Market Review: July 18, 2023

Closing Recap

Tuesday, July 18, 2023





DJ Industrials




S&P 500








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A few mixed economic reports and, more importantly, a better start to earnings season in Financials, were enough to move stocks off the pre-market lows. It was probably more the lack of disappointment than anything really to get investors excited, but right now the market seems to be looking for reasons to continue the trend higher. By mid-morning, breadth was about 5:2 in favor of advancers with the S&P up small after opening lower, NASDAQ retreating off modestly, but IWM +1.1% as small caps rebounded a bit. S&P sectors were mostly green, led by Energy, Financials and Healthcare, while Real Estate, Consumer Discretionary and Technology were laggards and the only sectors in the red. Perhaps investors were using some of their 1H tech gains to broaden exposure in hopes we really do find a path to a soft landing.


In data today, several comments on housing: @charliebilello notes homes in the US are turning at the slowest pace in over a decade with prospective buyers having 28% fewer homes available versus 2019; @KobeissiLetter comments this is the least affordable housing market in history with a record low homes on the market, median rent payments at $2000/mo, 53% of homes requiring $125K+ to afford and an average mortgage rate at 7%; lastly, @LizYoungStrat mentions homebuilder sentiment rose to 56 in July with current sales and buyer traffic offsetting a decline in future sales expectations. Separately, @RBAdvisors comments on industrial production turning negative, saying it is not a death knell for the economy, but it doesn’t lend support to the “increasingly consensus #SoftLanding forecast.”


Moving into the final hour of trading, US equities continued to grind higher. More NASDAQ names joined the party to lead the index higher and outpace the S&P, but small caps continued to lead. Sector-wise, Technology (XLK, +1.5%) went from worst to first, with Energy (XLE, +1.3%) and Financials (XLF, +1.1%) also leading. Consumer Staples (XLP, -0.18%), Real Estate (XLRE, -0.95%) and Utilties (XLU, -1.12%) were relative laggards and the only sectors in the red. Both growth and value gained as measured by the Russell 1000 Growth +0.96% and the Value counterpart +0.46%. Breadth continued to favor advancers by just better than 2:1.



Economic Data

·     Retail Sales for June increased +0.2% m/m in below the +0.5% estimate; June retail sales ex autos, gas rise +0.3% m/m, in-line with consensus estimates; US gasoline sales fell -1.4% m/m for June vs. May -2.1%; June Retail Sales Ex-gasoline +0.3% vs May +0.7%.

·     Industrial Production for June fell (-0.5%) vs. consensus 0.0% while Capacity Utilization reported at 78.9%, well below the consensus 79.5%.

·     July NAHB Housing market index 56 (consensus 56) versus 55 in June; index of current single-family home sales 62 versus 61 in June; index of home sales over next six months 60 versus 62 in June; index of prospective buyers 40 versus 37 in June.

·     Business Inventories for May rise +0.2% vs. consensus +0.2% and vs April +0.1% (prev +0.2%); May inventory/sales ratio 1.40 months’ worth vs April 1.40 months; Business sales +0.2% vs April -0.1% (prev +0.1%).



·     August gold futures climbed to their highest level since early June, settling +$24.40/oz, or +1.24%, to $1,980.80. Expectations the Fed may be closer to an end of rate hikes after more favorable CPI and PPI have pressured the US Dollar and allowed gold to move higher. Today’s soft industrial production results just supported the trade further.

·     WTI August crude futures started slowly, but quickly ramped alongside equities to finish +$1.60/bbl, or +2.16%, to $75.75, while Brent futures gained $1.13, or +1.44%, to $79.63/bbl.  The gain was the first in the past three sessions as traders look to OPEC to prop up prices after recent declines.






WTI Crude















10-Year Note





Sector News Breakdown



·     In Auto retail: AAP said late Monday that Canada’s TRC Capital Investment Corp. has made an unsolicited “mini-tender,” or less than 5% of the company’s shares, offer to purchase up to 1 million shares of the auto parts retailer at $65.75 a share.

·     In EV equipment: FREY was downgraded to Neutral at Goldman Sachs with $10 tgt saying although remains bullish on end-market demand, it believes the EU market will face intensifying pressure from Chinese LFP oversupply.


Retail, Consumer Staples & Restaurants:

·     In Food Processing: Barclays noted Russia ended its cooperation with the Black Sea grain deal today, intensifying uncertainty in the grain market – said sees possible beneficiaries as BG and ADM, while its protein sector may suffer on inputs if an alternative route is not settled on soon.

·     In restaurants: CMG accelerates international expansion through first-ever development agreement with Alshaya Group in Middle East. Raymond James previews quarter saying Top Ideas PLAY, BLMN, EAT, CMG, FWRG as continue to maintain a selective and flexible posture towards our restaurant universe.

·     In Beauty: COTY said it will sell a 3.6% stake in Wella for $150 million, subject to the completion of due diligence, reflecting a 4% premium to the book value of Wella as of March 31, 2023.

Leisure, Gaming & Lodging:

·     In Cruise lines: CCL upgraded from Hold to Buy at Argus with $21 tgt citing the company’s increased marketing spending, which should help to boost revenue; improved liquidity ($7.3 billion as of the end of 2Q23); and efforts to reduce debt. NCLH was downgraded to Hold from Buy at Truist (but up tgt to $23 from $17, while raise tgt on CCL to $16 from $11 and RCL to $115 from $72 noting it remains very clear to US that the industry is on a strong path to recovery.

·     In Boating/Leisure: Raymond James downgraded CWH, HZO, ONEW and PII to Market Perform ratings after outperformance and believes several revenue and margin headwinds remain and could limit further upside, including a weakening macroeconomic backdrop, higher borrowing rates and heightened promotional activity.



Banks, Brokers, Asset Managers:

·     In Banks: BAC Q2 EPS beat estimates by $0.04 and revs rose 11% to $25.2B vs. est. $24.98B as Q2 trading revs ex DVA $4.39B vs. est. $3.98B; Q2 FICC revs ex DVA $2.76B vs. est. $2.44B; equities trading revs ex DVA $1.62B vs. est. $1.54B; BK Q2 results better than comp STT last week in Trust banks as Q2 EPS $1.38 vs. est. $1.22; Q2 revs $4.45B vs. est. $4.38B; PNC Q2 revs fell short of estimates ($5.293B vs. $5.449B est.), said loans were stable but deposits fell by 2%, net interest margins fell by 5 bps and lowered its FY net interest income (NII) forecast to 5% to 6% Y-o-Y growth vs previous forecast of 6% to 8% growth.

·     In brokers: MS record revenue in its wealth management segment offset a muted quarter for its institutional securities business; Q2 revs $13.46B tops $13.11B estimate while EPS $1.24 topped the $1.15 estimate; said investment banking revenue, including fees from mergers and acquisitions, was about flat from a year ago at about $1.08 billion. MS trading revenue fell 22% from a year ago, following declines of 10% at JPMorgan and 13% at Citigroup; SCHW shares rose after EPS beat $0.75 vs. est. $0.71 as revs fell to $4.66B but topped ests $4.61B; said client cash flowed out at a slower rate than in previous months.

·     In consumer finance: SYF Q2 EPS beat and said loans that are more than 30 days past due as a percentage of total period-end loan receivables rose 110 bps to 3.84% in 2Q, net charge-offs as a percentage of total average loan receivables were 4.75%, up 202 bps – said the rise reflects the normalization of consumer behavior and is in line with the company’s expectations.

·     In REITs: PLD raised year EPS view to $3.30-$3.40 from prior $3.10-$3.25 view after earnings beat; in research: AIRC and CPT both upgraded to outperform from market perform at BMO Capital Markets, which is slightly more constructive on apartment real estate investment trusts heading into second- quarter earnings. ESS was downgraded to Hold from buy at Stifel, noting shares are up 18.4% since May 25 vs the RMS +10.4% and apartment REITs +12.1%.



Biotech & Pharma:

·     BIVI NM101 Phase 3 AD trial is nearing its completion by the end of September. Topline data expected in the Oct-Nov timeframe.

·     FDMT completes enrollment of phase 2 prism clinical trial for intravitreal 4d-150 in patients with wet AMD and reports interim safety and tolerability data; expect to provide update regarding phase 3 pivotal trial plans in q1 2024 after discussion with FDA in q4 2023.

·     KPTI announced that the FDA has granted Fast Track Designation to the development program of selinexor for the treatment of patients with myelofibrosis.

·     NVS Q2 sales rose to $13.62B from $12.78B y/y and above est. $13.45B; Q2 net profit rose to $2.32B from $1.70B y/y, but missed est.; raised its guidance, saying it expects group sales to grow in the high single digits, from a previous expectation of mid-single digits, and core operating income to grow in the low double digits, from a previous forecast of high single digits


Healthcare Services & MedTech movers:

·     In Medical Equipment: MASI tumbled after guides Q2 prelim revs $453M-$457M vs. est. $553.23M saying large orders that were anticipated for Q2 were delayed to the 2H of year.

·     In Managed Care: UNH was upgraded from Market Perform to Outperform at Bernstein and raised tgt to $603 after earnings citing attractive valuation, potential for hardening pricing in 2024, and attractive LT growth in value-based care, government MCO and OptumInsights.

·     In Medical Testing: CDNA said the United States District Court for the District of Delaware decision upheld and reaffirmed the March 2022 jury verdict finding that NTRA violated the Lanham Act by falsely advertising the scientific performance of its Prospera transplant test.

·     In Healthcare Services: TDOC said it is furthering its collaboration with MSFT by "working together" on integrating Azure and Nuance artificial-intelligence tools into its platform.


Industrials & Materials

·     In Aerospace & Defense: LMT Q2 adj EPS $6.73 tops est. $6.43 on better sales at $16.69B vs. est. $15.89B as backlog rose 17% y/y to $158.01B; raises FY eps view to $27.00-$27.20 from prior $26.60-$26.90 and sees FY cash flow from ops at least $8.15B; RKLB deploys satellites for NASA and commercial constellation operators, successfully recovers booster; ATRO sees prelim Q2 sales $170M-$175M vs. est. $167.5M; Q2 orders about $200M.


Materials, Metals & Mining

·     In Chemicals: Deutsche Bank previews sector saying only for the paint companies (AXTA, PPG, SHW) do they expect solid beats and raises and potentially materially share price movements and issues a Catalyst Call Buy on SHW while downgraded CE to Hold from Buy citing combo of lower EPS estimates and strong share price performance YTD.



Internet, Media & Telecom

·     In Internet: few analyst calls and previews: PINS upgraded to Outperform from In Line at Evercore ISI with $41 tgt and downgraded SHOP to In Line following outperformance. TTD was downgraded to Sell from Neutral at New Street with a price target of $69 (up from $57). KeyBanc raised price tgts on GOOGL to $140, TTD to $100, and PINS to $35 saying preference remains large-cap advertisers with product cycles like Overweight rated META and TTD and laggards with improving execution and margin drivers like Overweight-rated GOOGL and PINS.

·     In social media: Daily active users to META “Threads” on Android devices slumped to 23.6 million from 49 million, according to market researcher Similarweb’s report on Monday. Usage in the U.S., which peaked at about 21 minutes on July 7, was just over 6 minutes on July 14.

·     In Media: CMCSA’s NBCUniversal is raising the price of its streaming service Peacock by as much as $2 a month, the WSJ reported as the platform continues to lose money. Peacock has about 22M subscribers but had a $704M loss before EBUTDA ; FWONA split-off of ATL Braves Holdings and reclassification of tracking stock approved at Liberty Media’s special meeting of stockholders.

·     In Telecom: VZ said will begin testing its network to uncover the scope of its lead cable problem; Verizon said only a small percentage of its existing network includes lead-covered cables; TDS said it identified only ~10 miles of lead-covered cables in its network. TDS Telecom is identifying the next steps to address the very limited amount of lead cabling it estimates is in its network.


Hardware & Software movers:

·     In IT Services: Citigroup previews sector saying near-term macro concerns and longer-term AI-related fears should continue to be key discussion points during June-2023 earnings. Citi’s view on BPM remains differentiated as it believes: visibility for run-the-business tasks remains high; risk/fraud analytics can help the near term; Genpact (G) downgraded to Neutral due to its view that FY23 outlook was likely not de-risked enough it is below.

·     In software: MDB expands global collaboration with MSFT as strategic partnership accelerates workload migrations to MongoDB Atlas on Microsoft Azure; SPLK and MSFT are partnering to build Splunk’s enterprise security and observability offerings on Microsoft Azure.

·     In Communication Equipment: COMM downgraded from Buy to Hold at Deutsche Bank and cut tgt to $6 from $8 citing lingering pressure on customer orders, with recent data points (ERIC announcements, GLW intra-quarter commentary) indicating the lull is likely to persist.



·     Citi previews semi sector earnings: Citi said the recovery in the PC end market (27% of semi-TAM) will contrast weakness in the wireless and data center end markets (combined 27% of semi-TAM) and as a result Citi expects upside from INTC and downside from AMD. Said demand from the auto and industrial end markets (30% of semi-TAM) appears mixed. Citi is raising its estimates on NXPI, MCHP, and ON and trimming estimates on TXN and opening 90-day positive catalyst watches on NXPI and INTC and negative 90-day catalyst watches on TXN, AMD and GFS.

·     Bank America previews semis for quarter; sees in line Q2, in line/modestly below Q3 on lukewarm macro, but CY24 EPS recovery could sustain longer-term stock momentum Upgrade CAMT to Buy on AI packaging momentum, Downgrade COHR to Neutral, LITE to Underperform on sluggish telco CAPEX, valuation Cloud, Cars, Complexity top themes with top picks NVDA (est./PO raise to $550), AVGO, MRVL, ON, NXPI, AMAT, CDNS, SNPS. The firm also added MRVL to the US 1 list and removed GFS which remains Buy-rated.

·     Movers: WOLF said in release that supply chain not impacted by China export license control of Gallium and Germanium.


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.