Market Review: September 21, 2023

Closing Recap

Thursday, September 21, 2023





DJ Industrials




S&P 500








Russell 2000













Stocks fall/settle below the August lows! The weakness on Wednesday following comments by Fed Chairman Powell and the FOMC policy statement carried over into Thursday trading, with stocks broadly lower and closed at the lows for a second straight day. Not many places to hide as all eleven S&P sectors were markedly lower, with REITs (XLRE) standing out to the downside, falling over -3.4% as the worst S&P sector performer by far with big declines in ARE, BXP, PLD in the S&P. Higher Treasury yields are certainly having an impact on interest rate sensitive sectors/dividend paying names with the 10-yr hitting 4.49% today. The comments by Fed Chairman Powell and the FOMC policy statement yesterday really carrying over after they maintained their 5.25%-5.5% range as expected but signaled another hike could come later this year. Also, the Fed’s dot-plot of rate-path projections suggested its policy rate target would remain above 5% through the end of 2024 (reducing chances of aggressive cuts next year). This was not what the market was expecting/wanting and was evident by today’s stock market action as decliners outpaced advancers by a near 5:1 margin in the NYSE. Sentiment remains weaker after the bull-bear spread in the American Association of Individual Investors (AAII) weekly survey was -3.3 vs 5.2 last week as bullish sentiment fell to 31.3% from 34.4% while bearish sentiment rose to 34.6% from 29.2%. There are also concerns about another gov’t shutdown as we approach the September 30 deadline to fund it. The S&P 500 (SPX) took out the August lows of 4,335.51 late day as markets were very ugly overall, with nowhere to hide in what is normally a difficult time based on seasonality.


Lots of central bank action today/overnight after the Fed headlines yesterday:
–The Swiss National Bank snapped a string of 5-straight meeting rate hikes (stays at 1.75%)

–The Bank of England (BOE) halted its long run of interest rate increases as the British economy slowed, but it said it was not taking a recent fall in inflation for granted. The BoE’s Monetary Policy Committee voted by a narrow margin of 5-4 to keep the Bank Rate at 5.25%.

–Other Central bank action overnight included: the Philippines (rates stay steady), Indonesia (rates held steady), Taiwan (rates held steady), Riksbank (raised by 25-bps to 4%) and Norges Bank (raised by 25-bps to 4.25%).


Interesting tidbit: Nearly 95% of NFTs are worthless – a report by dappGambl based on data provided by NFT Scan and CoinMarketCap indicated that 95% of non-fungible tokens were effectively worthless. Out of 73,257 NFT collections, 69,795 of them had a market cap of zero ether.


Economic Data

·     Weekly Jobless Claims fell to 201K in the latest week from 221K prior and well below the consensus 225K; the 4-week moving average fell to 217,000 from 224,750 prior week and continued claims fell to 1.662M from 1.683M prior week.

·     Philadelphia Fed business conditions for September tumbles to -13.5 from +12 in August and worse than consensus -0.7 as the prices paid index for Sept 25.7 vs August 20.8 as new orders index plunges to -10.2 vs August 16.0; weaker employment index -5.7 vs August -6.0 and the six-month business conditions September 11.1 vs August 3.9.

·     Existing Home Sales for August reported at 4.04M unit rate (down -0.7%), below consensus 4.10M and vs. July 4.07M; Aug inventory of homes for sale 1.10 mln units, 3.3 months’ worth and the national median home price for existing homes $407,100, +3.9% from Aug 2022.


Commodities, Currencies & Treasuries

·     Oil prices finish lower in choppy trading, with WTI crude down -$0.03 to settle at $89.63 per barrel while Brent crude settles at $93.30 per barrel, down $0.23 or 0.25%. WTI crud hit highs of $90.98 per barrel after reports that Russia temporarily banned exports of gasoline and diesel to all countries outside a circle of four ex-Soviet states with immediate effect. Prices couldn’t hold the gains as global central banks signaling continuing tight policy weighed more. Gold prices fell over 1.35% to settle at $1,939.60 an ounce as the dollar index (DXY) rose +0.2% on recent FOMC comments about a future hike and as the Bank of England surprised by keeping rates steady. Treasury yields jumped early and held gains all day with the 10-yr yield rising as much as 14 bps to 4.49% before paring gains and the, 5-yr up 11 bps to 4.63%, 2-yr up 3 bps to 5.155%.






WTI Crude















10-Year Note





Sector News Breakdown



·     Detroit’s Big Three automakers (F, GM, STLA) and the United Auto Workers remained far apart in labor negotiations, less than 48 hours before the union’s deadline to make significant progress or escalate a strike with new work stoppages. The UAW has said it will announce strikes against more U.S. plants on Friday if no serious progress is made in talks by 12 P.M. EDT Friday.


Retailers, Consumer Staples & Restaurants:

·     In beauty: ELF shares opened lower, coming into the day down 9-straight days. Note on Tuesday, YipitData had tweeted: "We are observing a deceleration in ELF sales, this is solely being driven by the TGT channel, and is primarily comp related. Within WMT and AMZN in contrast, ELF sales have accelerated in recent weeks."

·     In grocers: CART shares broke IPO deal price of $30 after the bell last night and extended losses early this morning before bouncing back above that level.

·     In Beverages: KDP shared an updated CEO succession plan with Tim Cofer joining the company in November as COO before transitioning to the CEO role in 2Q24. Current CEO Bob Gamgort will serve as Executive Chairman after the transition.

·     In Restaurants: DRI results better as 1Q EPS of $1.78 vs Consensus $1.74 on sales 1% better at $2.73B and comps also slightly better at +5% vs Consensus +3.8%. Olive Garden +6.1% vs Consensus +5.1% and reaffirming all parts of the FY24 guide. YUMC was upgraded to Buy from Hold at Jefferies following its investor day.

·     In Retail: LULU added to Analyst Current Favorites list, reit Strong Buy w/ $440 PT at Raymond James as considers Lululemon to be one of the highest quality companies among global brands, with a strong yet still emerging brand with significant opportunities for growth.

·     In Euro retail: JD Sports Fashion (JDSPY) rises after reported higher 1H revenue and said it was on track to hit full-year profit targets, lifting other U.K. retailers. Next Plc (NXGPY) rose after reported higher sales and profit in the six months to July and raised full-year profit guidance.


Homebuilders, Building Products, Home Furnishing:

·     In Homebuilders: KBH posted as Q3 top/bottom line results beat consensus, but orders were light of street, while the 4Q GM% guide is also underwhelming (Q3 operating income margin was 11.3%, compared to 17.7%, housing gross profit margin of 21.5% decreased 520 bps) and said now expects Q4 to be the inflection point for gross margins vs. previous forecast of Q3.

·     DHI slides after CEO change as names Co-COO Romanowski as the new President and CEO who succeeds David Auld, who will transition to Executive Vice Chair (also note homebuilders lower in general after KBH results and spike in Treasury yields).


Energy, Industrials and Materials

·     Refiners spike (VLO, MPC, DK, PSX) after Russia has temporarily banned exports of gasoline and diesel to all countries outside a circle of four ex-Soviet states with immediate effect to stabilize the domestic market, the government said. It said the ban did not apply to fuel supplied under inter-governmental agreements to members of the Moscow-led Eurasian Economic Union, which includes Belarus, Kazakhstan, Armenia, and Kyrgyzstan.

·     In Package delivery giant FDX outperforms after raising its full-year profit outlook (FY24 adj EPS to $17.00-18.50 vs prior $16.50-18.50 and est. $17.50), as efforts to cut billions in costs helped its bottom line despite continued weaker shipping demand. Note FDX is in the early stages of merging its Express and Ground units, from which it expects to save $4B in costs over two years (cost cuts boosted FedEx’s margins in the fiscal first quarter).

·     In rails, GBX said it has won orders for 15,300 new railcars valued at $1.9 billion, as orders came in Q4. Susquehanna noted rail volumes were -1% Y/Y this week, compared to the four-week trend of -4%, QTD trend of -4% and YTD trend of -4%.TD Cowen lowered rail estimates (CSX, NSC, UNP) ahead of Q3 to reflect a very challenged rail environment. The firm said volumes QTD are below 2022 and pre-COVID levels, and labor, diesel, weather, should lead to OR pressure in Q3.

·     In Metals & Mining: Gold mining stocks/sector tumble early (AEM, GOLD, AUY, NEM) given the spike in the US dollar and Treasury yields following the “hawkish” tilt for a future rate hike by the Fed at its policy meeting yesterday. Reuters reported CLF clashes with US Steel (X) as sale process gets underway noting U.S. Steel has not opened its books to Cliffs since announcing on 8/13 it will explore a sale, even as it accepts initial bids this week from other potential acquirers, because Cliffs will not agree to its conditions

·     In Chemicals: MOS and NTR shares fell late Wednesday as RBC Capital noted the US ITC ordered by court to reconsider phosphate duties. The firm said it views this court ruling as potentially negative for domestic phosphate producers, especially Mosaic, as it brings uncertainty to future US pricing relative to global benchmarks.

·     In Paper & Packaging: IP was upgraded from Hold to Buy at Truist and raised its price tgt to $43 from $30 while raising estimates/price tgts for all containerboard producers (WRK to $44, PKG to $170) as believes that the containerboard market is reaching a positive inflection point and poised for recovery due to improving demand from the end of destocking and increasingly balanced inventories.

·     In Solar: ENPH was upgraded from Neutral to Buy w/ $185 PT at Seaport Global saying it should remain on a robust growth trajectory through 2025. After more than doubling this year, ENPH’s top line for Europe should remain in a robust uptrend, in Seaport’s view.



Bitcoin, FinTech, Payments:

·     FinTech stocks extend the 2022-2023 decline as PYPL falls around the $59 level (down -17% YTD) down a 5th straight day, and SQ now down -27% YT, falling a 7th straight day – both fintech stocks remain under pressure after the U.S. Federal Reserve kept its benchmark interest rate unchanged but suggested it could do one more hike by the end of this year.

·     In credit cards (AXP, COF, SYF), Wells Fargo noted card mailing volume remains light, suggesting the industry is somewhat cautious as volumes were down 10% m/m in Aug, vs the typical seasonal increase, and down 19% y/y. Smaller/regional banks are off much more than money center banks. Aug card mailings were 271M, still well below the 300M+ avg level pre-pandemic.



·     The REITs were the worst performing sector in the S&P, falling over 2.7% as higher interest rates and Treasury yields coupled with concerns over commercial real estate weakness has pushed many names to fresh 52-week lows (biggest drops in S&P from ARE, BXP, PLD).

·     Wells Fargo initiates coverage with a preference for growth potential supported by quality tenants, a strong cost of capital, and balance sheet positioning. Overweight: ADC (Top Pick), EPRT, FCPT, VICI: Equal Weight: GLPI, O, NNN, WPC; Underweight: EPR, SRC.


Insurance & Services:

·     AIZ said it currently expects global housing segment to record less than $50M pre-tax of reportable catastrophes 3Q23; submitted a plan to sell its Miami office to a potential buyer and expects to log a gain in 2024 above the current carrying value of $44.4M if deal completed.

·     ALL estimated its August catastrophe losses at $551M (+76% m/m), or $435M after-tax, as the month’s catastrophe losses include 18 events estimated at $641M, with about half the losses related to the Maui wildfire.

·     BHF downgraded to Sell at Goldman Sachs as they forecast weaker cash earnings than consensus anticipates driven by tepid equity returns on long-dated annuity contracts that carry high hurdle customer guarantees. Goldman says peers JXN, LNC, EQH, MET, PRU and CRBG trade in a 5.6x-11.5x range and it sees materially better growth rates to FCF at EQH, CRBG, and LNC vs. BHF.

·     VOYA reiterated Overweight at Piper saying they see as well-positioned to benefit from several catalysts: 1) The Health and Wealth Solutions product suite benefits from secular trends, 2) Upcoming open enrollment season is the first opportunity to cross-sell into Benefitfocus’ expanded total addressable market, 3) Investment Management distribution has seen improved capabilities, and 4) valuation is attractive while the company has best-in-class FCF conversion.



Biotech & Pharma:

·     AMTI to merge with CYTH in an all-stock transaction where Applied Molecular stockholders will receive ~0.174 shares of CYTH for one share of AMTI; the combined co to focus on advancing CYTH’s late-stage trial studying lead candidate Trappsol cyclo for a rare and severe autosomal recessive disorder called Niemann-Pick Disease Type C1

·     ETNB said the FDA granted Breakthrough Therapy Designation for its lead asset pegozafermin in patients with the liver disease nonalcoholic steatohepatitis (NASH).

·     TVTX shares slide after saying a late-stage study of Filspari in IgA nephropathy (rare kidney disease) failed in a head-to-head study vs. irbesartan fell short of producing a statistically significant difference by one measure of kidney function. LGND is the partner with TVTX.


Healthcare Services & MedTech movers:

·     Med Equipment and Servies: Barron’s noted that shares of companies that treat everything from Type 2 diabetes to sleep apnea have been sinking since new weight-loss medications from LLY, NVO skyrocketed (DXCM, INSP, MDGL, PODD, RMD, TNDM). SILK downgraded to Hold from Buy at Argus as expects Silk Road to face pressure from a recent adverse coverage decision from the Centers for Medicare and Medicaid.

·     In Managed care/Medicaid (CNC, MOH), Stephens noted according to an industry trade press update, Florida has once again delayed key dates relating to the bidding process for its highly anticipated statewide Managed Medicaid procurement. Specifically, final bids are now due October 25 while the state’s Notice of Intent to Award the contract is now expected in February 2024 (previously expected in Dec 2023)



Internet, Media & Telecom

·     In Media: PARA, WBD, NFLX advanced after CNBC reported last night that writers and producers are near an agreement to end the Writers Guild of America strike after meeting face to face on Wednesday. . TKO announced that USA Network has pinned down the rights for "SmackDown," the WWE wrestling hit that currently airs on Fox as TV rights start next fall following the 5-year deal ("SmackDown" aired on USA from 2016 to 2019). Rupert Murdoch stepping down as Chairman of FOX and NWSA. WMG shares bounce after falling -8.5% over the past 2 days due to a negative development (expected loss of BMG’s distribution biz).


Hardware & Software movers:

·     Big M&A deal in the cybersecurity and data analytics software as SPLK said it would be acquired by CSCO for $157 a share in cash in a deal with an enterprise value of about $28 billion.

·     In Internet Security: CRWD raised its target for subscription gross margins by 400 basis points, for operating margins by 900 basis points and free cash flow margin of 34%-38% of revenue, up 500bps from prior target at midpoint.

·     In Connected Cloud: IOT shares fall an 8th straight day after short seller SprucePoint issued a Strong Sell opinion on the company saying it sees 45%-75% downside risk saying the company has a material hardware business that gives them a uniquely poor business model.

·     IT Services & Consulting: NTNX upgraded from Neutral to Buy at Bank America and raise tgt to $50 PT from $39 saying sees fundamentals improving over the next few years including ACV billings, revenue, and operating margin.



·     AVGO shares fell after The Information reported GOOGL executives have discussed dropping Broadcom as a supplier of AI chips as early as 2027 ; MRVL shares jumped on reports in same article that “Google since last year has been working to replace AVGO with MRVL as the supplier for the networking interface chips that connect servers to ethernet switches in Google’s data centers. However, Google later came out (midday) and said it sees "no change" in Broadcom chip relationship (AVGO shares pared losses as MRVL shares slipped).

·     ARM dropped below its last Thursday IPO price of $51 in a broad stock market rout in recent days (down from $67 high last Friday).


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.