Market Review: October 23, 2023

Closing Recap

Monday, October 23, 2023





DJ Industrials




S&P 500








Russell 2000













The streak snapped! Stocks slid in the final hour, pushing the S&P (SPX) back below its 200-day moving average support of 4,235 as the 15-consecutive week of an S&P winning Monday was snapped (the longest streak ever). Stocks rolled more than 40 points off the intraday high as the “fade-trade” continues to work, failing to push higher after a morning reversal. What looked like a dreadful trading day ahead ended mixed as growth sectors like technology rebounded given a pullback in Treasury yields, but broader markets faded. Treasury yields reversed off morning highs following a tweet from Pershing Square hedge Fund manager Bill Ackman saying, “we covered our bond short; saying there is too much risk in the world to remain short bonds at current long-term rates”. The 10-year yield ended up hitting a low of 4.82% after highs above 5.02% overnight following the commentary. There were no major economic data points today or major earnings, but that will change with roughly 33% of the S&P 500 reporting in the next few days, including results from KO, MMM, GE, GM tomorrow morning before the big tech names come into play this week (AMZN, MSFT, GOOGL, INTC, META). Outside of the big swing in bond markets, M&A played a big role in today’s trading with at least 5 deals announced today, the biggest being Chevron (CVX) purchase of Hess (HES) in the energy sector. The CBOE Volatility index (VIX touched highs above 23 this morning before fading back below 20 (but closed back above). Oil prices edged lower as did commodity prices in general.


Commodities, Currencies and Treasuries

·     Treasury yields are the top story today as the long-end of the curve fell the most, with the 20-year yield down 20-bps off its highs to move back below 5% and the benchmark 10-year yield also fell about 20-bps off its intraday high above 5.02%. Pershing Square’s Bill Ackman tweeted earlier this morning that “We covered our bond short; saying there is too much risk in the world to remain short bonds at current long-term rates”. The headlines pushed bond markets higher and yields off overnight highs. Will the momentum continue into tomorrow?

·     U.S. crude oil futures settle at $85.49 per barrel, down -$2.59, 2.94% while Brent prices fell settle at $89.83 per barrel, down -$2.33, 2.53%. Natural Gas for Nov. delivery gained 2.70 cents per million British thermal units, or 0.93% to $2.9260 per million British thermal units, snapping its 8-day losing streak. Gold prices slip -$6.60 to settle at $,1987.80 an ounce despite the drop in the dollar/Treasury yields. The dollar index (DXY) had a significant pullback as the euro moved back above 1.06 ahead of key inflation data later this week.






WTI Crude















10-Year Note





Sector News Breakdown



·     For STLA, the United Auto Workers (UAW) union said on Monday that 6,800 workers at Chrysler parent Stellantis’ Sterling Heights Assembly Plant had joined the ongoing strike.

·     In EV, FSR said that it has dropped the price of its Ocean Extreme in the U.S. to $61,499 from $68,999. Customers who have already ordered or purchased the model will receive a $7,5000 price adjustment, even if their vehicle has already gone into production.


Retail, Consumer Staples & Restaurants:

·     In Personal Care: Raymond James with a few ratings changes as ELF was upgraded from Outperform to Strong Buy and adding it to the Analyst Current Favorites list as it believes the ~27% sell-off from its highs more than reflects growth deceleration off its peaks. The firm upgraded CHD to Market Perform from Underperform as thinks relative valuation to HPC peers is more balanced after recent market moves since the midpoint of the year (CHD -10% vs HPC -8% and SPX -5%), and downgraded NWL to Strong Buy from Outperform citing a more muted recovery path offset by a FY outlook that was already lowered last quarter.

·     In Food & Beverages: STZ receives a 90-day positive catalyst watch at Citigroup ahead of Investor Day on 11/2 as expect it to be a positive catalyst for the stock, with an opportunity for management to highlight the strong fundamentals of the beer business.

·     In Online travel & casinos: shares of WYNN, CCL, MGM, ABNB, LVS were among the top performers in the S&P with a rebound in leisure/discretionary names, helped by a pullback in Treasury yields which have impacted spending.



·     M&A in Energy: CVX said it would buy HES in an all-stock deal worth $53 billion to upgrade and diversify its portfolio, adding a large oil asset in Guyana and bolstering its U.S. shale operations. HES holders will receive $171 a share based on Chevron’s closing price, shareholders receiving 1.0250 shares of Chevron for each Hess share. 

·     In Energy research: Citigroup downgraded EOG to Neutral and revised its target price down to $135 as the recent rally has pushed shares to reflect ~$80 WTI prices applied to a healthy inventory position. Citi also downgraded FANG to neutral saying valuation appears to offer limited upside (new price target at $170).



Banks, Brokers, Asset Managers:

·     A Handful of analyst rating changes in Banks post earnings: MS downgraded from Buy to Hold by Dick Bove at Odeon saying it appears that the company lost direction in 2022 and has been floating without clear purpose since then. Wolfe Research upgraded CFG to Peer Perform from Underperform saying Citizens has a 260-bps capital shortfall after contemplating Basel III endgame-related capital impact but says its “manageable” and upgraded HBAN to Peer Perform from Underperform saying Huntington has retained its asset sensitivity.

·     In Crypto: Bitcoin prices rose over 3% early trading around the $31,000 level and Ethereum rose over 4% to $1,670 as crypto space extends last week gains with COIN, HUT, MARA, MSTR, RIOT all benefiting early.

·     In Mortgage Services: RDFN reports new listings and pending sales ticked up in september, but deals were canceled at highest rate in almost a year. Redfin said new listings dropped 8.9% on a year-over-year basis in September and remained far below pre-pandemic levels. That’s because mortgage rates hit the highest level in more than two decades, with the average weekly 30-year-fixed rate clocking in at 7.2%. @charliebilello noted: 53k US home purchases were canceled in September, which equates to 16.3% of all homes under contract. That’s the highest cancellation percentage since October 2022.



Biotech & Pharma:

·     In M&A news: RHHBY agreed to buy immunology company Telavant Holdings from ROIV and PFE in a $7.1 billion deal. ROIV has a 75% stake in Telavant and PFE 25%. Roche take on the rights to develop and commercialize it in the U.S. and Japan.

·     AMAM announces arx517, a PSMA-targeted ADC, demonstrates a promising 52% psa50 (≥50% reduction) and a highly differentiated safety and PK profile in patients with MCRPC, who progressed on multiple FDA-approved treatments.

·     AZN said that its drug Enhertu, which it developed in partnership with Daiichi Sankyo, has been approved in the European Union for the treatment of advanced non-small cell lung cancer; AZN said that it will receive $75 million from Daiichi as a milestone payment.

·     BMRN said the FDA approved the expanded use of its once-daily injection to treat children under the age of 5 with the most common form of short-limbed dwarfism. BMRN to Market Perform at Bernstein saying its short thesis of lower Roctavian numbers has largely played out.

·     HARP said that its experimental therapy HPN328 showed a response rate of 32% in patients with small cell lung cancer; therapy also showed a response rate of 35% across all tumor types in one patient cohort and a response rate of 42% in a patient group with cancers.

·     IONS upgraded from Underperform to Neutral at Bank America and boosted its tgt to $52 from $33 saying recent positive clinical data increase the likelihood that three of IONS’ lead assets will be approved for commercialization.

·     LICY said it is pausing construction work on its Rochester Hub project, pending completion of a review of its go-forward strategy and expects costs of the project to exceed previous guidance.

·     RVMD shares tumbled after releasing test results for an experimental cancer treatment that Leerink Partners said were "at best, in line with expectations," as 37.5% of patients responded to the treatment. But that included several unconfirmed responses.

·     VERV said that it had received clearance from the FDA to conduct a clinical trial in the U.S. of its experimental, gene-editing treatment for a common form of heart disease; the action removes a clinical hold on its CRISPR-based therapy, called VERVE-101, that was placed on it last November.


Healthcare Services & MedTech movers:

·     MDT said it received FDA approval for the Aurora EV-ICD™ MRI SureScan™ (Extravascular Implantable Cardioverter-Defibrillator) and Epsila EV™ MRI SureScan™ defibrillation lead to treat dangerously fast heart rhythms that can lead to sudden cardiac arrest (SCA).

·     PHG raised its comp sales guidance to 6%-7% rise vs. previous guidance for mid-single-digit comparable growth and sees adj Ebitda margin at 10%-11% compared with previous guidance at the upper end of the high-single-digit range for 2023.

·     WBA was upgraded to Overweight from Neutral at JP Morgan and raise tgt to $30 from $27 as believes that today commences a new era for shares as Tim Wentworth assumes the CEO role.


Industrials & Materials

Industrials & Transports

·     In Waste sector: WM and RSG both upgraded from Neutral to Buy at UBS and maintain Buy ratings on WCN & CWST as expects municipal solid waste stocks to be a popular way to ride out current market turbulence and risk of a rate-driven economic slowdown.

·     In Machinery: FTV agreed to acquire electronic test solutions company EA Elektro-Automatik Holding for $1.45 billion in cash. 

·     In the Cargo sector: Stonepeak has struck a deal to purchase shipping-container lessor TGH for more than $2 billion, as Textainer investors will receive $50 a share in cash (deal valued at more than $7B including debt 

·     In metals: Aluminum producer AA downgraded to Neutral from Buy at Bank America and cut tgt to $25 from $35 saying Alcoa in period of transition (cost reductions) that will take longer than previously expected.

·     In Chemicals: FMC cut its Q3 and 2024 outlook citing lower sales volumes in Latin America as sees Q3 revs of $982M below consensus of $1.2B and Q4 revs $1.14B-$1.38B vs. est. $1.67B and for FY24 sees revs $4.48B-$4.72B vs. est. $5.54B (shares of CTVA, others edge lower in sympathy).



Internet, Media & Telecom

·     In Semiconductors: NVDA shares jumped late afternoon after Reuters reported NVIDIA has quietly begun designing Central processing units (CPUs) that would run Microsoft’s Windows operating system and use technology from Arm Holdings (ARM); the headlines sunk shares of INTC in reaction while lifting NVDA.

·     In Media: DIS is nearing a deal to sell its India operations to conglomerate Reliance Industries whose streaming platform’s success has weighed on the U.S. company’s business, Bloomberg News reported.

·     In social media: PINS upgraded to Buy from Hold at Stifel with $32 tgt as checks skew more positive (Amazon commentary) and thinks there is still plenty of room for growth outside the domestic market (it believes ~40-45% of MAUs are still in a region without ads).

·     The Financial Times reported the Chinese gov’t has initiated an investigation into Foxconn, the Taiwan-based iPhone maker, over the firm’s tax and land use.


Hardware & Software movers:

·     In Security Software: OKTA adds to Friday sharp declines after saying a hacker used a stolen credential to access its support system. "The threat actor was able to view files uploaded by certain Okta customers as part of recent support cases," Okta’s Chief Security Officer said.

·     In Cloud Applications: Piper flagged risk to SW application sector on mismatch given accelerating 2024 consensus growth prospects that appear too optimistic. The firm downgraded ratings on CRM, U, MTTR to Neutral and ASAN, AYX to Underweight and reducing estimates and PTs across coverage list to reflect a more muted recovery in 2024 on macro headwinds and AI monetization uncertainty that could temper further SW multiple expansion.

·     In other software: UCTT shares fall as lowers Q3 EPS view to $0.04 from prior view of $0.08-$0.28 (consensus $0.15) primarily attributed to an abrupt decline in Services business volume, reduced efficiencies, and an unfavorable mix. DOCN upgraded from Underweight to Neutral at Piper as believes the risk- reward is much more balanced near term at current levels now that estimates have been appropriately reset, management has addressed AI with Paperspace. RNG was downgraded from Buy to Neutral at Rosenblatt and cut tgt to $35 as believes the recent change in leadership could lead to a resetting of revenue expectations.


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.