Market Review: May 15, 2023

Closing Recap

Monday, May 15, 2023





DJ Industrials




S&P 500








Russell 2000













U.S. stock markets moved quietly higher all day, climbing late morning throughout the afternoon as investors await key retail earnings this week (HD tomorrow, WMT on Thursday), debt ceiling talks between the GOP and White House (set for tomorrow), and a bevy of Fed speakers (14 on the calendar this week). The S&P 500 has spent 6 days chopping in a 60-point range after today’s market action. U.S. debt ceiling talks ($31.4 trillion borrowing limit is looming) seem to be making progress as President Biden is said to meet with congressional leaders on Tuesday May 16th but unlikely to be concluded before G7 Japan summit (May 19-21st). Dow component HD is expected to report tomorrow and WMT on Thursday leading a handful of retailer earnings this week. There is also a flurry of Fed speakers all week, with Bostic, Kashkari more “hawkish” today and Chicago Fed President Goolsbee more mixed. Manufacturing activity in New York state went back into contraction territory in May after ticking back toward expansion last month, falling to minus 31.8 in May from 10.8 in April (below ests of minus -4).


With today’s gains, the Dow Jones Industrial Average snapped its 5-day losing streak (granted was only down 1% over those 5-days) while the tech heavy Nasdaq led mkts higher, looking to extend its weekly advances to 4-straight as large cap tech continues to be a market leader (XLK Technology +22% YTD and Communications +25% YTD) comes into Monday riding a 3-week winning streak after rising +0.4% last week. Lone piece of U.S. economic data indicated slowing growth as the NY Fed Manufacturing posted a sharp drop from the prior month and well below consensus views.


Interesting stats of the day: @JonErlichman — Amazon went public this day in 1997. $1,000 invested in the IPO; would be worth $1.5 million today.” @Barchart notes “The market cap of Apple $AAPL is now $2.714 Trillion which is greater than the entire market cap of the Russell 2000 which is $2.208 Trillion. Separately, @SpecialSitsNews noted that “>7 companies just filed for bankruptcy in the last 48 hours. More bankruptcies in the last 2 days than an entire week, going back to March 2023.”


Economic Data

·     NY Fed’s empire state current business conditions index tumbles to -31.8 in May vs +10.8 in April and the new orders index sharply lower at -28.0 in May vs +25.1 in April. The prices paid index rose +34.9 in May above +33.0 in April. Employment index at -3.3 in May vs -8.0 in April and empire state six-month business conditions index +9.8 in May vs +6.6 in April.


Commodities, Currencies & Treasuries

·     WTI crude rises $1.07 or 1.53% to settle at $71.11 per barrel, rising as bullish sentiment about tightening supplies from OPEC+ cuts and a resumption in U.S. buying for reserves outweighed concerns about fuel demand in the top global oil consumers. Brent Crude futures settle at $75.23/bbl, up $1.06, 1.43%. Late day, headlines indicated the U.S. plans to buy 3 million barrels of oil for emergency reserve (SPR). Gold prices rose $2.90 to settle at $2,022.70 an ounce as the dollar pared some of last week’s gains.

·     The U.S. dollar index (DXY) slips -0.25% below 102.50 after posting its biggest weekly win since February last week (rose +0.64% last Thursday and +0.63% Friday). Turkey’s stock market fell more than 6% Monday and the lira also came under pressure after presidential elections in the NATO member looked like delivering no clear outcome. Treasury yields barely moving today, 10-yr has remained around the 3.5% since the open.






WTI Crude















10-Year Note





Sector News Breakdown


Retailers Consumer Staples & Restaurants:

·     Earnings this week in retail from: HD reports Tuesday 5/16, TGT, TJX reports on Wednesday 5/17, WMT reports Thursday 5/18 along with BABA, BBWI, ROST

·     SHAK rises early on reports activist investor Engaged Capital has built a stake and is planning to run proxy fight for three board seats at Shake Shack – WSJ

·     MODG mentioned positively in Barron’s this weekend saying sees a bull case in earnings that beat the consensus estimate and downplays reduced guidance.

·     TPR upgraded to Outperform from Market Perform at Bernstein with $55 tgt and raises FY24 numbers and expect multiple expansion to follow saying a strong China / Asia rebound will drive growth in FY24 despite flat/declining North American demand.



·     In MLP Sector: OKE agreed to acquire MMP in a cash and stock deal valued at ~$18.8B including assumed debt, resulting in a combined company with a $60B total enterprise value. The deal will consist of $25 per share in cash and 0.667 common share of Oneok for each outstanding Magellan with an implied value of $67.50

·     In solar and utilities: FSLR was downgraded from Outperform to Peer Perform, removed from Alpha List at Wolfe Research citing valuation after spike in shares last week on constructive Treasury guidance. NRG shares rallied after Elliott Management disclosed a $1 billion stake in the power company and unveiled a plan to create $5 billion in shareholder value. PNM shares fell after New Mexico supreme court denies motion to dismiss and remand merger appeal with AGR, schedules oral argument and has scheduled oral arguments for September 12, 2023.



Banks, Brokers, Asset Managers:

·     Strength in regional banks (KRE, WAL, CMA, ZION, PACW, etc.), but overall banks and financial institutions were mostly higher, among leaders on the day.

·     U.S. bank deposits fell to $17.15T from $17.164T w/w and US bank loans, leases fell by $15.7b in week ended May 3. Deposits at small U.S. Banks edge up to $5.24 trln in week ending May 3 vs $5.22 trln in prior week, Fed data, not seasonally adjusted. @charliebilello notes that “US bank deposits have fallen $600 billion since the beginning of February to $17.15 trillion. Where is much of that money going? Into market-market funds, which have risen $500 billion over that same time period to a record $5.33 trillion.”

·     In brokerage: SCHW upgraded from Market Perform to Outperform at Raymond James and raised tgt to $63 as believes recent data indicate that client cash sorting at Schwab is tapering, which should support balance sheet and net interest margin stabilization in 2H23.


Bitcoin, FinTech, Payments:

·     BAC credit card charge-off rate was 1.89% in April vs 1.90% in March and net charge off rate was 1.17% vs. 1.15% in March.

·     C – Citigroup Credit card charge-offs 1.99 % in April vs 1.67% in March and the credit card delinquency rate 1.14% at April end vs 1.17% at March end

·     COF April domestic credit card net charge-offs rate 4.26% vs 4.16% in March; 30+ day performing delinquencies rate for domestic credit card 3.57% at April end vs 3.66% at March end; April auto net charge-offs rate 1.16% vs 1.30% in March.

·     DFS credit card delinquency rate 1.38% at April end vs 1.40% at March end; card charge-off rate 1.78% at April end vs 1.61% at March end.

·     JPM credit card charge-off rate 1.58% in April vs 1.62% in March; credit card delinquency rate 0.87% at April end vs 0.88% at March end

·     SYF April adjusted net charge-offs 4.7% of average loan receivables; and April 30 days+ past due 3.7% of average loan receivables.



·     LXP upgraded to OW from SW at KeyBanc following 1,140 bps of YTD underperformance vs the Industrial REITs (-330 bps vs the RMS); said the Company’s predominantly single-tenant, net lease industrial portfolio is performing well – growth should remain steady.

·     MAA downgraded from Peer Perform to Underperform w/ $137 PT at Wolfe Research due to a "high bar" for ratings with a firm wide requirement of more conservative distribution given its macro-outlook, fundamentals, and valuation given recent performance, in particular to storage.


Insurance & Financial Services:

·     In tax preparation: the WSJ reported the Biden administration is considering creating a government-run alternative to TurboTax (INTU) and HRB, drawing resistance from Republicans and companies fearing a loss of business.

·     SOFI was downgraded to underperform from Neutral at Wedbush as believes the company may be nearing a tipping point on the fee income it recognizes related to loan origination and sales, and that capital levels may be overstated using fair value accounting and it believes the company may look to raise capital this year to support growth.



Healthcare Services, Biotech & Pharma:

·     SRPT shares jumped after an FDA advisory panel narrowly recommended approval for its gene therapy for Duchenne Muscular Dystrophy (DMD) by a vote of 8-6, ruling that the potential benefit to patients outweighs a long list of concerns from agency reviewers.

·     ATNX files for Chapter 11 proceedings; reaches agreement to pursue expedited sales process of certain assets.

·     CTLT was downgraded to Hold from Buy with Catalent indicating on Friday evening (May 12) that it is postponing its F3Q financial statements and earnings call for a second time.

·     NVRO was upgraded from Perform to Outperform at Oppenheimer with $40 tgt saying its ratings change is more tactical in nature with risk-reward being somewhat balanced.


Industrials & Materials

Materials, Metals & Mining

·     In metals: Newcrest (NCMGY) rises after agreeing to a $17.5 billion takeover by NEM in the gold mining sector; Newcrest said it recommends shareholders vote in favor of Newmont’s offer, which comprises 0.400 of its own shares for each Newcrest share.

·     In materials, chemicals: DD was upgraded to Buy at Deutsche Bank with $80 tgt saying shares are down 15% versus a 3% gain for the S&P since mid-January and DuPont’s shares now trade at a 50% discount to its peers. We think this marks a good entry point for shares. VNTR reaches agreement to enter prepackaged Chapter 11 to significantly reduce debt. CX downgrades to Neutral from Buy at Bank America citing 64% YTD share price appreciation that makes CX’ valuation less attractive.



Internet, Media & Telecom

·     In research: META was upgraded to Buy at Loop Capital and raised tgt to $320 saying the stock has already re-rated meaningfully this year mostly on expense reductions. GOOGL was downgraded to Hold from Buy at Loop Capital, nearing its price tgt and sees an unfavorable backdrop for higher P/E.


Hardware & Software movers:

·     AI shares outperformed all morning after guiding prelim earnings Q4 total revenue seen $72.1M-$72.4M vs. est. $71.1M; posts prelim estimates for adj. loss from operations of $23.7M-$23.9M vs. prior forecast of $24M-$28M loss.

·     MNDY beat and raise guidance; Q1 revs rise 50% y/y to $162.3M vs. est. $155.3M and sees year adj op profit $8M-$12M vs. prior view loss of (-$36M-$32M) and raises year revs to $702M-$706M from prior $688M-$693M view.

·     MSFT’s $75B bid for ATVI received European Union’s antitrust watchdog approval, giving the two companies a win after the deal hit a regulatory roadblock in the U.K.

·     NGMS shares jump as Aristocrat Leisure Limited agreed to acquire the co for $29.50 a share in all-cash deal for the lottery game technology company in a deal valued at $1.2B

·     NTDOY mentioned positively in Barron’s saying The Super Mario Bros. Movie has given Nintendo its first massive hit outside the gaming space, but its release of “The Legend of Zelda: Tears of the Kingdom” on Friday should be Nintendo’s biggest software release in years.



·     WDC shares advanced as Reuters reported that Kioxia and Western Digital are speeding up merger talks and nailing down a deal structure, as a slumping flash memory market puts fresh consolidation pressure on the world’s No. 2 and No. 4 players.

·     According to TrendForce, DRAM and NAND Flash prices are expected to fall further in the second quarter of 2023 due to weak server shipments and high inventory levels – Digitimes reports.


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.