Market Review: December 11, 2023

Closing Recap

Monday, December 11, 2023





DJ Industrials




S&P 500








Russell 2000













U.S. stocks were at it again, rallying off initial weakness to close higher as investors continue to “buy the dip”, awaiting potentially market moving macro catalysts this week. It was a crazy day overall as all seven mega-caps in the Nasdaq 100 were down around 1% or more (AAPL, AMZN, GOOGL, META, MSFT, NVDA, TSLA), yet the index was up 140 bps because breadth was overwhelmingly positive outside of those names. The Nasdaq 100 gained over 0.8%, while the broader Nasdaq Composite was only up slightly in a notable and rare divergence. Nothing derailed today’s steady climb, even two “weak” bond auctions as the 3 and 10-yr auctions disappointed with wider tails and slowing demand results. It was just another slow “melt-up” in major averages, a common theme during this 6-week winning streak for the S&P ahead of the CPI inflation data tomorrow (and 30-yr auction) and Wednesday’s big PPI inflation data and FOMC rate policy meeting/Powell press conference. Stock market participants continue to chase performance into the year-end, ignoring any broader mkt concerns. Outside of the FOMC policy meeting, also get policy rate decisions for UK, ECB, Mexico on Thursday.


Among focus today/this week, a combined $108B of 3-year, 10-year and 30-year bonds hit the block Monday and Tuesday, along with $213B of shorter-term bills (recall stocks slipped following the last 30-year auction 2-weeks ago which was poorly received). Then tomorrow morning 12/12, the November consumer price index (CPI) 8:30 AM, then on Wednesday the November Producer Price index (PPI) at 8:30, followed by the FOMC policy meeting (2:00 PM 12/13) and Powell press conference (2:30) which is expected to keep stock/bond markets on their toes. Will Powell try and talk back the market expectations for up to 120-bps worth or rate cuts in 2024 – including cuts potentially as soon as March.


Economic Data

·     November one-year ahead expected inflation at 3.4% versus 3.6% in October, lowest since April 2021. The November three-year ahead expected inflation unchanged at 3% and November five-year ahead expected inflation unchanged at 2.7%. Fed survey respondents’ views on the labor market were mixed in November.


Commodities, Currencies & Treasuries

·     Bond auctions weak, but no fear: The US Treasury sold $50B in 3-year notes at a yield of 4.49% vs. 4.473% when issued prior (1.7 bps tail, biggest since Feb ’23), as the bid-to-cover was 2.42 vs. 2.67 prior auction, and primary dealers take 26.24% of U.S. 3-year notes sale, direct 21.69% and indirect 52.08%. The US Treasury sold $37B in 10-year notes at a yield of 4.296% vs. 4.282% when issued prior (1.4 bps tail and 3rd tail in a row) as the bid-to-cover was 2.53, with Primary dealers taking 17.3% of U.S. 9-year 11-month notes sale, direct 18.87% and indirect 63.83%. The 10-yr yield rose as high as 4.295% after auction before easing back near lows of the day around 4.23%.

·     Gold prices fell to a near three-week low, dropping -$20.80 to settle at $1,993.70 an ounce, back below the $2,000 an ounce level after hitting all-time highs earlier last week above $2,150 an ounce, as the dollar and U.S. Treasury yields firmed. Markets await several crucial central bank meetings this week (FOMC, ECB, BOE) and U.S. inflation data (CPI and PPI) that could influence the Federal Reserve’s policy path.

·     WTI crude January futures settle at $71.32 a barrel, up 9 cents, 0.13% while Brent Crude futures settle at $76.03/bbl, up 19 cents, 0.25%. Natural gas prices hit a fresh 6-month low, falling -5.8% or 15 cents at $2.431/MMBtu, after trading as low as $2.294 as mild weather forecasts extend further into December.

·     The dollar rose early before paring gains to finish flat on the day with the dollar index (DXY) back at 104, slipping vs. euro but rising vs. the yen. Crypto assets saw weakness after a tremendous run the last few weeks, with Bitcoin falling over 8% below $41K after topping $44K overnight.






WTI Crude















10-Year Note





Sector News Breakdown


Retail, Consumer Staples & Restaurants:

·     BBY was upgraded from Hold to Buy at Jefferies and raised tgt to $89 from $69 saying ’24 won’t be a banner year, but investor expectations for neg. MSD% comps are conservative given DD% and near HSD% declines in ’22 + ’23, respectively.

·     GIL shares slide as announces leadership changes; Vince Tyra appointed as president and CEO as Glenn Chamandy leaving while Craig a. Leavitt to serve as interim president and CEO until Mr. Tyra assumes responsibilities on February 12, 2024.

·     NKE was upgraded to Buy from Neutral with a price target of $135 up from $100 at Citigroup saying while the company’s sales challenges remain, they are more optimistic about Nike’s ability to "protect" earnings in fiscal 2024 and 2025 despite a "choppy" macro environment.

·     XPOF shares hit record lows after disclosing a recently received request from the Securities and Exchange Commission to provide certain documents.

·     In Department Stores: Macy’s (M) shares rise after reports this weekend that an investor group has made a $5.8 billion offer to buy the company, the WSJ reported. Arkhouse Management and Brigade Capital Management on Dec. 1 submitted a proposal to acquire the shares they don’t already own for $21 a share (KSS, JWN shares rise in sympathy).

·     In Restaurants: DPZ was downgraded from Overweight to Neutral at Piper on valuation and Risk-Reward based decision, and Piper is not negative on the business or the strategy. Benchmark upgraded DPZ to a Buy rating with $455 tgt saying it has a better appreciation for the company-specific drivers of same store sales growth that Domino’s possesses in a challenging macro env’t and downgraded WING to Hold from Buy as believes that following their 47% move since its August 3rd upgrade to Buy, the shares now have a balanced risk/reward outlook going forward. SHAK announced long time CEO is retiring, while backs Q4 guidance.

·     In Food sector: CAG was downgraded from Outperform to In Line at Evercore/ISI noting frozen meals and vegetables (44% of sales) sales are particularly disappointing–down 6% YoY in measured channels due to share losses to brands and private label and weakening category trends; the firm upgraded KHC from In Line to Outperform, maintaining its view that organic sales trends will turn positive in 2024 and it is nudging its 2024e EBITDA higher.



·     OXY signed a $12 million cash-and-stock deal to acquire the oil and gas producer CrownRock as will take on $9.1 billion in new debt and issue $1.7 billion in new shares to finance the transaction, which sees it gaining CrownRock’s 94,000 net acres in the Midland Basin in Texas.

·     PBA set its outlook for 2024 backed by a positive outlook for commodity prices and improvements to the business; said sees 2024 Ebitda range of 3.73 billion Canadian dollars ($2.75 billion) to C$4.03 billion; also earmarked C$880 million for capital investments next year.

·     In E&P Research: CTRA, EQT, and SWN all upgraded to Buy from Neutral at Citigroup on expectations that natural gas will perform better than oil over the course of 2024 as the bank shuffles its ratings on small- and mid-sized energy producers. The firm also downgraded MGY to Sell from Neutral (cut tgt to $18 from $24).

·     Also, in E&P: Morgan Stanley upgraded OXY to Overweight from Equal Weight with an unchanged price target of $68 saying the stock’s historical valuation premium versus its large-cap U.S. peers has eroded; DVN was upgraded to Overweight (tgt to $52 from $48) noting shares have underperformed peers by 20% YTD. Morgan downgraded MRO to Equal Weight from Overweight as shares gained 45% since the start of 2022, outperforming peers by 10%, and downgraded EOG to Equal Weight saying the company’s free cash flow rate of change skews negative in 2024 versus peers due to higher spend in emerging plays.



·     In Insurance: MFC said it agreed to have Global Atlantic reinsure $13B of its reserves across four legacy/low return-on-equity blocks and the company plans to buy back $1.2B in stock as part of the deal. In research, Jefferies upgraded RGA & EQH to Buy in the life insurance sector saying they are constructive on the sector arguing that companies and investors appear to have been playing defense of late, and they see the potential for a pivot to offense. The firm said their top picks are CRBG, MET and UNM, with AMP and JXN also rated Buy. LNC is Underperform-rated.

·     In Payments/Services: DLO was upgraded to Equal Weight from Underweight at Barclays and raised tgt to $18 saying in addition to strong 40%+ gross profit growth YTD and stable mid-70s EBITDA margins, observes fewer competitor incursions into DLO’s markets.

·     In REITs: Mizuho upgraded O & NTST to Buy from Neutral given attractive valuation and better-than-anticipated earnings growth; downgraded ADC, GLPI to Neutral from Buy citing elevated WACCs and relatively full valuation and remain Buy on EPRT, VICI.



Biotech & Pharma:

·     ABBV upgraded from Neutral to Buy at Goldman Sachs with $173 tgt saying current share price reflects underappreciation of the company’s improving growth outlook.

·     ALLO presented a poster highlighting data from the ALPHA/ALPHA2 trials demonstrating the safety of ALLO-647 (anti-CD52 mAb) as part of the lymphodepletion regimen of patients receiving ALLO-501A, an allogeneic CD19-targeted CAR T cell therapy, in r/r LBCL and FL.

·     BMEA reported topline updates from a dosing cohort of a mid-stage trial for its drug in the treatment of patients with type 2 diabetes.

·     BPMC gave an oral presentation providing a clinical update for elenestinib, a next-generation KIT D816V inhibitor that does not cross the blood-brain barrier, for the treatment of indolent systemic mastocytosis.

·     COGT shares tumble as announces data from ongoing phase 2 apex trial evaluating Bezuclastinib in patients with advanced systemic mastocytosis.

·     LLY shares declined after a study showed patients on its weight-loss drug substantially regained weight after stopping treatment, according to a study published in journal JAMA on Monday. The study showed that patients who were obese and without diabetes experienced a 14% weight regain, 52 weeks after switching to placebo from Lilly’s tirzepatide.

·     MOR shares rise as Pelabresib and ruxolitinib combination significantly reduced spleen size, with an SVR35 response rate nearly double that of placebo plus ruxolitinib; the data showed a strong positive trend in reducing symptom burden and a twofold increase in patients achieving both SVR35 and TSS50 versus placebo plus ruxolitinib.

·     SDGR announced new preclinical data on SGR-1505, its investigational MALT1 inhibitor, and SGR-2921, its investigational CDC7 inhibitor.


Healthcare Services & MedTech movers:

·     ALGN and NVST were downgraded from Neutral to Sell at Goldman Sachs saying the dental industry enters 2024 facing an uncertain end-market backdrop due to the decline in patient traffic, elective demand, and practice CAPEX seen in many major markets in 2H23.

·     CI announced an additional $10B stock buyback, bringing its total share repurchase to $11.3B. Separately, the WSJ reported that Cigna and HUM could not agree to financial terms of an M&A deal, and they are shifting its efforts toward a smaller acquisition.

·     Life Science/Tools sector: Citigroup downgraded MTD to Sell ($975 tgt), QDEL downgraded to Neutral ($72 tgt), while upgraded ILMN to Neutral ($120 tgt) and FTRE upgraded to Buy ($40 tgt). Firm names BRKR its top pick in Tools given its best-in-class organic growth performance this year, attractive setup into next year with clear revenue visibility; names QGEN its top pick in Diagnostics given strong financial execution this year, sustainable growth drivers in the product portfolio and names FTRE its top pick in CROs and Labs given evidence of healthy bookings, a compelling margin turnaround story underway, and attractive valuation relative to peers when applying its revised FY25 EBITDA target.

·     In MedTech: Citigroup also upgraded IRTC to Buy from Neutral, anticipating the FDA warning letter to be lifted and, at the current valuation, stock upside to resume; downgraded EW to Neutral from Buy, despite the current valuation being an attractive entry point think that the growth of the TAVR market will be a quarter by quarter evaluation; and 3) opening a Positive Catalyst Watch on ITGR with continued momentum in its core business. Top Picks as we enter the year include ISRG which we add to the Focus List (procedural recovery, awaiting a new robot), BSX (expecting revenue acceleration in 2H from Farapulse), and IRTC (expecting FDA warning resolution and uptake of its next-generation Zio Monitor).


Industrials & Materials


·     In Industrials: WCN agreed to acquire 30 energy waste treatment and disposal facilities in Western Canada from Secure Energy Services for 1.08 billion Canadian dollars ($795 million) in cash. HOLI to be acquired by Ascendent Capital Partners for $26.50 in Cash.

·     In Transports: JBHT upgraded to Outperform at BMO Capital and raise tgt to $220 from $200 saying with rail service improving, rail earnings growth becoming increasingly volume dependent, and with meaningful market share recapture opportunity, believes that intermodal could be entering a period of growth not seen since the mid-2010s.

·     In Aerospace & Defense: LHX named two directors to its board and said it would review its operational performance; the company said it would also add an independent board member next year following a deal with major shareholder D. E. Shaw.

·     In Metals & Mining: gold miners AEM, NEM, GOLD decline further as gold prices dip under $2,000 an ounce (after all-time highs reached last week above $2,150 an ounce).

·     In Chemicals: Morgan Stanley lowered its Chemicals industry view from Attractive to In-Line coming off trough conditions but at a very modest slope; said 2024 back half loaded at best; and limited base case upside to most equities. The firm downgraded HUN to Equal weight saying its $28 price target requires a significant stretch to the implied EBITDA multiple in 2024. Also remains Underweight ALB as it continues to see risk to lithium multiples as lithium prices decline and believes that expectations for a recovery in Underweight OLN EBITDA remain both too high.



Internet, Media & Telecom

·     SE shares slip after reports TikTok to spend $1.5 billion taking over GoTo’s Indonesia Shop; Chinese firm will combine its shopping business with GoTo unit; TikTok has used Indonesia as template for global shopping push

·     PINS upgraded to Outperform from Sector Perform at RBC Capital and raised its price tgt to $46 from $32 saying it is a way to play the shift of intent-based ad platforms chasing impulse shopping’s $241B ad spend.

·     SNAP was upgraded from Equal Weight to Overweight at Wells Fargo and raise tgt to $22 from $8 as see advertising positively inflecting for first time since Apple’s privacy initiatives in April ’21 and reinvestment in ad tech stack, new ads mgmt and renewed focus leads US to raise ests.

·     SPOT was upgraded from Neutral to Buy at Rosenblatt and double tgt to $300 from $150 saying Spotify’s large-scale restructuring last week — shedding 17% of headcount, and its CFO, could be seen as scary, or promising.

·     Several Changes to the Nasdaq 100 index (announced late Friday): CDW, CCEP, DASH, MDB, ROP and SPLK were added to the index while ALGN, EBAY, ENPH, JD, LCID, ZM were removed.


Semi’s, Hardware & Software movers:

·     The Philadelphia semiconductor index (SOX) touches fresh 52-week highs, rising above 3,900, up over 3.4% (topping prior 52-week highs at 3,875); AVGO leading up over 9% in massive momentum upside buying and strength in equipment names (AMAT, LRCX, KLAC); SWKS makes it a 10th straight day of gains, but buying was broad based.

·     AVGO tops $1,000 per share leading chip names – Citigroup earlier resumed Buy and $1,100 tgt due to strength in core business/accretion from the VMware deal.

·     BB announced it plans to scrap its pursuit of a public listing for its internet-of-things (IoT) business, deciding to pursue a separation of the IoT and Cybersecurity businesses and establish them as standalone divisions.

·     NVDA shares fell, but pared losses after Reuters reported this afternoon U.S. Commerce Secretary Gina Raimondo, speaking in an interview with Reuters on Monday, said Nvidia "can, will and should sell AI chips to China because most AI chips will be for commercial applications."

·     SMCI was downgraded from Neutral to Negative at Susquehanna and reduced EPS estimates to reflect increased GM pressure caused by increased competition and higher Memory/ Storage cost. Additionally, there is increased diversification in Server architecture including AI application, consequently requiring higher inventories due to a larger number of SKUs for each configuration.


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.