Market Review: February 28, 2023

Closing Recap

Tuesday, February 28, 2023





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Stocks slumped in the final hour of trading for the month/day following another lackluster trading session, as the S&P 500 bounced between overnight highs and lows, leveling off just below the 50-day moving average (3,980) as investors look for the next clue as to the direction of interest rates and the overall stock market. Stocks closed mixed on Tuesday, but for February, major averages tallied losses following stellar gains in January as rising rate hike fears from the Fed weigh on sentiment. Markets were dull with a slow, steady push higher most of the morning back to the 4,000 level for the S&P 500 index before sliding in the final hour. Investor uncertainty is quite evident given the recent stock market reaction.

·     Treasuries were weaker with the 10-year yield back below 3.92%. JP Morgan’s strategist Kolanovic commented that equities are overvalued and at risk of further losses as a divergence with bonds is yet to close. Goldman argued that stocks in Japan and Europe may outperform US equities. Those comments followed a third warning from Morgan Stanley strategist Wilson yesterday, ramping his bets for a sell-off in March. Fed Fund Futures are now pricing in a peak rate of 5.4% by the July meeting.

·     Canaccord said it best this morning, “adding in two additional 25bp hikes beyond the March meeting saying” – “we think terminal of that magnitude (5.5% top end of range) is unnecessary and there seems to be an overreaction to recent data, but clearly what we think in this regard doesn’t matter when you have a Fed clearly intent on doing more”. They also said, “if our view that the unemployment rate gets to 4.5% by year-end is roughly right, as long as it also coincides with our other view that core inflation has slowed to around 3%, we think the Fed will cut”.


Economic Data:

·     Chicago PMI at weakest level since November last year, reported at 43.6 which was below the 45.4 estimate.

·     Consumer Confidence index for Feb 102.9 below consensus 108.5 and vs. Jan revised 106.0 while the hard-to-get index 10.5 in Feb vs Jan revised 11.1 (previous 11.3); US 1-year consumer inflation rate expectations 6.3% in February vs January revised 6.7% (previous 6.8%)

·     U.S. trade deficit in goods climbs 2% in January to three-month high of $91.5 billion and the trade gap in goods increased from $89.7 billion. An advanced estimate of wholesale inventories, meanwhile, showed a 0.4% decrease in January. Retail inventories rose 0.3% in the month.

·     U.S. home prices retreated for the sixth consecutive month in December 2022, according to the S&P CoreLogic Case-Shiller Home Price Index; seasonally adjusted HPI Composite for 20 cities: -0.5% M/M vs. -0.5% consensus and -0.5% prior.

·     The FDIC reported early-stage delinquencies rise to 0.56% in q4 2022 on overdue mortgage and auto loans, rate remains below pre-pandemic average; bank profits fall 4.6% to $68.4 bln in q4 2022 from q3, but profits remain above pre-pandemic average; U.S. Bank profits drop 5.8% in 2022 to $263 bln on higher provision, noninterest expenses.


Commodities, Currencies & Treasuries

·     Oil prices rise with WTI crude gaining $1.37 or 1.81% to settle at $77.05 per barrel, but was st6ill down -2.3% on the month, its 4th straight monthly decline. Prices have been rangebound so far in 2023 amid uncertainty over the state of the US economy, the pace of Fed rate hikes and overall oil and fuel demand. Natural gas price erase earlier declines and notches fifth straight session of gains, ending up 0.6% at $2.747 mln btus. Earlier, Reuters survey showed OPEC February oil output rises by 150,000 bpd from January to 28.97 million bpd, led by Nigeria, as quota-bound members comply with 169% of pledged cuts in February (vs. 172% in January.

·     A rebound off lows for the US dollar, turning positive vs. major rivals this afternoon while Treasury yields fell from highs, with the 10-yr yield failing at 3.98% again, hitting afternoon lows around 3.90%. Gold prices rise following the weakness in dollar and yields, rising $11.80 or 0.7% to settle at $1,836.70 an ounce.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers: TGT reported better Q4 results with EPS/revs $1.89/$30.98BM vs. est. $1.40/$30.72B AS Q4 comp sales up 0.7% down from 8.9% y/y and est. -1.7% but guided Q1 EPS guide of $1.50-$1.90 vs. est. $2.19 and year EPS $7.75-$8.75 vs. est. $9.25; ahead of earnings, DKS downgraded from Buy to Neutral at Citigroup as expect an EPS beat ($2.98 vs cons $2.90) driven by stronger sales, but anticipate weaker GM vs. consensus. CLAR projections for sales and adjusted Ebitda for the current year fell short of the average analyst estimates as N. America wholesale impacts 1Q guide, but Spring/Fall BD orders up y/y. KTB shares surge after quarterly results.

·     In autos: TSLA will host its highly anticipated investor day Wed March 1st at its Gigafactory in Austin, Texas with expectations: key updates on its global expansion/capacity plans, overall demand especially in the crucial China region, and supply constraints. Wedbush expects Musk’s “Master Plan 3” to include a slew of updates on the product roadmap which we believe will include Cybertruck updates and timing, Semi Truck delivery updates, 4680 battery technology and scale update, and the roadmap to what will ultimately be a vehicle in the $25k to $30k range.

·     In auto retail: AAP posted both an earnings and sales beat Q2, while same-store sales growth also came in higher than Wall Street’s expectations and guides FY23 sales $11.4B-$11.6B vs. est. $11.33B; AZO Q2 EPS $24.64/$3.69 billion in sales tops consensus $21.69/$3.56 billion as same-store sales for the quarter increased 5.3%, which was more than the 3.6% Wall Street expected. While gross profit fell 69 bps to 52.3% from the prior year.

·     Consumer staples: SJM reported better Q4 sales, in line GM, lower on SD&A, EPS slight beat while reaffirmed sales and raised low end of EPS guide; CELH upgraded to Outperform at Credit Suisse and raise price target to $120 from $110. OLPX Q4 slight miss, Q1 guide bad (revs -40% w/inventory issues), Q2 sequential improvement, but FY still well below the street (revs -20%, EPS -30%, etc.). For KO EU antitrust regulators on Tuesday scrapped an investigation into potential anti-competitive practices by The Coca-Cola Co and its bottlers, Coca-Cola Europacific Partners, and Coca-Cola Hellenic, citing insufficient ground for the case.

·     In Leisure & Travel: ABNB upgraded to Buy with $144 Target at Argus as expect demand for Airbnb rentals to remain strong in the U.S., driven by longer stays and growth in urban markets and should benefit from the easing of COVID-19 restrictions in China, growth in Latin America. In theme parks, SEAS Q4 EPS $0.76 vs. est. $0.73; Q4 revs $390.52M vs. est. $382.08M; Q4 attendance was 4.9 million guests and total revenue per capita increased 5.7%. In cruise lines, NCLH posted a wider-than-expected loss for 4Q as it is "undertaking a broad and ongoing margin enhancement initiative" this year and that it has already begun to trim costs, looking to drive a nearly 15% drop in non-fuel costs this year.

·     In housing: in building products, TREX 4Q revenue and EBITDA above the Street and 2023 EBITDA guidance of $265 million in line and William Blair thinks guidance will be a clearing event for the stock as investors can now think about future upside with 2023 trough EBITDA known. In home retail preview, Cowen preview WSM, RH saying they are cautious into prints given potentially wide-ranging outcomes at both. Fundamentally, they model for to decelerate on top line in 2023, but to take market share as our base case is for the industry to decline (5.5%). We note that RH lost share during the pandemic, while WSM slightly grew.

·     Restaurants: CBRL rises early after a beat and raise quarter and guidance; DPZ downgraded to Neutral from Buy at Northcoast; DNUT confirms an expanded market test with MCD to ~160 locations in Louisville and surrounding areas; QSR announces sale of 2.2 mln shares by 3G Capital with offering price at $64.65.



·     Energy top stories: CVX raised its share repurchase guidance to $10B-$20B a year and said it will raise its targeted annual buyback rate to $17.5 billion, starting in the second quarter; OXY reported EPS miss on transitory gas realizations/opex (EPS of $1.61 missed consensus $1.79), as Bofa notes the delta was lower realized gas and NGL prices (12c) weighed by the collapse in Waha basis in Dec that have since recovered. Ranger Oil Corp. (ROCC) is being bought by Baytex Energy Corp. in a cash and stock transaction valued at $2.35B including debt as Ranger holders will receive a fixed ratio of 7.49 shares of Baytex and $13.31 in cash – total $44.36 per share.



·     In banks: GS held investor day today – CEO David Solomon said that the bank is "considering strategic alternatives" for its consumer platforms business, which includes the specialty lender GreenSky and credit-card partnerships with AAPL and GM.

·     In FinTech, card services: Visa (V) and MA are slamming the brakes on plans to forge new partnerships with crypto firms after a string of high-profile collapses shook faith in the industry, people familiar with the matter told Reuters. MQ tgt to $8 from $14 at Morgan Stanley but says the risk/reward looks attractive into ’23 ahead of MQ’s renewal with SQ, which has the potential to surprise investor expectations to the upside.

·     Lending & Services: TREE downgrade from Positive to Neutral at Susquehanna and cut tgt to $36 from $46 saying Q4 results showed impressive expense discipline with upside to margins and in-line revenue driving better EBITDA – but a more muted outlook across Insurance and Consumer (especially Personal Loans -20% and Credit Card -29%) lead them to lower ’23 assumptions.



·     Pharma & Biotech: BMRN Q4 rev. of $538MM was in line with consensus ($541MM). Voxzogo’s launch is accelerating and BMRN guided to 95%+ Y/Y growth. Roctavian’s FDA approval is expected Mid:23. BMRN’s 2023 guidance projects +16% Y/Y rev. growth at midpoint. ACAD NUPLAZID sales for 4Q22 were slightly above consensus and guided to 2023 NUPLAZID sales of $520MM-$550MM, which at the midpoint falls below consensus estimates by 6%; KRYS upgraded to Buy from Neutral at Goldman Sachs and raise tgt to $124 from $79 saying the 5/19 PDUFA for collagen 7 (COL7A1) herpes simplex virus gene therapy (HSV GT) drug Vyjuvek for dystrophic epidermolysis bullosa (DEB) remains the key NT event. MRK falls after scrapping its third late-stage trial of a combination therapy with its cancer drug Keytruda, evaluating in treatment for a type of prostate cancer.

·     Healthcare services: HIMS Q4 Revenue/EBITDA came in above guidance and consensus estimates and FY23 guidance was introduced ahead of expectations as beat was across the board and largely stemmed from more than anticipated subscriber adds coupled with G&A efficiencies. PGNY rises after results as 4Q adj EBITDA $33.05Mm vs est. $32Mm on revs $214.3Mm vs est. $211.8Mm; guides 1Q revs $245-250Mm vs est. $230.9Mm and EBITDA $41.5-44M vs est. $36M. Hospital operator UHS shares slide as reported Q4 results that topped consensus, but still guided year profit below expectations (guides year EPS $9.50-$10.50 vs. est. $10.74).

·     In MedTech: SIBN shares jump as delivered strong top-line results for the Q4 and full year with impressive Y/Y growth in active surgeons with strong November and December across both its core business (primary SIJF) and new products. OMI shares tumble after Q4 EPS $0.28 misses the $0.40 est. citing volume decline and pricing issues while revs of $2.55B beat (est. $2.46B) but guides year profit $1.15-$1.65, well below $2.29 estimate. AHCO tumbles after cutting its year revenue outlook to $3.16B-$3.24B from $3.21B-$3.29B and Ebitda guidance.


Technology, Media & Telecom

·     Media & Telecom: DISH shares slide as Bank America double downgraded to underperform from Buy and slash tgt to $10 from $30 on assumption changes in our valuation framework. AT shares dipped around its 200-day moving average amid weakness in telco sector. Cable stocks slipped led by CHTR after the co said at DBAB conference it saw ‘slight downtick’ in rate of net adds in January vs. Q4 (CMCSA shares slipped). The WSJ reported late day that PARA turned down over $3B offer for Showtime.

·     In Semis outperforms in semis AMAT outperforms after Bloomberg reported the equipment maker to challenge ASML’s grip with new machines designed to reduce need for lithography. late Monday, the Biden administration warned companies that funding from the US Chips and Science Act will come with restrictions on investing in other countries and a limit on stock buybacks.

·     In software: WDAY reported solid F4Q23 results, with better-than-expected non-GAAP EPS of $0.99 (est. of $0.89); revenue of $1.65B, (est. $1.63B), up 20% y/y, flat with 20% last quarter; subscription revenue of $1.50B, (est. $1.49B) up 22% y/y; ZM reported Q4 results that beat expectations and gave an outlook for adjusted earnings that was much stronger than expected; LPSN slides after co reschedules earnings release on delay in filing 10-k with SEC; DDD announces restructuring initiative that is expected to reduce operating expenses in 2023 by approximately $2.5 mln to $3.5 mln.


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.