Market Review: March 24, 2023

Closing Recap

Friday, March 24, 2023





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     After several days of extreme volatility, stocks melted higher this afternoon, with the S&P 500 once again bouncing at its 200-day moving average (MA) technical support of roughly 3,930, as remains a key battleground level. With so much going on between the concerns in the banking system, interest rates, volatile Treasury/currency markets, and mixed economic data, traders have been on edge this week. The Fed boosted interest rates midweek along with other central banks while Chairman Powell called for no rate hikes this year – a stark difference than what fed futures are calling for. Fed President Bullard today said he is increasing his terminal rate expectations by 25 bps to 5.625% – while implied probabilities in the market are on the decline: implied peak sub-5% and implied end of year sub-4%. A significant difference to what the Fed is relaying and what bond and stocks are pricing in. Basically, no one believes the Fed. Ironic that after years of upward stock momentum and hearing the chant “don’t’ fight the Fed”, markets are taking a different view point this time around.

·     Treasury yields fell to lowest levels since September this week, the Russell 2000 index bounced off its lowest levels since October yesterday, but the S&P, Nasdaq and Dow remain stable and above key technical levels as strength in a handful of mega cap tech names this year keep major averages afloat (AAPL, AMD, META, TSLA, GOOGL, MSFT, NVDA). Of late breadth has turned in favor of decliners each day and today saw over 240 NYSE new 52-week lows vs. only about 18-new highs. Defensive sectors saw the biggest gains today (Utilities, REITs, Staples, and Healthcare), which happen to be some of the worst performers in 2023 so far.

·     Major averages continue to “hold the line” but with the Fed adamant of lowering inflation, signs of slowing earnings, and a lack of confidence in the banking system (don’t’ forget about the debt ceiling approaching in July), that’s a lot for Bulls to deal with, but continue to take it all in stride. European stocks dropped amid strong selling pressure driven by resurfacing market concerns about the banking sector. @bespokeinvest noted: As of yesterday’s close, eight sectors were lower year to date while the remaining three are up by over 10%. Going back to 1990, there have only been two other periods in which a sector has been up double-digits and all other sectors trade lower year too.


Economic Data:

·     U.S. Durables orders for Feb fell (-1.0%) vs. consensus +0.6% and below Jan -5.0%; U.S. Feb Durables ex-transportation orders unchanged vs. est. +0.2% and Jan +0.4%; U.S. Feb Durables ex-defense orders fell (-0.5%) vs Jan (-5.6%); U.S. Feb Durables shipments fell (-0.6%) vs. Jan (-0.4%) and Feb nondefense cap shipments ex-aircraft unchanged vs Jan +0.9%.

·     S&P Services PMI Flash Actual 53.8 (best level since April 2022) vs. est. 50.3 and prior 50.6 and S&P Manufacturing PMI Flash Actual 49.3 (best since May 2022) vs. est. 47, and previous 47.3.

·     Global money market and government bond funds received massive inflows in the seven days to March 22. Global money market funds drew a net $120.72 billion in inflows, the most in a week since April 2020. Government bond funds attracted a net $10.15 billion after witnessing $8.24 billion of net purchases in the previous week. – Reuters


Commodities, Currencies & Treasuries

·     Oil prices fell on Friday, with WTI crude down -$0.70 or 1% to settle at $69.26 per barrel, but off morning lows ($66.82 per barrel earlier) amid declining European banking shares and after U.S. Energy Secretary Jennifer Granholm said refilling the country’s Strategic Petroleum Reserve (SPR) may take several years, dampening demand prospects. Baker Hughes said the number of active U.S. rigs drilling for oil rose by four to 593 this week, bouncing after declines in each of the past five weeks. The total active U.S. rig count, climbed by four to 758.

·     Gold prices fell -$12.10 or 0.6% to settle at $1,983.80 an ounce, though still finished the week with a +0.5% advance (4th straight) after touching highs above $2,000 midweek (up over 8% YTD). Gold continues to be influenced by various fundamental forces ranging from Fed rate hike expectations, lingering banking fears, dollar weakness, and falling Treasury yields.

·     Treasuries extend their weekly and month advance, pushing yields down to lowest levels since September now with the 10-year yield at 3.30% and the two-year at 3.58% (narrowing the yield curve inversion to under 30-bps after highs around 110-bps just 2-weeks ago, prior to the SIVB/SBNY banking failures and subsequent central bank actions flooding mkts with liquidity). Markets are pricing 81% odds that the Fed will stop raising rates in May, according to the CME’s FedWatch tool followed by cuts in June, despite Fed Chair Powell saying mid-week that rate “cuts” were not in their baseline case.

·     The US dollar rebounds after a 6-day losing streak, bouncing off seven-week lows as nervousness over banks kept investors skittish and traders assessed the Federal Reserve’s chances of a pause to interest rate hikes. Meanwhile the safe-haven yen remains in demand. Elsewhere foreign investors made a record weekly purchase of Japanese government bonds last week, after the Bank of Japan maintained its ultra loose policy. This has also fueled demand for the yen.






WTI Crude















10-Year Note





Sector News Breakdown

Retail, Consumer Staples & Restaurants:

·     CBRL was upgraded to Buy at Argus with $126 tgt saying the co has seen success with new menu items, including alcoholic beverages and appetizers, that are appealing to younger customers and helping to raise the average check.

·     CURV posts better Q4 results – EPS loss (-$0.04) vs. est. loss (-$0.08); Q4 revs $301.2M vs. est. $295.5M while guides year sales $1.265B-$1.32B vs. est. $1.26B.

·     EXPR reported a 4Q adjusted loss per share and 13% comparable sales decline.

·     JOAN Q4 EPS and Ebitda missed estimates, while sales of $692.8M topped expectations of around $681M, but was down 5.8% y/y.

·     OXM posted better than expected 4Q results and FY23 revenue guidance was above the Street’s pre-release view and EPS guidance fell in line with consensus, Q1 EPS $3.60-$3.80 vs. est. $4.10.

·     LULU positive mention at Wedbush in earnings preview ahead of results next week (3/28) noting shares are down 20% over the past 4 months (vs. our coverage group average -2%) due primarily to concerns over inventories/gross margin, but believe the worst is behind them.


Energy, Industrials and Materials

·     Oil stocks initially fall as U.S. holds off refilling strategic reserve. U.S. Energy Secretary Granholm walked back refill plans and said refilling SPR will be difficult and likely to take years. She added that the White House wants to buy oil back at under $72 per barrel, and that sales and maintenance at two of the reserve’s four sites will make it difficult to buy back oil this year. Shares of majors (CVX, XOM), E&P (EOG, FANG, PXD, DVN), Oilfield services firms (BKR, SLB, HAL) were among the names weak on the day. Growing bank concerns also weighed.

·     Metals & Mining: Keybanc noted following an update on global steel production from the World Steel Association (WSA), production was down ~8% m/m via a ~10% output decrease in China and a RoW output decline of ~7%. On a y/y basis, global production was down ~1% y/y, with China production up ~6%, more than offset by a RoW decline of ~8%. Gold miners continue their good week with rising precious metal prices as investors sought have assets.



Banks, Brokers, Asset Managers:

·     More pressure into the weekend for banks in U.S./Europe. Truist noted the most recent Fed H.4.1 report showed a $43 billion decrease in discount window borrowing offset by a $42 billion increase in the BTFP facility and $37 billion increase in other loans (to FDIC controlled banks), since the end of last week (spot balances). The Federal Reserve Banks with the largest increases in securities, unamortized premiums, and discounts, repurchase agreements, and loans were New York ($55 billion) and San Francisco ($35 billion). Overall, report indicates that the liquidity stress in the banking system is still evident with more banks taking advantage of the BTFP facility.

·     Pressure started with European bank weakness overnight (DB, BCS, UBS) after a sharp rise in the cost of insuring its bonds against the risk of default. Credit default swaps on Deutsche Bank debt, which allow an investor to pay a regular premium to insure their debt holdings against default, jumped the most on record Friday as shares extended their slump for a third consecutive session.

·     In research: FHN was upgraded to Overweight at Wells Fargo saying the risk/reward of the TD merger being completed at the original $25 price is compelling at the current valuation, resulting in their upgrade to Overweight (said believe downside risk is limited to $15).

·     52-week lows in Insurance: ALL, AIG, LNC, MET, PRU, WRB and in banks: BAC, CFG, MTB, PNC, TD, WFC, WBS (several others as well).


Bitcoin, FinTech, Payments:

·     In payments (AXP, COF, MA, V): Bank America said total card spending per HH fell by 0.4% y/y in the week ending Mar 18 according to BAC aggregated credit and debit card data. Card spending has been slowing since Jan. At the national level, it has not been clearly impacted by regional banking stress.

·     In FinTech: SQ downgrade from Overweight to Neutral at Atlantic Equities after the Hindenburg Research report on Thursday allegations focused on Cash App’s predatory fees, fake user accounts, and links to criminal activity. Several other analysts weighed in on the report, defended by Truist, and Bank America).

·     In crypto: COIN adds to yesterday losses as TD Cowen downgraded to Underperform saying they see increased risk to co’s operations following U.S. SEC threat to sue on Thursday. They say they expect this to create an overhang on shares and remove positive n-t catalysts. Crypto assets dropped this morning after Changpeng Zhao, the CEO of Binance, said the cryptocurrency exchange is working on an issue that has impacted deposits and withdrawals on its platform.


Housing, REITs:

·     REITs remain under pressure, one of top S&P sector decliners YTD as industry feeling brunt of financial/banking concerns. Barclay’s downgraded SLG to Underweight and BXP to equal weight noting as investors increase the focus on refinancing risk, office REITs tend to have more near-term maturities than other subsectors, adding another relative headwind.

·     Tower stocks are underperforming REIT’s YTD according to KeyBanc citing: 1) concern of rising interest rates; and 2) concerns around the trajectory of U.S. leasing. They say they believe three factors could help improve sentiment: 1) valuations which are likely to bottom in the mid-teens AFFO/share multiples; 2) catalysts from U.S. carrier activity re-accelerating; and 3) clarity around financing costs. Said still relatively more favorable on SBAC vs. AMT

·     52-week lows in REITs: ARE, APLE, ABR, AHT, AVB, BXP, BDN, CPT, CUZ, OFC, DEI, EPR, EQH, EQR, ESS, HR, HT, SLG, SHO, VNO



Biotech & Pharma:

·     GSK shares slip after a CA judge will allow expert testimony linking GSK’s heartburn medication Zantac to one man’s cancer.

·     INCY shares slip after the FDA declines to approve extended-release version of its cancer drug Jakafi, which is already approved to treat bone marrow cancer, abnormally high RBC count in blood, and graft-vs-host disease.

·     REGN upgraded from Hold to Buy at Jefferies and raise tgt to $925 from $675 saying Dupixent well exceeded buyside bar, showing 30% reduction. & 83mL FEV1 benefit over placebo and firm thinks COPD could be $4Bn oppty for Dupi (incr. total Dupi PS to $19.2Bn).



Internet, Media & Telecom

·     NFLX weekly outperformance continues (+5.5%); Bank America noted third-party data has indicated that subscriber results for US and Canadas (UCAN) will be significantly stronger than current consensus (+100k) and their estimate (-350k) of net adds for the region.

·     META, AAPL, GOOGL, MSFT, NVDA, AMD have been the reason markets remain so strong, massive outperformance in all YTD and helping keep S&P, Nasdaq higher for year despite declines in energy, financials, and defensive/interest rate sensitive sectors this year.

·     ATVI shares rise in video game sector after UK’s Competition and Markets Authority updated its provisional findings on MSFT’s acquisition of the company after new evidence showed the transaction will not result in a substantial lessening of competition in console gaming in the UK.


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.