Market Review: September 14, 2023

Closing Recap

Thursday, September 14, 2023





DJ Industrials




S&P 500








Russell 2000













Stocks surged as US stock markets were undaunted by the rise in inflation data (CPI and PPI) the last two days as it still hasn’t changed the broader outlook for the Fed meeting next week, where they are expected to “pause” on any interest rate movements. Market gains accelerated today as China’s central bank announced it would cut the reserve requirement ratio on most banks, and as retail sales data came in better than expected (back to “soft landing” hopes for the economy). Markets chose to look the other way amid a rise in CPI inflation yesterday and PPI today, while the European Central Bank (ECB) raised rates a 10th straight time but hinted a more wait and see approach going forward. All eleven sectors finished higher, with more than 1% advances for REITs, Materials, Industrials, Energy, Staples and Consumer Discretionary, despite oil prices hitting highest levels since last November, Treasury yields closing at highs and the dollar surging (feels like something has to give).


Ahead of the FOMC policy meeting next week and the ECB rate hike today, @KobeissiLetter noted today: 1. China unexpectedly cut rates by their most since 2020; 2. Europe unexpectedly raised rates to their highest since 2001; 3. The Fed is expected to pause rate hikes for months; 4. Australia paused rate hikes four months ago; 5. Argentina unexpectedly raised rates to a record 118%; 6. Canada paused rate hikes but "prepared to hike more if needed" – Central banks doing completely different things.


Volatility could be increased tomorrow with quadruple witching option expiration and as the S&P, Russell and Nasdaq’s US indexes will rebalance on the close Friday. Quadruple witching is the expiration of four derivative contracts: stock index futures, stock index options, single stock options, and single stock futures (happens only 4x a year – Dec 15th will be the last of 2023). Goldman Sachs said they “estimate that over $3.4 trillion of notional options exposure will expire this Friday including $555 billion notional of single stock options”. Also, the odds of a US gov’t shutdown have also risen in recent days, but stock markets still not showing any concern.


Economic Data

·     The Producer Price Index (PPI) advanced 0.7% M/M in August, exceeding the 0.4% consensus and rising from 0.3% in July, while headline Y/Y rose +1.6% vs. est. +1.2% and above +0.8% in July. On a core basis (ex: food and energy), PPI M/M rose an in-line +0.2% and +2.2% Y/Y (also in-line with estimates), which was down from the 2.4% print prior.

·     August Retail Sales come in better, rising +0.6% M/M vs. +0.2% expected and +0.5% in July (revised from +0.7%), while core Retail Sales rose +0.6% M/M vs. +0.4% expected and +0.7% in July (revised from +1.0%). Ex-Auto & Gas: +0.2% M/M vs. +0.5% expected and +0.7% prior.

·     Weekly Jobless Claims rose to 220K from 217K prior week and vs. est. 225K; the 4-week moving average fell to 224,500 from 229,500 prior; continued claims rose to 1.688M from 1.684M prior (est. 1.695M) and the U.S. insured unemployment rate unchanged at 1.1%.

·     U.S. July inventory/sales ratio 1.39 months’ worth vs June 1.40 months; Business Inventories unchanged (consensus +0.1%) vs June -0.1% (prev unchanged); July business sales +0.6% vs June -0.2% (prev -0.1%). July retail inventories ex-autos revised to unchanged (prev +0.1%).



·     Oil prices surge as WTI crude gains $1.64 or 1.85% to settle at $90.16 per barrel, its highest level since November 2022 while Brent crude settled at $93.70 per barrel, up $1.82, 1.98%. Saudi Arabia and Russia have extended their oil output cuts to the end of 2023, and the move could result in a substantial market deficit for the rest of 2023, the International Energy Agency said on Wednesday. WTI crude is up almost 3% this week, on pace for the third straight weekly gain. The prices are up about 13% this year. Both benchmarks had slipped on Wednesday.

·     Natural gas prices finish 1% higher at $2.708/MMBtu, which marks the fifth daily gain in the past six sessions and puts prices 4% higher for the week.

·     Gold prices edge higher, rising $0.30 to settle at $1,932.80 an ounce a day after hitting 3-week lows as a surging dollar and stubbornly high Treasury yields pressure precious metals. Silver futures for December slipped -19 cents, or 0.8%, to $22.99 per ounce.


Currencies & Treasuries

·     The Euro was down -0.8% at 1.064 vs. the dollar, lowest levels since March while the Japanese yen little changed around 147.25. Overall, the dollar index (DXY) rose +0.5% to 105.25 following the ECB actions today and ahead of the FOMC policy meeting next week. Treasury yields meanwhile were volatile for a second day, with big swings up and down before finishing near best levels for the 10-year above 4.29% (off lows 4.22%) after inflation data last two days.






WTI Crude















10-Year Note





Sector News Breakdown



·     The UAW late Wednesday outlined plans for a series of strikes targeting individual, undisclosed U.S. auto plants if agreements are not reached by 11:59 p.m. EDT tonight, rather than a full walkout. UAW President Fain said the Detroit Three (GM, F, STLA) had offered 146,000 U.S. auto workers pay raises of as much as 20% over 4-1/2 years, but he blasted the proposal as inadequate even as automakers protested the union had yet to formally respond to their latest more generous offers. The union is asking for a 40% raise and major improvements in benefits. GM CEO Barra this afternoon said is now offering 20% raise increase to UAW over life of contract (offered 18% wage increase in previous contract offer) and would hike wages for hourly workers by 10% in first year and offers 25% increase to retirement healthcare plan.

·     Auto retailers/dealers saw strength today ahead of the potential UAW strike if no deal is reached tonight; shares of CVNA, KMX, AN, LAD, PAG all making big moves today.

·     European autos (BMWYY ) lower overnight after Beijing blasted the launch of a probe by the European Commission into China’s electric vehicle (EV) subsidies as protectionist and warned it would damage economic and trade relations, as shares in Chinese EV makers slipped (NIO, LI).

·     TSLA shares were strong, possibly benefitting from a possible strike by the Big Three automakers tonight of a union agreement can’t be reached by midnight, Also, Reuters reported Tesla has combined a series of innovations to make a technological breakthrough that could transform the way it makes electric vehicles.


Retail, Consumer Staples & Restaurants:

·     In Beverages: Pernod Ricard (PRNDY) and Remy Cointreau (REMYY) were both downgraded to Underweight at Barclays saying that the China population cohort is now in decline, which, when coupled with slower economic growth, will likely lead to a slowdown in premium spirits. UBS said its Hard Seltzer survey (SAM, STZ) results worsen sequentially saying despite showing some signs of stabilization towards the end of ’22, the hard seltzer decelerated once again through the Spring/Summer period, as measured by 2-yr stacked category growth.

·     In Restaurants and Food: YUMC shares outperformed after introduces 3-year financial targets at 2023 Investor Day aiming for 20,000 stores by 2026, targeting high-single-to-double-digit CAGR for system sales, operating profit over 2024-2026 and double-digit eps CAGR over 2024-2026.

·     In Retail: FIGS tgt cut to $8 from $10, NKE to $117 from $125 at TD Cowen after checks saying September’s digital data confirms late summer weakness at most apparel/footwear vendors and key retail partners. The firm said NIKE data remains tepid, SKX and FIGS inflected negative, and the only tangible signs of outsized strength are DECK, ONON.


Leisure, Gaming & Lodging:

·     In Casinos/Gaming: Bloomberg reported overnight that Apollo is among suitors for IGT’s global gaming division. Both CZR and MGM have been targeted by cyberattacks this week in a threat to operations as CZR paid roughly half of a $30 million ransom demanded by hackers after a recent cyberattack, the WSJ reported yesterday. GENI 20M share secondary offering priced at $5.35.

·     In Cruise lines: CCL, NCLH both upgraded to Buy at Redburn with $23 and $25 tgts respectively saying the sector has exited intensive care, and the fundamental investment case of strong secular growth and margin opportunity is clear. Notes longer booking windows and travel restraints mean cruise pricing has lagged leisure hotels, and the ‘discount’ has increased.

·     In theme parks: Keybanc with weekly traffic updates noting FUN traffic for the full week came in at -0.5% y/y, with trends showing further improvement vs last week (-10.9%); SEAS traffic for the full week was -5.3% y/y, an improvement vs the weather-impacted trends of August (-10.6%) and SIX traffic for the full week was +23.1% y/y, a second consecutive week of notably strong trends (following last week at +14.6%), which have outpaced 3Q trends seen to date.


Energy, Industrials and Materials

·     In Solar & Utilities: FSLR was upgraded to Outperform at BMO Capital Markets citing the stock’s continued pullback following its analyst day makes for a particularly attractive entry point. Goldman Sachs in solar space – said seeing signs of pipeline demand strength in US utility-scale solar, improving trends in US residential solar off the May trough, ongoing inventory issues. Shares of NOVA, ARRY, SPWR, SEDG were mostly higher.

·     In E&P and equipment; VTLE shares slip after saying it acquired three agreements for Permian Basin assets with a total transaction consideration of about $1.17B and announces 2.5M share common stock offering. RIG said it was awarded a 3-year contract worth $486M for new-build ultra-deepwater drillship Deepwater Aquila with a national oil company for work offshore Brazil.

·     In Metals: RIO was upgraded to Overweight at JP Morgan and tgt raised to A$131 from A$116, named New Top Pick saying iron ore prices are supported by strong Chinese steel production; IE 11.852M share Spot Secondary priced at $13.50; SBOW 4M share Secondary priced at $37.00.

·     In Aerospace & Defense: RTX downgraded from Neutral to Underperform at Bank America and cut tgt to $75 from $95 saying strength at Collins Aerospace will not be enough to balance the risks stemming from P&W and ongoing restructuring. SPCE said the flight window for “Galactic 04,” its fifth spaceflight this year, will open Oct. 5.

·     In Industrials: sector bounces back after tumbling on Wednesday; CARR downgraded to Neutral at Mizuho after strong outperformance noting shares are +37% YTD vs HVAC +27% (group +25%). PCT shares tumbled after reporting its facility in Ironton, Ohio, is in the process of restarting following a series of problems since Aug. 7. It added that it is “unable to eliminate the risk that the restart will be unsuccessful.”

·     In Transports: in airlines, DAL marked the 4th carrier to lower guidance in two days (joins AAL, ULCC, SAVE yesterday) as lowers Q3 EPS view to $1.85-$2.05, from prior $2.20-$2.50, though maintained its FY adj EPS $6-$7 (est. $6.58); DAL did say it sees Q3 revenue in the "upper half" of its forecast for 11% to 14% growth year over year.



Banks, Brokers, Asset Managers:

·     In brokers: HOOD said monthly active users decreased to 10.6 mln in August, down about 400 thousand from July 2023; net cumulative funded accounts at end of August were 23.2 mln, up about 30 thousand from July 2023. August assets under custody $89.7B, down 5%.

·     In FinTech: Visa (V) shares slipped after announced a proposal that would provide liquidity to Class B holders (banks from pre-IPO) by allowing them to convert half of the $96bn in Class B shares into Class C (which are tradable, but subject to lock-up provisions), Jefferies noted.

·     In Financial Services: Mizuho noted that QuickBooks Bill Pay (INTU) appears cheaper than third party solutions (such as BILL), given BILL charges $45 and $55 for its Essentials and Teams AP plans on a per user/per month basis. Additionally, while BILL charges $0.49/transaction for every ACH payment, INTU offers several free ACH transactions across its three plans.

·     In Insurance: MET was upgraded from Hold to Buy at Jefferies and raised tgt to $72, consistent with their more constructive view of US life, saying YTD performance in this asset class has been stable. Jefferies also upgraded PRU to hold from Underperform and raise tgt to $93 saying biggest concern has had of late has been its view that PRU had limited financial flexibility based on excess risk-based capital and excess Holdco cash earlier in the year.



Biotech & Pharma:

·     ALNY shares fell as some analysts questioned its Onpattro (Patisiran) market potential after the drug won votes of support from an FDA advisory panel by a vote of 9-3 for a new use in the treatment of cardiomyopathy, a heart-muscle disease (FDA has set an action date of Oct. 8.). Stifel noted after a briefing book that was critical but seemed open-minded, the firm was struck by FDA’s consistently negative tone at the Onpattro TTR-CM AdComm, noting the agency took most/every opportunity to criticize the clinical meaningfulness of the Onpattro 6MWT/QoL data.

·     HARP shares drop after announced that ABBV will not be exercising the Development and Option Agreement for Harpoon’s lead asset HPN217, a T-cell engager therapy targeting BCMA. Canaccord said the timing is a surprise (ahead of 2 large data readouts) and is not aware of what data AbbVie saw but was told the decision was part of AbbVie’s internal portfolio assessment.

·     LH hosted an Investor Day today: prior had reaffirmed ’23 adj EPS and provided long-range expectations, pointing to organic revenue CAGR through ’26 of 3.5% to 5.5%, 100bps to 150 bps margin expansion at enterprise level, total adj EPS growth CAGR of 8.5% to 11.5%.



Internet, Media & Telecom

·     In Online: ETSY was upgraded from Peer Perform to Outperform at Wolfe research with $100 tgt noting Etsy has been one of the significant underperformers under coverage universe, trading down -46% YTD vs WR Internet +37% and Nasdaq +32%.

·     In Media: Reuters reported that DIS has held exploratory discussions about selling its U.S. TV network ABC to regional TV station operator NXST saying the discussions come after Disney CEO Bob Iger said in July that the company could sell some of its traditional TV assets, which have struggled for years due to the rise of streaming services.


Hardware & Software movers:

·     In Hardware: HPQ shares dip after last night’s filing showed that Warren Buffet’s Berkshire Hathaway sold 5.5M shares on Monday (though Berkshire remains the #1 inst. holder). AAPL said starting tomorrow, September 15, customers can pre-order apple’s incredible new iphone 15 and iphone 15 pro models; customers can pre-order the iphone 15 lineup beginning Friday, September 15.

·     In Software: all eyes on ADBE earnings after the close tonight (industry looking to rebound after ORCL rev growth figures sunk the sector earlier this week); DV raised its year rev forecast to $562M-$572M from prior $557M-$569M outlook, while maintained Ebitda view. Bernstein positive on MSFT saying they see Azure annual revenue could rise to $75B-$100B over l-t; APPS downgraded to neutral at Bank America saying limited catalysts & low investor sentiment make re-rating unlikely in FY24 – likely to be a 2025 story.

·     IT Services & Consulting: PFSW +2%; to be acquired by GXO for $7.50 per share in cash in deal valued at about $181M, a 46% premium to the closing price of PFSW on Wednesday.



·     ARM 95.5M share IPO priced at $51.00, the high end of the $47-$51 price range (opened at $56.42 and traded as high as $66.14 on first day).

·     MU price tgt raised from $75 to $80, maintains Overweight at Barclays as they raise outlook for both bits and pricing and move slightly ahead of the Street for November and raise CY24.

·     SMTC Q2 beat but lower guidance as Q2 adj EPS $0.11 vs est. $0.02 on revs $238.4Mm vs est. $237.42Mm, sees Q3 net sales $190-210Mm vs est. $247.68Mm; was downgraded from a Buy to a Hold after results at Benchmark based on the firm’s unclear acquisition synergies of its recently closed purchase of Sierra Wireless.


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.