Market Review: June 13, 2023

Closing Recap

Tuesday, June 13, 2023





DJ Industrials




S&P 500








Russell 2000













Another rip-roaring session for US stocks! Today’s broad market strength (10 of 11 S&P sectors close higher) was led by two specific stories and no fear about possible higher interest rates. The May consumer prices (CPI) data came in-line to slightly better than consensus estimates and below the prior month, helping propel strength in high growth bets (tech) on expectations the Fed will indeed keep rates steady at tomorrow’s FOMC meeting (after raising rates 10-straight times prior). Meanwhile, Energy, Industrials, and Materials were the days biggest gainers following easing central bank action by China to boost their economy (details of both below). The S&P traded to new 52-week highs as did the Nasdaq while the SmallCap Russell 2000 jumped the most and the Dow Jones Industrial Average climbed for the 8th time in nine days. No stopping this market to this point in 2023 overall, dominated in tech strength. All eyes on the FOMC Policy meeting tomorrow where a pause is expected to be the most likely outcome, with the European Central Bank meeting on Thursday and Bank of Japan on Friday.


Inflation headlines better: May’s consumer price index rose 0.1% on the month, below the 0.2% estimate, with the annual inflation rate falling to 4.0%, below ests expecting an ease to 4.1% from 4.9%. The core CPI, excluding food and energy, rose 0.4%, in line with forecasts, lowering the core inflation rate to 5.3% from 5.5%. However, as @KobeissiLetter notes — “Inflation is now at 4.0% for the first time in 2 years, according to CPI data. But basic needs are still seeing much higher rates of inflation in the US. Shelter inflation still stands at 8.0%, Food inflation is at 6.7% and New Vehicles inflation stands at 4.7%. Rent inflation for people renting their primary residence is at an alarming 8.7%.”


Miners, Materials, and Commodity prices outperformed (Energy/Oil), as copper prices reached one-month highs after China cut its key rate in a sign that more policy easing may be on the way. US listed China stocks (BABA, BIDU, KWEB) also gained after China’s Central bank lowered a short-term lending rate for the first time in 10 months. The People’s Bank of China (PBOC) cut its seven-day reverse repo rate by 10 basis points to 1.90% from 2.00%, when it injected 2 billion yuan ($279.97 million) through the short-term bond instrument. Asia also rallied on the back of a Bloomberg report that China is considering a package of stimulus measures.


Economic Data

·     The Consumer Price Index (CPI) M/M rose +0.1% vs. est. +0.2% (vs. prior month +0.4%) and on a Y/Y basis rose +4.0% vs. est. +4.1% (prior month rose +4.9%). On a core basis, ex: food & energy for CPI M/M rose +0.4%, in-line with ests (and prior +0.4%) and Y/Y rose +5.3%, in-line with estimates and vs. prior +5.5%. Producer Price Index (PPI) data tomorrow morning.


Commodities, Currencies & Treasuries

·     August gold settles -$11.10, or -0.56%, to $1,958.60, pulling back despite a drop in the U.S. dollar, and was one of the few commodity sectors to show weakness. Industrial metals like copper saw strength after China lowered rates.

·     WTI crude rose $2.30 or 3.43% to settle at $69.42 per barrel in nice after yesterday’s losses. The China news overnight helped bounce commodity prices as did softer inflation.

·     Natural gas prices looking higher for the 7th time in 8-days, above $2.336/MMBtu, partly fueled by a broader move higher in oil and other energy commodities on China optimism

·     The US dollar index (DXY) slid to as low as 103.04 following CPI data before paring losses, hitting 3-week lows on bets the Fed will not raise rates tomorrow; the euro rose 0.3% to $1.079 after climbing to $1.0824, its highest since May 22; against the yen, the dollar rose 0.4% above 140.

·     Treasury yields jumped across the board as the US 5-year yield rose to 4.019%, highest since March 10th while the benchmark 10-year yield popped 7-bps late day to 3.84% and the shorter-term 2-yr rose over 10-bps to 4.7% (a 3-month high).






WTI Crude















10-Year Note





Sector News Breakdown

Consumer Staples & Restaurants:

·     BG and GLNCY backed Viterra announced an $18B deal to merge, creating one of the world’s largest agriculture trading firms. Viterra holders to also get about $2.0b in cash, representing a total consideration mix of about 75% BG stock and 25% cash.

·     In Food: THS reaffirms Q2 guidance while raises and narrows fiscal year 2023 adjusted EBITDA guidance to $355M-$370M from $345M-$365M prior.

·     In dining: PLAY shares jumped after the company discussed at its Investor Day six levers to grow revenue and adjusted Ebitda at its investor event, including strategic games pricing and improved food and beverage offerings. CAVA IPO expected to trade this Thursday – deal range was raised to $19.00-$20.00 from $17.00-$19.00 – now intends to sell roughly 14.44M shares to raise $289M

·     In grocers: The International Brotherhood of Teamsters is formally opposing the merger of The Kroger Company (KR) and Albertsons Companies, Inc. (ACI) currently under review at the Federal Trade Commission. The Teamsters represent more than 22,000 members across both companies’ stores, distribution centers, and manufacturing plants nationwide.


·     Specialty Retail: Morgan Stanley upgraded URBN to OW; downgraded CPRI to EW and Reiterate BBWI with Overweight and JWN at Underweight saying see ’23e EPS/valuation downside & recommend owning defensive stocks w/ operational efficiency &/or EPS stability. Identify stocks that 1) meet those criteria &/or 2) have sufficiently de-risked ‘23e EPS w/ fair valuation. ULTA was upgraded to Buy from Hold at Loop Capital.

·     CHGG said to eliminate 80 employees, about 4% of its workforce; estimates that it will incur charges of about $5M-$6M in connection with these actions.

·     HD reaffirms fiscal 2023 guidance; still sees comparable sales -2% to -5%, estimate -3.75%; still sees sales -2% to -5%, and still sees operating margin 14%-14.3%, estimate 14.2%.

·     WMT said it would invest $257 million to open a beef-packing plant in Olathe, Kansas in 2025, creating more than 600 jobs (note shares hit 52-week highs today).

·     In running shoes: Wedbush said after expert call that the most bullish tone on this call was centered around DECK’s Hoka brand; had a far more controversial view of ONON, however, as he seems far more cautious about the sustainability of recent growth trends. Said seemed underwhelmed by other brands that have tried to make pushes into Running (ADDYY, SKX).


Leisure, Gaming & Lodging:

·     In Leisure: MANU shares jumped after a report from Qatar’s Al-Watan that Qatar’s Sheikh Jassim bin Hamad al-Thani will soon be announced as the preferred bidder. He has been battling Jim Ratcliffe for control of the club

·     Cruise lines extend yesterday gains, with CCL, NCLH, RCL all hitting 52-week highs for a second day; yesterday two firms upgraded CCL after mgmt meetings saying sees a "bullish tone" on current trends and 1H24 bookings.

·     In RV sector/towable: CWH said it plans to open more brand-specific dealerships, mixing up its traditional format of Camping World-branded dealerships selling various brands under one roof. DOOO upgraded to Buy from Neutral at Davidson and up tgt to $126 from $111 after its most recent NA ORV checks revealed continued BRP ORV market share gains, more effective BRP promotional activity vs the competition, and dealer feedback.



·     In oilfield services: shares of PTEN and NEX advanced after the WSJ reported the two are in discussions over a potential tie-up that would establish a major player in the oilfield-services industry; said a deal isn’t imminent, and it’s not certain that the talks will result in a transaction, the people cautioned. ; OVV revised its 2Q and full year 2023 guidance to reflect the early close of the Midland Basin and Bakken transactions; expects Q2 total production of 520,000-540,000 boepd vs its previous forecast of 515,000-535,000 boepd.

·     Oil Majors: the WSJ reported that in the hours before an Ohio refinery accident killed two workers last year, BP supervisors opted to keep the plant running despite a series of malfunctions and a petroleum spill serious enough to prompt major equipment shutdowns, citing a preliminary report by government investigators.

·     E&P Sector: EOG was downgraded from Buy to Neutral at Goldman Sachs and cut tgt to $130 following 11% relative outperformance to other large-cap peers (PXD, FANG and DVN) since October 18, 2022. TTE said it made an oil and gas Discovery on the OML 102 oil field offshore Nigeria. DVN upgraded from Neutral to Buy w/ $58 PT (from $63) at Goldman Sachs as believes that valuation is becoming more compelling and see potential for well costs to reduce a function of lower raw material costs (tubulars, sand, among others), and modestly lower pricing.

·     In Utilities & Solar: DUK announced the sale of the solar and wind portfolio in its commercial renewables segment for $2.8B



Banks, Brokers, Asset Managers:

·     In Banks: ZION firm said its second quarter net interest margin is trending toward 2.85%, which analysts described as being weaker than estimates and a downturn from the first quarter. Note yesterday, CFG, KEY, HBAN and TFC all guided down net interest income due to a combination of likely higher than previously expected rates, higher deposit betas & continued deposit remixing. More banks speaking today with USB weighing in at Morgan conference.

·     Asset managers: AB preliminary assets under management decreased to $670 billion during May 2023 from $676 billion at the end of April. Modest firmwide net inflows were offset by market depreciation, resulting in a 1% AUM decrease during May. IVZ preliminary month-end assets under management (AUM) of $1,487.6 billion, an increase of 0.2% versus the previous month-end. The firm experienced net long-term outflows of $2.2 billion in the month.

·     In FinTech: PYPL downgraded from Overweight to Neutral w/ $72 PT (from $90) at Atlantic saying there looks to be no quick fixes to PayPal’s branded market share or transaction margins, making it tough to see what actions will reignite investor interest in the stock near-term; GPN was downgraded to Hold from Buy at Jefferies saying while believe downside is limited with valuation near trough levels, they struggle to see what drives a re-rating in the near term.

·     In Insurance: ESNT and RDN both downgraded from OP to MP in mortgage insurers at KBW Inc. based on valuation saying they have been the best-performing subsector in the resi mortgage industry in 2023, with an avg increase of 24% (including dividends), compared to 14% for other residential mortgage companies. He’s recommending OP rated MTG and ACT which both trade below book. CB announces $5B share buyback.



Biotech & Pharma:

·     ACRS completes enrollment in phase 2b study of Oral Zunsemetinib (ATI-450) for moderate to severe rheumatoid arthritis topline data in Q4.

·     BIIB shares led declines in the S&P after a report that Leqembi may not be widely used for Alzheimer’s in Europe.

·     FWBI said it achieved the enrollment target for its mid-stage study investigating a treatment candidate for a type of pancreatic disorder associated with cystic fibrosis.

·     ELAN and TRUP shares outperformed following positive data points in the CPI report this morning; Vet Services Data up 11%.


Industrials, Aerospace & Defense

·     MEI shares fell after guided FY24 EPS $1.55 -$1.75 below consensus $2.58 and guided FY24 revs $1.15B- $1.2B vs. est. $1.21B citing additional costs to support new program launches and the impact from program roll offs.

·     UNP said it expects a one-time Q2 expense of around $70M from ratification of a new deal with its labor union; said rising labor expenses expected to lead to an increase in UNP’s Q2 operating ratio by about 120 basis points.

·     Morgan Stanley initiates coverage on European aerospace with a preference for aftermarket suppliers, and names France’s Safran as its top pick.


Materials, Metals & Mining

·     Industrial metals jumped (FCX, AA, X, CLF, STLD, CENX) after China’s Central banks lowered a short-term lending rate for the first time in 10 months. The People’s Bank of China cut its seven-day reverse Repo rate by 10 basis points to 1.90% from 2.00% on Tuesday, when it injected 2 billion yuan ($279.97 million) through the short-term bond instrument.

·     In Steel sector (X, NUE, STLD): BMO Capital noted the U.S. spot HRC prices dropped 10.7% over the past two weeks to $920/st. (the lowest level since February; up 31.4% YTD). Spot HRC prices have now declined nearly 22% since the recent peak reached in April, but with lead times continuing to narrow, utilization rates increasing, scrap prices declining and typical summer slowdown likely forthcoming, the negative momentum continues.

·     In aluminum, Reuters reported a major global aluminum producer cut its premium to Japanese buyers for July-Sept shipments of primary aluminum to $180 per month from an initial $180 per month, citing two sources directly involved in quarterly price talks said. $170 for the ton. The $170 offer is still 31% to 36% above current quarter premiums.

·     In packaging and paper: GPK shares underperformed followed presentation at Wells Fargo conference, talking down Q2 volume growth.



Internet, Media & Telecom

·     NFLX tgt raised to $490 from $410 at Bank America and increase estimates as continue to view NFLX’s crackdown on password sharing and the AVOD opportunity as inextricably linked.

·     DIS pared gains midday after delays several movies including latest “Avengers,”, “Star Wars”, and “Avatar” films – updates film release schedule, includes major delays.


Hardware & Software movers:

·     ORCL delivered a strong quarter beating in Cloud and guided to a strong Q1 while cash flow and EPS were very strong, and the weaknesses in the quarter were mainly because Cloud is outperforming licenses. Reported 18% Y/Y-CC growth was in-line with guidance while margins came up short as the company continues to build capacity with heightened CAPEX.

·     AAPL downgraded to Neutral from Buy but raise tgt to $190 from $180 at UBS owning to softer iPhone & Services growth fundamentals + valuation; data checks suggest there won’t be enough of an acceleration to support the stock’s premium of more than 50% to the market.

·     In Video games: ATVI said late yesterday its Diablo IV had the “best-selling opening in Blizzard’s history”, crossing $666M in global sell-through in the first 5d of being on the market; players have already spent >276M hours within the game.

·     In IT Services & Consulting: ACN said to invest $3B in AI to accelerate clients’ reinvention; will double AI talent to 80,000 people through hiring, acquisitions, and training.



·     The Philadelphia semi-index (SOX) traded to fresh 52-week highs, topping the 3,700 level up 1.65% as the ongoing buying momentum in the chip space on “AI” growth continues to push names like NVDA, AMD, and others higher.

·     AMD shares sunk this afternoon after holding a company event where they showcased their upcoming line of artificial intelligence processors, aiming to help data centers handle a crush of AI traffic and challenge NVDA.

·     INTC shares rose on multiple reports that chip designer Arm Holdings, which is majority owned by Softbank, is in discussions with potential strategic investors, including INTC to be an anchor investor in Arm’s initial public offering later this year. In April, Reuters reported that U.K.-based Arm planned to sell shares on the Nasdaq in a bid to raise $8 billion to $10 billion.


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.