Closing Recap

Friday, June 09, 2023

Index	Up/Down	%	Last
DJ Industrials	43.63	0.13%	33,877
S&P 500	5.02	0.12%	4,298
Nasdaq	20.62	0.16%	13,259
Russell 2000	-15.07	0.80%	1,865

 

 

 

 

 

 

 

 

 

U.S. stocks closed out another week with gains as the S&P 500 index closed just below the 4,300 after spending most of the day above (high 4,322.62); its last close above was Aug 16, 2022. The S&P posted its 4th consecutive weekly advance, now up more than 20% from its October 2022 low (and only -12% away from all-time high close). The bounce in the Nasdaq turned the Composite positive for the week, making it a 7th-straight weeks of gains (longest since Jan 2020), while the Nasdaq 100 hits fresh intraday 52-week highs. Smallcaps slipped Thursday and Friday but still the big winners on week with the Russell 2000 +1.8% (and +6.5% MTD). Global stocks markets continue to push higher as Japan’s Nikkei 225 capped its ninth-straight week of gains – the longest stretch of gains since 2017.

 

Sentiment of late turning more bullish: Barclays noted today that investors are giving up on the bearish view and start chasing the new bull market. Says technicals are frothy (bullish sentiment, VIX lowest in 3 years, surging Tech inflows). But tentative broadening of leadership into lagging small caps and Value may help sustain the breakout. Mixed dataflow keeps complacency in check, though. Just yesterday, the bull-bear spread in the American Association of Individual Investors (AAII) weekly survey was 20.2 vs -7.7 last week as Bullish sentiment jumped to 44.5% (highest since 11/21) from 29.1%, Neutrals fell to 31.2% from 34.1% and Bearish sentiment tumbled to 24.3% (lowest since 11/21) from 36.8%.

 

Next week catalysts certainly picking up after no Fed speakers this week and light earnings and economic calendar. Coming up, inflation data on Tuesday (CPI) and Wednesday (PPI) ahead of the FOMC rate meeting Wednesday at 2:00 PM and Powell press conference at 2:30 PM and then the European central Bank (ECB) policy meeting.

 

Interesting Stats:
1) Coming into today, the top 8’s impact on the S&P returns YTD compared to the remaining 492 members. Of the S&P +10.10% YTD returns, +0.18% have come from the other 492 members.
2) Investors are piling into calls. Intraday put/call ratio reached levels not seen since July 2021

3) U.S. corporate companies have gone bankrupt so far in 2023 is higher than the first five months of any year since 2010, data from S&P Global Market Intelligence showed. There were 54 corporate bankruptcy petitions in May compared with 52 in April, according to S&P Global, with the year-to-date count more than doubling to 286 from a year earlier.

 

Economic Data

·     China May Annual CPI +0.2% vs. est. +0.3% (prior +0.1%); Monthly CPI fell (-0.2%) vs. est. (-0.1%) and prior fell (-0.1%); the annual PPI fell (-4.6%) vs. est. (-4.3); the decline in food prices narrowed by 0.3 PPs to 0.7% m/m due to seasonal factors, contributing to a decrease of approximately 0.12 percentage points in m/m CPI. Food prices drop results in an approximately -0.13 PPs decrease.

 

Commodities, Currencies & Treasuries

·     Oil prices slid on Friday, with WTI crude -$1.12 or 1.57% to settle at $70.17 per barrel – for the week Nymex crude fell -2.19%; Brent Crude futures settled at $74.79/bbl, down $1.17, 1.54%. Baker Hughes (BKR) said the weekly US gas rig count down 2 to 135; total rig count 695; oil rig count was up 1 to 556. Gold prices slip -$1.40 or 0.1% to settle at $1,977.20 an ounce, up slightly from last Friday’s closing price of $1,969.60 an ounce, awaiting the FOMC rate decision next Wednesday. Front month Comex copper for June delivery gained 6.6% to $3.789, its largest one-week net, percentage gain since week ending April 14^th.

·     The U.S. dollar bounced off two-week lows, with the DXY +0.2% at 103.50 as expectations have grown that the Federal Reserve will likely hold interest rates steady at their policy meeting next week (worth noting CPI and PPI data results next week could shake things up). Monetary policy meetings next week include the FOMC, the European Central Bank and the Bank of Japan. This past week, both the Bank of Canada and the Reserve Bank of Australia surprised markets by raising interest rates to tackle stubborn inflation. The euro eased 0.3%, backing off Thursday’s two-week high and the buck rebounded against the Japanese yen, rising 0.3% to 139.30.

·     The 10-year yield rose 3-bps today and up 5.3 bps to 3.744% this week, rising four of the past five weeks; the 10-yr remains 48-bps from its 52-week high of 4.231% hit in late October and up 113-bps from its 52-week low of 2.605% hit Monday, Aug. 1, 2022. Yield is up 45-bps point from its 2023 closing low of 3.285% hit Wednesday, April 5, 2023. The shorter-term 2-year yield into the Fed meeting next week rose 10-bps this week to 4.60%, 179-bps off 52-week low last July of 2.814% and off 46-bps from 52-week high of 5.06^ on March 8^th.

 

 

Macro	Up/Down	Last
WTI Crude	-1.12	70.17
Brent	-1.17	74.79
Gold	-1.40	1,977.20
EUR/USD	-0.0035	1.0746
JPY/USD	0.53	139.44
10-Year Note	0.03	3.744%

 

 

Sector News Breakdown

Consumer Staples, Retailers & Restaurants:

·     APRN shares rise more than 50% after repaying notes, eliminates debt; announced the closing of its previously announced deal in which the company transferred its operational infrastructure to fresh meal provider FreshRealm.

·     AVO Q2 adj EPS $0.01 vs. est. loss (-$0.01); Q2 revs $221.1M vs. est. $218.11M; Adjusted EBITDA was $7.6 million for Q2, a 17% decrease compared to the same period last year.

·     ONON shares outperformed as UBS maintained their Strong Conviction in Buy Rating and price target is 50% above current price saying they thinks ONON’s focus on innovation, performance, athletes, sports, direct-to-consumer selling, and maintaining a premium, full-price brand image should lead to industry leading sales growth and earnings beats.

·     TGT was downgraded to Neutral from Buy at Citigroup saying after significant sales gains in 2020- 2022, the firm believes 2023 will show that sales have peaked and are likely to fall further, creating a “giveback” situation.

 

Autos, Leisure, Gaming & Lodging:

·     TSLA rises for an 11^th straight day, fresh 7-month highs after GM announces collaboration with the EV charging company, to integrate North American charging standard connector design into its EVs beginning 2025; collaboration to expand access to charging for gm EV drivers at 12,000 Tesla superchargers, and growing; shares of EV charging co’s CHPT, EVGO, BLNK slide in reaction.

·     In leisure: MTN top/bottom-line miss as Q3 EPS $8.18/$1.24B vs. est. $8.84/$1.27B; lowers FY23 net income view to $251M-$283M from $321M-$396M; said Q3 pass product sales through May 30 for N.A. ski season increased approximately 6% in units and approximately 11% in sales.

 

Energy, Industrials and Materials

·     In Aerospace & Defense: PL shares tumbled after mostly in-line Q1 (April), but lowered guidance for Q2 and for the current FY24 (Jan), citing lighter-than-expected bookings in Q1, longer sales cycles, and generally smaller deal sizes. MOOG/a reiterated previously issued guidance for fiscal year 2023 with sales of $3.2 bln, adjusted operating margin of 11.0%.

·     In Chemicals: the sector remained under pressure after tumbling on Thursday after some comments at the Deutsche Bank conference weighed on the space. Deutsche Bank said today the tone from conference was cautious as demand remains weak across most end-markets, the normal seasonal uplift in the June quarter has largely not occurred, the Chinese recovery has been slower than expected and customer destocking is still not done. Notes that are being partially offset by continued pricing strength of lower-than-expected raw material costs. The firm noted because of the weak demand, EMN and LYB reduced their Q2 outlooks.

·     In agriculture: (DE ) – USDA WASDE report out: estimates 2023/24 crop-corn 15.265 bln bushel, yield 181.5 bu/acre harvest acres 84.1 mln; 2022/23 end stocks corn 1.452 bln bu; soybeans 230 mln bu; wheat 0.598 bln bu; 2023/24 exports-corn 2.1 bln bu; soybeans 1.975 bln bu; wheat 0.725 bln bu; 2023/24 world end stocks-wheat 270.71 mln tonnes (trade estimate 264.65 mln) and 2023/24 world end stocks- corn 313.98 mln (trade estimate 313.12 mln).

·     In Transports, Industrials: MMM shares slipped midday after Judge Jeffrey Graham of the U.S. Bankruptcy Court in Indianapolis dismissed the chapter 11 bankruptcy of MMM subsidiary Aearo Technologies, siding with personal-injury lawyers who asserted the bankruptcy petition was filed in bad faith because it aims to resolve 3M’s mass tort liabilities; DAL rises for its 11th straight advance as airlines have outperformed in transportation sector.

 

Financials

Banks, Brokers, Asset Managers:

·     In Bitcoin: COIN outlook cut to negative from stable at Moody’s following SEC complaint. The SEC on Tuesday alleged COIN traded at least 13 crypto assets that are securities that should have been registered, including tokens such as Solana, Cardano, and Polygon.

·     In credit cards: for V, UK’s Competition Appeal Tribunal refused to certify special purpose vehicle Commercial and Interregional Card Claims’ lawsuits against MasterCard and Visa for charging retailers so-called multilateral interchange fees.

·     In lending (NAVI, SLM): Stephens noted with $1.64 trillion of federal student loans currently outstanding and the resumption of interest and principal payments by August 29 as part of the U.S. debt ceiling resolution, the impact should add a significant burden for U.S. consumer’s cash.

·     In Services: TNET shares jumped midday after Reuters reported the online payroll services provider with a market value of $5.8 billion, is exploring a potential sale of the company, and hired Morgan Stanley to engage potential acquirers. https://tinyurl.com/4n5zarb2

 

Healthcare

Biotech & Pharma:

·     The Biden administration on Friday announced it would impose inflation penalties on 43 drugs for the third quarter of 2023, having fined 27 earlier this year, in a move it said would lower costs for older Americans by as much as $449 per dose. – CNBC reported.

·     AZN said it had reached an agreement with Quell Therapeutics to develop, manufacture and commercialize engineered T-regulatory, or Treg, cell therapies for autoimmune diseases. Quell will receive $85 million upfront in the form of a cash payment and an equity investment and is eligible to receive more than $2 billion in milestone/royalties.

·     BIIB shares were halted today ahead of an FDA advisory panel meeting that is set to discuss supplemental biologics license application for Leqembi (lecanemab), its drug with partner Eisai.

·     CRSP and VRTX said the FDA accepted review of marketing application for their experimental gene-editing therapy, exa-cel, for two types of blood disorders; PDUFA date of 12/8/2023 (priority review) for SCD and 3/30/2024 for TDT.

·     EDIT announces positive initial EDIT-301 safety and efficacy data from the first four patients treated in the RUBY trial and the first patient treated in the EdiTHAL trial.

·     PRAX announces plans to begin ulixacaltamide phase 3 in essential tremor by year end after completing end of phase 2 meeting with FDA.

·     RPTX was upgraded from Hold to Buy at Stifel and raised tgt to $16 from $11 following initial lunresertib (PKMYT1) data, on a bullish thesis around combination therapy.

 

Healthcare Services & MedTech movers:

·     ANGO to sell dialysis product portfolio, Biosentry Product for $100M to MMSI; narrows FY23 revenue view to $338M-$339M from $338M-$342M prior; MMSI lowers FY23 EPS view to $2.81-$2.92 from $2.83-$2.93 and raises rev outlook.

·     CVS, TEVAand WBA announced opioids settlement to tune of $17.3B with New York Attorney general.

·     SIEN rose after announced that the FDA has granted a 510k-clearance for the Company’s novel, patented1 AlloX2 Pro Tissue Expander.

 

Technology

Internet, Media & Telecom

·     NFLX shares jumped after the WSJ reported that the co’s long-awaited crackdown on password sharing in the U.S. delivered a windfall of new subscribers in its earliest days, according to new data from streaming analytics company Antenna. https://tinyurl.com/4sveze8s

·     DISH shares slip on report that the company appears increasingly desperate to sell assets and raise money – and continues to battle speculation from insiders that it could face bankruptcy – NY Post https://tinyurl.com/2etr7zxp

·     ROKU shares rise for 10th straight positive trading day.

 

Hardware & Software movers:

·     ADBE extends recent gains into earnings next week; upgraded to Overweight at Wells Fargo and raised tgt to $525 from $420 saying they come away from recent work more confident Gen AI is a tailwind to ADBE as it expects much of the early value to accrue to established platforms.

·     AMSWA shares fell as reports Q4 revs fell -14% y/y to $29.9M vs. est. $30.71M; sees FY24 revenue $120M-$126M vs. est. $131.48M.

·     BRZE shares rose following earnings as reported a solid 1Q with rev growth of 31% above Street of 28% (but below prior qtr +40%), RPO of $478M, up 22% y/y, billings of $117M, up 29% y/y, and FY24 organic growth guide was raised from 23% to 24%.

·     DOCU Q1 beat as EPS $0.72 vs. est. $0.56, revs +12% y/y to $661.4M vs. est. $641.7M but -14% growth last quarter, adj op mgn 26.6% vs. 23.6% last quarter; Q1 billings of $674.8M (+10% y/y); guides Q2 revs $675M-$679M vs. est. $670.3M and raises year rev outlook.

·     PATH downgraded to EW from OW at Wells Fargo with $20 tgt saying initial results of turnaround reflected in valuation following YTD outperformance and notes lack of visibility around ultimate impact of both gen AI and the co’s recent GTM changes.

·     QLYS downgraded from Neutral to Underweight at Piper and cut tgt to $109 from $120 noting shares are up +19% following 1Q results and believes valuation and recent move not warranted.

·     In Optical and Equipment: GLW upgraded to OW at Morgan Stanley saying believe estimates and valuation are de-risked and expect improved fiber demand and Display margin improvement from price increases to be more meaningful catalysts in FY24, setting up attractive risk/reward.

 

Semiconductors:

·     The semiconductor index (SOX) hit highs of 3,580, or up more than 1.5% initially (52-week highs 3,643 on May 30^th), but pulled back with little profit taking in tech.

·     In memory sector (MU, WDC), Digitimes reported DRAM contract prices are likely to bottom out in the third quarter of 2023 while the NAND flash segment will reach the lowest point in the fourth quarter, according to memory module company Adata Technology.

·     TSM reported revenue increased 19.4% sequentially to a four-month high of NT$176.54 billion (US$5.74 billion) in May 2023.