Market Review: June 12, 2023

Closing Recap

Monday, June 12, 2023





DJ Industrials




S&P 500








Russell 2000













U.S. stocks rise all day in slow, steady, strength early, and then pushed sharply higher late day, adding to prior weekly advances for the S&P (up 4 straight weeks) and Nasdaq (7-straight weekly gains) while the Russell 2000 is now up 7% month-to-date and the Dow with its best monthly return in 2023, up over 3%. S&P and Nasdaq hitting fresh 52-week highs. Not a care in the world for investors it seems with stocks climbing ahead of key consumer prices (CPI) inflation data tomorrow morning and the FOMC policy meeting on Wednesday. Traders see a 74% chance of the central bank holding interest rates at the 5%-5.25% range on Wednesday, while pricing in a 51% chance of a 25-basis-point increase in July, according to the CME FedWatch tool. The CBOE volatility index (VIX) edged up after hitting pre-pandemic levels in the previous week, rising 5% at 14.50. There are also two other central banks meeting this week with the ECB Thursday and Bank of Japan Friday after the FOMC Wednesday (recall Aussie and Canada banks raised rates last week). Friday, 6/16 will be a busy day, given it is a quadruple witching Friday (simultaneous expiration of index futures, index options, stock futures, and stock options) and 2Q23 rebalance Friday for several major market indexes.


Consumer price index (CPI) data for May tomorrow morning. Estimate for CPI headline M/M to rise +0.2% (vs. prior month +0.4%) and on a Y/Y basis to rise +4.1% (prior month rose +4.9%). On a core basis, ex: food & energy for CPI M/M est. to rise +0.4% (prior +0.4%) and Y/Y to rise +5.3% (prior +5.5%). One inflation data point showed short-term expectations falling, but longer term steady to slightly higher. The NY Fed said one-year ahead expected inflation at 4.1% vs 4.4% in April, but May five-year ahead expected inflation at 2.7% vs 2.6% in April and 3-year inflation expectations rise to 3% vs 2.9%.


Usual suspects lead again today, adding to YTD gains: Technology (+35% YTD), Discretionary (+26% YTD) and Comm (+32% YTD). Bernstein notes market strength concentration: Year-to-date, the broader market (top 1500 stock universe) is up 12.5%; 10 stocks have contributed 940 bps of the performance, or 75%. Within the S&P500, the results are even more striking; 10 stocks have contributed 90% of the Index’s 13.0% gain this year. The stocks are AAPL (up 39%), MSFT (+36%), NVDA (+164%), GOOG (+38%), AMZN (+48%), META (+120%), TSLA (+91%), AVGO (+45%), AMD (+87%) and CRM (+58%).


Commodities, Currencies & Treasuries

·     Oil prices dropped sharply with WTI crude down -$3.05 or 4.355% to settle at $67.12 per barrel, 3-month lows, and prices are down $10/bbl over the past two months despite last week’s announcement that Saudi Arabia will deliver an extra extendable production cut. Prices dropped ahead of a U.S. Federal Reserve meeting as investors tried to gauge its appetite for further rate hikes and amid concerns about the prospects for Chinese demand and rising Russian supply. Gold prices slipped -7.50 to settle at $1,969.70 an ounce as the dollar and yields rose, as prices dropped for back-to-back sessions with all eyes on CPI tomorrow and FOMC on Wednesday.

·     Treasury yields jumped with big week of auctions: the U.S. sold $40 bln 3-year notes at high yield 4.202% vs. 4.2% when issued prior with bid-to-cover ratio 2.70, as primary dealers take 16.74% of U.S. 3-year notes sale, direct 21.74% and indirect 61.53%. Also, the U.S. sold $32 bln in 10-year notes at a yield of 3.791%, with bid-to-cover demand weak at 2.36, as primary dealers take 17.8% of U.S. 9-year 11-month notes sale, direct 19.92% and indirect 62.28%. Treasury yields moved to highs midday following the 10-yr auction results as 3.79% for the benchmark bond.






WTI Crude















10-Year Note





Sector News Breakdown



·     Electric Vehicles: TSLA shares jumped early, making it a 12th straight day of gains. In Chinese electric vehicles: XPEV shares rise after saying its new model G6 received more than 25,000 reservations in three days, the company said on its official Weibo; NIO downgraded from Buy to Neutral w/ $7.50 PT from $25.80 at Nomura after earnings last week showed lackluster deliveries with eroding gross margin profile. NIO also said they will cut prices for all vehicle models by 30,000 Renminbi ($4,201) starting Monday.

·     In auto retail: KMX was downgraded to Neutral at Northcoast; AZO was upgraded from In Line to Outperform w/ $2,700 PT up from $2,640 at Evercore/IS as sees the stock’s 6% price decline since reporting F3Q results as an attractive entry point for an industry leader.


Retailers, Consumer Staples & Restaurants:

·     Bank America provided eCommerce updates saying May eCommerce spend was flat y/y, an acceleration from -2% in April, suggesting some improvement in eCommerce spend. 2QTD spend is tracking -1.5% y/y, decelerating 50bps vs 1Q at -1%. Amazon estimates are sequentially flat, in line with data Online Restaurant spend tracking at +2% Q/Q for Q2 is in line with DASH estimates, slightly below Uber at +4% Q/Q.

·     ANF upgraded to Buy from Hold at Argus noting the company has been transitioning away from larger-format, tourist-dependent flagship locations to smaller stores that cater to local customers and has broadened its offering to include office and special occasion clothing.

·     Adidas (ADDYY) upgraded to Outperform at Bernstein saying its brand heat languished through 2022 as Yeezy, China, CEO change, product launch delays and excess inventory took their toll. Now Bernstein is seeing it heat up again – China KOLs are back.

·     SIG downgraded to Neutral from Buy at Northcoast, reducing operating income expectations and margin, reflecting company guidance and their own checks.

·     TGT shares fell for a 4th consecutive trading day, while WMT shares outperformed.


Leisure, Gaming & Lodging:

·     Cruise lines were active today, with shares rising as two brokers upgraded shares of Carnival. CCL upgraded Overweight from Neutral at JPMorgan and raised tgt to $16 from $11 after mgmt meetings saying sees a "bullish tone" on current trends and 1H24 bookings. Bank America also upgraded CCL to Buy with $20 tgt from $11 following positive management meetings in Miami and raised price tgts on RCL ($95 from $82) and NCLH ($19 from $17).



·     Energy stocks slid alongside a drop in oil prices as Iran dismissed reports that it is in talks with the US over an interim nuclear deal to get sanctions relief and markets await key inflation data tomorrow and the FOMC policy meeting on Wednesday

·     In Utilities: CNP upgraded from Neutral to Buy w/ $32 PT at Guggenheim while maintaining its $32 PT as it sees 8% potential growth in 2024 and the high end of 6-8% guidance attractive relative to high quality peers. AEE upgraded to Overweight from Sector Weight with a $90 price target at KeyBanc saying believes the outcome in the IL MYRP will ultimately be constructive, and consequently the current trading levels present a rare entry point for the stock.

·     In refiners: tgts trimmed at TD Cowen as DINO tgt to $42 from $44, MPC to $145 from $147, VLO to $137 from $146 and VTNR to $7 from $8 in refiners saying investor conviction in the group is low, which could mean limited n/t support for undervalued large caps VLO and MPC. DK and DINO could fare among the best during revision cycle given upside to cons. and improving ops q/q; PARR should benefit from Hawaii margins better than feared.



Banks, Brokers, Asset Managers:

·     In Banks: JPM agreed in principle to settle with Epstein victim in class action suit-statement JPMorgan: litigation still pending between the US Virgin Islands and bank JPMorgan: litigation still pending between the US Virgin Islands and bank, and JPMorgan claims against Jes Staley. Trust banks fell as STT said sees Q2 NII in line with prior guidance, down 5%-10% sequentially (at Morgan Stanley conference0 and KEY dropped as sees NII coming in softer than expected for Q2; TFC also sunk late day after forecasts 3% revenue growth year-over-year for the full year, versus 5%-7% previously issued outlook.

·     In crypto: Bitcoin prices dropped below $26,000 on crypto concerns; recall last week, the SEC charged both Binance and Coinbase (COIN) on Monday and Tuesday last week, respectively, alleging that the crypto exchanges, among other things, have sold unregistered securities.

·     In Asset Managers: 1) APAM May prelim AUM data totaled $136.4 billion; 2) LAZ prelim May AUM totaled approximately $230.0 billion as forex depreciation of $2.9 billion, net outflows of $0.9 billion and market depreciation of $0.8 billion; 3) BEN preliminary month-end assets AUM $1,404.2B compared to of $1,420.7B at April 30, 2023; 4) TROW preliminary month-end assets under management of $1.35 trillion with net outflows for May 2023 were $9.6 billion

·     In Exchanges & Brokers: NDAQ agreed to buy software company Adenza for $10.5 billion in cash and stock from Thoma Bravo. The terms of the deal include $5.75 billion in cash and 85.6 million shares of Nasdaq common stock. ; HOOD said Net Cumulative Funded Accounts at the end of May were 23.1M, up approximately 20K m/ml while Monthly Active Users (MAU) declined to 10.6M in May, down approximately 900K m/m. Trading Volumes in May were higher for equities and options and lower for crypto compared to April 2023.

·     In payments/services: Morgan Stanley downgraded shares of BILL (to EW from OW) and EXFY (to UW from EW) saying mid-market businesses are the most attractive opportunity set for AP automation platforms/B2B payments; virtual card penetration is central to revenue growth, but pricing may hurt long-term adoption. SOFI tgt raised to $11 from $8 at Truist as think investors are gaining confidence in SoFi’s growth model and accounting. The firm said SoFi positioned as leading beneficiary of bank deposit outflows given 4.3% APY savings and small size.



Biotech, Pharma & Healthcare Services:

·     BIIB said on Friday 6/9, the FDA held an Advisory Committee (AdCom) meeting on Eisai/Biogen’s pending biologic license application (BLA) for Leqembi (lecanemab, early Alzheimer’s disease/AD). The panel voted unanimously to recommend the companies’ drug Leqembi to treat Alzheimer’s disease. Approval of the drug is expected by July 6.

·     CTLT posted a bigger-than-expected Q3 loss and cut its annual forecast for a second time, hurt by persistent production challenges at the contract drug manufacturer’s major facilities; said will also amend its annual filing for 2022 to reflect a $26M deduction caused by a rev error.

·     KDNY to be acquired by NVS for up to $3.5 bln in boost to late-stage pipeline Under the agreement, Chinook shareholders would receive $3.2 billion, or $40 per share in cash, which represents a premium of 66.7% to Friday’s closing price.

·     ILMN rises after CEO Francis DeSouza resigns, just weeks after he survived an activist investor’s campaign to remove him from the DNA sequencing giant’s board.

·     NTLA announced updated interim results from the Phase 1 portion of the ongoing Phase 1/2 study of NTLA-2002. Data from the 50mg cohort suggest durability of effect (~6mo w/o attack), although note the patients’ low disease severity, as per BMO Capital.


Industrials & Materials


·     In airlines, LUV added to Analyst Current Favorites w/ $45 tgt at Raymond James and CPA removed from Analyst Current Favorites. DAL extending gains, rising a 12th straight day while broader Dow Transports underperformed. Reuters reported U.S. District Judge delayed the effective date of a permanent injunction after ruling AAL and JBLU must end their Northeast Alliance (NEA)- judge initially said the injunction would take effect June 20.

·     Deutsche Bank prepared preview for 2Q estimates saying believes SAIA, UPS, GXO, UNP and CSX (in that order) will see strong sequential step ups in 2Q earnings and it’s where it is most positive into the quarter, while truckload companies KNX and WERN will likely see meaningful step downs and projecting a meaningful miss at KNX. The firm is also projecting double digit % misses at WERN, CP and JBHT and thinks ODFL will hit its 2Q margin target while SAIA has potential to exceed it by 50-100 basis points, in its view.


Materials, Industrials Aerospace & Defense

·     In the HVAC industry: TD Cowen said Q2 HVAC data points are mixed as demand appears strong, whereas cool Q2 weather augurs soft resi HVAC replacement demand. Pricing is firm, but IRA tax credits have yet to be defined by the states and stimulate sales. Firm favors TT, JCI, LII and CARR in that order and raised tgt on LII to $325.

·     In agriculture (DE, AGCO, MOS, NTR): Bernstein noted on Friday, The USDA released June’s WASDE report, showing ending stock estimates for corn and soy +0.9% and +2.7% higher than street estimates, respectively. Corn futures were 0.7% down closing at $6.05/bu and soy were 1.7% higher at $13.86/bu. The corn stock-to-use ratio (STUs) increased to 15.6% and is still above the 10% ‘tight territory’ threshold.

·     In Materials/Metals: RIO said that it plans to invest $1.1 billion to expand its low-carbon aluminum smelter at Complexe Jonquiere, Canada; said the expansion will increase capacity by around 160,000 metric tons of primary aluminum a year, enough for 400,000 electric cars. Industrial metals prices were mixed, stock trickled lower.

·     In chemicals: TiO2 Quarterly update at BMO Capital (CC, TROX) saying despite TiO2 demand and pricing expected to recover moving through 2023, BMO is cautious in its near-term outlook. BMO sees a softening in 2023 and a muted recovery (as of now) for 2024. The firm said continues to believe CC (OP) offers an attractive risk reward profile. MEOH downgraded at Scotia citing the timing and magnitude of methanol price declines, rising inventory, and little-to-no cost-curve support, sending shares lower.



Hardware & Software movers:

·     APPF shares rose after Keybanc raised tgt to $190 from $155 after announced it would begin charging at least a $1 transaction fee for ACH payments.

·     ATVI shares dipped after the WSJ reported the FTC plans to seek an emergency court order that would block MSFT from closing its $75 billion deal for Activision Blizzard.

·     CRM doubled its venture capital fund for generative AI startups to $500 million and unveiled the AI Cloud service that hopes to attract enterprises by offering the company’s AI-powered products under one umbrella – shares dropped late day after AI day presentation ongoing.

·     PLTR shares strong early after Bank America raised tgt to $18 from $13 saying the co is positioned to be one of the dominant providers of generative AI by providing a near-term solution.

·     ORCL shares rise; reports earnings after the bell tonight, upgraded from Peer Perform to Outperform w/ $130 PT at Wolfe Research and The Information reported Friday Oracle is expected to address the Microsoft-Open AI team by building on its investment in Cohere.

·     ROKU made it an 11th straight day of gains.

·     SentinelOne (S) was upgraded to Overweight at Morgan Stanley saying despite recent missteps, the firm believes the market is now mispricing the inherent value of SentinelOne as a long-term share gainer and the potential for meaningful margin upside.



·     AVGO: EU antitrust regulators to clear Broadcom’s purchase of VMware – Reuters

·     AMD tgt raised to $150 from $110 at KeyBanc as growth remained robust in May as Genoa-X begins to ramp, while Citi also provided positive comments ahead of the co’s data center day (expect focus on Bergamo and MI300 + reiteration of 2H’23 datacenter guidance).

·     INTC shares outperformed broader strength in semis, up around 5% most of the day.


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.