Market Review: June 30, 2023

Closing Recap

Friday, June 30, 2023





DJ Industrials




S&P 500








Russell 2000













US equity futures gained overnight, then enjoyed a nice incremental pop on economic data. The core PCE price index gained +0.3% month/month, in-line with expectations, but below the prior reading of +0.4%. The year/year core PCE price index was +4.6%, slightly below the prior/estimate, both +4.7%. Yields retreated modestly with the equity pop as investors re-evaluated hopes and expectations around future Fed moves with a Fed-favorite inflation metric somewhat more benign. Mid-morning breadth was about 2.3:1 in favor advancers with big caps leading after a softer relative showing yesterday. AAPL made a push above the $3T market-cap level intraday, while the NASDAQ was +1.65% vs IWM +0.55% early, with all sectors in the green. Sector leaders included Communications, Consumer Discretionary and Consumer Staples, while Real Estate, Materials and Utilities were relative laggards.


Data-wise today, @charliebilello notes we should see another reduction in the inflation rate next month with the Cleveland Fed expecting 3.2% for both CPI and PCE, but the market continues to price in an 87% probability of a Fed hike at the July meeting. Meanwhile, @RBAdvisors notes the UMich Sentiment survey is looking more like recovery than recession with early-cycle sectors starting to hum, so it seems the Fed has more work to do. Also on the UMich survey, @LizAnnSonders highlights 1-year inflation expectations dipped to 3.3% from 4.4%, the lowest since 2021. Lastly, yesterday @DataTrekMB pointed out that 2-year yields had moved to their highest levels since early March and that, since the start of 2022, stocks have been hit each time the 2-year has jumped quickly higher. Stay tuned.


Stocks continued a slow grind higher into the final hour. Breadth expanded to about 2.6:1 in favor of advancers and small caps continued to lag. From a sector view, Real Estate (XLRE) slipped into the red at about -0.6%, but everything else remained in the green. Technology (XLK, +1.65%), Consumer Discretionary (XLY, +1.44%) and Healthcare (XLV, +1.25%) were leaders. Both value and growth enjoyed the rally, with growth leading. The Russell 1000 Growth +1.5% vs Russell 1000 Value +1.03%.


Economic Data

·     Personal income for May rose +0.4%, topping consensus +0.3% and vs. April +0.3% (prev +0.4%); the May personal saving rate was +4.6%. Personal Spending +0.1% vs. consensus +0.2%

·     The PCE price index M/M for May rose +0.1% vs April +0.4% (and prior +0.4%) as the core PCE price index +0.3% (in-line with consensus +0.3%) vs April +0.4%

·     The PCE price index Y/Y for May rose a lighter +3.8% vs April +4.3% (and prior +4.4%); while core PCE rose +4.6% (vs. est. +4.7%) and vs April +4.7% (prev +4.7%).

·     University of Michigan surveys of consumers sentiment final June 64.4 vs. est. 63.9 vs preliminary June 63.9 and final May 59.2; current conditions index final June 69.0 from 68.0 prior and expectations index final June 61.5 vs. prelim June 61.3.

·     University of Michigan surveys of consumers 1-year inflation outlook final June 3.3% vs prelim 3.3% and final May 4.2%. University of Michigan surveys of consumers 5-year inflation outlook final June 3.0% vs prelim 3.0% and final May 3.1%

·     Chicago PMI for June actual: 41.5 vs 40.4 previous; and below the estimate 43.8.


Commodities, Currencies and Treasuries

·     WTI August crude held early gains throughout the day to settle +$0.78/bbl, or +1.12%, to $70.64, while Brent futures also gained +$0.56/bbl, or +0.75%, to $74.90. Today’s move capped a gain for the month but wasn’t enough to offset losses for the quarter, down about -6.5% in the last three months and is down -12.1% for the first half. Recent voluntary production cuts by several OPEC+ members and the OPEC+ deal have supported pricing in expectation of tighter supply, but demand has waned. Also in play has been higher Chinese refinery throughput, declines in US oil stocks and expectations for replenishment of the SPR.

·     Natural gas prices rose +3.6% at $2.798/MMBtu, the highest closing price since March 3rd as another large decline in gas-targeted rigs triggers renewed hopes for an eventual drop in production rates. Despite ending at a 17-week high, the front-month contract for August delivery fell by -1.6% for the week.

·     August gold futures rallied to settle +$11.50/oz, or +0.6%, at $1,929.40. The move was not nearly enough to offset recent weakness, with the month finishing -2.7% and the quarter -2.9% as the Fed holds rates high and expects to disappoint investors hoping for quick cuts. The quarterly slide was the largest since 3Q22, while the monthly loss was the largest since February.


Currencies & Treasuries

·     Treasury yields fell on the day, but ended the month and quarter sharply higher on rising expectations of additional rates hikes from the Fed in coming months. The benchmark 10-year yield rose 8.1 bps this week to 3.818%, was up 18.2-bps this month, and rose +32.7-bps this quarter (-41.3-bps from 52-week high of 4.231% on Oct 24th. The shorter term 2-year yield also fell on the day, but rose 12.9-bps this week at 4.877%, rose 48.9% this month and jumped +81.7 bps this quarter (52-week high stands at 5.064% on March 8th).






WTI Crude















10-Year Note





Sector News Breakdown



·     TSLA is expected to report record Q2 vehicle deliveries this weekend. Expectations are for global deliveries of 445,000 vehicles from April to June, according to the average estimates of nine analysts by Refinitiv.

·     XPEV launches and prices its G6 SUV model at 209,900 yuan ($28,944.54) per unit in mainland China. The G6 priced 20% below Tesla’s Model Y starting price of 263,900 yuan ($36,390.97); G6 receives 25,000 orders in 72-hour presale window – South China Morning Post reported.

·     NKLA gets notice from Nasdaq that it has regained compliance with the exchange’s listing rules on Thursday. Nasdaq had given NKLA a delisting notice last month for not meeting its minimum bid price requirements.


Retail, Consumer Staples & Restaurants:

·     In retail: NKE a disappointment as Q4 EPS estimate by a penny, while gross margin also fell on moves to clear inventories through promotions, while North American sales only rose 5%, its slowest such growth in 4 quarters and said sees Q1 rev growth to be flat to low-single digit, below estimates of a 5.8% rise. A positive, revs beat as Greater China sales jumped 16%.

·     In Beverages: STZ reported an 11% increase in beer sales in the latest quarter as its Modelo Especial brand became America’s top beer, but said net income fell 65% to $135.9M and revenue rose 6% to $2.51B as higher raw material prices, marketing spending weighed on profits.


Leisure, Gaming & Lodging:

·     In cruise lines: CCL upgraded from Hold to Buy at Jefferies as raise tgt to $25 from $9 saying the leadership change and the supply and demand recovery, the resulting capital pivot, drive a significant shift from debt to equity should position the shares as more broadly investable.

·     In towables/RVs: CWH upgraded from Neutral to Buy at Davidson and raise tgt to $36 from $25 saying given the normalization occurring in the RV industry over the past 6-12 months, CWH has accelerated their acquisitions and the firm believes their strategy is working.



·     In Energy: CLB was downgraded to Sell at Citigroup, lower ests and tgt to $21 on NAM completion weakness negatively impacting Production Enhancement. NEXT said its LNG project has received funding to support a positive final investment decision of the first three liquefaction trains (Phase 1) at the Rio Grande LNG export facility in Brownsville, Texas

·     In Solar: ENPH upgraded to Buy from Neutral at B Riley with a $214 price target; SEDG tgt raised to $396 from $379 at Bank America saying Q2 setup looks healthy and further points to EBITDA acceleration in second half of this year, driven by compounding operating leverage and further commercial and industrial.

·     In Utilities: D lowered Q2 operating EPS view to 44c-50c vs. prior view 58c-68c (est. 64c) and said given pending business review, company has not provided full-year 2023 earnings guidance. AEP mentioned positively at BMO Capital saying the LPSC voted to approve SWEPCO’s March settlement with modest modifications and more importantly, approved the flex-up capacity option – which they say is a significant positive for the stock as it addresses the regulatory story.



Banks, Brokers, Asset Managers:

·     In Insurance: ROOT shares fell after co issued a statement late Thursday that it is not in receipt of any proposal that is actionable. Recall shares had jumped on June 21 WSJ report that Embedded Insurance has made multiple approaches and offered to acquire Root for $19.34 per share.

·     In Crypto: Bitcoin prices slumped after the WSJ reported the SEC said a recent wave of applications filed by asset managers to launch spot bitcoin exchange-traded funds are inadequate, according to people familiar with the matter. Regulator tells Nasdaq, Cboe that recent filings from BlackRock, Fidelity and others aren’t clear and comprehensive. Shares of COIN, MARA, RIOT, MSTR and others that move on Bitcoin fell

·     In Lending: (SOFI, NAVI) the US Supreme Court blocks President Biden’s plan to cancel $430 billion in student loan debt. The policy would have relieved the debt of over 40 million Americans. Six Republican state attorneys general argued that the loan forgiveness policy violates the separation of powers and the Administrative Procedure Act. Tens of millions of borrowers will now resume monthly student loan payments.



Biotech & Pharma:

·     AUPH shares rose after its board of directors announced the exploration of strategic alternatives to maximize shareholder value; said has accepted recent director resignations and has initiated a search for new directors.

·     BDTX 15M share Secondary priced at $5.00 per share.

·     GNFT and partner Ipsen announced positive top-line data from the pivotal Phase 3 ELATIVE trial of elafibranor in primary biliary cholangitis (PBC) as largely anticipated.

·     PTCT said its experimental drug vatiquinone, which is being studied as a treatment of mitochondrial disease associated seizures (MDAS), failed to achieve its goal of reduction in observable motor seizures.

·     RNLX the FDA granted marketing authorization to its AI-based test to assess risk of Progressive decline in kidney function in adults with diabetes and early-stage kidney disease.


Healthcare Services & MedTech movers:

·     ACCD reported strong Q1 results, above consensus as well as the high end of guidance for both revenue ($2.5 million beat) and adjusted EBITDA (a $3.8 million, or 23%, beat) while also increased its guidance for fiscal 2024.

·     BHG shares jumped as entered into a definitive agreement to sell its California Medicare Advantage business for $600M to MOH as proceeds will be used to pay off debt/liabilities.

·     BLCO said it agreed to buy NVS’ dry eye drop for $1.75B (deal also includes up to $750M in milestones for NVS).


Industrials & Materials

Aerospace & Defense

·     SPR workers approved a new labor contract, ending a six-day strike that threatened to disrupt output at plane makers BA and EADSY. About 6,000 members of the International Association of Machinists and Aerospace Workers voted to ratify a four-year contract.

·     BAH mentioned positively at William Blair saying the company’s tracker picked up that BAH was recently re-awarded the Space Force Remote Sensing $630m/8-yr contract- was originally given to BAH in Jan ’22, but never started b/c of protests.

·     HWM reiterated Outperform at TD Cowen and raised tgt to $55 from $49 along with ‘23 estimates saying the stock remains attractive and expect Q2 beat & C23 guidance hike.


Materials, Metals & Mining

·     In Metals: Gold miner KGC rebuffed a takeover approach by rival Endeavour Mining in recent months, Bloomberg News reported late Thursday saying Endeavour was considering a potential cash-and-stock deal for Kinross. Gold prices reversed initial losses as May PCE inflation data came in-line to slightly better PCE data, raising hopes the Fed will be less aggressive in rate hikes.

·     In paper sector: IP & PKG estimates and tgts lowered at Jefferies and remain Underperform rated to reflect intra quarter price declines in containerboard, pulp, and UFS. Firm said containerboard prices likely aren’t bottoming until 2H23 / early 2024, and the industry needs to see several larger mill closures for S/D to be in balance.



Hardware & Software movers:

·     In the PC sector, Citigroup initiated CDW w/ Buy ratings, noting commercial PCs “are seeing early signs of recovery” and Neutral ratings on HPQ, HPE, and DELL. Said the hardware sector is going through a period of cyclical downturn, following a sharp acceleration in pandemic-induced demand. Citi initiated AAPL at Buy w$240 tgt saying the Street is underestimating continued gross margin expansion driven by a shift toward higher-end iPhones, along w/ further share gains in China and India.

·     In Cloud Server: The Information reported late yesterday that MSFT’s Cloud Server Business in 2022 Was Less Than Half of AWS, New Document Reveals. Azure generated half the revenue of its primary rival, Amazon Web Services, in the 12 months ended June 2022, according to internal documents briefly posted by federal antitrust regulators

·     In Software: PRGS rallies early following quarterly results; Q2 EPS $1.06 vs. est. $0.90; Q2 revs $178.3M vs. est. $169.78M; sees FY adj EPS $4.16-$4.24, vs. prior $4.09-$4.17.



·     Semiconductors paced the gains in tech for the week, month, and YTD as the first half ends: Philly semi-index (SOX) +1.75% around 3,675 (not far from 52-week high 3,743), rises nearly 5% this week, +6.5% on month and up more than +42% in 1H’23. Shares of NVDA +190% YTD, AMD +76% YTD, AVGO +54% YTD, MRVL +57% YTD, AMAT +54% YTD are among top in the index.

·     ASML shares active the Dutch government set out new export control measures for advanced semiconductor-manufacturing equipment due to security concerns, aligning with U.S. efforts to prevent key technology from advancing China’s military power. ASML said it didn’t expect a material impact on its guidance from the new export controls, which will affect shipments.

·     SGH posted beat and raise quarterly results as Q3 adj EPS $0.66 vs. est. $0.40; Q3 revs fell -17.1% y/y to $383M vs. est. $375.5M; Q3 non-GAAP gross margin increased to 28.0%, an improvement of 230 bps y/y.


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.