Market Review: September 28, 2023

Closing Recap

Thursday, September 28, 2023





DJ Industrials




S&P 500








Russell 2000













U.S. stock markets rebound ahead of tomorrow’s PCE inflation data reading, the preferred measure of inflation by the FOMC, where a “hotter” reading could raise the alarm bells again for “higher for longer” on the rate hike cycle, potentially boosting Treasury yields and the dollar further…or a “cooler” reading could spark a rebound in beaten up stocks (growth, interest rate sensitive), as major averages remain on track for monthly losses between 4 and 5% with one trading day left in September. It has been a rough stretch for U.S. stocks, but they bounced today as nearly all eleven S&P sectors finished higher, paced by more than 1% gains for Materials, Communications, Discretionary, and REITs (Utilities fell a 6th straight day as lone decliner). We get Dow component Nike (NKE) earnings results after the bell tonight and cruise line Carnival (CCL) tomorrow morning. Data today was mixed as jobless claims improved, GDP was in-line on weak spending, and housing data was soft. Meanwhile, a US Government shutdown still looms this weekend. Speaker McCarthy said he still believes a deal can be struck even if overtime/extended play is needed. McCarthy called every challenge he has is an opportunity but realizes not getting everything he wants. Treasury yields hit a new cycle high this morning before falling 10-bps off that level and oil hit 10-month highs above $95, before sliding. Is it possible a trading bottom is in for US stocks heading into seasonally strong months (Oct-Nov)? Tomorrow’s data could help.


Economic Data

·     Weekly Jobless Claims rose to 204K from 202K the prior week and below the 215K est.; the 4-week moving average fell to 211K from 217,250 the prior week (previous 217,000) and continued claims rose to 1.670M from 1.658M the prior week (est. 1.675M).

·     U.S. Q2 GDP growth was +2.1%, on an annualized basis, in the third estimate, unchanged from the previous estimate and in-line with consensus. US Q2 Personal Consumptions +0.8% vs. est. and prior reading of +1.7%.

·     Inflation portion of GDP: The PCE price index rose +2.5%, vs. +2.5% expected previous estimate of 2.5% and core PCE Prices final 3.7%, in-line with consensus and prior reading; the Q2 GDP Price deflator index 1.7% vs. 2.0% est. and core PCE.

·     The Pending Home sales index for August fell (-7.1%) vs. est. (-0.8%) and down (-18.7%) y/y.


Commodities, Currencies & Treasuries

·     Oil prices touched fresh 10-month highs above $95 per barrel before selling off on profit taking, as WTI crude fell -$1.97 or 2.1% to settle at $91.71 per barrel while Brent crude fell -$1.17 to settle at $95.38 per barrel.

·     Gold prices continued to tumble, falling -$12.30, or -0.65%, to $1,878.60 an ounce. The recent move by the US dollar to 10-month highs and a continuous march higher in Treasury yields have dented prices of precious and industrial metals.

·     Treasury yields pulled back off earlier highs (10-yr touched high around 4.69%) in a bout of profit taking as bonds have tumbled in recent weeks on higher interest rate expectations following the latest “higher for longer” outlook from the Fed on rates. Note the 10-year yield is up 50-bps in September alone and the 2-year yield up about 23-bps this month.






WTI Crude















10-Year Note





Sector News Breakdown



·     In Auto retail: KMX shares slid as Q3 revenue fell 13% y/y to $7.07B (above est. $7.02B) while used-vehicles sales were -11% lower and wholesale vehicle sales down -22%; said Total retail used-vehicle sales were down 7.4% on-year at 200,825 units and avg selling price -4% for Q3.

·     The United Auto Workers union wants to emerge from its strike against Detroit’s three major automakers with at least a 30% pay raise, Bloomberg reported. That’s the level – which is lower than the around 40% hike initially proposed to Ford (F), GM and Stellantis (STLA) – that the union believes will allow it to satisfy existing members and organize non-union plants.


Retailers, Consumer Staples & Restaurants:

·     In Footwear: NKE comes into earnings tonight down 17 out of last 18 sessions (including 9-straight into today) and down -23% YTD – is the bar set low enough remains the question.

·     In Apparel & Accessories: one M&A deal as CHS to be acquired by Sycamore Partners for $1 billion, with holders to receive $7.60 per share in cash, a 65% premium from yesterday.

·     In Beverages: NAPA shares fell after the CEO announced he is retiring while 4Q EPS $.015 tops consensus $0.13, while FY $0.68 mid-point vs consensus $0.70.

·     In Tobacco: PM lowers FY guide to $5.96-6.05 vs prior $6.13-6.22 citing headwinds involving US dollar strength vs a range of currencies and a balance-sheet-related currency impact.


Leisure, Gaming, Transports & Lodging:

·     In Airlines: JBLU the latest airline to issue a warning saying Q3 revs are expected to come in at the low end of its prior guidance range of down 8% to -4%, while CASM ex-fuel (cost per available seat mile) is expected to be near the high end of guidance of 2.5%-5.5%.

·     In Leisure products: LULU and PTON announced a five-year strategic global partnership through which Peloton will become the exclusive digital fitness content provider for lululemon, and lululemon will become the primary athletic apparel partner to Peloton.

·     In Food delivery: UBER, DASH and Grubhub Inc. lost an attempt to block a New York City rule setting minimum pay for food delivery workers, handing the city a victory as the food delivery cos must pay an $18 minimum wage.

·     In Theme Parks: Keybanc notes weekly park traffic lower – operators saw impact from Tropical storm Ophelia. FUN traffic for the full week was -14.7% y/y, including the weekend at -21.5%, SEAS traffic for the full week came in at -23.1% y/y, including the weekend at -24.7%; and SIX traffic for the full week was -10.3% y/y, including the weekend at -12.5%.



·     In Energy stocks: Saudi Aramco agreed to buy a stake in MidOcean Energy for $500 million, its first investment in liquefied natural gas. The U.S. Interior Department will release its highly anticipated five-year offshore oil drilling plan on Friday. Several delays in releasing the schedule have left the U.S. without a congressionally mandated five-year schedule of offshore oil and gas auctions since the previous one expired in June 2022.

·     In Solar: U.S. Dept of Energy signs $3B loan guarantee agreement with NOVA to expand clean energy access to disadvantaged homeowners and communities; note solar stocks remain weak as the Solar ETF (TAN) made another 52-week low today, lowest levels since September 2020.



Banks, Brokers, Asset Managers:

·     In Brokers: JEF Q3 profit declined -74% as EPS $0.22 below the est. $0.33 and revs $1.18B missed the $1.25B est.; Q3 Investment banking revenue at Jefferies dipped -2% y/y to $644.6M but nearly 28% higher q/q; Q3 asset management unit revs fell -97% y/y.

·     In REITs: China Evergrande Group shares were suspended on Thursday, Hong Kong’s exchange announced. The chairman of the embattled Chinese real estate developer has reportedly been placed under surveillance, according to Bloomberg News.



Biotech & Pharma:

·     Managed care (CI, ELV, HUM, UNH) – Charlie Bilello tweets: "Average US family health insurance premium…2000: $6k, 2002: $8k, 2004: $10k, 2006: $11k, 2008: $13k, 2010: $14k, 2012: $16k, 2014: $17k, 2016: $18k, 2018: $20k, 2020: $21k, 2022: $22k – that’s a 249% increase since 2000 (5.8% per year)."

·     ACAD shares dropped after a patent hearing regarding its drug Nuplazid, which is used to treat Parkinson’s disease. Acadia filed separate lawsuits last October alleging that copies of Nuplazid infringed a patent, including a lawsuit against MSN, as per Seeking Alpha.

·     BCLI shares plunged after advisors to the FDA voted down the company’s investigational treatment for amyotrophic lateral sclerosis (ALS) saying it did not demonstrate substantial evidence of effectiveness for treatment of mild to moderate ALS.

·     BNOX shares soar as reported positive results from a mid-stage trial of a treatment for post-traumatic stress disorder; said the Phase 2b trial evaluating BNC210 led to a "statistically significant" reduction in total PTSD symptom severity at 12 weeks.

·     GRTS shares rose after announcing they will receive as much as $433 million from the US government to conduct a trial of its next-generation Covid-19 vaccine.

·     IMVT 7.37M share Secondary priced at $38.00.

·     KRTX announced the submission of a New Drug Application to the U.S. FDA for KarXT for the treatment of schizophrenia.

·     SLNO 3M share Spot Secondary priced at $20.00.


Industrials & Materials

·     AGCO is forming a joint venture with positioning-technology company TRMB in a deal that includes AGCO’s acquisition of an 85% stake in Trimble’s portfolio of agriculture assets and technologies, paying $2B in cash.

·     JCI said they experienced disruptions in portions of its internal information technology infrastructure and applications resulting from a cybersecurity incident.

·     OSK and TEX both downgraded to Sector Weight from Overweight at Keybanc as think order rates could moderate from recently elevated levels and at the same time supply chain improvements allow for revenue increases and faster backlog monetization.

·     WOR achieved Q1 adj EPS of $2.06 vs. Street’s $2.04 aided by strong JV income and solid inventory holding gains, while Steel Processing pricing was weaker; adjusted EBITDA was $164M vs. $210M achieved last quarter.


Aerospace & Defense

·     Deutsche Bank initiated coverage of the A&D sector with a positive view on commercial aero, and a preference for aftermarket over OE. Specifically, the overall risk/reward on OE generally looks worse given challenges with price/cost, supply chain performance, and a variety of idiosyncratic risks. Top 5 Buy-rated ideas: HWM, WWD, CR, GE, GD.

·     HII was upgraded from Neutral to Overweight at JP Morgan with $247 tgt (down from prior $250) noting shares are down 10% the past three months on little news, and while it has been a tough market for Defense stocks, sees this as an attractive entry point.



Internet, Media & Telecom

·     In Media: (NFLX, DIS, CMCSA, PARA, WBD) Hollywood studios and negotiators for Hollywood actors on strike will hold talks on Oct. 2, both sides said in a joint statement on Wednesday, in the first such meeting in months.


Hardware & Software movers:

·     In IT Services & Consulting: ACN reports Q4 EPS above views on light revs amid weak bookings which fell -10% to $16.6B while providing FY24 guidance of 2-5% in constant currency revenue growth; Q4 consulting bookings were down 2% and outsourcing bookings were up 10%.

·     In Software: WDAY shares tumbled after lowered its subscription revenue growth outlook for next three years to between 17% and 19%, owing to macroeconomic conditions, down from prior view of 20% plus growth, w/ op margins targeted at 25%+ in FY27 vs. 25%+ in FY26 last year.

·     In EMS sector: JBL mixed Q4 results as EPS $2.45 top ests $2.32 but revs of $8.46B below ests $8.54B; guidance also mixed as sees Q1 core EPS $2.40-$2.80 above consensus $2.33 but guides Q1 revs $8.4B-$9B vs. consensus $9.18B.

·     In PC Hardware: Bank America lowers their PC estimates given a weaker macro-outlook and slower recovery trajectory as now model PC units down -14.5% y/y in C23 to 250mn, and then +4.8% y/y to 262mn in C24. Maintain Buy on DELL, Neutral on AAPL and Underperform on HPQ.

·     In 3D sector: SSYS terminates merger with DM after preliminary vote count; said to explore strategic alternatives DDD



·     MU shares decline after reported better results, while guidance was mixed (revs beat, while GM/ EPS was slightly lower); KeyBanc noted results reflect the normalization of inventories across PC and smartphones, while lower EPS/GM guidance was impacted by strategic purchases in DRAM and NAND; also mgmt sees F4Q as the bottom in pricing and expects pricing to improve over the next several quarters and sees positive GM through 2H24, as well as a return to positive EPS

·     NVDA shares pared gains late day after the WSJ reported France’s competition authority raided NVIDIA’s local offices this week on suspicion the company engaged in anticompetitive practices.


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.