Market Review: June 21, 2023

Closing Recap

Wednesday, June 21, 2023





DJ Industrials




S&P 500








Russell 2000













After US stocks managed to bounce off morning lows and rally all afternoon, Wall Street slumped in the final 30 minutes of the trading day, erasing some of those gains as major averages ended lower. The tech heavy Nasdaq dropped -1% (though still leading on year +30% YTD), while strong gains in yesterday losers Energy, Industrials, and Materials helped pare S&P losses and allow the Smallcap Russell 2000 index to outperform. It has been a year of rotation, keeping major averages afloat consistently, primarily led by Technology (XLK +36% YTD), Communications Services (XLC +33% YTD) and Consumer Discretionary (XLY +28% YTD). Those groups slipped today, allowing buying in other sectors, with Energy the best performer. All eyes were on Fed Chairman Powell this morning as he pretty much endorsed the outlook for two more rate hikes this year (and outlook for no rate cuts). Powell said to the House Financial Services Committee, "given how far we’ve come, it may make sense to move rates higher but to do so at a more moderate pace." Powell reiterated the fact that the central bank remains "strongly committed to bringing inflation back down to our 2% goal," and said it would be "a pretty good guess" that future rate hikes are in the cards if the economy continues its current path.


While the Fed did pause at the June meeting, there is now an 80% chance for a rate hike in July according to Fed futures, but action in the US dollar (sunk sharply after his comments) shows US stock markets do not believe in a chance of future hikes. Expectations of rate hikes from the Bank of England at its meeting tomorrow rose after core inflation in the U.K. overnight was the highest since 1992 (7.1% vs. 6.8% last month, and headline inflation that was unchanged at 8.7% (above ests 8.4% and among the highest in the G20). Moody’s today issued a warning, saying that US consumer strength is starting to weaken and will deteriorate further this year; says tempered momentum in consumption growth will weigh on the economy in the second half of 2023 and says defaults in many consumer-related sectors will rise in the coming year. Bitcoin prices topped $30K, rising over 6% as upside momentum continues in the crypto space.


Commodities, Currencies & Treasuries

·     Oil prices rise as WTI crude futures settle at $72.53 per barrel, up $1.34, 1.88%, while Brent crude futures settle at $77.12/bbl, up $1.22, 1.61%. Gold prices slip -$2.80 to settle at $1,944.90 an ounce, a 4th straight decline (hitting 3-month lows earlier) while silver prices slipped -1.8% to $22.77 an ounce despite a drop in the dollar as Fed Chairman Powell indicated that two more rate hikes is likely by the Fed this year.

·     The US dollar index (DXY) dropped over -0.2% to 2-day lows below 102.30 despite Fed Chairman Powell saying the fight against inflation still "has a long way to go" and despite a recent pause in rate hikes officials agreed borrowing costs would likely still need to move higher. The Fed had left interest rates unchanged at its June meeting but signaled in new projections that borrowing costs may still need to rise by as much as half of a percentage point by the end of this year.

·     Bitcoin prices have surged the last two trading sessions after trading in a tight range in recent weeks amid SEC scrutiny. Bitcoin rose above $30K for the 2nd time this year after lows below $27K Tuesday. The WSJ noted that a Bitcoin bonanza on tap if BlackRock ETF is approved – Grayscale (GBTC) owners could see a double benefit, and Coinbase would get a shot in the arm . Recall the SEC charged both Binance and Coinbase last week, respectively, alleging that the crypto exchanges, among other things, have sold unregistered securities. Still, crypto prices and stocks (COIN, MSTR, MARA, RIOT) have jumped in recent days.

·     Treasury yields rose initially following Fed Chairman Powell commentary this morning but slid this afternoon following a strong bond auction result. The US Treasury sold $12B in 20-Year bond sale at high yield 4.010% (vs. 4.028% when issued and vs. prior 3.954%), with a bid-to-cover (demand) at 2.87 vs. 2.56 prior auction and indirect bidders awarded 74.6% of auction vs. previous 70.6%. The 10-yr yield hit highs of 3.79% this morning; lows of 3.73% this afternoon.






WTI Crude















10-Year Note





Sector News Breakdown



·     China electric vehicle makes (LI, XPEV, NIO) shares rose initially after China unveiled a 520-billion-yuan ($72.3 billion) package of tax breaks over four years for electric vehicles and other green cars.

·     TSLA shares active: Barclays downgraded Tesla to Equal Weight from Overweight with a price target of $260, up from $220 saying the stock’s performance amid its recent rally has been "too sharp relative to challenging near-term fundamentals," given questions on margins and demand elasticity. Separately, TSLA CEO Elon Musk said India’s Prime Minister Narendra Modi was pushing the company to make a "significant investment" in the country, adding that such an announcement was expected soon.

·     HOG tgt cut to $45 from $55 at Bank America citing dealer foot traffic and registration data indicate the higher rate env’t is pressuring unit sales; new model demand appears to be tapering off while HOG is not easily able to pivot production to high demand Trikes models and see some downside risk to current guidance, among other factors.


Consumer Staples & Restaurants:

·     In beverages: TAP with a 90-day positive catalyst watch call at Citigroup today as believes will continue to benefit from the Bud Light controversy throughout the summer, leading to upside to both top- and bottom-line estimates and raised 2023 guidance.

·     In restaurants: CMG tgt upped to $2,300 from $2,200 following Q2 checks as believes the company is poised to see accelerated market share gains in a post-COVID environment, resulting in sustained growth above pre-COVID levels.

·     In Household products: CHD traded higher as Jefferies raised its ’23-’25 EPS estimates by 1-2% and are now ~5% ahead of the Street in ’24 & ’25, mostly due to strength in TheraBreath.


·     Large cap retail: AMZN said it will hold its Prime Day shopping event on July 11-12 (Jefferies raised its price tgt from $135 to $150, maintains Buy as believes upside to consensus, combined with positive sentiment from AI will help AMZN shares to re-rate. Separately, the FTC files a lawsuit against Amazon for enrolling consumers in Amazon Prime without consent. TGT said Target Circle week, the biggest sale of the season, is coming July 9-15 exclusively for members.

·     In discount stores: DLTR introduced longer-term targets for $10+ of EPS power in FY26 (Jan. 2027) and reaffirmed both Q2 and FY23 guidance this morning ahead of its Investor Day; said expect to achieve +MSD% comp growth and gain market share behind improving sales productivity and enhancing margins at FDO and extending the multi-price journey at Tree. The guidance lifted shares, as well as other discount stores (DG, BIG).

·     In furniture and mattress: LZB reported Q4 EPS and sales above Street expectations, with relatively flat delivered comps but retail segment written same-store sales sequentially decelerated to flat (from +3% in 3Q); guides Q4 revenue $470M-$490M vs est. $522.4M.

·     In online retail: SHOP announced plans to make its Shop Pay service available for online stores not hosted on its namesake cloud platform. Shopify’s platform is used by retailers to build and manage e-commerce websites. It helped process $49.6 billion worth of online purchases last quarter, a 15% increase from the same time a year earlier.


Leisure, Gaming & Lodging:

·     In towables/RVs: WGO Q3 EPS $2.13 tops est. $1.78 but revs fell -38% y/y to $900.8M, missing consensus $977.1M; adjusted EBITDA $96.4M vs est. $92.3M.

·     In leisure products: PTON assumed/downgraded from Peer Perform to Underperform at Wolfe with $6 tgt citing sustained weak demand for at-home fitness products post the COVID pull forward, and lack of confidence on NT growth initiatives such as FaaS and 3P distribution.


Homebuilders, Building Products, Home Furnishing:

·     Homebuilders are up 2% in the last week and 8% in the last month vs. the S&P’s 0.2% and 4.4% ahead of KBH earnings tonight. Group surged last week after LEN results topped views. KBW Inc. said for shares to rally with earnings, results should confirm housing market momentum beyond the Spring selling season and including in West Coast markets, where KBH has outsized exposure, rather than show signs of deceleration or slowdown.



·     In Energy: after falling the most on Tuesday with broader commodity weakness, energy stocks were the top gainers in the S&P, with oil prices rebounding. U.S. crude oil refining capacity has reversed two years of declines and climbed by more than 100,000 barrels, to 18.1 million barrels per day (bpd), according to a government report released.

·     In Utilities, CEG downgraded from Overweight to Sector Weight on valuation at KeyBanc saying shares approach their price target and many of the catalysts that it envisioned have played out; AGR upgraded to Sector Weight at KeyBanc saying the valuation moves toward the large-cap group average and as a few overhangs clear.

·     Biofuels (ADM, BG, DAR, GPRE, REGI): Shares slide late yesterday – Bloomberg notes weakness attributed to the Biden administration requiring oil refiners to blend less ethanol into their products for 2024 and 2025 than previous proposals. Grain handlers and ethanol producers retreated on the news, which will mean less industrial demand for corn – US EPA finalizes 2024 biofuel blending volumes at 21.54 bln gallons, versus 21.87 bln gallons in proposed rule.



·     In Real Estate: the WSJ reported Silicon Valley companies are dumping office space at an accelerating pace, as tech leaders such as Google and Facebook parent Meta Platforms close locations and reassess their commitments. Office-vacancy rates in Silicon Valley, which includes the Northern California communities of San Jose, Palo Alto and Sunnyvale, were up to 17% in June from 11% in 2019, according to data firm CoStar Group. In some spots, such as Menlo Park and Mountain View, the rate surpassed 20% this spring. (names like KRC, BXP, HPP among owner of office space in Silicon Valley/West Coast.

·     In financial services: LZ tgt rose to $15 from $14 at JMP Securities and raise ests citing healthy business formation and website visits data. Notes the U.S. Census Bureau reported May non-adjusted business applications of 530,276, an increase of 30% Y/Y and 54% above May 2019.

·     In credit cards (MA, V, AXP, COF, DFS): Citigroup said Card spending for the four weeks ended 6/17/23 declined -8.0% Y/Y, ticking up +20bp from the prior week (-8.2%); 2-yr stack data also saw modest improvement (+90bp to -10.5%) while 3-yr stack data inflected to -1.7%. Card spending seems to be stabilizing in the -HSD% Y/Y range.

·     In insurance: ROOT shares jumped late day after the WSJ reported Embedded Insurance offered $19.34 a share for the company, but hasn’t managed to negotiate a deal



Biotech & Pharma:

·     ALDX said it received a Complete Response Letter (CRL) from the FDA citing a lack of evidence of effectiveness of its experimental treatment for primary vitreoretinal lymphoma.

·     ARGX said the FDA approved Vyvgart Hytrulo as the first subcutaneous (SC) therapy for generalized myasthenia gravis (gMG).

·     BLUE said the FDA granted priority review to its gene therapy for sickle cell disease, known as lovo-cel, with a target decision date under the Prescription Drug User Fee Act (PDUFA) of Dec. 20.

·     PIRS shares tumbled as partner AZN informed the co of its decision to discontinue dosing in an ongoing mid-stage trial evaluating its experimental drug for treatment of asthma.

·     QURE shares slumped after mixed data, as its gene therapy for Huntington’s disease reduced levels of a key protein linked to the disease by 8.1% at a lower dose, vs a 52.8% reduction reported by the company last year.

·     SRPT’s SRP-9001 for treating DMD had an AdComm on 5/12. The committee voted 8:6 in favor of accelerated approval for Duchenne patients ages 4-5 years & extended the PDUFA date to tomorrow.

·     The European Association for the Study of the Liver (EASL) Conference taking place June 21-24: JMP Security said in preview: MDGL’s Resmetirom will be the belle of the ball again as Phase 3 MAESTRO-NASH data will be presented for the first time to the broader hepatology community to kick off the conference’s first General Session on Thursday. Firm notes ICPT has multiple NASH poster presentations, including a late breaker, but any NASH data will be overshadowed by the June 22 PDUFA data, where they think approval is unlikely. Lastly, the firm says potentially the most impactful, in their view, could be VIR’s combo studies, RNAi + IFN-a and RNAi + monoclonal (both + nuc), with additional off-treatment data. RothMKM said (on 6/13), that the most important abstract, in their opinion, will be the Phase 3 MAESTRO-NASH results for MDGL where they look for a further breakout of their data, and the datasets for the GLP1 class, both of which will have high read-through to their covered companies VKTX and TERN.


Healthcare Services & MedTech movers:

·     EXAS said Blue-C study met all endpoints, showing improved cancer sensitivity, specificity, & precancer sensitivity; plans to complete FDA submission for next-gen Cologuard by end of 2023 (with 91% specificity vs. 87% specificity original Cologuard).

·     PDCO shares rally as reported F4Q results, with revenue of $1.72B (vs. $1.66B est.) and EPS of $0.84 (vs. $0.70 est.), with Dental strength, Internal Sales strength and better margins while guided initial FY24 guidance of $2.45 to $2.55 (vs. $2.34 consensus).

·     SKIN downgraded to Hold from Buy at Stifel and tgt cut to $10 from $17 saying sales growth in HydraFacial’s booster attachment product may soon see a slowdown.

·     TFX downgraded from Buy to Hold at Needham saying checks indicate that urologists are reducing their use of UroLift due to its retreatment rates, reimbursement cuts, and increasing use of competing procedures (also believes consensus ests are likely too high).

·     TRUP shares tumble after California sent an objection letter on the pet insurance company’s proposed rate increase


Industrials & Materials


·     Package delivery giant FDX provided a 2024 profit outlook below analyst expectations (2024 adj EPS $16.50-$18.50 vs. est. $18.31) saying a drop in package demand offset the company’s $4 billion cost-cutting plan; Q4 revs $21.9B missed the $22.67B estimate and said Q4 operating results in qtr fell from lower global volumes, partially offset by decreased expenses.

·     In railroads (CSX, UNP, NSC), TD Cowen said following a high-profile derailment in February and a STB that has made regulation a priority, the U.S. Class I’s are poised for change. Reciprocal switching rules could impact roughly one-third of U.S. Class I carloads and place medium-term pressure on pricing, while disincentivizing capital expenditures. TDCowen estimate EPS declines ranging from 2% to 9% if the impact is realized in ’24 and view the rail stocks as being pressured.


Industrial, Aerospace & Defense

·     The American Institute of Architects’ Architecture Billings Index (ABI) was 51.0 in May vs. 48.5 in April. The ABI had previously been below the expansion threshold of 50 for six of the past seven months, which followed 20 consecutive months of the index being above 50 previously (shares of URI, WSC, MGRC among names leveraged to data).


Materials, Metals & Mining

·     In materials: PCT announced the first commercial production of UPR polypropylene resin from post-industrial recycled feedstock at its Ironton, OH flagship plant; facility is expected to produce 107 million pounds of ultra-pure recycled resin annually once fully operational, the co said.

·     In agriculture (DE, AGCO, MOS, NTR): The USDA released its crop progress data on Tuesday, June 20, at 4:00 p.m. ET. Corn and soybean conditions continued to deteriorate. Good and excellent corn conditions came in at 55% versus the 61% seen last week. Good and excellent soybean conditions came in at 54% versus 59% seen last week. Reuters reported India’s wheat harvest in 2023 is at least 10% lower than the government’s estimate, a leading trade body told Reuters on Wednesday, amid a sharp rise in local prices during the past two months.



Internet, Media & Telecom

·     In Internet/Media: SPOT assumed/upgraded to Outperform from Peer Perform at Wolfe Research with $190 tgt citing path for top-line acceleration, steady margin expansion, and potential for sustained upside revisions to Street estimates over the next ~12 months.

·     Online dating: MTCH was downgraded at Wolfe to Peer Perform from Outperform, saying the online dating sector’s secular growth slowing and execution of Match’s strategy not certain.


Hardware & Software movers:

·     SoftBank (SFTBY) founder Masayoshi Son said the company is prepared to go on the offensive after three years of asset sales amid excitement over advances in artificial intelligence, ending more than a year of relative dormancy in startup investments.

·     ADBE was upgraded to Outperform from Market Perform at BMO Capital with a price target of $570, up from $500 as believes that ADBE can capture price/mix, as well as new users, through generative AI.

·     RAMP was upgraded to Buy at Benchmark with $33 tgt saying its forthcoming offshoring and automation cost initiatives (with phase-in beginning 2H FY24E) are underappreciated and point to visible and meaningful margin expansion through FY25E.



·     The sector saw profit taking after a monstrous run to start the year (SOX +44% YTD on AI growth hopes), with the Philly semi-index (SOX) falling over -2.5% to 3,550 by midday, led by some of the year’s biggest winners (AMD, NVDA). NVDA was up 7 of last 8 trading sessions into today, coming off an all-time high of $439.90 yesterday as shares dipped.

·     AMD said it plans to invest $135M in Ireland over four years; projects in Ireland relate to next generation AI, data center, networking and 6G communications infrastructure.

·     INTC said it would sell 20% of its stake in IMS Nanofabrication to private equity firm Bain Capital in a deal valuing the Austrian producer of chipmaking tools at about $4.3 billion.

·     COHR downgraded by two analysts: 1) Rosenblatt cut to Neutral from Buy noting shares are up ~80% in the past month on the thesis AI will drive massive growth in 800G and above Datacom Optical modules. 2) Northland cut to MP from OP post the recent strong move that narrowed the valuation Gap with competitor LITE noted in its 6/1 AI focused note significantly.


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.