recover.

·     JNJ upgraded to Buy at UBS ahead of the upcoming Dec 5th Analyst Day given their increasingly bullish view on the company’s Innovative Medicine formerly Pharmaceutical) business, and expectations for MedTech growth at least in line with the market (MSD).

·     PFE said it was stopping development of a twice-daily oral obesity medication danuglipron after an underwhelming clinical trial. The medicine met its primary target in a placebo-controlled Phase 2b trial, leading to a statistically significant amount of weight lost but weight reductions were smaller than those seen in trials of rival medicines targeting the same GLP-1 pathway.

·     The Texas attorney general has filed a lawsuit that accuses PFE of “unlawfully” and “intentionally” misrepresenting the efficacy of its Covid-19 vaccine. The 54-page lawsuit claims that Pfizer conducted a “scheme of serial misrepresentations,” and violated the Texas Deceptive Trade Practices Act, by saying the shot was durable and could protect against transmission.



Internet, Media & Telecom

·     In media: AAPL and PARA have discussed bundling their streaming services at a discount, the latest attempt by rival entertainment giants to team up as they look to make their offerings more affordable and attractive, the WSJ reported ; SPOT downgraded from Buy to Neutral at Citigroup saying while they like strategy and execution, they no longer believe the risk-reward is compelling.


Hardware & Software movers:

·     DELL reported Q3 mixed results as EPS beat but revs missed as its Client Solutions Group (PC) revenue below guidance and the company guided this segment and its server segment below Consensus for 4QF24. Citigroup noted if sees November notebook numbers below expectations, it believes this could be the end of the PC refresh cycle.

·     ESTC rises after good quarter, as Cloud drove most of the beat accelerating its momentum, was positive on the AI opportunity driven by its vector search driven ESRE offering, and Q3 guide was above Street and FY24E rev guide was raised by slightly less than the beat in the quarter.

·     IOT reported a strong Q3 with 40% rev growth above ests 32% and raised FY24 growth guide by 3% at the high-end to 41% as strength was driven by large customer activity, continued momentum in non-transportation verticals, and multi-product adoption.

·     PATH delivered a revenue beat and continued progress in improving profitability while delivered 4% Y/Y net new ARR growth after six quarters of declines, although FX adjusted NRR was 123% vs 125% in FQ2 and UiPath saw low-end customer churn.



·     AMBA posted in-line F3Q results and guided F4Q above expectations indicating demand is stabilizing, as its customers have made meaningful progress regarding inventory destocking; also provided an annual update to its six-year auto design funnel to $2.4B from $2.3B representing only a 4% increase, noting weak auto trends and project delays.

·     MRVL reported in-line F3Q results and guided F4Q lower, as stronger than expected demand from AI optical DSPs is being offset by weaker trends across other segments including Carrier Infra, Enterprise Networking, and Consumer. AI is expected to exit this year well above its prior outlook of $200M and tracking above its LT revenue target of $800M in FY25/FY26.

·     SMCI 2.1M share Spot Secondary priced at $262.00.


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.