Market Review: December 14, 2023

Closing Recap

Thursday, December 14, 2023





DJ Industrials




S&P 500








Russell 2000













Up, up, and away go stocks into year-end, with no “pumping of the brakes” for this stock market runaway train again today. The Dow Jones Industrial Average hit another all-time high, the Nasdaq 100 surges behind another spike in semis (SOX +57% YTD) and the S&P 500 within striking distance of its all-time best. Treasury yields tumble, the dollar slides and the Fed just changed the script on interest rates in a span of 2-weeks, taking market participants by surprise with mass buying in interest rate sensitive sectors the last two days (REITs, housing, solar, banks), as major averages are on track for a 7th straight week of gains since the October lows. Decelerating inflation readings over the past month (CPI, PPI this week, core PCE last week, UoM inflation expectations falling and today U.S. import prices fell 1.4% y/y, the 10th consecutive YoY decline) have all likely led the Fed to their aggressive change in posture on rates in just a 2-week span. CNBC noted earlier: On December 1st, Powell said “it would be premature to…speculate on when policy might ease” while yesterday (12/13) said “rate cuts are something that begins to come into view and clearly is a topic of discussion.” This policy “pivot” caught markets off guard and opened the flood gates to more buying into year-end across most sectors. Tomorrow is a massive option expiration so expect some more volatility in a week that has been nothing but positive (6-day win streak for S&P).  


Economic Data

·     November retail sales advanced rose +0.3% m/m above the expected (-0.1%) decrease and above the October reading of (-0.2%) slump; core retail sales rose 0.2% vs. (-0.1%) consensus and +0.1% prior. Nov gasoline sales fell (-2.9%) vs Oct (-1.2%) and ex-autos/gasoline +0.6% vs Oct +0.1% (prev +0.1%).

·     Weekly Jobless Claims reported at 202K vs. est. 220K; the 4-wk moving avg fell to 213,250 from 221,000 prior week; continued claims climbed to 1.876M from 1.856M prior week and the U.S. insured unemployment rate climbed to 1.3% from 1.2% prior week.

·     Export prices for November rose +0.9%, much better than the expected (-1.0%) decline and (-0.9%) prior (revised from -1.1%), while Nov Import prices fell (-0.4%) vs. (-0.7%) consensus and (-0.6%) prior (revised from -0.8%). Nov non-petroleum import prices +0.2%, year-over-year (-0.6%).

·     Business Inventories for October fell (-0.1%) vs. consensus unchanged and vs Sept +0.2%; Oct business sales (-1.0%) vs Sept +0.9% (prev +1.1%) and Oct retail inventories ex-autos unrevised at -0.9% (prev -0.9%).



·     Oil prices extended the previous session’s gains, with WTI crude rising $2.11, or 3.04% to settle at $71.58 per barrel, boosted by a weaker dollar and as the International Energy Agency (IEA) lifted its oil demand forecast for next year. Brent Crude futures settle at $76.61/bbl, up $2.35, 3.16%.

·     Gold prices surged 2.4% or $47.60 to settle at $2,044.90 an ounce (hit highs of $2,062.90) as the U.S. dollar and Treasury yields were beaten lower after the Federal Reserve signalled an end to its monetary policy tightening cycle. Gold recently pulled back after hitting a record-high settlement on Dec. 1 at $2,089.70 (intraday record is $2,152.30 on 12/4). The surprise rate pivot by the Fed got the ball rolling for commodity prices the last two days as Silver also rallied $1.47, or 6.4%, to settle at $24.39 an ounce. The dollar hit a 4-month low and Treasury yields at the lowest since July.


Currencies & Treasuries

·     Treasury prices extended gains after yesterday’s push following the FOMC reversal on policy to an outlook of lower rates in 2024 (a different stance then their “higher for longer” call just 2-3 weeks back), pushing yields broadly lower for a second day (after tumbling in recent weeks). The benchmark 10-yr yield extended losses, down about -9bps to 3.93% and the 2-yr down -8 bps to 4.39% and the 30-yr was down -12 bps to 4.06%.

·     The U.S. dollar index (DXY) hit a fresh four-month low, dropping over -1% to 101.80 before paring losses back to 102 after the Fed late Wednesday indicated that its interest-rate hiking cycle has ended and that lower borrowing costs are coming in 2024. The euro pushed to 4-month highs approaching 1.10 after the ECB said policy rates would be set at sufficiently restrictive levels for as long as necessary and the pound rose after the Bank of England held interest rates in a "finely balanced" decision.






WTI Crude















10-Year Note





Sector News Breakdown


Retail, Consumer Staples & Restaurants:

·     FL was upgraded from Neutral to Overweight at Piper and raise tgt to $33 from $24 as think FL can realize >180 bps of operating margin expansion in 2024. FL saw 250 bps of merch margin pressure in 2022 followed by ~300 bps of merch margin pressure in 2023 due to higher promotions.

·     DECK was downgraded to Hold from Buy at Stifel but raise tgt to $709 from $600 and in footwear sector said their bias favors premium and innovative brands with proven consumer connection and high-return growth vectors (top picks, ONON and LULU) and sees favorable risk reward for brands with relative momentum, strong cash flow, and balance sheet optionality (CROX and KTB).

·     In Mattress retail (TPX, SNBR): Piper said their Mattress Retailer Survey for November featured sales notably better than prior months at down -1% and -4% on a mean/median basis, the best month since January 2023


Homebuilders, Building Products, Home Furnishing:

·     In Housing sector: LEN to report earnings after the close tonight; TOL board of directors has approved a new 20M share repurchase authorization to replace its existing authorization; overall, the policy shift from the Fed to rate cuts in 2024 (which the market had already been baking in), sent the dollar and Treasury yields lower, lifting several builders to fresh 52-week/all-time highs (KBH, PHM, LEN, TOL, MTH, BZH).

·     In Building Products: BLD and IBP were both upgraded to Overweight at JPMorgan while downgraded SWK to Underweight and TREX to Neutral saying following a strong rebound year for their building products universe, albeit still trailing the homebuilders, it remains less constructive and more selective towards the sector compared to its more positive stance towards the homebuilders. They also upgraded BECN to Overweight on its inexpensive relative valuation and its outlook for continued strong execution of its strategic plan.


Leisure, Gaming & Lodging:

·     In Theme Parks: SEAS was downgraded to equal weight from overweight at Morgan Stanley, as sees the pending Epic Universe opening in Orlando in 2025 as an overhang that likely limits multiple expansion and sees mid-single digit rev growth for US parks in 24. The firm reiterated its Overweight rating on FUN and upgraded SIX to OW $32 tgt as it sees the pro forma entity undervalued given the merger benefits.

·     In online travel/lodging: TRIP was upgraded from Neutral to Buy at BTIG with $25 tgt ongoing challenges in metasearch should be more than offset by growth at Viator/TheFork and it pencils out to low-double-digit topline growth and high-teens EBITDA growth, putting US ahead of consensus expectations; JP Morgan downgraded GLPI to Neutral from Overweight while upgraded CHH (given the stock’s pull back since its hostile offer to buy WH), HST, PK, RHP and SHO to Neutral from Underweight as now believes there is less absolute/relative downside in the Lodging REITs.

·     In Leisure: LYV was upgraded from Equal Weight to Overweight at Morgan Stanley saying fundamentals in music and live events are the healthiest in M&E heading into the New year while noting shares, however, have lagged the market by 2,000bps since YE21 even as returns on capital have improved.



·     In Energy: Warren Buffett’s Berkshire Hathaway acquired nearly 10.5M shares of OXY so far this week for about $588.7M, according to an SEC filing, bringing the firms total stake in Occidental to about 27%; CVE forecast total upstream production in the range of 770K-810K barrels of oil equivalent per day (boepd), compared with 775K-795K boepd expected this year while raised capex spending.

·     In Midstream: ETRN was downgraded to Underweight from Equal Weight at Wells Fargo citing its limited pool of potential buyers, valuation, and no potential sale until H2’24. EE was downgraded to underweight at Wells Fargo citing limited visibility to potential growth projects. GEI was upgraded to Overweight citing EBITDA upside at STX Gateway, near-term marketing upside, and potential to surprise on buybacks this year. PBA said it agreed to acquire ENBs interests in three joint ventures operated by the companies for about $2.3B.

·     In Refiners: Wells Fargo said they remain positive on US refining but less bullish than a year ago as they upgraded MPC to Overweight from Equal Weight while saying PSX (restructuring and activist uplifts) and PBF (closing a valuation Gap) remain WELLS’s top large and mid-cap picks. Wells assumes fewer system shocks and decelerating demand growth in its base case will allow 2024 crack spreads to shrink vs 2023 levels.

·     In Oil E&P: in energy outlook call, Wells Fargo said they lean into unhedged gas on favorable risk/reward as upgrade AR, CTRA and downgraded EOG, RRC; at UBS, they downgraded MRO and CHK while upgraded CTRA saying they see a more balanced risk/reward for Energy entering 2024. To the positive side, they see WTI recovering to $75-80/bbl, further consolidation improving capital efficiencies, and financial strength supporting shareholder returns above S&P500 levels but see little growth, a lack of visible catalysts, and potential for declining interest rates, limits upside.

·     In Utilities: sector tumbled midday after the Illinois Commerce Commission rejected grid plans from AEE and ComEd (which is owned by EXC), sending shares of all lower; other utilities declined as well. Solar industry outperformed, with big gains in ENPH, FSLR, SEDG, SPWR, ARRY and others with industry seen as a big beneficiary of a lower rate environment after the Fed flipped its outlook on rates to cuts sooner than later.



·     In Payments: Barclays upgraded CTSH and PAYX to EW and downgraded RSKD (to EW) and GDOT (to UW) saying they believe after a few years in the valuation wilderness, the payments industry sentiment is finally starting to firm up again. Despite a late summer retrenchment, the valuation trend line from late 2022 to the present has moved—albeit gradually—up and to the right. Said their favorites in 2024 are SQ, GPN, FIS and ACN on the IT Services side. DFS said credit card charge-off rate 1.79% at November end vs 2.09% at October end and credit card delinquency rate 1.54% at November end vs 1.47% at end October. FOUR shares spiked late day after Bloomberg reported GPN is noted to weigh an acquisition for the company

·     In Banks: Wells Fargo named Citigroup (C) as top pick in large caps, replaces JPM, followed by FITB in large caps and said bottom picks are CMA and BPOP top pick in Midcap. Said estimates asymmetrical bank stock payoffs in 2024-2025 given stocks up 1/3-1/2 most time (75% chance) and down 0%-15% in recession and stagflation (25%). Piper named PPBI, BANC, BANR as three highlighted Overweight ideas they have high conviction on heading into Q423 earnings; FULT was downgraded at Stephens citing valuation.

·     In Brokers & Exchanges: HOOD said equity notional trading volumes jumped 18% to $52.9B in November y/y while options contracts traded rose 17% to 95.3M in November and net cumulative funded accounts up 1% at 23.3M for the month, up approximately 20 thousand from October.

·     In Insurance: ALL said rate increases for Allstate brand auto insurance have resulted in a premium impact of 11.4%, which are expected to raise annualized written premiums by approximately $2.97 billion, and rate increases for Allstate brand homeowners’ insurance have resulted in a premium impact of 10.1%, which are expected to raise annualized written premiums by approximately $1.03 billion.



Biotech & Pharma:

·     ALEC was upgraded to Buy from Hold at Stifel and raised its price target due to the positive outlook for a treatment against Alzheimer’s disease.

·     AMGN said the FDA accepted its marketing application for tarlatamab, a bispecific antibody to treat advanced small cell lung cancer; approval decision date is June 12, 2024.

·     APLS shares fell after warning it was informed of a negative trend vote by the European Medicines Agency’s Committee for Medicinal Products for Human Use for its treatment for the eye disease geographic atrophy.

·     BLUE said in advanced discussions with some other large commercial payers, more than 15 Medicaid agencies in U.S. following FDA approval of Lyfgenia.

·     GKOS said the FDA approved the application for a single administration per eye of iDose TR for the reduction of intraocular pressure in patients with ocular hypertension or open-angle glaucoma.

·     MRNA shares rose after revealed new data from a continuing early-stage trial of the personalized cancer treatment it is testing with MRK, saying that the updated results help build the case that the drug works.

·     SAGE and BIIB announced the commercial launch of Zurzuvae, an oral treatment for women with postpartum depression.

·     ALPN, AMGN, CRNX, CYTK, DYN, FUSN, GILD, SLNO, SVRA, VKTX were named the top ten ideas in Biotech for 2024 by Oppenheimer saying they stay focused on individual stocks and provide our favorable market outlook through the lens of our high conviction ideas (>$250M market capitalization).


Industrials & Materials

·     In Transports: Lower rate outlook, stronger economic data, and transports helping outperform with gains in likes of FDX, UPS and others; ALK issued better monthly metrics: raised Q4 revs growth to 2.25%-3.25%, from prior 1%-4%, said capacity measured as available seat miles (CASM) to be up 13%-14% vs. prior 11%-14% view while said fuel cost per gallon is tracking at the high end of its range at about $3.40, versus prior guidance of $3.30-$3.40.

·     In Aerospace & Defense: Overnight, the U.S. Senate backed a defense policy bill authorizing a record $886 billion in annual military spending with strong support from both Democrats and Republicans on Wednesday. NOC was downgraded from Peer Perform to Underperform at Wolfe Research saying the margin profile of the fixed price B-21 is downside risk, and the margins of the fastest slice of the portfolio in the Space segment has been disappointing.

·     In Metals & Mining: in steels, NUE guided Q4 EPS in range of $2.75-$2.85 per share, below consensus of $3.18 saying they expect decreased Q4 earnings due to moderating average selling prices at most of product groups within segment and lower volumes; gold miners (NEM, AEM, GOLD) resumed upward momentum early with a 2% jump overnight in gold prices as the US dollar and Treasury yields slide initially. In aluminum, AA shares rise after decision from the Western Australian Government that will allow the Company to continue bauxite mining and downstream alumina refining in the State.



·     In Software: ADBE posted better-than-expected Q4 EPS of $4.27 (consensus $4.14) and a 46.4% operating margin on revenue of $5.05B (consensus $5.01B), up 12% y/y (13% in cc), up from 10% last quarter but flat on a cc basis, butFY24 guide disappointed high expectations (new ARR $1.90B vs. St. $2.02B), sending shares lower.

·     In Networking: ANET added to US Focus List and reiterate Buy, raising PT to $300 at Citigroup as maintains ANET as its #1 networking equipment pick into 2024 on sustainable growth in enterprise led by share gains and growing AI opportunity in the cloud from Ethernet adoption (see InfiniBand vs Ethernet debate).

·     In Semiconductors: The Philly semi-index (SOX) rises another 2% on day around 4,100, which has been leading tech over the last few weeks (up about 10% in December and 57% YTD), with most names higher on the day; it was the 6th up day in a row for SOX, off lows of 3,669 on 12/7. ASYS shares weak after saying it sees Q1 revenues in a range of $21-$24M, down from Q4 revs of $27.7M. INTC shares higher after saying dozens of personal computer makers are using its newest chip which will be available in DELL, MSFT, (and others) laptops.


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.