Market Review: March 22, 2023

Closing Recap

Wednesday, March 22, 2023





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Stocks finish at the lows amid late day sell-off! As expected, markets were quiet ahead of the Fed decision. We did see a tech-driven boost mid-morning with only Technology (XLK, +0.81%) and Consumer Staples (XLP, +0.47%) green at noon, but that faded into early afternoon and the Fed decision. Expectations had moderated recently, so the Fed’s announced +25bps rate change was generally in-line, but the shift in language from ongoing increases to some additional firming gave the markets a nice initial pop. Then, of course, investors settled into the idea that the less aggressive stance is based on expectations for lower growth and less robust hiring and that’s not necessarily a good thing. The December implied rate moved lower again to 4.25% from 4.43% this morning despite Powell’s comments that rate cuts this year are not in the baseline expectations. Volatility, yes; consistent direction in the post-Fed move in equities, definitely no. Stocks faded into the final hour during the Powell press conference and after Treasury Secretary Yellen said the Treasury is not considering or working on a unilateral expansion of deposit insurance – her comments took banks lower the final hour.

·     Consistent with this morning’s pre-Fed action, @Bespokeinvest highlights the big performance in big tech, saying Big Tech has been on fire in 2023 after a disastrous 2022. NVIDIA, Tesla, and Meta are all up more than 60% YTD. Microsoft, Apple, Alphabet, and Amazon are up 15-20%+. Separately, despite the big dip in gasoline inventories announced today, @GasBuddyGuy reminds us prices today are an average of $0.84/gal lower than a year ago. That’s money back in the pocket of consumers.

·     On a sector basis, heading into the final hour of trading, Technology (XLK, +0.3%) maintained its leadership position but was the only sector able to hold gains after Powell downplayed any likelihood of rate cuts this year. Real Estate (XLRE, -2.5%) and Financials (XLF, -1.30%) led the decliners, followed by Energy (XLE, -1%) and Materials (XLB, -0.90%). Breadth slipped during the Powell comments to about 1.5:1 in favor of decliners and Growth outpaced Value thanks to the tech leadership.


Commodities, Currencies & Treasuries

·     April gold settled +$8.50/oz, or +0.43%, to $1,949.60 ahead of today’s Fed decision and extended gains after the Fed moved +25bps and gave a more dovish outlook in the statement. Gold was further helped by the Dollar fade on the Fed announcement as investors once again eye the $2,000 level once again.

·     In a somewhat unusual twist, oil rallied off EIA data despite crude inventories posting a gain versus an expected draw. The move was attributed to meaningfully-below-expected levels in both gasoline and distillates. May WTI crude futures gained $1.23, or +1.76%, to settle at $70.90/barrel, while Brent also climbed +$1.37, or +1.82%, to finish at $76.69/barrel. The Fed announcement coming with slightly more dovish commentary also supported initial afternoon gains in crude along with other risk assets.

·     Treasury yields tumble following the FOMC meeting comments and the dollar down about 1% with the euro approaching the 1.09 level as U.S. markets appear to not believe the Fed as Chairman Powell said rate cuts are not the base case: the SEP shows relatively slow growth and rebalancing in the labor market. Assuming the economy proceeds as expected, there will not be a case for and easing this year.






WTI Crude















10-Year Note





Sector News Breakdown



·     Online auto retailer CVNA said it sees core loss to narrow in Q1 to $50M-$100M, down from $348M a year earlier and announces private exchange offers relating to existing notes; guided Q1 net sales $2.4B-$2.6B vs. est. $2.72B.


Consumer Staples & Restaurants:

·     In packaged food: UBS said they have a cautious near-term outlook on the US Packaged Food sector (CAG, HSY, NOMD given their expectation for the broad inflationary environment to weigh on consumers’ purchasing power and retailers’ (WMT, TGT, KR) desire to keep costs down.

·     In restaurants: DNUT upgraded from Hold to Buy at Truist and raise tgt to $20 as believe DNUT is one of the few packaged good companies that will post meaningful volume growth in 2023, while most companies will face decelerating or declining growth.


·     NKE Q3 results beat with constant-FX +19% (vs. est. +LDD), with EPS of $0.79 above consensus $0.55. They raised FY reported revenue guidance to +HSD (vs. +MSD prior) but lowered the FY gross margin outlook to -250bps and said sees 4q flat to low single-digit revenue growth.

·     GME reported Q4 beats for revenue and EPS relative to Street expectations driven in large part by hardware sales and cost control; Q4 inventory was $682.9M, compared to $915.0M at the close of prior year’s 4q, and said cash, cash equivalents and marketable securities were $1.391B.

·     OLLI posts better-than-expected Q4 sales, profit and guides annual sales, adj EPS above estimates, while sees 2023 gross margin in the range of 39.1% to 39.3% vs est. of 38.7%.

·     ROST upgraded from Hold to Buy at Loop Capital and raise tgt to $115 as see improved brands and values in the company’s stores and think the company’s outlook provided in February looks conservative as spending seems to be holding steady.

·     SCVL miss and lower guide; Q4 EPS $0.79 vs. est. $0.80; Q4 revs $290.78M vs. est. $309.59M; sees FY23 EPS $3.96-$4.20 vs. est. $4.29; sees FY23 revenue $1.26B-$1.32B vs. est. $1.36B.

·     WOOF slides after slightly misses Q4 estimates for revenue and profit and guides 2023 net revenue between $6.15B-$6.27B, below analysts’ estimate of $6.38B.


Leisure, Gaming & Lodging:

·     In lodging & travel: TZOO shares surge following quarterly results; in lodging, HST downgraded to Neutral from Buy at Compass Point, along with SHO and APLS

·     In towables/RVs: WGO Q2 adj EPS $1.88 vs. est. $1.25 and revs fell -25.6% y/y to $866.7M but above ests. $806.9M; Q2 adj Ebitda $88.4M and gross margin 16.9%


Homebuilders, Building Products, Home Furnishing:

·     Loop Capital said they remain BUY-rated on all three roofing names (OC, BECN, CSL) as see valuations as compelling, pricing expectations too low, and enough pent-up demand to drive stronger earnings results during the upcoming peak season.

·     Weekly MBA mortgage data showed: weekly mortgage applications rose 3.0% in week ended March 17; purchase index rises 2.2% and the refinancing index rises 4.9% as the average 30-year mortgage rate falls 23 bps to 6.48 pct in March 17 week, lowest rate in a month.



·     In Energy: EIA weekly inventory data showed crude inventories rose by 1.1M barrels in the week compared with analysts’ expectations for a 1.6M drawdown; Cushing stockpiles fell -1.1M barrels last week, the EIA said. Gasoline stocks fell by -6.4M barrels vs. est. -1.7M drop and distillate stockpiles fell by -3.3M barrels vs. ests. For -1.5M barrel drop. AR downgraded to Market Perform from Outperform at BMO Capital and cuts tgt to $28 reflecting a less competitive FCF/capital return profile through 2024 and above-peer average valuation.

·     In Solar: ENPH upgraded from Neutral to Positive at Susquehanna saying they believe the setup has become much more attractive since they downgraded the stock to Neutral in mid-December. Following an almost 40% decline in share price since early December, valuation has become more rational, especially considering the longer-term growth potential. ARRY 4Q adj EPS $0.10 vs est. $0.08 on revs $402.1Mm vs est. $366.8Mm, gr mgn 20%, adj EBITDA $51.7Mm vs est. $44.9Mm; guides FY revs $1.8-1.95B vs est. $1.89B, adj EBITDA $240-265Mm vs est. $248.8Mm.

·     In Utilities: ED upgraded from Hold to Buy at Argus noting beginning in 2023, Con Ed will benefit from higher rates, higher ROE, and tax credits. The company is also buying back stock after previously diluting EPS through new equity issuance.



Banks, Brokers, Asset Managers:

·     Banks the biggest sector loser late day after Treasury Secretary Yellen said the Federal Deposit Insurance Corporation (FDIC) was not considering providing "blanket insurance" for banking deposits following the collapse of two prominent U.S. banks this month. The KRE finished on the lows down -5.69% and the BKX lows -4.7% also at lows.

·     Barclays said they revise numbers across all brokers, COIN based on recent changes in rates and other data, and are well below the Street on SCHW, where they think near-term cash borrowing will weigh on F23/F24 EPS & balance sheet growth.

·     In financial services: DBD announced an amendment to its asset-based credit facility (ABL) to add a new $55M in first-in-last-out (FILO) tranche. This announcement comes on the heels of the company seeking a going-concern waiver and immediate solutions to shore-up its balance sheet last week per disclosures made in multiple SEC filing



·     ESA weighing takeover bid for LSI Bloomberg reported late day. INVH downgraded to Neutral and lowering our PT to $32 from $33 at Mizuho saying while they remain long-term fans of this well-established platform, they see incremental internal and external risk / headwinds that support view that the stock is relatively fairly valued with a less-compelling risk / reward profile vs direct peers AMH and TCN (which was initiated at Buy).



Biotech & Pharma:

·     AVDL said the FDA approved its pre-launch activities request (PLAIR) for Lumryz drug, which will be used for the treatment of excessive daytime sleepiness in adults with narcolepsy.

·     ETNB said its experimental treatment (pegozafermin) for nonalcoholic steatohepatitis (NASH) led to NASH resolution compared to placebo in a Phase 2b clinical trial; 89bio said it plans to move the drug into Phase 3 research.

·     HQY put up a strong quarter as it beat the high end of its revenue and EBITDA guidance ranges for F4Q23 and raised its revenue and EBITDA guidance for FY24.

·     KRTX 2.48M share Secondary priced at $161.33.

·     REGN said the FDA approved the expanded use of its Evkeeza drug in children aged 5 to 11 to treat an ultra-rare disease that causes high cholesterol levels.

·     RHHBY announces collaboration with LLY to enhance early diagnosis of Alzheimer’s disease.


Industrials & Materials


·     In rail cars: GBX receives orders for 4,500 railcars with value of $580M in Q2 and guides Q2 prelim revs about $1.1B vs. est. $782.4M and guides prelim Q2 EPS to $0.95-$1.00 vs. est. $0.37. In trucking, KNX upgraded from Peer Perform to Outperform at Wolfe.


Aerospace & Defense

·     BA CFO said commercial unit margins says likely will get worse in Q1 versus Q4 on lower volumes; says defense margins to be negative in Q1 and reiterates 2023 FCF goal of $3B-$5B.

·     BA has secured a deal worth at least $2.5 billion at list prices to sell 21 of its 737 MAX jets to Japan Airlines Co, industry sources said, according to Reuters.

·     AIR reported 3Q adj EPS of $0.75 which was ahead of the Street’s $0.70 estimate as top-line sales of $521M (up 15% y/y) were also ahead of the Street’s $487M estimate and announced the $120M acquisition of aerospace aftermarket software provider Trax yesterday.

·     VORB said it would recall a small group of employees beginning March 23 to prepare for its next mission.



Internet, Media & Telecom

·     In AdTech: META and DV both upgraded to Overweight at Keybanc saying as the ad market settles on more stable footing, they shift their rating distribution back toward Overweight as now have five of nine Platform and AdTech stocks rated OW. View is that companies with product cycles (DV, TTD) and a combination of expense discipline/operational improvement/controversy (META, GOOGL, PINS) stand best positioned to benefit from an eventual recovery.

·     In music: SPOT and WMG upgraded to Buy from Neutral at Guggenheim saying they believe that the global music industry—including labels, platforms, and artists—has the potential for market-leading financial growth over the next several years.



·     NVDA makes it a 7th straight day of gains following upbeat analyst commentary after its 2023 Spring GTC keynote amidst growing optimism as Generative AI drives the next leg of growth.

·     AMD moves back above the $100 level amid broad strength in semis and tech.

·     MRVL is slashing about 320 jobs, or 4% of its workforce, in what it said was a response to an industry slowdown – Bloomberg.


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.