Market Review: September 19, 2023

Closing Recap

Tuesday, September 19, 2023





DJ Industrials




S&P 500








Russell 2000













U.S. stocks finish lower on light news flow as we await the FOMC tomorrow at 2pm and the more important Chair Powell testimony at 2:30pm. Another light economic calendar Tuesday with August Housing Starts showing a big drop below consensus while Building Permits came in above estimates. The top story today was the second big IPO in the last few days with Instacart (CART) shares opening at $42 in its debut after pricing 22M shares at $30 last night (follows the 95M share IPO last week from ARM). Another high-profile IPO is tonight with Klaviyo (KVYO) 19.2M issue expected to price between $27-$29 per share (aiming for $9 billion valuation). Also today, the United Auto Workers (UAW) strike is going on 5-days now and said it would announce on Friday more U.S. plants to strike if no serious progress was made in talks with the Detroit Three automakers. Treasury yields hit highs late day with the 10-year above 4.36% into the Fed tomorrow. Crude oil jumped initially but finished lower. Just another day of choppy markets with all awaiting Powell and the Fed tomorrow. In other macro stories today: A Reuters survey said the percentage of surveyed U.S. firms optimistic about the five-year China business outlook fell to 52%, the lowest level of optimism since the survey was first introduced in 1999. Also, the Organization of Economic Cooperation and Development (OECD) raised its forecast for global growth in 2023 but cut its outlook for economic activity next year to 2.7% from 2.9%. Inflation readings were hotter in both Canada and UK overnight.


Economic Data

·     Housing Starts for August fell -11.3% M/M to 1.283M well below the 1.435M expected reading and 1.447M prior (revised from 1.452M). Building Permits, however, rose +6.9% M/M to 1.543M vs.1.440M expected and 1.443M prior (revised from 1.442M). Aug single-family permits +2.0% to 949,000-unit rate; multifamily +15.8% to 594,000-unit rate.


Commodities, Currencies & Treasuries

·     Oil prices erased early gains as WTI crude slips -$0.28 or 0.31% to settle at $91.20 per barrel, off earlier highs of $93.74 per barrel, while Brent crude settle at $94.34/bbl, down 9 cents, 0.1%. Natural gas prices end higher for the seventh time in nine sessions, closing the day 4.4% higher at $2.848/MMBtu, the highest settlement price since Aug. 9.

·     Gold prices were little changed on day, edging higher $0.30 to settle at $1,953.70 an ounce awaiting the Fed interest rate meeting tomorrow. The same can be said for the US dollar (DXY little changed) and Treasury yields, edging slightly higher. Treasury yields did hit current cycle highs with the 2-yr rising to 5.09%, the 5-yr 4.50%, and the 10-yr 4.36%.






WTI Crude















10-Year Note





Sector News Breakdown



·     In autos: The United Auto Workers union said it would announce on Friday more U.S. plants to strike if no serious progress was made in talks with the Detroit Three automakers (GM, F, STLA). Volvo (VLVLY) said it will end production of diesel cars by early 2024 as it moves toward its target of selling only fully electric cars by 2030. DJ notes Volvo sold 615,121 cars in 2022, of which 8.8% were diesel while 33% were from its Recharge range of fully electric or plug-in hybrid models.

·     In Auto Retail: AZO reported Q4 EPS $46.46 topping est. $45.00 as net sales rose 6.4% y/y to $5.69B above est. $5.62B while operating profit $1.22B, +11% y/y; said Q4 comp sales +4.5%, topping est. +2.53%, but shares fell as the domestic commercial business fell short of forecasts (total domestic commercial sales increased 3.9% to $1.499B missing ests. of $1.55B). KMX shares fell further below 50-day MA of $82.70 after Wedbush noted earlier that CAF delinquencies loss rates jumped for the second straight month in August.

·     In the Electric Vehicle sector: NIO slips as announces proposed offering of US$1 billion convertible senior notes; weakness in EV space overall with NKLA, RIVN falling.


Consumer Staples & Restaurants:

·     In Retail: BBY is rolling out a series of October sales events, looking to boost sales amid sluggish demand. The company’s events include a Samsung-focused (10/6-10/8) and MSFT-focused events (10/13-10.15) as well as a "48-hour flash sale from 10/10-10/11 and a weekend gaming event as well. SFIX shares slip after Q4 revenues declined 22% YoY, in line with guidance, while Q1 sales are planned down 18-20% (vs. est. 12%) and sees year sales down more-than-expected. CROX positive mention by Wedbush today saying based on a sum-of-the-parts analysis, believe the shares are at least 25% undervalued today.

·     In Restaurants: SBUX was downgraded from Outperform to Market Perform at TD Cowen and cut tgt to $107 pointing to worrisome macro & competitive pressures that it expects to challenge China comp store sales and hence SBUX’s multiple.

·     In grocers: CART shares opened at $42 after its IPO priced at $30 a share, at the upper end of its expected range, raising $660 million with a fully diluted valuation of around $10 billion.

·     In Sporting Goods: Bank America said credit card data implies Q3 tracking ahead of consensus for DKSwhile ASO card data implies F3Q tracking below consensus as observed sales decreased -13.0% for the week ending 9/10, decelerating from -9.4% over the trailing four weeks.


Leisure, Gaming & Lodging:

·     In Casino/Travel/Leisure: ABNB listings in NYC plunged 77% after City crackdown reported the NY Post. The regulations for Airbnb’s largest market limit all short-term rentals to just two guests and require the hosts to be present for stays of less than 30 days. ; MGM shares fell after the New York Post reported the casino could lose out on at least two full-scale casino licenses in New York state over an alleged bookmaking scandal.

·     In Cruise lines: Industry active this morning after Truist upgraded shares of CCL to Hold from Sell) and RCL (to buy from Hold) and raised tgts to $17 and $137 respectively saying they are once again positive on the sector after dropping to neutral earlier this summer amid a runup in the sector’s stock prices. They say fundamentals remain strong, with demand holding up. Separately, Reuters reported China’s Transport Ministry said it is fully resuming from Tuesday international cruise ship transport to and from ports in the country.


Energy, Industrials and Materials

·     In Machinery: Evercore/ISI downgraded shares of DE and CNHI to In Line from Outperform and cut tgt to $424 (from $456) and $14 (from $16) respectively saying feedback from its component contacts highlight revenue risk across agriculture is already here for 2023. Farm equipment production schedules are going down for Europe and now also Brazil.

·     In Aerospace & Defense: RKLB shares tumble after saying its 41st mission ends after the rocket experienced an issue minutes after launch and that it is working with FAA to investigate root causes; the company said its next mission, scheduled before the end of Q3, will be postponed.

·     Steel stocks get a boost after U.S. Steel (X) said it sees 3q adj EPS $1.10-$1.15, above est. $0.92 and sees Q3 adj EBITDA to be approximately $550M vs. est. $485.6M; said expect to end Q3 with cash on hand of approximately $3B (better updates than comps NUE, STLD in recent days).

·     In transports: NSC said it launched an interim program to compensate homeowners around East Palestine, Ohio who have had to sell their properties at a reduced value following a Feb. 3 train derailment that spilled toxic chemicals.

·     In Chemicals: MEOH was upgraded at Raymond James to Outperform and tgt raised to $60 saying spot methanol prices are on the rise after an 18-month protracted slide and are poised to tighten further given traditional demand-side factors and near-term seasonal influences.

·     In Solar: ARRY shares rise after Bank America added it to the US 1 list underpinned by (1) secular revenue growth, (2) significant option value from the IRA still absent in street estimates, and (3) a track record of execution at a discounted multiple. ENPH shares initially higher after last night Director Rodgers reported buying 32,600 shares for $4M on 9/14 as per filing.



Banks, Brokers, Asset Managers:

·     In Brokers: LAZ downgraded to Sell and cut tgt to $32 at Goldman Sachs as sees top-line growth slowing due to slower MD hiring, structurally lower growth in asset management, and unfavorable exposure to the better parts of the M&A landscape. Launch on IBKR at Neutral as it offers unique structural growth while also facing increasing cyclicality from growing NII and EPS risks from rate cuts. 12m target, $97.

·     In Regional Banks: SNV anticipates $23M charge-off in Q3 related to a borrower’s bankruptcy as per 8-K filing and expects an increase in Q3 charge-offs arising from a 10.75% participation in a $218.5M nationally syndicated credit.

·     In Exchanges: CBOE said Edward Tilly has resigned following an investigation that determined the CEO didn’t disclose personal relationships with colleagues.

·     In FinTech: SQ announced that Alyssa Henry, Square’s CEO, will be leaving Block in the coming weeks after roughly 9 years with the company.



Biotech & Pharma:

·     APLS shares rose; after competitor Iveric (owned by Astellas) announced the outcome of a 2-yr efficacy analysis of Izervay, its approved treatment for a common type of age-related vision loss. May not be competitive against a similar medicine marketed by APLS.

·     ARQT announced that the INTEGUMENT-PED pivotal Phase 3 trial of roflumilast cream 0.05% in children ages 2 to 5 years with mild to moderate atopic dermatitis met its primary endpoint and all secondary endpoints.

·     BGNE said that the European Commission has approved Tevimbra (tislelizumab) as monotherapy for the treatment of adult patients with unresectable, locally advanced, or metastatic esophageal squamous cell carcinoma (ESCC) after prior platinum-based chemotherapy.

·     KNTE shares fell; said it is restructuring its operations and will explore alternatives for exarafenib monotherapy and its KIN-3248 FGFR program, along with pausing development of its KIN-7136 MEK inhibitor program (also downgraded to HCW and Wedbush on headlines).

·     MRK announced the FDA has accepted and granted priority review for a supplemental new drug application (sNDA) seeking approval for WELIREG, Merck’s oral hypoxia-inducible factor-2 alpha (HIF-2α) inhibitor, for the treatment of adult patients with advanced renal cell carcinoma (RCC) following immune checkpoint and anti-angiogenic therapies.


Healthcare Services & MedTech movers:

·     In MedTech: BSX agreed to acquire smaller medical-technology company Relievant MedSystems for an initial $850M in cash in a deal that expands its portfolio of treatments for chronic low back pain; said Relievant expects to generate sales of more than $70M this year.

·     In Pharmacy Retail: CVS was upgraded to Outperform at Evercore/ISI and raises price tgt to $83 from $81 saying they see operational issues improving and an attractive current valuation.

·     In Medical Equipment: GMED upgraded to Buy at Stifel but lower tgt to $61 from $65 saying the market has a pessimistic view of GMED+NUVA, with NewCo valuation well-below historical levels for both standalones. Acknowledge its upgrade is likely “early”.



Internet, Media & Semi’s

·     In Media: DIS said it would nearly double its capital expenditure for the parks business to about $60 billion over the next ten years. Disney notes that its parks, experiences, and products segment has expanded at a combined annual growth rate of 6% since fiscal 2017 and generated $32.3 billion in operating income over the last 12 months, according to a regulatory filing.

·     In Internet: GOOGL said that Bard, its generative artificial intelligence, will have the ability to fact-check its answers and analyze users’ personal Google data. The release last year of ChatGPT, a chatbot from MSFT’s OpenAI, sparked a race in the tech industry. PINS during its investor day offered guidance of 3–5-year revenue growth CAGR in mid to high teens, lifting shares.

·     In Semiconductors, ARM shares fell a 3rd day after IPO priced at $51 last Thursday (traded as high as $69 on Friday 9/14) – hit lows around $54 this morning. INTC tumbled on lows after its Intel Event’s underwhelming news as BABA says it is using new Intel Central processor chips to serve its large language model; SMCI announces future support & upcoming early access for 5th gen Intel Xeon processors on the complete family of x13 servers.


Hardware & Software movers:

·     MSFT quarterly dividend up 10% to $0.75. Also reports Microsoft Corp. plans to refresh its Xbox consoles in the holiday season of 2024, according to a product roadmap posted online. MSFT is planning a successor to the Xbox Series X priced at the same $499, and Ellewood, a refreshed Xbox Series S that also maintains the current price of $299.

·     TEAM shares were active after Mizuho said it has learned that TEAM has again announced a series of price changes to its Cloud versions of flagship products Jira Software, Confluence, and Jira Service Management. The new pricing will be effective one month from now (Oct. 18).

·     DELL upgraded from Neutral to Outperform at Daiwa and raised its price tgt to $80 from $50 saying the demand slowdown since 2HCY22 seems to be abating. Two new positives are macro tech demand improving and AI sales ramping, both aid long term growth potentials.

·     RXT was upgraded from Market Perform to Outperform at Raymond James with $3.50 tgt.


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.