Market Review: May 08, 2023

Closing Recap

Monday, May 08, 2023





DJ Industrials




S&P 500








Russell 2000













U.S. stocks were stuck, trading in a very narrow range all day today (S&P 18-point range intraday – smallest in 2023) as markets continue to exhibit no fear ahead of key inflation data later this week (CPI 5/10 and PPI 5/11), ongoing banking sector concerns, and the possibility of a U.S. default with the debt ceiling needing to be raised by June. Since 1959, the U.S. debt ceiling has increased 89 times, but the two sides appear far off in negotiations. Meanwhile, investors continue to bet on Fed rate cuts following an expected “pause” at the June meeting despite the Fed just last week saying it wasn’t their base case. Treasury yields continue to trade well below the current fed funds rate of 5%-5.25%. The Fed has hiked rates by 500 bps over the last 14 months, the fastest rate hiking cycle since the early 1980s, but major U.S. averages have been unphased this year, still trading higher on the year despite the banking turmoil that saw three massive bank failures (FRC, SBNY, SIVB) in the last 2-months. Energy, Communications, and Financials were among the leaders in the S&P while REITs, Utilities and Industrials fell the most. Stocks took a brief dip late in the day after the Fed noted banks tightened credit terms for all categories of commercial real estate loans through Q1 vs prior quarter and saw weaker CRE demand. The Fed survey also noted banks tightened credit terms for all categories of consumer credit through Q1 vs prior quarter; fewer were more willing to make consumer installment loans. Stocks slipped on the headlines but quickly rebounded, ending not far off the highs on a very quiet day.


Economic Data

·     The NY regional Fed bank reported as part of its April Survey of Consumer Expectations that respondents see inflation one year from now at 4.4%, down from 4.7% in the March survey. Inflation three years from now was seen at 2.9%, compared to 2.8% in March, while five years from now it was expected to be at 2.6%, versus 2.5% in the prior month.

·     U.S. March wholesale inventories revised to unchanged (consensus +0.1%) from +0.1% and wholesale sales fell -2.1% vs Feb +0.4% (prev +0.4%); March stock/sales ratio 1.40 months’ worth vs Feb 1.37 months.


Commodities, Treasuries and Currencies

·     Oil prices rose as WTI crude gained $1.82 or 2.55% to settle at $73.16 per barrel while Brent crude advanced $1.71 or 2.27% to settle at $77.01 per barrel. Oil prices jumped after posting its third straight weekly fall on Friday. Nymex Natural Gas for June delivery gained 10.10 cents per million British thermal units, or 4.73% to $2.2380 per million British thermal units. Gold prices rose $8.40, or 0.4% for the session to settle at $2,033.20 an ounce, rising for the fourth time in five sessions as prices recouped part of Friday’s 1.5% decline.

·     The U.S. dollar remained relatively weaker against most of its major peers before paring losses. Fed funds futures traders are now pricing for the fed funds rate to reach 4.993 in July and remain below that all year below the Fed’s target range stands at 5% to 5.25%. Sterling hit a more than one-year peak against the dollar trading as high as $1.2668 (best since Apr ’22) but pared gains. Focus this week is the Bank of England meeting Thursday where a 25-bps hike is expected. Meanwhile the euro holds about 1.10, up about 15% since its September lows. Bitcoin prices rolled as much as 7% late day to lows around $27,350. Treasury yields were broadly higher.






WTI Crude















10-Year Note





Sector News Breakdown


Consumer Staples & Restaurants:

·     In Beauty: The New York Post reported billionaire Nelson Peltz is exploring a possible shakeup at EL that could include ousting the longtime CEO of the cosmetics giant — and possibly pushing for a turnaround and eventual sale of the company. (CNBC’s David Faber said this morning that Peltz saying the NY Post story not true as shares pared gains). 

·     In food: THS Q1 $0.68 v $0.39e, Rev $894.8M v $852M; guides Q2 Rev $810-840 v $875Me, adj EBITDA $65-80M, margin 7.9-9.4%; TSN shares slide on lower guidance – Q1 adj EPS $0.82 vs. est. $0.79; Q1 revs $13.13B vs. est. $13.60B; guides FY Capex to $2.3B down from prior about $2.5B and lowers FY sales $53B-$54B from $55B-$57B (Street at $55.04B); CEO also said “never seen this highly unusual situation where beef, pork and chicken are all experiencing challenges at the same time” – shares of PPC, HRL also active on comments.



·     ENR Q2 $0.64 v $0.51est. and revs $684M as affirms FY23 $3.00-3.30 v $3.11e, adj EBITDA $585-615M, Organic Rev "to increase low single digits."

·     FRPT posted Q1 sales beat, reaffirming FY sales outlook, but shares erased early gains.

·     PTON upgraded from Underperform to Market Perform at BMO Capital saying they still fear TAM will prove materially lower than management expectations and see risks, but also see green shoots as risk/reward has shifted, even skewed upward.

·     TUP shares fall after saying it had engaged investment bank Moelis & Co LLC (MC) to explore strategic alternatives, adding that it expects a "material decline" in revenues for the first quarter ended April 1


Leisure, Gaming & Lodging:

·     In theme parks: SIX shares rise on better-than-feared Q1 results as attendance was down -5% y/y vs but better than some ests of -10% (MSCO) while stronger per caps drove the upside (especially in admissions at +10% with in-park spend +3%); revs and adj EBITDA topped consensus.

·     In casinos & Gaming: for CHDN, Kentucky Derby Recap: Mage wins the 149th Run for the Roses. Churchill Downs announced that wagering from all sources was the highest all-time for the Kentucky Derby race, the Kentucky Derby Day program, and Kentucky Derby Week races. Given this backdrop, CHDN expects Kentucky Derby week to reflect a new record with $14-$16M of EBITDA growth vs. last year, up slightly from prior guidance of $10- $15M.

·     In education: VTRU upgrade to OW at Morgan Stanley and downgrade LAUR to EW as update models, including 1Q23 expectations; said a weak macro-outlook should keep the sector trading at depressed levels, implying upside if FIES comes back.


Homebuilders, Building Products, Home Furnishing:

·     SPB shares rallied after the DOJ said late Friday that it has settled its antitrust challenge to the Swedish lock maker Assa Abloy’s planned acquisition putting the $4.3 billion deal on track for completion.

·     In home improvement retail: TDCowen lowered 1Q23 comps & EPS estimates at HD and LOW on weather headwinds, lumber pressure, and modestly softening consumer – that said, Pro checks are better than feared, and DIY demand for projects remains solid.

·     In building products: flooring company LL Q1 adjusted EPS loss (-$0.31) vs. est. loss (-$0.15) and vs. $0.13 y/y while Q1 revenue $240.7M miss $258.4M est.; said Q1 comps declined -15% vs consensus -8% and is not providing FY guidance just that 2023 full year revenues to continue to be challenged due to macro uncertainty.


Energy, Industrials and Materials

·     In oils, OXY shares slipped after Warren Buffett said this weekend that Berkshire Hathaway Inc. won’t make an offer for full control of the energy group, lightening speculation he was seeking to own the company after spending months buying up its shares. Crescent Point Energy (CPG) said it has temporarily limited oil production in Alberta as wildfires spread across the province.

·     In lithium space: ALB upgraded to neutral from underperform as lithium markets stabilize, rally likely; raise tgt to $200 from $195 as spot lithium prices have stabilized and are likely to rally n-t. In chemicals, SMG was upgraded to Overweight at JPM saying the company’s raw material cost pressure has come to an end, and it is now poised to receive significant raw material benefits.

·     In transports: In Airlines, JPMorgan upgraded AAL upgraded to Overweight in a reshuffling of ratings while downgraded LUV and ULCC to Neutral saying the long-term relationship between Discounters and the Big 3 has inverted; it’s now the larger airlines that control the high ground, and they believe this newfound relationship between operating models can persist. In logistics, XPO was upgraded to Neutral from Underperform at Bank America after having downgraded in November on volume and margin pressures – notes the co added ODFL’s prior CFO Wes Frye to its Board in March and named Dave Bates, ODFL’s former SVP Operations, as its COO of N.A.



Banks, Brokers, Asset Managers:

·     In banks: PACW slashed its quarterly dividend to $0.010 and said business remains “sound.” Helped boost other regional lenders initially before paring gains. Note the KBW Regional Banking Index dropped 8% last week, the worst weekly decline since mid-March, when the crisis started.

·     Bitcoin prices fell over -5% to below $28,000 after Cryptocurrency exchange Binance halted bitcoin withdrawals for several hours on Monday; weighed on shares COIN, MARA, RIOT.

·     In payments: GDOT downgraded from Buy to Hold at Needham saying 1Q results came in well above their expectations, though believe this was largely the result of favorable seasonality in the tax processing business and better BaaS trends. PYPL expected to report earnings tonight.



Biotech & Pharma:

·     ANIP raises FY23 revenue guidance to $385M-$410M from $360M-$385M prior; adjusted non-GAAP EBITDA guidance to $97M-$107M from $78M-$88M and adj EPS view.

·     AXSM reported a smaller-than-expected Q1 EPS loss on much better revs $$94.6M vs. est. $26M, which included its first full qtr launch of depression drug Auvelity.

·     BAX confirms pact to sell biopharma unit to Advent, Warburg Pincus; Baxter will receive $4.25B in cash, subject to certain closing adjustment.

·     BNTX confirms FY vaccine revenue outlook, announces portfolio expansion plans.

·     CTLT shares tumbled after delays Q3 results & conference call; said expects to significantly reduce both its FY23 net revenue and Adjusted EBITDA guidance by more than $400M each.

·     IMRN rises as announces FDA removed clinical hold on new Campylobacter ETEC Therapeutic Paves way for clinical trial initiation.

·     RXRX to acquire two companies in the AI-enabled drug discovery space; Cyclica for a purchase price of $40M and Valence for a purchase price of $47.5M.

·     SWAV shares dipped amid speculation BSX talks have broken down

·     TRUP downgraded to Neutral at Bank America after shares declined Friday post earnings results; firm notes shares had already discounted a lot of headwinds, but still downgraded.



Internet, Media & Telecom

·     Towers: Bank America said AMT and EQIX are top picks, while still prefer data centers over towers; said they view both the DC and tower sectors positively but prefer DCs due to secular pricing power tailwinds.

·     In telco: DISH shares slip initially on miss as Q1 EPS $0.35 vs. est. $0.36; Q1 revs $3.96B vs. est. $4.06B; said Q1 net Pay-TV subs decreased approximately 552,000 and retail wireless net subscribers decreased by approximately 81,000 in Q1.


Hardware & Software movers:

·     Internet Security: ZS shares rise in Internet Security as reported stronger-than-expected Q3 results and boosted its revenue, as sees 3Q revs view $415M-$419M vs prior guidance $396M-$398M; FTNT was upgraded from Neutral to Buy at Bank America and raised tgt from $66 to $75noting it trades at a premium to cyber peers’ 20-25x, which they believe is warranted given the company’s strong fundamentals.

·     Software movers: SNOW upgraded to Buy from Hold at Stifel with $185 tgt as commentary from MSFT as well as other 3rd party consumption models (DDOG, FROG, CFLT) lead them to believe the optimization headwinds the group has felt over the last 9 months are stabilizing; BL upgraded to Neutral on valuation at Citigroup after reported 1Q23 results with a $1M rev beat vs. in-line revs for the past 2 quarters yet a $0.18 EPS beat; DBX was upgraded from Sell to Neutral at Goldman Sachs and upped tgt to $25 from $22 following Q1 results that beat across all metrics (with revenue coming in 2% higher than consensus, ARPU beating by 1%, operating margin by 5% and EPS by 15%). WKME was downgraded to MP from OP at BMO Capital and tgt trimmed to $11 from $13 as have growing concerns about WalkMe growth over the next few years.



·     AMD and NVDA shares outperformed in semi space on more AI growth hopes.

·     QCOM said it would buy Israel’s Autotalks Ltd that makes chips used in technology aimed at preventing vehicle crashes.

·     Bank America lowered AVGOests. on near-term networking headwinds but maintain Buy ratings for the networking leaders AVGO and MRVL; said multiple yellow flags in peer earnings suggesting inventory correction in networking, optical, storage markets.


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.