Market Review: February 13, 2023

Closing Recap

Monday, February 13, 2023





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Monday was a slow, steady, low volume climb for US stocks, erasing much of last week’s losses with markets showing no concern into a key inflation reading tomorrow. Big news Tuesday, the Consumer Price Index (CPI) for January at 8:30 AM ET. On a headline M/M basis, consumer prices expected to rise +0.5% (prior -0.1%) and on a Y/Y basis rise +6.2% (prior +6.5%). On a core basis, CPI Ex: Food & Energy M/M expected to rise +0.4% (prior +0.3%) and rise +5.5% Y/Y (prior +5.7%). Volatility is expected as the data gives a good read on future interest rate hike intentions by the Fed. The Nasdaq snapped its 3-day losing streak on Monday, though nearly all eleven sectors were firmly higher (energy lagged). In data today, the NY Fed said January one-year-ahead expected inflation unchanged at 5% versus December; three-year-ahead expected inflation 2.7% vs. 2.9% in Dec, five-year-ahead expected inflation 2.5% vs. 2.4% in Dec, expected home price rise at 1.1%, vs. 1.3% in Dec. Note @KobeissiLetter notes “For the first time since November 2022, the market is no longer pricing in any interest rate cuts in 2023. Just two weeks ago, markets were expecting 2 interest rate cuts in 2023. Tuesday’s CPI number just became even more important.” Markets have been prepping into tomorrow’s data as @lisaabramowicz1 notes “investors have pulled a net $31 billion from U.S. equity mutual funds and ETFs in the past six weeks: Refinitiv Lipper data through Wednesday. That’s the most money pulled in aggregate from domestic equity funds to start a year since 2016.”


Commodities, Currencies & Treasuries

·     Oil prices rebound, as WTI crude rises $0.42 or 0.535% to settle at $80.14 per barrel, off earlier lows of $78.45 per barrel while NYMEX natural gas March futures settle at $2.4050/MMBtu, ending sharply lower on mild temperatures. Gold prices slide -$11.00 or 0.6% to settle at $1,863.50 an ounce, a 5-week low. The US dollar dipped on day as investors rotate into riskier assets, showing zero concern of hawkish CPI print tomorrow morning. Treasury yields steady all day, down 2-bps at 3.72% again as investors await the CPI tomorrow morning at 8:30 AM.






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10-Year Note





Sector News Breakdown



·     In autos: Ford Motor Co. (F) is investing $3.5 billion to build a battery plant in Michigan with help from China’s Contemporary Amperex Technology Co. Ltd. The facility, which will be built in Marshall, Mich., about 100 miles west of Detroit, and is expected to create about 2,500 jobs.

·     In car rental: HTZ mentioned positively in Barron’s saying the car rental company is highly profitable and has bought back over 30% of its stock since its emergence from bankruptcy in mid—2021 and its early adoption of electric vehicles gives it an edge on rivals.

·     In auto retail: AAP downgraded to Neutral from Buy at Roth MKM saying following an impressive Q4 print from ORLY and outlook for extended comp gains, they can no longer dismiss the serial underperformance of AAP.

·     In electric vehicles (EV): WSJ reported NKLA has started work on hydrogen plants, part of a fueling network the company intends to underpin its push to compete in the nascent zero-emissions truck market. In auto suppliers: MGA wins battery enclosures business on first-ever Chevrolet Silverado EV


Retail, Consumer Staples & Restaurants:

·     APRN shares slide after filed an “at-the-market” equity offering program for up to $70M.

·     In consumer goods: CHD downgraded to Hold from Buy at Argus saying the company is facing pressure from weak sales of high-margin discretionary products, low fill rates on retail orders, and high operating and interest costs.

·     In apparel: CPRI downgraded to Market Perform at Cowen and tgt lowered to $55 from $70 citing fears that the wholesale channel (27% of sales) could get worse before improving, as well as concerns on customer demand at MK (70% of sales) amid a somewhat bumpy path thus far; RL upgraded to Buy at Bank America to reflect confidence in strong revenue trends continuing given the brand’s global diversification and management’s ability to pull cost levers.


Homebuilders, Building Products, Home Furnishing:

·     In housing services: ZG upgraded to Outperform from in-line at Evercore/ISI and tgt jumps to $61 as anticipates Q1 being the trough quarter for residential real estate in terms of existing homes sales and home prices; in building products, MAS upgraded from Sell to Hold at Deutsche Bank and raised tgt to $56 after quarterly results in home improvement, Wells Fargo noted the Q4 setup was “tricky” as an understatement saying FY23 ests are too high, sentiment is bearish; yet shares are off ’22 lows & rates add support. LOW is Q4 preferred play.



Banks, Brokers, Asset Managers:

·     GS Chief Executive Officer David Solomon said he should have gone with his instincts and acted sooner to cut jobs, the Financial Times reported. In asset managers: AB upgraded from Neutral to Outperform at Credit Suisse following better-than-expected 4Q22 results and comprehensive model refresh a see several themes into 2023-24.

·     In Fintech: FIS shares fell after it booked a $17.6 billion write-down on the payment-processing business it bought for $41 billion just four years ago (FIS said it would spin off its merchant payments business, Worldpay).

·     In Insurance: RBC Capital said in the insurance sector, so far, 4Q has seen more earnings misses than in any recent quarter and share price reactions, both positive and negative, have been more volatile than in a normal earnings season (especially in P&C). Earnings generally beat in P&C (5 beats, 2 misses, 1 in-line) and missed in life (3 beats, 4 misses, 2 in-line). UFCS downgrade from Neutral to Underweight at Piper saying it is more of a valuation call. UIHC shares tumbled more than 50% after saying it expects to incur about $197 million of net loss & loss adjustment expense related to current accident year catastrophe events for Q4.



Biotech & Pharma:

·     AXSM received notice letter from TEVA, providing notification to Co that Teva has submitted ANDA to FDA (pushing generic version of AXMS depression drug)

·     GRCL said it plans to initiate phase 1/2 clinical trial in China in 3q; IND application for trial of FasTCAR-T GC012f; China NMPA clearance for IND application for phase ½.

·     GTHX shares fall after releasing Phase 3 PRESERVE 1 trial where anti-tumor efficacy data, including ORR and preliminary measures of survival, favored the placebo arm, driving the company to discontinue its colorectal (CRC) trial.

·     NVAX shares active after the company extended its partnership with the U.S. Government, which secured up to 1.5 million additional doses of Novavax’ COVID-19 vaccine.

·     OCUL announced 10-month interim data from an early-stage study of its experimental treatment for wet age-related macular degeneration.

·     VRCA upgraded to Outperform and raise tgt to $11 at RBC Capital after mgmt meetings, where the company expressed confidence in regulatory proceedings for VP-102 in molluscum contagiosum following successful tech transfer, recently disclosed site inspections.


Healthcare Services & MedTech movers:

·     CVS files for four-part senior notes offering; size not disclosed.

·     HSIC authorized a new $400 million share repurchase program.

·     SHC reaffirms 2022 revenue view $995M-$1.005B vs. consensus $1B.

·     SYNH downgraded from Neutral to Underweight at JPMorgan saying the company has little visibility into improvement in the company’s clinical business in 2023 against a heightened competitive backdrop.

·     SRDX downgraded to Hold from Buy at Needham saying SurVeil is unlikely to receive FDA approval until late CY23 at the earliest in our view.

·     SRNE shares tumble after to company and its non-opioid painkiller development unit Scintilla Pharmaceuticals commence Chapter 11 proceedings under the U.S. bankruptcy code.


Transports, Industrials & Materials

·     XPO downgraded from Overweight to Equal Weight at Morgan Stanley and cut tgt to $43 from $55 saying the 4Q print was tougher than expected and believe the stock could be in a "penalty box" for a while, as the market seeks more evidence on execution and traction toward LT targets; SAIA downgrade from Equal Weight to Underweight w/ $230 PT (from $188) at MSCO; in rails; UNP files for two-part notes offering; size not disclosed; NSC noted they are still cleaning up hazardous materials from a Feb. 3 train derailment in East Palestine, north of Pittsburgh. Five of the derailed cars in East Palestine were carrying the chemical vinyl chloride, a type of gas.

·     Defense stocks were active (GD ) following reports that the US has shot down three unidentified objects over the past three consecutive days, thought to be surveillance balloons; WSJ reported a federal judge in Texas denied a request by families of those killed in two 737 MAX crashes to throw out or modify a two-year-old settlement between Boeing Co. (BA) and the U.S. Department of Justice.

·     In metals: FCX Indonesia unit has temporarily halted mining and processing work at its Grasberg mine as flooding and debris flow from heavy rains and landslides damaged the milling complex; GORO suspends its dividend; said as per 2023 guidance, lower gold grades will result in less production in 2023 than 2022 and further significantly contribute to an increased Cash Costs and All-in Sustaining Costs; CLF announces price increase for hot rolled, cold rolled and coated steel products.

·     Chemicals: CF shares fall after Scotiabank downgraded to sector perform citing a dire outlook for agricultural nutrient makers this year as the price of nitrogen falls. Said earlier Q4 results and/or a rosy outlook later this week don’t really matter, as the above issues are out of co control.

·     In paper & packaging: WRK downgraded to Hold from Buy at Argus after recently reported weak fiscal 1Q23 results as sales and earnings both fell from the prior year, and EPS of $0.55 missed the consensus forecast of $0.60. Management also withdrew its full-year earnings guidance.



Internet, Media & Telecom

·     In social media: META rises after recent press reports suggest Meta might be preparing for another round of layoffs. In Internet: UBS cautious on SHOP again saying they did a cost-benefit analysis for Buy with Prime (BwP), which makes them incrementally more negative on the potential impact to SHOP. Notes the avg order value on SHOP is ~$100 vs an avg unit price on AMZN of $30-$35, suggesting that on SHOP, merchants are either selling higher priced items or they sell more units per order. GOOGL shares extend recent losses on the growing competition from Microsoft’s (MSFT) AI-powered technologies and antitrust action from the government.


Hardware & Software movers:

·     In software: The Verge reports MSFT hopes to hold a product event in March at which it will detail how OpenAI’s technology will be incorporated into Office productivity software; CRM tgt raised to $200 at Bank America and lower FY24 rev estimates in a transition year saying is emerging as quality GARP Stock; VMW shares fell on Friday amid fears the AVGO deal could face more intense regulatory opposition from the FTC; TWLO to cut 17% of workforce.

·     Internet Security: CHKP 4Q rev/EPS of $638.5M/$2.45 (+7% y/y vs 6.1%E) exceeded St’s $636M/$2.36E, driven by a tad better subscription line performance ($231M vs. $229E) and Product line of $173.4M; OKTA Initiate at Underperform and $64 tgt at Bank America, implying -17% additional downside saying consensus is modeling Okta’s Customer Identity too high.

·     In video games: (ATVI, EA, TTWO) – NPD said that U.S. consumer spending on video game content, hardware and accessories totaled $4.3B in January 2023, a decline of 5% when compared to a year ago. Video game hardware spending was flat, while content (-5%) and accessories (-14%) spending fell.

·     In IT Services: FSLY double upgraded to Buy from Underperform at Bank America with $16 tgt saying the co has strong foundations and believe the new mgmt team can capitalize on them.


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.