Market Review: December 08, 2023

Closing Recap

Friday, December 08, 2023





DJ Industrials




S&P 500








Russell 2000













U.S. stocks “melted” higher again (all afternoon), closing out the week with modest gains after doing what they have been doing for most of 2023, bouncing on dips, showing no “fear” since this 6-week stock market rocket higher began after a “scary” October. The CBOE Volatility index (VIX) traded back near last week lows around 12.50 (last time that low was January 2020), with inflation fears abating (sees the UoM inflation expectations data below), and jobs remaining strong – but not too strong – keeps Wall Street’s case (hope) for Fed rate cuts in 2024 ahead of next week’s FOMC meeting. Broader stock market averages remain on track for stellar 2023 gains, with the Nasdaq on pace for +37% YTD, the S&P 500 +19% YTD, the Dow +9% YTD and the Russell 2000 up only a modest 6% as Smallcaps have broadly underperformed large caps all year. The S&P 500 Index (SPX) traded back above the 4,600 level early and late in the day, after being stuck in a range of 4,550 to 4,600 the last 2-weeks. Seasonal strength has certainly come in to play with the “Santa Claus” rally in full effect this year!


In stock news, the FDA approved two gene therapies to treat patients with sickle cell disease, one by BLUE and another from combo of CRSP/VRTX (more below). Several Homebuilders and Building Product stocks saw fresh 52-week highs (some all-time highs), while semiconductors got more positive analyst commentary with prices not far off 52-week highs. Momentum remains to the upside with analysts betting bullish on sectors that have already seen massive moves higher as the chase is on into year-end performance. Today was another sell the defensive assets (gold/silver, Utilities, REITs, and Consumer Staples), while investors bought beaten-up energy stocks, along with technology (+50% YTD now), Communications (+46% YTD) and Consumer Discretionary (+34% YTD), the go to sectors for 2023.


Economic Data

·     Strong November jobs reading as private sector jobs +150,000 (mostly in-line with the +153,000 estimate) and Nonfarm payrolls +199,000 above consensus +180,000); average hourly earnings all private workers +0.4% from prior month (above est. +0.3%) and the Unemployment rate falls to 3.7%, below the 3.9% estimate. November labor force participation rate 62.8%. Solid headline jobs readings, higher wages, and lower unemployment.

·     The change in payrolls for September was revised down by 35,000, from +297,000 to +262,000, and the change for October remained at +150,000. With these revisions, employment in September and October combined is 35,000 lower than previously reported.

·     University of Michigan surveys of consumers sentiment prelim Dec 69.4 above consensus 62.0 and the Nov final 61.3; current conditions index prelim Dec 74.0 (vs. est. 68.5) vs final Nov 68.3; expectations index prelim Dec 66.4 (vs. est. 57.0) vs final Nov 56.8

·     University of Michigan data inflation expectations for 1-yr was 3.1%, sharply below the prior reading of 4.5% and inflation expectations for 5-yr reported at 2.8% vs. prior 3.2%.


Commodities, Currencies

·     Oil prices finish higher on Friday, but down for the 7th consecutive week amid worries about a supply surplus and weak Chinese demand, though prices rebounded after Saudi Arabia and Russia lobbied OPEC+ members to join output cuts. Both Brent and WTI slid to their lowest since late June in the previous session. Overnight, Chinese customs data showed its crude oil imports in November fell 9% from a year earlier as high inventory level (raising demand fears). U.S. WTI crude oil futures settle at $71.23/bbl, up $1.89, 2.73% and Brent Crude futures settle at $75.84/bbl, up $1.79, 2.42%, but each down around 4% this week. The weekly Baker Hughes (BKR) report showed the U.S. rig count is up 1 from last week to 626 with oil rigs down 2 to 503, gas rigs up 3 to 119 and miscellaneous rigs unchanged at 4. Natural gas for January delivery settles down 0.2% at $2.581/MMBtu for a fifth straight weekly decline.

·     Gold prices tumble -$31.90 to settle at $2,014.50 an ounce, a sharp roll after hitting all-time highs of $2,152.30 just 5-days ago and ends the week lower by -3.5%. The U.S. dollar bounced against the yen after falling over 2.5% on Thursday on BoJ intervention expectations, while the dollar index (DXY) rises +0.45% back above 104. Treasury yields bounced after economic data with the 10-year up 10-bps to 4.24% on data.

·     In grains, wheat futures snapped their 8-day win streak after the USDA raised its forecast for global wheat production by about 1 million metric tons to 783.01 million for the 2023-24 marketing year. The USDA also lowered its global soybean-production forecast by 1.5 million metric tons to 398.88 million metric tons due to lower production in Brazil.






WTI Crude















10-Year Note





Sector News Breakdown


Retail, Consumer Staples & Restaurants:

·     LULU reported slight top-line Q3 beat with better adjusted GMs driving healthy adjusted EPS beat and guided 4Q revenue/EPS just below Street at the high end.

·     DECK was downgraded to Neutral from Buy at Citigroup after a strong run while raising F24E from $24.44 to $24.69 to reflect strong UGG momentum in 2H24 (and raising its TP to $710), it believes the market now has high expectations that are getting increasingly difficult to beat.

·     CURV surges on better results as Q3 EPS loss ($0.03) smaller than est. ($0.05), adj EBITDA $19.4Mm vs est. $13.4Mm on revs $275.408Mm vs est. $245.83Mm, gr mgn 33.2%; guides Q4 net sales $267-283Mm vs est. $266.72Mm.


Homebuilders, Building Products, Home Furnishing:

·     Shares of AWI among homebuilders/building product names making 52-week highs today.

·     In Homebuilders, Deutsche Bank reiterates DHI and MTH as Top Picks and adds TOL following its strong earnings report earlier this week, upgraded NVR to Hold from Sell on more favorable valuation and TMHC to Buy from Hold on favorable relative valuation and expected momentum in the business due to its diversified buyer exposures. KBH was downgraded to Sell on valuation.

·     In Building Products, Deutsche Bank sees the year ahead favoring stock selection, and has positive bias toward Residential Construction exposure and the Distributor business model. Reiterate Top Picks BLD, BLDR and CNM and add BECN to Top Picks; upgrades OC to Buy from Hold on a combination of solid Roofing and Insulation prospects and attractive valuation and downgrades POOL to Hold from Buy as it worries that potential downside risks to earnings in ’24 are now not at all reflected in the stock’s multiple especially after the more recent rise in the shares. Other changes, AMWD upgraded to Hold from Sell, AZEK downgraded to Hold from Buy.

·     In Home Furnishings: RH Q3 results came in slightly worse than expected on the top line and much worse on the bottom line while the company reduced its outlook for FY23 with it noting incremental demand pressure emerging in October; lowers FY operating margin in the range of 13.6%-14.0% vs. prior forecast of 14.5% to 15.5%.


Leisure, Gaming & Lodging:

·     In Leisure: JOUT shares fell as posted a bigger-than-expected Q4 EPS loss of (-$1.56) vs. est. loss (-$0.32) as sales fell to $96.3M from $196.4M y/y and below consensus of $121M saying was particularly impacted by significantly slower demand.

·     In Guns & Ammo: SWBI reports mostly in-line Q results with adj EPS $0.14 vs est. $0.14 on revs $124.96Mm vs est. $123.9Mm, gross margin 25.4%; warned margins continue to be temporarily pressured by fixed-cost absorption, inflationary factors, and inventory reserve adjustments.

·     In Cruise lines: CCL posts its 10th consecutive up day, hitting best levels above $18 since early August while RCL was up an 8th straight day and NCLH also up a 10th straight day.


Energy, Industrials and Materials

·     In Industrials: HON has struck a roughly $5 billion deal to buy CARR security business, according to people familiar with the matter, as the industrial giant embarks on a spending spree to bolster its portfolio, WSJ reports. In Aerospace & Defense: PL reported F3Q24 results, which included an acceleration of net new customer additions, adjusted EBITDA outperformance, and continued pipeline strength.

·     In Solar: FSLR upgraded from Equal Weight to Overweight at Morghan Stanley and raise tgt to $237 from $214 saying after the 20% sell-off in the past three months, sees an attractive risk-reward profile for the stock – believes FSLR pricing will remain resilient in the near-medium term. NOVA shares fell after House Energy and Commerce Chair Rodgers, and Senate Energy and Natural Resources Ranking Member Barrasso, R-Wyo. expressed concern about rewarding NOVA highlighting reports on how Sunnova has previously scammed and misled consumers.

·     In Energy: IMO was upgraded to Neutral and MEGEF downgraded at JPMorgan saying they continue to favor Canadians despite more normal valuation gap; remains Overweight on XOM, with the most attractive valuation among US peers and the most defensive dynamics in a downside case and Neutral on OXY and COP. In E&P equipment, NOV was upgraded to OW from Neutral as the firm is less bullish on the sector’s prospects given signs of ample physical supply of both oil and gas – said HAL remains their lone NAM levered OW. Refiner PSX 2024 capital expenditure at $2.2B, compared with its estimated 2023 spending of $2.5B.

·     Reuters reported late day that Endeavor Energy Partners is exploring a sale that could value the largest privately-held oil and gas producer in the Permian basin of the United States at between $25B and $30B, according to people familiar with the matter.



Banks, Brokers, Asset Managers:

·     In Business/Info Services: Deutsche Bank said sees asymmetric risk/reward in EFX which they upgrade to Buy if mortgage rates decline to 5.5% (from 7%), and a recession should hasten this decline and maintains Buy on TRU as a mortgage recovery will help. Said SPGI and MCO are also set up to outperform as rate volatility declines; however, sees valuation upside for MCO as limited; also downgraded CTAS, VRSK, FDS to Hold.

·     In Crypto: RIOT upgraded from Underweight to Neutral at JP Morgan and raised tgt to $12 from $8 as thinks Riot is a potential long-term winner in bitcoin mining but continue to think this is more than reflected at the current valuation.

·     In Banks: AX announced that it purchased two loan portfolios (including CRE, multifamily and mixed-use) from the FDIC. Piper noted these loans have an unpaid principal balance of $1.25B and were purchased at 63% of par, representing a discount of roughly $463.7M (a 37% discount).

·     In Insurance: MBI shares surged after the announcement of a “special” dividend from its insurance operating company, National Public Finance, $550M of which will be used to pay the $8 extraordinary dividend.

·     In REITs: Wells Fargo with several changes as they downgraded APLE, DRE to Equal Weight from Overweight and SHO to Underweight from Equal Weight as expects earnings headwinds or concerns for individual assets to weigh on Sunstone’s share price more so than peers.



Biotech & Pharma:

·     The FDA approved two gene therapies to treat patients with sickle cell disease, one by BLUE and another from combo of CRSP (more below). @adamfeuerstein noted “$VRTX $CRSP Casgevy $2.2 million, no black box. $BLUE Lyfengia $3.1 million, black box. Bluebird will have to lower its price, right? How can it not? Also, Bluebird confirmed to us that it DID NOT get a pediatric rare disease voucher for this approval. Recall, the company had presold the voucher for $100M, assuming it would get one.

·     BLUE announces FDA approval of lyfgenia (lovotibeglogene autotemcel) for patients ages 12 and older with sickle cell disease and a history of Vaso-occlusive events. However, shares tumbled as the approval came with a Black Box warning.

·     BLUE upgraded from Underweight to Equal Weight at Morgan Stanley and raised tgt to $7 from $3 ahead of likely approval later this month. The firm thinks lovo-cel is likely to be approved for sickle cell disease by the December 20 PDUFA date.

·     CHRS said finance chief McDavid Stilwell has resigned from the company to pursue other opportunities.

·     CRSP and VRTX received FDA approval for a treatment (Casgevy) for sickle-cell disease based on the transformative gene-editing technology Crispr.

·     RHHBY said it has received positive long-term follow-up data and significant overall survival benefit from the Katherine study, which examines people with early-stage breast cancer.


Healthcare Services & MedTech movers:

·     CDMO shares slide as lowers FY24 revenue view to $137M-$147M from $145M-$165M (est. $154.09M) after a wider Q2 miss and revs of $25.4M missing the est. $33.21M and said expects revenue growth during the second half of the fiscal year.

·     MDRX shares fall after saying they overhauled its leadership team, and named a new executive chairman, and interim CEO and interim CFO following an independent investigation of its internal controls.



Internet, Media & Telecom

·     In Internet: GOOGL shares give back some of Thursday gains after TechCrunch noted its new Gemini AI model is getting a mixed reception after its big debut yesterday, but users May have less confidence in the company’s tech or integrity after finding out that the most impressive demo of Gemini was pretty much faked.

·     In media: PARA shares rise after Deadline reported last night that David Ellison & RedBird Capital Kicking Paramount Global’s Tires Via National Amusements.


Hardware & Software movers:

·     AAPL head of iPhone and watch design Tang Tan is leaving the company in February, Bloomberg News reported on Friday, citing people with knowledge of the matter.

·     DOCU reported non-GAAP EPS of $0.79 (est. $0.63) on revenue of $700M (est. $690M), up 9% y/y, down from 11% growth last quarter; billings of $692M +5% y/y vs. est. $675M but down from 10% growth last quarter; net retention of 100%, down from 102% last quarter; adj operating margin of 26.8%, up from 24.7% last quarter.

·     GWRE Q1 revs $207.4M vs. est. $200.9M, but down from 10% y/y on better earnings as subscription revenue of $127.6M up 29% y/y, up from 25% y/y last quarter and ARR of $770.0M, up 14% y/y while guidance was mixed for F2Q24 and in line to good for FY24,

·     HCP shares fall after results after cRPO/billings miss vs its ests, and mgmt still modeling sharp 2H deceleration; Q3 earnings beat as revs rises 17% y/y to $146M vs. est. $143M, but down from 26% last quarter; non-GAAP RPO of 700M missing consensus of $719M; growth has slowed dramatically, from 52% in Q3 to an implied 10% in Q4.

·     MSFT partnership with AI pioneer OpenAI is under regulatory scrutiny, with the U.K.’s competition watchdog taking the first step toward a formal investigation of the tie-up. The Competition and Markets Authority wants to know whether the partnership between Microsoft and OpenAI (which it owns 49% of) results in the creation of a relevant merger situation.

·     SMAR posted solid F3Q revenue and OM results and is raising its FY24 revenue and guidance; Q3 billings growth of 22% comes in well ahead of consensus of 17% and the Company maintaining its FY24 billings growth outlook of 20%.



·     AVGO reported Q4 results, which were largely in line with expectations and instead of guiding for Q1, provided full-year FY24 guidance of $50B in revs and EBITDA margins of 60%, given the anticipated transformation of VMW from perpetual to subscription is expected to make it difficult to forecast NT.

·     Morgan Stanley with several changes: They move their industry view on Semiconductors from In-Line to Attractive, as see a bottoming process for the broad markets in 1H24 as they saw in vertical markets in CY23. Offsetting, they downgrade Semi Cap from In-Line to cautious as current trends are likely to soften. LRCX was downgraded from Overweight to Equal Weight w/ $720 PT as expects a recovery in memory utilization to dampen hope around a V-shaped recovery and see limited margin upside. In Semi’s, QRVO upgraded from Equal Weight to Overweight w/ $134 PT (from $120) saying it has the most attractive catalysts out of smartphone names while downgraded QCOM from Overweight to Equal Weight after good execution.


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.