Market Review: May 30, 2023

Closing Recap

Tuesday, May 30, 2023





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S&P 500








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U.S. stocks finished mixed, paring earlier gains as the S&P 500 index managed to hold above the 4,200 level as strength in technology again saved the broader averages from falling. After weeks of negotiations, President Joe Biden and House Speaker Kevin McCarthy struck an agreement this weekend to raise the debt ceiling and avert a potential government default. The agreement between the White House and McCarthy is a two-year budget deal that would essentially hold spending flat for 2024, while boosting it for defense and veterans, and capping increases at 1% for 2025. It would suspend the debt limit until January 2025. That news, coupled with more strength in “AI” related technology names (i.e. NVDA) pushed major averages higher initially before modest profit taking. The debt ceiling measure is expected to be voted on by Congress and the Senate in the coming days ahead of a possible June 5 debt default.


Approaching the end of May, stock market resiliency remains amazing. Bespoke noted the tech sector (XLK) “entered its shortened trading week up 32.7% YTD and more than 3 standard deviations above its 50-DMA”. In the last few weeks, the Fed raised interest rates by 25 bps and interest rate futures add 50 bps in rate hike expectations in the next few months (compared to expectations of cuts of as much as 75-bps by the end of 2023 just 2-weeks ago). Mortgage rates hit fresh highs above 7.1%, total household debt hits record $17.1 trillion and credit card debt soars. PCE Inflation advanced for first time since October 2022 on Friday, but stock markets were unphased, with the S&P 500 closing above the 4,200 level for the first time since August 2022. The market strength has been amazing. Certainly no “Sell in May, Go Away” this year, with the Nasdaq +6% with 2-days left, the S&P +1% and the Dow -3%.


Economic Data

·     Consumer Confidence index 102.3 above consensus 99.0 and vs April revised 103.7 (previous 101.3); the present situation index 148.6 in May vs April revised 151.8 and the expectations index 71.5 in May vs April revised 71.7 (previous 68.1); jobs hard-to-get index 12.5 in May vs April revised 10.6 (previous 11.1) and 1-year consumer inflation rate expectations 6.1% in May.

·     S&P CoreLogic reported March 20-metro area home prices -1.1% from year ago vs +0.4% in February; March home prices in 20 metro areas +0.5% seasonally adj vs revised -0.1% in February; March 20-metro area home prices non-adjusted +1.5% vs revised +0.3% in February.

·     U.S. FHFA home price index jumped 0.6% to 398.0 in March following the 0.7% bounce in February to 395.5 (was 394.8). It is a third straight monthly increase after unchanged reading through the fall and winter. But the index slowed to a 3.6% y/y clip versus 4.2%.


Commodities, Treasuries and Currencies

·     US crude futures tumbled with WTI crude down -$3.21 or 4.42% to settle at $69.46 per barrel, re-setting the rally from last week on ideas Russian fuel exports are set to increase and OPEC-plus will leave current production arrangements in place. Saudi Arabia’s Energy Minister may have kept the option of another output cut on the table ahead of the OPEC+ meeting on June 4, although Russian Deputy Prime Minister Alexander Novak stated that he anticipated no new measures from the group. Brent Crude futures settled at $73.54/bbl, down $3.53, 4.58%. Natural gas futures fell -9c, or 3.7% to settle at $2.327 per million British thermal units (MMBtu).

·     August gold prices rose $14 or 0.7% to settle at $1,977.10 an ounce, getting a bounce as yields and the dollar pare some of last week’s gains. There was wider market optimism about the U.S. debt ceiling deal after the White House and House leader McCarthy reached a deal in principle this weekend, but still awaits two key votes this week. Spot gold bounced off 10-week lows.

·     Treasury yields declined across the curve, with the 10-yr down 13-bps to 3.68% while the 2-yr yield was down over 11-bps to 4.475% after the debt ceiling deal eased fears of a U.S. default. The yield on the 1-month T-bill maturing in the first eight days of June, which was considered particularly at risk of default, was trading around 5.28%, after topping 7% last week as investors steered clear of more at-risk bills. Still, market concerns remain about the possibility of further rate hikes by the Fed at the June meeting as inflation data edged higher last week and comes ahead of CPI data next week. The U.S. dollar was mostly lower as the euro held the 107-level.






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10-Year Note





Sector News Breakdown


Consumer Staples, Retailers, & Restaurants:

·     In beverages: Business Beer Daily reported that the latest BUD Light trends showed volumes -29.5% vs. previous week 28.4% (and -27.7% prior) and noted Coors Light +15.2% (v +16.9% prior), Miller Lite up 12.1% (vs +15.1% week prior); in research, RothMKM upgraded SAM to a Buy (raised tgt to $386 from $274) saying they believe Seltzer and Truly will benefit in the summer from Bud Light share losses and gross margin lift from production shift will be realized in 2Q. Firm also upgraded (given inventory days timing) STZ to buy with $270 tgt. Jefferies said that positioned as a health & wellness offering, Prime Hydration has quickly become a disruptive brand in the space, reaching 8% share in the US sports drink category as of April and believes it is very plausible the brand approaches ~$800M in US retail sales and ~10% share in ’23; PEP shares down a 6th straight day after hitting all-time highs mid-month.

·     In retail: TGT shares slip for the 8th straight day following recent controversy in stores; BIG tumbles, extending recent earnings-related losses as price tgt cut by Bank America and Deutsche Bank after earnings last week; said demand pressure and liquidity concerns remain.

·     In food and consumer: NSRGY – Nestle said it had hired the London Stock Exchange Group’s finance chief Anna Manz as its new chief financial officer. Manz will replace Francois-Xavier Roger, who is stepping down to pursue new professional challenges after eight years in the role; PG shares dropped below its 200-day moving average support of $143.50 in Staples weakness.


Autos, Leisure, Gaming & Lodging:

·     In autos: Ford (F) upgraded to Buy from Hold at Jefferies with a price target of $16, up from $13 saying there is something grounded and "back-to-basics" in Ford’s strategy of focusing on its strengths. In EV charging, CHPT was upgraded to Buy from Neutral with a price target of $14, down from $15.50 at Bank America after reassessing line of sight to cash inflection.

·     In casinos: WYNN mentioned positively in Barron’s saying the operator of casino resorts is set to prosper as Macau rebounds from China’s zero-tolerance Covid-19 lockdown and shares are a solid bet with more growth to come.

·     In cruise lines: CCL tgt to $11 from $10, RCL to $85 from $72 at Truist saying after conversations with senior executives at very large travel agencies that specialize in cruises and from examining “big data” on future bookings and pricing, there were no “negative surprises” during the two months following the front-end loaded Wave Season. However, what stood out was the strength of bookings for 2024 and 2025.



·     In pipelines: ETRN shares surge after RBC Capital upgraded to Outperform from Sector Perform and raised tgt to $10 from $7 saying the debt ceiling deal this weekend surprisingly contains specific language to essentially fast track the Mountain Valley Pipeline (MVP), which is currently held up in the courts.

·     Natural gas producers (AR, RRC, CHK, CTRA, SWN) underperformed in a generally weak energy sector as natural gas prices declined sharply.

·     In Solar, alt energy; PLUG shares rose after saying it aims to build three plants in Finland costing some $6 billion to produce green hydrogen and ammonia for the European market.



·     In banks, shares of CMA broadly underperformed in the regional banking sector, leading decliners in the S&P 500, but overall regional banks slipped as the day progressed. In credit cards, MA shares slipped after the FTC approves final order requiring MasterCard to stop blocking the use of competing debit payment networks.

·     In REITs: Mortgage REIT EFC agreed to acquire another mortgage REIT AAIC, in a deal that should increase scale and liquidity, the companies said ; CTRE, OHI, and SBRA scored the best in REIT Skilled Nursing analysis at Wells Fargo, and expect meaningful operational improvement from these portfolios in the months ahead.

·     In Financial Services: BTIG said INTU, HRB, SOFI are potential debt ceiling winners. Noted, 1) a handshake agreement reducing IRS funding levels should be viewed as a positive for INTU and HRB as it reduces the likelihood of the IRS building an expansive efile competitor, 2) a federal student loan payments are expected to begin again this fall, which should be viewed as directionally positive for SOFI and possibly lead generation platforms as there could be increased demand for student loan refinancing.



Biotech & Pharma:

·     AMLX shares slip after saying that a committee for the European medicine’s regulator is "trending toward" a negative opinion on the company’s amyotrophic lateral sclerosis (ALS) drug application seeking conditional approval in the region.

·     IOVA shares rallied after announced that lifileucel’s BLA for the treatment of post-PD-1 metastatic melanoma was accepted by the FDA; the filing was granted Priority Review, which set a November 25, 2023, PDUFA date.

·     CCCC and SPRO announced exclusive licensing agreement for the development and commercialization in Greater China of CFT8919; CCCC to receive a $10M upfront payment, a $25M equity investment and is eligible to receive up to $357M for milestones.

·     LXRX said the FDA approved INPEFA, a once-daily oral tablet to reduce the risk of cardiovascular death, hospitalization for heart failure, and urgent heart failure visit in adults with heart failure or type 2 diabetes mellitus, chronic kidney disease, and other cardiovascular risk factors.

·     In vaccines: Jefferies said MRNA, GSK, SNY, BAVA and ICVX seen as the best positioned in global vaccines pointing out that since COVID, the public health awareness of respiratory viruses is higher than ever and there is significant interest to reconsider virus vaccinology in a post-pandemic world. Estimates the annual market oppty for vaccines targeting flu, COVID and RSV may reach $35B globally across US, EU, China, and Japan over time.


Healthcare Services & MedTech movers:

·     GHSI announces appointment of former Neutrogena and Coca-Cola executive Jan Hall as President and CEO.

·     In the CRO sector, Jefferies said they continue to prefer IQV and ICLR due to large pharma exposure and cheaper valuations. The firm points out for over a year, cash runways at CMD biotech’s have been in decline, but 4Q22 cash balances held steady.

·     In MedTech: MDT was assumed and upgraded to Overweight at Morgan Stanley saying restructuring of internal operations should drive more consistent performance, while our bottom-up work shows 4 areas that could drive mid-teens EPS upside.


Industrials & Materials


·     In airlines (AAL, JBLU, UAL, DAL): U.S. Screened nearly 9.8 million airline passengers over four-day holiday weekend, topping pre-covid 2019 levels by 300,000 – the TSA reported.

·     In materials: industrial metals continue to weaken, with shares of AA hitting 52-week lows in aluminum space, while CLF, X, FCX and other metals extend declines on growing recession fears; also, the “reopen” in China did not take hold as many expected, impacting commodity prices.

·     In Defense sector: implications after debt ceiling deal: Citigroup said President Biden and Speaker McCarthy reached a deal over the weekend that allows for continued near-term growth in defense spending while simultaneously cutting non-defense discretionary and increasing the debt ceiling through early 2025. Citi expects defense stocks to react positively to the news and Congressional approval of the deal in the coming days. Remains buy rated GD, LDOS, LMT, SAIC. BTIG said defense spending should see a ~3% increase next year after the debt ceiling revelations, which is a positive top-line increase and a shift from the 2011 debt ceiling precedent that applied cuts uniformly.

·     In Industrials: Barclays noted that Permitting reform included in the House/GOP White House "Fiscal Responsibility Act" gives MTZ. Firm noted MTZ is one of the key contractors of MVP which had been in construction prior to the pandemic and largely stalled since due to a permitting issue that impacted <10% of the entire project.

·     In Chemicals: KPLUY slips as European ag chemicals names extend losses; MOS, CF, NTR extends recent losing streaks, all at fresh 52-week lows: JPM noted earlier that nitrogen fertilizer prices to move lower in Q3 as the planting season concludes; also noted Euro nat gas prices at new year lows – said higher prices for European natural gas, used as a feedstock to make nitrogen fertilizers, challenged CF’s European competitors last year amid a tightness in supply. Meanwhile Piper noted this morning" current corn crop continues to show signs of exceptional health, and as such, an above trendline yield becomes increasingly possible which they see as a drag on ag.



Internet, Media & Telecom

·     NFLX shares moved to more than 1-year highs as the company approaches its password sharing crackdown timetable; market expectations is that they can boost subscribers.

·     IAC tgt raised to $72 and ANGI to $3.75 at KeyBanc saying coming out of earnings and conference season, IAC appears to have a solid handle on Angi’s customer and service professional acquisition and is making progress toward its Dotdash Meredith (DM) synergy targets.



·     NVDA becomes the first trillion-dollar semi chip maker. The co announced a new class of large-memory AI supercomputer – an NVIDIA DGX supercomputer powered by NVIDIA GH200 Grace Hopper Superchips and the NVIDIA NVLink Switch System

·     NVDA said it was building Israel’s most powerful AI supercomputer.

·     NVDA said it was set to collaborate with MediaTek Inc on technology to power vehicle infotainment systems.

·     NVDA announced a partnership with WPP to push for AI-enabled content engine for digital advertising.

·     COHR Board approved a restructuring plan.


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.