Market Review: May 24, 2023

Closing Recap

Wednesday, May 24, 2023





DJ Industrials




S&P 500








Russell 2000














U.S. stocks flirted with some key technical support levels as debt limit talks in Washington remain “far apart” with negotiators still squabbling over key issues, especially the spending cuts demanded by Republicans, as time runs short to avert a U.S. default (June 1st “X-day”). S&P futures (Spuz) 50-day MA support held around 4,116 while SPX 50-day MA support is at 4,090 (currently roughly 11-point difference between SPX and S&P futures). The Dow Jones Industrial Average also held its 200-day MA support of roughly 32,775. Markets remain glued to the debt ceiling talk “tape bombs”, moving quickly on any headline from McCarthy or others. As of late this afternoon, both sides still nowhere close with only about a week left before the U.S. runs out of money and stocks finished broadly lower. Technology stocks saw a sharp bounce in the final hour of trading, paring losses led by a bounce in semiconductors into earnings tonight for NVDA, a top player in space, as well as AI.


The other factor weighing on markets the last few days (Spuz 100-point roll off Monday highs) is the recent resurgence of the U.S. dollar and bounce in Treasury yields as bets about FOMC rate cuts have disappeared and now markets baking in at least one more 25-bps hike within the next two Fed meetings. @KobeissiLetter noted: “The BASE CASE is now showing a 46% chance of at least 1 rate hike by July. There’s now an 11% chance of 2 interest rate hikes by July. Just last week, markets saw interest rate CUTS beginning in July. Futures have added 25 bps of rate hike expectations in 24 hours. Earnings season is nearly complete with a handful of retailers moving today on results, but a decent dose of technology earnings tonight including NVDA in the semiconductor space and a few software companies on the docket with SNOW, SPLK, PATH among them. VIX hits 3-week highs, before slipping late.


Economic Data

·     According to the May FOMC meeting, minutes showed Federal Reserve officials "generally agreed" that the need for further interest rate increases "had become less certain," with several saying that the quarter-percentage-point increase they approved might be the last. Others cautioned the U.S. central bank needed to keep its options open given the risks of persistent inflation. "Several participants noted that if the economy evolved along the lines of their current outlooks, then further policy firming after this meeting may not be necessary," the minutes said, adding weight to expectations the Fed is likely to pause its aggressive rate-hike campaign at the upcoming June 13-14 meeting. Yet there was division about the path ahead.

·     UK Consumer prices (CPI) rose by 8.7% in annual terms in April, down from 10.1% in March but above the forecast of 8.2% but remains further away from October’s 41-year high of 11.1%. Only Austria has higher CPI inflation at 9.5% while Italy also shares a reading of 8.7%.


Commodities, Currencies & Treasuries

·     Oil prices rose after with WTI crude +$1.43 or 1.96% to settle at $74.34 per barrel after weekly data showed U.S. inventories and fuel supplies tightening. The EIA said weekly crude stocks fell -12.5M barrels vs. forecast for 800K barrel build. Oil extended gains after Saudis warned that OPEC+ could reduce output further to keep prices high offset a lack of progress in US debt talks.

·     The U.S. dollar held just shy of a two-month high (up 2.6% since 5/9) as U.S. debt ceiling negotiations dragged on, while the pound firmed and then softened after stronger-than-expected British inflation data. Bitcoin prices slid over 3%, holding lows just above the $26,000 level, falling along with gold.

·     Two-year Treasury yields rose for the 10th consecutive session, rising 7.4 bps to 4.357% while the benchmark 10-year yield rose 2-bps to 3.72%. The U.S. Treasury sold $43B in 5-year auction at yield of …vs. 3.763% when issued prior as bid-to-cover ratio 2.58 (vs. prior 2.54), and primary dealers take 9.34% of U.S. 5-year notes sale, direct 17.96% and indirect 72.71%.

·     Gold prices fell -$9.09 or -0.5% to settle at $1,064.50 an ounce down a third straight session to lowest levels in nearly a week while gold miners (GDX) have fallen over 11% in about 2-weeks.






WTI Crude















10-Year Note





Sector News Breakdown



·     Benchmark noted North American vehicle production increased 8.6% in April to 1.3Mm units, the 15ths consecutive YoY increase, and the total exceeded planned production at the beginning of the month by 4%. GM production continues to come in higher than expected, beating the 30-day plan by 12,700 units, and second quarter production is on track to increase 12% YoY while Ford (F) missed the April schedule by 3,700 units but added to May and June schedule.

·     In Chinese EV sector: XPEV provided weaker-than- expected guidance on revenue and deliveries for Q2; said Q1 deliveries of 18,230, compared with 34,561 y/y and deliveries were down ~18% q/q; Q1 revs of 4.03 bln yuan was down ~46% /y/ from 7.45 bln yuan (LI, NIO active in sympathy).



·     Lots of earnings in the apparel retail sector today: ANF, KSS, URBN rise on results.

·     ANF raised its FY sales outlook to +2%-4%, vs. previous range of +1%-3% growth citing steady demand for its clothes and accessories; posted Q1 sales $836M topping est. $814.5M.

·     KSS posted an unexpected Q1 profit of $0.13 vs. est. loss (-$0.42), helped by tighter inventory management and cost control while maintained its annual sales and profit forecasts; said Q1 gross margin improved 67-bps to 39%, while inventory declined 6% to $3.5B.

·     URBN reported a strong EPS beat, driven by top-line upside at Anthropologie and Free People and gross margin well-ahead of expectations and was upgraded to Overweight at Barclays and tgt raised to $38 on accelerating sales and sees positive inflections in its sales-to-inventory risk. GMs beat handily (+260bps vs +100bps guide). Anthro (+13% comps) and FP (+17%) continue to lead.

·     EXPR shares slid after posted a wider-than-expected Q1 loss and weaker-than-expected sales while same-store sales fell 14% citing external factors and challenges in product assortments.

·     PLCE shares slide as lowered 2023 adj net income forecast to $1.00-$1.50 from prior range of $2.50-$3.00 and lower sales view of $1.58B-$1.59B vs. prior $1.62B-$1.66B after Q1 net sales fell 11.2% to $321.6M on larger EPS loss.

·     SCVL Q1 EPS $0.60 vs. est. $0.69; Q1 revs $281.2M vs. est. $288.1M; cuts FY23 EPS view to $3.60-$3.85 from $3.96-$4.20 (est. $3.73) and cuts FY23 revenue view.

·     VFC reported a top-and-bottom-line beat (better SGA offset weaker GM) and introduced FY guidance that enveloped consensus.


Leisure, Gaming & Lodging:

·     In the RV/towable sector: CWH upgraded to Outperform from Market Perform with a revised target price of $35 from $26 at BMO Capital saying after channel checks it thinks lower manufacturer production levels will benefit New RV margins and Used RV retail.


Homebuilders, Building Products, Home Furnishing:

·     Homebuilder TOL reported Q2 earnings results ahead of expectations on both the top and the bottom lines as net orders were down -18.8% y/y but above consensus estimates of a -26.7% decline and raised its FY23 guidance on almost every metric. Management also noted that the increased demand that began in January continued throughout the quarter.

·     Barclays raises PT of several U.S. homebuilders saying they think the investment community is still under-appreciating the positive impact that this inventory shortage has to new construction, and the implications to builders and building products. Raises DHI PT to $138 from $131, KBH to $56 from $51, LEN to $135 from $120, PHM to $90 from $86, TMHC to $52 from $45.

·     US Mortgage Applications fell 4.6% as mortgage rates moved higher. US mortgage rates rose to a more than two-month high, reducing home purchase and refinance activity. The rate on a 30-year fixed mortgage increased 12 bps to 6.69%, according to Mortgage Bankers Association data.



·     Oil prices rose after weekly data showed U.S. inventories and fuel supplies tightening. The EIA said weekly crude stocks fell -12.5M barrels vs. forecast for 800K barrel build. Oil extended gains from Tuesday after a warning from the Saudi energy minister to speculators raised the prospect of further OPEC+ output cuts. The Saudis warned that OPEC+ could reduce output further to keep prices high offset a lack of progress in US debt talks.

·     In E&P and Refining Sector: natural gas producers active after Goldman Sachs downgraded SWN to Sell from Neutral given it sees downside risks to natural gas prices in 2024 from higher supply and expect the company to generate less attractive FCF in 2023/24. Goldman upgraded RRC from Sell to Neutral w/ $31 PT saying the company has made significant progress towards balance sheet. IEP shares extend losses, falling for a 4th straight day on continued selling pressure after Hindenburg short report earlier this month (shares down -49% MTD).



Banks, Brokers, Asset Managers:

·     Citigroup (C) announced it will pursue an initial public offering (IPO) of its consumer, small business and middle-market banking operations in Mexico following the planned separation of its leading institutional business that will remain part of Citi.

·     In regional banks: PACW agreed to sell its real estate lending unit to Roc360, a property focused bank. FHN was upgraded to Buy from Hold at Jefferies and previews the upcoming Investor Day as views FHN as unique as this will be the first-time mgmt. provides guidance in 17 months post TD deal break. Said find risk/reward attractive given robust capital position/M&A optionality.

·     In Crypto: Bitcoin slid under the $27,000 level to as low as $26,100, off nearly 4%, leading a broad decline in major cryptocurrencies as markets reacted to poor U.K. inflation figures.

·     In Financial Services: INTU missed 3Q top-line expectations as disappointing TurboTax results stemming from a 2% decline in IRS returns volume was roughly ~$200M headwind and INTU ceding DIY share (80 bps) due to a loss of pandemic era filers.



Biotech & Pharma:

·     PTCT shares fell -20% after the announcement of the discontinuation of preclinical and early research programs in gene therapy as part of a strategic portfolio prioritization. Stifel said with less fear of near-term competition from PTCT, RETA can continue to work on the pediatric sNDA for Skyclarys to extend its addressable population to all FA patients.

·     SRPT shares slumped after saying an approval decision on its gene therapy for Duchenne muscular dystrophy (DMD has been delayed from May 29 until June 22.

·     ILMN will be watched closely as shareholders will decide Thursday 5/25 whether to back current management or side with Carl Icahn in his quest to shake up its board of directors.


Healthcare Services & MedTech movers:

·     Agilent (A) cuts FY23 rev guidance to range of $6.93B-$7.03B vs. est. $7.09B. from prior $7.03B-$7.1B (est. $7.09B) and trims FY23 adj. EPS forecast to $5.60-$5.65 from prior $5.65-$5.70 citing macroeconomic uncertainty, coupled with stresses in the banking system.

·     ACCD was upgraded from Neutral to Buy at Bank America saying its steady growth profile, supported by recurring per member per month (PMPM fees) and at-risk performance guarantee revenue, should sustain its high teens/approaching 20% growth rate.

·     IART downgraded to Underweight at JPMorgan given the disappointing execution seen in recent history and uncertainty in the path toward improved top-line growth.

·     WOOF shares tumbled after the company swung to a Q1 loss despite higher revenue.


Transports, Industrials & Materials

·     Truckers fall as LSTR lowered Q2 EPS view to $1.75-$1.85 from prior view $1.90-$2.00 and cuts rev forecast to $1.33B-$1.38 vs. prior $1.4B-$1.45B citing market conditions, trends in loads number; watch shares of other logistics and trucker names WERN, JBHT, ODFL, XPO.

·     Engineering and Design: DY strong quarterly results as Q1 EPS $1.73 vs. est. $0.70; Q1 revs $1.045B vs. est. $939.2M; sees 2Q contract rev increasing mid-single digit as percentage of contract rev vs year-ago (but shares slipped); positive for MTZannounces quarterly cash dividend and new $500 million stock repurchase program.

·     In Metals: NUE announces reorganization of plate group, including ceasing production at Nucor Steel Longview, LLC; SUPGF was downgraded to Market Perform at BMO Capital saying as catalyst metals transaction remains top of mind.



Internet, Media & Telecom

·     GOOGL analysts were positive on the company following its Google Marketing Live event, which they said reinforced the progress it is making with AI, as well as the revenue opportunity represented by the technology.

·     NFLX as reported midday Tues, Netflix will begin cracking down on password sharing in the US

·     AVID shares spiked midday after Reuters reported it’s exploring potential sale


Hardware & Software movers:

·     Lenovo (LNVGY) Q4 revenue fell 24% and it cut 8% to 9% of its workforce citing slowing demand for PCs; Q4 revs $12.63B, marking the third consecutive quarterly fall and below ests $12.74B; said its revenue shrank 14%, marking the first annual decline since 2019.

·     NEWR Q4 earnings topped ests while revenue slightly beat fiscal Q4 views, but the data analytics firm guided lower on fiscal Q1 and 2024 revenue as guides 1Q revs $238-240Mm vs est. $251.2Mm, sees FY revs $1.02-1.03B.

·     In cyber security: PANW delivered a beat with key metrics above Street estimates, punctuated by billings (+26%-Y/Y), revenue (+24%-Y/Y), NGS ARR (+60%-Y/Y), and operating margin/FCF Margin about 360/450bps above consensus; raised its annual forecasts for revenue.

·     In IT Services; Comm Equipment: GLW announces 20% increase to display glass substrate prices; ANET and FTNT added to the US 1 List at bank America and removed CSCO and QCOM said it had secured an up to $2.6 billion deal with the Internal Revenue Service (IRS) for modernizing the government tax agency’s systems.



·     NVDA earnings after the bell; a good gauge for semis and AI sectors.

·     ADI shares slide after guided Q3 revenue and profit below analysts’ estimates as sees revs $3.1B plus/minus $100M missing the $3.16B est. and EPS $2.52 plus/minus 10c vs. est. $2.65 as says expects revenue to moderate given the economic uncertainty and normalizing supply chains.


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.