Market Review: September 13, 2023

Closing Recap

Wednesday, September 13, 2023





DJ Industrials




S&P 500








Russell 2000













U.S. stocks finished mixed with large caps outperforming small caps after today’s slightly “hotter” inflation report failed to dent investor optimism. Utilities, Consumer Discretionary and Technology paced the S&P gains while Energy, REITs, Materials, and Industrials were mostly lower. The August headline CPI Y/Y came in above estimates as did the core CPI M/M reading, but expectations remain for the Fed to hold rates steady at next weeks FOMC policy meeting. Treasury yields and the US dollar popped initially after the report but faded the rest of the day. There was a noticeable drop in the commercial real estate sector, led by weakness from CBRE after comments at the Barclays financial services conference weighed heavily on commercial REITs as well as regional banks (which have large exposure to CRE). Industrials dropped behind MMM comments at the Morgan Stanley conference as well as weakness in airlines after AAL, SAVE, ULCC all lowered outlooks.


The consumer price index (CPI) came in slightly “hotter” today, with the producer price index (PPI) now tomorrow morning at 8:30 AM. Estimates are for Aug headline PPI M/M to rise +0.4% (vs. prior month +0.3%) and on a Y/Y basis to rise +1.2% (up from prior month +0.8%). On a core basis (ex: food & energy) M/M PPI expected to rise +0.2% (down from prior month +0.3%) and rise +2.2% Y/Y (down from prior month +2.4%). Other economic data tomorrow includes August Retail Sales and Weekly Jobless Claims. Other items to watch tomorrow include the looming UAW auto union strike tomorrow (GM, Ford, STLA) if no agreement can be reached overnight as well as the ECB policy meeting tomorrow and PPI inflation data. Expectations of another ECB hike shifted higher after a Reuters report said the ECB expects inflation to stay above 3% next year. Also tonight, the ARM semiconductor 95M share IPO is expected to price tonight (range expected $47-$51).


Interesting: @LizAnnSonders noted: Yesterday’s muted move for S&P 500 has been norm rather than exception in past 6 months; 140 trading days without moving 2%+ in either direction (longest stretch since one that ended in early 2018 & 2nd-longest in >15 years). Goldman Sachs noted today they remain Neutral in their asset allocation (OW cash, Neutral equity/ credit/ bonds/ commodities) and are selective on adding cyclical risk and look for carry/ relative value opportunities.


Economic Data

·     Aug Consumer Price Index (CPI) headline M/M rose +0.6% vs. est. 0.6% (vs. 0.2% in July) and y/y change +3.7% vs. est. 3.6% (vs. 3.2%). CPI Core inflation (ex: food & energy) M/M rose +0.3% vs. est. 0.2% (same as prior month) and on a y/y basis fell to +4.3%, in-line with estimates but below prior month of 4.7%). Aug CPI Energy Prices +5.6%; Food Prices +0.2%.

·     The U.S. government posted an August surplus of $89 billion due to the reversal of $319 billion in student loan forgiveness costs after the Supreme Court struck down the Biden administration program in June. The August surplus compares to a year-earlier deficit of $220 billion. Receipts last month totaled $283 billion, down 7% or $21 billion from a year earlier, while outlays came to $194 billion after the student loan reversal.

·     US mortgage purchase applications fell 16.7% over the past ten weeks, the lowest since 1995, per Reuters. This week, the Mortgage bankers Assoc said its applications index fell -0.8%, the purchase index rises 1.3% and the refinance index falls -5.4% as the average 30-year mortgage rate rises 6 bps to 7.27% in sept 8 week.

·     The Institute of International Finance estimated that Chinese equities saw an outflow of $14.9B last month, highlighting the negative sentiment toward the country’s economic challenges, amid skepticism over Beijing’s measures to stem slowdown. 


Commodities, Currencies & Treasuries

·     Oil prices end lower as WTI crude slips -$0.32 or 0.36% to settle at $88.52 per barrel, pulling back from 10-month-highs, after weak commodity prices and a weekly EIA report that was bearish in almost every category. The data showed US crude production rose 100,000 barrels a day to a three-year and nearly all-time high of 12.9M bpd. It also showed unexpectedly large increases in US inventories of crude oil, gasoline, and diesel. Diesel fuel futures end up 3.2% at $3.4354 a gallon, highest closing price since Jan. 23.

·     Gold prices declined by -$2.60, or 0.1%, to settle at $1,932.50 an ounce on Comex, settling at three-week lows, failing to rally despite a pullback in the US dollar and Treasury yields despite the higher CPI inflation reading. The U.S. dollar ended down slightly after an early CPI related pop.

·     Treasury yields were volatile post CPI – hitting pre-mkt highs of 4.352% (just below the recent Aug 22 hi of 4.362%) but reversed lower below 4.24% as the pullback in yields/dollar helped boost growth related stocks. The 10-yr yield touched lows below around 4.24%. The U.S. dollar was little changed overall.






WTI Crude















10-Year Note





Sector News Breakdown



·     Strike deadline looms: United Auto Workers (UAW) union President Shawn Fain said the union is still seeking significant pay hikes as talks continue with the Detroit Big Three automakers (GM, F, STLA), a day before four-year labor deals is set to expire Thursday. Fain has vowed to call strikes at the three auto makers if no deal is reached. The UAW initially sought a 20% wage hike upon ratification and four annual 5% hikes but had offered to trim those hikes to around 36% in total, three sources told Reuters. Fain said the union was still seeking 40% hikes in total.

·     Stellantis said it had offered U.S. hourly workers a 14.5% wage hike over four years, while GM had offered workers a 10% wage hike and two additional 3% annual lump-sum payments over four years. Ford last week hiked its offer to a 10% wage hike and lump sum payments.

·     Chinese EV stocks weak (LI, NIO, XPEV) after the Financial Times reported the European Union is launching an investigation into Chinese subsidies for electric vehicles in a bid to ward off a flood of cheap imports.

·     Ford (F) rises after co plans to double production of Hybrid F-150 pickup trucks in 2024 and as UBS assumed coverage with a Buy (from Sell) with $15 tgt as believes earnings will be more resilient than expected driven by the higher margin Ford Pro segment.


Consumer Staples & Restaurants:

·     HAIN announced a formal restructuring program targeting annualized savings of $130M-$150M by FY27; said expects to achieve 400 to 500 basis points of adjusted gross margin improvement and deliver $400 million in cumulative cash flow by fiscal 2027.

·     In Packaged Foods: TDCowen initiated coverage on the U.S. packaged foods sector with a cautious outlook and several below-consensus estimates. Said they believe that most of these companies raised prices too high on structurally challenged brands and now face a formidable cyclical downturn. Outlook reflects risk of price discounting, subdued volume growth, and margin pressure over the next 12 months. OP rated on MDLZ – Underperform rated on BGS and MP rated on CPB



·     Shares of AMZN and WMT hitting fresh 52-week highs today in the retail space while AAP, DG, Macy’s (M), JWN, RAD among retailers hitting 52-week lows. Dollarama (DLMAF) raised its annual sales forecast, saying it now expects comparable store-sales growth of between 10% and 11% for fiscal 2024, compared with between 5% and 6% estimated previously.

·     European luxury goods sector downgraded to Neutral from Positive at Barclays and downgraded LVMUY to EW from OW as macro indicators deteriorate: The Luxury Goods sector has been going through a severe de-rating over the past month, which BARC thinks reflects the deteriorating macro indicators coming from China and the gradual return to more normalized growth.

·     UBS said they remain bearish on Softline retail as believe the consumer spending environment for soft goods will deteriorate over the NTM. Believes ongoing inflation, lapping fiscal stimulus, and the impact of high interest rates will weigh on sales and it sees few margin drivers and said the stocks with most FY24 EPS downside vs Street are GPS, JWN, DDS, BURL, FL, and KSS.



·     Energy stocks have been up and down all week as the XLE was the top S&P sector decliner Monday, best performer on Tuesday and worst sector again today while oil prices remain around best levels of 2023. TTE announces an oil project of 200,000 b/d in Block 58 and launches development studies with the objective of sanctioning the project by the end of 2024 (note APA is the US development partner of TTE). RBC said investors were disappointed with the size of project, timing of first production, and project cost.

·     Oil supply cuts by Saudi Arabia and Russia will create a “significant supply shortfall” and threaten a renewed surge in price volatility, the International Energy Agency warned. Global oil markets face a deficit of 1.2 million barrels a day during the second half of 2023 following last week’s announcements by the OPEC+ leaders that they’ll extend cutbacks to the end of the year.



Banks, Brokers, Asset Managers:

·     In Asset managers: monthly Assets under management (AUM) data out: 1) APAM prelim AUM end of Aug totaled $142.8 billion; 2) BEN prelim AUM of $1.42 trillion on August 31, 2023, compared to $1.45 trillion at July 31, 2023; 3) IVZ prelim AUM of $1,527.7 billion, a decrease of 2.7% vs. prior month-end; 4) LAZ prelim AUM totaled approximately $237.3 billion (market depreciation of $4.4 billion, foreign exchange depreciation of $2.3 billion and net outflows of $0.4 billion); 5) TROW prelim AUM of $1.40 trillion as of August 31, 2023. Preliminary net outflows for August 2023 were $7.8 billion; 6) VRTS prelim AUM of $169.4 billion; 7) VCTR prelim AUM of $161.9 billion as of August 31, 2023; 8) AB prelim AUM decreased -1.4% to $694 billion during August 2023 from $704 billion at the end of July.

·     In the REIT sector: CBRE shares tumbled midday, dragging the broader REIT sector lower (XLRE -1% – BXP, SLG, VNO weak) following comments at the Barclays conference where concerns about deals not getting done and the need to see a path back towards lower rates dragged on sentiment. Note shares of regional banks came under pressure behind the sharp pullback in the REIT sector (biggest decliners included TFC, USB, ZION, KEY, MTB in the S&P).



Biotech & Pharma:

·     AKLI said that it will cut down its workforce by ~40% as it looks to transition from prescription to a non-prescription business model; reduction in staff and resources will be focused on its pediatric prescription business.

·     ALNY shares were halted most of the day into 9/13 AdCom meeting to discuss the Onpattro sNDA in ATTR-CM.

·     EIGR said it would discontinue its phase 3 LIMT-2 trial of Peginterferon Lambda in patients with chronic hepatitis delta.

·     HOTH announces positive results in HL-KIT killing cancer cells in both gastrointestinal stromal tumors and Acute Myeloid Leukemia (AML); shares erased gains after the company announces $2.89 million registered direct offering priced at-the-market under Nasdaq rules.

·     IMGN was upgraded to overweight from neutral at JP Morgan citing the ongoing launch of Elahere, a drug for ovarian cancer.

·     MDGL shares rise after saying the FDA granted priority review for its new drug application for resmetirom, a thyroid hormone receptor to treat the underlying causes of NASH in the liver. 

·     MRNA said a reformulated version of its mRNA-based flu shot met primary goals in a final-stage trial — a result that could pave the way for it to seek regulatory approval.

·     NVO conducts a two-for-one stock split.

·     RCKT said reached alignment with the FDA regarding its Phase 2 trial for the treatment of Danon disease; said its study would evaluate the use of the investigational gene therapy RP-A501 to treat 12 patients with Danon disease – also, prices 7.8M-share secondary priced at $16 per share.



·     Rough day for airlines with three operators lowering guidance:

·     1) AAL guides Q3 adj EPS to $0.20-$0.30, down from prior $0.85-$0.95 saying its new labor contract with its pilots’ union and higher fuel prices (now sees paying avg $2.90-$3.00 a gallon for jet fuel vs. prior view $2.55-$2.65) will weigh on quarterly earnings; said RASM expected to fall by about 5.5% to 6.5%, at the low end of the company’s previous expectations.

·     2) SAVE lowers Q3 adjusted operating margin to -14.5% to -15.5%, from prior -5.5% to -7.5%, estimate -7.22% and cuts revenue forecast to between $1.24 billion and $1.25 billion, against its previous estimate of $1.3 billion to $1.32 billion.

·     3) ULCC lowers Q3 guidance stating there has been ‘recent significant unexpected change in the booking trajectory; now targeting adjusted pre-tax margin for the quarter to fall by -4% to -7% vs. previous forecast an increase of 4% to 7%. Cuts Q3 capacity forecast to a year-over-year increase of 20% to 21%, down from 21% to 23%.


Industrials and Materials

·     In Industrials: REVG raises FY net sales outlook to $2.55B-$2.6B from prior forecast of $2.45B-$2.55B after posts top and bottom-line beats citing better net sales in Q3 to higher demand for vehicles in Fire & Emergency and Commercial segments. WKHS said it received IRS approval as a qualified manufacturer for the Commercial Clean Vehicle Credit. CECO acquired the Florida-based Kemco Systems and raised its revenue outlook for the year to $525M from $500M-$525M range. MMM tumbles after CFO says it is seeing "a slow growth environment" in 2024 and that the consumer has shifted spending from discretionary to staples and other experimental activities. Shares of CAT, PH, GNRC were broadly lower in a week industrials sector.

·     In Packaging and Containers: Credit Suisse downgraded BALL (tgt to $58 from $65), OI (tgt to $22 from $21) to Neutral from Outperform but upgraded SEE (tgt to $47 from $59) to Outperform as views Sealed Air as a major beneficiary of a soft-landing economic scenario in 2024 and sees the stock being priced for recession currently.



·     AAPL shares active after Bloomberg news reported China has flagged security issues with Apple’s (AAPL) iPhones while noting that it is not banning purchases.

·     ARM’s 95.5M share IPO is expected to price tonight, within range of $47-$51 and trade tomorrow. Arm, the chip designer owned by SoftBank Group Corp, received enough backing from investors to secure at least the top end of the price range in its IPO, which would command a $54.5 billion valuation on a fully diluted basis – Reuters

·     In Media: NFLX shares fell after the company’s CFO, speaking at the Bank America conference, acknowledged that prolonged Hollywood strikes are hurting business and offered soft guidance on operating margins. The CFO offered operating margins — in in the 18% to 20% range — which fall short of current consensus of 22%.

·     In the Optical sector: AAOI shares fall after it terminated its agreement to sell manufacturing facilities in China to Yuhan Optoelectronic Technology.

·     Unity Software (U) shares fall as Oppenheimer noted Unity announced new pricing structure for its game engine yesterday where Unity game creators will pay a small fee (Unity Runtime Fee) per install. Opco says while Unity’s pricing announcement resulted in a PR disaster for the company yesterday, OPCO doubts it will lead to many developers leaving Unity for other engines.


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.